Errors revealed by Trial Balance Trial balance, as we know, is a statement prepared after the ledger, followed by a journal. It has a list of all the general ledger accounts contained in the ledger of a business. Each nominal ledger account either holds a debit balance or credit. It is primarily useRead more
Errors revealed by Trial Balance
Trial balance, as we know, is a statement prepared after the ledger, followed by a journal. It has a list of all the general ledger accounts contained in the ledger of a business. Each nominal ledger account either holds a debit balance or credit.
It is primarily used to identify the balance of debits and credits entries from the transactions recorded in the general ledger in a certain accounting period. The debit and credit sides total are equal in a trial balance.
Classification of errors in the trial balance
Errors of Commission: Errors arising due to wrong posting of a journal entry, a ledger account, wrong totaling of a subsidiary book, or even wrong recording of accounts. Therefore, resulting in trial balance error. E.g business receives an amount on goods sold on credit but it is instead posted to additional capital a/c.
Errors of Omission: This occurs when some transactions are fully or partially omitted from books of accounts. A complete omission is a case when the transaction is completely omitted but a partial omission is seen when the transaction is entered in the journal but not posted to the ledger. E.g a cheque worth $4,100 was received from ABC Ltd. but completely omitted. Then the rectification entry shall be passed later on.
Compensating Errors: It occurs when the errors are equal in amount and opposite to each other so and so that they cancel each other which further creates no difference in the Trial Balance. E.g Harry’s account is debited to $300 wrongly instead of $400. On the other hand, Liam’s account is credited by $700 instead of $800.
Errors of Principles: These are the errors occurring when the entries that are posted are incorrect, violating the accounting policy. E.g when receiving money from debtor then debiting debtor and crediting the amount of money received.
Some of the common errors
Some more (commonly seen) errors while preparation of the trial balance:
Errors of Commission
Addition or totaling mistakes in the trial balance, debit, and credit side.
Wrong totaling of subsidiary books.
Error in the sum total of subsidiary book.
Posting in the wrong account.
Recording a transaction incorrectly in a journal.
Balance wrote on the wrong side of the trial balance.
Error in posting a journal to a ledger.
Posting on the wrong side of the account.
Errors of Omission
Goods purchased and returned to the supplier may be entered in the purchase returns book but not posted in the debit of the supplier account.
Cash paid to creditors was completely omitted from the recording.
Compensating Errors
Wrong posting of the same amount in another account, which may not be affecting the equalizing of trial balance.
Errors of Principles
Posting twice to a ledger account.
Balance c/d or balance b/d is written on the wrong side of the ledger account.
Reversal of a journal entry by mistake like, crediting cash and debiting debtor’s a/c.
In Tally, it is possible to record credit sales entry in the following accounting vouchers: Sales Voucher Journal Voucher Generally, sale entries whether credit sales or cash sales are recorded in the Sales vouchers. Also, I strongly recommend you to record sales entries in the Sales voucher only aRead more
In Tally, it is possible to record credit sales entry in the following accounting vouchers:
Sales Voucher
Journal Voucher
Generally, sale entries whether credit sales or cash sales are recorded in the Sales vouchers. Also, I strongly recommend you to record sales entries in the Sales voucher only as it can record various aspects related to credit sales like the sales order number, delivery note number, particulars of creditor and much more.
In this answer, I have shown the steps to record a credit sales entry into the Sale voucher. My answer is based on Tally Prime, the latest version of Tally. If you are using Tally ERP 9, there will be only a few areas of differences which are not that significant.
Steps to record credit sales in Sales voucher
To record credit sales entry, you have to first open the Sales voucher creation window. To open the Sales creation window, the steps are as follows:
Gateway of Tally → Voucher → Press F8
The Sales voucher creation window will open and will look like this:
Now, there are three modes to the sales voucher which you can be accessed and changed from the ‘Change mode’ option in the right-hand side menu or by simply pressing Ctrl + H. Upon pressing Ctrl + H, the Change mode option will open.
I will recommend you to use ‘Item Invoice’ mode. It looks like an invoice and it is easier to use and understand. The image of the sale voucher given is in the item invoice only.
Now to have to fill in the following details:
Reference number of the sale entry if there is any
Select the Party name or the name of the debtor (Press ALT + C if you want to create a new debtor)
The dispatch details menu will open. Enter the details if you want otherwise leave them blank.
The party details menu will open asking again for the party name and party’s other details.
