IPO - Initial Public Offering also referred to simply as a
"public offering" or "flotation".
IPO -when a company issues common stock or shares to the
public for the first time.They are often issued by smaller,
younger companies seeking capital to expand, but can also be
done by large privately-owned companies looking to become
publicly traded
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Contigent liability is the liability which may or may not occur.To be more clear on this one your are giving bank surity to your friend, it will be reflect in your books as contigent liability. if your firend repays the bank loan without any defaults then that liability will not affect you. If he fails to repay the amount you are the one suppose to repay that loan. So at that point of time that loan will be
liability for you. This liability is said to be as contigent liability.
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When we receive the stock from vendor if we have received excess stock then send it back to vendor after passing the bill in our books, later material is not required as per our internal purpose then we will pass the debit note.
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The literal meaning of both the terms are taken to be the
same. When the goods are kept in the warehouse to be
released to the shop for selling it is called as INVENTORY.
When inventory comes into the shop for selling to the
ultimate consumers it is known as stock. In other words,
goods when in warehouse/godown are called INVENTORY and on
the other hand goods when in the shop for sales are called
STOCK. To conclude, Inventory is the phenomenon between
warehouse/godown and shop/selling point. Stock is the
phenomenon between shop/selling point and the buyers
ultimate consumers.
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1) contra entry means the transaction from bank to cash and
cash to bank in F4 in tally.
2) Contra entry refers to entry passed for the transaction
which affects both bank & cash Ledgers and the entry should
be posted to both cash and bank.
In Tally Contra Vouchers included only Ledgers related to
Cash and Bank, & allowed enties related to bank and cash
only eg: Transfer from 1 bank to another bank, Depositing
to bank, withdrawing from bank, & transfering of cash to
petty cash.
3) contra entry is passed in following cases
1)when there is a transaction between two different banks
i.e transfer of funds from one bank to another or,
2)cash withdrawn from bank or,
3)cash dedposited in bank or,
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An invoice or bill is a commercial document issued by a
seller to the buyer, indicating the products, quantities,
and agreed prices for products or services the seller has
provided the buyer. An invoice indicates the buyer must pay
the seller, according to the payment terms. The buyer has a
maximum amount of days to pay these goods and are sometimes
offered a discount if paid before
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Cost Centre is a segment of a business or other organization
in which costs can be segregated, with the head of that
segment being held accountable for expenses. Cost centers
are established in large organizations to identify
responsibility and to control costs.
Each department/division, project, office, factory, section
in a department, a process line in a factory can be a cost
centre. it may differ from company to company and may not be
uniform over different industries, companies, etc. The
purpose of cost centre segmentation is identification,
fixation of responsibility and control of costs as also
matching revenue-cost wherever possible. It also helps in
employee performance appraisal.
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Cash Flow Statement : Statement showing changes in inflow &
outflow of cash during the period.
Funds Flow Statement :Statement showing the sorce &
application of funds during the period
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Amalgamation means merging the company to the another
company or one company takes over other company.
For Example:-
A ltd. takes over the company B ltd. It means B ltd
amalgamated with A ltd.
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CAPITAL BUDGETING = INVESTING IN LONG TERM ASSETS
Definition:
Capital: Fixed Assets used in production.
Budget : Plan of In - And outflows During Some
Period.
Capital Budgeting: Process Of Viable Investment Projects
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Salary a/c Dr
To Salary payable a/c
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Global Depositary Receipt (GDR) is a certificate issued by
a depository bank, which purchases shares of foreign
companies and deposits it on the account. GDRs represent
ownership of an underlying number of shares.
Global Depository Receipts facilitate trade of shares, and
are commonly used to invest in companies from developing or
emerging markets.
Prices of Global Depositary Receipt are often close to
values of related shares, but they are traded and settled
independently of the underlying share.
Several international banks issue GDRs, such as JPMorgan
Chase, Citigroup, Deutsche Bank, Bank of New York. GDRs are
often listed in the Frankfurt Stock Exchange, Luxembourg
Stock Exchange and in the London Stock Exchange, where they
are traded on the International Order Book (IOB). Normally
1 GDR = 10 Shares, but not always.
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BRS means analysis and adjustment difference between the
cash shown on a bank statement, and the amount shown in the
account holder's records. This matching process involves
making allowances for the cheques issued but not yet
presented, and cheques deposited but not yet cleared or
crideted. And, if discrepancies persist, finding the cause
and bringing the records into agreement
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amortization usually refers to spreding an intangible asset cost over the asset's useful life.
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Cash a/c dr 2350
To bad debts
recovered 2350
(being B.D recovered)
Read more:
http://wiki.answers.com/Q/What_is_the_journal_entry_for_Bad_Debt_Recovery_of_2350_which_was_debited_to_the_bad_debts_recovered_account#ixzz1JQGnGrFQ
Transfer entry
Bad debts recovered a/c dr 2350
To P&L a/c 2350
(Being B.D recovered
transferred to P&L a/c)
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Complex of facilities,organizations and trained engaged in
providing healthcare with geographical area.
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1)We can not post depreciation entry on land
We can post depreciation entry other than land
Ex Depreciation a/c Dr XXXX
To Plant & Machenary a/c XXX
To Vehicles a/c XXX
etc........
