The journal entry for the closing stock is passed at the year-end as closing stock is the inventory held by a business at the end of its accounting period. However, the entry for recording closing stock depends on how it is treated in the books of accounts. The two types of the accounting treatmentRead more
The journal entry for the closing stock is passed at the year-end as closing stock is the inventory held by a business at the end of its accounting period. However, the entry for recording closing stock depends on how it is treated in the books of accounts.
The two types of the accounting treatment of closing stock are as follows:
Closing stock is not shown in the Trial Balance.
Closing stock is shown in the Trial Balance.
Closing stock is not shown in the Trial Balance:
As per this treatment, the closing stock is not shown in the Trial Balance because it is already a part of the purchases of the business. Showing it in the Trial Balance would lead to a double effect. This will not give us accurate profit/loss at the end of the year.
The closing stock is transferred to Trading A/c by passing a closing entry.
Closing stock is an asset. It is debited because there is an increase in the assets. Trading A/c is credited because of the Matching concept as the value of the closing stock is adjusted against the cost of goods sold.
At the end of the year, it is shown on the Asset side of the Balance Sheet, under the head Current Assets and sub-head Inventory.
For example,
ABC Ltd. at the beginning of the year had an opening inventory of 20,000. During the year, purchases worth 5,000 were made and goods worth 10,000 were sold. At the end of the year, the value of the closing stock will be 15,000 (20,000 + 5,000 – 10,000).
Now the closing stock worth 15,000 will be recorded through this journal entry:
Closing Stock A/c
15,000
To Trading A/c
15,000
(Being closing stock worth 15,000 transferred to Trading A/c)
Closing stock is shown in the Trial Balance:
This scenario is possible only when the closing stock is adjusted against purchases. By adjusting against purchases, the double effect of showing both purchases and closing stock in Trial Balance is eliminated.
The following entry is recorded to adjust closing stock against purchases.
Closing Stock is debited as there is an increase in the asset. Purchase A/c is credited because of the Matching concept.
After recording the adjustment entry, the closing stock is shown on the debit column of the Trial Balance. It is not shown in the Trading A/c as it is already adjusted against purchases. In the Balance Sheet, it is shown as a Current Asset.
Here I have prepared the Income & Expenditure A/c and Balance Sheet of Bharti Club: Income & Expenditure A/c for the year ended 31st March 2019 Expenditure Amt Income Amt To Salary 25,000 By Subscriptions (WN 1) 69,900 To Travelling Expenses 4,000 By Donations Read more
Here I have prepared the Income & Expenditure A/c and Balance Sheet of Bharti Club:
Income & Expenditure A/c for the year ended 31st March 2019
Expenditure
Amt
Income
Amt
To Salary
25,000
By Subscriptions (WN 1)
69,900
To Travelling Expenses
4,000
By Donations
5,000
To Stationery
13,000
By Life Membership Fees
10,000
To Rent
32,000
By Income from Investments
2,000
To Surplus (Balancing figure)
12,900
86,900
86,900
Balance Sheet as on 31st March 2019
Liabilities
Amt
Assets
Amt
Capital Fund (WN 2)
44,900
Cash
30,000
Add: Surplus
12,900
57,800
9% Investments
25,000
Advance Subscription
3,500
Books
12,000
Life Membership Fees
10,000
Outstanding Subscription
4,300
71,300
71,300
Working Note 1: Calculation of Subscriptions
Particulars
Amt
Total subscriptions received in 2018-19
70,500
Add: Advance subscription for 2018-19
2,000
Subscription outstanding for 2018-19
4,300
6,300
76,800
Less: Advance subscription for 2019-20
(3,500)
Subscription outstanding for 2017-18
(3,400)
(6,900)
69,900
Working Note 2: Calculation of Capital Fund
We prepare the previous year’s balance sheet of Bharti Club to identify the capital.
To proceed with how to make a partnership deed, let me explain to you in short what is partnership deed? A partnership deed is the written agreement between the partners who have agreed to share profits of a business carried on by them. This basically contains terms and conditions to be followed betRead more
To proceed with how to make a partnership deed, let me explain to you in short what is partnership deed?
A partnership deed is the written agreement between the partners who have agreed to share profits of a business carried on by them. This basically contains terms and conditions to be followed between the partners.
Few contents of the partnership deed are as follows:
Name, address, and type of business of the partnership firm.
Name & address of all the partners
Profit-sharing ratio.
