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Simerpreet
SimerpreetHelpful
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Bill of Exchange
  2. Sandy CMA Final
    This answer was edited.

    Specimen of Bill of Exchange Important points of Bill of Exchange: Date: When a bill of exchange is drawn, the drawer has to specify the date in the top right corner. The date is important for the purpose of calculating the due date of the bill. Generally, the drawee is given three days as a grace pRead more

    Specimen of Bill of Exchange

    Important points of Bill of Exchange:

    Date: When a bill of exchange is drawn, the drawer has to specify the date in the top right corner. The date is important for the purpose of calculating the due date of the bill. Generally, the drawee is given three days as a grace period over and above the due date of maturity.

    In the above specimen, the date mentioned is 25th July 2021, so the due date will be three months + 3 days( grace period) i.e. to say  28th October 2021.

    Term: In the above, the term as agreed by the drawer and drawee is 3 months. So the maturity date will be after 3 months.

    Stamp: The Stamp is affixed in the left corner in every bill of exchange, the value of which depends upon the amount specified in the bill.

    Parties involved in Bill of Exchange:

    1. Drawer: The one who makes the bill, i.e. the creditor.
    2. Drawee: The one on whom the bill is drawn, i.e. the debtor.
    3. Payee: The one to whom the amount is to be paid is the payee.

    Sometimes, the drawer and the payee are the same people.

    For Example,

    i) A bill of exchange for Rs 10,000 is drawn by Sandy on Karan which is due after three months. Karan accepted the bill which is met at maturity and hence becomes the acceptor of the bill by putting his signature.

    Here, Sandy is the drawer and Karan is the drawee. As the payment on maturity is received by Sandy so the payee will be Sandy.

    ii) A bill of exchange for Rs 10,000 is drawn by Sandy on Karan which is due after three months. Karan accepted the bill. Thereafter Sandy endorsed the bill in favor of his creditor, Vikash. The bill is met at maturity.

    So in this case, Sandy is the drawer, Karan is the drawee and Vikash is the payee as he received the amount at maturity.

    Acceptance: Acceptance by the drawee is given on the face of the bill as-

    Meaning of BOE:

    In a business, in the case of credit sales, the payment is received after a certain period of time. In such a case the seller i.e. the creditor makes a credit note and the purchaser i.e. the debtor accepts the same by giving his acceptance by signing the instrument, to pay the amount of money mentioned to a certain person or the bearer of the instrument.

    It is generally a negotiable instrument i.e. can be transferred from one person to another.

    Features of Bill of Exchange.

    1. It is a written document.
    2. It is an unconditional order to pay.
    3. It must be signed by the maker of the bill i.e. the drawer.
    4. It must be properly stamped.
    5. The amount is payable either to a specified person or to his order or to the bearer.
    6. It contains an order to pay the amount mentioned in the instrument both in figures and words.
    7. The amount is to be paid either on the expiry of a fixed period from the date of the bill or on-demand.

     

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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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Jayesh Gupta
Jayesh GuptaCurious
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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
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Aadil
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  2. Radhika
    This answer was edited.

    A Capital Account is an account that shows the owner's equity in the firm and a Partner's Capital Account is an account that shows the partner's equity in a partnership firm. Partner’s Capital Account includes transactions between the partners and the firm. Examples of such transactions are: CapitalRead more

    A Capital Account is an account that shows the owner’s equity in the firm and a Partner’s Capital Account is an account that shows the partner’s equity in a partnership firm.

    Partner’s Capital Account includes transactions between the partners and the firm. Examples of such transactions are:

    • Capital introduced in the firm
    • Capital withdrawn
    • Interest on Capital
    • Interest on Drawings
    • Profit or loss in the financial year, etc.

    When partners are given interest on their capital contribution in the firm, it is called on Interest on Capital.

    In case the partnership firm does not have a Partnership Deed, the Partnership Act does not include a provision for Interest on Capital. However, if the partners want they can mutually decide the rate of Interest on Capital.

    Interest on Capital is calculated on the opening capital of the partners and is only allowed when the firm makes a profit, that is, in case a firm incurs losses, it cannot allow Interest on Capital to its partners.