Select the name of the item to be sold (Create stock item if not created before by pressing Alt + C when in Name of Item field)
Enter the quantity and rate of the item and the total amount will be auto-populated.
After it, the accounting details menu will open where you have selected the sales account you want to credit. If a sales account is not created, press ALT + C to create it.
Enter narration if you desire and finally accept the voucher.
This is a completed sales voucher:
Hence, this is how you have recorded a credit sales entry in the sales voucher.
Depreciation on Tools and Equipment Tools and Equipment are the instruments that are used for producing any product, machine, or service. Also, tools and equipment are a part of plants and machinery, making them a major fixed asset. Therefore, a certain percentage of depreciation is charged on ToolsRead more
Depreciation on Tools and Equipment
Tools and Equipment are the instruments that are used for producing any product, machine, or service. Also, tools and equipment are a part of plants and machinery, making them a major fixed asset. Therefore, a certain percentage of depreciation is charged on Tools and Equipment.
As we’re aware, depreciation refers to a process in which assets lose their value over time until it becomes obsolete or zero. It is chargeable on the fixed assets and it ultimately results in depreciation of the value of fixed assets except, land. The land is an exception in fixed assets as where all the fixed assets are depreciated, the land’s value is appreciated over time.
The rate of depreciation as per the Income Tax Act on tools and equipment (plant and machinery) is 15%.
Example
Suppose given below are the details regarding the tools and equipment:
And, we’re required to calculate the value of the tools and equipment as on 1-Mar-22
In this, as we can see the business’ accounting period starts in March and ends in April. Therefore, we can easily deduct the depreciation amount and get the desired result.
Solution: Opening Value = $30,000
Depreciation = 15% of $30,000 = $4,500
Value of tools and equipment as on 1-Mar-22 = $30,000 – $4500 = $25,500
Meaning of Working Capital Firstly, let’s understand the meaning of the working capital. Working capital is the factor which demonstrates the liquidity position of the business to carry out day to day operations. It majorly includes cash & bank balances and liquid assets. Managing working capitaRead more
Meaning of Working Capital
Firstly, let’s understand the meaning of the working capital. Working capital is the factor which demonstrates the liquidity position of the business to carry out day to day operations. It majorly includes cash & bank balances and liquid assets.
Managing working capital is a crucial process to maintain short term liquidity and so ultimately resulting into achieving long term objectives efficiently. Working capital can be calculated by deducting business’s current liabilities from current assets.
To achieve the ideal working capital requirement for any business, it is important to understand various types of working capital and various ways to manage it.
Coming to Permanent Working Capital, also called as Fixed Working Capital, it is the minimum working capital required or maintained by businesses. Such type of working capital is maintained to take care of regular financial obligations like creditors, inventory, salaries etc.
Irrespective of scale of operations carried out in business, Permanent Capital is maintained by businesses which can be in form of Net Working Capital.
There is no specific formula for calculating Fixed Working Capital, it completely depends upon the business’s assets and liabilities. So accordingly, it can be estimated through the balance sheet of the business.
For calculating Permanent Working Capital, you can follow below steps:
Calculate Net Working Capital for each day for a whole month
Find the smallest value among them
That will be Permanent Working Capital for the month
Follow the above steps for every month
There you have the annual figure for Permanent Working Capital
The requirement of Permanent Working Capital changes as the business expands. It is crucial to make sure that the working capital level does not fall below the Permanent Working Capital requirement.
Types of Permanent Working Capital:
Permanent working capital is further divided into two types:
Regular working capital – This refers to capital required to maintain healthy cashflow for purchases of raw materials, payment of wages etc.
Reserve working capital – This refers to amount which is more than regular working capital to take care of unexpected business expenses due to contingent events.
Introduction First, we should know what Earnings per share is. Earnings per share or EPS is the earnings available to each equity share of a company. The general formula of Earning per share is as follows: Earnings per share indicate the profit-generating capability of an enterprise and potential inRead more
Introduction
First, we should know what Earnings per share is.
Earnings per share or EPS is the earnings available to each equity share of a company. The general formula of Earning per share is as follows:
Earnings per share indicate the profit-generating capability of an enterprise and potential investors often compare the EPS of different companies to choose the best investment alternative.
It is shown at the bottom of the Statement of profit and loss of a company.
Basic Earnings per share
As per AS-20, there are two types of EPS.