Rights, duties, and liabilities of all partners.
Date of commencement of the partnership
Method of settlement of dispute among the partners.
Treatment of loss in case of insolvency of one or more partners.
Generally, a partnership deed contains all those matters which can affect the relationship between the partners. However, if there is no such agreement the partnership should follow the provisions mentioned under The Partnership Act, 1932.
Now coming to the main question how to make a partnership deed? See the process is not so complicated. The partnership deed may be oral or written, but as the oral agreement has no value for obtaining tax benefits, a partnership firm always prefers a written agreement.
To prepare the same the partnership deed must be prepared on a stamp paper and signed by all the partners as per Indian Stamp Act and copies of the same should be with all the partners and also must be filed by the registrar of the firm.
A deed may vary depending on the nature of the partnership they are engaged in. Generally, partnerships are of three types
General partnership
Limited partnership
Limited liability partnership
the process of making deed is same for all but, the content of deed may vary depending on the liability of partners in the partnership.
Receipts and payment account is a summary of cash transactions prepared at the end of the accounting period from the cash book where the transactions are recorded in chronological order. It is an Asset/ Real Account that records both revenue and capital receipts and payments. It is mainly prepared fRead more
Receipts and payment account is a summary of cash transactions prepared at the end of the accounting period from the cash book where the transactions are recorded in chronological order. It is an Asset/ Real Account that records both revenue and capital receipts and payments. It is mainly prepared for non-profit organizations and helps in the preparation of final accounts.
Proforma
Income and Expenditure Account is an account prepared by not-for-profit organizations to see whether the income of a particular period is sufficient to cover the expenses of that period. If the revenue is more than the expenses, it is known as “Surplus” or “Excess of Income over Expenditure” and if the expenses are more than Income, it is known as “Deficit” or “Excess of Expenditure over Income”. The account is prepared on the accrual basis of accounting i.e. all revenue incomes whether received or not and all revenue expenditures of the period whether paid or not are taken into account. However, in case of surplus, the money is not distributed among the members. Similarly, if there is a deficit it is not borne by the members.
In the books of Youth Ltd. Income & Expenditure A/c for the year ended 31 March 2018 Expenditure Amt (₹) Income Amt (₹) To Salaries 31,500 By Subscription (W.N.1) 75,000 To Postage 1,250 By Entrance fees 1,100 To Rent 9,000 By Sale of old magazines 450 To Printing and Stationery 14,000 By IntereRead more
In the books of Youth Ltd.
Income & Expenditure A/c for the year ended 31 March 2018
Expenditure
Amt (₹)
Income
Amt (₹)
To Salaries
31,500
By Subscription (W.N.1)
75,000
To Postage
1,250
By Entrance fees
1,100
To Rent
9,000
By Sale of old magazines
450
To Printing and Stationery
14,000
By Interest on investment (W.N.3)
3,500
To Sports material consumed (W.N.2)
10,000
To Miscellaneous expenses
3,100
To Depreciation on furniture (W.N.4)
1,000
To Surplus
10,200
80,050
80,050
Working Notes:
1. Calculation of Subscription:
Subscription for the year
60,000
Add: Outstanding subscription
16,200
Less: Subscription in arrears
(1,200)
75,000
2. Calculation of sports material consumed:
Opening stock of Sports Material
3,000
Add: Purchased during the year
11,500
Less: Closing stock of Sports material
(4,500)
10,000
3. Calculation of Interest on investment:
Investment as on 1.10.2017 = 70,000
The investment will be calculated for 6 months i.e starting from 1.10.2017 to 31.3.2018
For 6 months
= 70,000 * 10% * 6/12
= 3,500
4. Calculation of Depreciation on furniture:
Furniture as on 1.10.2017 = 20,000
Depreciation on the furniture will be calculated for 6 months i.e starting from 1.10.2017 to 31.3.2018
Buildings S.No. Particulars Rate 1 Buildings which are used mainly for residential purposes except hotels and boarding houses. 5% 2 Buildings other than those used mainly for residential purposes and not covered by sub-items (1) above and (3) below. 10% 3 Buildings acquired on or after the 1st day oRead more
Buildings
S.No.
Particulars
Rate
1
Buildings which are used mainly for residential purposes except hotels and boarding houses.
5%
2
Buildings other than those used mainly for residential purposes and not covered by sub-items (1) above and (3) below.
