The land is a fixed asset and is treated as a long-term asset account. Explanation The land is a fixed asset which is also referred to as a long-term asset. The fixed assets are those assets that are not expected to be cashed, consumed, last, sold, or written off within one accounting year and areRead more
The land is a fixed asset and is treated as a long-term asset account.
Explanation
The land is a fixed asset which is also referred to as a long-term asset.
The fixed assets are those assets that are not expected to be cashed, consumed, last, sold, or written off within one accounting year and are purchased for long-term use. The fixed assets are also called non-current assets and the reason behind it is that current assets are easily converted into cash within one year and they are not.
Fixed assets are planned by the company to be used for the long term in order to generate income.
Example- Land, building, furniture, plants & equipment, etc.
Why is land an asset?
Although the land is not depreciated, it is still considered to be an asset because just like other assets the business spends its own money to acquire it.
It can also be used by the business for different operations and it doesn’t create any liability for the business. Instead, reselling the land after a few years can help the company earn a huge margin of profit.
Land in the balance sheet
On the asset side of the balance sheet, the land is stated under the heading long-term assets.
Balance Sheet (for the year…)
Therefore, the land is a fixed asset and is treated as a long-term asset account.
Ledger Folio A ledger folio, in simple words, is a page number of the ledger account where the relevant account appears. The term 'folio' refers to a book, particularly a book with large sheets of paper. In accounting, it's used to maintain ledger accounts. The use of ledger folio is generally seenRead more
Ledger Folio
A ledger folio, in simple words, is a page number of the ledger account where the relevant account appears. The term ‘folio’ refers to a book, particularly a book with large sheets of paper. In accounting, it’s used to maintain ledger accounts.
The use of ledger folio is generally seen in manual accounting, i.e the traditional book and paper accounting as it is a convenient tool used for tracking the relevant ledger account from its journal entry. Whereas, in computer-oriented accounting (or computerized accounting), it’s not really an issue to track your relevant ledger account.
Ledger folio, abbreviated as ‘L.F.’, is typically seen in journal entries. The ledger folio is written in the journal entries, after the ‘date’ and ‘particulars’ columns. It is really convenient when we’re dealing with and recording a large number of journal entries. As we will be further posting them into ledger accounts, thus, ledger folio comes in as a really useful component of journal entries.
The number in the ledger folio may be numeric or alphanumeric.
The ledger folio column in the journal has nothing to do with the accounting principles and rules. It’s used by us as per our methods and needs.
Example
We’ll look at how the ledger folio column is used while recording journal entries.
We can find the relevant ledger accounts on the page numbers of the book as mentioned in the above entries, i.e. the cash and sales account on page – 1 whereas, the purchases and sundry creditors on page – 2 of the relevant ledger book.
Current Assets & Examples Current Assets are those assets that are bought by the company for a short duration and are expected to be converted into cash, consumed, or written off within one accounting year. They are also called short-term assets. These short-term assets are typically called currRead more
Current Assets & Examples
Current Assets are those assets that are bought by the company for a short duration and are expected to be converted into cash, consumed, or written off within one accounting year. They are also called short-term assets.
These short-term assets are typically called current assets by the accountants and have no long-term future in the business. Current assets may be held by a company for a duration of a complete accounting year, 12 months, or maybe less. A major reason for the conversion of current assets into cash within a very short amount of time is to pay off the current liabilities.
Examples
Some of the major examples of current assets are – cash in hand, cash at the bank, bills receivables, sundry debtors, prepaid expenses, stock or inventory, other liquid assets, etc.
All of these assets are converted into cash within one accounting year.
Liquid assets are a part of current assets. Although they are easier to be converted into cash than current assets.
Current assets (along with current liabilities) help in the calculation of the current ratio. And they’re also referred to as circulating/floating assets.
Current assets are shown on the balance sheet (on the asset side) under the heading, current assets.
1) A simple petty cash book is like a cash book. Definition The term 'petty' means small. A simple petty cash book is identical to a cash book, maintained to record the small expenses of a business like stationery, postage, stamps, carriage, etc. The cash received by a petty cashier is recordRead more
1) A simple petty cash book is like a cash book.
Definition
The term ‘petty’ means small. A simple petty cash book is identical to a cash book, maintained to record the small expenses of a business like stationery, postage, stamps, carriage, etc. The cash received by a petty cashier is recorded on the debit/ receipt side whereas, the cash he pays is recorded on the credit/ payment side. The difference between the sum of the debit and credit items represents the balance of the petty cash in hand.
Format
Explanation
Cash Book– A simple petty cash book is recorded and maintained just like the cash book. Just like a cash book records all the major transactions of the business, a petty cash book only focuses on the expenses which are of little value. Just like the cash book is maintained by the accountant of the business, the petty cash book is maintained by the petty cashier.
