AccountingQA Latest Questions

Jayesh Gupta
Jayesh GuptaCurious
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Receipts Amt Payments Amt To Balance b/d 85,000 By Doctors and Coaches Honorarium 25,000 To Subscription 68,500 By Medicines 15,500 To Entrance Fees 25,000 By Medical Equipment 30,000 To Life Membership Fees 30,000 By General Expenses 8,000 To Donations for tournament fund 20,000 By Furniture 20,000 To Sale of old Medical equipment (Book Value ...

  2. Manvi Pursuing ACCA
    This answer was edited.

    In the books of Krish Fitness and Wellness Club Income & Expenditure A/c for the year ended 31 March 2020 Expenditure Amt Income Amt To Doctors and Coaches Honorarium 25,000 By Subscription (600*100) 60,000 To Medicines 15,500 By Entrance Fees 25,000 To General Expenses 8,000 By Miscellaneous ReRead more

    In the books of Krish Fitness and Wellness Club

    Income & Expenditure A/c for the year ended 31 March 2020

    Expenditure Amt Income Amt
    To Doctors and Coaches Honorarium 25,000 By Subscription (600*100) 60,000
    To Medicines 15,500 By Entrance Fees 25,000
    To General Expenses 8,000 By Miscellaneous Receipts 15,000
    To Newspaper 8,000 By Deficit (excess of expenditure over income) 21,500
    To Rent, Rates and Taxes 5,000
    To Tournament Expenses (W.N.1) 25,000
    To Loss on Sale of Medical Equipment (W.N.2) 10,000
    To Depreciation on Medical Equipment 25,000
    1,21,500 1,21,500

     

    Working Notes:

    1.Calculation of Tournament Fund

    Tournament Fund as of 1 April 2019 15,000
    Add: Donations to Tournament Fund 20,000
    Less: Tournament Expenses -60,000
                   Tournament Expenses -25,000

     

    2. Calculation of Loss on Sale of Medical Equipment

    Book Value of Medical Equipment 15,000
    Less: Sold -5,000
                     Loss on Sale of Medical Equipment 10,000
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Manvi
Manvi
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    The profit and loss appropriation account is an account created in addition to the Trading & Profit and loss account in the case of partnership firms. It is a nominal account. The net profit or loss from the Profit and loss account is transferred to the Capital A/c when we do the accounting of sRead more

    The profit and loss appropriation account is an account created in addition to the Trading & Profit and loss account in the case of partnership firms. It is a nominal account.

    The net profit or loss from the Profit and loss account is transferred to the Capital A/c when we do the accounting of sole proprietors.

    But, while doing the accounting of partnership, there is a need to appropriate this profit or loss as there are two or more partners’ capital accounts. So, for this purpose, the Profit and loss appropriation account is created.

    The net profit or loss is appropriated among the partner’s capital after adjustment the items like partner’s salary, commission, interest on capital, interest on drawing etc. It consists of items related to the partner’s claim.

    The format of the profit and loss appropriation account is as below:

    Let solve a problem to sharpen our concept:

    A and B are partners in firm sharing profits and losses in the ratio of 4:1. On 1st January 2019, their capitals were ₹ 20,000 and ₹ 10,000 respectively. The partnership deed specifies the following:

    1. Interest on capital is to be allowed at 5% per annum.
    2. Interest on drawings charged to A and B are ₹ 200 and ₹ 300 respectively.
    3. The net profit of the firm before considering interest on capital and interest on drawings amounted to ₹ 18,000.
    4. A is to be paid an annual salary of ₹2000

    Prepare Profit and loss appropriation account for the year ending 31st December 2019.

    Solution:

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AbhishekBatabyal
AbhishekBatabyalHelpful
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  2. Radhika
    This answer was edited.

    Capital maintenance is a principle that states profit should not be recorded until its cost or capital has been maintained. In other words, profit should not be recognized unless net assets have been maintained. Capital maintenance states that profit recognized is the increase in the value of net asRead more

    Capital maintenance is a principle that states profit should not be recorded until its cost or capital has been maintained. In other words, profit should not be recognized unless net assets have been maintained.

    Capital maintenance states that profit recognized is the increase in the value of net assets. However, there are two exceptions to it:

    • Cash increased because of sale of stock to shareholders
    • Cash decreased because of dividend payout to its shareholders

    It is important because:

    • It protects the interest of shareholders
    • It protects the interest of creditors
    • Accurately analyzing the performance of the company

    Capital maintenance is of two types:

    • Financial Capital Maintenance

    It is measured by the value of assets at the beginning and end of the financial year.

    • Physical Capital Maintenance

    It is measured by the production capacity at the beginning and end of the financial year.

    Capital maintenance is concerned with keeping proper account balances of assets and not the physical assets.

    Inflation is the increase in the economic value of goods due to the lower purchasing power and not an actual increase in the value of assets. So, if the value of an asset is increased due to inflation it does not depict the right picture for the company.

    Hence, if the value of assets increases due to inflation, companies need to adjust the value of assets to assess if capital maintenance has occurred. 

     

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Karan
Karan
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  2. PriyanshiGupta Graduated, B.Com
    This answer was edited.

    Sales return shows the sale price of goods returned by customers. It is deducted from sales or gross sales in the income statement. It is a contra revenue account that represents returns from the customers and deductions to the original selling price, in case of any defective product received by theRead more

    Sales return shows the sale price of goods returned by customers. It is deducted from sales or gross sales in the income statement.

    It is a contra revenue account that represents returns from the customers and deductions to the original selling price, in case of any defective product received by the customer or any other manufacturing default.