    Example:

    In a partnership firm, there are two partners A and B, and their capital contribution is Rs 10,000 and 20,000 respectively. Interest on capital is @ 10% p.a. The Interest on Capital for both the partners is:

    Partner A- 10,000 * 10/100 = 1,000

    Partner B- 20,000 * 10/100 = 2,000

    The journal entry for Interest on Capital is an adjusting entry and is shown as:

    Interest on Capital A/c                                                          Dr. 3,000
                                         To A’s Capital a/c 1,000
                                         To B’s Capital A/c 2,000
    • Partner’s Capital Account is credited because it is credit in nature and interest on capital is an addition to the account.
    • Interest on Capital Account is debited because it is an expense account.

     

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A_Team
A_Team
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  2. Rahul_Jose Aspiring CA currently doing Bcom

    Working capital is defined as the difference between current assets and current liabilities of a business. Current assets include cash, debtors and stock whereas current liabilities include creditors and short term loans etc. FORMULA Current Assets - Current Liabilities = Working Capital Zero workinRead more

    Working capital is defined as the difference between current assets and current liabilities of a business. Current assets include cash, debtors and stock whereas current liabilities include creditors and short term loans etc.

    FORMULA

    Current Assets – Current Liabilities = Working Capital

    Zero working capital is when a company has the exact same amount of current assets and current liabilities. When both are equal, the difference becomes zero and hence the name, Zero working capital. Working Capital may be positive or negative. When current assets exceed current liabilities, it shows positive working capital and when current liabilities exceed current assets, it shows negative working capital.

    Zero working capital can be operated by adopting demand-based production. In this method, the business only produces units as and when they are ordered by the customers. Through this method, all stocks of finished goods will be eliminated. Also, raw material is only ordered based on the amount of demand.

    This reduces the investment in working capital and thus the investment in long term assets can increase. The company can also use the funds for other purposes like growth or new opportunities.

    EXAMPLE

    Suppose a company has Inventory worth Rs 3,000, Debtors worth Rs 4,000 and cash worth Rs 2,000. The creditors of the company are Rs 6,000 and short term borrowings are Rs 3,000.

    Now, total assets = Rs 9,000 ( 3,000 + 4,000 + 2,000)
    And total liabilities = Rs 9,000 ( 6,000 + 3,000)
    Therefore, working capital = 9,000 – 9,000 = 0

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A_Team
A_Team
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  2. GautamSaxena Curious .
    This answer was edited.

    There are three types of businesses that can be commenced, they are sole proprietorship, partnership, and joint-stock company. As we all know, to start any business a certain sum of money has to be invested by the owner which is known as the capital of the business in terms of accounting. In companiRead more

    There are three types of businesses that can be commenced, they are sole proprietorship, partnership, and joint-stock company. As we all know, to start any business a certain sum of money has to be invested by the owner which is known as the capital of the business in terms of accounting.

    In companies, commencement is a declaration issued by the company’s directors with the registrar stating that the subscribers of the company have paid the amount agreed. In a sole proprietorship, the business can be commenced with the introduction of any asset such as cash, stock, furniture, etc.

    Journal entry

    In the journal entry, “Started business with Cash”

    As per the golden rules of accounting, the cash a/c is debited because we bring in cash to the business, and as the rule says “debit what comes in, credit what goes out.” Whereas the capital a/c is credited because “debit all expenses and losses, credit all incomes and gains”

    As per modern rules of accounting, cash a/c is debited as cash is a current asset, and assets are debited when they increase. Whereas, on the increment on liabilities, they are credited, therefore, capital a/c is credited.

    Therefore, the entry we’ll be passing is-

     

     

     

     

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Simerpreet
SimerpreetHelpful
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  2. Vishnu_K Nil
    This answer was edited.

    Meaning of Partnership Deed A Partnership Deed is a written agreement between partners who are willing to form a Partnership Firm. It is also called as a Partnership Agreement. Contents of a Partnership Deed A Partnership Deed shall mainly include the following contents: Name of the Partnership firmRead more

    Meaning of Partnership Deed

    A Partnership Deed is a written agreement between partners who are willing to form a Partnership Firm. It is also called as a Partnership Agreement.