Therefore, a petty cash book is like a sub-part of a cash book itself.
Statement – A statement in accounting terms refer to a report. They are prepared to show some accounting data and different types of statements show different perspectives of the company’s financial health and performance. For e.g Balance sheet, trial balance, cash flow statements, etc.
Thus, a petty cash book is not a part of statements in accounting.
Journal – A petty cash book is not a part of a journal as a journal entry records business transactions in the accounting system for an organization and is also called the building block of the double-entry accounting method. While a petty cash book is maintained to record the small expenses of a business that are of little value.
No, the building is not a current asset. Explanation Current assets are those in a business that is reasonably expected to be sold, consumed, cashed, or exhausted within one year of accounting through normal day-to-day business operations. Examples: Cash and cash equivalent, stock, liquid assets, etRead more
No, the building is not a current asset.
Explanation
Current assets are those in a business that is reasonably expected to be sold, consumed, cashed, or exhausted within one year of accounting through normal day-to-day business operations.
Examples: Cash and cash equivalent, stock, liquid assets, etc.
The building is expected to have a valuable life for more than a year and is bought for a longer term by a company. The building is a fixed asset/non-current asset, those assets which are bought by the company for a long term and aren’t supposed to be consumed within just one accounting year.
In order to understand it more clearly, let’s see the two types of assets in the classification of the assets on the basis of convertibility:
In the classification of the assets on the basis of their convertibility, they are classified either as current assets or fixed assets. Also referred to as current assets/ non-current assets or short-term/ long-term assets.
Current Assets – As explained above, those assets in a business that is reasonably expected to be sold, consumed, cashed, or exhausted within one year of accounting.
Fixed Assets – Those assets which are not likely to be converted into cash quickly and are bought by the business for a long term.
Building in the balance sheet
Let us take a look at the balance sheet’s asset side and see where building and current assets are shown
Balance Sheet (for the year ending…)
As we can see, the building is shown on the long-term assets side and not in the current assets.
Prepaid Payable Prepaid payable or prepaid expenses refer to the future expenses that have been paid in advance. It is an advance payment made by the business for the goods and services to be received by the business in the future. A prepaid expense is an asset on the balance sheet. The number of prRead more
Prepaid Payable
Prepaid payable or prepaid expenses refer to the future expenses that have been paid in advance. It is an advance payment made by the business for the goods and services to be received by the business in the future.
A prepaid expense is an asset on the balance sheet. The number of prepaid expenses that will be used up within one year is reported on a company’s balance sheet as a current asset. According to generally accepted accounting principles (GAAP), expenses should be recorded in the same accounting period as the benefit generated from the related asset.
Example
ABC Ltd. purchases insurance for the warehouse. It was ₹2,000 per month. The company pays ₹24,000 in cash upfront for a 12-month insurance policy for the warehouse. Each month an adjusting journal entry will be passed, adjusting the amount of insurance used from the prepaid insurance.
Journal Entry-
Prepaid Expenses in Balance Sheet-
Prepaid expenses are shown in the balance sheet under the current assets heading as it’s a short-term asset and to be consumed within one accounting year.
Sundry debtor refers to either a person or an entity that owes money to the business. If someone buys some goods/services from the business and the payment is yet to be received, a group of such individuals or entities is called sundry debtors. Sundry debtors are also referred to as trade receivableRead more
Sundry debtor refers to either a person or an entity that owes money to the business. If someone buys some goods/services from the business and the payment is yet to be received, a group of such individuals or entities is called sundry debtors. Sundry debtors are also referred to as trade receivables or account receivables.
The term ‘Sundry’ means various or several, referring to a collection of miscellaneous items combined under one head. Sundry debtors typically arise from core business activities such as sales of goods or services. The business treats them as an asset.
Example
Suppose you run a business, ABC Ltd. Mr. Y bought goods from you on credit. Therefore, Mr. Y will be recorded as Debtor (current asset) in your books of accounts. Similarly, a collection of such debtors is viewed as sundry debtors from the business’ point of view.
Journal Entry
Rules
As per the golden rules of accounting, we ‘debit the receiver and credit the receiver’. That’s how in this journal entry we’ll be debiting the sundry debtor’s account. Also, ‘debit what comes in and credit what goes out.’ That’s why sales a/c is credited and cash a/c is debited.
As per the modern rules of accounting, ‘debit the increase in asset and credit the decrease in asset’. That’s why we debit sundry debtors and cash a/c. And credit sales a/c when goods are sold and inventory decreases.
Why debtor is an asset?
As we know, a debtor refers to a person or entity who owes money to the business which means, the money is to be received by them in the future, making them an asset. On the other hand, creditors are a liability to the firm as we owe them money and it is to be paid by us in the near future, making it an obligation for the firm.
