AccountingQA Latest Questions

Anushka Lalwani
Anushka Lalwani
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    Introduction In Tally, journal entries are made in the vouchers. For each type of journal entry, there is a specific voucher. It is the vouchers where the transactions are recorded along with all the relevant details. Hence, when we speak of journal entries in tally, it is the vouchers which we haveRead more

    Introduction

    In Tally, journal entries are made in the vouchers. For each type of journal entry, there is a specific voucher. It is the vouchers where the transactions are recorded along with all the relevant details. Hence, when we speak of journal entries in tally, it is the vouchers which we have to master.

    In Tally, vouchers are of four types:

    1. Accounting vouchers
    2. Inventory vouchers
    3. Order voucher
    4. Payroll voucher

    The vouchers under the above voucher types are as shown below:

    To open the voucher creation menu follow these steps:

    In Tally ERP 9: Gateway of Tally→ Accounting Vouchers→ Voucher creation menu will open

    In Tally Prime: Gateway of Tally→ Vouchers→ Voucher creation menu will open

    Out of the above vouchers, the vouchers which I would suggest you practice are as follows (along with their short-cut keys):

    1. Contra Voucher – F4
    2. Payment Voucher – F5
    3. Receipt Voucher – F6
    4. Journal Voucher – F7
    5. Sales Voucher – F8
    6. Purchase Voucher – F9
    7. Credit note – Alt + F6
    8. Debit note – Alt + F5

     

    All of the above are accounting vouchers. You can simply press the short-cut keys to open the respective voucher while in the voucher creation menu

    If you are new to tally, I would suggest you practice only the accounting vouchers.

    Here, I have discussed only the accounting vouchers:

    Payment Voucher – F5

    A payment voucher is used to record payments of cash or by the bank. Payment can be to creditors or for expenses.

    There are two modes to this voucher which you can change by clicking the ‘Change Mode’ option on the right-hand side menu or simply pressing Ctrl + H. This menu will open.

    Select the ‘Double Entry’ mode for sake of simplicity. In this mode, the entry will be just like the conventional journal entry as in the double entry system of accounting.

    You have to just select the account you want debit which can be an expense, creditor etc. and you can credit only the cash or bank accounts as it is a payment voucher. Below there is a narration field which you can fill too. After entering all the necessary details you have to accept the voucher.

    Here, is a filled payment voucher in which I have recorded an expense payment entry.

     

     The journal entries which you can practice on payment vouchers are as follows:

    • Payment of expenses like rent, electricity, wages, salaries, carriage, interest etc
    • Payment to trade creditors.
    • Purchase of Assets

     

    Receipt Voucher – F6

    A receipt voucher is used for the recorded receipt of cash in the business. Just like a payment voucher, I recommend you to use it in Double Entry mode. In Tally prime, it looks this:

     

    The receipt voucher given above is already filled. I have passed a ‘collection from the debtor’ entry here. 

    The journal entries you can practice in the receipt voucher are as follows:

    • Receipt of cash from trade debtors.
    • Receipt of interest from the bank.
    • Commission received
    • Sale of Assets.

    Purchase Voucher – F7

    A purchase voucher is a voucher for exclusively recording purchase of goods entries. Purchase whether cash or credit should be recorded in the purchase voucher only as it allows recording of additional details related to purchase as well as tracking with purchase order and receipt note.

    The purchase voucher looks like this:

    Here, the purchase voucher is opened in ‘Item invoice’ mode. Item invoice is easier to understand hence I advise you to this mode to use the purchase voucher. You can change the mode by pressing Ctrl + H.

    If you wish to record transactions like journal entries then you can choose the ‘As Voucher’ mode.

    The details which you have to fill in are as follows:

    • Reference number or Bill number
    • Party A/c Name or the name of the creditor. (If the creditor is not created, press Alt + C to create)
    • Name of item purchased ( Press Alt + C to create the stock item if not created)
    • Enter the quantity and rate of the item and the total amount will be auto-populated.
    • The accounting details menu will open asking for the account to be debited for the purchase. Select the purchase account you want to debit or create a purchase account by pressing Alt + C if not created.

    • Enter a narration if you want and accept the voucher.

    Below is a complete purchase voucher where a credit sale transaction is passed:

    Sales Voucher – F8

    A sales voucher is a voucher for exclusively recording sales of goods entries. Sales, whether cash or credit, should be recorded in the sales voucher only as it allows recording of additional details related to sales as well as tracking with Sales orders and Delivery notes.

    Here also, I recommend you to use the sales voucher in Invoice mode

    Filling up of details in sales voucher is same as in purchase voucher. The difference here is that in the ‘Accounting details’ section you have selected a sales account to be credited.

