AccountingQA Latest Questions

Bonnie
BonnieCurious
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  2. Naina@123 (B.COM and CMA-Final)
    This answer was edited.

    To proceed with how to make a partnership deed, let me explain to you in short what is partnership deed? A partnership deed is the written agreement between the partners who have agreed to share profits of a business carried on by them. This basically contains terms and conditions to be followed betRead more

    To proceed with how to make a partnership deed, let me explain to you in short what is partnership deed?

    A partnership deed is the written agreement between the partners who have agreed to share profits of a business carried on by them. This basically contains terms and conditions to be followed between the partners.

    Few contents of the partnership deed are as follows:

    • Name, address, and type of business of the partnership firm.
    • Name & address of all the partners
    • Profit-sharing ratio.
    • Rights, duties, and liabilities of all partners.
    • Date of commencement of the partnership
    • Method of settlement of dispute among the partners.
    • Treatment of loss in case of insolvency of one or more partners.

     

    Generally, a partnership deed contains all those matters which can affect the relationship between the partners. However, if there is no such agreement the partnership should follow the provisions mentioned under The Partnership Act, 1932.

    Now coming to the main question how to make a partnership deed? See the process is not so complicated. The partnership deed may be oral or written, but as the oral agreement has no value for obtaining tax benefits, a partnership firm always prefers a written agreement.

    To prepare the same the partnership deed must be prepared on a stamp paper and signed by all the partners as per Indian Stamp Act and copies of the same should be with all the partners and also must be filed by the registrar of the firm.

    A deed may vary depending on the nature of the partnership they are engaged in. Generally, partnerships are of three types

    • General partnership
    • Limited partnership
    • Limited liability partnership

    the process of making deed is same for all but, the content of deed may vary depending on the liability of partners in the partnership.

    Further to know more about the registration process of partnership firm you can refer the following link https://www.mca.gov.in/Ministry/actsbills/pdf/Partnership_Act_1932.pdf

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Bonnie
BonnieCurious
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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

     

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

    The "Income and Expenditure" account lists all the income and expenses incurred by the entity throughout the year. This account is very identical to the profit and loss account and is generally prepared on an accrual basis irrespective of whether the amount is received or paid. Non-profit organizatiRead more

    The “Income and Expenditure” account lists all the income and expenses incurred by the entity throughout the year. This account is very identical to the profit and loss account and is generally prepared on an accrual basis irrespective of whether the amount is received or paid. Non-profit organizations (NPO) prepare this type of account to ascertain surplus earned or deficit incurred by them during the period.

    Talking about the format of income and expenditure accounts we generally see that all the expenses are recorded on the debit side while all incomes are recorded on the credit side. One important thing to note is that items so recorded are revenue items while capital nature items are generally ignored because only current period items are recorded in this statement.

    Since it is a Nominal account, we follow the golden rules to prepare this, stating “debit all expenses and losses and credit all incomes and gains”. The closing balance at the end shows the surplus or deficit for the year. If the balancing figure appears on the debit side it is surplus and if the balancing figure appears on the credit side it is a deficit for the entity.

    Following is the format of income and expenditure account

     

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Bonnie
BonnieCurious
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  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    To start with let me first explain the difference between receipts and income & payment and expenditure. Although Receipts and Income may look similar terms, there are some differences. Receipts have their relation with both cash and cheques received on account of various items of the organizatiRead more

    To start with let me first explain the difference between receipts and income & payment and expenditure.

    Although Receipts and Income may look similar terms, there are some differences.

    Receipts have their relation with both cash and cheques received on account of various items of the organization. Whereas, income is considered as a revenue item for finding surplus or deficit of the organization. All the receipts collected during the year may not be considered as income.

    For Example, if an organization sale of its assets that is of a capital nature, it would not be considered as an item of income and hence would be treated in the balance sheet.

    Similarly, Payment and Expenditure are two different terms. Payments are those that have their relation with cash and cheques given for various activities of the organization. Whereas, Expenditure is considered as revenue expenditure for ascertainment of surplus or deficit in the case of a not-for-profit organization. All payments made during the year may not be considered as expenditures.

    Differences

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Bonnie
BonnieCurious
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Calls in AdvanceCompanies Act
  2. Naina@123 (B.COM and CMA-Final)
    This answer was edited.

    To begin with, lets us understand what the Companies Act 2013 tells about calls-in-advance, so basically as per section 50 of the companies act 2013 "A company may if so authorized by its articles, accepts from any members the whole or part of amount remaining unpaid on any share held by him, even iRead more

    To begin with, lets us understand what the Companies Act 2013 tells about calls-in-advance, so basically as per section 50 of the companies act 2013 “A company may if so authorized by its articles, accepts from any members the whole or part of amount remaining unpaid on any share held by him, even if no amount has been called up”.

    To be more precise whenever excess money is received by the company than, what has been called up is known as calls-in-advance.

    Accounting Treatment

    Well, it is to be noted that calls-in-advance is never a part of share capital. A company when authorized by its article can accept those advance amounts and directly credit the amount received to the calls-in-advance account.

