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Anushka Lalwani
Anushka Lalwani
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A. Cash Book B. Statement C. Journal D. None of These

  2. Akash Kumar AK
    This answer was edited.

    The correct option is A) Cash book let's understand what is petty cash book: A petty cash book is a cash book maintained to record petty expenses. Petty expenses, mean small or minute expenses for which the payment is made in coins or a few notes or which are smaller denominations like tea or coffeeRead more

    The correct option is A) Cash book

    let’s understand what is petty cash book:

    • A petty cash book is a cash book maintained to record petty expenses.
    • Petty expenses, mean small or minute expenses for which the payment is made in coins or a few notes or which are smaller denominations like tea or coffee expenses, postage, bus or taxi fare, stationery expenses, etc.
    • The person who maintains the petty cash book is known as the petty cashier.
    • It is a simple process that helps organizations by focusing on major transactions as petty cashiers handle all small transactions.

     

    Generally, the petty cashbook is prepared as per the Imprest system. As per the Imprest system, the petty expenses for a period (month or week) are estimated and a fixed amount is given to the petty cashier to spend for that period.

    At the end of the period, the petty cashier sends the details to the chief cashier and he is reimbursed the amount spent. In this way, the debit balance of the petty cashbook always remains the same.

     

    The petty cash book has two columns in which

    • Cash received is recorded in the Left column i.e, “Receipts” or “Debit” column.
    • Cash payments are recorded in the Right column i.e, “Payment” or “Credit” column.

     

    Balance of Petty cash book

    The balance of petty cash book is never closed and their balances are carried forward to the next accounting period which is considered one of the most significant qualities of an asset whereas Income doesn’t have any opening balance and their balances get closed at the end of every accounting year.

    A petty cash book is placed under the head current asset in the balance sheet. The Closing Balance of the petty cash book is computed by deducting Total expenditure from the Total cash receipt (as received from the head cashier).

     

    Format for petty cash book

    Only small denominations are recorded in the petty cash book. It varies with the type, quantity, and need of a business. It involves cash and checks.

     

    • Ordinary Petty cash book:

     

    • Analytical Petty cash book:

     

    Conclusion

    A simple petty cash book is a type of cash book because it records the small expenses which involve small transactions in the ordinary daily business.

    A petty cash book is not as important as an income statement, balance sheet, or trail balance it doesn’t measure the accuracy of accounts so it is not treated as a statement.

    No journal entries are made in the books of accounts while spending or purchasing using a petty cash book so, it is not treated as a journal.

     

     

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Simerpreet
SimerpreetHelpful
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    Introduction  Working capital refers to the capital which is required by an enterprise to smoothly run its daily operations. It is the measure of the short-term liquidity of a business.  Working capital is the total of the current assets of a business, net of its current liabilities. Working capitalRead more

    Introduction 

    Working capital refers to the capital which is required by an enterprise to smoothly run its daily operations.

    It is the measure of the short-term liquidity of a business. 

    Working capital is the total of the current assets of a business, net of its current liabilities.

    Working capital = Current Assets – Current Liabilities 

    The working capital consists of cash, accounts receivable and inventory of raw materials and finished goods fewer accounts payable and other short-term liabilities.

    Without a proper level of working capital, a business cannot maintain regular production and pay its creditors and expenses.

    Hence, for proper management of working capital, it is divided into types:

    • Permanent working capital 
    • Temporary working capital 

    I have discussed them below:

    Permanent Working Capital 

    It is the fixed level or minimum level of working capital that an enterprise needs to maintain to ensure production at the normal capacity and pay for its daily expenses. It is independent of the level of production.

    It is also known as fixed working capital.

    By ‘permanent’,  it does not mean that it will forever remain at the same level or amount but it may change if the overall production capacity changes. But such changes in permanent working capital are not often.

    Temporary Working Capital 

    It is the level of working capital that depends upon the level of production of a business. It is the excess working capital over the permanent capital that is required to meet seasonal high demand.

    It is also known as fluctuating working capital because it tends to change often depending on the level of production.

    Temporary working capital is required when high production is required to meet seasonal demands. 

    For example, a bakery will need more working capital to meet the increased demand for cakes and pastry during Christmas season 

    Graph showing permanent and temporary working capital

    Here, the temporary working capital is fluctuating whereas the permanent working capital is gradually increasing with time.

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Simerpreet
SimerpreetHelpful
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  2. ShreyaSharma none
    This answer was edited.

    Ledger posting As we know, a business records all of its transactions in the journal. After the transactions are recorded in the journal, they are posted in the principal book called ‘Ledger’. Transferring the entries from journals to respective ledger accounts is called ledger posting or posting toRead more

    Ledger posting

    As we know, a business records all of its transactions in the journal. After the transactions are recorded in the journal, they are posted in the principal book called ‘Ledger’. Transferring the entries from journals to respective ledger accounts is called ledger posting or posting to the ledger accounts. Balancing of ledgers is carried out to find differences at the year’s end.

    Posting to the ledger account means entering information in the ledger, and respective accounts from the journal for individual records. The accounts that are credited are posted to the credit side and vice versa.

    Ledger maintenance is done at the end of an accounting period and it’s maintained to reflect a permanent summary of all the journal accounts. In the end, all the accounts that are entered and operated in the ledger are closed, totaled, and balanced. Balancing the ledger means finding the difference between the debit and credit amounts of a particular account.