2)YOU CAN POST YOUR DEPRECIATION ENTRY IN JOURNAL VOUCHER.
DEPRECIATION ENTRY IS UNDER
DEPRECIATION AIC DR. 500000/-
TO BUILDING AIC 200000/-
TO CAR A/C 100000/-
TO MACHINERY AIC 200000/-
(BEING DEPRECIATION CHARGE ON BUILDING,CAR & MACHINERY)
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Reimbursement is the act of compensating someone for an
expense[citation needed]. Often, a person is reimbursed for
out-of-pocket expenses when the person incurs those
expenses through employment or in a account of carrying out
the duties for another party or member.
Common examples are firms compensating individuals who buy
supplies for their companies, or firms compensating
employees on field or out-of-town assignments who pay for
their stay and transportation.
Reimbursement can be of many types like day care, mobile
expense, transport, medical expense, study expenditure
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Pre Paid Expenses or Pre Post Expenses mean expenses of
next year is to be paid in current year means insurance of
building vehicle etc. cover current & next year. So this
year insurance exp. & next year exp. is pre paid exp.
all expnses which is paid in advance or incured during the
accounting periode but the benefit against these expenses
is not received is know as prepaid expneses.
For Exaple: Prepaid insurance, prepaid rent, prepaid mobile
bill etc
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1. Material (which u r getting material name) A/C Dr. XXX
To GRN A/C Cr. XXX
(Being Material received.)
2. GRN A/C Dr. XXX
Vat Recoverable Dr. XXX (If Inside state Purchase)
To Party XXX
To TDS Contractor Payable
(Being stock received from the party)
Inventory a/c has been hit
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Debit the reciver, Credit the Giver
Debit all expenses, Credit all incomes
Debit what comes in credit what goes out
Personal a/c- Debit the receiver of benefit, Credit the
giver of benefit.
Real a/c- Debit what comes in, Credit what goes out.
Nominal a/c- Debit all expenses and losses, Credit all
incomes and gains.
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Mainly there are four types of bank accounts. They are
Fixed or terms deposit
Savings deposit
Current deposit or current a/c
Recurring deposit or a/c
Savings deposit
Current deposit or current a/c
Recurring deposit or a/c
open cash credit account
foreign curreny non resident a/c
escrew a/c
Savings account
• Transactional account
• Joint account
• Low-cost account
• Time deposit / certificate of deposit
• Numbered bank account
• Negotiable Order of Withdrawal account
• Automatic transfer service account
• Money market deposit account
• Individual Savings Account
• Tax-Exempt Special Savings Account
• Transaction deposit
• Nostro and vostro accounts
• personal account
• Overdraft Free Account
These are all kinds of accounts found. But all are not
popular. For more information refer to wikipedia.org. You
will find all the answers.
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Fixed asset means Fixed Investment with Assets i.e. Plant &
Machinery, Electrical Installation, Vehicles, Land &
Building etc
the asset which generate long term revenues more than one
accounting
These assets are held by the business for more than one
accounting period. fixed assets may be two types.
Tangible assets
intangible assets
Irrespective of nature and type of business, there are two
types of Assets. They are fixed assets and Current Assets.
Current assets are those assets which can be easily
converted into cash within a period of generally say one
year. Fixed Assets are those assets which can be touched,
felt and can be seen. The Benefits of fixed assets can be
derived more than one accounting period i.e, the benefit
can be derived for more than 12 months. Examples of Fixed
Assets are Plant & Machinery, Furniture, premises, Vehicles
etc.,
fixed assets are those which cannot be converted into
cash....fixed assets remains for a considerable period of
time..example of fixed assets are land
&buildings,furniture,machinery etc.....
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Bridge Loan is a loan taken by the borrower of a bank or
financial institution which is the lendor to the
borrower.The loan taken to meet the requirements in the
period between the approval,sanction and disbursement of
the loan.It carries a higher rate of interest than the
normal one.It is generally adjusted or set-off against the
loan disbursed.
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Minority intrest in busness is a ownership of a company
that is less then 50% of oustanding shares
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The process of converting the financial transactions into
financial statements is ruled by principles called
accounting concepts and conventions:
• Business Entity Concept
• Dual Aspect Concept
• Accrual Concept
• Money Measurement Concept
• Matching Concept
• Conservative Convention
concepts are going concern concept,cost concept,business
entity concept.
conventions are convention of disclosure,convention of
conservatisim
Accounting Concepts
1-Business Entity COncept
2-Dual Aspects Concepts or Accounting Equation Concepts or
Balance Sheet Concept
3-Going Concern COncept
4-COst COncept
5-Money Measurement COncept
6-Accounting Period Concept
Accounting Conventions
1-Convention OF consistency
2-Convention OF disclosure
3-Convention OF Materiality
4-Convention OF Conservatism
Accounting Concepts
The American Institute of Certified Public Accountants
defines accounting as “the art of recording, classifying and
summarising in a significant manner and in terms of money
transactions and events, which are, in part at least, of a
financial character, and interpreting the results thereof “.
A business house must necessarily keep a systematic record
of its day-to-day transactions to enable stakeholders to get
a complete financial picture of the company and to take
stock of its financial position on a periodic basis.
