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Astha
AsthaLeader
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Consignment
  2. Naina@123 (B.COM and CMA-Final)
    This answer was edited.

    Consignment is "goods sent by its owners to his agent for the purpose of sale". In simple language, the word consignment means to send goods to another person for sale on his behalf without transfer of ownership. In accounting terms, consignment is the process where the owner (consignor) transfers tRead more

    Consignment is “goods sent by its owners to his agent for the purpose of sale”. In simple language, the word consignment means to send goods to another person for sale on his behalf without transfer of ownership.

    In accounting terms, consignment is the process where the owner (consignor) transfers the possession of the goods to the agent (consignee) to make a sale on his behalf while the ownership of goods remains with the owner until the sale is made by the agent. In return, the agent receives an agreed percentage of the sum in the form of commission. 

    Generally, there are two parties involved in consignment, those are as follows:

    1. CONSIGNOR: the person who is the owner and sender of goods.
    2. CONSIGNEE: the person who receives goods for sale/resale from the consignor in exchange for a percentage of the sale or on an agreed sum known as commission.

    The relationship between consignor and consignee is that of principal and agent.

    Let me give you a simple example of how consignment works.

    Mr. John (consignor) sends goods to Mr. Jeh (consignee) worth Rs 20,000 to sell these goods at a cost plus 10%. Mr. Jeh agrees to sell these goods on his behalf for a commission of 1% on the sale. Therefore Mr. Jeh sold these goods at the agreed amount i.e Rs 22,000 [20,000+ 10% of 20,000] and charges Rs 220 [1% of Rs 22,000] as commission made on such sale and remit the remaining balance to the owner Mr. John.

    There is a lot of confusion regarding “is consignment the same as the sale of goods?“. The answer is NO.

    The reason what makes it different from the sale is

    a) In sale the ownership gets transferred from seller to buyer but in case of consignment the ownership remains with the consignor until the sale is made by the agent.

    b) In sale the risk gets transferred with the transfer of goods, whereas in consignment the risk remains with the owner till the sale is made.

    c) Also goods once sold cannot be returned on damages /defaults, but in case of consignment goods that come to be faulty can be returned to the consignor.

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Karan
Karan
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  2. prashant06 B.com, CMA pursuing
    This answer was edited.

    The journal entry for a loan to an employee is as follows: Loans to employee A/c                                            …..Dr xxx             To Bank/Cash A/c xxx (Being loan given to employee) From the above journal entry, we see that there are two accounts-first one is "Loan to employee accounRead more

    The journal entry for a loan to an employee is as follows:

    Loans to employee A/c                                            …..Dr xxx
                To Bank/Cash A/c xxx
    (Being loan given to employee)

    From the above journal entry, we see that there are two accounts-first one is “Loan to employee account” and the second one is “Bank/cash account“. Both are assets for the company.

    Loan to employees is considered an asset because they are expected to be returned by the employee within the stipulated time period. If the loan is repaid within one year it will be shown under the current asset and if it is not expected to be collected within a year or in short might be repaid after a year then it will be shown under long-term assets.

    Also, we all know Bank/cash is an asset for the company.

    Why loan to employee A/c is debited and Bank/cash A/c is credited?

    As per the modern rule:

    ASSETS
    Increase Debit
    Decrease Credit

    Connecting the above-stated entry with the modern rule “loan to an employee” is debited as money comes back into the business hence there is an increase in an asset therefore debited. While in the second case “bank/cash account” is credited as the money goes out of the business, there is a decrease in assets of the company therefore credited.

    Loan to employee The inflow of cash in a future date Increase in an asset Debit
    Bank/ cash The outflow of cash Decrease in an asset Credit

    We notice that in this entry there is an increase in one asset while a decrease of another asset. Therefore the impact on the balance sheet is Nil.

    Let me give you a simple illustration of the above entry

    Mr. Ross was an employee of Maxwell Pvt ltd. Mr. Ross was lent Rs 2,00,000 by the company for some emergency purpose. So as per modern rules the accounting entry in the books of the company will be as follows:

    Loans to Mr. Ross A/c                                            …..Dr 2,00,000
                To Bank/Cash A/c 2,00,000
    (Being loan given to Mr. Ross)
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A_Team
A_Team
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  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
    This answer was edited.

    IND AS 102: ‘Share-based payments’ in its actual text is considerably lengthy and very detailed. The objective of my answer is to provide a basic understanding of what IND AS 102 is all about. Further reading of the actual text is suggested for a more detailed understanding. IND AS 102 is the IndiaRead more

    IND AS 102: ‘Share-based payments’ in its actual text is considerably lengthy and very detailed.

