AccountingQA Latest Questions

Anushka Lalwani
Anushka Lalwani
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  2. Radhika
    This answer was edited.

    Unrecorded Assets are the assets that are completely written off but still physically available in the company or assets that are not shown in the books of the company. Unrecorded assets are generally recorded or recognized at the event of admission, retirement, death of a partner when all the assetRead more

    Unrecorded Assets are the assets that are completely written off but still physically available in the company or assets that are not shown in the books of the company.

    Unrecorded assets are generally recorded or recognized at the event of admission, retirement, death of a partner when all the assets and liabilities are revalued or dissolution of the firm.

    Since Accounting Standards require firms to record all the assets and liabilities in their books, it is therefore mandatory to record such unrecorded assets.

    There can be two cases for treatment of such unrecorded assets:

    • Unrecorded Asset entered into the business and recorded in books
    Unrecorded Asset A/c (Dr.) Amt
     To Revaluation A/c Amt

    The unrecorded asset is now debited since it has to be recorded in the books now and Revaluation Account is credited since it is again for the business which will eventually be transferred to Partners’ Capital Account.

    • Unrecorded Asset taken over by a partner and paid cash   
    Cash A/c (Dr.) Amt
     To Partners’ Capital A/c Amt

    If a partner decides to take over an unrecorded asset then his account is credited with that amount and since cash paid by the partner comes into business Cash Account is debited.

    • Unrecorded Asset discovered during Dissolution
    Cash/ A/c (Dr) Amt
     To Realization A/c Amt

    When an unrecorded asset is discovered during the dissolution of the firm, such an asset is sold directly to the outsider and as a result, cash A/c is debited since the cash is entering the business. The entry is made through the Revaluation A/c and it is hence credited.

    Example:

    At the time of revaluation, firms find a typewriter that has not been recorded in the books and is valued at Rs 10,000.  The journal entry to record that typewriter will be:

    Typewriter A/c (Dr.) 10,000
      To Revaluation A/c 10,000

     

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Aadil
AadilCurious
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    In Tally, it is possible to record credit sales entry in the following accounting vouchers: Sales Voucher  Journal Voucher Generally, sale entries whether credit sales or cash sales are recorded in the Sales vouchers. Also, I strongly recommend you to record sales entries in the Sales voucher only aRead more

    In Tally, it is possible to record credit sales entry in the following accounting vouchers:

    • Sales Voucher 
    • Journal Voucher

    Generally, sale entries whether credit sales or cash sales are recorded in the Sales vouchers. Also, I strongly recommend you to record sales entries in the Sales voucher only as it can record various aspects related to credit sales like the sales order number, delivery note number, particulars of creditor and much more.

    In this answer, I have shown the steps to record a credit sales entry into the Sale voucher. My answer is based on Tally Prime, the latest version of Tally. If you are using Tally ERP 9, there will be only a few areas of differences which are not that significant. 

    Steps to record credit sales in Sales voucher

    To record credit sales entry, you have to first open the Sales voucher creation window. To open the Sales creation window, the steps are as follows:

    Gateway of Tally → Voucher → Press F8 

    The Sales voucher creation window will open and will look like this:

    Now, there are three modes to the sales voucher which you can be accessed and changed from the ‘Change mode’ option in the right-hand side menu or by simply pressing Ctrl + H. Upon pressing Ctrl  + H, the Change mode option will open.

    I will recommend you to use ‘Item Invoice’ mode. It looks like an invoice and it is easier to use and understand. The image of the sale voucher given is in the item invoice only.

    Now to have to fill in the following details:

    • Reference number of the sale entry if there is any
    • Select the Party name or the name of the debtor (Press ALT + C if you want to create a new debtor)
    • The dispatch details menu will open. Enter the details if you want otherwise leave them blank.
    • The party details menu will open asking again for the party name and party’s other details.
    • Select the name of the item to be sold (Create stock item if not created before by pressing Alt + C when in Name of Item field)
    • Enter the quantity and rate of the item and the total amount will be auto-populated.
    • After it, the accounting details menu will open where you have selected the sales account you want to credit. If a sales account is not created, press ALT + C to create it.
    • Enter narration if you desire and finally accept the voucher.

