Maintaining Books of Accounts by Small Business Owners, Check Complete Requirement of Maintenance of Books of Accounts, also check Requirement to Maintain Books And Audit, What books of accounts are required to be maintained by “persons?”, Where the books of accounts should be kept. in this article you may check complete details regarding Maintaining Books of … Read more
Deferred Revenue Expenditure: Deferred revenue expenditure is that expenditure for which payment has been made or a liability incurred but which is carried forward on the presumption that it will be of benefit over a subsequent period or periods. In short, it refers to that expenditure that is, for the time being, deferred from being charged … Read more
Classification of Errors or Types of Errors: Every concern is interested in ascertaining its true profit and financial position at the close of the trading year. But in spite of the best efforts of the bookkeeper and the accountant certain errors are committed in the recording of the transactions which affect the final accounts of … Read more
Capital expenditure is that expenditure which results in acquisition of an asset or which results in an increase in the earning capacity of a business. The benefit of such expenditure lasts for a long period of time. As we have already discussed, capital expenditure contributes to the revenue earning capacity of a business over more … Read more
AS 5 – Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies. This Standard should be applied by an enterprise in presenting profit or loss from ordinary activities, extraordinary items and prior period items in the Statement of Profit and Loss, in accounting for changes in accounting estimates, and … Read more
Journal: A journal is often referred to as Book of Prime Entry or the book of original entry. In this book transactions are recorded in their chronological order. The process of recording transaction in a journal is called as ‘Journalisation’. The entry made in this book is called a ‘journal entry’. Journal is the book of … Read more
Accounting standard 28 Impairment of Assets: The objective of AS 28 is to prescribe the procedures that an enterprise applies to ensure that its assets are carried at no more than their recoverable amount. The asset is described as impaired if its carrying amount exceeds the amount to be recovered through use or sale of … Read more
Accounting Cycle: When complete sequence of accounting procedure is done which happens frequently and repeated in same directions during an accounting period, the same is called an accounting cycle. Accounting cycle starts from the recording of individual transactions and ends on the preparation of financial statements and closing entries. The accounting cycle is the name given to the collective … Read more
General Journal: This is also known as Journal Proper or General Journal. It is used for making the original record of such transactions for which no special journal has been kept in the business. All transactions are first recorded in the journal as and when they occur; the record is chronological; otherwise it would be difficult to … Read more
LedLedger Accounts – Principal Book of Accounts: All journals are posted into ledger chronologically and in a classified manner Ledger is the principal book of accounts where similar transactions relating to a particular person or property or revenue or expense are recorded. It is a set of accounts. It contains all accounts of the business enterprise … Read more
Branches of Accounting: Accounting has universal application for recording transactions and events and presenting suitable information to aid decision-making regarding any type of economic activity ranging from a family function to functions of the national government. But hereinafter we shall concentrate only on business activities and their accounting because the objective of this study material is … Read more
Contingent Assets and Contingent Liabilities: A contingent asset is a potential asset associated with a contingent gain. Unlike contingent liabilities and contingent losses, contingent assets and contingent gains are not recorded in accounts, even when they are probable and the amount can be estimated. and A contingent liability is defined as a liability which may arise depending on the outcome of a specific event. It is a possible obligation which may or may … Read more
Types of Cash Book: Cash book is the book in which all transactions concerning cash receipts and cash payments are recorded. Cash Book is in the form of an account. It serves the purpose of Cash Account also. On the debit side, all cash receipts are recorded while on the credit side, all cash payments … Read more
Steps to Locate Errors: Even if there is only a very small difference in the trial balance, the errors leading to it must be located and rectified. A small difference may be the result of a number of errors. The following steps will be useful in locating errors: Whenever there is a difference in the trial … Read more
AS 1 – Disclosure of Accounting Policies. This Standard deals with the disclosure of significant accounting policies which are followed in preparing and presenting financial statements. Disclosure of Accounting Policies To ensure proper understanding of financial statements, it is necessary that all significant accounting policies adopted in the preparation and presentation of financial statements should … Read more