    As these advance amounts are a liability for the company these are shown under the head current liability of the balance sheet until calls are made and are paid to the shareholders.

    Since this is the liability of the company, it is liable to pay the interest amount on such call money from the date of receipt until the payment is done to the shareholders. The rate of interest is mentioned in the articles of association. If the article is silent regarding the rate on which interest is paid then it is assumed to be @6%.

    Accounting Entry

    Bonnie let us understand the entries with help of an example

    ADIDAS LTD issued 25,000 equity shares of Rs 10 each payable as follows:

    ON APPLICATION  Rs 5

    ON ALLOTMENT    Rs 3

    ON FINAL CALL     Rs 2

    Application on 30,000 shares was received. excess money received on the application was refunded immediately. Mr. X who was allotted 1,000 shares paid the call money at the time of allotment and all amounts were duly received assume interest rate @6% for 3 months, so the relevant accounting entry goes as follows:

    Important Points to be noted under calls-in-advance as per the companies act 2013

    • The shareholder is not entitled to any voting rights on money paid until the said money is called for.
    • No dividends are payable on advance money.
    • Board may pay interest on advance not exceeding 12%.
    • The shareholders are entitled to claim the interest amount as mentioned in the article, if there are no profits, then it must be paid out of capital because shareholders become the creditors of the company.
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Bonnie
BonnieCurious
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Calls in AdvanceJournal Entry
  2. Manvi Pursuing ACCA
    This answer was edited.

    Journal Entry for Calls in Advance  Calls in advance mean excess money received by the company than what has been called up. Calls in advance are treated as Current Liability and shown in the Balance Sheet on the liability side. Journal Entry will be : Here we will "Debit" Bank A/c as it will increaRead more

    Journal Entry for Calls in Advance 

    Calls in advance mean excess money received by the company than what has been called up. Calls in advance are treated as Current Liability and shown in the Balance Sheet on the liability side.

    Journal Entry will be :

    Here we will “Debit” Bank A/c as it will increase assets of the company and “Credit” Calls in Advance A/c because it will increase the company’s current liabilties.

    For Example:

    Mr.Z shareholder of ABC Ltd was allotted 2,000 equity shares of Rs.10 each. He paid call money at the time of allotment.

    On Application Rs 5
    On Allotment Rs 2
    On First and final call Rs 3

     

    Journal Entry is as follows:

    Here, the company received an excess amount of Rs.6,000 (2,000*3) from a shareholder Mr.Z who paid the call money in advance. ABC Ltd will record this under Calls in Advance A/c. While passing journal entry ABC Ltd will debit its Bank A/c by Rs.6,000 and credit calls in advance account by Rs.6,000.

    When share calls are called up, calls received in advance are adjusted. The company will hold only the required amount which will make allotted shares fully paid.

    Once the amount is transferred to relevant call accounts, calls in advance account will be written off.

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Bonnie
BonnieCurious
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Balance SheetCalls in Advance
  2. Radha M.Com, NET
    This answer was edited.

    Let us begin with a short explanation of what Calls-in-Advance is: Whenever a company accepts money from its shareholders for calls not yet made, then we call it calls-in-advance. To put it in even simpler terms, it is the amount not yet called up by the company but paid by the shareholder. An imporRead more

    Let us begin with a short explanation of what Calls-in-Advance is:

    Whenever a company accepts money from its shareholders for calls not yet made, then we call it calls-in-advance. To put it in even simpler terms, it is the amount not yet called up by the company but paid by the shareholder. An important thing to note here is that a company can accept calls-in-advance from its shareholders only when authorized by its Articles of Association.

    Calls-in-advance is treated as the company’s liability because it has received the money in advance, which has not yet become due. Till the amount becomes due, it will be treated as a current liability of the company.

    The journal entry for recording calls-in-advance is as follows:

    The money received from the shareholder is an asset for the company and therefore Bank A/c is debited with the amount received as calls-in-advance. The calls-in-advance A/c is credited because it is a liability for the company.

    Since Calls-in-Advance is a liability, it is shown in the Equities and Liabilities part of the Balance Sheet under the head Current Liabilities and sub-head Other Current Liabilities.

    For better understanding, we will take an example,

    ABC Ltd. made the first call of 3 per share on its 10,00,000 equity shares on 1st May. Max, a shareholder, holding 5,000 shares paid the final call amount 2 along with the first call money. Now let me show the journal entry to record calls-in-advance.

    In the Balance Sheet, I will show calls-in-advance in the following manner,

    The calls-in-advance of 10,000 is shown under the Equities and Liabilities side of the balance sheet under the head current liabilities and sub-head other current liabilities. It will be shown as a liability till the final call money becomes due. The amount received by the company from Max is shown on the Assets side of the balance sheet under head current assets and under the sub-head cash and cash equivalents.

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Bonnie
BonnieCurious
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  2. Astha Leader Pursuing CA, BCom (Hons.)
    This answer was edited.

