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AbhishekBatabyal
AbhishekBatabyalHelpful
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  2. Ayushi Curious Pursuing CA

    By the name, it can be easily deduced that Advance tax means the tax paid in advance. Advance tax is the tax paid by an assessee in the Previous Year itself based on his estimated income. We know that Income tax liability is known in the Assessment Year based on the income of the Previous Year. But,Read more

    By the name, it can be easily deduced that Advance tax means the tax paid in advance.

    Advance tax is the tax paid by an assessee in the Previous Year itself based on his estimated income.

    We know that Income tax liability is known in the Assessment Year based on the income of the Previous Year. But, the government encourages the taxpayers to pay the tax in the Previous Year itself based on the estimated income.

    As per section 208 of the Income Tax 1961, if the total income liability on the estimated income comes up more than Rs. 10,000, then advance tax has to be paid.

    The advance tax has to be paid according to the following schedule for the individual and corporate assessees [Other than the assessee who computing profits on a presumptive basis under section 44AD(1) and 44ADA(1)]:

    Due date of Instalment Amount Payable
    On or before 15th June No less than 15% advance tax liability.
    On or before 15th September No less than 45% of tax liability, as reduced by any amount if any paid in the earlier instalment.
    On or before 15th December No less than 75% of tax liability, as reduced by any amount or amounts if any paid in the earlier instalments.
    On or before 15th March No less than 100% of tax liability, as reduced by any amount or amounts if any paid in the earlier instalments.

     

    Any amount paid by the way of advance tax on or before 15th March shall be treated as advance tax paid during each financial year on or before 15th March.

    Also as per section 219, the tax credit is given for the advance tax paid in the regular assessment of income tax.

    In case of non-payment or short payment of the advance tax,  interest is payable as per section 234B. Interest is also attracted in case of delayed payment of advance tax as per section 234C.

    That’s all, I would conclude my answer hoping that it was helpful in making the concept of advance tax easy to grasp.

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Ayushi
AyushiCurious
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  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
    This answer was edited.

    TDS stands for Tax Deducted at Source It is the tax deducted on certain incomes as specified under sections 192 to 194N of the Income Tax Act,1961 by the person who is responsible to pay such income. For example, an employer is liable to deduct the TDS on the salary paid to the employee subject to tRead more

    TDS stands for Tax Deducted at Source

    It is the tax deducted on certain incomes as specified under sections 192 to 194N of the Income Tax Act,1961 by the person who is responsible to pay such income.

    For example, an employer is liable to deduct the TDS on the salary paid to the employee subject to the provisions of the Income Tax Act, 1961.

    TDS is deducted either,

    • at the time of payment

    OR

    • At time of credit to the account of the payee or at the time of payment; whichever is earlier

    We know that Income tax liability is calculated after the income for a year is earned. In the next year, which is called the Assessment Year, income tax payable is calculated on the income earned in the Previous Year

    For example:

    Year 2021-2022 – This year (Previous Year) – Income is earned here.

    Year 2021-2022 – Next Year (Assessment Year) – Income tax is assessed here.

    But, the government collects the income tax from the income of the assessee in the Previous Year itself by the following ways:

    1. TDS – Tax Deducted at Source
    2. TCS – Tax Collected at Source
    3. Advance Tax

    Some of the most common sections are given below:

    1. Section 192 – Salary
    2. Section 194A – Interest other on securities deposits with the bank, post office etc) –  @10%
    3. Section 194B and 194BB – Winning from lotteries, crossword puzzle – @30%
    4. Section 194 – DA – Payment in respect of Life Insurance Policy – @5%.

    So, according to sections 192 to 194N, some amount of income tax is deducted from the income of the assessee in the Previous Year itself.

    In the Assessment Year, the assessee also gets a tax credit for the TDS i.e. the Income Tax liability gets reduced by the amount of Tax Deducted at Source in the Previous Year.