    The objective of my answer is to provide a basic understanding of what IND AS 102 is all about. Further reading of the actual text is suggested for a more detailed understanding.

    IND AS 102 is the India specific version of IFRS 2 which deals with the accounting of Share-based payments. IND AS 102 and IFRS are almost similar.

    It deals with the financial reporting of the share-based payment transactions entered into by an enterprise in the following cases:

    1. Transactions with suppliers of goods or services that are settled by share-based payments.
    2. Transactions with employees of the enterprise in nature of Employee Stock Option Plan.

    Share-based payments are of three types:

    • Equity settled share-based payment: It is a transaction in which an entity receives goods or services from the supplier of those goods and services (including an employee) and settles it by issuing equity instruments of the entity or its parent entity.

     Example: A business acquires an asset for Rs. 1,00,000 and makes payment by the issue of its equity shares.

    • Cash settled share-based payment: It is a transaction in which an entity incurs a liability and settles the transaction by paying cash or other assets based on the price of the equity instruments of the entity or group’s entity.

    Example: A business acquires an asset for Rs. 1,00,000 and makes payment in amounts of case based upon its share price.

     

    • Share-based payment transaction with cash alternatives:- In this case,  either the entity or the counterparty has the option of settling the transaction either through with issue of equity or payment of cash by incurring liability.

     

    Things that are not under the scope of IND AS-102

    • Transactions with parties who are acting in the capacity of shareholders.
    • Where a business acquires net assets of a business in case of amalgamation, joint venture etc and issues shares as consideration.

    Recognition

    In a share-based transaction,

    • goods and services are to be recognised when the goods or services are received by the entity.
    • Also, the corresponding increase in equity in equity-settled transactions or liability in the cash-settled transactions is to be recognised.

    Measurement

    The amount at a share-based transaction is to be recorded depending upon the type of counterparty:

    1. Non-employee counter-party: The transaction will be measured based on the fair value of the goods or services received on the date when the goods or services are received.
    2. Employee counter-party: The transaction is to be recorded at the fair value of the equity instruments as on the grant date because the services rendered by the employee cannot be recorded reliably.

    I hope this is enough for a basic understanding of the IND AS 102.

     

     

     

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A_Team
A_Team
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A. Original B. Duplicate C. Personal D. Nominal

  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)

    The correct option is (A) Original. Journal entry is the book of the original entry. It is because every event or transaction which is of monetary nature is first recorded in the journal. The transactions recorded in the journal are known as journal entries. Journal follows the double-entry system oRead more

    The correct option is (A) Original. Journal entry is the book of the original entry. It is because every event or transaction which is of monetary nature is first recorded in the journal. The transactions recorded in the journal are known as journal entries.

    Journal follows the double-entry system of accounting. It means a journal entry affects at least two accounts. It is from the journal entries, the ledger accounts are prepared. For example, the transaction, ‘sale of goods for Rs 1000 for cash’ affects two accounts. The journal entry is:

    There are many special journals that record some special set of transactions which are called subsidiary journals or daybooks. Such special journals are not considered the books of original entry.

    Option (B) Duplicate is wrong. It is because the journal is the book where monetary events and transactions are recorded. It cannot be the book of duplicate entries. There is no such thing as ‘book of duplicate entry.’

    Option (C) Personal is wrong. Personal is a type of account under the golden rules of accounting. A personal account is a type of account that represents a person. But, the journal is not an account, it is a book. Also, there is no such thing as book of personal entry.

    Option (D) Nominal is wrong. Nominal is also a type of account under the golden rules of accounting. The nominal account is a type of account that represents an income, expense, gain or loss. Journal is a type of account but a book.

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AbhishekBatabyal
AbhishekBatabyalHelpful
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  2. PriyanshiGupta Graduated, B.Com
    This answer was edited.

    Income derived from farming land, building constructed or associated with farming land, and commercial products from farming land is called agricultural income. According to Section 10(1) of the Income Tax Act, agricultural income is exempt from tax. However, the government can levy tax if agricultuRead more

    Income derived from farming land, building constructed or associated with farming land, and commercial products from farming land is called agricultural income.

    According to Section 10(1) of the Income Tax Act, agricultural income is exempt from tax. However, the government can levy tax if agricultural income is above Rs 5,000.

    Following are the sources to be considered for agricultural income according to the conditions mentioned in Section 2 (1A) of the Income Tax Act:

    • Revenue generated through rent or lease of land in India that is used for agricultural purposes.
    • Revenue generated through the commercial sale of produce gained from agricultural land.
    • Revenue generated through the renting or leasing of buildings in and around the agricultural land subject to the following conditions:
    • The cultivator or farmer should have occupied the building, either through rent or revenue.
    • The building is used as a residential place, storeroom, or outhouse.
    • The agricultural land or the land where the building is located, is being assessed for land revenue or subject to a local rate assessed.

