AccountingQA Latest Questions

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

    Meaning The term ‘Sundry creditors’ consist of two words:  ‘Sundry’ and ‘creditors’.  The word ‘sundry’ means the items which are not significant enough to be named separately. It also refers to a collection of miscellaneous items. Creditors are the person from whom money is borrowed or goods are puRead more

    Meaning

    The term ‘Sundry creditors’ consist of two words:  ‘Sundry’ and ‘creditors’. 

    The word ‘sundry’ means the items which are not significant enough to be named separately. It also refers to a collection of miscellaneous items.

    Creditors are the person from whom money is borrowed or goods are purchased on credit by a business or a non-business entity. They have to be repaid after a period of time which is usually less than or up to one year.

    By combining the meaning of both words, ’sundry’ and ‘creditor’, the term ‘sundry creditor’ will refer to the collection of insignificant creditors of an entity.

    Back in the days when accounting records were maintained on paper, only the records of those creditors were maintained separately, from whom goods are purchased regularly and in large amounts. 

    But there used to be numerous other creditors with whom the transactions were occasional and insignificant. To reduce the paperwork, records of all such creditors were maintained on a single page or book under the head ‘Sundry Creditors’

    Nowadays, as accounting records are maintained digitally, hence maintaining records of each and every creditor is not a problem. 

    Hence, every creditor whether small or big, is grouped under the head ‘Sundry creditor’ or ‘Trade Creditor’.

     

    Accounting Treatment 

    Sundry creditors are the persons to whom a business owes money. 

    Hence, as per golden rules of accounting, Sundry creditor is a personal account and the golden rule for personal account is, ‘Debit the receiver and credit the giver’ 

    We know sundry creditors are liabilities, hence, as per modern rule of accounting, sundry creditors are credited in case of increase and debited in case of decrease.

    Example, a business purchased goods for Rs. 10,000 from ABC & Co. The journal entry will as follows:

    Here, ABC & Co is the creditor. It is credited as it is a personal account and the creditor has given the goods to the business, hence the giver is credited.

    From point of view of modern rules of accounting, ABC & Co. is a creditor, a liability. On purchase of goods on credit, a liability is created. Hence, ABC & Co A/c is credited.

     

    Balance sheet

    Sundry creditor is a current liability, so it is shown on the liabilities side of a balance sheet. Trade payable and accounts payable mean sundry creditors only.

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Naina@123
Naina@123
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  2. prashant06 B.com, CMA pursuing
    This answer was edited.

    Revenue also called income is nothing but the income generated by individuals or businesses from the sale of goods or investing capital or assets. Some examples of revenue are as follows:- Sales revenue Dividend received Interest earned Rent received Commission    1. SALES REVENUE Sales revenueRead more

    Revenue also called income is nothing but the income generated by individuals or businesses from the sale of goods or investing capital or assets. Some examples of revenue are as follows:-

    1. Sales revenue
    2. Dividend received
    3. Interest earned
    4. Rent received
    5. Commission

     

     1. SALES REVENUE

    Sales revenue is the income received by the individual or business by selling its product or provision of services. the words “sale” and “revenue” are used interchangeably to mean the same thing. It is to be noted that revenue does not necessarily mean it has been received in cash, it can be partly in cash or partly on credit also.

    How to calculate sales revenue?

    SALES REVENUE = NO. OF UNITS SOLD * AVERAGE PRICE PER UNIT

    For example:- Amazon sold 4000 units of shirts @ 500 each. Therefore sales revenue for amazon is

    Sales revenue = 4000 * 500

    = 20,00,000

    Treatment of sales revenue in the financial statement, since sales are part of a trading account and appear on the credit side of the trading account.

    2. DIVIDEND RECEIVED

    Naina, this can be explained in simple terms. Suppose you own shares of a company which declares dividend so the dividend received is income for you. Since it does not reduce the assets of a company nor creates a liability it is shown as income and posted on the credit side of profit & loss A/c.