    Contents of a Partnership Deed

    A Partnership Deed shall mainly include the following contents:

    1. Name of the Partnership firm
    2. Address of the Partnership firm
    3. Details of all the Partners
    4. Date of commencement of the Business
    5. The amount of capital contributed by each of the partners forming the Partnership firm
    6. The Profit sharing ratio (The Business profit shared among the partners on a ratio basis)
    7. The rate or amount of Interest on Capital & the rate or amount of Interest on drawings to each partner respectively.
    8. The salary payable to each of the partners of the firm.
    9. The rights, duties, and power of each partner of the firm.
    10. The duration of the existence of the firm

    Importance of Partnership Deed

    1. Proper regulation of duties, liabilities, and rights of the partners are made in the partnership deed and hence there cannot be any issue during the course of the business.
    2. There can be no disputes between the partners upon Profit sharing, salary, commission, interest on capital, and interest on drawings.
    3. A partnership Deed acts as Legal proof for the conduct of the business and is used for many other registrations such as GST registration, and other related purposes.

     

    Format of a Partnership Deed

    The Partnership Deed shall originally be executed on an Indian Non-Judicial stamp paper.

    The format of the Partnership deed is given below with an assumption that 4 partners are forming the Partnership.

                                                                    PARTNERSHIP DEED

    This deed of partnership is made on [Date, Month, Year] between:

    1. [First Partner’s Name], [Son/Daughter] of [Mr. Father’s Name], residing at [Address Line 1, Address Line 2, City, State, Pin Code] hereinafter referred to as FIRST PARTNER.

    2. [Second Partner’s Name], [Son/Daughter] of [Mr. Father’s Name], residing at [Address Line 1, Address Line 2, City, State, Pin Code] hereinafter referred to as SECOND PARTNER.

    3. [Third Partner’s Name], [Son/Daughter] of [Mr. Father’s Name], residing at [Address Line 1, Address Line 2, City, State, Pin Code] hereinafter referred to as THIRD PARTNER.

    4. [Fourth Partner’s Name], [Son/Daughter] of [Mr. Father’s Name], residing at [Address Line 1, Address Line 2, City, State, Pin Code] hereinafter referred to as FOURTH PARTNER.

     

    Whereas, the parties hereto have agreed to commence business in partnership and it is expedient to have a written instrument of partnership. Now, this partnership deed witnesses as follows:

    1. BUSINESS ACTIVITY
    The parties hereto have mutually agreed to carry on the business of [Description of Business Activity Proposed].

    2. PLACE OF BUSINESS
    The principal place of the partnership business will be situated at [Address Line 1, Address Line 2, City, State, Pin Code]

    3. DURATION OF PARTNERSHIP
    The duration of the partnership will be at will.

    4. CAPITAL OF THE FIRM
    Initially, the capital of the firm shall be Rs. [Total Partners Contribution].

    5. PROFIT SHARING RATIO
    The profit or loss of the firm shall be shared equally among all the partners and transferred to the partner’s current account.

    6. MANAGEMENT
    The [First Partner] of the firm shall be Managing Partner and he will look after all the day-to-day transactions of the firm and any legal activities in the name of the firm and the remaining partners shall cooperate to do so.

    7. OPERATION OF BANK ACCOUNTS
    The firm shall open a current account in the name of [Partnership Firm Name] at any bank and such account shall be operated by [First Partner] and [Second Partner] jointly as declared from time to time to the Banks.

    8. BORROWING
    The written consent of all Partners will be required for the partnership to avail credit facilities from any financial institution.

    9. ACCOUNTS
    The firms shall regularly maintain in the ordinary course of business, true and correct accounts of all its transactions and also of all its assets and liabilities, the property books of account, which shall ordinarily be kept at the firm’s place of business. The accounting year shall be the financial year from 1st April onwards and the balance sheet shall be properly audited and the same shall be signed by all the Partners. Every Partner shall have access to the books and the right to verify their correctness.

    10. RETIREMENT
    If any partner shall at any time during the subsistence of the partnership, be desirous of retiring from the firm, it shall be competent from his to do so, provided he shall give at least one calendar month’s notice of his intention of doing so. The remaining partner shall pay the retiring partner or his legal representatives of the deceased partner, the purchase money of his share in the assets of the firm.

