AccountingQA Latest Questions

Anushka Lalwani
Anushka Lalwani
In: >

  2. ShreyaSharma none
    This answer was edited.

    Ledger Folio A ledger folio, in simple words, is a page number of the ledger account where the relevant account appears. The term 'folio' refers to a book, particularly a book with large sheets of paper. In accounting, it's used to maintain ledger accounts. The use of ledger folio is generally seenRead more

    Ledger Folio

    A ledger folio, in simple words, is a page number of the ledger account where the relevant account appears. The term ‘folio’ refers to a book, particularly a book with large sheets of paper. In accounting, it’s used to maintain ledger accounts.

    The use of ledger folio is generally seen in manual accounting, i.e the traditional book and paper accounting as it is a convenient tool used for tracking the relevant ledger account from its journal entry. Whereas, in computer-oriented accounting (or computerized accounting), it’s not really an issue to track your relevant ledger account.

    Ledger folio, abbreviated as ‘L.F.’, is typically seen in journal entries. The ledger folio is written in the journal entries, after the ‘date’ and ‘particulars’ columns. It is really convenient when we’re dealing with and recording a large number of journal entries. As we will be further posting them into ledger accounts, thus, ledger folio comes in as a really useful component of journal entries.

    • The number in the ledger folio may be numeric or alphanumeric.
    • The ledger folio column in the journal has nothing to do with the accounting principles and rules. It’s used by us as per our methods and needs.

     

    Example

    We’ll look at how the ledger folio column is used while recording journal entries.

     

    We can find the relevant ledger accounts on the page numbers of the book as mentioned in the above entries, i.e. the cash and sales account on page – 1 whereas, the purchases and sundry creditors on page – 2 of the relevant ledger book.

     

    See less
    • 0
Anushka Lalwani
Anushka Lalwani
In: >

  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.

    See less
    • 0
Anushka Lalwani
Anushka Lalwani
In: >

  2. GautamSaxena Curious .
    This answer was edited.

    Sundry debtor refers to either a person or an entity that owes money to the business. If someone buys some goods/services from the business and the payment is yet to be received, a group of such individuals or entities is called sundry debtors. Sundry debtors are also referred to as trade receivableRead more

    Sundry debtor refers to either a person or an entity that owes money to the business. If someone buys some goods/services from the business and the payment is yet to be received, a group of such individuals or entities is called sundry debtors. Sundry debtors are also referred to as trade receivables or account receivables.

    The term ‘Sundry’ means various or several, referring to a collection of miscellaneous items combined under one head. Sundry debtors typically arise from core business activities such as sales of goods or services. The business treats them as an asset.

     

    Example

    Suppose you run a business, ABC Ltd. Mr. Y bought goods from you on credit. Therefore, Mr. Y will be recorded as Debtor (current asset) in your books of accounts. Similarly, a collection of such debtors is viewed as sundry debtors from the business’ point of view.

    Journal Entry

    Rules

    As per the golden rules of accounting, we ‘debit the receiver and credit the receiver’. That’s how in this journal entry we’ll be debiting the sundry debtor’s account. Also, ‘debit what comes in and credit what goes out.’ That’s why sales a/c is credited and cash a/c is debited.

    As per the modern rules of accounting, ‘debit the increase in asset and credit the decrease in asset’. That’s why we debit sundry debtors and cash a/c. And credit sales a/c when goods are sold and inventory decreases.

     

    Why debtor is an asset?

    As we know, a debtor refers to a person or entity who owes money to the business which means, the money is to be received by them in the future, making them an asset. On the other hand, creditors are a liability to the firm as we owe them money and it is to be paid by us in the near future, making it an obligation for the firm.

     

    Sundry Debtors in Balance Sheet

    Sundry debtors are shown under the current asset heading on the balance sheet. They are often referred to as account receivables.

     

    Balance Sheet (for the year ending….)

    See less
    • 0
Anushka Lalwani
Anushka Lalwani
In: >

  2. Ayushi Curious Pursuing CA
    This answer was edited.

    Introduction In Tally, journal entries are made in the vouchers. For each type of journal entry, there is a specific voucher. It is the vouchers where the transactions are recorded along with all the relevant details. Hence, when we speak of journal entries in tally, it is the vouchers which we haveRead more

    Introduction

    In Tally, journal entries are made in the vouchers. For each type of journal entry, there is a specific voucher. It is the vouchers where the transactions are recorded along with all the relevant details. Hence, when we speak of journal entries in tally, it is the vouchers which we have to master.