    If the land does not fall under the provisions stated above, the Income Tax Act requires a separate evaluation to calculate tax.

    The Income-tax Act has laid down a method to indirectly tax such income.
    This method or concept is called the partial integration of agricultural income with non-agricultural income. It aims at taxing the non-agricultural income at higher rates of tax.

    Partial integration of agricultural income with non-agricultural income involves the following steps:

    1.  For example, the base income of the individual is Rs. 20,000 and agricultural income is Rs 10,000, then we first have to calculate tax on Rs 30,000. For convenience, we can call this tax T(30,000)
    2. Assuming that the income falls under tax slab A, this tax slab A has to be added to the agricultural income and tax has to be calculated on it as well and it is called T(S+10,000).
    3. The final tax on the individual’s income will be T(30,000)- T(A+10,000)

    The important step to keep in mind is to aggregate the agricultural income while calculating tax otherwise it can lead to double taxation, extra tax, or interest on tax.

     

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Pooja_Parikh
Pooja_Parikh
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  2. Rahul_Jose Aspiring CA currently doing Bcom
    This answer was edited.

    Depreciation is an accounting method that is used to write off the cost of an asset. The company must record depreciation in the profit and loss account. It is done so that the cost of an asset can be realised over the years rather than one single year. Furniture is an important asset for a businessRead more

    Depreciation is an accounting method that is used to write off the cost of an asset. The company must record depreciation in the profit and loss account. It is done so that the cost of an asset can be realised over the years rather than one single year.

    Furniture is an important asset for a business. As per the Income Tax Act, the rate of depreciation for furniture and fittings is 10%. However, for accounting purposes, the company is free to set its own rate.

    JOURNAL ENTRY

    Journal entry for depreciation of furniture is:

    Here, depreciation is debited since it is an expense and as per the rules of accounting, “increase in expenses are debited”. Furniture is credited because a “ decrease in assets is credited”, and the value of furniture is reducing.

    TYPES OF DEPRECIATION

    Furniture can be depreciated in any of the following ways:

    • Straight-Line Method – It is calculated by finding the difference between the cost of the asset and its expected salvage value, and the result is divided by the number of years the asset is expected to be used.
    • Diminishing Value Method – It is calculated by charging a fixed percentage on the book value of the asset. Since the book value keeps on reducing, it is called the diminishing value method.
    • Units of Production

    For accounting purposes, the two many methods used for depreciating furniture is the straight-line method and the diminishing value method. However, for tax purposes, they are combined into a block of furniture, where the purchase of new furniture is added and the sale of furniture is subtracted and the resulting amount is depreciated by 10% based on the written downvalue method.

    EXAMPLE

    If a company buys furniture worth Rs 30,000 and charges depreciation of 10%, then by straight-line method, Rs 3,000 would be depreciated every year for 10 years.

    Now if the company decided to use the diminishing value method (or written down value method), then Rs 3,000 (30,000 x 10%) would be depreciated in the first year, and in the second year, the book value of the furniture would be Rs 27,000 (30,000-3,000). Hence depreciation for the second year would be Rs 2,700 (27,000 x 10%) and so on.

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Jasmeet_Sethi
Jasmeet_SethiCurious
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  2. GautamSaxena Curious .
    This answer was edited.

    Fluctuating Capital Fluctuating capital is a capital that is unstable and keeps changing frequently. In the fluctuating capital, the capital of each partner changes from time to time. In partnership firms, each partner will have a separate capital account. Any additional capital introduced during thRead more

    Fluctuating Capital

    Fluctuating capital is a capital that is unstable and keeps changing frequently. In the fluctuating capital, the capital of each partner changes from time to time. In partnership firms, each partner will have a separate capital account. Any additional capital introduced during the year will also be credited to their capital account. In the fluctuating capital method, only one capital a/c is maintained i.e no current accounts like in the fixed capital a/c method. Therefore, all the adjustments like interest on capital, drawings, etc. are completed in the capital a/c itself.

    It is most commonly seen in partnership firms and it is not essential to mention the Fluctuating Account Method in the partnership deed.

    • All the adjustments resulting in a decrease in the capital will be debited to the partner’s capital, such as drawings made by each partner, interest on drawings, and share of loss.
    • Similarly, the activities or adjustments that lead to an increase in the capital are credited to the partner’s capital account, such as interest on capital, salary, the share of profit, and so on.

    Fluctuating Capital Account Format

     

     

     

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