Stakeholders include the company’s promoters, shareholders,
creditors, employees, government and the public.
The accounting practice is based on certain standard
concepts, which enable accountants to convey meaningful
information to all stakeholders. These concepts are as
follows: -
· The business entity concept – According to this, the
business is treated as a distinct entity from its owners.
This enables the business to segregate the transactions of
the company from the private transactions of the proprietor(s).
· The money measurement concept – Only those transactions,
which are expressed in monetary terms are recorded in the
books of accounting. Money is the common unit, which enables
various items of diverse nature to be summed up together and
dealt with.
· The cost concept – The transactions are recorded at the
amounts actually involved. For instance, a piece of land may
have been purchased at Rs.1,50,000, whereas the company
considers it to be worth Rs.3,00,000. The land is recorded
in the books of accounts at Rs.1,50,000 only. Thus, an
arbitrary valuation of the company’s assets is avoided by
recording the value at the actual amount involved. Since
this amount would have been mutually agreed upon by both the
parties involved in the transaction, it is an objective
valuation.
· The going concern concept – According to this concept, it
is assumed that the business will exist for a long time and
transactions are recorded on this basis. This concept forms
the basis for the distinction between expenditure that will
yield benefit over a long period of time and expenditure
whose benefit will be exhausted in the short-term.
· The dual aspect concept – Business firms raise funds in
any of the following ways–
o Additional capital (increase in owners’ equity)
o Earning revenue (increase in owners’ equity)
o Profits (increase in owners’ equity)
o Additional loans (increases outside liability)
o Disposing off assets (reduces assets)
An increase in liabilities (including owners’ equity) and
reduction in assets represent sources of funds. These funds
can be put to any of the following uses –
o Purchasing of assets (increase in assets)
o Cash balances (increase in assets)
o Operational expenses (decrease in owners’ equity)
o Clearing liabilities due (decrease in liabilities)
o Losses (decrease in owners’ equity)
All increases in assets and decreases in liabilities
(including owners’ equity) represent the uses of funds.
The sum of the sources of funds equals the sum of the uses
of funds. Thus, the dual aspect of accounting means that
Owner’s Equity + Outside Liability = Assets
This is the fundamental accounting equation.
· The realisation concept – Accounting records transactions
from the historical perspective, i.e. it records
transactions that have already occurred. It does not attempt
to forecast events; this prevents the business from
presenting inflated profits based on their expectations. A
transaction is recorded only on receipt of cash or a legal
obligation to pay. Until then, no income or profit can be
said to have arisen.
· The accounting period concept – Business firms prepare
their income statements for a particular period. This
period, known as the accounting period, is usually the
calendar year (January 1 to December 31) or the financial
year (April 1 to March 31). Some firms, like trading firms
have shorter periods such as a month or less, while others
may have longer terms. The Companies Act, 1956 has set a
maximum limit of 15 months for the accounting period.
· The matching concept – According to this concept, expenses
borne in the production of goods and services should be
matched with revenues realised from the sale of these goods
and services. This helps determine the profits or losses for
a particular accounting period.
· The conservatism concept – According to this concept,
revenues should be recognised only when they are realized,
while expenses should be recognized as soon as they are
reasonably possible. For instance, suppose a firm sells 100
units of a product on credit for Rs.10,000. Until the
payment is received, it will not be recorded in the
accounting books. However, if the firm receives information
that the customer has lost his assets and is likely to
default the payment, the possible loss is immediately
provided for in the firm’s books.
· The consistency concept – Once the firm adopts a
particular method for a particular event, it will handle
subsequent events of that type the same manner. For
instance, suppose it provides for depreciation through the
straight-line method, it will follow that method in the
subsequent years as well, unless it has sufficient reason to
change the method.
· The materiality concept – According to this concept, the
firm need not record events, which are insignificant and
immaterial. For instance, if a large manufacturing firm has
accounts receivables worth crores of rupees, it would not
find it necessary to provide for a possible bad debt worth
Rs.100.
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Journal Entries of transactions relating to investment
1. When investment is purchased interest date
Investment account Debit ( Quoted price + brokerage ) X No. of investment
bank account Credit
2. When interest or dividend is received after purchase
Bank Account Debit
Investment Account Credit
3. When investment is sold at interest date
Bank Account debit
investment account Credit
4. For transfer of interest or dividend to profit and loss account at the end of year ( but there is no need to enter this entry in tally 9 because tally 9 automatically transfer to profit and loss account )
Interest account or dividend account debit
Profit and loss account credit
5. Pass the journal entry of profit on sale of investment in manual or tally 9 both
Investment Account Debit
Profit and loss account Credit
6. At end of year show investment at cost price or market price which is less as asset in balance sheet ( but need no do in tally 9)
Example
On 1st jan 2008 S.P. Ltd purchase 1000 15 % debentures of Reliance Ltd. Of Rs. 100 each @ Rs. 96 each . On 1st july 2008 , ½ of debentures were sold at Rs. 99 each . Debenture interest is payable half yearly on 30th june and 31st December . Pass voucher entries in tally 9
Working notes
1) Interest on 30th june 2008 will be received 15% on Rs 100000 for 6 months interest = Rs. 100000 X 15/100 X 6/12 = Rs. 7500
2) ½ of debentures were sold @ Rs. 99 . Therefore sale proceeds will be Rs. 99 X 500 = Rs. 49500
3) Interest on 31st December 2008 will be received @ 15% on Rs. 50000 for 6 months . Interest = Rs. 50000 X 15/100 X 6/12 = Rs. 3750
4) profit on sale of investment = 49500-48000 = Rs. 1500
For recording above transaction in tally 9
1) First of all create S.P. Ltd in tally 9
2) Activate interest calculation in feature F11
3) Create ledger of 15 Debenture in reliance Co. account under investment account , bank account under bank account , Interest account under indirect income .