    Here is a completed sales voucher where I have recorded a credit sale transaction:

    Contra Voucher – F4

    A Contra voucher is used to record contra transactions. Contra transactions are those transactions which take place between:

    • A Bank account and cash account
    • Two different bank accounts 

    The journal entries which can be practised on contra voucher are as follows:

    1. Withdrawal of cash from the bank.
    2. Deposit from cash into the bank.
    3. Transfer of amount from one bank to another.

    Given below is a completed Contra voucher in which ‘cash deposited into bank’ transaction is recorded:

    Journal Voucher – F7

    There are many transactions which cannot be passed in any of the vouchers discussed above. The examples of such transactions or journal entries are as follows:

    1. Depreciation of assets
    2. Entries related to the provision
    3. Prepaid Expenses
    4. Outstanding expenses
    5. Rectification of error entries
    6. Accrued income entries
    7. Any other entry which cannot be passed in any other voucher.

    It is an important voucher in Tally as many crucial entries are recorded in it.
    The journal voucher looks like this:

    It looks like a journal book and it does not have any different mode like voucher discussed above:

    The journal entries to practice on journal vouchers are many. You can refer to the examples of transactions I have mentioned above.

     

    Debit Note Voucher – Alt + F5

    A debit note voucher is to record purchase return transactions in Tally. Hence, the only transaction you can record here is of purchase return. The debit note voucher looks like this:

     

    Credit Note Voucher– Alt + F5

    In credit note vouchers, the sale return transactions are recorded. The credit note voucher looks like this:

    That’s all.  These are vouchers I would recommend one to practice on Tally.

     

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A_Team
A_Team
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  2. Akash Kumar AK
    This answer was edited.

    Generally, Assets are classified into two types. Non-Current Assets Current Assets   Non-Current Asset Noncurrent assets are also known as Fixed assets. These assets are an organization's long-term investments that are not easily converted to cash or are not expected to become cash within an acRead more

    Generally, Assets are classified into two types.

    1. Non-Current Assets
    2. Current Assets

     

    Non-Current Asset

    Noncurrent assets are also known as Fixed assets. These assets are an organization’s long-term investments that are not easily converted to cash or are not expected to become cash within an accounting year.

    In general terms, In accounting, fixed assets are assets that cannot be converted into cash immediately. They are primarily tangible assets used in production having a useful life of more than one accounting period. Unlike current assets or liquid assets, fixed assets are for the purpose of deriving long-term benefits.

    Unlike other assets, fixed assets are written off differently as they provide long-term income. They are also called “long-lived assets” or “Property Plant & Equipment”.

     

    Examples of Fixed Assets

    • Land
    • Land improvement (e.g. irrigation)
    • Building
    • Building (work in progress)
    • Machinery
    • Vehicles
    • Furniture
    • Computer hardware
    • Computer software
    • Office equipment
    • Leasehold improvements (e.g. air conditioning)
    • Intangible assets like trademarks, patents, goodwill, etc. (non-current assets)

     

    Valuation of Fixed asset

    fixed assets are recorded at their net book value, which is the difference between the “historical cost of the asset” and “accumulated depreciation”.

    “Net book value = Historical cost of the asset – Accumulated depreciation”

     

    Example:

    Hasley Co. purchases Furniture for their company at a price of 1,00,000. The Furniture has a constant depreciation of 10,000 per year. So, after 5 years, the net book value of the computer will be recorded as

    1,00,000 – (5 x 10,000) = 50,000.

    Therefore, the furniture value should be shown as 50,000 on the balance sheet.

     

    Presentation in the Balance Sheet

    Both current assets and non-current assets are shown on the asset side(Right side) of the balance sheet.

     

    Difference between Current Asset and Non-Current Asset

    Current assets are the resources held for a short period of time and are mainly used for trading purposes whereas Fixed assets are assets that last for a long time and are acquired for continuous use by an entity.

    The purpose to spend on fixed assets is to generate income over the long term and the purpose of the current assets is to spend on fixed assets to generate income over the long term.

    At the time of the sale of fixed assets, there is a capital gain or capital loss but at the time of the sale of current assets, there is an operating gain or operating loss.

    The main difference between the fixed asset and current asset is, although both are shown in the balance sheet fixed assets are depreciated every year and it is valued by (the cost of the asset – depreciation) and current asset is valued as per their current market value or cost value, whichever is lower.

     

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SidharthBadlani
SidharthBadlani
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  2. Ishika Pandey Curious ca aspirant
    This answer was edited.

    Definition Gross profit is the excess of the proceeds of goods and services rendered during a period over their cost, before taking into account administration, selling, distribution, and financial expenses. When the result of this computation is negative it is referred to as gross loss Formula : ToRead more

    Definition

    Gross profit is the excess of the proceeds of goods and services rendered during a period over their cost, before taking into account administration, selling, distribution, and financial expenses.

