The following are the important entries which are made in the journal properOpening EntriesAll the assets and liabilities of the previous year are required to be carried forward to current year by passing entries. Such entries are called opening entries and passed through the journal proper. The assets are debited and liabilities are credited while passing opening entries. The excess of assets over liabilities is credited to capital account.Closing EntriesThe entries prepared for closing different ledger accounts in the process of preparing final...
Tuesday, 29 June 2010
Monday, 28 June 2010
Concept And Meaning Of Journal Proper
Posted on 00:21 by Unknown
Journal proper is one of the important journals or subsidiary books. It is a subsidiary book in which not all but only a few types of transactions are recorded. There are certain types of transactions which are not recorded in other subsidiary books but are recorded in the journal proper. These transactions, for example, include the transactions relating to drawings, outstanding expenses, accrued incomes, reserves, provisions, interest on capital, drawing of goods and assets by proprietor, loss of goods by some reasons, and credit purchase and...
Sunday, 27 June 2010
Importance And Methods Of Preparation Of Trial Balance
Posted on 23:44 by Unknown
Importance Of Trial BalanceThe trial balance is important due to the following reasons* Trial balance summarizes all the financial transactions of the business.* Trial balance provides a check on the arithmetical accuracy of recordings of all the financial transactions of the business.* Trial balance helps in locating errors by providing a starting point for the location of errors committed if any.* Trial balance provides a basis for the preparation of final accounts.Methods Of Preparation Of Trial BalanceThe following are the methods of preparing...
Objectives Of Trial Balance
Posted on 23:27 by Unknown
The following are the important objectives of trial balance1. To Check The Arithmetical AccuracyTrial balance is based on the double-entry principle of debit equals credit or credit equals debit. As a result, the debit and credit columns of trial balance must always be equal. If they do, it is assumed that the recordings of financial transactions are accurate. Conversely, if they do not, it is assumed that they are not arithmetically accurate. Therefore, one important purpose of preparing trial balance is to provide a check on the arithmetical...
Concept And Meaning Of Trial Balance
Posted on 22:27 by Unknown
Trial balance is an important statement prepared under the double-entry system. The fundamental principle of the double-entry system is that for every amount of debit there is an equal amount of credit and vice verse. This principle provides a check on arithmetical accuracy of the recording of financial transactions in different books such as journal and the ledger. Such a check can be performed by preparing a statement called trial balance. Trial balance is a statement prepared taking up the debit and credit totals or balances of all ledger accounts...
Preparation Of Bank reconciliation statement
Posted on 22:11 by Unknown
The following procedures are followed while preparing the bank reconciliation statement:* Compare cash book and pass book items.* Give sign to all the items of cash book and pass book which are matched with each other.* Make a list of unmatched items found in cash book and pass book.* Prepare bank reconciliation statement taking balance either from cash book or pass book as a basis.* Adjust the items which cause the disagreement in the balances. Add the items which have decreased the balance on the book with which reconciliation is to be made....
Reasons For Disagreement Between Cash Book And Pass Book Balances
Posted on 22:01 by Unknown
The following are the important causes or reasons for the disagreement between the balances shown by the pass book and cash book.1. Cheques issued but not presented for payment.2. Cheques paid or deposited but not collected and credited by the bank.3. Interest credited by the bank but entered in cash book.4. Bank charges, commission and interest in overdraft debited by the bank but not entered in cash book.5. Expenses directly paid by the bank on behalf of customer but not recorded in cash book.6. Incomes directly collected by the bank on behalf...
Needs And Importance Of Bank Reconciliation Statement
Posted on 21:53 by Unknown
Bank reconciliation statement is an important technique by which the accuracy of the bank balance shown by the pass book and cash book is ensured. The need and importance of bank reconciliation statement can be summarized in the following points.* Bank reconciliation statement ensures the accuracy of the balances shown by the pass book and cash book.* Bank reconciliation statement provides a check on the accuracy of entries made in both the books.* Bank reconciliation statement helps to detect and rectify any error committed in both the books.*...
Saturday, 26 June 2010
Concept And Meaning Of Bank Reconciliation Statement
Posted on 22:48 by Unknown
A modern business performs its transactions through bank. It generally receives cash through bank deposits and makes cash payments by issuing cheques. In order to keep records of its transactions, it maintains a cash book with bank columns. It is in fact the bank account in the books of the business. On the other hand, bank also maintains the customer's account in its books. Whenever the business opens an account in the bank by depositing some amount, the bank provides it with a cheque book to facilitate the withdrawal or payment of cash, and a...