4) Pass the voucher entry of purchasing investment in payment voucher, sale of investment in receipt voucher and interest received on investment is in receipt voucher and profit on sale of investment transfer to profit and loss account in journal voucher
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Before doing Accounting treatment of investment we should understand the meaning of following accounting terms which will use when will do accounting treatment.
☼ What is Investment ?
Investment are those assets of businessman by which he earn dividend , interest , rent or profit due to increase the value of investment .
Current stock is not called investment because businessman purchases them for selling, in other words, the do business of that stock.
Generally businessman invests money in property and building so, these are the basic investments.
According to Accounting Standard 13 “Investment is the assets held by enterprise for earning income by way of dividends, interest and rent."
☼ Types of Investment
Investment may be short term or long term.
We can also include shares, debentures, and bonds and mutual funds of other company, if we purchase them for the purpose of earning of interest or dividend from them.
☼ Type of Business
1. Commodity business: - These are general type of business which deal in products but invests his extra money in different property, shares and bonds.
2. Financial business: - If any business which deal in the trading of shares, or debentures or any other fixed property. Then his work is to purchase and sale of such product and earn profit from them. This is special case . According to AS -13 , at this time , these products will deem as his stock item not investment .
☼ Com- Interest Investment
When a businessman buys investment include its cost and accrued interest . Then this investment is called com-interest investment .
So it is the duty of accountant to separate both .
Calculation of accrued interest = face value of security purchase X period( months )
_________________________________________________________
12 X 100
Calculation of cost of investment = ( Quotation price X No. of security purchase ) – Accrued interest as per calculated
☼ Ex- Interest Investment
When businessman buys investment on its cost and gives accrued interest amount extra to the seller .
☼ Nominal Value
Nominal Value is face value of security . This is so important in investment accounting . Because interest is calculated on nominal value of security
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Before knowing the accounting treatment of provident fund , we must know the basic detail of Provident fund in India and what is its important from accounting point of view. This will be the helpful for fresher accountants in the field of accounting .
Employees Provident Fund
Employees provident fund is the fund which is created for the social security and retirement benefits for the employees. Different Countries organizations are created this for the benefits of employees.
Employees' Provident Fund Organisation of India
EPFO , India Established in 1952 consequent to the enactment of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The head office of the Organisation is in New Delhi. [1].
Presently, the following three schemes are in operation under the Act:
1.
Enrolment: An employee is eligible for membership from the day he joins the covered establishment.
•If the employee’s emoluments exceed Rs. 6,500/- per month, he has the option to join the Scheme(s) with the consent of employer.
•Declare previous employment details, if any, in Form No. 11 to the employer.
On becoming a member of the Schemes file details in Form No. 2 ( family particulars/ nominations) through the employer.
•Rate of contribution payable by a member shall be @ 12% of his emoluments.
A member can contribute statutorily over and above the prescribed rate.
•In provident fund includes three scheme
•The Employees Provident Fund Scheme, 1952
•The Employees Family Pension Scheme, 1971
•The Employees Deposit-Linked Insurance Scheme, 1976
6. Calculation of Provident Fund from Basic Salary
Employee
Both Employer and employee give their share in this fund . Currently employee gives 12% of his basic salary in this employee provident fund .
Employer
Employer is also responsible for contribution in employees provident fund for the benefit of employees .
•The rate are given following on basic salary .
3.67% Provident Fund (A/c 1) + 8.33% Pension (A/c 10) + 1.10% Admin Charges onPF (A/c 2) + 0.50% EDLI (A/c 21) + 0.01% Admin Charges on EDLI (A/c 22)
Total employee’s provident fund
Now total is equal to = Employee’s contribution + Employer’s contribution
Total provident fund = 13.61% on basic salary
Pension (8.33% or 541/- which ever less)
7. Regular activities:
employer is responsible for given information and following forms
•Time of joining:- Form
•Employee should fill, at the time of joining, nomination & Declaration form.
•Form 2, includes the following· Name of the employee· Parent/spouse name· Date of Birth· Sex· Marital Status· AC No· Address· Names, address, relation, Share for each etc Also for changing nominee names Form 2 is used. His eligibility begins on the date of joining the firm.
Submitted along with form-5. Withdrawers/Dead :
•Form 10c (pension) &
•19 PFForm 19 is used for withdrawing PF amount. Employee and parent/spouse name, name of the establishment, Ac no, Reasons for leaving service, Contribution for current financial year etc.
•Form 10 is used for pension withdrawal.