    Sales allowances arise when any customer accepts the product at a lower price than the original price or, in other words, a reduction in the price charged by a seller, due to any problem related to the sold product like a quality issue, an incorrect price charged or shipment issue.

    Sales allowances are created before the final billing is paid by the buyer.

    Journal entry for sales return and allowances:

    Dr. Sales return and allowances Amt  
    Cr. Accounts receivable   Amt
    • Sales Return Account is debited because it is reverse of Sales Account which is credited at the time of sale.
    • Account Receivable Account is credited to reverse the debtors debited at the time of sale.
    • Hence Sales Return entry is just reverse of the entry recorded at the time of sale.

     

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AbhishekBatabyal
AbhishekBatabyalHelpful
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    Meaning A valuation account is a balance sheet account that is paired with another balance sheet account to report the carrying amount of the paired account at a reduced value. The purpose of a valuation account is to reduce the balance of the concerned asset or liability without affecting the mainRead more

    Meaning

    A valuation account is a balance sheet account that is paired with another balance sheet account to report the carrying amount of the paired account at a reduced value.

    The purpose of a valuation account is to reduce the balance of the concerned asset or liability without affecting the main ledger account.  This is a conservative approach to use valuation accounts to present the value of the concerned asset or liability at a reduced value.

    The most common example of a valuation account is the ‘Provision for doubtful debts account’. It appears in the balance sheet as a reduction from the debtors’ accounts. Also when the amount is transferred to this provision, it appears in the statement of profit and loss account. But it doesn’t appear in the debtors’ account ledger.

    Treatment

    A valuation account appears only in the balance sheet. Sometimes, it also appears in the profit and loss account when any amount is transferred to it.

    Valuation accounts are only used in accrual accounting. They cannot be used in cash-based accounting as there is no flow of cash related to valuation accounts.

    They have a balance opposite of their paired accounts i.e. if their paired account is an asset then they will have a credit balance and if it is a liability then they will have a debit balance.

    Other Examples of valuation accounts are as follows:

    1. Provision for doubtful debts (offsets the account receivables or debtors’ account)
    2. Accumulated depreciation (report the assets net of depreciation)
    3. Discount on bonds payable (reduces the reporting balance of bond payable account)
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Aadil
AadilCurious
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  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
    This answer was edited.

    Introduction Often cash is withdrawn by the owner or proprietor of a business for his or her personal use. Such withdrawal of cash is an outflow of capital from business and it is known as drawings. The accounting treatment of cash withdrawn for personal use is expressed in the accounting equation aRead more

    Introduction

    Often cash is withdrawn by the owner or proprietor of a business for his or her personal use. Such withdrawal of cash is an outflow of capital from business and it is known as drawings.

    The accounting treatment of cash withdrawn for personal use is expressed in the accounting equation as shown in the example below:

    It is shown as a negative figure under both assets and capital heading. I will be explaining why it is so.

    Accounting Equation

    The accounting equation represents the relationship between assets, liabilities, and capital of an entity whether profit oriented or not, according to which, the total assets of a business equals to the sum of its total capital and total liabilities.

    Assets = Liabilities + Capital

    This equation holds good in every monetary transaction or event like the event given in the question.

    Cash withdrawn for personal use

    We know every transaction affects two accounts. In this case, too, the ‘cash withdrawn for personal use’ affects two accounts. Cash withdrawn for personal use is known as drawings.

    Let’s see the journal entry for drawings of cash from business:


    Here the drawing account is debited because it is a contra-equity account i.e. it is a mirror image of the capital account or opposite of the capital account. Here the cash account is an asset account; hence it is credited as it is reduced.

    As drawings represent the outflow of capital from the business, it is written off from the Capital account in the balance sheet.

    Hence, in the accounting equation, the drawing amount is deducted from the Asset side and from the capital side, indicating a balance.

    It does not appear in the statement of profit or loss despite having a debit balance because it is not an expense account.

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Aadil
AadilCurious
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  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
    This answer was edited.

    GST stand for Goods and Services Tax which is levied on almost all the good and services supplied in India. Generally, a business is required to charge GST on all the goods and services supplied by it if its turnover is over the limit as prescribed by respective GST laws. We can also do accounting fRead more

    GST stand for Goods and Services Tax which is levied on almost all the good and services supplied in India. Generally, a business is required to charge GST on all the goods and services supplied by it if its turnover is over the limit as prescribed by respective GST laws.

    We can also do accounting for GST in Tally by enabling it from the company features.

    The steps to enable GST and perform GST accounting in Tally are as given below.

    Enabling GST in Tally

    GST can be enabled in Tally from the ‘Company features’ menu which opens just after the creation of a company. There is an option called ‘Enable Goods and Services Tax (GST)’. You have to enter ‘Yes’.

    If the company is already created and the GST was not enabled earlier, then just press F11 and select the company for which you want to enable GST. The ‘company features’ menu will open again, from there you have to enter ‘Yes’ beside the ‘Enable Goods and Services Tax (GST)’ option.

    In both cases, this menu will open:

     

    Do have look at the details I have filled in. You have to:

    • Select the State in which your business is.
    • Registration type is Regular in most cases.
    • Keep the ‘Assessee of another territory’ option at ‘No’, if your business operated from one state only.
    • Enter your 19-digit GST number.
    • Periodicity can be set to ‘Monthly’ or ‘Quarterly’ as per the turnover of the business. ‘Quarterly’ preferred.
    • Keep the E-way bill option at ‘No’ if the E-way bill is not required.
    • Keep the ‘Set/Alter GST rate details’ option at ‘No’ if you want to charge different goods at different GST rates. If GST rates are set up from here, it will be uniform for all goods and services.
    • Keep the rest of the options as shown in the above image.

    These settings are enough if you are to just practice GST in Tally.

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