Sundry Debtors in Balance Sheet
Sundry debtors are shown under the current asset heading on the balance sheet. They are often referred to as account receivables.
What account is land?
The land is a fixed asset and is treated as a long-term asset account. Explanation The land is a fixed asset which is also referred to as a long-term asset. The fixed assets are those assets that are not expected to be cashed, consumed, last, sold, or written off within one accounting year and areRead more
The land is a fixed asset and is treated as a long-term asset account.
Explanation
The land is a fixed asset which is also referred to as a long-term asset.
The fixed assets are those assets that are not expected to be cashed, consumed, last, sold, or written off within one accounting year and are purchased for long-term use. The fixed assets are also called non-current assets and the reason behind it is that current assets are easily converted into cash within one year and they are not.
Fixed assets are planned by the company to be used for the long term in order to generate income.
Example- Land, building, furniture, plants & equipment, etc.
Why is land an asset?
Although the land is not depreciated, it is still considered to be an asset because just like other assets the business spends its own money to acquire it.
It can also be used by the business for different operations and it doesn’t create any liability for the business. Instead, reselling the land after a few years can help the company earn a huge margin of profit.
Land in the balance sheet
On the asset side of the balance sheet, the land is stated under the heading long-term assets.
Balance Sheet (for the year…)
Therefore, the land is a fixed asset and is treated as a long-term asset account.
See lessWhat is the meaning of ledger folio?
Ledger Folio A ledger folio, in simple words, is a page number of the ledger account where the relevant account appears. The term 'folio' refers to a book, particularly a book with large sheets of paper. In accounting, it's used to maintain ledger accounts. The use of ledger folio is generally seenRead more
Ledger Folio
A ledger folio, in simple words, is a page number of the ledger account where the relevant account appears. The term ‘folio’ refers to a book, particularly a book with large sheets of paper. In accounting, it’s used to maintain ledger accounts.
The use of ledger folio is generally seen in manual accounting, i.e the traditional book and paper accounting as it is a convenient tool used for tracking the relevant ledger account from its journal entry. Whereas, in computer-oriented accounting (or computerized accounting), it’s not really an issue to track your relevant ledger account.
Ledger folio, abbreviated as ‘L.F.’, is typically seen in journal entries. The ledger folio is written in the journal entries, after the ‘date’ and ‘particulars’ columns. It is really convenient when we’re dealing with and recording a large number of journal entries. As we will be further posting them into ledger accounts, thus, ledger folio comes in as a really useful component of journal entries.
Example
We’ll look at how the ledger folio column is used while recording journal entries.
We can find the relevant ledger accounts on the page numbers of the book as mentioned in the above entries, i.e. the cash and sales account on page – 1 whereas, the purchases and sundry creditors on page – 2 of the relevant ledger book.
See lessWhat are examples of current assets?
Current Assets & Examples Current Assets are those assets that are bought by the company for a short duration and are expected to be converted into cash, consumed, or written off within one accounting year. They are also called short-term assets. These short-term assets are typically called currRead more
Current Assets & Examples
Current Assets are those assets that are bought by the company for a short duration and are expected to be converted into cash, consumed, or written off within one accounting year. They are also called short-term assets.
These short-term assets are typically called current assets by the accountants and have no long-term future in the business. Current assets may be held by a company for a duration of a complete accounting year, 12 months, or maybe less. A major reason for the conversion of current assets into cash within a very short amount of time is to pay off the current liabilities.
Examples
Some of the major examples of current assets are – cash in hand, cash at the bank, bills receivables, sundry debtors, prepaid expenses, stock or inventory, other liquid assets, etc.
Current assets on the balance sheet
Balance Sheet (for the year…)
See lessSimple petty cash book is like a?
1) A simple petty cash book is like a cash book. Definition The term 'petty' means small. A simple petty cash book is identical to a cash book, maintained to record the small expenses of a business like stationery, postage, stamps, carriage, etc. The cash received by a petty cashier is recordRead more
1) A simple petty cash book is like a cash book.
Definition
The term ‘petty’ means small. A simple petty cash book is identical to a cash book, maintained to record the small expenses of a business like stationery, postage, stamps, carriage, etc. The cash received by a petty cashier is recorded on the debit/ receipt side whereas, the cash he pays is recorded on the credit/ payment side. The difference between the sum of the debit and credit items represents the balance of the petty cash in hand.
Format
Explanation
Cash Book – A simple petty cash book is recorded and maintained just like the cash book. Just like a cash book records all the major transactions of the business, a petty cash book only focuses on the expenses which are of little value. Just like the cash book is maintained by the accountant of the business, the petty cash book is maintained by the petty cashier.
Therefore, a petty cash book is like a sub-part of a cash book itself.