    This is a completed sales voucher:

    Hence, this is how you have recorded a credit sales entry in the sales voucher.

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Anushka Lalwani
Anushka Lalwani
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A. Cash Book B. Statement C. Journal D. None of These

  2. Akash Kumar AK
    This answer was edited.

    The correct option is A) Cash book let's understand what is petty cash book: A petty cash book is a cash book maintained to record petty expenses. Petty expenses, mean small or minute expenses for which the payment is made in coins or a few notes or which are smaller denominations like tea or coffeeRead more

    The correct option is A) Cash book

    let’s understand what is petty cash book:

    • A petty cash book is a cash book maintained to record petty expenses.
    • Petty expenses, mean small or minute expenses for which the payment is made in coins or a few notes or which are smaller denominations like tea or coffee expenses, postage, bus or taxi fare, stationery expenses, etc.
    • The person who maintains the petty cash book is known as the petty cashier.
    • It is a simple process that helps organizations by focusing on major transactions as petty cashiers handle all small transactions.

     

    Generally, the petty cashbook is prepared as per the Imprest system. As per the Imprest system, the petty expenses for a period (month or week) are estimated and a fixed amount is given to the petty cashier to spend for that period.

    At the end of the period, the petty cashier sends the details to the chief cashier and he is reimbursed the amount spent. In this way, the debit balance of the petty cashbook always remains the same.

     

    The petty cash book has two columns in which

    • Cash received is recorded in the Left column i.e, “Receipts” or “Debit” column.
    • Cash payments are recorded in the Right column i.e, “Payment” or “Credit” column.

     

    Balance of Petty cash book

    The balance of petty cash book is never closed and their balances are carried forward to the next accounting period which is considered one of the most significant qualities of an asset whereas Income doesn’t have any opening balance and their balances get closed at the end of every accounting year.

    A petty cash book is placed under the head current asset in the balance sheet. The Closing Balance of the petty cash book is computed by deducting Total expenditure from the Total cash receipt (as received from the head cashier).

     

    Format for petty cash book

    Only small denominations are recorded in the petty cash book. It varies with the type, quantity, and need of a business. It involves cash and checks.

     

    • Ordinary Petty cash book:

     

    • Analytical Petty cash book:

     

    Conclusion

    A simple petty cash book is a type of cash book because it records the small expenses which involve small transactions in the ordinary daily business.

    A petty cash book is not as important as an income statement, balance sheet, or trail balance it doesn’t measure the accuracy of accounts so it is not treated as a statement.

    No journal entries are made in the books of accounts while spending or purchasing using a petty cash book so, it is not treated as a journal.

     

     

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A_Team
A_Team
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  2. Ishika Pandey Curious ca aspirant
    This answer was edited.

    Overview And Definition Shareholder's equity represents the net value of a company. As an accounting measure, shareholders’ equity (also referred to as stockholders’ equity) is the difference between a company’s assets and liabilities. It is also called the book value of equity. For example – retainRead more

    Overview And Definition

    Shareholder’s equity represents the net value of a company. As an accounting measure, shareholders’ equity (also referred to as stockholders’ equity) is the difference between a company’s assets and liabilities. It is also called the book value of equity.

    For example – retained earnings, common stock, etc.

     

    Liabilities

    Liabilities are the obligation or something a company or a person owes to another party. normally it is in cash form but it can be in other forms also.

    And these liabilities need to be settled as per the terms agreed upon by the party.

    For example – taxes owned, trade payables, etc.

     

    Assets

    Assets are those which has ownership of a company and controlling power with the company. In other words, Or something which will generate profits today and in the future.

    For example – cash, building, etc.

     

    Conclusion

    Therefore I can conclude that stockholders’ equity refers to the assets remaining in a business once all liabilities have been settled, or I can say as it is not the same thing as the company’s assets. Assets are what the business owns.