Thursday, 24 June 2010
Types Of Petty Cash Book
Posted on 22:55 by Unknown
The following are the types of petty cash book1. Simple Petty Cash BookA simple petty cash book is one in which there is only one amount column on its both sides with common date and particular column. The debit column is used for entering the balance of cash in the hand of petty cashier at the beginning of the period and the amount received from the head cashier. The credit amount column is used for entering the petty payments in order of date. It is balanced like a ledger account.2. Analytical Petty Cash BookAn analytical petty cash book is...
Meaning Of Petty Cash Book, Its Importance And Advantages
Posted on 00:30 by Unknown
Meaning Of Petty Cash BookA petty cash book is one in which all petty or small payments made through petty cash fund are recorded systematically. Petty cash book is maintained by the petty cashier. Petty cash book can be maintained either in a simple or in analytical way.Importance And Advantages Of Petty Cash BookBusiness performing a large number of petty transactions usually maintain a separate petty cash book. The following points highlight the importance and advantages of petty cash book which can be taken as its objectives as well.* Petty...
Wednesday, 23 June 2010
Concept And Meaning Of Petty Cash Fund And System Of Petty Cash
Posted on 23:44 by Unknown
Petty cash fund is a certain amount of fund which is kept aside for paying all small or petty expenses, like bus fare, cartage, postage stamp etc. that cannot be paid particularly through cheque. The amount of fund is availed to a separate staff who is known as petty cashier by debiting petty cash account and crediting cash account.System Of Petty CashThere are two types of petty cash. One is ordinary and another is imprest system as explained below:1. Ordinary System Of Petty CashUnder it, the petty cashier is given a certain amount of cash for...
Concept And Meaning Of Dishonor Of Cheque And Reasons For Dishonor
Posted on 23:16 by Unknown
The bank should pay the amount mentioned on the cheque as soon as it is presented. If the amount of cheque is paid by the bank to the payee, the cheque is said to be honored. If the bank refuses to pay the amount of cheque, then the cheque is said to be dishonored. Thus the dishonored of the cheque means the refusal by the bank to pay the amount of cheque to the payee. It is a condition in which the bank does not pay the amount of the cheque to the payee. In fact, when the drawer draws the cheque without following all the rules of issuing cheque...
Tuesday, 22 June 2010
Rules For Drawing A Cheque
Posted on 01:59 by Unknown
If the drawer makes the cheque properly and if the balance of the drawer at the bank permits, the bank must pay the amount of cheque as soon as it is presented. If the drawer does not make the cheque properly, the bank rejects payment. Hence, to make the cheque properly, the following points or rules must be considered.1. DateDate should be mentioned on the cheque properly. If the cheque is more than three months old or contains future date then the bank will not pay the amount.2. Name Of The PayeeThe name of the payee should be mentioned on the...
Parties To A Cheque Or Parties Involved In A Cheque
Posted on 01:45 by Unknown
There are three parties involved in a cheque. They are as follows1. Drawer:Drawer is the party who draws the cheque upon a soecified banker. He is the maker of the cheque. He is the account holder who draws the cheque for drawing money from his bank account. He is the person who issues cheque directing the bank to pay a certain sum of money to a certain person or to the bearer. Thus, the person who signs the cheque is known as drawer.2. DraweeDrawee is the party upon whom the cheque is drawn. Drawee is the bank. It is the party to whom the drawer...
Meaning And Characteristics Of Cheque
Posted on 01:27 by Unknown
Cheque is an important means of payment. Cheque is used for paying a large sum of money. It is the most widely used tool for drawing money from the bank. Cheque is used by the buyer or debtor to pay the due amount of goods to his seller or creditor out of his bank deposit. Cheque is a written order issued by a depositor to a particular bank directing it to pay a certain sum of money to a certain person or to the bearer of the cheque.Characteristics Of Cheque1. An Unconditional OrderThe drawer or the depositor should not lay down any condition in...
Concept And Types Of Bank Accounts
Posted on 00:46 by Unknown
Concept Of Bank Account In order to perform cash transactions through bank, a business requires to operate an account in commercial bank which is known as 'Bank Account'.Types Of Bank Accounts The following are the types of bank accounts in which amount can be deposited or cash transactions can be operated.1. Current AccountA current account is one in which there is no restriction in respect of the number of withdrawals and extent of the amount to be drawn. Mostly, it is operated by businessmen for the sake of convenience ans safety in handling...
Monday, 21 June 2010
Objectives And Importance Of Cash And Banking Transactions
Posted on 23:10 by Unknown
A business must have strict financial rules and accounting system to perform , record, report and control the cash and banking transactions. Proper recording and accounting of cash and banking transactions are important to achieve the following objectives.* To have systematic and permanent record of all cash and banking transactions in a separate book.* To obtain reliable and detailed information of all cash receipts and payments easily and immediately.* To keep effective control over misappropriation of cash and banking transaction.* To know the...
