AccountingQA Latest Questions

Simerpreet
SimerpreetHelpful
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A) No entries made at all in the general ledger for items paid by petty cash B) The same number of entries in the general ledger. C) Fewer entries made in the ...

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

    The correct option is D) Fewer entries in the general ledger To understand why option D is correct, we need to understand the concept. Petty cashbook is a special cashbook prepared for recording petty or small cash expenses. The benefit is that the chief cashier can focus on large cash and bank tranRead more

    The correct option is D) Fewer entries in the general ledger

    To understand why option D is correct, we need to understand the concept.

    • Petty cashbook is a special cashbook prepared for recording petty or small cash expenses.
    • The benefit is that the chief cashier can focus on large cash and bank transactions and there are fewer transactions in the main cashbook.
    • The petty cashier is provided with a fixed amount for a month or week and is reimbursed the amount spent at the end of the period after he sends the details of expenses to the chief cashier.
    • There are entries for the transfer of cash to the petty cashier in the main cashbook only.

    Option A ‘No entries made at all in the general ledger for items paid by petty cash ‘ is wrong. It is not possible to omit entries of petty expense just because there is a petty cashbook. There will be entries related to:

    • The cash is given to the petty cashier in a fixed amount or the amount spent as petty expenses during the month or week.

    Petty cash A/c  Dr.        Amt

        To Cash A/c                   Amt

     Option (B) ‘The same number of entries in the general ledger is wrong because there can never be the same number of entries as all the petty expenses are recorded in the petty cashbook and only the entries for transfer of cash to the petty cashier is recorded in the main cash book.

    Option D ‘More entries made in the general ledger​’ is wrong because the number of entries actually reduce as only petty cash transfer entries are recorded in the main cashbook instead of numerous entries of petty cash transactions.

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

    AS-11: The effects of changes in foreign exchange rates deal with the issues in the translation of foreign currency transactions and foreign operations. Foreign operations of a reporting enterprise mean its subsidiary, associate, joint venture or branch which is based or conducted in a country otherRead more

    AS-11: The effects of changes in foreign exchange rates deal with the issues in the translation of foreign currency transactions and foreign operations.

    Foreign operations of a reporting enterprise mean its subsidiary, associate, joint venture or branch which is based or conducted in a country other than the country of the reporting entity

    For simple understanding let’s consider foreign operation as a branch of a business that is based in a foreign country.

    Foreign Integral operations

    So, integral foreign operations will be a dependent branch that works on the directions of the head office and it is like an extension of the business. The head office consigns goods to it and it sells them and remits cash and reports to the head office.

    It is dependent on head office for receiving goods to sell and to cover its expenses.

    Further, the difference in foreign exchange rate affects the present and future cash flows to the head office.

    Foreign Non-Integral operations

    A non-integral foreign operation will be like an independent branch that can operate without the aid of the head office. Apart from selling goods of the head office, it also buys goods from the local market and sells them.

    Also, it covers its expenses on its own. It doesn’t remit the cash from sales regularly like a dependent branch. It is like acts an investment of the main business.

    The difference in the foreign exchange rate has little or no effect on the present or future cash flows of the head office

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Jayesh Gupta
Jayesh GuptaCurious
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  2. Spriha Sparsh
    This answer was edited.

    Liabilities are obligations which a business owes to external or internal parties.As per the accounting equation liabilities are equal to the difference between assets and capital. Total Outside Liabilities  in relation to the Borrower can be all secured and unsecured loans, including current liabilRead more

    Liabilities are obligations which a business owes to external or internal parties.As per the accounting equation liabilities are equal to the difference between assets and capital.

    Total Outside Liabilities  in relation to the Borrower can be all secured and unsecured loans, including current liabilities of the Borrower.

    External Liability or outside liability is an obligation which a business has to pay back to external parties i.e. lenders, vendors, government, etc. Payable to Sundry creditors for the supply of any goods for the business or payable to any contractors for receiving any services or payable to the Govt. or other departments for any statutory payments like taxes or other levies. All these liabilities are known as an external liability to the business and are shown on the liability side of the Balance sheet after charging into the profit & loss account of that period.