    In Tally, vouchers are of four types:

    1. Accounting vouchers
    2. Inventory vouchers
    3. Order voucher
    4. Payroll voucher

    The vouchers under the above voucher types are as shown below:

    To open the voucher creation menu follow these steps:

    In Tally ERP 9: Gateway of Tally→ Accounting Vouchers→ Voucher creation menu will open

    In Tally Prime: Gateway of Tally→ Vouchers→ Voucher creation menu will open

    Out of the above vouchers, the vouchers which I would suggest you practice are as follows (along with their short-cut keys):

    1. Contra Voucher – F4
    2. Payment Voucher – F5
    3. Receipt Voucher – F6
    4. Journal Voucher – F7
    5. Sales Voucher – F8
    6. Purchase Voucher – F9
    7. Credit note – Alt + F6
    8. Debit note – Alt + F5

     

    All of the above are accounting vouchers. You can simply press the short-cut keys to open the respective voucher while in the voucher creation menu

    If you are new to tally, I would suggest you practice only the accounting vouchers.

    Here, I have discussed only the accounting vouchers:

    Payment Voucher – F5

    A payment voucher is used to record payments of cash or by the bank. Payment can be to creditors or for expenses.

    There are two modes to this voucher which you can change by clicking the ‘Change Mode’ option on the right-hand side menu or simply pressing Ctrl + H. This menu will open.

    Select the ‘Double Entry’ mode for sake of simplicity. In this mode, the entry will be just like the conventional journal entry as in the double entry system of accounting.

    You have to just select the account you want debit which can be an expense, creditor etc. and you can credit only the cash or bank accounts as it is a payment voucher. Below there is a narration field which you can fill too. After entering all the necessary details you have to accept the voucher.

    Here, is a filled payment voucher in which I have recorded an expense payment entry.

     

     The journal entries which you can practice on payment vouchers are as follows:

    • Payment of expenses like rent, electricity, wages, salaries, carriage, interest etc
    • Payment to trade creditors.
    • Purchase of Assets

     

    Receipt Voucher – F6

    A receipt voucher is used for the recorded receipt of cash in the business. Just like a payment voucher, I recommend you to use it in Double Entry mode. In Tally prime, it looks this:

     

    The receipt voucher given above is already filled. I have passed a ‘collection from the debtor’ entry here. 

    The journal entries you can practice in the receipt voucher are as follows:

    • Receipt of cash from trade debtors.
    • Receipt of interest from the bank.
    • Commission received
    • Sale of Assets.

    Purchase Voucher – F7

    A purchase voucher is a voucher for exclusively recording purchase of goods entries. Purchase whether cash or credit should be recorded in the purchase voucher only as it allows recording of additional details related to purchase as well as tracking with purchase order and receipt note.

    The purchase voucher looks like this:

    Here, the purchase voucher is opened in ‘Item invoice’ mode. Item invoice is easier to understand hence I advise you to this mode to use the purchase voucher. You can change the mode by pressing Ctrl + H.

    If you wish to record transactions like journal entries then you can choose the ‘As Voucher’ mode.

    The details which you have to fill in are as follows:

    • Reference number or Bill number
    • Party A/c Name or the name of the creditor. (If the creditor is not created, press Alt + C to create)
    • Name of item purchased ( Press Alt + C to create the stock item if not created)
    • Enter the quantity and rate of the item and the total amount will be auto-populated.
    • The accounting details menu will open asking for the account to be debited for the purchase. Select the purchase account you want to debit or create a purchase account by pressing Alt + C if not created.

    • Enter a narration if you want and accept the voucher.

    Below is a complete purchase voucher where a credit sale transaction is passed:

    Sales Voucher – F8

    A sales voucher is a voucher for exclusively recording sales of goods entries. Sales, whether cash or credit, should be recorded in the sales voucher only as it allows recording of additional details related to sales as well as tracking with Sales orders and Delivery notes.

    Here also, I recommend you to use the sales voucher in Invoice mode

    Filling up of details in sales voucher is same as in purchase voucher. The difference here is that in the ‘Accounting details’ section you have selected a sales account to be credited.

    Here is a completed sales voucher where I have recorded a credit sale transaction:

    Contra Voucher – F4

    A Contra voucher is used to record contra transactions. Contra transactions are those transactions which take place between:

    • A Bank account and cash account
    • Two different bank accounts 

    The journal entries which can be practised on contra voucher are as follows:

    1. Withdrawal of cash from the bank.
    2. Deposit from cash into the bank.
    3. Transfer of amount from one bank to another.