    Let me give you a short example of a dividend received, suppose you own 1000 shares of ABC.ltd. the company at the quarter-end calculate its earnings and decides to declare a dividend of Rs 5 per share. Therefore you would receive 1000* 5 i.e Rs 5000 as dividend income.

    3. INTEREST INCOME EARNED

    Interest income is the earnings the entity receives on any investments made. To be more precise it is money earned by an individual or business for lending their fund either by putting them as deposit in the bank. It is shown on the credit side of the profit & loss A/c.

    A very simple example for interest earned is when a business or an individual deposits money in the bank as savings and decided not to touch it for the coming years then such a depositor will gain interest on such savings by the bank. such type of income so received is treated as interest received and shown as income in the profit & loss A/c.

    3. RENT RECEIVED

    When money is received by the business for exchange of use of assets of the business by the other person, then it will be called rent received. Rent can be received by the business firm in respect of land, building, machinery, etc. As rent received is income for the business firm, it is shown on the credit side of profit & loss A/c.

    For example, X. ltd received Rs 20,000 via cash on one of its properties to Mr. Z. Then rent so received shall be treated as income in the books of ABC. ltd and same shall be treated as income and shown in the profit & loss statement.

    Summarised extract of profit & loss account is shown below for dividend received, Rent received and interest earned.

     

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

    You must have knowledge of what depreciation is. Depreciation is the process of allocating the value of an asset over its useful life. It reduces the carrying value of the asset year by year till it is scraped. It is an expense (expense of using the asset for business purposes) and it is charged toRead more

    You must have knowledge of what depreciation is. Depreciation is the process of allocating the value of an asset over its useful life. It reduces the carrying value of the asset year by year till it is scraped.

    It is an expense (expense of using the asset for business purposes) and it is charged to profit and loss account.

    Depreciation can be reported in the financial statement in two ways:

    1. Deduct depreciation from the asset account and show the asset at “depreciation less” value. See the journal entries below:

    1. Maintain a provision for depreciation account and show the asset account at original cost. In this method, no entry is passed through the asset account. See the journal entries below:

     

    Provision for depreciation account represents the collection of total depreciation till date on an asset. That’s why it is also called accumulated depreciation account. When an asset is sold, its accumulated depreciation is credited to the asset account. See the journal entry below:

    It is shown on the liabilities side of the balance sheet. It is a nominal account because it is shown as an expense in the statement of profit or loss.

    In case provision for depreciation account is not maintained then the balance sheet looks like this:

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Aadil
AadilCurious
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    The term ‘contra’ means  'opposite'. Therefore, a contra revenue account is an account that is opposite of the revenue accounts of a business i.e. sales account. It has the opposite balance of the revenue account i.e. debit balance. The purpose of the contra revenue account is to ascertain the actuaRead more

    The term ‘contra’ means  ‘opposite’. Therefore, a contra revenue account is an account that is opposite of the revenue accounts of a business i.e. sales account. It has the opposite balance of the revenue account i.e. debit balance.

    The purpose of the contra revenue account is to ascertain the actual amount of sales and record the items which have reduced the sales.

    These are the contra revenue accounts commonly seen in businesses:

    • Sales return account: This account records the amount of goods sold returned by customers. The journal entry for recording sale return is as follow:

    The total sales return is deducted from the sales in the balance sheet. Though being opposite of the sales account, the sale return account is not an expense account. It is considered an indirect loss as it reduces sales.

    • Sale Discount account: This account records the amount of discount allowed to customers. The journal entry for recording sale discounts is as follows:

    Sales discount is an expense hence it is debited to the profit and loss account.

    Sales returns and sales discounts are shown in the trading and profit and loss account in the following manner:

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Radha
Radha
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  2. Vijay Curious M.Com
    This answer was edited.

