Please briefly explain why you feel this question should be reported.

Please briefly explain why you feel this answer should be reported.

Please briefly explain why you feel this user should be reported.

Sign InSign Up

AccountingQA

AccountingQA Logo AccountingQA Logo

AccountingQA Navigation

  • Home
  • Ask Questions
  • Write Answers
  • Explore
  • FAQs
Search
Ask A Question

Mobile menu

Close
Ask a Question
  • Home
  • Questions
    • Most Visited
    • Most Active
    • Trending
    • Recent
  • Follow
    • Categories
    • Users
    • Tags
  • Write an Answer
  • Badges & Points
  • Request New Category
  • Send a Suggestion
  • Search Your Accounting Question..

  • Recent Questions
  • Most Answered
  • Answers
  • Most Visited
  • Most Voted
  • No Answers

AccountingQA Latest Questions

Anushka Lalwani
Anushka Lalwani
In: 1. Financial Accounting > Accounting Terms & Basics

What is the meaning of ledger folio?

  • 1 Answer
  • 0 Followers
Answer
  1. ShreyaSharma none
    Added an answer on August 18, 2022 at 9:01 pm
    This answer was edited.

    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.

     

    See less
    • 0
    • Share
      Share
      • Share on Facebook
      • Share on Twitter
      • Share on LinkedIn
      • Share on WhatsApp
A_Team
A_Team
In: 1. Financial Accounting > Miscellaneous

Prepaid expenses is current assets or current liabilities?

  • 2 Answers
  • 0 Followers
Answer
  1. Ishika Pandey Curious ca aspirant
    Added an answer on January 5, 2023 at 8:58 am
    This answer was edited.

    Definition Prepaid expenses are those expenses whose payments are done in advance which can be for the goods or services whose benefit will accrue in the subsequent accounting period. A prepaid expense is a current asset. prepaid expenses are classified under the head current assets in the balance sRead more

    Definition

    Prepaid expenses are those expenses whose payments are done in advance which can be for the goods or services whose benefit will accrue in the subsequent accounting period.

    A prepaid expense is a current asset. prepaid expenses are classified under the head current assets in the balance sheet.

    This is because they provide future economic benefits to the company. As such, they are assets that can be used to generate revenue in the future.

    For example prepaid rent, prepaid insurance, etc.

     

    Current assets are defined as cash and other assets that are expected to be converted into cash or consumed in the production of goods or rendering of services in the normal course of business.

    Or in other words, we can say that the expected realization period is less than the operating cycle period although it is more than the period of 12 months from the date of the balance sheet.

    For example, goods are purchased with the purpose to resell and earn a profit, debtors exist to convert them into cash i.e., receive the amount from them, bills receivable exist again for receiving cash against it, etc.

     

    Current liabilities are liabilities that are payable generally within 12 months from the end of the accounting period or in other words which fall due for payment in a relatively short period.

    For example bills payable, short-term loans, etc.

     

    Why current assets and not a  current liability?

    Now let me try to explain to you that prepaid expenses are classified as current assets  and not as a current liability which is as follows :

      • we can say that the expected realization period is less than the operating cycle period although it is more than the period of 12 months from the date of the balance sheet.
      • expected to be converted into cash or consumed in the production of goods or rendering of services in the normal course of business.
      • In the business prepaid expense are treated as an asset which we can see on the asset side of the balance sheet.
      • Or in other words, we can say that it is initially recorded as a prepaid expense as an asset in the balance sheet and subsequently its value is expensed over time in the profit and loss account.

     

    Example

    Now let us take an example for explaining prepaid expenses which are mentioned below.

    An insurance premium of Rs 50000 has been paid for one year beginning (previous year). The financial year ends on 31st  march YYYY.

    It means the premium for 6 months i.e., 1st April, YYYY(current year) to 30th September, YYYY(current year) amounting to Rs 25000 is paid in advance.

    Thus, of premium paid in advance (Rs 25000)  is a Prepaid Expense. It will be accounted as an expense in the financial year ending  31st  march next year. In the balance sheet as of 31st march YYYY ( current year ) it will be shown as Current Asset.

    Here is an extract of the profit /loss account and balance sheet of the above example:

     

    Key points

    There are a few things to keep in mind when dealing with prepaid expenses.

