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A_Team
A_Team
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Receipts and Payments A/C for the year ended 31st March 2020 Receipts Amt Payments Amt To Balance b/d  (Cash)        180,000 By Salary        480,000 To Subscriptions        900,000 By Rent           50,000 To Sale of Investments        200,000 By Stationery           20,000 To Sale ...

  2. Radha M.Com, NET
    This answer was edited.

    Here I've prepared the Income & Expenditure A/c. Income & Expenditure A/c for the year ended 31st March 2021 Expenditure Amt Income Amt To Salary      4,80,000 By Subscriptions      9,00,000 To Rent          50,000 By Donations          10,000 To Stationery          20,000 To Loss on sale ofRead more

    Here I’ve prepared the Income & Expenditure A/c.

    Income & Expenditure A/c for the year ended 31st March 2021

    Expenditure Amt Income Amt
    To Salary      4,80,000 By Subscriptions      9,00,000
    To Rent          50,000 By Donations          10,000
    To Stationery          20,000
    To Loss on sale of furniture (WN)          10,000
    To Surplus      3,50,000
         9,10,000      9,10,000

     

    Working Note: Calculation of Loss on sale of furniture

    The following calculation is made to identify the loss incurred on the sale of furniture.

    Particulars Amt
    Book Value of Furniture        40,000
    Less: Sale Value of Furniture        30,000
    Loss on Sale of Furniture        10,000

     

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A_Team
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  2. Vijay Curious M.Com

    Cash Book is called a journalized ledger because it is considered to be both a journal as well as a ledger. As you know Cash Book is a subsidiary book. But like a journal, the transactions in the Cash Book are recorded in it for the first time from the source documents/vouchers. Hence it is considerRead more

    Cash Book is called a journalized ledger because it is considered to be both a journal as well as a ledger.

    As you know Cash Book is a subsidiary book. But like a journal, the transactions in the Cash Book are recorded in it for the first time from the source documents/vouchers. Hence it is considered to be a journal for all cash transactions.

    Cash Book can also be viewed as a Cash A/c because all transactions involving cash are recorded in it. It provides a summary of cash transactions. Hence it is considered to be a ledger account for cash transactions.

    Since Cash Book is both a journal and ledger, you can very well call it a ‘journalized ledger’.

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Astha
AsthaLeader
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  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    Personal Accounts: The accounts of persons, firms, companies, etc. are personal accounts. There is a further classification to personal accounts- Accounts of Natural Persons: The transactions relating to individual human beings fall under this category. For Example, accounts of Joseph, Richard, MorrRead more

    Personal Accounts: The accounts of persons, firms, companies, etc. are personal accounts. There is a further classification to personal accounts-

    • Accounts of Natural Persons: The transactions relating to individual human beings fall under this category. For Example, accounts of Joseph, Richard, Morris, etc.
    • Accounts of Artificial Persons: The transactions relating to firms, organizations, companies, institutions, associations, etc. fall under this category. For Example, Oil India Ltd, Symbiosis college, Assam Tea company, etc.
    • Representative Personal Accounts: The transactions relating to certain person or a group of persons, although the name of the concerned person or persons are not mentioned in the account head, such types of accounts come under this head. Such type of accounts generally include outstanding accounts or prepaid accounts. For Example, accounts like wages outstanding, outstanding salary, commission received in advance, salary prepaid, etc.

    Note: When any Prefix or Suffix is used before/ after any nominal account head, such account is classified as Representative personal account under traditional approach.

    For Example, Salary A/c is a nominal account whereas salary outstanding A/c is a personal account as the word outstanding is being used as a prefix to Salary A/c.

    The Accounting rule for Personal Account is –

    Debit the Receiver of the benefit.

    Credit the Giver of the benefit.

    Real Account: The transactions relating to tangible things i.e. the things that can be seen, touched and physically exchanged and the intangible things that cannot be seen, touched but the presence can be felt comes under this category. For Example, tangible things like Cash, goods, building, machinery, etc. and intangible things like goodwill, patent, trademarks, etc.

    The Accounting rule for Real Account is –

    Debit what comes in.

    Credit what goes out.

    Nominal Accounts: The transactions relating to losses, expenses, incomes and gains comes under this category. For Example, Rent paid, wages paid, commission received, interest paid/ received, etc.

    The Accounting rule for Nominal Account is –

    Debit Expenses and Losses.

    Credit Gains and Incomes.

    Some Common Examples under the three heads are

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Naina@123
Naina@123
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  2. prashant06 B.com, CMA pursuing

    A cash discount is a discount allowed to customers when they make payments for the items they purchased. This type of discount is generally based on time. The early the payment is made by the debtors, the more discount they earn. To be more precise cash discount is given to simulate or encourage earRead more

    A cash discount is a discount allowed to customers when they make payments for the items they purchased. This type of discount is generally based on time. The early the payment is made by the debtors, the more discount they earn. To be more precise cash discount is given to simulate or encourage early payment by the debtors.

    Trade discount is a discount allowed by traders on the list price of the goods to the customer at specified rate. Unlike cash discount, trade discount is based on number of sale i.e, more the sale more the discount earned. This is mainly given on bulk orders by the customers.

    To understand trade discount and cash discount let me give you simple example

    Mr. X purchased goods from Mr. Y of list price Rs 10,000. Mr. Y allowed a 10% discount to Mr.X on the list price for purchasing goods in bulk quantity. Further, he was provided with cash discount of Rs 500 for making an immediate payment. Therefore the entry for the above transaction in the books of Mr. X would be

    Purchase A/c                                                        ……Dr 9,000
               To Cash A/c 8,500
               To Discount received 500
    (Being goods purchased from Mr. Y worth Rs. 10,000@ 10% trade discount and cash discount of Rs. 500)
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Manvi
Manvi
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  2. Karan B.com and Pursuing ACCA
    This answer was edited.