    11. DEATH OF PARTNER
    In the event of the death of any partners, one of the legal representatives of the deceased partner shall become the partner of the firm and in the event, the legal representative shows their denial to point the firm, they shall be paid part of the purchase amount calculated as on the date of the death of the partner.

    12. ARBITRATION
    Whenever there by any difference of opinion or any dispute between the partners shall refer the same to the arbitration of one person. The decision of the arbitration so nominated shall be final and binding on all partners, such arbitration proceedings shall be governed by Indian Arbitration Act, which is in force.

    In witness whereof, this deed of partnership is signed sealed, and delivered this [Day, Month, Year] at [City, State]:

    FIRST PARTNER                                            SECOND PARTNER

    [Address Line 1]                                                        [Address Line 1]
    [Address Line 2]                                                        [Address Line 2]
    [City, State, Pin Code]                                              [City, State, Pin Code]

    THIRD PARTNER                                            FOURTH PARTNER

    [Address Line 1]                                                         [Address Line 1]
    [Address Line 2]                                                        [Address Line 2]
    [City, State, Pin Code]                                              [City, State, Pin Code]

    WITNESS ONE                                                  WITNESS TWO

    [Address Line 1]                                                         [Address Line 1]
    [Address Line 2]                                                         [Address Line 2]
    [City, State, Pin Code]                                               [City, State, Pin Code]

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Simerpreet
SimerpreetHelpful
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  2. Karishma

    Realisation account  A realisation account is a nominal account prepared at the time of dissolution of a business.  All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissoluRead more

    Realisation account 

    A realisation account is a nominal account prepared at the time of dissolution of a business.  All the assets and liabilities except cash and bank balance are transferred to the realisation account. A realisation account is prepared to calculate the profit or loss on the dissolution or closing of the firm.

    All the assets are transferred to the debit of the realisation account and all the liabilities are transferred to the credit of the realisation account. When assets are sold, Cash A/c is debited and Reliastion A/c is credited and when liabilities are paid off, Cash A/c is credited and Realisation A/c is credited.

    If the credit side exceeds the debit side of the realisation account, it results in profit. In contrast, if the debit side exceeds the credit side of the realisation account, it results in a loss. in case of profit, the Capital account is credited and in case of loss, the Capital account is debited.

    The debit side of the realisation account

    All the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the debit of the realisation account and payment of outside liabilities is also recorded on the debit side of the realisation account. Payment made for dissolution expenses is also recorded on the debit side of the realisation account.

    • Assets: All the assets including Land and building, Plant and machinery, Furniture, Stock,  sundry debtors, and investments are transferred to the debit side of the realisation account. The debit balance of profit and loss balance is not transferred.
      • Accounting entry for this is as follows:

    Realisation A/c Dr…..

    To Assets A/c …..

    (All the assets transferred to the realisation account)

    • Cash and bank A/c: Payment for the liabilities including sundry creditors, outstanding expenses, bills payable, loans and advances, bank overdrafts and cash credit is transferred to the debit side of the realisation account.
      • Accounting entry for this is as follows:

    Realisation A/c Dr…..

    To Cash A/c …..

    (Payment made for liabilities)

    • Profit on realisation: If the credit side of the realisation account exceeds the debit side, it results in a profit then the capital account is credited.
      • Accounting entry for this is as follows:

    Realisation A/c Dr…..

    To Capital A/c …..

    (Being profit transferred to the capital account)

    Credit side of realisation account:

    All the liabilities and provisions are transferred to the credit side of the realisation account. Capital account of partners, profit and loss balance and loans from partners are not transferred. Sale proceeds of all the assets including Land and building, Plant and machinery, furniture, stock, debtor and investment are transferred to the credit side of the Realisation account.