     

    How to Calculate Shareholders’ Equity

    Shareholders’ equity is the owner’s claim when assets are liquidated, and debts are paid up. It can be calculated using the following two formulas:

    Formula 1:

    Shareholders’ Equity = Total Assets – Total Liabilities

     

    Formula 2:

    Shareholders’ Equity = Share Capital + Retained Earnings – Treasury Stock

    Let me now take the example of a small business owner who is into the business of chairs in India.

    As per the balance sheet of the proprietorship firm for the financial year ending on March 31, YYYY, the following information is available. Determine the shareholders’ equity of the firm.

    Given, Total Assets = Net property, plant & equipment + Warehouse premises + Accounts Receivable + Inventory
    = Rs (1000,000 + 300,000 + 500,000 + 800,000)

    Total Assets = Rs 2600,000

     

    Again, Total liabilities = Net debt+ Accounts payable + Other current liabilities

    = Rs (700,000 + 700,000 + 600,000)

     

    Total Liabilities = Rs 2,000,000

    Therefore, the shareholders’ equity of the firm as on March 31, YYYY, can be calculated as,

    = Rs (2600,000 – 2,000,000)

     

    Shareholders’ Equity = Rs 600,000

    Therefore, the shareholders’ equity, as of March 31, YYYY, stood at Rs 600,000.

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Ishika Pandey
Ishika PandeyCurious
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  2. SidharthBadlani CA Inter Student

    A bills receivable book is a subsidiary book that shows the details of various bills receivables drawn on customers. It shows the amount, due date, date when the bill was drawn, name of the acceptor, and various other details pertaining to each bill. A bills payable book is a subsidiary book that shRead more

    A bills receivable book is a subsidiary book that shows the details of various bills receivables drawn on customers. It shows the amount, due date, date when the bill was drawn, name of the acceptor, and various other details pertaining to each bill.

    A bills payable book is a subsidiary book that shows the details of various bills that suppliers have drawn on the business. It shows the amount, due date, date when the bill was drawn, name of the drawer and various other details pertaining to each bill.

    The total of both these books is ultimately transferred to the general ledger. From there, it is used in drafting the balance sheet.

    Importance of bills receivable and bills payable books

    Bills receivable books help us know the amount that each customer is liable to pay us on specific dates while bills payable books help us know the amounts that we have to pay our various suppliers on certain dates.

    Together these books help us handle our cash flows in an efficient manner.

    We can evaluate our credit cycle. Bills receivable books help us avoid bad debts while bills payable books help us to avoid defaults.

     

    Difference between bills receivable and bills payable

    These are the primary differences between bills payable and bills receivable:

    • Bills receivable represent the amounts that the business is to receive from customers while bills payable represent the amounts that the business has to pay to suppliers.
    • Bills receivable are recorded as an asset in the balance sheet while bills payable are recorded as a liability.
    • Bills receivable are drawn by the business on the customers while the bills payable are drawn by the suppliers on the business.
    • Bills receivable are the outcome of credit sales while bills payable are the outcome of credit purchases.
    • Bills receivable result in an inflow of cash while bills payable result in an outflow of cash.
    • The dishonor of a bill receivable is recorded as an increase in the debtors of the business. Default on payment of bills payable may occur either because the business has become bankrupt or the business may record an increase in creditors.

    We can conclude that both bills receivable and bills payable books are subsidiary books. Bills receivable shows the details of every bill that the business has drawn on each credit customer. Bills payable show the details of every bill that each credit supplier has drawn on the business.

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Atreya
AtreyaCurious
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  2. Ishika Pandey Curious ca aspirant

    Definition A limited liability partnership (LLP)is a business vehicle like a partnership that features the partners ‘ liability is limited. Thus, it has elements of partnership and company. Another important feature of LLP is that each partner is not responsible or liable for another partner’s miscoRead more

    Definition

    A limited liability partnership (LLP)is a business vehicle like a partnership that features the partners ‘ liability is limited. Thus, it has elements of partnership and company.

    Another important feature of LLP is that each partner is not responsible or liable for another partner’s misconduct or negligence.