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Manvi
Manvi
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    The profit and loss appropriation account is an account created in addition to the Trading & Profit and loss account in the case of partnership firms. It is a nominal account. The net profit or loss from the Profit and loss account is transferred to the Capital A/c when we do the accounting of sRead more

    The profit and loss appropriation account is an account created in addition to the Trading & Profit and loss account in the case of partnership firms. It is a nominal account.

    The net profit or loss from the Profit and loss account is transferred to the Capital A/c when we do the accounting of sole proprietors.

    But, while doing the accounting of partnership, there is a need to appropriate this profit or loss as there are two or more partners’ capital accounts. So, for this purpose, the Profit and loss appropriation account is created.

    The net profit or loss is appropriated among the partner’s capital after adjustment the items like partner’s salary, commission, interest on capital, interest on drawing etc. It consists of items related to the partner’s claim.

    The format of the profit and loss appropriation account is as below:

    Let solve a problem to sharpen our concept:

    A and B are partners in firm sharing profits and losses in the ratio of 4:1. On 1st January 2019, their capitals were ₹ 20,000 and ₹ 10,000 respectively. The partnership deed specifies the following:

    1. Interest on capital is to be allowed at 5% per annum.
    2. Interest on drawings charged to A and B are ₹ 200 and ₹ 300 respectively.
    3. The net profit of the firm before considering interest on capital and interest on drawings amounted to ₹ 18,000.
    4. A is to be paid an annual salary of ₹2000

    Prepare Profit and loss appropriation account for the year ending 31st December 2019.

    Solution:

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Manvi
Manvi
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    The journal entry for commission received is as presented below: Cash A/c / Bank A/c  / A Personal A/c    Dr.    -   ₹                     To Commission received A/c          -        ₹         (Being ₹ commission received)   The commission received means an amount received by a person or entity forRead more

    The journal entry for commission received is as presented below:

    Cash A/c / Bank A/c  / A Personal A/c    Dr.    –   ₹

                        To Commission received A/c          –        ₹        

    (Being ₹ commission received)

      The commission received means an amount received by a person or entity for the provision of a service. For example, a firm sold goods worth ₹10,000 of a manufacturer and was paid an amount of ₹1000 in cash as commission. So, the entry in the books of accounts of the firm will be as follows:

    Cash A/c       Dr.       ₹1000

    To Commission received A/c    ₹1000

    Now, let’s understand the logic behind the journal entry through the modern rules of accounting.

    Cash account, bank account and personal account are asset accounts. Hence, they are debited when assets are increased.

    While the commission received account is an income account. Hence, when income increases, it is credited.

    As per the traditional rules i.e. the golden rules of accounting, these are the explanations:

    Commission can be received in cash or bank. Hence the Cash or Bank account is debited as they are real accounts.

    “Debit what comes in, credit what goes out”

    Also, when it is not received but accrued, then a personal account is debited (the person or entity who has received the service but has not paid for it yet).  The following rule applies to the personal account.

    “Debit the receiver, credit the giver”

     Commission received is an income, thus it is a nominal account. It will be credited because of the following rule of nominal accounts:-

    “Debit all expense and losses, credit all income and gains”

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Manvi
Manvi
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  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
    This answer was edited.

    As the name suggests, unrecorded liabilities means the liabilities that a firm fails to record in its book of accounts. Usually, a firm gets to know about its unrecorded liabilities when it is about to get dissolved. What happens is that upon hearing that a firm is going to dissolve in near future,Read more

    As the name suggests, unrecorded liabilities means the liabilities that a firm fails to record in its book of accounts.

    Usually, a firm gets to know about its unrecorded liabilities when it is about to get dissolved. What happens is that upon hearing that a firm is going to dissolve in near future, its creditors and lenders report to the firm about their dues.

    At that time, a firm may get to know that it had failed to record some liabilities in its books and it has settled them now.