Basic EPS
Diluted EPS
Basic Earnings per share has the same meaning as given above. But the formula of basic earnings per share as per AS-20 is as follows:
The formula of basic earnings per share is slightly different from the general formula of EPS. Here the numerator is the same as discussed above. But the denominator is different.
Here it is ‘Weight average number of equity shares outstanding’ instead of ‘Total number of equity shares outstanding.
The two components of the formula are discussed below:
Meaning of earnings available to equity shareholders
The earnings or net profit which remains after deduction of interest payable, preference dividend, if any, and tax is known as earnings available to equity shareholders. It is calculated as shown below:
Weighted average number of equity shares outstanding
The weighted average will be calculated by applying the weight of the time period for which the numbers of shares were outstanding. Let’s see a simple case to understand the calculation of the weighted average number of equity shares outstanding:
Solution:
Alternative way:
The calculation of the weighted average number of equity shares is different in special cases like:
party paid-up shares
bonus shares and
right issue shares
Partly paid-up shares
Partly paid-up shares are not considered in the above calculation unless they are eligible to take part in dividends. In that case, such partly paid-up shares are included in the calculation as fractional shares.
For example, 300 equity shares of Rs. 10 each and Rs. 5 paid up will be considered as 150 shares. (300 x 5/10)
Bonus shares
We know bonus shares are issued at no cost to the shareholders. Issue of bonus shares leads to an increase in the number of equity shares without an increase in the resources.
AS-20 tells us to make adjustments to the number of shares outstanding before the issue of bonus shares as if the bonus shares were issued at the beginning of the earliest reported period. The effect will be retrospective.
Take the following example:
Here, number of bonus shares = 30,000 x 2 = 60,000
As the earliest report period is 2011, its EPS will also have to be adjusted. Bonus issue will be treated as if it had occurred at the beginning of the earliest reported period.
The right issue generally has an exercise price that is less than the fair value of the shares. Hence, we can say that the right issue has an element of bonus in them.
So, just like in the case of a bonus issue, we will have to adjust the number of shares outstanding before the right issue up to the earliest reported period by an adjustment factor.
The number of shares outstanding before the right issue is to be multiplied by the adjustment factor given below:
Theoretical ex-right value per share is calculated in the following way:
Let’s see an example:
Net profit for 2011 Rs. 11,00,000
Net profit for 2012 Rs. 15,00,000
No. of shares outstanding prior to rights issue 5,00,000 shares
Rights issue price Rs. 15
Last date to exercise rights 1st March 2012
The right issue is one new share for every 5 shares outstanding (i.e. 1,00,000 new shares)
The fair value of shares immediately prior to 1st March 2012 = Rs. 21
Before we jump in the concept of valuation of Goodwill, let us first understand the meaning of term “Goodwill”. Goodwill is an Intangible asset of the business. As the definition of Intangible asset, Goodwill cannot be seen or felt. In simple words it is business’s worth or its reputation earned oveRead more
Before we jump in the concept of valuation of Goodwill, let us first understand the meaning of term “Goodwill”.
Goodwill is an Intangible asset of the business. As the definition of Intangible asset, Goodwill cannot be seen or felt. In simple words it is business’s worth or its reputation earned over a period of time.
Calculation of value of the goodwill in monetary terms is done at the time of merger or acquisition of the business. Goodwill is often applied to businesses which are earning large number of profits, have crucial corporate links and large customer/client base.
Self-earned goodwill is never shown in monetary terms in business’s own balance sheet while goodwill which is purchased is shown in the asset side of the balance sheet of the buyer business.
Following are the methods under which goodwill can be valued:
Average Profit Method – In this method, Goodwill is calculated by average profits multiplied by the number of years purchased. Typically, last 5-6 years profit figures are taken ignoring any abnormal gains or loss during the year. Formula for the same would be as follows:
Goodwill = Average Profit x No. of Years Purchase
Weighted Average Method – This method is updated method of average profit method, Profits of the previous years are calculated by specific number of weights. This method is useful when there is a lot of fluctuations in the profits and importance has to be given to current year’s profit. Formula for the same would be as follows:
Goodwill = Weighted Average Profit x No. of Years Purchase
Where,
Weighted Average Profit = Sum of Profits multiplied by weights / Sum of Weights
Super Profit Method – Super profit is additional profit generated by the business over normal profit. Further for the calculation, Super profit is capitalized by the normal rate of return and resulting figure is value of Goodwill.