    When the result of this computation is negative it is referred to as gross loss

    Formula :

    Total Revenues – Cost Of Goods Sold

    Net profit is defined as the excess of revenues over expenses during a particular period.

    When the result of this computation is negative it is called a net loss.

    Net profit may be shown before or after tax.

    Formula :

    Total Revenues – Expenses
    Or
    Total Revenues – Total Cost ( Implicit And Explicit Cost )

    The basic difference between gross profit and net profit is that gross profit estimates the profitability of a company whereas net profit is to show the performance of the company.

    Key points of Gross Profit

    Some of the key points of as for gross profits follows :

    • Stage of calculation: Gross Profit is calculated in the first stage of the Final Account.

    • Purpose of calculation: It is calculated to know the total profit earned during the particular accounting

    • Type of balance: Gross Profit shows the credit balance of the Trading Account.

    • Dimension: It is a narrow concept as it is a part of Net Profit.

    • Treatment: It is not treated directly in the balance sheet. It is transferred to the Profit And Loss Account.

    Key points of Net Profit

    Some of the key points of as for gross profits follows :

    • Stage of calculation: Net Profit is calculated in the second stage of the Final Account.

    • Purpose of calculation: It is calculated to know the net profit earned during the particular accounting

    • Type of balance: Net Profit shows the credit balance of the Profit And Loss Account.

    • Dimension: It is a wider concept as it includes Gross Profit.

    • Treatment: It is treated directly in the balance sheet by adding or subtracting from the capital.

    Examples

    Now let me explain to you by taking an example which is as follows :

    In a business organization there were the following data given as purchases made Rs 73000, inventory, in the beginning, was Rs 10000, direct expenses made were Rs 7000, closing inventory which was Rs 5000, revenue from operation during the period was Rs 100000.
    Then,
    COST OF GOODS SOLD = Purchases + Opening Inventory + Direct Expenses – Closing Inventory.
    = Rs ( 73000 + 10000+ 7000- 5000)
    = Rs 85000

    GROSS PROFIT = REVENUE – COST OF GOODS SOLD
    = Rs ( 100000 – 85000 )
    = Rs 15000

    Now from the above question keeping the gross profit same if the indirect expenses of the organization are Rs 2000 and the other income is Rs 1000.
    Then,

    NET PROFIT = GROSS PROFIT – INDIRECT EXPENSES + OTHER INCOMES
    = Rs ( 15000 – 2000 + 1000)
    = Rs 14000

    Conclusion

    So here I conclude that gross profit is the difference between revenues from sales and/or services rendered and its direct cost.

    Whereas net profit is after the deduction of total expenses from the total revenues of the enterprise.

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Aadil
AadilCurious
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  2. Mehak
    This answer was edited.

    To understand why we do not record self-generated goodwill in accounting, let us first understand what goodwill is and its accounting treatment. What is Goodwill? Goodwill is an intangible asset of a business.  It represents the reputation and brand value of a business built over time. It is a valueRead more

    To understand why we do not record self-generated goodwill in accounting, let us first understand what goodwill is and its accounting treatment.

    What is Goodwill?

    Goodwill is an intangible asset of a business.  It represents the reputation and brand value of a business built over time. It is a value over and above the tangible assets of the business.

    Goodwill often arises when a business purchases another business and pays a premium, which means a price higher than the fair value of the business.

    Characteristics of Goodwill

    Goodwill has the following characteristics:

    1. It is an Intangible asset, meaning it has no physical existence and cannot be seen or touched.
    2. It is generally recognized during transactions in mergers and acquisitions.
    3. It is the value attributed to the brand value and reputation of the business.
    4. It adds value to a business beyond its tangible assets.

    Example of Goodwill

    Let us take an example to understand the concept of goodwill better.

    Suppose there is a company ABC Ltd. It is planning to acquire XYZ Ltd. The fair value of the assets of XYZ is calculated to be 600,000. However, ABC has agreed to pay a sum of 650,000 to acquire the company. This difference of 50,000 is goodwill.

    Impact on Financial Statements

    Goodwill is shown under the assets side of the Balance Sheet.

    What is self-generated goodwill?

    Self-generated goodwill in simple words means the positive reputation or trust that a business earns over time through their own hard work and decisions. It’s not something bought or inherited but something built from scratch internally, like a brand’s reputation, loyal customers, strong relationships, or unique ideas.

    For example, a small business that goes the extra mile to offer great customer service or always delivers high-quality products over the years will naturally build goodwill.

    It is also known as internally generated goodwill.

    Why do we not record sef-generated goodwill?

    Self-generated goodwill is not recorded in the financial statements because of the following reasons:

    1. Measurement may not be reliable: The measurement of self-generated goodwill is majorly based on the judgment of the managers. It is based on the value creation because of a good reputation or consumer base of the business, which might not be measured accurately.
    2. Conservatism principle: As per the conservatism principle, a business shall not overstate its assets or liabilities. However, self-generated goodwill might be overstated.
    3. Lack of market transaction: There is a lack of a market transaction that ensures verification of the value of goodwill as in the case of purchased goodwill.
    4. Manipulation: There are higher chances of manipulation of financial statements through self-generated goodwill.