    LLP as constituted in INDIA:

    The limited liability partnership act, 2008 came into effect on 31st march, 2009. LLP is different from a partnership as it operates like a partnership, but in an LLP each partner is protected from personal liability, except to the extent of his capital contribution in the LLP.

    • LLP is subject to income tax like any other partnership firm.

    • A partner is not liable for independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner‘s wrongful business decisions or misconduct.

    • LLP is a body corporate and legal entity separate from its partners. It has perpetual succession like a limited liability company.

    Indian partnership act 1932 is not applicable to LLPs and also the limit on the number of partners in an LLP is not applicable, unlike an ordinary partnership firm where the maximum number of partners cannot exceed the number specified under SEC 464 of Companies Act 2013, which at present is 50.

    The LLP Act, 2008 specifies that a least one of the partners in the LLP is a citizen of India and an Indian national.

    • The Registrar Of Companies ( ROC) is authorized to register and control LLPs.

     

    Characteristics

    • Separate legal entity :

    Like a company, LLP also has a separate legal entity. Therefore partners and LLP are distinct from each other, like a company where the company has a legal entity separate from its shareholders.

    • Minimum capital :

    LLP is not required to maintain minimum capital. Thus partners in LLP decide how much capital will be contributed by each partner.

    • The Minimum number of members :

    An LLP can be established with at least two members who shall also be the designated partners and shall have Director Identification Number (DIN).

    There is no limit on the maximum number of partners. Members other than designated partners are required to have DIN.

    • Audit is not mandatory :

    All companies, whether private or public, are required to get their accounts audited. However, an audit of LLP‘s books of accounts is not mandatory except :

    • If the contribution of the LLP exceeds Rs 25 lakhs: or
    • If the annual turnover of the LLP exceeds Rs 40 lakhs.

     

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Aditi
Aditi
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  2. Mehak
    This answer was edited.

    What is Inventory? Inventory refers to the stock of goods or raw materials a business uses to produce the final goods sold to the customers. What is the Inventory Turnover Ratio? Inventory Turnover Ratio is the financial ratio that shows how efficiently a business sells and replenishes its inventoryRead more

    What is Inventory?

    Inventory refers to the stock of goods or raw materials a business uses to produce the final goods sold to the customers.

    What is the Inventory Turnover Ratio?

    Inventory Turnover Ratio is the financial ratio that shows how efficiently a business sells and replenishes its inventory. It shows how well a business manages its inventory.

    Inventory Turnover ratio is calculated as follows:

    Inventory Turnover Ratio = Cost of goods sold / Average Inventory 

    where Average Inventory = (Inventory at the beginning of the year + Inventory at the end of the year) / 2

    If inventory turnover is high, it means products are selling quickly. But if it’s too high, the company might not have enough stock, leading to fewer sales.

    If turnover is low, there are slow sales or too much stock. That can lead to higher storage costs and obsolete products. It is important to find the right balance between the two.

    Why is the Cost of Goods Sold taken as a numerator instead of revenue while calculating the Inventory Turnover Ratio?

    The cost of goods sold is the sum of all the direct costs involved in the production of goods. On the other hand, Revenue is the total amount of money earned through the sale of goods and services.

    The cost of goods sold (COGS)  includes materials, labor, and overhead costs. Inventory consists of these costs and hence, it is better to take (COGS) as the numerator.

    Revenue, however, considers things like markups, discounts, and other adjustments that don’t directly relate to the actual cost of inventory.

    Let us understand it better with the help of an example:

    Suppose the opening inventory is 20,000 and the closing inventory is 10,000. Average inventory can be calculated as (20,000 + 10,000)/2 = 15,000.

    If the cost of goods sold is 45,000 the Inventory turnover ratio comes out to be 45,000/15,000 = 3.

    On the other hand, if the revenue of 60,000 is taken as the numerator, the Inventory turnover ratio comes out to be 60,000/15,000 = 4

    A high inventory turnover ratio shows that the inventory is moving faster than it is which is misleading for the stakeholders.

    Hence, the Cost of goods sold is taken as the numerator for the calculation of the Inventory turnover ratio.

     

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