    We know that when a partnership firm is dissolved, a realisation account is created to which all the assets and liabilities of the firm are transferred.  Entries are as given below:

    Realisation A/c     Dr.      ₹ Amt

    To Assets A/c                  ₹ Amt

    ( Asset transferred to realisation account)

    Liabilities A/c    Dr.        ₹ Amt

    To Realisation A/c       ₹ Amt

    (Liabilities transferred to realisation account)

    Hence, for transferring unrecorded liabilities, the procedure is the same for the recorded liabilities:

    Unrecorded Liabilities A/c        Dr.     ₹ Amt

    To Realisation A/c                               ₹ Amt

    ( Unrecorded liabilities transferred to realisation account)

    Then to pay off the unrecorded liability the entry is:

    Realisation A/c     Dr.    ₹ Amt

    To Cash / Bank A/c       ₹ Amt

    (Unrecorded liabilities paid off)

    That’s it, I hope I was able to make you understand.

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Karan
Karan
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    Secondary books of accounts are most commonly known as subsidiary books of accounts or day books. They are prepared to record the same type of journals in an ordered manner in a special book. They are nothing, but special journals. Recording all the journals entries in a single journal and these posRead more

    Secondary books of accounts are most commonly known as subsidiary books of accounts or day books. They are prepared to record the same type of journals in an ordered manner in a special book. They are nothing, but special journals.

    Recording all the journals entries in a single journal and these posting them to different ledgers can be very difficult if the number of transactions is huge.

    So, recording the same type of transactions in a special journal proves to be useful in efficient book-keeping and also information retrieval.

    There are eight subsidiary books:

    1. Cashbook – It is three types. (a) Single column cash book – It records only cash receipts and cash payments. (b) Double column cash book – Apart from cash receipts and cash payments, it also records bank receipts and bank payments. (c) Triple column cash book – It additionally records the discount allowed and discount received.
    2. Purchase book – It records all the credit purchases except the purchase of assets.
    3. Sales book – It records all the credit sales except the sale of assets.
    4. Purchase return book – It records all the transactions related to the return of purchased goods.
    5. Sale return book – It records all the transactions related to the return of goods from customers.
    6. Bills receivable book – It records the particulars of all the bills drawn in favour of the business.
    7. Bills payable book – It records the particulars of all the bills drawn in the name of the business.
    8. Journal proper – It records those transactions which cannot be recorded in any of the above-mentioned books. For example, entry related to depreciation charged on assets.

     

    Also, there are a few more things to know:-

    1. Subsidiary books may look like ledger accounts but they are not ledgers. Ledgers are books of final entry and subsidiary books can be said to be the book of intermediate entry and are not but special journals.
    2. Once transactions are recorded in the subsidiary books, they are then posted to the ledgers.
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Karan
Karan
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A. Debit balance B. Credit balance C. Either Debit or Credit D. None of these

  2. Ayushi Curious Pursuing CA
    This answer was edited.

    The correct option is C. Either Debit or Credit. Partner’s Current account is prepared when the capital account is of fixed nature. We know that partner’s capital account can be of fluctuating nature or fixed nature. In the case of fluctuating partner’s capital, all the transactions relating to theRead more

    The correct option is C. Either Debit or Credit.

    Partner’s Current account is prepared when the capital account is of fixed nature. We know that partner’s capital account can be of fluctuating nature or fixed nature.

    In the case of fluctuating partner’s capital, all the transactions relating to the appropriation of profit, salary, commission, drawings, the introduction of capital, interest on capital etc. are passed through the partner’s capital account.

    The balance of partner’s capital is generally credit but sometimes it may show debit balance indicating that the business owes to partner.

    But when the partner’s capital account is of fixed nature, then separate partner’ current accounts are prepared. Through this account, all the transactions of revenue nature are passed like appropriation of profits, salary or commission paid to a partner, interest on capital and drawings. The balance of this account may be debit or credit.

    The debit balance means the partner has withdrawn a lot of amount as drawings in anticipation of profits. The credit balance means the partner owes to the business.

    The partner’s capital shows a fixed amount as capital and its balance is affected only when additional capital is introduced or capital is withdrawn. The balance of this account is always credit.

    The partner current account is prepared when the firm wants to show the revenue transactions and capital transactions related to the partner ‘capital separately.

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