10%
3
Buildings acquired on or after the 1st day of September, 2002 for installing machinery and plant forming part of water supply project or water treatment system and which is put to use for the purpose of business of providing infra- structure facilities.
40%
4
Purely temporary erections such as wooden structures.
40%
Furniture & Fittings
S.No.
Particulars
Rate
Furniture and fittings including electrical fittings.
10%
Machinery & Plant
S.No.
Particulars
Rate
1
Machinery and plant other than those covered by sub-items (2), (3) and (8) below.
15%
2 (i)
Motor cars, other than those used in a business of running them on hire, acquired or put to use on or after the 1st day of April, 1990 except those covered under entry (ii).
15%
2 (ii)
Motor cars, other than those used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020.
30%
3 (i)
Aeroplanes – Aero engines.
40%
3 (ii)
(a) Motor buses, motor lorries and motor taxis used in a business of running them on hire other than those covered under entry (b).
30%
(b) Motor buses, motor lorries and motor taxis used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020.
45%
3 (iii)
Commercial vehicle which is acquired by the assessee on or after the 1st day of October, 1998, but before the 1st day of April, 1999 and is put to use for any period before the 1st day of April, 1999 for the purposes of business or profession.
40%
3 (iv)
New commercial vehicle which is acquired on or after the 1st October, 1998, but before the 1st April, 1999 in replacement of condemned vehicle of over 15 years of age and is put to use for any period before the 1st day of April, 1999 for the purposes of business or profession.
40%
3 (v)
New commercial vehicle which is acquired on or after the 1st April, 1999 but before the 1st April, 2000 in replacement of condemned vehicle of over 15 years of age and is put to use before the 1st April, 2000 for the purposes of business or profession.
40%
3 (vi)
New commercial vehicle which is acquired on or after the 1st April, 2001 but before the 1st April, 2002 and is put to use before the 1st day of April, 2002 for the purposes of business or profession.
40%
3 (via)
New commercial vehicle which is acquired on or after the 1st January, 2009 but before the 1st October, 2009 and is put to use before the 1st October, 2009 for the purposes of business or profession.
40%
3 (vii)
Moulds used in rubber and plastic goods factories.
30%
3 (viii)
Air pollution control equipment.
40%
3 (ix)
Water pollution control equipment.
40%
3 (x)
Solid waste control equipments & solid waste recycling and resource recovery systems.
40%
3 (xi)
Machinery and plant, used in semi-conductor industry covering all integrated circuits (ICs).
30%
3 (xia)
Life saving medical equipment.
40%
4
Containers made of glass or plastic used as re-fills.
40%
5
Computers including computer software.
40%
6
Machinery and plant, used in weaving, processing and garment sector of textile industry, which is purchased & put to use under TUFS on or after the 1st April, 2001 but before the 1st April, 2004.
40%
7
Machinery and plant, acquired and installed on or after the 1st September, 2002 in a water supply project or a water treatment system and which is put to use for the purpose of business of providing infrastructure facility.
40%
8 (i)
Wooden parts used in artificial silk manufacturing machinery.
40%
8 (ii)
Cinematograph films – bulbs of studio lights.
40%
8 (iii)
Match factories – Wooden match frames.
40%
8 (iv)
Mines and quarries.
40%
8 (v)
Salt works – Salt pans, reservoirs and condensers, etc., made of earthy, sandy or clayey material or any other similar material.
40%
8 (vi)
Flour mills – Rollers.
40%
8 (vii)
Iron and steel industry – Rolling mill rolls.
40%
8 (viii)
Sugar works – Rollers.
40%
8 (ix)
Energy saving devices: (a) Specialised boilers and furnaces.
40%
(b) Instrumentation and monitoring system for monitoring energy flows.
40%
(c) Waste heat recovery equipment.
40%
(d) Co-generation systems.
40%
(e) Electrical equipment.
40%
(f) Burners.
40%
(g) Other equipment.
40%
8 (x)
Gas cylinders including valves and regulators.
40%
8 (xi)
Glass manufacturing concerns – Direct fire glass melting furnaces.
40%
8 (xii)
Mineral oil concerns: (a) Plant used in field operations (above ground) distribution – Returnable packages.
40%
(b) Plant used in field operations (below ground), but not including kerbside pumps including underground tanks and fittings used in field operations (distribution) by mineral oil concerns.
40%
(c) Oil wells not covered in clauses (a) and (b).
15%
8 (ix)
Renewal energy devices.
40%
9 (i)
Books owned by assessees carrying on a profession.