Ind AS 7 Statement of Cash Flows – Ind AS 7 prescribes principles and guidance on preparation and presentation of cash flows of an entity from operating, investing and financing activities for a reporting period. The objective of Ind AS 7 is to provide information about the historical changes in cash and cash equivalents of … Read more
Difference between Capital Expenditure and Revenue Expenditure: The following are the points of distinction between capital expenditure and revenue expenditure: The Revenue Expense relates to the operations of the business of an accounting period or to the revenue earned during the period or the items of expenditure, benefits of which do not extend beyond that period. … Read more
Accounting Equation: The accounting equation that is the foundation of double entry accounting. The accounting equation displays that all assets are either financed by borrowing money or paying with the money of the company’s shareholders. Thus, the accounting equation is: Assets = Liabilities + Shareholder Equity. All business transactions are recorded as having a dual aspect. At any point of time, a firm … Read more
Ind AS 40 Investment Property. The objective of IndAS 40 is to prescribe the accounting treatment for investment property and related disclosure requirements. Investment property is property (land or a building or part of a building or both) held (by the owner or by the lessee as a right-of-use asset) to earn rentals or for … Read more
Comparison between Capital Expenditure and Revenue Expenditure, check out difference between capital Expenditure and Revenue Expenditure. Capital Expenditure: This represents expenditure incurred for the purpose of acquiring a fixed asset which is intended to be used over long term for earning profits there from. e. g. amount paid to buy a computer for office use … Read more
Features of the Ledger Account: After recording the transactions in the journal, recorded entries are classified and grouped into by preparation of accounts. The book which contains all set of accounts (viz. personal, real and nominal accounts), is known as Ledger. It is known as principal books of account in which account-wise balance of each … Read more
Accounting for Not for Profit Organisation, Check Accounting for non profit organisations, A Not for Profit Organisation prepares their financial statements in the following form: i) Income & Expenditure Account & ii) Balance sheet Generally, such organizations also prepare a Receipt & Payment Account. Accounting for Not for Profit Organisation Must Read – Various Types of Vouchers … Read more
Limitations of Accounting, What are the Limitations of Accounting: Accounting is not fully exact: Accounting is influenced by the personal judgment in respect of various terms.People are bound to have different ideas and the estimates will naturally differ from person to person. Thus this will lead to the different amount of profit shown by a different … Read more
Accounting Standard 16 – Accounting for Borrowing Costs (AS 16). This Standard should be applied in accounting for borrowing costs. This Standard does not deal with the actual or imputed cost of owners’ equity, including preference share capital not classified as a liability. Exchange differences on foreign currency borrowings to the extent of the difference … Read more
Balancing Ledger Accounts: Balancing of an account means the process of equalizing the two sides of an account by putting the difference on the side where amount is short. After Ledger Posting is completed the various accounts are balanced in order to know the exact position of a particular kind of transaction. Where the debit side of an account … Read more
Double Entry System of book-keeping has emerged in the process of evolution of various accounting techniques. It is the only scientific system of accounting. According to it, every transaction has two-fold aspects debit and credit and both the aspects are to be recorded in the books of accounts. For example, if a business acquires something … Read more
Petty Cash Book: Payments in cash of small amounts like traveling expenses, postage, carriage etc. are petty cash expenses. These petty cash expenses are recorded in the petty cash book. The petty cash book is maintained by separate cashier known as petty cashier. The firm may adopt Imprest System of maintaining petty cash. The petty cashier … Read more
Rules of Debit and Credit: The left hand side of an account is called the debit side; while the right hand side is called the credit side. An entry on the left side of an account is called a debit entry, or merely a debit, an entry on the right side is called a credit … Read more
What is IASB, FASB, IFRS, Ind AS and US GAAP?. Every individual performs some kind of economic activity. A salaried person gets salary and spends to buy provisions and clothing, for children’s education, construction of house, etc. A sports club formed by a group of individuals, a business run by an individual or a group … Read more
IND AS 36 Impairment of Assets: The objective of Ind AS 36 is to prescribe the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered … Read more