•Form 19: Employee should fill, all information like Bank a/c, name, DOJ…with signature and then Employer like present year contributions, DOR…for PF Fund – Due date: After 60 Daysof Resignation)
•Transfer :- Form 13Form 13 is used for transferring an employee AC from one company to another. Both employer and employee have to specify his name, PF AC no, Position etc and submitted with a covering letter (consolidated list of employees). Photocopy of the above is kept in PF file for transfer.4. Employee register 3A, 65. For advance : Form 316. In case of employee expired / dead :
•Process detailsForm 10 D (For claiming benefits under Pension)Employee should fill like Expired/late employee name, nomination name, details, Nomination Bank a/c…for monthly Pension
•Form 20 (For Claiming EPF Contributions)Employee should fill like Expired/late employee name, nomination name, details,Nomination Bank a/c…for withdrawal of PF Fund (Incase of Death of a member
•Form 5 IF (For Claiming EDLI benefits, nominee will get benefit)EDLI for death case, nominee will get benefit.7.
•Form 9 (Register of employers - Application for review filed under)Monthly Remittance / Challans:1. Challans every month before 15th (4 copies/ quadruplicate)2. All A/c (A/c Nos-1,2,10,21&22)3. To Bank4. both employer & employee contribution· Account group no eg Ma mu 1246 (state-first two alphabets /city/acc no: of the company)· Month· Total number of subscribers· Total wages due for each account (wages on which calculations are done)· Each accounts totals (consolidated amount with employer and employee share)· Name of the establishment and address· Name and signature of the depositor· Name of the bank, mode and date of remittance etc
•Challan is submitted tp PF office along with form-12A every month.Monthly returns:1. Form 12 A, with all information and employees list of contribution before 25th2. With Form 5 (new joiners list) , form 10 (resigned employees list), challans copy3. Information about last month employees, new & resigned employees & this month staff.Form 5· Name of the establishment and address· Month· Code no: of the factory· A c no:· Name of new employees· Fathers or Husband name in case of married women· Date of birth· Sex· Date of joining the fund· Total period of previous services as on the date of joining the fund Form 10· Name of the establishment and address· Month· Code no: of the establishment· A c no:· Name of member who is leaving· Fathers or Husband name in case of married women· Date of leaving service· Reasons for leaving service· Signature of authorized officer and stamp of the establishment Cross checking the above is done with the salary statement which includes the number and name all current employees.Form 12 A:· Name of the establishment and address· Currency period and month (April yr to march yr)· Statutory rate of contribution (12%)· Group code (NA for unexampled establishment. Establishment having more than 1000 have to keep a PF trust and have to specify the group code)· Total wages due for each account (wages on which calculations are done)· Amount of contribution and amount remitted (consolidated amount with employer and employee share)· Date of remittance· Total number of subscribers for the current month.· Name and address of the bank in which the amount is remitted.· Details of subscribers for E.P.F, PF, EDLI--No of subscribers as per last month--No of new subscribers (vide Form 5)--No of subscribers left service (vide Form 10)--Total no of subscribers (After adding and subtracting the new and retired employees with,the number should tally with monthly list of employees)Cross checking the above is done with the salary statement.
Annul returns:
•Form 3 A (Individual Computation sheet)
•2. Form 6 A (Consolidated Annual Contribution Statement)
•3. before 30th April every yearForm 6A:· Currency period and month (April yr to march yr)· Name of the establishment and address· Code no: of the establishment· No: of member voluntary contributing at a higher rate· AC No of each employee followed by their name, annual salary, annual contribution, employer contribution, refund of advance, rate of voluntary contribution.· This grand total should tally with all form 12 A and challans totals.
•Form 3A: RegisterThis form is filled up for each employee stating his each monthly salary, contribution, Employer share, Refund of advance, No of days/period of non contributing service, if any (eg. unauthorised leave). If the employee is resigned during that financial year then the date of leaving service and reasons for leaving service should be specified in this form. Using Form 3A, form 6 A is filled up and crosschecking is done with all challans and 12 A forms.* Muster Roll * Wage Register * Inspection Book * Cash Book, Voucher & Ledger * PF work sheet Forms:Form 3: Contribution Cards - Individual Computation sheet contains all PF amts month-wise.
•Form 3 A: Contribution Cards – Form
•Form 4: Contribution card for employees other than monthly paid employees - Form Form 5 A: Return of Ownership to be sent to the Regional Commissioner - Form Form 6: Return of the Contribution Cards sent to the Commissioner on the expiry of the period of currency – FormForm 6 A: Consolidated Annual Contribution Statement - Consolidated Computation Sheet,contains total employees list, there total half yearly information.
•Form 6 is top sheet and 6A is attachments.
•Form 9: Register of employees - Application for review filed under.Register 3: Individual Computation, there Gross salary, Basic, DA, attendance, PF, Pension Information maintains month-wise.
•Form 3 is top sheet and 3A is attachments
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When you start your business large scale then you have to make the accounts of branch also. There are following way of maintaining branch accounting.
When our branches are not making full accounts of our branch and with rough information we make all accounts of branch in the head office.