    • First, is that the expenses are actually prepaid. This means that the expenses were paid for before they were used.

     

    • Second, it is essential to track the number of prepaid expenses that have been used. That is to make sure that the prepaid expenses are not overstated on the company’s financial statements. This can happen if the company pays for more goods or services than it actually

     

    • Last but not least it is important to keep in mind that changes in the value of prepaid expenses can impact the company’s net income. For example, if the company’s prepaid insurance increases in value, this will increase the company’s net income.

     

    See less
    • 0
    • Share
      Share
      • Share on Facebook
      • Share on Twitter
      • Share on LinkedIn
      • Share on WhatsApp
Anushka Lalwani
Anushka Lalwani
In: 1. Financial Accounting > Accounting Terms & Basics

Is goodwill real or nominal?

  • 1 Answer
  • 0 Followers
Answer
  1. Akash Kumar AK
    Added an answer on November 21, 2022 at 12:51 pm
    This answer was edited.

    Goodwill In Accounting Aspect, Goodwill refers to an Intangible asset that facilitates a company in making higher profits and is a result of a business’s consistent efforts over the past years which can be the business's prestige, reputation, good name, customer trust, quality service, etc. GoodwillRead more

    Goodwill

    In Accounting Aspect, Goodwill refers to an Intangible asset that facilitates a company in making higher profits and is a result of a business’s consistent efforts over the past years which can be the business’s prestige, reputation, good name, customer trust, quality service, etc.

    Goodwill has no separate existence although the concept of goodwill comes when a company acquires another company with a willingness to pay a higher price over the fair market value of the company’s net asset in simple words the goodwill can be only realized while at the time of sale of a business.

     

    The formula for Goodwill

     

    Types of Goodwill

    there are two types of goodwill.

     

    1. Inherent Goodwill/Self-generated goodwill

    Inherent goodwill is the internally generated goodwill that was created or generated by the business itself. it is generally generated from the good reputation of the business.

    Inherent Goodwill or Self-generated goodwill is generally not shown in the books or never recognized in the books of Accounts and no journal entry for the inherent goodwill is passed.

     

    2. Purchased Goodwill/Acquired Goodwill

    At the time of acquisition of a business by another business, any amount paid over and above the net assets simply refers to the amount of Purchased Goodwill or Acquired goodwill.

    A Journal entry is passed in the case of the Purchase of goodwill.

     

    Type of Account

    generally, Goodwill is considered and recorded as an Intangible asset(long-term asset) due to its physical absence like other long-term assets.

     

    Modern rule of accounting:

    as per the Modern rule of accounting, all Assets or all possessions of a business are comes under the head Asset accounts.

    as Goodwill is treated as an Intangible asset it is an Asset Account.

     

    Journal entry for purchase of goodwill as per Modern rule

    Goodwill A/c Dr. – Amt

    To Cash/Bank A/c – Amt

    (The modern approach of accounting for the Asset account is: “Debit the increase in asset and Credit the decrease in the asset“)

     

    The golden rule of accounting

    As per the golden rule of accounting, all assets or possessions of a business other than those which are related to any person (debtor’s account) are considered Real accounts.

    Such accounts don’t close by the year-end and are carried forward.

    As Goodwill is an Intangible asset it is treated as a Real account as per the golden rule of accounting.

     

    Journal entry for purchase of goodwill as per Golden rule

    Goodwill A/c Dr. – Amt

    To Cash/Bank A/c – Amt

    (The golden rule of accounting for the Real account is: “Debit what comes in and Credit what Goes out“)

    See less
    • 0
    • Share
      Share
      • Share on Facebook
      • Share on Twitter
      • Share on LinkedIn
      • Share on WhatsApp
Anushka Lalwani
Anushka Lalwani
In: 1. Financial Accounting > Miscellaneous

What is revenue reserve?

ReservesRevenue Reserve
  • 1 Answer
  • 0 Followers
Answer
  1. PriyanshiGupta Graduated, B.Com
    Added an answer on November 15, 2021 at 1:31 pm
    This answer was edited.

