AccountingQA Latest Questions

Anushka Lalwani
Anushka Lalwani
In: >

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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Jasmeet_Sethi
Jasmeet_SethiCurious
In: >

  2. GautamSaxena Curious .
    This answer was edited.

    Fluctuating Capital Fluctuating capital is a capital that is unstable and keeps changing frequently. In the fluctuating capital, the capital of each partner changes from time to time. In partnership firms, each partner will have a separate capital account. Any additional capital introduced during thRead more

    Fluctuating Capital

    Fluctuating capital is a capital that is unstable and keeps changing frequently. In the fluctuating capital, the capital of each partner changes from time to time. In partnership firms, each partner will have a separate capital account. Any additional capital introduced during the year will also be credited to their capital account. In the fluctuating capital method, only one capital a/c is maintained i.e no current accounts like in the fixed capital a/c method. Therefore, all the adjustments like interest on capital, drawings, etc. are completed in the capital a/c itself.

    It is most commonly seen in partnership firms and it is not essential to mention the Fluctuating Account Method in the partnership deed.

    • All the adjustments resulting in a decrease in the capital will be debited to the partner’s capital, such as drawings made by each partner, interest on drawings, and share of loss.
    • Similarly, the activities or adjustments that lead to an increase in the capital are credited to the partner’s capital account, such as interest on capital, salary, the share of profit, and so on.

    Fluctuating Capital Account Format

     

     

     

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Bonnie
BonnieCurious
In: >

Calls in AdvanceJournal Entry
  2. Manvi Pursuing ACCA
    This answer was edited.

    Journal Entry for Calls in Advance  Calls in advance mean excess money received by the company than what has been called up. Calls in advance are treated as Current Liability and shown in the Balance Sheet on the liability side. Journal Entry will be : Here we will "Debit" Bank A/c as it will increaRead more

    Journal Entry for Calls in Advance 

    Calls in advance mean excess money received by the company than what has been called up. Calls in advance are treated as Current Liability and shown in the Balance Sheet on the liability side.

    Journal Entry will be :

    Here we will “Debit” Bank A/c as it will increase assets of the company and “Credit” Calls in Advance A/c because it will increase the company’s current liabilties.

    For Example:

    Mr.Z shareholder of ABC Ltd was allotted 2,000 equity shares of Rs.10 each. He paid call money at the time of allotment.

    On Application Rs 5
    On Allotment Rs 2
    On First and final call Rs 3

     

    Journal Entry is as follows:

    Here, the company received an excess amount of Rs.6,000 (2,000*3) from a shareholder Mr.Z who paid the call money in advance. ABC Ltd will record this under Calls in Advance A/c. While passing journal entry ABC Ltd will debit its Bank A/c by Rs.6,000 and credit calls in advance account by Rs.6,000.

    When share calls are called up, calls received in advance are adjusted. The company will hold only the required amount which will make allotted shares fully paid.

    Once the amount is transferred to relevant call accounts, calls in advance account will be written off.

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Ayushi
AyushiCurious
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  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)

    Introduction Income tax means the tax charged on the income of a person which the person has earned during a financial year. As per the Income-tax act, 1961, the income tax on income earned during a financial year is assessed in the following financial year and tax is to be paid on the assessed incoRead more

    Introduction

    Income tax means the tax charged on the income of a person which the person has earned during a financial year. As per the Income-tax act, 1961, the income tax on income earned during a financial year is assessed in the following financial year and tax is to be paid on the assessed income if payable.

    The year in which the income is earned is called the Previous Year and the following year in which the previous year’s income is assessed is known as the Assessment Year

    Steps involved in the computation of Income-tax of a person:

    1. Determination of residential status of the person
    2. Classification and computation of income under the five heads of income
    3. Clubbing of income of spouse, minor child etc
    4. Set-off or carry forward of losses
    5. Computation of Gross Total Income
    6. Deductions from Gross Total Income to arrive at Total Income
    7. Application of the rates of taxes on total income
    8.  Advance tax and tax deducted at source
    9. Arrival  at Tax payable/ Tax refundable
    10. Determination of residential status of the person

    Determination of residential status of the person

    The residential status of a person is of great significance for ascertaining the taxability of a person’s income as per the Income-tax act, 1961. As per the act, a person can fall into one of the following criteria:-

    1. Resident and Ordinarily Resident in India
    2. Resident but Not Ordinarily Resident in India
    3. Non-Resident

    Classification and computation of income under the five heads of income

    Now, a person’s income can be from various sources. As per section 14 of the Income-tax act, there are five main heads of income for computation of income tax:

    1. Income from Salary
    2. Income from House Property
    3. Profits and Gains from Business or Profession
    4. Capital Gains
    5. Income from other sources

    Income under each head is to be computed as per provisions of the Income-tax Act, 1961.

    Clubbing of income of spouse, minor child etc

    Some individual taxpayers divert some portion of their income to their spouses and minor child in order to reduce their tax liability as the slab rate of income tax for individuals is progressive.

    Such diverted income is to be clubbed with the income of the assessee as per the provisions of the Income-tax act.