    Discount received is the reduction in the price of the goods and services which is received by the buyer from the seller. It is an income for the buyer and is credited to the discount received account and credited to the seller/supplier’s account. Journal entry for discount received as per modern ruRead more

    Discount received is the reduction in the price of the goods and services which is received by the buyer from the seller. It is an income for the buyer and is credited to the discount received account and credited to the seller/supplier’s account.

    Journal entry for discount received as per modern rules:

    Creditor’s A/c Debit Decrease in liability
            To Cash A/c Credit Decrease in asset
            To Discount Received A/c Credit Increase in income
    (Being goods purchased and discount received)

    Discount allowed is the reduction in the price of the goods which is granted by the seller to the buyer on prompt payment of their account. It is an expense for the seller and is debited to the discount allowed account and credited to the buyer’s account.

    Journal entry for discount allowed as per modern rules:

    Cash A/c Debit Increase in asset
    Discount Allowed A/c Debit Increase in expense
        To Debtor’s A/c Credit Decrease in asset
    (Being goods sold and discount allowed)

    For example, A Ltd. offers a 10% discount to the customers who settle their debts within two weeks. Mr.B a customer purchased goods worth Rs.20,000.

    According to modern rules, A Ltd will record this sale as:

    Particulars Amt Amt
    Cash A/c                                    Dr. 8,000
    Discount Allowed A/c             Dr. 2,000
                To Mr.B’s A/c 10,000

     

    Mr.B will record this purchase as:

    Particulars Amt Amt
    A Ltd A/c                                    Dr. 10,000
       To Cash A/c 8,000
       To Discount Received A/c 2,000

    For a business, the discount received is an income, and the discount allowed is an expense. In the above example, A Ltd has granted a discount and B is the receiver of the discount. Hence, for A Ltd discount allowed is an expense and for B discount received is an income.

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Vijay
VijayCurious
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  2. Radha M.Com, NET
    This answer was edited.

    Outstanding expenses are those expenses that have been incurred during the accounting period but are yet to be paid. Basically, any expense which has become due for payment but is not paid will be called an outstanding expense. Outstanding expenses are treated as a liability as the business is yet tRead more

    Outstanding expenses are those expenses that have been incurred during the accounting period but are yet to be paid. Basically, any expense which has become due for payment but is not paid will be called an outstanding expense.

    Outstanding expenses are treated as a liability as the business is yet to make payment against them. Examples of outstanding expenses include outstanding rent, salary, wages, etc.

    At the end of the accounting year, outstanding expenses have to be accounted for in the book of accounts so that the financial statements reflect the accurate profit/loss of the business.

    Journal entry for recording outstanding expenses:

    Expense A/c Debit
       To Outstanding Expenses A/c Credit
    (Being expenses outstanding at the end of the year)

    The concerned expense A/c is debited as there is an increase in expenses. Outstanding expenses are a liability, hence they are credited.

    Let me give you a simple example,

    Max, a sole proprietor pays 1,00,000 as salary for his employees at the end of every month. Due to the Covid-19 lockdown, he could not pay his employees’ salaries for March month. So the salary for March (1,00,000) will be treated as an outstanding expense. The following entry is made to record outstanding salaries for the year.

    Salary A/c   1,00,000
       To Outstanding Salaries A/c   1,00,000
    (Being salaries outstanding at the end of the year)

    At the end of the year, outstanding salary will be adjusted in the P&L A/c and it will be shown as a Current Liability in the Balance Sheet.

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Radha
Radha
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  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    The journal entry for asset purchase is- Particulars Amount Amount Asset A/c                                                             Dr $$$      To  Bank A/c $$$ According to the Modern Approach for Assets Account: When there is an increase in the Asset, it is ‘Debited’. When there is a decreaseRead more

    The journal entry for asset purchase is-

    Particulars Amount Amount
    Asset A/c                                                             Dr $$$
         To  Bank A/c $$$

    According to the Modern Approach for Assets Account:

    • When there is an increase in the Asset, it is ‘Debited’.
    • When there is a decrease in the Asset, it is ‘Credited’.

     

    So the journal entry here is about the purchase of an asset and since there is an increase in Asset, the assets account will be debited as per the modern rule and due to the decrease of cash in the bank account, it will be credited.

    For Example, Richard purchased furniture worth Rs 6,000 for his business.

    I will try to explain it with the help of steps.

    Step 1: To identify the account heads.

    In this transaction, two accounts are involved, i.e. Furniture A/c and Bank A/c as Richard has acquired the furniture paying a certain amount.

    Step 2: To Classify the account heads.

    According to the modern approach: Furniture A/c is an Asset account and Bank A/c is also an Asset account.

    According to the traditional approach: Furniture A/c is a Real account and Bank A/c is also a Real account.

    Step 3: Application of Rules for Debit and Credit:

    According to the modern approach: As asset increases because Furniture has been bought, ‘Furniture A/c’ will be debited. (Rule – increase in Asset is debited).

    Bank account is also an Asset account. As the asset is in the form of cash decreases because the amount has been paid by cash or cheque, Bank account will be credited. (Rule – decrease in Asset is credited).

    According to the traditional approach: Furniture A/c is a Real account and Bank is also a Real account, for which the rule to be applied is ‘Debit what comes in and Credit what goes out’. Furniture being asset comes in the business, so Furniture A/c will be debited and as cash goes out Bank A/c will be credited.

    So from the above explanation, the Journal Entry will be-

    Particulars Amount Amount
    Furniture A/c                                                      Dr 6,000
         To  Bank A/c 6,000

     

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