Statement – A statement in accounting terms refer to a report. They are prepared to show some accounting data and different types of statements show different perspectives of the company’s financial health and performance. For e.g Balance sheet, trial balance, cash flow statements, etc.
Thus, a petty cash book is not a part of statements in accounting.
Journal – A petty cash book is not a part of a journal as a journal entry records business transactions in the accounting system for an organization and is also called the building block of the double-entry accounting method. While a petty cash book is maintained to record the small expenses of a business that are of little value.
Therefore, 1) Cash book is the correct option.
See lessIs building a current asset?
No, the building is not a current asset. Explanation Current assets are those in a business that is reasonably expected to be sold, consumed, cashed, or exhausted within one year of accounting through normal day-to-day business operations. Examples: Cash and cash equivalent, stock, liquid assets, etRead more
No, the building is not a current asset.
Explanation
Current assets are those in a business that is reasonably expected to be sold, consumed, cashed, or exhausted within one year of accounting through normal day-to-day business operations.
Examples: Cash and cash equivalent, stock, liquid assets, etc.
The building is expected to have a valuable life for more than a year and is bought for a longer term by a company. The building is a fixed asset/non-current asset, those assets which are bought by the company for a long term and aren’t supposed to be consumed within just one accounting year.
In order to understand it more clearly, let’s see the two types of assets in the classification of the assets on the basis of convertibility:
In the classification of the assets on the basis of their convertibility, they are classified either as current assets or fixed assets. Also referred to as current assets/ non-current assets or short-term/ long-term assets.
Building in the balance sheet
Let us take a look at the balance sheet’s asset side and see where building and current assets are shown
Balance Sheet (for the year ending…)
As we can see, the building is shown on the long-term assets side and not in the current assets.
Therefore, the building is not a current asset.
See lessWhat is a prepaid payable?
Prepaid Payable Prepaid payable or prepaid expenses refer to the future expenses that have been paid in advance. It is an advance payment made by the business for the goods and services to be received by the business in the future. A prepaid expense is an asset on the balance sheet. The number of prRead more
Prepaid Payable
Prepaid payable or prepaid expenses refer to the future expenses that have been paid in advance. It is an advance payment made by the business for the goods and services to be received by the business in the future.
A prepaid expense is an asset on the balance sheet. The number of prepaid expenses that will be used up within one year is reported on a company’s balance sheet as a current asset. According to generally accepted accounting principles (GAAP), expenses should be recorded in the same accounting period as the benefit generated from the related asset.
Example
ABC Ltd. purchases insurance for the warehouse. It was ₹2,000 per month. The company pays ₹24,000 in cash upfront for a 12-month insurance policy for the warehouse. Each month an adjusting journal entry will be passed, adjusting the amount of insurance used from the prepaid insurance.
Journal Entry-
Prepaid Expenses in Balance Sheet-
Prepaid expenses are shown in the balance sheet under the current assets heading as it’s a short-term asset and to be consumed within one accounting year.
Balance Sheet (for the year ending…)
See lessWhat is the meaning of sundry debtors?
Sundry debtor refers to either a person or an entity that owes money to the business. If someone buys some goods/services from the business and the payment is yet to be received, a group of such individuals or entities is called sundry debtors. Sundry debtors are also referred to as trade receivableRead more
Sundry debtor refers to either a person or an entity that owes money to the business. If someone buys some goods/services from the business and the payment is yet to be received, a group of such individuals or entities is called sundry debtors. Sundry debtors are also referred to as trade receivables or account receivables.
The term ‘Sundry’ means various or several, referring to a collection of miscellaneous items combined under one head. Sundry debtors typically arise from core business activities such as sales of goods or services. The business treats them as an asset.
Example
Suppose you run a business, ABC Ltd. Mr. Y bought goods from you on credit. Therefore, Mr. Y will be recorded as Debtor (current asset) in your books of accounts. Similarly, a collection of such debtors is viewed as sundry debtors from the business’ point of view.
Journal Entry
Rules
As per the golden rules of accounting, we ‘debit the receiver and credit the receiver’. That’s how in this journal entry we’ll be debiting the sundry debtor’s account. Also, ‘debit what comes in and credit what goes out.’ That’s why sales a/c is credited and cash a/c is debited.
As per the modern rules of accounting, ‘debit the increase in asset and credit the decrease in asset’. That’s why we debit sundry debtors and cash a/c. And credit sales a/c when goods are sold and inventory decreases.
Why debtor is an asset?
As we know, a debtor refers to a person or entity who owes money to the business which means, the money is to be received by them in the future, making them an asset. On the other hand, creditors are a liability to the firm as we owe them money and it is to be paid by us in the near future, making it an obligation for the firm.
Sundry Debtors in Balance Sheet
Sundry debtors are shown under the current asset heading on the balance sheet. They are often referred to as account receivables.
Balance Sheet (for the year ending….)
See less