    Profits earned by a firm are not completely distributed to its owners, some of the profits are retained for various purposes. Reserves are profits that are apportioned or set aside to use in the future for a specific or general purpose. Reserves follow the Conservative Principle of accounting.  ReveRead more

    Profits earned by a firm are not completely distributed to its owners, some of the profits are retained for various purposes. Reserves are profits that are apportioned or set aside to use in the future for a specific or general purpose. Reserves follow the Conservative Principle of accounting. 

    Revenue reserve is created from the net profits of a company during a financial year. Revenue reserve is created from revenue profit that a company earns from the daily operations of the business.

    Various types of reserves are:

    • Capital Redemption Reserve: It is created to issue fully paid bonus shares or reduction of capital in accordance with Article 3 of the Companies Act, 2013.
    • General Reserve: It is a reserve created to provide for various requirements of the company from time to time.
    • Debenture Redemption Reserve: It is required by the Companies Act, 2013 to transfer the amount of debentures that are going to be redeemed in the following year to minimize the risk of default.
    • Securities Premium Reserve: When shares and debentures are issued at a price higher than the book value, then such higher amount is transferred to Securities Premium Reserve
    • Revaluation Reserve: It is created to revalue the assets and liabilities and provide for gain or loss.

    Different parts of profit are apportioned to create a different reserve and those reserves can only be used for purposes as defined.

    While accounting for Revenue Reserve, the profit decided to transfer to Revenue Reserve are first transferred to Profit and Loss Appropriation Account and then to Revenue Reserve Account. In the balance sheet, Revenue Account is shown under the Capital and Reserves head.

    Liabilities Amount Amount
    Share Capital
    Reserve and Surplus
    General Reserve
    Capital Redemption Reserve
    Securities Premium Account
    Profit and Loss Account

    Uses of Revenue Reserve:

    • Revenue Reserves are created to expand business or for meeting contingencies that may arise in the future.
    • It can also be used to distribute dividends or bonus shares to its shareholders.

    Example:

    Given that Revenue Reserve Account stands at Rs 1,00,000 and the company wants to distribute Rs. 40,000 as dividend to its shareholders. The treatment of this transaction in the financial statements will be-

    Particulars                                                                                                                           Amount (Rs.)

    Revenue Reserve Account                                                                                                    1,00,000

    (less) Dividend distributed                                                                                                    (40,000)

    The amount shown in Balance Sheet                                                                                    60,000

     

     

    See less
    • 0
    • Share
      Share
      • Share on Facebook
      • Share on Twitter
      • Share on LinkedIn
      • Share on WhatsApp
Ishika Pandey
Ishika PandeyCurious
In: 1. Financial Accounting > Subsidiary Books

What is bills payable and bills receivable book ?

  • 1 Answer
  • 2 Followers
Answer
  1. SidharthBadlani CA Inter Student
    Added an answer on February 5, 2023 at 12:58 pm

    A bills receivable book is a subsidiary book that shows the details of various bills receivables drawn on customers. It shows the amount, due date, date when the bill was drawn, name of the acceptor, and various other details pertaining to each bill. A bills payable book is a subsidiary book that shRead more

    A bills receivable book is a subsidiary book that shows the details of various bills receivables drawn on customers. It shows the amount, due date, date when the bill was drawn, name of the acceptor, and various other details pertaining to each bill.

    A bills payable book is a subsidiary book that shows the details of various bills that suppliers have drawn on the business. It shows the amount, due date, date when the bill was drawn, name of the drawer and various other details pertaining to each bill.

    The total of both these books is ultimately transferred to the general ledger. From there, it is used in drafting the balance sheet.

    Importance of bills receivable and bills payable books

    Bills receivable books help us know the amount that each customer is liable to pay us on specific dates while bills payable books help us know the amounts that we have to pay our various suppliers on certain dates.

    Together these books help us handle our cash flows in an efficient manner.

    We can evaluate our credit cycle. Bills receivable books help us avoid bad debts while bills payable books help us to avoid defaults.

