Capital Expenditure Revenue Expenditure Cash Expense Credit Expense
Return inwards in simple terms means sending back goods by the customer to the seller. Simply speaking when your customer purchases items from your business but is not satisfied with the items so received they return those items back to you. Some of the reasons for sending back the items are statedRead more
Return inwards in simple terms means sending back goods by the customer to the seller. Simply speaking when your customer purchases items from your business but is not satisfied with the items so received they return those items back to you. Some of the reasons for sending back the items are stated below:
- Incorrect items delivered by the seller
- The excess amount delivered to the buyer
- Return of expired/ spoiled good
In such a case, the return is initiated by the buyer and a credit note is issued to the buyer, and the same is recorded in the books of accounts. Also, this return inward is deducted from the total sales.
Example: M/s Pest ltd sold 4 units of fertilizers spraying tools of Rs 10,000 each to Mr. Zen. On inspection, he found 1 unit worth Rs 10,000 so received to be defective. Therefore the return of Rs 10,000 was initiated and goods were returned to the seller. A credit note of Rs 10,000 will be raised by the seller (M/s Pest ltd) to the buyer (Mr. Zen). The following adjustment will be shown in the trading account.
Return outwards means returning the goods by the buyer to the supplier. In layman language, when you purchase items for your business and you are not happy with the items then you may decide to return them.
In this case, a debit note is issued to the seller and is recorded in the books of accounts, and the same is reduced from the total purchases in the trading account so prepared.
Example: Suppose you are dealing in a business of clothing. You purchased 20 shirts for Rs.10,000 from a wholesale market. When you sold these shirts, you found 10 shirts worth Rs 5,000 to be defective which were returned by your customer. Therefore you will return these shirts to the wholesale market from where you purchased them. The following adjustment will be shown in the trading account.
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The correct answer is 2. Revenue Expenditure. An honorarium is a voluntary payment paid to a person for the services provided. It is a type of cost incurred for the expenses of guests and volunteers. This is a payment made to the person who is not an employee of the institution. Revenue expendituresRead more
The correct answer is 2. Revenue Expenditure. An honorarium is a voluntary payment paid to a person for the services provided. It is a type of cost incurred for the expenses of guests and volunteers. This is a payment made to the person who is not an employee of the institution.
Revenue expenditures are the short-term expenses and consumed within one accounting year and are also known as operating expenses.
Payment of honorarium to the secretary is treated as revenue expenditure because benefits from the expense are derived in the same accounting period. The honorarium is a type of outside expense and any outside expense is revenue in nature. It is a daily allowance incurred to cover the hotel/stay expense.
Payment of honorarium to the secretary is shown on the Expenditure side of the Income and Expenditure Account.
Capital Expenditure is the expense incurred on acquiring an asset and honorarium cannot be a capital expenditure as benefits derived from it cannot be carried forward to the next year.
It cannot be treated as cash or credit expense although it is paid in cash or credit. In this case, it will be treated as a revenue expense while preparing financial statements.
Payment of honorarium is mainly a topic of not-for-profit organizations.
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