Followings are the items which are included in the credit side of the trading account.1.SalesBoth cash sales and credit sales are included in trading account.2.Sales returnsSales returns must be deducted from total sales and to be shown in the credit side of trading account. Sales returns are the sold goods which are returned from customers.3.Closing stockClosing stock means the value of goods which are remain unsold in a particular accounting period. Closing sock may be in the form of raw materials ,. work in progress or finished goods. Closing...
Sunday, 27 December 2009
Items included in the debit side of the trading account
Posted on 22:09 by Unknown
Followings are the items which are include in the debit side of the trading account1. Opening Stock:Opening stock consists of raw materials , work in progress and finished goods depending upon the nature of business. In merchandising business , the opening stock consists of finished goods. In manufacturing concern , opening stock consists of raw materials.2. PurchasePurchase includes both credit purchase and cash purchase. Purchase is available in trial balance.3. Purchase ReturnsPurchase returns is appear in the credit side of trial balance. Purchase...
Advantages Of Trading Account
Posted on 20:36 by Unknown
Here are the following advantages of trading account1. Trading account shows the relationship between gross profit and sales that helps to measure profitability position.2. Trading account shows the ratio between cost of good sold and gross profit.3. Trading account gives the information about efficiency of trading activities.4. Trading account helps to compare between cost of good sold and gross profit.5. Trading account provides information regarding stock and cost of good so...
Thursday, 24 December 2009
Importance Of Trading Account
Posted on 02:51 by Unknown
It is very important to find out gross profit or loss for the business to know whether purchasing, manufacturing and sales are sufficient for earning or not.The main objectives or important of trading account are as follows.1.Trading account helps to know gross profit or loss.2.Trading account provides information about the direct expenses.3.Trading account provides safety against possibilities of loss.4.Trading account helps in comparison of closing stock with last year's st...
Monday, 21 December 2009
Concept And Meaning Of Trading Account
Posted on 22:16 by Unknown
The first step of final account is trading account.Trading account is nominal account which is prepared at the end of accounting year. Trading account helps to find out gross profit or gross loss during the accounting period. Trading account consists of two sides 'debit and credit' . All direct expenses are debited and direct incomes are credited in trading account.Trading account contains mainly purchase of goods , sale of goods and expenses relating to the daily operation of facto...
Preparation of Final Account
Posted on 22:10 by Unknown
Final account is the combination of income statement and balance sheet. The final account is prepared at the end of every year which may be a calendar year or other also.Normally final account includes the following items.1. Trading Account2. Profit and loss Account3. Profit and loss Appropriation Account4. Balance Sh...
Concept And Meaning Of Final Account
Posted on 22:02 by Unknown
Final Account is the final process of accounting. Final account is prepared to show the final result of the company in a specific period. Final account is also known as financial statement.Profit and loss account and balance sheet are included in final account.Profit and loss account shows the profitability achieved during the accounting period and balance sheet reflects the composition of various assets, liabilities, and share holder's equity on the accounting peri...
Tuesday, 8 December 2009
Items Included In The Liabilities Side Of The Balance sheet
Posted on 22:16 by Unknown
1. Fixed LiabilitiesThose liabilities which are payable to the owners only on the liquidation of the company after making the payment of other outside liabilities are called fixed liabilities.2.Current LiabilitiesCurrent liabilities are those type of liabilities which are payable out of current assets within the next accounting period.Bills payable,short term bank overdraft are the examples of current liabilities.3.Long term LiabilitiesLong term liabilities are those liabilities which are not payable within the next accounting period but will be...
Sunday, 29 November 2009
Items Included In The Assets Side Of Balance Sheet
Posted on 21:24 by Unknown
1.Fixed AssetsThose assets which are acquired and held permanently for a long time in the business are fixed assets.2.Current AssetsThose assets which can not be put to constant uses and intended for resale or which in the ordinary course of business will be converted into other assets are current assets.3.Intangible AssetsIntangible assets are those assets whih can not be touched,seen and have no volume but have value.4.Wasting AssetsThose assets which are depceted gradually or exhausted in the process of earning income are known as wasting a...
Sunday, 22 November 2009
Items Included In The Balance Sheet
Posted on 21:37 by Unknown
Items Included In The Assets Side Of Balance Sheet1. Fixed Assets2. Current Assets3. Wasting Assets4. Intangible Assets5. Investments6. Fictitious AssetsItems Include In The Liabilities Side Of Balance Sheet1. Fixed Liabilities2. Long Term Liabilities3. Current Liabilities4. Contingent Liabilit...
Concept And Meaning Of Balance Sheet
Posted on 21:29 by Unknown
Balance Sheet is a tabular statement of balances carried forward after closing the books of account kept according to principles of accounting.Balance sheet is a statement prepared with a view to measure the financial position of a business on a certain fixed date.Balance sheet indicates the financial position of a concern by its assets on a given date and its liabilities on that date.Excess of assets over liabilities represents capital or net worth or shareholders' fund and is indicative of the financial soundness of a compa...