Concept Of Cash And Banking Transactions
Posted on 22:44 by Unknown
All financial transactions are ultimately settled in cash. Some transactions are settled immediately after purchase and sale and the rest are after few days. In fact, business transactions are settled sooner or later either in cash or through bank. Usually, small sums are settled in cash and large sums are settled through bank. There is a greater chance of misappropriating cash while performing cash and banking transactions. Cash can be misappropriated by showing no record or less record of cash receipts. Similarly, it can be misappropriated by...
Importance And Utility Of Ledger Accounts
Posted on 22:24 by Unknown
The following are the important utilities of ledger accounts1. Ledger account keeps a permanent record of all financial transactions in a classified manner.2. Ledger account shows detailed financial information of a business regarding debtors and creditors, assets, and incomes and expenses.3. Ledger account helps to prepare a trial balance in order to check the arithmetical accuracy of the recording of the financial transactions of the business.4. Ledger account helps to prepare profit and loss account so as to ascertain the profit or loss of the...
Objectives Of Ledger Accounts
Posted on 22:07 by Unknown
The following are main objectives of ledger accounts1. To Provide Classified Financial InformationThe ledger is a permanent book of record which contains a number of accounts of different subjects. Its purpose is, therefore to provide classified financial information about the subjects such as a person, asset and an expense or income.2. To Provide Check On Arithmetical AccuracyThe fundamental double-entry principle provides that debit is always equal to credit or vice verse. Since the ledger account is prepared under the double-entry system, it...
Meaning Of Ledger And Ledger Accounts
Posted on 02:10 by Unknown
The final destination of all entries made in the journal is the ledger as they are all subsequently transferred to it. The ledger is the most important book under the double-entry system. Ledger is a permanent book of record, which contains all accounts relating to the financial transactions of a business. Therefore, it is also called the book of accounts. An account contained in the ledger book is called ledger account. A ledger account is a statement shaped liked an English alphabet 'T' that systematically contains all financial transactions...
Rules Of Journalizing Or Rules Of Debit And Credit
Posted on 01:02 by Unknown
Under the double entry system, every financial transactions of a business has a double effect. That is, each transaction involves at least two accounts. One aspect of the transaction is debited in an account and the other credited in another account. The debiting and crediting of the accounts are done on the basis of certain rules. These rules are called rules of journalizing i.e debit and credit. There are two alternative bases for the rules of debit and credit such as follows.1. Rules Of Debit And Credit Based On The Types Of Account2. Rules...
Sunday, 20 June 2010
Meaning Of Journal,Its Objectives And Journalizing
Posted on 22:29 by Unknown
Accounting process starts with the identification of financial transactions of a business. Such financial transactions are recorded permanently in the books of accounts systematically in different specialized books. These books of accounts are called journal.The journal is an important book under the double-entry system. Journal is the first book of systematic record of the financial transactions of the business. Journal is called the book of original or prime entry, because its financial transactions are first of all recorded in this book as and...
Computation Of Accounting Equation
Posted on 22:11 by Unknown
The accounting equation shows that any point of time the total assets of a business are always equal to the total of its capital and liabilities. If, by a financial transaction, there is a change in the amount of assets there must be a corresponding change in the amount of either capital or liabilities or both. Therefore, double-entry book-keeping can also be seen as mainly a set of rules by which an increase in assets is connected with a corresponding decrease or with the balancing increase and/or decrease in equity. The set of can be stated in...
Concept And Meaning Of Accounting Equation
Posted on 02:08 by Unknown
One of the important features of double-entry book-keeping is that it makes a twofold or double effect. It implies that every financial transaction has a simultaneous effect on two separate accounts. Such an effect is always of equal amount. This gives rise to the fundamental principle of double-entry system. That is 'For every debit, there is a corresponding credit or vice verse', or Debit= Credit and Credit= Debit. With this fundamental principle, a relationship between three basic elements of accounting can be developed. The three basic elements...
Concept Of Accounting Process Or Accounting Cycle And Its Steps
Posted on 01:38 by Unknown
Accounting consists of a number of sequential steps of activities. Those include identifying, recording, classifying, summarizing and communicating financial transactions. The sequence of the steps to be followed in accounting activities is known as accounting process. The accounting process takes the form of a cycle. The sequential steps of accounting activities are taken in cyclical order. The cyclical order starts from the beginning of the transaction till financial results are derived by preparing final accounts at the end of the accounting...
