Bills Payable Book Bills payable book, also known as a B/P book is a subsidiary or secondary book of account in which transactions relating to bills of exchange are recorded. It includes the recording of bills that are payable by a business. In a business where the number of bills exchanging hands iRead more
Bills Payable Book
Bills payable book, also known as a B/P book is a subsidiary or secondary book of account in which transactions relating to bills of exchange are recorded. It includes the recording of bills that are payable by a business.
In a business where the number of bills exchanging hands is large in number, it is very useful, as it is tough to journalize all the bills drawn. A bills payable account generally has a credit balance as it is supposed to be paid at maturity and be a liability.
Format for B/P book
The person, who draws the bill of exchange, is called a “drawer”.
The customer, on whom it is drawn, is called a “drawee” or an “acceptor”.
Errors revealed by Trial Balance Trial balance, as we know, is a statement prepared after the ledger, followed by a journal. It has a list of all the general ledger accounts contained in the ledger of a business. Each nominal ledger account either holds a debit balance or credit. It is primarily useRead more
Errors revealed by Trial Balance
Trial balance, as we know, is a statement prepared after the ledger, followed by a journal. It has a list of all the general ledger accounts contained in the ledger of a business. Each nominal ledger account either holds a debit balance or credit.
It is primarily used to identify the balance of debits and credits entries from the transactions recorded in the general ledger in a certain accounting period. The debit and credit sides total are equal in a trial balance.
Classification of errors in the trial balance
Errors of Commission: Errors arising due to wrong posting of a journal entry, a ledger account, wrong totaling of a subsidiary book, or even wrong recording of accounts. Therefore, resulting in trial balance error. E.g business receives an amount on goods sold on credit but it is instead posted to additional capital a/c.
Errors of Omission: This occurs when some transactions are fully or partially omitted from books of accounts. A complete omission is a case when the transaction is completely omitted but a partial omission is seen when the transaction is entered in the journal but not posted to the ledger. E.g a cheque worth $4,100 was received from ABC Ltd. but completely omitted. Then the rectification entry shall be passed later on.
Compensating Errors: It occurs when the errors are equal in amount and opposite to each other so and so that they cancel each other which further creates no difference in the Trial Balance. E.g Harry’s account is debited to $300 wrongly instead of $400. On the other hand, Liam’s account is credited by $700 instead of $800.
Errors of Principles: These are the errors occurring when the entries that are posted are incorrect, violating the accounting policy. E.g when receiving money from debtor then debiting debtor and crediting the amount of money received.
Some of the common errors
Some more (commonly seen) errors while preparation of the trial balance:
Errors of Commission
Addition or totaling mistakes in the trial balance, debit, and credit side.
Wrong totaling of subsidiary books.
Error in the sum total of subsidiary book.
Posting in the wrong account.
Recording a transaction incorrectly in a journal.
Balance wrote on the wrong side of the trial balance.
Error in posting a journal to a ledger.
Posting on the wrong side of the account.
Errors of Omission
Goods purchased and returned to the supplier may be entered in the purchase returns book but not posted in the debit of the supplier account.
Cash paid to creditors was completely omitted from the recording.
Compensating Errors
Wrong posting of the same amount in another account, which may not be affecting the equalizing of trial balance.
Errors of Principles
Posting twice to a ledger account.
Balance c/d or balance b/d is written on the wrong side of the ledger account.
Reversal of a journal entry by mistake like, crediting cash and debiting debtor’s a/c.
Depreciation on Tools and Equipment Tools and Equipment are the instruments that are used for producing any product, machine, or service. Also, tools and equipment are a part of plants and machinery, making them a major fixed asset. Therefore, a certain percentage of depreciation is charged on ToolsRead more
Depreciation on Tools and Equipment
Tools and Equipment are the instruments that are used for producing any product, machine, or service. Also, tools and equipment are a part of plants and machinery, making them a major fixed asset. Therefore, a certain percentage of depreciation is charged on Tools and Equipment.
As we’re aware, depreciation refers to a process in which assets lose their value over time until it becomes obsolete or zero. It is chargeable on the fixed assets and it ultimately results in depreciation of the value of fixed assets except, land. The land is an exception in fixed assets as where all the fixed assets are depreciated, the land’s value is appreciated over time.
The rate of depreciation as per the Income Tax Act on tools and equipment (plant and machinery) is 15%.
Example
Suppose given below are the details regarding the tools and equipment:
And, we’re required to calculate the value of the tools and equipment as on 1-Mar-22
In this, as we can see the business’ accounting period starts in March and ends in April. Therefore, we can easily deduct the depreciation amount and get the desired result.