Thursday, 5 November 2009
Differences Between Cost Accounting And Management Accounting
Posted on 02:48 by Unknown
Main distinction between Cost Accounting and Management Accounting are as follows.1. Cost accounting deals with ascertainment , allocation , apportionment accounting aspect of costs.Management accounting deals with the effect and impact of costs on the business.2. Cost accounting provides a base for management accounting whereas management accounting is derived from cost accounting and financial accounting.3. Cost accounting does not include financial accounting , tax planning and tax accounting. Management accounting includes financial and cost...
Differences Between Financial Accounting And Management Accounting
Posted on 02:07 by Unknown
Main distinctions between Financial and Management Accounting.1. The main objective of financial accounting is to measure business income and communication of business information to the various categories of persons like management , creditors , suppliers , bankers , investors etc.whereas the main objective of management accounting is to help the internal management.2. The financial accounting deals with all the activities of the business , assesses results of the business as a whole and reveals the overall performance and position of the enterprise...
Sunday, 1 November 2009
Limitations Of Management Accounting
Posted on 21:37 by Unknown
Though management accounting is helpful tool to the management as it provides information for planning, controlling and decision making, still its effectiveness is limited by a number of reasons. Some of the limitations of management accounting are as follows:1. Based On Accounting InformationManagement accounting is based on data and information provided by financial accounting and cost accounting. As such the correctness and effectiveness of managerial decisions will depend upon the quality of data provided by cost and financial accounts. So,...
Merits Of Management Accounting
Posted on 21:18 by Unknown
Following advantages from the management accounting system may enjoy by a business:1. Management accounting analyze and interpret systematically the information collected from within and outside the business and communicate the result to the management. This will help in implementing managerial policy decision effectively.2. Management accounting helps in comparing actual performance with the budgeted standard and reporting management by deviations of corrections.3. All the business activities are planned well ahead base on the accounting information...
Scope Of Management Accounting
Posted on 20:42 by Unknown
The scope or field of management accounting is very wide and broad based and it includes a variety of aspects of business operations. The main aim of management accounting is to help management in its functions of planning, directing, controlling and areas of specialization included within the admit of management accounting. The scope of management accounting can be studied as follows:1. Financial AccountingFinancial accounting forms the basis for analysis and interpretation for furnishing meaningful data to the management. The control aspect is...
Functions Of Management Accounting
Posted on 03:04 by Unknown
Key functions of management accounting1. Forecasting and planning.2. Co-ordinating.3. Organising.4. Controlling.5. Financial Analysis and interpretation.6. communications.7. Motivating.8.Decision maki...
Role Of Management Accounting
Posted on 02:57 by Unknown
The main objectives or roles of management accounting are as follows.1. Assistance in planning and formulation of future policies.2. Management accounting helps in controlling performance.3. Management accounting helps in interpretation of financial information.4. Management accounting helps in coordinating operations.5. Management accounting helps in organising.6. Management accounting helps in evaluating the efficiency and effectiveness of policies.7. Management accounting helps in motivating employees.8. Management accounting helps in the solution...
Concept And Meaning Of Management Accounting
Posted on 02:33 by Unknown
Management accounting is the presentation of accounting information in such a way as to assist management in the creation of policy and the day to day operation of an undertaking.Management accounting relates to the use of accounting data collected by financial and cost accounting for the purpose of policy formulation, planning , control and decision-making by the top management. Management accounting uses all techniques of financial and cost accounting to help management to make decision in a scientific mann...
Differences Between Financial Accounting And Cost Accounting
Posted on 02:08 by Unknown
The main differences between financial accounting and cost accounting are given as under.1.Financial accounting provides information about the business in general way.Financial accounting tells about the profit and loss and financial position of the business.Cost accounting provides information to the management for proper planning,control and decision making.2. Financial accounting classifies,records and analyses the transactions in subjective manner or according to the nature of expenses.Cost accounting records the expenditure in an objective...
Concept And Meaning Of Cost Accounting
Posted on 01:51 by Unknown
Cost accounting has been developed due to limitations of financial accounting. Financial accounting is concerned with record keeping directed towards the preparation of Profit and Loss Account and Balance Sheet. It provides information regarding the profit and loss which is helpful for the management to control the major functions of business like finance , administration , production and distribution.But details regarding operating efficiency to these divisions are lacking in financial accounting.Cost accountancy is the application of costing...
Concept And Meaning Of Financial Accounting
Posted on 01:34 by Unknown
Financial accounting is a branch of accounting which is concerned with the preparation of financial statements for decision makers. Financial accounting is used to prepare accounting information for internal and external users. Therefore financial accounting may be defined as the process of summarizing financial data and publishing annual reports for the benefit of the people inside and outside the organizati...