    Given below is a completed Contra voucher in which ‘cash deposited into bank’ transaction is recorded:

    Journal Voucher – F7

    There are many transactions which cannot be passed in any of the vouchers discussed above. The examples of such transactions or journal entries are as follows:

    1. Depreciation of assets
    2. Entries related to the provision
    3. Prepaid Expenses
    4. Outstanding expenses
    5. Rectification of error entries
    6. Accrued income entries
    7. Any other entry which cannot be passed in any other voucher.

    It is an important voucher in Tally as many crucial entries are recorded in it.
    The journal voucher looks like this:

    It looks like a journal book and it does not have any different mode like voucher discussed above:

    The journal entries to practice on journal vouchers are many. You can refer to the examples of transactions I have mentioned above.

     

    Debit Note Voucher – Alt + F5

    A debit note voucher is to record purchase return transactions in Tally. Hence, the only transaction you can record here is of purchase return. The debit note voucher looks like this:

     

    Credit Note Voucher– Alt + F5

    In credit note vouchers, the sale return transactions are recorded. The credit note voucher looks like this:

    That’s all.  These are vouchers I would recommend one to practice on Tally.

     

    See less
    • 0
Anushka Lalwani
Anushka Lalwani
In: >

A. Cash Book B. Statement C. Journal D. None of These

  2. Akash Kumar AK
    This answer was edited.

    The correct option is A) Cash book let's understand what is petty cash book: A petty cash book is a cash book maintained to record petty expenses. Petty expenses, mean small or minute expenses for which the payment is made in coins or a few notes or which are smaller denominations like tea or coffeeRead more

    The correct option is A) Cash book

    let’s understand what is petty cash book:

    • A petty cash book is a cash book maintained to record petty expenses.
    • Petty expenses, mean small or minute expenses for which the payment is made in coins or a few notes or which are smaller denominations like tea or coffee expenses, postage, bus or taxi fare, stationery expenses, etc.
    • The person who maintains the petty cash book is known as the petty cashier.
    • It is a simple process that helps organizations by focusing on major transactions as petty cashiers handle all small transactions.

     

    Generally, the petty cashbook is prepared as per the Imprest system. As per the Imprest system, the petty expenses for a period (month or week) are estimated and a fixed amount is given to the petty cashier to spend for that period.

    At the end of the period, the petty cashier sends the details to the chief cashier and he is reimbursed the amount spent. In this way, the debit balance of the petty cashbook always remains the same.

     

    The petty cash book has two columns in which

    • Cash received is recorded in the Left column i.e, “Receipts” or “Debit” column.
    • Cash payments are recorded in the Right column i.e, “Payment” or “Credit” column.

     

    Balance of Petty cash book

    The balance of petty cash book is never closed and their balances are carried forward to the next accounting period which is considered one of the most significant qualities of an asset whereas Income doesn’t have any opening balance and their balances get closed at the end of every accounting year.

    A petty cash book is placed under the head current asset in the balance sheet. The Closing Balance of the petty cash book is computed by deducting Total expenditure from the Total cash receipt (as received from the head cashier).

     

    Format for petty cash book

    Only small denominations are recorded in the petty cash book. It varies with the type, quantity, and need of a business. It involves cash and checks.

     

    • Ordinary Petty cash book:

     

    • Analytical Petty cash book:

     

    Conclusion

    A simple petty cash book is a type of cash book because it records the small expenses which involve small transactions in the ordinary daily business.

    A petty cash book is not as important as an income statement, balance sheet, or trail balance it doesn’t measure the accuracy of accounts so it is not treated as a statement.

    No journal entries are made in the books of accounts while spending or purchasing using a petty cash book so, it is not treated as a journal.

     

     

    See less
    • 0
Anushka Lalwani
Anushka Lalwani
In: >

  2. Ayushi Curious Pursuing CA
    This answer was edited.

    Changing a Ledger name in Tally is an easy process. The requirement of changing the name of a ledger may arise in three situations: Situation 1: When we need to change a ledger's name, right after its creation while being in the ledger creation menu Situation 2: When we realize the need to change aRead more

    Changing a Ledger name in Tally is an easy process. The requirement of changing the name of a ledger may arise in three situations:

    • Situation 1: When we need to change a ledger’s name, right after its creation while being in the ledger creation menu
    • Situation 2: When we realize the need to change a ledger’s name during passing an entry in any voucher.
    • Situation 3: Other situations where we are not on the Voucher Creation window or ledger creation window.

     

    In Tally, there are plenty of shortcut keys that can ease the way we work on it. My methods will be based on such shortcuts on Tally ERP 9.0.

    Situation 1

     Often just after ledger creation, we realize that we have made mistake in entering the name of the ledger.

     Many opt to choose this long path to alter the ledger’s name.