    There are two types of ledger accounts in the accounting system – temporary and permanent. Temporary accounts are those whose balances zero out and we do not carry forward balances to the next year. Examples are revenue and expenses accounts or nominal accounts. The balances of such accounts are traRead more

    There are two types of ledger accounts in the accounting system – temporary and permanent.

    Temporary accounts are those whose balances zero out and we do not carry forward balances to the next year. Examples are revenue and expenses accounts or nominal accounts. The balances of such accounts are transferred to the profit and loss account and therefore are not balanced.

    Permanent accounts are those whose balances are carried forward to the next accounting year in form of opening balances. These accounts are balanced and such balances are transferred to the balance sheet. Examples are assets, liability and capital accounts or personal and real accounts.

    Balancing an account means equaling both the debit and the credit side of the account. Generally, there is a difference between the accounts recorded as a carry down balance in the case of permanent accounts and as a transfer balance in the case of temporary accounts.

    Balancing serves as a check to the double-entry rule of accounting.

    Balanced accounts

    As discussed above, the balanced accounts are shown in the balance sheet and the balancing figure for such accounts are carried forward to the next accounting period.

    Unbalanced accounts

    As per the above discussion, the balancing figures of unbalanced accounts are transferred to the profit and loss account and no balances are carried forward to the next accounting period.

    Suppose a company Shine Ltd. has machinery costing 5,00,000 at the beginning of the accounting period and charges depreciation of 10% on the asset. The company also has creditors amounting to 50,000 at the beginning of the period and purchases goods amounting to 30,000 on credit. It has a cash balance of 95,000 at the beginning of the period and earns interest amounting to 10,000.

    Following ledgers would be prepared to record the above entries:

    The above ledgers can be shown as follows:

    The balance of the machinery account will be shown in the balance sheet and therefore it is a balanced account.

    The balance is transferred to the profit and loss account and therefore depreciation account is an unbalanced account.

    The balance of creditors account will be shown in the balance sheet and therefore it is a balanced account.

    The balance is transferred to the profit and loss account and therefore purchases account is an unbalanced account.

    The balance of the cash account will be shown in the balance sheet and therefore it is a balanced account.

    The balance is transferred to the profit and loss account and therefore interest account is an unbalanced account.

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Bonnie
BonnieCurious
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Compound EntryLedger
  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    When in a single transaction two or more accounts are involved, such kinds of transactions are termed as Compound entries. Example 1, Johnson Co. purchased goods worth 5,000, and half of the amount was paid in cash and the other half by cheque. So here three accounts are involved: Purchase account-Read more

    When in a single transaction two or more accounts are involved, such kinds of transactions are termed as Compound entries.

    Example 1, Johnson Co. purchased goods worth 5,000, and half of the amount was paid in cash and the other half by cheque.

    So here three accounts are involved:

    Purchase account- That is to be debited.

    Cash account- That is to be credited.

    Bank account- That is to be credited.

    Journal entry:

    Now posting the above journal entry in a ledger account.

    In the Journal, the Purchase account has been debited. So in the ledger, the purchase account will also be debited. Since the purchase account is debited in the ledger, the corresponding two credit accounts of this entry i.e. the cash and the bank will be written on the debit side in the particulars column. So while posting, the amount to be considered would be the amount individually paid in cash and bank as shown in the journal entry.

    Cash a/c is credited with the purchase account.  In the ledger, purchase a/c will be posted on the credit side. So while posting, the amount to be considered would be the amount individually paid in cash.

    Bank a/c is credited with the purchase account. In the ledger, purchase a/c will be posted on the credit side. So while posting, the amount to be considered would be the amount individually paid in Bank a/c.

    Example 2,  Johnson Co purchased goods and made payment in cash 2,000. Along with it, it also paid commission and interest of 1,000 and 500 respectively.

    So here four accounts are involved:

    Purchase account- That is to be debited.

    The commission allowed account- That is to be debited.

    Interest allowed account- That is to be debited.

    Cash account- That is to be credited.

    Journal Entry:

    Now posting the above journal entry in a ledger account.

    In the journal entry, the cash account has been credited. So in the ledger, the cash account will also be credited. Since the cash account is credited in the ledger, the corresponding three accounts will also be credited in the particulars column. As in the journal entry the three debit accounts viz. Purchase, the commission allowed, and interest allowed, the amounts written against them shall be entered in the respective accounts in the amount column on the credit side of the cash account.

    Purchase a/c is debited with a cash account.  In the ledger, Cash a/c will be posted on the debit side. So while posting, the amount to be considered would be the amount individually paid in the Purchase account.

    The commission allowed a/c is debited with a cash account.  In the ledger, cash a/c will be posted on the debit side. So while posting, the amount to be considered would be the amount individually paid in Commission allowed a/c.

    Interest allowed a/c is debited with a cash account.  In the ledger, cash a/c will be posted on the debit side. So while posting, the amount to be considered would be the amount individually paid in Interest allowed a/c.

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