Formula for the same would be as follows:
Goodwill = Super Profits x (100/Normal Rate of Return)
Annuity Method – In this method, Discounted amount of the super profits is calculated by taking into consideration the current value of the annuity at rate of return.
Formula for the same would be as follows:
Goodwill = Super Profit x Discounting Factor
Capitalization Method – In this method, existing capital employed is deducted from capitalized number of average profits or super profits. The resulting figure is Goodwill.
Formula for the same would be as follows:
a. Average Profit Capitalization Method –
Goodwill = [Average Profit / Normal Rate of Return x 100] – Capital Employed
b. Super Profit Capitalization Method –
Goodwill = Super Profits x (100/ Normal Rate of Return)
Income and Expenditure A/c of Charitable Trust Income and Expenditure A/c is like the Profit and Loss A/c in the Balance Sheet of the Charitable Trust. All the income and expenses are, therefore, recorded in this. It is used to determine the surplus or deficit of income over expenditures over a specRead more
Income and Expenditure A/c of Charitable Trust
Income and Expenditure A/c is like the Profit and Loss A/c in the Balance Sheet of the Charitable Trust. All the income and expenses are, therefore, recorded in this. It is used to determine the surplus or deficit of income over expenditures over a specific accounting period.
It shows the summary of all the income and expenditures done by the charitable trust over an accounting year. All the revenue items relating to the current period are shown in this account, the expenses and losses on the expenditure side, and incomes and gains on the income side of the account.
Therefore, as you can see here, how a charitable trust may use MS Excel for making their Income and Expenditure A/c, the Surplus and Deficit are the balancing figures used for balancing both the debit and credit sides.
Later on, they are even used in the Balance Sheet. As follows-
Which errors are revealed by trial balance?
Errors revealed by Trial Balance Trial balance, as we know, is a statement prepared after the ledger, followed by a journal. It has a list of all the general ledger accounts contained in the ledger of a business. Each nominal ledger account either holds a debit balance or credit. It is primarily useRead more
Errors revealed by Trial Balance
Trial balance, as we know, is a statement prepared after the ledger, followed by a journal. It has a list of all the general ledger accounts contained in the ledger of a business. Each nominal ledger account either holds a debit balance or credit.
It is primarily used to identify the balance of debits and credits entries from the transactions recorded in the general ledger in a certain accounting period. The debit and credit sides total are equal in a trial balance.
Classification of errors in the trial balance
Some of the common errors
Some more (commonly seen) errors while preparation of the trial balance:
Errors of Commission
Errors of Omission
Compensating Errors
Errors of Principles
See lessIn which voucher type credit sales is recorded in tally?
In Tally, it is possible to record credit sales entry in the following accounting vouchers: Sales Voucher Journal Voucher Generally, sale entries whether credit sales or cash sales are recorded in the Sales vouchers. Also, I strongly recommend you to record sales entries in the Sales voucher only aRead more
In Tally, it is possible to record credit sales entry in the following accounting vouchers:
Generally, sale entries whether credit sales or cash sales are recorded in the Sales vouchers. Also, I strongly recommend you to record sales entries in the Sales voucher only as it can record various aspects related to credit sales like the sales order number, delivery note number, particulars of creditor and much more.
In this answer, I have shown the steps to record a credit sales entry into the Sale voucher. My answer is based on Tally Prime, the latest version of Tally. If you are using Tally ERP 9, there will be only a few areas of differences which are not that significant.
Steps to record credit sales in Sales voucher
To record credit sales entry, you have to first open the Sales voucher creation window. To open the Sales creation window, the steps are as follows:
Gateway of Tally → Voucher → Press F8
The Sales voucher creation window will open and will look like this:
Now, there are three modes to the sales voucher which you can be accessed and changed from the ‘Change mode’ option in the right-hand side menu or by simply pressing Ctrl + H. Upon pressing Ctrl + H, the Change mode option will open.
I will recommend you to use ‘Item Invoice’ mode. It looks like an invoice and it is easier to use and understand. The image of the sale voucher given is in the item invoice only.
Now to have to fill in the following details:
This is a completed sales voucher:
Hence, this is how you have recorded a credit sales entry in the sales voucher.
See lessWhat is depreciation on tools and equipment?