♫ Steps for maintaining branch accounting
a) In that type of branches, it is necessary to make bank account in the name of head office so that amount got from cash sale can be deposited in head office bank account.
b) All miscellaneous expenses is given by head office accountant to branch accountant on impress or advance system of cash book.
c) All salaries, rent, advertising and other expenses must be paid by head office.
d) Head office can send goods to branch on cost price or invoice price.
e) It is necessary for branch to make the list of debtors if branch has all to sell the goods on credit .It is duty of branch accountant to send branch debtors list to head office weekly or monthly.
f) These branches can make memorandums in different registers.
On these memorandums and registers head office can make branch account
For making branch account in head office, we open each branch account in head office with given branch name
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When two firm amalgamate with each other , at this time we treat following accounting in the books of old firms so that all doubt solves .
1st
Revaluation of Assets and Liabilities
All entries same as at the time of admission and retirement
2nd
Transferring reserve to old partners capital account into their old ratio
3rd
treatment of Goodwill
We evaluate the goodwill according to the condition of agreement and then goodwill will open with agreed value int the books
4th
Treatment of Assets and liabilities not taken by new firm
If assets and liabilities are not taken by new firm , then these item will transfer to the capital accounts of partners of old firm and we close these accounts
A -Treatment of assets and liabilities taken by new firm (In the books of old partners)
a) For closing the account of assets
New Firms Account Debit
Assets Account Credit ( at revalued value)
b) For closing the accounts of liabilities
Liabilities Account Debit
New Firm Account Credit
6th
Closing the accounts of partners capital
Partner's capital account Debit
New Firms Account Credit
B - In the books of new firm
Assets Account Debit
Liabilities Account Credit
Partner's capital Account Credit
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When two or more firms merge into one firm and makes a new firm , then this is called amalgamation of firms . For accounting point of view this definition is so important because if one firm purchases other firm , then this is not called amalgamation but if both firms decide to join or integrate then this is called amalgamation .
For Example
Suppose A and B firm decide to close their business and start the business with the name of AB firm after joining with each other then this is called amalgamation of A and B firm
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When two or more partner decides to change their capital according to their profit and loss ratio , then it is necessary to make capital adjustment in the form of cash .
I explain it with an example
Suppose one partner A who invested Rs. 100000 and other partner B invested Rs 200000 . If they decides to divide their capital in their profit sharing ratio and suppose their profit and loss sharing ratio is 1:1 then we calculate total capital first that is Rs.300000 and if we divide into ½ and ½ , it will be 150000 and150000 to A and B so A will invest more 50000 Rupees and B will withdraw Rs . 50000 because his old capital excess Rs.50000 from his new capital .
Then the journal entry will pass in the books of account
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This account is very useful for calculating the profit or loss when partners decides to reconstruct their partnership firm . When a new partner comes in firm or exit from firm , making of this account is very necessary , I am giving the proforma of this account
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This account is very useful for calculating the profit or loss when partners decides to reconstruct their partnership firm . When a new partner comes in firm or exit from firm , making of this account is very necessary , I am giving the proforma of this account
Revaluation account
Dr. side
To Asset ( decrease in the amount of certain asset )
To Liabilities ( increase in the amount of any certain liabilities )
To Liabilities ( if any liability have but not recorded in books )
To transfer of profit to partner in old ratio
(if credit side is more than debit side )
Cr. Side
By Asset ( increase in the amount of certain asset )
By Liabilities ( Decrease in the amount of any certain liabilities )
By Asset ( if any asset have but not recorded in books )
By transfer of profit to partner in old ratio
(if debit side is more than credit side )
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Correct calculation of goodwill is very difficult work. But with using correct formulae of specific method , you can easily calculate goodwill . There are four methods to calculate goodwill .
Ist Method
Average profit method
In this method, we calculate previous year’s profits average and then we multiply it with number of purchase years.
2nd Method
Super profit method
In this method, we calculate normal profit with normal rate on investment. Then we calculate super profit with following formula.
Super profit = actual profit – normal profit
or
Super profit = average profit - normal profit
Goodwill = super profit X No. of purchase years
3rd Method
Capitalization method
In this method, we calculate capital employed with following formula
Capital employed = average profit or normal profit X 100/ Rate
Goodwill = capital employed – Net Assets
4th Method
Annuity Method
In this method we first of all calculate annuity . Annuity means annual value . These day , accountant are using different annuity tables for calculating annuity , after this they can easy calculate goodwill with following formula .
Goodwill = Super profit X Annuity
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Balance sheet is main part of financial statement . This is necessary to make it . Making of balance sheet is very easy but you must know the rule of making balance sheet . In Right side we will have to show all assets and in the left side we will have to show all liabilities . If you want to see the proforma of Google Inc.'s balance sheet ,
Balance Sheet Get Balance Sheet for:
http://finance.yahoo.com/q/bs?s=goog&annual
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I am writing very simple method for correcting the mistakes and error in books of accounts
All work must be done on rough paper or notepad .There are the part of working notes .
Ist step
What is the mistake or error .
Write it as wrong record of ledger accounts or wrong journal entry .
2nd step
What should be the correct entry or what should record which is correct according to the nature of error of accounting . Write it in second step
3rd step
Best rectification of error or write the rectification entry in such a way so that difference will be auto correct .
I take an example
XYZ co. purchased machinery of $ 5000 but by mistake this amount was debited in purchase account .