    Where, Internal Liability – All obligations which a business has to pay back to internal parties such as promoters, employees, etc. are termed as internal liabilities. Example – Capital, Salaries, Accumulated profits, etc.

    Example – Borrowings, Creditors, Taxes, etc.

    Where, 1) Person A takes a loan from person B (person not associated with the company), person B is an external liability to person A.
    2) Person A has a tax liability of Rs.1000, here the government is an external liability to whom A has to pay the liability amount.

    3) Person A got goods on credit from person C for 60 days, C is an external liability to A, which A has to pay within the time period.

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Bonnie
BonnieCurious
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  2. Ishika Pandey Curious ca aspirant
    This answer was edited.

    What is net credit sales? Net credit sales are those revenues by a business entity, less all sales returns and allowances. Immediate payment in cash is not included in net credit sales. Formula  The formula for net credit sales is as follows: Net credit sales  = Sales on credit - Sales returns - SalRead more

    What is net credit sales?

    Net credit sales are those revenues by a business entity, less all sales returns and allowances. Immediate payment in cash is not included in net credit sales.

    Formula

     The formula for net credit sales is as follows:

    Net credit sales  = Sales on credit – Sales returns – Sales allowances

    In the balance sheet, you can find credit sales in the “short-term assets “section. It can be calculated from account receivables, bills receivables, and debtors of the balance sheet.

    Credit sales = closing debtors + receipts – opening debtors

    Steps to calculate net credit sales

    • Calculate total sales for the period
    • Subtract the Sales Returns
    • Subtract the Sales Allowances
    • Subtract the Cash Sales ( if any )

     

    Terms relevant to understand before calculation

    Sales return:  A sales return is when a customer or client returns or sends a product back to the seller. And this can happen due to various reasons, including:

    • Excess quantity ordered
    • Not upto Customer expectations
    • Shipping delays ( product arrived late )
    • Accidentally ordered an item and there can be more such reasons.

    Sales allowance: A sales allowance is a discount that a seller offers a buyer as an alternative to the buyer for returning the product.

    Because of a problem or issue with the buyer’s order or we can say that he is not satisfied with the product.

    Cash sales: Cash sales are sales in which the payment is done at once or I can say that buyer has obligation to make payment to the seller.

    Cash sales are considered to include bills, checks, credit cards, and money orders as forms of payment.

    Example

    Now after understanding the terms used in the formula let me explain to you with an example which is as follows:-

      • First, we will calculate the Total Sales for the Period:- In the month of May, Flipkart company had cash sales of Rs 80,000. The total amount in Accounts Receivables is Rs 150,000, with Rs 30,000 as the carryover from April’s receivables.
      • Since you only want to know about credit sales in the current period (September), you subtract Rs 30,000 from the total. This means that for the month of September, Flipcart Company had sales totaling Rs 200,000 (80,000 + 120,000).

     

      • Second, we will subtract the Sales Returns:- During the month of September, Flipcart Company issued Rs 20,000 in refunds, because several items were damaged during shipment, so the customer could not use them.
      • This amount would reduce the total number of cash sales if the accounts receivable balance was from a credit customer. This reduces the total sales to Rs 180,000 (Rs 200,000 in total sales – Rs 20,000 in returns).

     

      • Thirdly we will subtract the Sales Allowances:- Sales allowances are discounts offered to customers for not asking for full refunds.
      • For example, an item that had been shipped to a customer was the wrong size, but the customer told that he will agree to keep the item if the price could be adjusted. Flipcart Company issued Rs 10,000 in allowances in May.
      • After this deduction, the total sales for May are Rs 170,000 (Rs 180,000 – Rs 10,000).

     

      • Then at last there are any cash sales then subtract:- After figuring out the total number of sales for September and then subtracting the sales returns and allowances, the cash sales are deducted since you are focusing on net credit sales for the period.
      • After deducting the Rs 60,000 in cash sales, Flipcart Company has Rs 110,000 as net credit sales.

