Accrual Accrual expense means the transaction that takes place in a particular period must be accounted for in that period only irrespective of the fact when such amount has been paid. An accrual of the expenditure which is not paid will be listed in the books of accounts. These accruals can be furtRead more
Accrual
Accrual expense means the transaction that takes place in a particular period must be accounted for in that period only irrespective of the fact when such amount has been paid.
An accrual of the expenditure which is not paid will be listed in the books of accounts. These accruals can be further divided into two parts
Accrual Expense-
Accrual Expense means any transaction that takes place in a particular period but the amount for it will be paid on a later period.
For example- If rent of 10,000 for the month of March was paid in April month then this rent will be accounted for in the books in March
For example- Interest of 1,000 for the month of March of the loan amount of 10,000 paid in April then will be accounted for in the books in March
These are the following accrued expense
- Accrual Rent– Accrual rent means the amount for using the land of the landlord is paid at a later period than the period when it is put into use.
- Accrual Insurance– Accrual insurance means the amount paid as a premium to the insurance company paid on a later period than the period when it is due
- Accrual Expense- Acrrual expense means the amount for any expense paid on a later period than the period when it pertains to be paid
- Accrual Wages- Accrual wages means the amount which is paid to employees on a later period than the period when the wages get due
- Accrual Loan Interest– Loan Interest means the amount of interest on a loan which is paid on a later period than the period when it is due on
Accrual Revenue-
Accrual Revenue means any transaction that takes place in a particular period but the amount for it will be received in the later period.
For example- If interest of 10,000 on bonds for the period of March is received in April months then this amount will be accounted for in March. These are the following accrued revenue
For example- Rent of 10,000 for the month of March received in April month then this rent will be accounted for in the books in March
- Accrual Income- Acrrual expense means the amount for any income received on a later period than the period when it pertains to be received
- Accrual Rent– Accrual rent means the amount for using the land of the entity by the other party is received at a later period than the period when it is put into use.
- Accrued Interest– Accrued interest means the amount of interest received on a later period than the period when it pertains to receive
The bonus expense account is debited because according to the modern rule of accounting “Increase in expense is debited”. Accrued bonus liability is credited because according to the rule of accounting, “Increase in liability is credited”.
Drawings of goods The drawings of the goods, in a business, take place when the owner/partner of a business withdraws goods for their personal use. It's hence called drawings as it reduces the capital invested by the owner(s). It's also called the withdrawal account. The drawings are generally madeRead more
Drawings of goods
The drawings of the goods, in a business, take place when the owner/partner of a business withdraws goods for their personal use. It’s hence called drawings as it reduces the capital invested by the owner(s). It’s also called the withdrawal account.
The drawings are generally made for cash or stock by the owner/partner and the relevant account is thus reduced causing the adjustment done on the owner/partner’s capital at the cost price.
Journal entry
The journal entry for the goods withdrawn for personal use will be as follows:
Explanation via rules
The drawings account is debited because it decreases the balance of the capital account. Whereas, the purchases account is credited as it causes a reduction in the purchases account.
As per the modern rules of accounting, we credit the decrease in assets, thus, the purchases account is credited. Whereas, the withdrawal account when increased is debited. Therefore, the drawing account is debited here.
As per the golden rules of accounting, “debit what comes in and credit what goes out.” Hence, the purchase account is credited. And, “if any expense or loss is incurred for the business, the expense or loss account shall be debited“. Thus, the drawing account is debited.
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