Solution: Opening Value = $30,000
Depreciation = 15% of $30,000 = $4,500
Value of tools and equipment as on 1-Mar-22 = $30,000 – $4500 = $25,500
Income and Expenditure A/c of Charitable Trust Income and Expenditure A/c is like the Profit and Loss A/c in the Balance Sheet of the Charitable Trust. All the income and expenses are, therefore, recorded in this. It is used to determine the surplus or deficit of income over expenditures over a specRead more
Income and Expenditure A/c of Charitable Trust
Income and Expenditure A/c is like the Profit and Loss A/c in the Balance Sheet of the Charitable Trust. All the income and expenses are, therefore, recorded in this. It is used to determine the surplus or deficit of income over expenditures over a specific accounting period.
It shows the summary of all the income and expenditures done by the charitable trust over an accounting year. All the revenue items relating to the current period are shown in this account, the expenses and losses on the expenditure side, and incomes and gains on the income side of the account.
Therefore, as you can see here, how a charitable trust may use MS Excel for making their Income and Expenditure A/c, the Surplus and Deficit are the balancing figures used for balancing both the debit and credit sides.
Later on, they are even used in the Balance Sheet. As follows-
Interest on Drawings Interest on drawings is debited to the capital account. As Interest on drawings is charged on the drawings made by partners/proprietors from their respective capital accounts in a partnership firm or proprietary concern. Drawings refer to the amount withdrawn by an owner or parRead more
Interest on Drawings
Interest on drawings is debited to the capital account.
As Interest on drawings is charged on the drawings made by partners/proprietors from their respective capital accounts in a partnership firm or proprietary concern.
Drawings refer to the amount withdrawn by an owner or partner for his personal use. Thereby, interest on drawings is an income of a firm payable by the owner hence, it’s deducted/debited.
The Profit and Loss Account, on the other hand, shows the income and expenses of a business incurred over an accounting period. Accounts like interest on drawings and capital are not shown in the P&L a/c because they are internal transactions and P&L a/c focuses only on the financial statement that summarizes the revenues, costs, and expenses incurred during a specified period.
Meaning of Opening Stock Opening stock is the inventory or stock of goods that are available at the beginning of the new accounting year carried down from the previous year's closing stock which is recorded in the books of accounts. In simple words, Opening stock is the goods/quantity/products thatRead more
Meaning of Opening Stock
Opening stock is the inventory or stock of goods that are available at the beginning of the new accounting year carried down from the previous year’s closing stock which is recorded in the books of accounts.
In simple words, Opening stock is the goods/quantity/products that are held by a business at the beginning of a new accounting period and it is the closing stock of the preceding year carried down.
Similarly, the closing stock is the number of unsold goods that remain with the business at the end of an accounting year and is further carried down to the next year as Opening Stock.
Formula
There are 3 main formulas used for Opening Stock’s calculation. They are-
For manufacturing companies
Opening Stock = Raw Material Cost + Work in Progress + Finished Goods Cost
When only Sales, GP, COGS, and Closing Stock are given
Opening Stock = Sales – Gross Profit – Cost of Goods Sold + Closing Stock
You can use this one when only limited information is provided
Can you show bills payable book format?
Bills Payable Book Bills payable book, also known as a B/P book is a subsidiary or secondary book of account in which transactions relating to bills of exchange are recorded. It includes the recording of bills that are payable by a business. In a business where the number of bills exchanging hands iRead more
Bills Payable Book
Bills payable book, also known as a B/P book is a subsidiary or secondary book of account in which transactions relating to bills of exchange are recorded. It includes the recording of bills that are payable by a business.
In a business where the number of bills exchanging hands is large in number, it is very useful, as it is tough to journalize all the bills drawn. A bills payable account generally has a credit balance as it is supposed to be paid at maturity and be a liability.
Format for B/P book
Bills Payable A/c
See lessWhich errors are revealed by trial balance?
Errors revealed by Trial Balance Trial balance, as we know, is a statement prepared after the ledger, followed by a journal. It has a list of all the general ledger accounts contained in the ledger of a business. Each nominal ledger account either holds a debit balance or credit. It is primarily useRead more
Errors revealed by Trial Balance
Trial balance, as we know, is a statement prepared after the ledger, followed by a journal. It has a list of all the general ledger accounts contained in the ledger of a business. Each nominal ledger account either holds a debit balance or credit.
It is primarily used to identify the balance of debits and credits entries from the transactions recorded in the general ledger in a certain accounting period. The debit and credit sides total are equal in a trial balance.
Classification of errors in the trial balance
Some of the common errors
Some more (commonly seen) errors while preparation of the trial balance:
Errors of Commission
Errors of Omission
Compensating Errors
Errors of Principles
See lessWhat is depreciation on tools and equipment?