40%
9 (ii)
Books owned by assessees carrying on business in running lending libraries.
40%
Ships
S.No.
Particulars
Rate
1
Ocean-going ships including dredgers, tugs, barges, survey launches and other similar ships used mainly for dredging purposes and fishing vessels with wooden hull.
20%
2
Vessels ordinarily operating on inland waters, not covered by sub-item (3) below.
20%
3
Vessels ordinarily operating on inland waters being speed boats.
20%
Intangible Assets
S.No.
Particulars
Rate
1
Know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature not being goodwill of business of profession.
To start with let me first explain the difference between receipts and income & payment and expenditure. Although Receipts and Income may look similar terms, there are some differences. Receipts have their relation with both cash and cheques received on account of various items of the organizatiRead more
To start with let me first explain the difference between receipts and income & payment and expenditure.
Although Receipts and Income may look similar terms, there are some differences.
Receipts have their relation with both cash and cheques received on account of various items of the organization. Whereas, income is considered as a revenue item for finding surplus or deficit of the organization. All the receipts collected during the year may not be considered as income.
For Example, if an organization sale of its assets that is of a capital nature, it would not be considered as an item of income and hence would be treated in the balance sheet.
Similarly, Payment and Expenditure are two different terms. Payments are those that have their relation with cash and cheques given for various activities of the organization. Whereas, Expenditure is considered as revenue expenditure for ascertainment of surplus or deficit in the case of a not-for-profit organization. All payments made during the year may not be considered as expenditures.
What is the Journal Entry for Closing Stock?
The journal entry for the closing stock is passed at the year-end as closing stock is the inventory held by a business at the end of its accounting period. However, the entry for recording closing stock depends on how it is treated in the books of accounts. The two types of the accounting treatmentRead more
The journal entry for the closing stock is passed at the year-end as closing stock is the inventory held by a business at the end of its accounting period. However, the entry for recording closing stock depends on how it is treated in the books of accounts.
The two types of the accounting treatment of closing stock are as follows:
Closing stock is not shown in the Trial Balance:
As per this treatment, the closing stock is not shown in the Trial Balance because it is already a part of the purchases of the business. Showing it in the Trial Balance would lead to a double effect. This will not give us accurate profit/loss at the end of the year.
The closing stock is transferred to Trading A/c by passing a closing entry.
Closing stock is an asset. It is debited because there is an increase in the assets. Trading A/c is credited because of the Matching concept as the value of the closing stock is adjusted against the cost of goods sold.
At the end of the year, it is shown on the Asset side of the Balance Sheet, under the head Current Assets and sub-head Inventory.
For example,
ABC Ltd. at the beginning of the year had an opening inventory of 20,000. During the year, purchases worth 5,000 were made and goods worth 10,000 were sold. At the end of the year, the value of the closing stock will be 15,000 (20,000 + 5,000 – 10,000).
Now the closing stock worth 15,000 will be recorded through this journal entry:
Closing stock is shown in the Trial Balance:
This scenario is possible only when the closing stock is adjusted against purchases. By adjusting against purchases, the double effect of showing both purchases and closing stock in Trial Balance is eliminated.
The following entry is recorded to adjust closing stock against purchases.
Closing Stock is debited as there is an increase in the asset. Purchase A/c is credited because of the Matching concept.
After recording the adjustment entry, the closing stock is shown on the debit column of the Trial Balance. It is not shown in the Trading A/c as it is already adjusted against purchases. In the Balance Sheet, it is shown as a Current Asset.
See lessFollowing is the Receipts and Payments Account of Bharti Club for the year ended 31st March 2019?
Here I have prepared the Income & Expenditure A/c and Balance Sheet of Bharti Club: Income & Expenditure A/c for the year ended 31st March 2019 Expenditure Amt Income Amt To Salary 25,000 By Subscriptions (WN 1) 69,900 To Travelling Expenses 4,000 By Donations Read more
Here I have prepared the Income & Expenditure A/c and Balance Sheet of Bharti Club:
Income & Expenditure A/c for the year ended 31st March 2019
Balance Sheet as on 31st March 2019
Working Note 1: Calculation of Subscriptions
Working Note 2: Calculation of Capital Fund
We prepare the previous year’s balance sheet of Bharti Club to identify the capital.
Balance Sheet as on 31st March 2018
How to make a partnership deed?