     

    Why do we need net credit sales?

    • Net Credit sales help to calculate the accounts receivable turnover ratio.

     

    • Net credit sales also indicate the amount of credit you offer to your customer.

     

    •  Net credit sale is also used to calculate other financial analysis items like days sales outstanding.
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A_Team
A_Team
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  2. Ayushi Curious Pursuing CA

    In trial balance, the treatment of the general reserve is that it is presented on the credit side. A trial balance is a statement prepared to check the arithmetical accuracy of the books of accounts. It features the closing balances of all the assets, liabilities and equity of a business. General reRead more

    In trial balance, the treatment of the general reserve is that it is presented on the credit side.

    A trial balance is a statement prepared to check the arithmetical accuracy of the books of accounts. It features the closing balances of all the assets, liabilities and equity of a business.

    General reserve is a free reserve created out of revenue profits of a business to meet future needs and uncertainties. By free reserve, we mean dividends can be freely declared and distributed out of it.

    Since the general reserve is an internal liability i.e. liability to the owner or owners or the business, it has a credit balance and is hence shown on the credit side of the trial balance.

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Nistha
Nistha
In: >

Debit Balance
  2. Pooja_Parikh Aspiring Chartered Accountant
    This answer was edited.

    A Profit and Loss (P&L) statement is a financial statement that records a summary of all expenses and incomes of a business during a period of time. It helps in determining the financial performance of the business. After recording all transactions in an account, if the debit side is greater thaRead more

    A Profit and Loss (P&L) statement is a financial statement that records a summary of all expenses and incomes of a business during a period of time. It helps in determining the financial performance of the business.

    After recording all transactions in an account, if the debit side is greater than the credit side, then the account is said to have a debit balance. Similarly, if the credit side is greater than the debit side, then the account has a credit balance.

    In a P&L account, when the expenses (debit) are greater than the incomes (credit), the business is said to be in a net loss. This loss is what we call the debit balance of a Profit and Loss account. A P&L account with a debit balance can be subtracted from Capital or be shown on the asset side of the Balance Sheet.

    As you can see above, the net loss is shown on the right side of the P&L account. This represents the debit balance of P&L. Once it is transferred to the balance sheet, it is either subtracted from capital or shown on the asset side as shown in the second image. However, they cannot be shown on both sides of the balance sheet at the same time.

    However, if the credit side is greater, that is if income is greater than expenses, then the P&L account shows a credit balance which is also known as net profit. This profit is added with Capital to show the final balance in the Balance Sheet.

    Debit balance of Profit & Loss account is not preferable for a business. Hence they should put in efforts to either reduce costs or increase their income to gain profits.

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Sandy
Sandy
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InterestInterest Received in AdvanceJournal Entry
  2. Nistha Pursuing B.COM H (B&F) and CMA
    This answer was edited.

    Classified under advance income, Interest received in advance is unearned income that pertains to the following accounting period but is received in the current period. Such interest is not related to the current accounting period and the related benefits for such income are yet to be provided. HencRead more

    Classified under advance income, Interest received in advance is unearned income that pertains to the following accounting period but is received in the current period. Such interest is not related to the current accounting period and the related benefits for such income are yet to be provided. Hence, it is a liability for the concern.

    The treatment of such advance interest is based on the Accrual concept of accounting.

    The journal entry for interest received in advance is:

    Now suppose, a firm Star shine receives interest on loan of 5,00,000 @ 7% p.a. extended to another firm. In the current accounting period, Star shine receives 50,000 as interest, excess being advance for the following year. Then the following journal entries should be passed:

       

    Cash received in form of interest is debited (Debit what comes in) and interest account is credited because of an increase in interest income (credit all incomes and gains).

    Interest account is debited because we have to decrease the interest income since 15,000 relates to the next accounting year. Interest received in advance is credited because such interest of 15,000 is not yet earned and is a liability for the concern.

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