Importance And Advantages Of Double-entry Book-keeping
Posted on 01:10 by Unknown
The following are the main advantages of double-entry book-keeping:1. ScientificThe double-entry book-keeping system is a scientific system of book-keeping. Double-entry system has its own set of principles and rules. Under those principles and rules, two aspects of every financial transaction are recorded.2. SystematicA systematic technique is followed in recording financial transaction in double-entry book-keeping system. It records financial transactions in a systematic and chronological order with suitable narration of the financial transaction.3....
Features Of Double-entry Book-keeping
Posted on 00:46 by Unknown
The following are the main features of double-entry book-keeping system1. Two AspectsThe double-entry book-keeping recognizes that every transaction has two aspects. It is based on the fact that a transaction is an exchange and every exchange involves either two things, or two persons, or a thing and a person. Furthermore, if business makes a transaction, the business will be either the benefit receiver or benefit giver.2. Debit And CreditThe double-entry book-keeping system provides the two aspects of the transaction with the names 'debit' and...
Concept And Meaning Of Double-entry Book-keeping
Posted on 00:31 by Unknown
Book-keeping is an act of keeping permanent records of the financial transactions of a business in a systematic and orderly manner. The financial transactions of the business are identified, recorded and classified in different books. In modern entities, records of financial transactions are maintained under a double-entry system. The double entry system has been recognized as a systematic and complete system for recording financial transactions. Double-entry system recognizes that every financial transactions has two aspects. It then records two...
Wednesday, 9 June 2010
Basic Concept About The Absorption Of Overheads
Posted on 01:18 by Unknown
The absorption of overheads is also known as the recovery of the overheads. Absorption of overheads is the process of sharing the overhead costs by all the products of a particular department. Absorption of overheads is the application of overheads to each unit of output. In other words, the process of ascertaining the total overhead costs of each unit of output or job by using overhead rate is known as the absorption of overhead. Thus the distribution of the overhead expenses allotted to a particular department over the units of produced in that...
Basic concept Of Allocation Of Overhead And Apportionment Of Overheads
Posted on 00:38 by Unknown
Allocation Of OverheadsOverheads are common costs incurred for the benefits of a number of costs centers or cost units. Therefore, they can not be identified and allocated directly to a particular unit of output. As such, they are to be allocated among the units of output of a particular department or a number of departments or cost centers.Allocation of overheads is the process of charging overhead costs to a particular department or cost center. It is the allotment or assignment of an overhead cost to a particular cost unit. If the overhead cost...
Classification Of Overheads Based On Control
Posted on 00:21 by Unknown
Control of cost is one of the prime concerns of management. There are some expenses which can easily be controlled by the management while some other cannot be. From the point of view of cost control, overheads can be divided into two types:1. Controllable OverheadsControllable overheads are the indirect expenses which the management of a manufacturing concern can keep under its control, as they are influenced by its decisions. Therefore those overheads which vary due to the management decisions are called controllable overheads. The examples of...
Tuesday, 8 June 2010
Classification Of Overheads Based On Element
Posted on 23:55 by Unknown
Based on the components or elements, overheads can be classified as indirect materials, indirect labor and other indirect expenses. This classification is also known as classification of overheads according to their nature or sources. Each element of such overheads is described below:1. Indirect MaterialsAll materials other than direct ones are indirect materials. Indirect materials do not form the part of the finished products. They can not be identified with or traceable to a particular cost unit or cost centers. They cannot be allocated but...
Classification Of Overheads Based On Behavior
Posted on 22:51 by Unknown
This classification is based on the behavior or variability of overheads. Such a classification of overheads is based on change in the amount of overheads with the change in output. According to this classification, there are four types of overheads:1. Fixed OverheadsFixed overheads are also called period costs or capacity costs. Fixed overheads are incurred for creating an output capacity of the concern for a fixed period of time. They are the costs which remain fixed or constant in total despite changes in the volume of production or sales. Fixed...
Thursday, 3 June 2010
Classification Of Overheads Based On Functions
Posted on 00:23 by Unknown
A manufacturing concern carries out mainly two types of functions. These are manufacturing and non-manufacturing functions. Manufacturing functions are concerned with converting raw materials into finished goods while non-manufacturing functions are concerned with general administration, selling and distribution of goods. The organization incurs several indirect expenses while performing such manufacturing and non-manufacturing activities. The classification of overheads with reference to these major functions of the organization is functional...
Wednesday, 2 June 2010
Meaning And Classification Of Overheads
Posted on 22:26 by Unknown
A manufacturing concern incurs different items of costs while converting raw materials into finished outputs. Such costs can be classified on different basis. One such basis is the directness of the costs to the product unit or identifications of costs with a particular product unit.For example, raw materials can be directly identified with the product unit, whereas consumable stores or cotton waste can not be directly identified with any product unit. On this basis, therefore, the cost can be classified into direct costs and indirect costs. Hence,...
Subscribe to:
Posts (Atom)