Depreciation on Tools and Equipment Tools and Equipment are the instruments that are used for producing any product, machine, or service. Also, tools and equipment are a part of plants and machinery, making them a major fixed asset. Therefore, a certain percentage of depreciation is charged on ToolsRead more
Depreciation on Tools and Equipment
Tools and Equipment are the instruments that are used for producing any product, machine, or service. Also, tools and equipment are a part of plants and machinery, making them a major fixed asset. Therefore, a certain percentage of depreciation is charged on Tools and Equipment.
As we’re aware, depreciation refers to a process in which assets lose their value over time until it becomes obsolete or zero. It is chargeable on the fixed assets and it ultimately results in depreciation of the value of fixed assets except, land. The land is an exception in fixed assets as where all the fixed assets are depreciated, the land’s value is appreciated over time.
The rate of depreciation as per the Income Tax Act on tools and equipment (plant and machinery) is 15%.
Example
Suppose given below are the details regarding the tools and equipment:
And, we’re required to calculate the value of the tools and equipment as on 1-Mar-22
In this, as we can see the business’ accounting period starts in March and ends in April. Therefore, we can easily deduct the depreciation amount and get the desired result.
Solution: Opening Value = $30,000
Depreciation = 15% of $30,000 = $4,500
Value of tools and equipment as on 1-Mar-22 = $30,000 – $4500 = $25,500
See lessWhat is permanent working capital?
Meaning of Working Capital Firstly, let’s understand the meaning of the working capital. Working capital is the factor which demonstrates the liquidity position of the business to carry out day to day operations. It majorly includes cash & bank balances and liquid assets. Managing working capitaRead more
Meaning of Working Capital
Firstly, let’s understand the meaning of the working capital. Working capital is the factor which demonstrates the liquidity position of the business to carry out day to day operations. It majorly includes cash & bank balances and liquid assets.
Managing working capital is a crucial process to maintain short term liquidity and so ultimately resulting into achieving long term objectives efficiently. Working capital can be calculated by deducting business’s current liabilities from current assets.
To achieve the ideal working capital requirement for any business, it is important to understand various types of working capital and various ways to manage it.
Coming to Permanent Working Capital, also called as Fixed Working Capital, it is the minimum working capital required or maintained by businesses. Such type of working capital is maintained to take care of regular financial obligations like creditors, inventory, salaries etc.
Irrespective of scale of operations carried out in business, Permanent Capital is maintained by businesses which can be in form of Net Working Capital.
There is no specific formula for calculating Fixed Working Capital, it completely depends upon the business’s assets and liabilities. So accordingly, it can be estimated through the balance sheet of the business.
For calculating Permanent Working Capital, you can follow below steps:
The requirement of Permanent Working Capital changes as the business expands. It is crucial to make sure that the working capital level does not fall below the Permanent Working Capital requirement.
Types of Permanent Working Capital:
Permanent working capital is further divided into two types:
- Regular working capital – This refers to capital required to maintain healthy cashflow for purchases of raw materials, payment of wages etc.
- Reserve working capital – This refers to amount which is more than regular working capital to take care of unexpected business expenses due to contingent events.
See lessWhat is ‘basic earnings per share’ as per AS-20?
Introduction First, we should know what Earnings per share is. Earnings per share or EPS is the earnings available to each equity share of a company. The general formula of Earning per share is as follows: Earnings per share indicate the profit-generating capability of an enterprise and potential inRead more
Introduction
First, we should know what Earnings per share is.
Earnings per share or EPS is the earnings available to each equity share of a company. The general formula of Earning per share is as follows:
It is shown at the bottom of the Statement of profit and loss of a company.
Basic Earnings per share
As per AS-20, there are two types of EPS.
Basic Earnings per share has the same meaning as given above. But the formula of basic earnings per share as per AS-20 is as follows:
The formula of basic earnings per share is slightly different from the general formula of EPS. Here the numerator is the same as discussed above. But the denominator is different.
Here it is ‘Weight average number of equity shares outstanding’ instead of ‘Total number of equity shares outstanding.
The two components of the formula are discussed below:
Meaning of earnings available to equity shareholders
The earnings or net profit which remains after deduction of interest payable, preference dividend, if any, and tax is known as earnings available to equity shareholders. It is calculated as shown below:
Weighted average number of equity shares outstanding
The weighted average will be calculated by applying the weight of the time period for which the numbers of shares were outstanding. Let’s see a simple case to understand the calculation of the weighted average number of equity shares outstanding:
Solution:
Alternative way:
The calculation of the weighted average number of equity shares is different in special cases like:
Partly paid-up shares
Partly paid-up shares are not considered in the above calculation unless they are eligible to take part in dividends. In that case, such partly paid-up shares are included in the calculation as fractional shares.