Saturday, 31 October 2009
Limitations Of Financial Statements
Posted on 21:33 by Unknown
The financial statements suffer from the following limitations:1. Financial statements include the quantitative information which is expressed in monetary units. They do not provide any qualitative information which may have greater impact upon the decision makers.2. Financial statements record and reveal only the historical data in nature. They do not include any future possible results.3. Financial statements are strictly confined within the boundary of some accounting principles. They are used as the guidelines in recording and reporting the...
Importance Of Financial Statements
Posted on 21:17 by Unknown
Financial statements are the important sources of information to all the users of accounting information like; management, owners, debtors, creditors, employees, government agencies, financial analysts, etc. The following are the points which highlight the importance of financial statements:1. Financial statements are the summary of information relating to profitability, and resources owned by the firm.2. Financial statements provide the information which can be compared with those of other firms.3. Employees can use financial statements to...
Concept, Features And Objectives Of Financial Statements
Posted on 20:44 by Unknown
Concept Of Financial StatementsPast events and performances serve as background for making projections if they are to be realistic.The financial statements provide important information concerning past financial transactions and their effects om the profitability and the financial position of the business. Various users of financial statements such as owners , investors , creditors , management etc. must make an analysis of financial statements to make right decision. Therefore financial statements are the means of conveying to owners , management...
Limitations Of Accounting
Posted on 20:27 by Unknown
The followings are the main limitations of Accounting.1. Accounting records only those transactions which can be measured in monetary terms.2. Accounting transactions are recorded at cost in the books.The effect of price level changes is not brought into the books with the result that comparison of the various years becomes difficult. For example, the sale to total asset in 2009 would be much higher than in 2002 due to rising prices , fixed assets being shown at the cost and not at market price.3. Accounting statements are prepared by following...
Internal Users Of Accounting Information
Posted on 20:13 by Unknown
Internal users of accounting information are persons related to the organisation itself.1. Owners : Business owners want to know whether their funds are being properly used or not. Accounting information helps them them to know the profitability and the financial position of the concern in which they have invested their funds.2. Management: Accounting information is called the eyes and ears of management.It helps a manager in appraising the performance of the subordinates.3. Employees : Employees of the organisation can get the actual information...
Users Of Accounting Information
Posted on 19:48 by Unknown
The basic objective of accounting is to provide information which is useful for persons inside and outside the organisation.Accounting provides the information to the external and internal users which may base decisions that results in the allocation of economic resource in society.External users of accounting information are those groups or persons who are outside the organisation for whom accounting function is performed.Internal users of accounting information are those persons or groups who are inside the organisati...
External Users Of Accounting Information
Posted on 19:48 by Unknown
Accounting provides the information which is useful for persons or groups inside or outside the organisation.External Users of accounting information :1. Investors : Those who want to invest money in an organisation want to know the financial health of the organisation. They need accounting information which will help them in evaluating past performance and future prospects of the organisation.2. Creditors : Creditors means supplier of goods and services on credit , banks and lenders of money who want to know the financial position of a concern...
Classification Of Accounting
Posted on 19:37 by Unknown
Accounting may be classified into the following types.1. Financial Accounting:Financial accounting is maintained to record business transactions in the books of accounts so that operating results and financial condition for a particular period on a particular date can be known.2. Cost Accounting:The process of accounting for cost which begins with recording of expenditure and ends with the preparation of statistical data is called cost accounting.3. Management Accounting:IManagement accounting is related to the use of accounting data collected...
Functions Of Accounting
Posted on 00:17 by Unknown
Accounting has to perform two distinct functions.1. Historical Function Of AccountingHistorical function of accounting relates to recording , classifying , summarising , analysing and interpreting past transactions. This functions reports at regular intervals to managers , owners and other parties by means of financial statements.2. Managerial Function Of AccountingManagerial function of accounting is helpful in planning future activities of the organisation and in controlling daily operations by comparing the actual results with pre-determined...
Friday, 30 October 2009
Objectives Of Accounting
Posted on 23:57 by Unknown
The main objective of accounting is to provide information about the financial condition of the organisation to internal and external users.Other objectives of accounting are as follows.1. Accounting helps on making decisions concerning more rational acquisition of limited resources through better decision choices.2.Accounting helps for efficient use of available resource through prompt detection of inefficiencies.3.Accounting helps for more equitable distribution of resources.4.Accounting helps to make policy decisions relating to change...
Introduction Of Accounting
Posted on 23:23 by Unknown
Concept And Meaning Of AccountingAccounting may be defined as the systematic recording , summarizing and analyzing of financial transactions and reporting the results.The main purpose of accounting is to show the exact financial condition of the business .Accounting helps to ascertain profit or loss during a specified period.It also helps to have control over the firms property.Therefore accounting is the art of recording and classifying business transactions and events in monetary terms.In the recent years accounting is defined as the art of communicating...
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