    The difference between a ledger & a trial balance is as follows: Basis Ledger Trial Balance Meaning Ledger is a book/register in which all the accounts are put together. A Trial Balance is a statement showing the debit and credit balance of all the accounts to ascertain the arithmetical accuracyRead more

    The difference between a ledger & a trial balance is as follows:

    Basis Ledger Trial Balance
    Meaning Ledger is a book/register in which all the accounts are put together. A Trial Balance is a statement showing the debit and credit balance of all the accounts to ascertain the arithmetical accuracy of the books of accounts.
    Basis of preparation Journal is the basis for recording transactions in the ledger. The closing balances of different accounts in the ledger are the basis for preparing the trial balance.
    Objective It is prepared to see the net effect of various transactions affecting a particular account. It is prepared to check the arithmetical accuracy of the books of accounts.
    Format A ledger has four identical columns on the debit and credit sides: 1. Date, 2. Particulars, 3. Journal Folio, 4. Amount. A Trial Balance has five columns: 1. S.No, 2. Name of Accounts, 3. Ledger Folio, 4. Debit Balance, 5. Credit Balance.
    Stage of Recording A ledger is prepared after recording the transactions in the journal. A trial balance is prepared after posting the transactions in the ledger.
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Naina@123
Naina@123
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  2. Radha M.Com, NET
    This answer was edited.

    The rate of depreciation on a car as per the Income Tax Act depends upon the purpose for which it has been purchased and the year on which it was acquired. As per the Income Tax Act, cars come under the Plant and Machinery block of assets. The Act classifies cars into two categories, Group 1 - MotorRead more

    The rate of depreciation on a car as per the Income Tax Act depends upon the purpose for which it has been purchased and the year on which it was acquired.

    As per the Income Tax Act, cars come under the Plant and Machinery block of assets.

    The Act classifies cars into two categories,

    • Group 1 – Motor cars other than those used in the business of running them on hire.
    • Group 2 – Motor taxis used in the business of running them on hire.

     

    Group 1:

    1. If the motor car is acquired and put to use on or after 23rd August 2019 but before 1st April 2020, then the rate applicable is 30%.
    2. If the motor car is acquired and put to use on or after 1st April 1990, then the rate applicable is 15%. (All the cars which are not covered under the category (1) comes under this category.)

     

    Group 2:

    1. If the motor taxi is acquired and put to use on or after 23rd August 2019 but before 1st April 2020, then the rate applicable is 45%.
    2. The rate applicable for motor taxis not covered under category (1) is 30%.

     

    Here is a summarised version of the rates applicable to cars,

     

    The rates can also be found on the Income Tax India website.

     

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Aadil
AadilCurious
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  2. Karan B.com and Pursuing ACCA

    In accounting, sales returns are the goods returned by the customer to the seller. This can be due to goods delivered is damaged or defective. A return can also be due to late delivery, or the wrong items being sent to the buyer. Sales return is a subsidiary book in which all the details are recordeRead more

    In accounting, sales returns are the goods returned by the customer to the seller. This can be due to goods delivered is damaged or defective. A return can also be due to late delivery, or the wrong items being sent to the buyer.

    Sales return is a subsidiary book in which all the details are recorded for the goods returned which were sold on credit. It is also known as return inwards.

    Accounting for Sales Return

    Whenever there is a sale return, the seller will debit the sales return account and credit the debtor’s account. The total amount of sales returns is deducted from the gross sales for the period giving the figure for net sales. Debtor’s account is credited because the amount receivable from debtors will reduce.

    The sales return is a contra account to the sales.

    Format of sales return book:

    In the above format, a credit note is a statement prepared by the seller and sent to the buyer. In this statement, all the details are mentioned in respect of the goods sent by the buyer and are an indication that the buyer’s account is credited in respect of the goods received.

    For example, Mr. A sold goods to Mr. B costing Rs 50,000 on 1 December. On 5 December, goods amounting to Rs 15,000 were found defective and were returned immediately to Mr. A.

    Mr. A will account for this in the following way:

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