    Format for realisation Account is as under:

    Realisation A/c
    Particulars Amount Particulars Amount
    To Land & Building By Provision for Doubtful Debts A/c
    To Plant & Machinery By Sundry Creditors A/c
    To Furniture By Bills Payable A/c
    To Debtors By Outstanding Expenses A/c
    To Goodwill A/c By Bank Loan, Overdraft, Cash Credit A/c
    To Investment A/c By Bank/ Cash A/c (Assets realized):
    To Bank/ Cash A/c (Liabilities Paid): Land and Building
    Sundry Creditors Plant and Machinery
    Bill Payable Furniture
    Outstanding Expenses Stock
    Bank Loan, Debtors
    Overdraft, Bad Debts recovered
    Cash Credit Investment
    To Bank/ Cash A/c By  Capital A/cs
    (Realisation Expenses) (assets taken over)
    To Capital A/c By Capital A/cs
    (Realisation Expenses) (Loss on Realisation)
    To Capital A/cs
    (Profit on Realisation)
    Total Total
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Astha
AsthaLeader
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Balance SheetMiscellaneous Expenditure
  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    Miscellaneous expenditure in the balance sheet The expenses that are written off in the current financial year are shown on the debit side of the profit and loss account. However, those that are not written off during the current financial year are shown in the balance sheet on the Assets Side as MiRead more

    Miscellaneous expenditure in the balance sheet

    The expenses that are written off in the current financial year are shown on the debit side of the profit and loss account. However, those that are not written off during the current financial year are shown in the balance sheet on the Assets Side as Miscellaneous expenditure.

    Miscellaneous expenditure are those expenses that are not categorized as Operating expenses i.e. these are not classified as manufacturing, selling, and administrative expenses.

    For example, BlackRock has spent 5,00,000 which will be written of in 5 consecutive years as an Advertisement expense. During the current financial year, only 1,00,000 will be written off and the rest will be carried to the next year and year thereafter.

    Treatment in the first year:

    • 1,00,000 which is written off during the current financial year will be shown on the debit side of the Profit and Loss account.
    • 4,00,000 which is carried forward will be shown on the assets side of the balance sheet as miscellaneous expenditure because all assets and expenses have a debit balance.

    Treatment in the second year:

    • 1,00,000 which is written off during the current financial year will be shown on the debit side of the Profit and Loss account.
    • 4,00,000 which is carried forward will be shown in the assets side of the balance sheet as a miscellaneous expenditure.

    The same will be done in the third, fourth, and fifth years.

    Conclusion

    Deferred revenue expenditure is also a long-term expenditure the benefit of which cannot be derived within the same year. So the amount that is written off during the current year is shown on the debit side of the profit and loss account and the amount which is not written off during the current financial year is shown on the assets side under the head Miscellaneous expenditure.

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Jasmeet_Sethi
Jasmeet_SethiCurious
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Depletion Amortization Depression

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

    The correct option is 2. Amortization. Depreciation in spirit is similar to Amortization because both depreciation and amortization have the same characteristics except that depreciation is used for tangible assets and amortization for intangible assets. To make it clear, intangible assets are thoseRead more

    The correct option is 2. Amortization.

    Depreciation in spirit is similar to Amortization because both depreciation and amortization have the same characteristics except that depreciation is used for tangible assets and amortization for intangible assets.

    To make it clear, intangible assets are those assets that cannot be touched i.e. they are not physically present. For example, goodwill, patent, trademark, etc. Hence, these assets are amortized over their useful life and not depreciated.

    Example for Amortizing intangible assets: A manufacturing company buys a patent for Rs 80,000 for 8 years. Assuming that the residual value of the patent after 8 years to be zero.

    The depreciation to be written off will be

    Yearly Depreciation = Cost of the patent – Residual value / Expected life of the asset.

    = 80,000 – 0 / 8

    = Rs 10,000 every year.

    Whereas, tangible assets are those assets that can be touched i.e. they are physically present. For example, building, plant & machinery, furniture, etc. Hence, these assets are depreciated over their useful life and not amortized.

    Example of Depreciating tangible asset:  A manufacturing company bought machinery for Rs 8,10,000 and its estimated life is 8 years, scrap value being Rs 10,000.

    The depreciation to be written off will be

    Yearly Depreciation = Cost of machinery – Scrap value / Expected life of the asset.

    = 8,10,000 – 10,000 / 8

    = 8,00,000 / 8

    = Rs 1,00,000 every year.

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