Depreciation on Tools and Equipment Tools and Equipment are the instruments that are used for producing any product, machine, or service. Also, tools and equipment are a part of plants and machinery, making them a major fixed asset. Therefore, a certain percentage of depreciation is charged on ToolsRead more
Depreciation on Tools and Equipment
Tools and Equipment are the instruments that are used for producing any product, machine, or service. Also, tools and equipment are a part of plants and machinery, making them a major fixed asset. Therefore, a certain percentage of depreciation is charged on Tools and Equipment.
As we’re aware, depreciation refers to a process in which assets lose their value over time until it becomes obsolete or zero. It is chargeable on the fixed assets and it ultimately results in depreciation of the value of fixed assets except, land. The land is an exception in fixed assets as where all the fixed assets are depreciated, the land’s value is appreciated over time.
The rate of depreciation as per the Income Tax Act on tools and equipment (plant and machinery) is 15%.
Example
Suppose given below are the details regarding the tools and equipment:
And, we’re required to calculate the value of the tools and equipment as on 1-Mar-22
In this, as we can see the business’ accounting period starts in March and ends in April. Therefore, we can easily deduct the depreciation amount and get the desired result.
Solution: Opening Value = $30,000
Depreciation = 15% of $30,000 = $4,500
Value of tools and equipment as on 1-Mar-22 = $30,000 – $4500 = $25,500
See lessCan I get income and expenditure account of charitable trust in excel?
Income and Expenditure A/c of Charitable Trust Income and Expenditure A/c is like the Profit and Loss A/c in the Balance Sheet of the Charitable Trust. All the income and expenses are, therefore, recorded in this. It is used to determine the surplus or deficit of income over expenditures over a specRead more
Income and Expenditure A/c of Charitable Trust
Income and Expenditure A/c is like the Profit and Loss A/c in the Balance Sheet of the Charitable Trust. All the income and expenses are, therefore, recorded in this. It is used to determine the surplus or deficit of income over expenditures over a specific accounting period.
It shows the summary of all the income and expenditures done by the charitable trust over an accounting year. All the revenue items relating to the current period are shown in this account, the expenses and losses on the expenditure side, and incomes and gains on the income side of the account.
Later on, they are even used in the Balance Sheet. As follows-
On the Assets Side
On the Liability Side
See lessInterest on drawings is
Interest on Drawings Interest on drawings is debited to the capital account. As Interest on drawings is charged on the drawings made by partners/proprietors from their respective capital accounts in a partnership firm or proprietary concern. Drawings refer to the amount withdrawn by an owner or parRead more
Interest on Drawings
Interest on drawings is debited to the capital account.
As Interest on drawings is charged on the drawings made by partners/proprietors from their respective capital accounts in a partnership firm or proprietary concern.
Drawings refer to the amount withdrawn by an owner or partner for his personal use. Thereby, interest on drawings is an income of a firm payable by the owner hence, it’s deducted/debited.
The Profit and Loss Account, on the other hand, shows the income and expenses of a business incurred over an accounting period. Accounts like interest on drawings and capital are not shown in the P&L a/c because they are internal transactions and P&L a/c focuses only on the financial statement that summarizes the revenues, costs, and expenses incurred during a specified period.
Partners’ Capital A/c
See lessWhat is the meaning of opening stock?
Meaning of Opening Stock Opening stock is the inventory or stock of goods that are available at the beginning of the new accounting year carried down from the previous year's closing stock which is recorded in the books of accounts. In simple words, Opening stock is the goods/quantity/products thatRead more
Meaning of Opening Stock
Opening stock is the inventory or stock of goods that are available at the beginning of the new accounting year carried down from the previous year’s closing stock which is recorded in the books of accounts.
Formula
There are 3 main formulas used for Opening Stock’s calculation. They are-
Opening Stock = Raw Material Cost + Work in Progress + Finished Goods Cost
Opening Stock = Sales – Gross Profit – Cost of Goods Sold + Closing Stock
Opening Stock = COGS + Closing Inventory – Purchases
Types of Opening Stock
There are three types of Opening Stock or we may also say that Opening Stock consists of these 3 elements. They are-
Opening Stock in Final Accounts
Opening stock is a part of the Trading Account while preparing the Final Accounts. And this is how it is posted in the Trading A/c.
Trading A/c (for the year ending…)
Example of Opening Stock
Example
IKEA, the biggest Furniture manufacturer collected this data on April 1, 2021,
Timber – $300,000
Wood – $30,000
Nails – $15,000
Pre-cut Wood – $120,000
Assembled Furniture – $400,000
Now, adding them (as said earlier, Opening stock is a combination of these three.)
Opening Stock (Raw Material + Work in Progress + Finished Goods) = $865,000
Therefore, that’s how one can calculate Opening Stock.
See less