AccountingQA Latest Questions

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 VoucherĀ  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 VoucherĀ 
    • 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.Ā 

    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 ā†’ Voucher ā†’ Press F8Ā 

    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 ā€˜Change modeā€™ option in the right-hand side menu or by simply pressing Ctrl + H. Upon pressing CtrlĀ  + H, the Change mode option will open.

    I will recommend you to use ā€˜Item Invoiceā€™ 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 partyā€™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, theĀ 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 bookĀ 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 bookĀ 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 theĀ Imprest system.Ā 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 isĀ reimbursed the amount spent.Ā 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 isĀ 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 whereasĀ IncomeĀ doesnā€™t have any opening balance and their balances getĀ closedĀ at the end of every accounting year.

    A petty cash book is placed under the head current assetĀ in theĀ balance sheet.Ā 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, shareholdersā€™ equity (also referred to as stockholdersā€™ equity) is the difference between a companyā€™s assets and liabilities. It is also called the book value of equity. For example ā€“ retainRead more

    Overview And Definition

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

    For example ā€“ 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 ā€“ 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 ā€“ 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 Shareholdersā€™ Equity

    Shareholdersā€™ equity is the ownerā€™s claim when assets are liquidated, and debts are paid up. It can be calculated using the following two formulas:

    Formula 1:

    Shareholdersā€™ Equity = Total Assets ā€“ Total Liabilities

     

    Formula 2:

    Shareholdersā€™ 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 shareholdersā€™ 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 shareholdersā€™ equity of the firm as on March 31, YYYY, can be calculated as,

    = Rs (2600,000 ā€“ 2,000,000)

     

    Shareholdersā€™ 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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Anushka Lalwani
Anushka Lalwani
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  2. Kajal

    All expenses whose benefits are received over the years or the expenses or losses that are to be written off over the years are classified as Deferred revenue expenses. It includes fictitious expenses like preliminary expenses, loss on issue of debentures, advertising expenses, loss due to unusual oRead more

    All expenses whose benefits are received over the years or the expenses or losses that are to be written off over the years are classified as Deferred revenue expenses. It includes fictitious expenses like preliminary expenses, loss on issue of debentures, advertising expenses, loss due to unusual occurrences like loss due to fire, theft, and research and development expenses, etc.Ā 

     

    DEFERRED REVENUE EXPENSES

    There are certain expenses which are revenue in nature (i.e. expenses incurred to maintain the earning capacity of the firm and generate revenue) but whose benefits are received over a period of years generally between 3 to 7 years. It means its benefit is received not only in the current accounting period but over a few consecutive accounting periods.

    CHARACTERISTICS

    • Revenue in nature
    • Benefits received for more than one accounting period.
    • Huge expenditure (large amount is involved)
    • Affects the profitability of the business (since a large amount is involved if charged in the same accounting period, then it will decrease the profitability for the year)
    • Written off over the years either partially or entirely.
    • Fictitious asset It doesn’t result in the creation of any asset but is shown as an asset (fictitious asset) on the Balance Sheet till fully written off.

     

    EXAMPLES

     

    ADVERTISING EXPENSES refers to the expenses incurred for promoting the goods or services of the firm through various channels like TV, Social media, Hoardings, etc.

    As the benefit of advertising is not received not only in the period when such expenses were incurred but also in the coming few years, it is classified as Deferred revenue expense.

    For example –Ā Suppose the company incurred $10 lakh on advertising to introduce a new product in the market and estimated that its benefit will last for 4 years. In this case, $250,000 will be written off every year, for 4 consecutive years.

     

    EXCEPTIONAL LOSSESĀ are losses that are incurred because of some unusual event and don’t happen regularly like loss from fire, theft, earthquake, flood or any other natural disaster, confiscation of property, etc.

    Since these losses can’t be written off in the year they occurred they are also treated as Deferred revenue expenditure and are written off over the years.

     

    RESEARCH AND DEVELOPMENT EXPENSESĀ are expenses incurred on researching and developing new products or improving the existing ones. Its benefits are received for many years and thus are classified as Deferred revenue expenses.

    For example –Ā Expenses incurred on the creation of intangible assets like patents, copyrights, etc.

     

    PRELIMINARY EXPENSESĀ are those expenses which are incurred before the incorporation and commencement of the business. It includes legal fees, registration fees, stamp duty, printing expenses, etc.

    These expenses are fictitious assets and are written off over the years.

     

    TREATMENT

    It is debited to the P&L amount (amount written off that year) and the remaining amount on the Aeest side of the Balance Sheet.

    In the above example of advertising expenses, in Year 1, $250,000 will be debited in the P&L A/c and the remaining amount of $750,000 is shown on the Asset side of the Balance Sheet.

    In Year 2, $250,00 in P&L A/c and the remaining $500,000 in Balance Sheet.