    Set-off and carry forward of losses

    Losses suffered under the heads of the income like ‘Profit and Gains from Business and Profession’, ‘Income from House property’ can be set off against the income earned under other heads as per provision of the act.

    If set off is not possible in the current assessment year then the loss can be carried forward to the next assessment year.

    Computation of Gross Total Income

    Gross Total Income is arrived at by computing the total of income under all five heads of income after giving necessary deductions as applicable under each head of income.

    Deductions from Gross Total Income to arrive at Total Income

    Income tax act, 1961 allows specific deduction from the Gross Total Income under sections 80C to 80U. These deductions are provided to encourage certain kinds of investments like life insurance premiums etc and provide relief on certain spending like medical expenses, interest expenses on home loans etc which leads to the overall welfare of the people.

    After allowing the deductions from Gross Total Income, we arrive at Total Income.

    Application of the rates of taxes on total income

    Tax is calculated at a rate on the total income. The rate and calculation of income tax depend on the type of assessees.

    Individuals and HUFs

    For individuals who are below the age of 60 years and HUFs:

    For individuals over 60 years and 80 years of age, the basic exemption limit is ₹3,00,000 and ₹5,00,000 respectively.

    Also, as per section 115BAC, individuals and HUFs have the option to choose an alternative slab rate of tax as per which the income tax is charged at concessional rates. But, the various exemptions and deductions like housing rent allowance, leave travel concession, standard deduction on salary income cannot be availed. This slab rate system was introduced recently to reduce the complexity of filling IT returns by small taxpayers.

    Rates of tax related to other types of assessees is not provided for sake of simplicity.

    Advance tax and tax deducted at source

    After calculating the tax on total income as per specified rates, the income tax amount is to be reduced by the advance tax and tax deducted at the source.

    Tax payable/ Tax refundable

    After performing all the steps above, we arrive at Income tax payable or tax refundable.

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Aditi
Aditi
In: >

  2. Mehak

    To understand the difference in Revenue recognition under IFRS and GAAP , it is important to understand what are IFRS and GAAP. Both of these are accounting standards accepted globally.  These are discussed below: What is IFRS? IFRS is a set of accounting standards developed by the International AccRead more

    To understand the difference in Revenue recognition under IFRS and GAAP , it is important to understand what are IFRS and GAAP. Both of these are accounting standards accepted globally.  These are discussed below:

    What is IFRS?

    IFRS is a set of accounting standards developed by the International Accounting Standards Board. These standards are globally accepted accounting standards.

    They were developed and implemented with the objective of providing a consistent, transparent and reliable framework for the presentation and reporting of financial statements.

    IFRS ensure uniformity and this helps in comparability of financial statements across the companies of different countries.

    Some examples of IFRS Standards are : IFRS 2 – Share based payments, IFRS 9 – Financial Instruments, IFRS 16 – Leases, etc.

    What is GAAP?

    GAAP stands for Generally Accepted Accounting Principles. GAAP is primarily used in the USA. These are a set of accounting principles, rules and procedures which are crucial for providing consistency and transparency in the presentation and reporting of financial statements.

    Some examples of GAAP Standards are: ASC 606: Revenue Recognition, ASC 842: Leases, ASC 740: Income Taxes, etc.

    Difference in Revenue Recognition under IFRS and GAAP

    Though both of these standards have the main goal of promoting consistency and uniformity, there are certain differences in the Revenue Recognition under IFRS and GAAP.

    This is because of the fact that the nature of IFRS and GAAP is different as IFRS is more principle- based and GAAP is rule based.

     

     

     

     

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Jasmeet_Sethi
Jasmeet_SethiCurious
In: >

To ascertain the debtors and creditors of the business To ascertain the financial position of the business To ascertain the profit or loss of the business To ascertain the collective effect of all ...

  2. Manvi Pursuing ACCA
    This answer was edited.

    The correct answer is 4. To ascertain the collective effect of all transactions pertaining to a particular account. The reason being is that in the ledger account all the effects are recorded for example,  how much money is spent on a particular type of expense or how much money is receivable from aRead more

    The correct answer is 4. To ascertain the collective effect of all transactions pertaining to a particular account. The reason being is that in the ledger account all the effects are recorded for example,  how much money is spent on a particular type of expense or how much money is receivable from a debtor. In ledger accounts, information can be obtained about a particular account.

    Ledger is the Principal book of accounts and also called the book of final entry. It summarises all types of accounts whether it is an Asset A/c, Liability A/c, Income A/c, or Expense A/c. The transactions recorded in the Journal/Subsidiary books are transferred to the respective ledger accounts opened.

     

    Importance of preparing ledger accounts:

    1. Ledger accounts get the ready results i.e. helps in identifying the amount payable or receivable.
    2. It is necessary for the preparation of the Trial Balance.
    3. The financial position of the business is easily available with the help of Assets A/c and Liabilities A/c.
    4. It helps in preparing various types of income statements on the basis of balances shown in ledger accounts.
    5. It can be used as a control tool as it shows balances of various accounts.
    6. It is useful for the management to forecast or plan for the future.
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