Ist step
Wrong entry
Purchase account debit $ 5000
Cash Account Credit $ 5000
2nd step
Correct entry
Machinery Account Debit $ 5000
Cash Account Credit $ 5000
3rd Step
Rectification of error entry
Machinery account Debit $ 5000
Purchase account Credit $ 5000
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Rectification of errors is very tough work . It is main duty of chartered accountant of any country . A lot of errors can be done by accountant . So C.A. audits the full accounts and if he see any error , his duty to see that why it happen and how can rectify this so that profit or loss or financial position do not affect of this happenings .
To day my main aim is not write just article on this topic but actually , I want to give you simple way to correct your accounts error forever .
Read following lines very seriously and concentrately :-
1. first of find out your error and mistake from accounts.
2. write what is the mistake or incorrect journal entry or incorrect accounts .This error may affect one account or two account note it .
3. Write correct journal entry or make correct account in rough page.
4. in rough page , you will also have to do treatment of your mistake.
suppose you wrote 1000Rs. as sake instead of RS.2000 sale which was correct .
Its wrong is journal entry is
cash account Dr. 1000
To Sale account 1000
In rough paper you should also write correct journal entry
Cash account Dr. 2000
To sale account 2000
Then now your are analyst you should see that 1000 is less in both side so for making the correctness pass another journal entry of 1000 Rs.
Cash account Dr. 1000
To Sale Account 1000
This entry is called rectify entry
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Before making of provision of bad debts accounts , you must understand the concept of provision , reserve etc. Because without understanding these you cannot understand the concept of making of provision of bad debts accounts .
Meaning of provision or reserve
When we start our business , we faces certain losses like bad debts , depreciation or discount so if we do not keep some part of our cash or profit in cash form in business pocket , we can face the problem of lack of money for operational requirement , so we take future planning and after scientific estimation we makes provision of reserve of our losses on the certain percentage of loss it may be 5% or 10% or 15 % . This is called provision or reserve of loss .
•Making of this account is very easy
•It will open with opening balance of provision for bad debts
•it will show in credit side of this account .
•In the debit side we will write actual bad debt of trail balance and outside
•in the debit side also writing new provision of bad debts with writing to balance c/d
•Balancing figure will be the amount of provision transferring to profit and loss account as loss written off .
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There are four latest method apply , if any body withdraws any fund or cash for personal use from his firm .
1.If any partner withdraws every month in the first day the he will pay to firm @ given rate for 6.5 months
2.If any partner withdraws every month in the middle of month , he will pay interest on drawing @ given rate for 6 months
3.If any partner withdraws every month in the end of month , he will pay interest on drawing @ given rate for 5.5 months
4.If any partner does not withdraw every month then his withdrawing month usage product will be calculated
suppose if he withdraw Rs.5000 in first of march then he will calculate product of
5000X10 =50000
after calculating product he calculate his payable interest on drawing @ given rate
= amount of product X R/100 X 1/12
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Suppose A and B are the partners . They do not have any partnership agreement . How will you solve the following disputes among them ?
a) A spent twice the time that B devoted to business .A claims that he should get a salary of Rs. 3000 per month for extra time spent Ans. No Salary will be given in the absence of any agreement .
b)B has provided a capital of Rs. 50000 where as A has provided only Rs. 10000 as capital . A however has provided Rs. 20000 as loan to firm . What interest if any will be given to A and B ?Ans. Only interest on loan @6% will be given
c) A wants to introduce his son Sunil into his business . B objects to it .
Ans. No new partner will be admitted
d) B wants that profit should be distributed in ratio of capital but A wants that it should be distributed equally
Ans.Profit should be shared equally in the absence of any agreement
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In the partnership accounting , all the final accounts are same as sole trade business final accounts . But main difference in these accounts are that In partner ship accounting , we make one extra account that is called profit and loss appropriation account which is used for calculating net share of profit or loss of different partner of a firm.
•This account is opened with credit balance of net profit ,
•In the debit side , we show interest on capital , salary and commission of partners and
•in credit side we shows interest on drawing , after adjusting these items , we transfer net profit to partners capital accounts in their profit sharing ratio
•In Absence of any partner ship deed Partner will divide profit or loss equally
•No interest on capital is given
•No interest on drawing is given
•No salary to any partner Interest on loan given by any partner is 6% annual.
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Making the accounts of Sport clubs or trust or society is very easy but you should know the way of maintaining it . First of all when you are making the accounts you must classify all the item in to capital and revenue nature . If expenses are in cash , so it must show in receipt and payment accounts , here do not see any nature because this account show all receipt of cash and bank from any source for business . Even if we get money through other person's credit card , then it will be deemed cash receipt . After this you can easily make income and expenditure account . This account shows net income or loss from club , so only all expenses which belongs to this year will send in expenses side of this account .It is not necessary that these are in cash it may also payable also .
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Manufacturing accounting means accounting relating to production or manufacturing. All accounting can divide also manufacturing and non manufacturing.
Accounting up to converting raw material to finished product includes in manufacturing accounting. We specially open manufacturer account for recording all items regarding production. In manufacture account we record direct material cost, labor cost and production overhead cost. Manufacture account is helpful to find out the value of cost of production which transfers to trading account. It is also part of financial statement.
