AccountingQA Latest Questions

Naina@123
Naina@123
In: >

Bill of Exchange
  2. prashant06 B.com, CMA pursuing
    This answer was edited.

    Advantages of Bill of Exchange: Bill of Exchange is generally used as an instrument of credit as it offers many advantages to its users. The advantages are as follows: CONCLUSIVE EVIDENCE: It acts as a shred of conclusive evidence in case of any dispute between the parties like seller-buyer, drawer-Read more

    Advantages of Bill of Exchange:

    Bill of Exchange is generally used as an instrument of credit as it offers many advantages to its users. The advantages are as follows:

    • CONCLUSIVE EVIDENCE: It acts as a shred of conclusive evidence in case of any dispute between the parties like seller-buyer, drawer-drawee, debtors creditors, etc. Issuing the Bill of Exchange binds the party into a legal relationship. It acts as a legal document and proof in a court of law.

     

    • TERMS AND CONDITIONS: When a Bill of Exchange is issued, it mentions all the terms and conditions of payments. The terms and conditions can be like the amount of bill, date of payments, place of payment, interest amount if any, maturity period, etc.

     

    • ACT AS MEANS OF CREDIT: With the help of the Bill of Exchange, buyers can purchase goods on a credit basis and make payment after the credit period expires. If in case of emergency the drawer can also get such Bills discounted before the maturity period.

     

    • WIDER ACCEPTANCE: The Bills of Exchange carries a wide acceptance feature for the parties through which payments can be received and made without any difficulty.

     

    • RELATIONSHIP FRAMEWORK: The Bill of Exchange acts as an instrument that provides a framework enabling the smooth credit transaction between the parties as per the agreement.

     

    • MUTUAL ACCOMMODATION: Sometimes bills are mutually accommodated for the benefit of the parties. The Bill is drawn and accepted by drawer and drawee. Then the same bill is discounted by the drawer and the agreed sum is remitted to the drawee. This is basically done mutually to provide financial help to each other.
    See less
    • 0
Bonnie
BonnieCurious
In: >

Receipts Amount Payments Amount To Balance b/d 32,500 By Salaries 31,500 To Subscription By Postage 1,250 2016-17            1,500 By Rent 9,000 2017-18          60,000 By Printing and 2018-19            1,800 63,300 Stationery 14,000 To Donations (Billiards Table) 90,000 By Sports Material 11,500 By Miscellaneous Expenses 3,100 To Entrance Fees 1,100 By Furniture (1.10.2017) 20,000 To Sale of old magazines 450 By 10% investment (1.10.2017) 70,000 By Balance ...

  2. Manvi Pursuing ACCA
    This answer was edited.

    In the books of Youth Ltd. Income & Expenditure A/c for the year ended 31 March 2018 Expenditure Amt (₹) Income Amt (₹) To Salaries 31,500 By Subscription (W.N.1) 75,000 To Postage 1,250 By Entrance fees 1,100 To Rent 9,000 By Sale of old magazines 450 To Printing and Stationery 14,000 By IntereRead more

    In the books of Youth Ltd.

    Income & Expenditure A/c for the year ended 31 March 2018

    Expenditure Amt (₹) Income Amt (₹)
    To Salaries 31,500 By Subscription (W.N.1) 75,000
    To Postage 1,250 By Entrance fees 1,100
    To Rent 9,000 By Sale of old magazines 450
    To Printing and Stationery 14,000 By Interest on investment (W.N.3) 3,500
    To Sports material consumed (W.N.2) 10,000
    To Miscellaneous expenses 3,100
    To Depreciation on furniture (W.N.4) 1,000
    To Surplus 10,200
    80,050 80,050

     

    Working Notes:

    1. Calculation of Subscription:
    Subscription for the year 60,000
    Add: Outstanding subscription 16,200
    Less: Subscription in arrears (1,200)
    75,000
    2. Calculation of sports material consumed:
    Opening stock of Sports Material 3,000
    Add: Purchased during the year 11,500
    Less: Closing stock of Sports material (4,500)
    10,000
    3. Calculation of Interest on investment:
    Investment as on 1.10.2017 = 70,000
    The investment will be calculated for 6 months i.e starting from 1.10.2017 to 31.3.2018
    For 6 months = 70,000 * 10% * 6/12
    = 3,500
    4. Calculation of Depreciation on furniture:
    Furniture as on 1.10.2017 = 20,000
    Depreciation on the furniture will be calculated for 6 months i.e starting from 1.10.2017 to 31.3.2018
    For 6 months = 20,000 * 10% * 6/12
    = 1,000

     

    See less
    • 0
Jayesh Gupta
Jayesh GuptaCurious
In: >

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
    See less
    • 0
Manvi
Manvi
In: >

  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:

    See less
    • 0
AbhishekBatabyal
AbhishekBatabyalHelpful
In: >

  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. 

     

    See less
    • 0
Karan
Karan
In: >

  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.

     

    See less
    • 0
AbhishekBatabyal
AbhishekBatabyalHelpful
In: >

  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)
    See less
    • 0
Load More Questions

Most Helping Users

Astha

Astha

Leader
Simerpreet

Simerpreet

Helpful
AbhishekBatabyal

AbhishekBatabyal

Helpful