For example, 300 equity shares of Rs. 10 each and Rs. 5 paid up will be considered as 150 shares. (300 x 5/10)
Bonus shares
We know bonus shares are issued at no cost to the shareholders. Issue of bonus shares leads to an increase in the number of equity shares without an increase in the resources.
AS-20 tells us to make adjustments to the number of shares outstanding before the issue of bonus shares as if the bonus shares were issued at the beginning of the earliest reported period. The effect will be retrospective.
Take the following example:
Here, number of bonus shares = 30,000 x 2 = 60,000
Therefore, EPS for 2012 = 60,00,000 /(30,000 + 60,000)= Rs. 6.67
As the earliest report period is 2011, its EPS will also have to be adjusted. Bonus issue will be treated as if it had occurred at the beginning of the earliest reported period.
Adjusted EPS for 2011= 18,00,000 / (30,000 + 60,000) = Rs. 20
Right issue
The right issue generally has an exercise price that is less than the fair value of the shares. Hence, we can say that the right issue has an element of bonus in them.
So, just like in the case of a bonus issue, we will have to adjust the number of shares outstanding before the right issue up to the earliest reported period by an adjustment factor.
The number of shares outstanding before the right issue is to be multiplied by the adjustment factor given below:
Theoretical ex-right value per share is calculated in the following way:
Let’s see an example:
Net profit for 2011 Rs. 11,00,000
Net profit for 2012 Rs. 15,00,000
No. of shares outstanding prior to rights issue 5,00,000 shares
Rights issue price Rs. 15
Last date to exercise rights 1st March 2012
The right issue is one new share for every 5 shares outstanding (i.e. 1,00,000 new shares)
The fair value of shares immediately prior to 1st March 2012 = Rs. 21
Solution:
See lessHow to do Valuation of Goodwill?
Before we jump in the concept of valuation of Goodwill, let us first understand the meaning of term “Goodwill”. Goodwill is an Intangible asset of the business. As the definition of Intangible asset, Goodwill cannot be seen or felt. In simple words it is business’s worth or its reputation earned oveRead more
Before we jump in the concept of valuation of Goodwill, let us first understand the meaning of term “Goodwill”.
Goodwill is an Intangible asset of the business. As the definition of Intangible asset, Goodwill cannot be seen or felt. In simple words it is business’s worth or its reputation earned over a period of time.
Calculation of value of the goodwill in monetary terms is done at the time of merger or acquisition of the business. Goodwill is often applied to businesses which are earning large number of profits, have crucial corporate links and large customer/client base.
Self-earned goodwill is never shown in monetary terms in business’s own balance sheet while goodwill which is purchased is shown in the asset side of the balance sheet of the buyer business.
Following are the methods under which goodwill can be valued:
Goodwill = Average Profit x No. of Years Purchase
Goodwill = Weighted Average Profit x No. of Years Purchase
Where,
Weighted Average Profit = Sum of Profits multiplied by weights / Sum of Weights
Formula for the same would be as follows:
Goodwill = Super Profits x (100/Normal Rate of Return)
Formula for the same would be as follows:
Goodwill = Super Profit x Discounting Factor
Formula for the same would be as follows:
a. Average Profit Capitalization Method –
Goodwill = [Average Profit / Normal Rate of Return x 100] – Capital Employed
b. Super Profit Capitalization Method –
Goodwill = Super Profits x (100/ Normal Rate of Return)
See lessCan I get income and expenditure account of charitable trust in excel?
Income and Expenditure A/c of Charitable Trust Income and Expenditure A/c is like the Profit and Loss A/c in the Balance Sheet of the Charitable Trust. All the income and expenses are, therefore, recorded in this. It is used to determine the surplus or deficit of income over expenditures over a specRead more
Income and Expenditure A/c of Charitable Trust
Income and Expenditure A/c is like the Profit and Loss A/c in the Balance Sheet of the Charitable Trust. All the income and expenses are, therefore, recorded in this. It is used to determine the surplus or deficit of income over expenditures over a specific accounting period.
It shows the summary of all the income and expenditures done by the charitable trust over an accounting year. All the revenue items relating to the current period are shown in this account, the expenses and losses on the expenditure side, and incomes and gains on the income side of the account.
Later on, they are even used in the Balance Sheet. As follows-
On the Assets Side
On the Liability Side
See less