To proceed with how to make a partnership deed, let me explain to you in short what is partnership deed? A partnership deed is the written agreement between the partners who have agreed to share profits of a business carried on by them. This basically contains terms and conditions to be followed betRead more
To proceed with how to make a partnership deed, let me explain to you in short what is partnership deed?
A partnership deed is the written agreement between the partners who have agreed to share profits of a business carried on by them. This basically contains terms and conditions to be followed between the partners.
Few contents of the partnership deed are as follows:
Generally, a partnership deed contains all those matters which can affect the relationship between the partners. However, if there is no such agreement the partnership should follow the provisions mentioned under The Partnership Act, 1932.
Now coming to the main question how to make a partnership deed? See the process is not so complicated. The partnership deed may be oral or written, but as the oral agreement has no value for obtaining tax benefits, a partnership firm always prefers a written agreement.
To prepare the same the partnership deed must be prepared on a stamp paper and signed by all the partners as per Indian Stamp Act and copies of the same should be with all the partners and also must be filed by the registrar of the firm.
A deed may vary depending on the nature of the partnership they are engaged in. Generally, partnerships are of three types
the process of making deed is same for all but, the content of deed may vary depending on the liability of partners in the partnership.
Further to know more about the registration process of partnership firm you can refer the following link https://www.mca.gov.in/Ministry/actsbills/pdf/Partnership_Act_1932.pdf
See lessWhat is receipts and payments account and income and expenditure account format?
Receipts and payment account is a summary of cash transactions prepared at the end of the accounting period from the cash book where the transactions are recorded in chronological order. It is an Asset/ Real Account that records both revenue and capital receipts and payments. It is mainly prepared fRead more
Receipts and payment account is a summary of cash transactions prepared at the end of the accounting period from the cash book where the transactions are recorded in chronological order. It is an Asset/ Real Account that records both revenue and capital receipts and payments. It is mainly prepared for non-profit organizations and helps in the preparation of final accounts.
Proforma
Income and Expenditure Account is an account prepared by not-for-profit organizations to see whether the income of a particular period is sufficient to cover the expenses of that period. If the revenue is more than the expenses, it is known as “Surplus” or “Excess of Income over Expenditure” and if the expenses are more than Income, it is known as “Deficit” or “Excess of Expenditure over Income”. The account is prepared on the accrual basis of accounting i.e. all revenue incomes whether received or not and all revenue expenditures of the period whether paid or not are taken into account. However, in case of surplus, the money is not distributed among the members. Similarly, if there is a deficit it is not borne by the members.
Proforma
See lessPrepare Income and Expenditure Account of Youth Club from the following particulars for the year ended on 31st March 2018?
In the books of Youth Ltd. Income & Expenditure A/c for the year ended 31 March 2018 Expenditure Amt (₹) Income Amt (₹) To Salaries 31,500 By Subscription (W.N.1) 75,000 To Postage 1,250 By Entrance fees 1,100 To Rent 9,000 By Sale of old magazines 450 To Printing and Stationery 14,000 By IntereRead more
In the books of Youth Ltd.
Income & Expenditure A/c for the year ended 31 March 2018
Working Notes:
See lessWhat are the income tax depreciation rates for ay 2020-21?
Buildings S.No. Particulars Rate 1 Buildings which are used mainly for residential purposes except hotels and boarding houses. 5% 2 Buildings other than those used mainly for residential purposes and not covered by sub-items (1) above and (3) below. 10% 3 Buildings acquired on or after the 1st day oRead more
See lessWhat is the difference between receipts and payments account and income and expenditure account?
To start with let me first explain the difference between receipts and income & payment and expenditure. Although Receipts and Income may look similar terms, there are some differences. Receipts have their relation with both cash and cheques received on account of various items of the organizatiRead more
To start with let me first explain the difference between receipts and income & payment and expenditure.
Although Receipts and Income may look similar terms, there are some differences.
Receipts have their relation with both cash and cheques received on account of various items of the organization. Whereas, income is considered as a revenue item for finding surplus or deficit of the organization. All the receipts collected during the year may not be considered as income.
For Example, if an organization sale of its assets that is of a capital nature, it would not be considered as an item of income and hence would be treated in the balance sheet.
Similarly, Payment and Expenditure are two different terms. Payments are those that have their relation with cash and cheques given for various activities of the organization. Whereas, Expenditure is considered as revenue expenditure for ascertainment of surplus or deficit in the case of a not-for-profit organization. All payments made during the year may not be considered as expenditures.
Differences
See less