    In Year 3, $250,000 in P&L A/c and the remaining $250,000 in the Balance Sheet and in the last Year 4, only the remaining amount of $250,000 in P&L A/c and nothing in the Balance Sheet.

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Astha
AsthaLeader
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Contingent Assets
  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    To begin with, let me first give you a small explanation of what Contingent assets are A contingent asset is a potential asset or economic benefit that does not exist currently but may arise in the near future. Such an asset arises from an uncertain and unpredictable event. To make it clear with anRead more

    To begin with, let me first give you a small explanation of what Contingent assets are

    A contingent asset is a potential asset or economic benefit that does not exist currently but may arise in the near future. Such an asset arises from an uncertain and unpredictable event.

    To make it clear with an example: String Co. filed a lawsuit against a competitor company Weave Tech Co. for infringing on company ABC’s patent. Even if it is probable (but not certain) that Strings Co. will win the lawsuit, it is a contingent asset.

    As such, it will not be recorded in Strings Co. general ledger accounts until the lawsuit is settled.

    At most the Strings Co. can do is, prepare a note disclosing the fact that it has filed the lawsuit the outcome of which is uncertain.

    Disclosing Contingent Assets

    • The probability of occurrence is virtually certain or probable: It will be disclosed as an asset in the balance sheet.

    For Example, The court orders for reimbursement to Strings Co. say 1,00,000 for the damages, but it has not yet received the money. Although it is virtually certain that the company will receive the money in the near future, it will be treated as an asset and can be disclosed in the balance sheet on the assets side.

    • The probability of occurrence is probable: It will be disclosed as notes to accounts below the balance sheet.

    For Example, Strings Co. filed a lawsuit against a competitor company Weave Tech for infringing on Strings Co. patent. Even if it is probable (but not certain) that Strings Co. will win the lawsuit, it is a contingent asset.

    As such, it will not be recorded in Strings company’s general ledger until the lawsuit is settled.

    At most the Strings Co. can do is, prepare a note disclosing the fact that it has filed the lawsuit the outcome of which is uncertain.Ā 

    • The probability of occurrence is remote or not probable:Ā Ā It will not be treated as a contingent asset.

    In this case, the disclosure of it is not permitted.

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Jasmeet_Sethi
Jasmeet_SethiCurious
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CreditorsDebtorsDifference BetweenGainProfit
  2. Karan B.com and Pursuing ACCA
    This answer was edited.

    Debtors and Creditors Points of Distinction Debtors Creditors Meaning A debtor is a person or entity that owes money to the other party (the other party is also known as the creditor). A creditor is a person or entity to whom money is owed or who lends money. Nature The debtors will have a debit balRead more

    Debtors and Creditors

    Points of Distinction Debtors Creditors
    Meaning A debtor is a person or entity that owes money to the other party (the other party is also known as the creditor). A creditor is a person or entity to whom money is owed or who lends money.
    Nature The debtors will have a debit balance. The creditors will have a credit balance.
    Receipt of payment The payment or amount owed is received from the debtor. The payment of the amount owed is made to the creditors.
    Nature of account Debtors are account receivables. Creditors are accounts payable.
    Status They are shown under assets in the balance sheet under the head current assets. They are shown as an asset because the amount is receivable from them. They are shown under liabilities in the balance sheet under the head current liabilities. They are shown as a liability because the amount is payable to them.
    Credit / Loan period Debtors are the one who takes a loan or purchase goods on credit and has to pay the money in the agreed time period, with or without interest. Creditors are the ones who provide loans or extend the duration of the credit period.
    Discounts They are the ones who receive discounts. They can offer discounts to debtors.
    Provision for doubtful debts Provision for doubtful debts is created for debtors. No such provision is created for creditors.

    Ā Example:

    Mr. A purchases raw materials from its supplier Mr. D on credit.

    Here for Mr. D, Mr. A will be a debtor because the amount is receivable from him.

    Similarly, for Mr. A, Mr. D will be his creditor because the amount is payable to him.

    Profit and Gain

    Points of Distinction Profit Gain
    Meaning The excess of revenue of a period over its expenses is termed as profit.

    Profit = Total Income-Total Expenses

    		 Gain means profit that arises from incidental events and transactions, such as capital gain.
    Generation It is generated within the operations of a business. It is generated outside the business operation.
    Nature of account Profit calculated will appear in the Profit and Loss A/c. The gain will appear in the income statement.
    Types Gross profit

    Net profit

    Operating profit

    		  

    Capital gain

    Long term capital gain

    Short term capital gain

     

    Example: A companyā€™s sales for the period are $60,000 and expenses incurred are $40,000. Here the profit calculated will be $20,000 because revenue exceeds expenses.

    Profit = Total Income-Total Expenses

    = 60,000 – 40,000

    = $20,000

    Mr. X owned land worth $10,00,000 and after 10 years he sold it at a current market value of $14,00,000. So the gain he earned is $4,00,000. This gain of $4,00,000 will be termed as a capital gain since land is a capital asset.

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