     

    Difference between bills receivable and bills payable

    These are the primary differences between bills payable and bills receivable:

    • Bills receivable represent the amounts that the business is to receive from customers while bills payable represent the amounts that the business has to pay to suppliers.
    • Bills receivable are recorded as an asset in the balance sheet while bills payable are recorded as a liability.
    • Bills receivable are drawn by the business on the customers while the bills payable are drawn by the suppliers on the business.
    • Bills receivable are the outcome of credit sales while bills payable are the outcome of credit purchases.
    • Bills receivable result in an inflow of cash while bills payable result in an outflow of cash.
    • The dishonor of a bill receivable is recorded as an increase in the debtors of the business. Default on payment of bills payable may occur either because the business has become bankrupt or the business may record an increase in creditors.

    We can conclude that both bills receivable and bills payable books are subsidiary books. Bills receivable shows the details of every bill that the business has drawn on each credit customer. Bills payable show the details of every bill that each credit supplier has drawn on the business.

    See less
    • 0
    • Share
      Share
      • Share on Facebook
      • Share on Twitter
      • Share on LinkedIn
      • Share on WhatsApp
A_Team
A_Team
In: 1. Financial Accounting > Miscellaneous

What are some examples of fictitious asset?

  • 1 Answer
  • 0 Followers
Answer
  1. Vijay Curious M.Com
    Added an answer on July 28, 2021 at 2:40 pm
    This answer was edited.

    Fictitious assets are not actually assets. They are expenses/losses not written off in the year in which they are incurred. They do not have any physical presence. Their expense is spread over more than one accounting period. A part of the expense is amortized/written off every year against the compRead more

    Fictitious assets are not actually assets. They are expenses/losses not written off in the year in which they are incurred. They do not have any physical presence. Their expense is spread over more than one accounting period.

    A part of the expense is amortized/written off every year against the company’s earnings. The remaining part (which is yet to be written off) is shown as an asset in the balance sheet. They are shown as assets because these expenses are expected to give returns to the company over a period of time.

    Here are some examples of fictitious assets:

    • Preliminary expenses.
    • Promotional expenses.
    • Loss incurred on the issue of debentures.
    • Underwriting commission.
    • Discount on issue of shares.

     

    To make it simple I’ll explain the accounting treatment of preliminary expenses with an example.

    The promoters of KL Ltd. paid 50,000 as consultation fees for incorporating the company. The consultation fee is a preliminary expense as they are incurred for the formation of the company. The company agreed to write off this expense over a period of 5 years.

    At the end of every year, the company will write off 10,000 (50,000/5) as an expense in the Profit & Loss A/c.

    The remaining portion i.e. 40,000 (50,000 – 10,000) will be shown on the Assets side of the Balance Sheet under the head Non – Current Assets and sub-head Other Non – Current Assets. 

    Here are the financial statements of KL Ltd.,

    Note: As per AS 26 preliminary expenses are fully written off in the year they are incurred. This is because such expenses do not meet the definition of assets and must be written off in the year of incurring.

    Source: Some fictitious assets examples are from Accountingcapital.com & others from Wikipedia.

     

    See less
    • 0
    • Share
      Share
      • Share on Facebook
      • Share on Twitter
      • Share on LinkedIn
      • Share on WhatsApp
Aadil
AadilCurious
In: 6. Software & ERPs > Tally

How to enable GST in tally?

  • 1 Answer
  • 0 Followers
Answer
  1. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
    Added an answer on August 29, 2022 at 8:02 pm
    This answer was edited.

    GST stand for Goods and Services Tax which is levied on almost all the good and services supplied in India. Generally, a business is required to charge GST on all the goods and services supplied by it if its turnover is over the limit as prescribed by respective GST laws. We can also do accounting fRead more

    GST stand for Goods and Services Tax which is levied on almost all the good and services supplied in India. Generally, a business is required to charge GST on all the goods and services supplied by it if its turnover is over the limit as prescribed by respective GST laws.

    We can also do accounting for GST in Tally by enabling it from the company features.

    The steps to enable GST and perform GST accounting in Tally are as given below.

    Enabling GST in Tally

    GST can be enabled in Tally from the ‘Company features’ menu which opens just after the creation of a company. There is an option called ‘Enable Goods and Services Tax (GST)’. You have to enter ‘Yes’.

    If the company is already created and the GST was not enabled earlier, then just press F11 and select the company for which you want to enable GST. The ‘company features’ menu will open again, from there you have to enter ‘Yes’ beside the ‘Enable Goods and Services Tax (GST)’ option.