    Conclusion

    On a concluding note, self-generated goodwill is something that adds real value to a business, but it’s not something that can easily be measured or captured in financial statements. Accounting is all about providing clear, reliable information, and including goodwill would make things murky and open to manipulation. Even though it doesn’t show up on the books, you can still see its effects in a company’s reputation and success. Maybe in the future, businesses will find a way to highlight it better, but for now, leaving it out helps keep financial reports honest and straightforward.

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

    The Furniture and Fixture is depreciated @10% according to the income tax act and as per the companies act, 2013 @9.50% under Straight line method and @25.89% under written down value method. Furniture and fixture form a major part to furnish an office. For Example, the chair, table, bookshelves, etRead more

    The Furniture and Fixture is depreciated @10% according to the income tax act and as per the companies act, 2013 @9.50% under Straight line method and @25.89% under written down value method.

    Furniture and fixture form a major part to furnish an office. For Example, the chair, table, bookshelves, etc. all comes under Furniture and Fixture. The useful life of Furniture and Fixtures is estimated as 5-10 years depending upon the kind of furniture.

    Rate of depreciation in reference to days

    • If Furniture is bought and put to use for more than 180 days, then the full rate of depreciation will be charged.
    • If the furniture is bought and put to use for less than 180 days, then half the rate of depreciation will be charged.
    • If the furniture is bought but is not put to use, then no depreciation will be charged.
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Manvi
Manvi
In: >

  2. Karan B.com and Pursuing ACCA
    This answer was edited.

    Bad Debt is the amount that is irrecoverable from the debtors. It is the portion of the receivables. It includes two accounts “Bad Debts A/c” and “Debtors A/c or Accounts Receivable A/c”. The amount cannot be recovered by the debtor for reasons like the debtor is no longer in the position to pay offRead more

    Bad Debt is the amount that is irrecoverable from the debtors. It is the portion of the receivables. It includes two accounts “Bad Debts A/c” and “Debtors A/c or Accounts Receivable A/c”.

    The amount cannot be recovered by the debtor for reasons like the debtor is no longer in the position to pay off the debt or has become insolvent.

    There are two methods to write off bad debts:

    1. Direct Method
    2. Allowance for Doubtful Debts

     

    1. Direct Method: In this method, the amount of bad debts is directly deducted from the total receivables and the second effect is transferred to the debit side of Profit and Loss A/c as an expense.

    The journal entry for bad debts as per modern rules of accounting is as follows:

    Bad Debts A/c Debit Increase in expenses
          To Accounts Receivable A/c Credit Decrease in assets
    (Being bad debts written off )

     

    Journal entry for transferring bad debts to profit and loss account:

    Profit and Loss A/c Debit
          To Bad Debts A/c Credit
    (Being bad debts transferred to profit and loss a/c )

     

    For example, A Ltd had a total receivable of Rs.2,50,000 and bad debts for the period amounted to Rs.10,000.

    Here, the journal entries will be:

    Bad Debts A/c Debit 10,000
          To Accounts Receivable A/c Credit 10,000
    (Being bad debts written off )

     

    Profit and Loss A/c Debit 10,000
          To Bad Debts A/c Credit 10,000
    (Being bad debts transferred to profit and loss a/c )

     

     2. Allowance for Doubtful Debts:  In this method allowance is the estimation of the debts which is doubtful to be paid. The company creates a reserve for such debts which are uncollectible.

    Firstly, the company will create a reserve which will be based on the accounts receivable. The journal entry will be:

    Bad Debts A/c Debit
          To Allowance for Doubtful Debts A/c Credit
    (Being allowance for doubtful debts created)

     

    When a specific receivable is uncollectible it will be charged as an expense, and Allowance for Doubtful Debts will be “Debited” and Accounts Receivable will be “Credited”.

    Allowance for Doubtful Debts A/c Debit
                  To Accounts Receivable A/c Credit
    (Being bad debts written off)

    For example, Mr.B sold goods worth Rs.15,000 to Mr.D. He creates an allowance of Rs.15,000 in case Mr.D fails to pay the amount. At the end of the period, Mr.D defaults and does not pay the debt.

    In this case, Mr.B will first record the journal entry for allowance and then will write off Mr.D’s account.

    Bad Debts A/c 15,000
          To Allowance for Doubtful Debts A/c 15,000
    (Being allowance of Rs.10,000 created for doubtful debts)

     

    Allowance for Doubtful Debts A/c 15,000
                  To Mr.D’s A/c 15,000
    (Being Mr.D’s account written off)
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