    While posting to the ledger account, suppose goods were bought for cash. While passing the journal entry, we’ll be debiting the purchases a/c and crediting the cash a/c by stating it as, ‘To Cash A/c’.

    Now, this entry will be affecting both the purchases account and the cash account. In the cash account, we’ll be debiting purchases. Whereas in the purchases account, we’ll be crediting the cash. That’s how it works in the double-entry bookkeeping system of accounting.

    Example

    Mr. Tony Stark started the business with cash of $100,000 on April 1, 2021. He bought furniture for business for $15,000. He further purchased goods for $75,000.

    Now, we’ll be journalizing the transactions and posting them into the ledger accounts.

    Journal Entries

    Posting to Ledger Account

    Cash A/c

    Capital A/c

    Furniture A/c

    Purchases A/c

     

     

     

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Simerpreet
SimerpreetHelpful
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  2. GautamSaxena Curious .
    This answer was edited.

    Ledger posting The process of entering all transactions from journal to ledger is called ledger posting. Each ledger account contains an individual asset, person, revenue, or expense. As we're aware the journal records all the transactions of the business. Posting to the ledger account not only helpRead more

    Ledger posting

    The process of entering all transactions from journal to ledger is called ledger posting. Each ledger account contains an individual asset, person, revenue, or expense. As we’re aware the journal records all the transactions of the business.

    Posting to the ledger account not only helps the proper maintenance of the ledger book but also helps in reflecting a permanent summary of all the journal accounts. In the end, all the accounts that are entered and operated in the ledger are closed, totaled, and balanced.

    Balancing the ledger means finding the difference between the debit and credit amounts of a particular account, it’s done on the day of closing of the accounting year. Sometimes journal entries are made and maintained monthly. Therefore, the balancing of the ledger’s date depends on the business’ closing date and the way a business maintains its books of accounts.

    Example

    Mr. Jack Sparrow decided to start a new clothing business. On 1st April 2021, He started the business with a total sum of $100,000 cash. He purchased furniture, including desks and shelves for $25,000. Mr. Sparrow then decided to start with women’s clothing and purchased a complete range of clothes from the wholesale market for $50,000. On the next day, he sold all the stock for $75,000. He also hired a worker for $5,000.

    We need to journalize these transactions and post them into the ledger account.

     

    Journal Entries

     

    Ledger Accounts

    Cash A/c

     

    Capital A/c

     

    Purchases A/c

     

    Sales A/c

     

    Salary A/c

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

    Fixed Working Capital Permanent working capital is also known as fixed working capital. Working capital is the excess of the current assets over the current liability and further, it is classified on the basis of periodicity, into two categories, permanent working capital, and variable working capitRead more

    Fixed Working Capital

    Permanent working capital is also known as fixed working capital.

    Working capital is the excess of the current assets over the current liability and further, it is classified on the basis of periodicity, into two categories, permanent working capital, and variable working capital.

    Permanent working capital means the part of working capital that is permanently locked up in current assets to carry business smoothly and effortlessly. Thus, it’s also known as fixed working capital.

    The minimum amount of current assets which is required to conduct a business smoothly during the year is called permanent working capital. The amount of permanent working capital depends upon the nature, growth, and size of the business.

    Fixed working capital can further be divided into two categories:

    • Regular working capital: It is the minimum amount of capital required by a business to fund its day-to-day operations of a business. E.g. payment of wages, salary, overhead expenses, etc.
    • Reserve margin working capital: Apart from day-to-day activities, additional working capital may also be required for contingencies that may arise at any time like strike, business depression, etc.

     

    Whereas, on the other hand, variable working capital, also known as temporary working capital refers to the level of working capital that is temporary and keeps fluctuating.

     

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A_Team
A_Team
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  2. ShreyaSharma none
    This answer was edited.

    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…)

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

    Non-debt capital receipts As we're aware, there are two main sources of the government’s income — revenue receipts and capital receipts. Revenue receipts are all those receipts that neither create any liability nor cause any reduction in assets for the government, whereas, capital receipts are thoseRead more

    Non-debt capital receipts

    As we’re aware, there are two main sources of the government’s income — revenue receipts and capital receipts. Revenue receipts are all those receipts that neither create any liability nor cause any reduction in assets for the government, whereas, capital receipts are those money receipts of the government that either create a liability for a government or cause a reduction in assets.

    Revenue receipts comprise both tax and non-tax revenues while capital receipts consist of capital receipts and non-debt capital receipts. Non-debt capital receipt is a part of capital receipt.

    Definition

    Non-debt capital receipts, also known as NDCR, are the taxes and duties levied by the government forming the biggest source of its income. Those receipts of the government lead to a decrease in assets, and not an increase in liabilities. It accounts for just 3% of the central government’s total receipts.

    The union government usually lists non-debt capital receipts in two categories:

    • Recovery of loans – Recovery of loans means the amount recovered when a loan defaults.
    • Other receipts – Other receipts basically mean disinvestment proceeds from the sale of the government’s share in public-sector companies.
    • Money accrued to the union government from the listing of central government companies and the issue of bonus shares.

     

    For Example – Disinvestment and recovery of loans are non-debt creating capital receipts.

     

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