    In both cases, this menu will open:

     

    Do have look at the details I have filled in. You have to:

    • Select the State in which your business is.
    • Registration type is Regular in most cases.
    • Keep the ‘Assessee of another territory’ option at ‘No’, if your business operated from one state only.
    • Enter your 19-digit GST number.
    • Periodicity can be set to ‘Monthly’ or ‘Quarterly’ as per the turnover of the business. ‘Quarterly’ preferred.
    • Keep the E-way bill option at ‘No’ if the E-way bill is not required.
    • Keep the ‘Set/Alter GST rate details’ option at ‘No’ if you want to charge different goods at different GST rates. If GST rates are set up from here, it will be uniform for all goods and services.
    • Keep the rest of the options as shown in the above image.

    These settings are enough if you are to just practice GST in Tally.

    See less
    • 0
    • Share
      Share
      • Share on Facebook
      • Share on Twitter
      • Share on LinkedIn
      • Share on WhatsApp
Load More Questions

Sidebar

Question Categories

  • 1. Financial Accounting

      • Accounting Terms & Basics
      • Bank Reconciliation Statement
      • Banks & NBFCs
      • Bills of Exchange
      • Capital & Revenue Expenses
      • Consignment & Hire Purchase
      • Consolidation
      • Contingent Liabilities & Assets
      • Departments & Branches
      • Depreciation & Amortization
      • Financial Statements
      • Goodwill
      • Insurance Accounting
      • Inventory or Stock
      • Investment Accounting
      • Journal Entries
      • Ledger & Trial Balance
      • Liquidation & Amalgamation
      • Miscellaneous
      • Not for Profit Organizations
      • Partnerships
      • Ratios
      • Shares & Debentures
      • Source Documents & Vouchers
      • Subsidiary Books
  • 2. Accounting Standards

      • AS
      • IFRS
      • IndAS
  • 3. Cost & Mgmt Accounting
  • 4. Taxes & Duties

      • GST
      • Income Tax
  • 5. Audit

      • Bank Audit
      • Internal Audit
      • Miscellaneous - Audit
      • Statutory Audit
  • 6. Software & ERPs

      • Tally
  • 7. MS-Excel
  • 8. Interview & Career
  • Top Questions
  • I need 20 journal entries with ledger and trial balance?

  • Can you show 15 transactions with their journal entries, ledger, ...

  • What is furniture purchased for office use journal entry?

  • What is loose tools account and treatment in final accounts?

  • What is the Journal Entry for Closing Stock?

  • What is the journal entry for goods purchased by cheque?

  • What is commission earned but not received journal entry?

  • What is the journal entry for interest received from bank?

  • How to show adjustment of loose tools revalued in final ...

  • Following is the Receipts and Payments Account of Bharti Club ...

Hot Topics

Accounting Policies Accounting Principles Balance Sheet Bank Reconciliation Statement Bill of Exchange Branch Accounting Calls in Advance Capital Capital Expenditure Companies Act Compound Entry Consignment Creditors Current Assets Debit Balance Debtors Depreciation Difference Between Dissolution of Firm Dissolution of Partnership Drawings External Users Fictitious Assets Final Accounts Financial Statements Fixed Assets Fixed Capital Fluctuating Capital Gain Impairment Installation Interest Received in Advance Internal Users Journal Entry Ledger Loose Tools Miscellaneous Expenditure Profit Rent Rent Received in Advance Reserves Revaluation Revenue Expenditure Revenue Reserve Sacrificing Ratio Subscription Subscription Received in Advance Trial Balance Type of Account Uncalled Capital
  • Home
  • Questions
    • Most Visited
    • Most Active
    • Trending
    • Recent
  • Follow
    • Categories
    • Users
    • Tags
  • Write an Answer
  • Badges & Points
  • Request New Category
  • Send a Suggestion

Most Helping Users

Astha

Astha

  • 50,291 Points
Leader
Simerpreet

Simerpreet

  • 72 Points
Helpful
AbhishekBatabyal

AbhishekBatabyal

  • 65 Points
Helpful

Footer

  • About Us
  • Contact Us
  • Pricing
  • Refund
  • Forum Rules & FAQs
  • Terms and Conditions
  • Privacy Policy
  • Career

© 2021 All Rights Reserved
Accounting Capital.