Manufacturing account starts opening balance of raw material in its debit side.
Amount of purchase of raw material are also debited in this account and direct labour charges and other manufacturing overheads like, depreciation of plant, lighting of plant and factories other expenses will transfer to debit side of manufacturing account. In the credit side of manufacturing account we shows closing balance of raw material and work in progress and scrap sale. The difference of both sides is the cost of production which transfers to trading account’s debit side.
Manufacturing account is also helpful for finding the value of gross profit because gross profit is difference between cost of sale and sale value but cost of sale can not be calculated without finding the value of cost of production .So, factory accountant records every transaction relating to factory and one these voucher entry basis we find manufacture or manufacturing account
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Before doing accounting treatment of provision for doubtful debts , you must know the complete definition of provision . In accounting , it is a reserve that is against loss due to non payment of debtors . In case debtor does not give us our amount . Then if we have make provision or reserve for this , we can easily purchase new goods but if we have no money due to every year bad debts then we can become insolvent . So with our work experience we should make our provision on our debtors with some % on debtor .
Now you are ready for doing the accounting treatment of provision for doubtful debts .
First of pass the journal entry of actual bad debts .
Entry for recording actual bad debt which did not record in books of business
1. Bad debts account Dr. xxxxx
To Sundry Debtors Account xxxxxx
Entry for transferring bad debts to provision for bad debts Account
2. Provision for bad debts account Dr. xxxxxx
To Bad Debts account xxxxx
Transfer of provision for bad debts account to profit and loss account
3. Profit and loss account Dr. xxxxxx
To Provision for bad debts account xxxxx
It is not necessary that provision for doubtful debt account will go only to the debit side of this account but it may go to the credit side . It will decide after making provision for doubtful debt account . Which is very easy to make . I am showing you this account . After study of this account you can easily make this account and take the benefits of this provision
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Some people are coming from non medical and medical in field of accounting . There can easily learn tally and some basic rules of accounting From any coaching institute but they do not know the accounting treatment of outstanding expenses in book of accounts . Then I am training of this point at this time .
First of all I am telling you that outstanding expenses are those expenses which are payable but not paid , so it is our duty to record it at the closing of financial year .Dear friends according to the accounting principals any expenses paid or payble is the expenses of business , so when we makes profit and loss account of business , it must be added in paid expense and you can make journal entry in tally.
Expenses account dr. xxxxx
To outstanding expense account xxxxx
This entry automatically adjust your final account , you need not change your final accounts in tally . This is facility to you in using tally
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There are many adjustment because earlier we have not passed any journal entry , so at the time of making final account we have to adjust them .
Name of items
Adjustment entry
Effect on trading and profit and loss account
Effect on balance sheet
1. Closing stock
Closing stock account dr. xxx
To trading account xxx
Closing stock will write in the credit side of trading account
It will show as asset in the final account
2. outstanding expenses or expenses payable or expenses due but not paid
Expenses account dr. xxx
To outstanding exp. xxx
Outstanding expenses will add in expenses . if it is direct it will go to trading account’s debit side , if it is indirect nature then it will go to the debit side of profit and loss account
It will be the current liability so it will go to the liability side of balance sheet.
3. advance expenses
Advance expenses a/c dr. xxx
To expenses account xxx
It will deduct from respective expenses paid .
It will be the current asset so it will go to assets side of balance sheet
4. income receivable
Outstanding income account dr. xxx
To income account xxx
It will add in the income and go to credit side of profit and loss account
It will show as asset in the assets side of balance sheet
5. income received in advance
Income account dr. xxx
To advance income account xxx
It will deduct from the income received
It will shown as liability in the liabilities side of balance sheet
6 Goods use for personal use
Drawing account dr. xxx
To purchase account
It will deduct from purchase in the debit side of trading account
= purchase –drawing in goods
It will deduct from capital in the liabilities side of balance sheet
=capital- drawing in goods
7. Destroyed of goods
loss by fire or accident account Dr. xxx
To trading
If there is no insurance
It will also go to profit and loss account
Profit and loss account dr. xxx
To loss by fire / accident
It will shown in credit side of trading account
And also in profit and loss account’s debit side
It will not go to balance sheet
8. Depreciation
Depreciation account dr. xxx
To respective asset account xxxx
It will go to the debit side of profit and loss account
It will deduct from fixed asset . Because it decrease the value of asset
=fixed asset - depreciation
9. provisional for doubtful debts
If you have make any provision for doubt ful debts the its journal entry will passed
Provision for doubtful debt account dr. xxx
To Bad debts account xxx
( New bad debts which is not shown in trial balance will transfer to provision for doubtful debt account )
Net value of provision for doubtful debt account transfer to profit and loss account’s debit side
=total bad debt + closing balance or provision of doubtful debt or this year provision - opening balance of provision for doubtful debts
Deduct from debtor
= debtor – new bad debts – this year provision or closing balance of provision for bad debts
10. Commission to manager
Commission account dr. xxx
To outstanding commission
It will shown in the debit side of profit and loss account as o/s commission to manager
If it charge on the amount after charging such commission then we will calculate
= profit before commission X Rate/ 100+rate
It will shown as liability
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