    Exiting Voucher creation menu → Gateway of Tally menu → Accounts Info → Ledger option → Alter option → Select the ledger → Ledger alteration window opens.

    Instead of it, you can choose to use Page Up key while on the ledger creation window. Press the Page-up key till you reach that ledger. Then you can edit its name or any other details.

    Pressing the page up key automatically opens the ledger alteration mode and lets the user scroll through the ledgers available.

    The ledger alteration window looks like this:

    Situation 2

     Sometimes, while performing entries into vouchers, we feel the need to alter a ledger’s name.

    This can be done by pressing Ctrl + Enter key with the cursor on the ledger’s name in the voucher creation menu.

    On pressing Ctrl + Enter Key, the ledger alteration window will open, from where the user can alter the ledger name or any other details.

    Situation 3

    When the user is not either on the voucher creation menu or on the ledger creation menu, then the ledger’s name has to be altered by going through the following steps:

    Gateway of Tally menu → Accounts Info → Ledger option → Alter option → Select the required ledger → ledger alteration window opens.

    That’s it. These are different approaches to changing a ledger’s name.

    One thing that is common among all approaches is the opening of the Ledger alteration window at the end. Hence, it is only through the Ledger alteration window we can change a ledger’s details including its name.

     

    See less
    • 0
Anushka Lalwani
Anushka Lalwani
In: >

  2. GautamSaxena Curious .
    This answer was edited.

    Interest on drawings Drawings refer to the money withdrawn by owners/partners for personal use from the business. The drawings, in accounting terms, can be of any type. It can be cash withdrawn from business or furniture or car etc. Drawings are money or assets that are withdrawn from a company by iRead more

    Interest on drawings

    Drawings refer to the money withdrawn by owners/partners for personal use from the business. The drawings, in accounting terms, can be of any type. It can be cash withdrawn from business or furniture or car etc. Drawings are money or assets that are withdrawn from a company by its owners for personal use and must be recorded as a reduction of assets. It’s paid back to the business with some interest.

    Interest on drawings is an income for the business and reduces the capital of the owner. Interest on drawings is the amount of interest paid by the partners, calculated concerning the period for which the money was withdrawn.

    • It’s an income for the business. Hence, credited to P&L Appropriation A/c.
    • It’s an expense for the owner/partner. Therefore, debited to owner’s/partner’s capital a/c
    • Interest on drawings is charged to the partners only when there is an agreement made among the partners in this regard or if it is mentioned in the Partnership Deed.

    Formulae for Interest on drawings

    There are three formulae used for calculating the interest on drawings. They are:

    1. Simple Method: In this method, as the name suggests, the amount of interest on drawings is calculated simply for the time the amount has been utilized.

    Interest on Drawings = Amount of drawings × Rate/100 × No. of Months/12 

    2. Product Method: This method is used when-

    • Drawings are made of unequal amounts at irregular intervals of time. Then this formula is used-

    Interest on Drawings = Total of Products × Rate/100 × 1/12

    • When drawings are made of equal amounts at regular/equal intervals of time. Then interest on drawings can be calculated on the total of the amount drawn, for the average of the period applicable to the first and last installment.

    Interest on Drawings= Total amount of drawings × Rate/ 100 × Average Period/12

    Also, note-

    Average Period = (No. of months left after first drawings+ No. of months left after last drawings)/2

    Example:

    Harish withdrew equal amounts at the beginning of every month for 9 months. Total drawings amounted to ₹6,000. Calculate the interest on drawings charged if the rate was 6% p.a.

    Solution:

    Average period = (No. of months left after first drawings+ No. of months left after last drawings)/2 = (9+1)/2 = 5 months 

    Interest on Drawings = Total of drawings × Rate/100 × 5/12

                                            = ₹ 6,000 × 6/100 × 5/12
                                            = ₹ 150.

    Journal entry for interest on drawings: 

    Interest transferred to Profit & Loss A/c:

     

     

     

     

     

     

    See less
    • 0
Anushka Lalwani
Anushka Lalwani
In: >

  2. GautamSaxena Curious .
    This answer was edited.

    Journal entry for commission earned but not received Commission earned but not received is called accrued income. As we know there are two types of accounting, cash basis of accounting, in which the transaction is recorded only when cash is received or paid, and accrual basis of accounting, in whichRead more

    Journal entry for commission earned but not received

    Commission earned but not received is called accrued income. As we know there are two types of accounting, cash basis of accounting, in which the transaction is recorded only when cash is received or paid, and accrual basis of accounting, in which even if money is yet to be accepted or paid, the transactions are still recorded.

    E.g of accrual income- rent earned but not collected, interest on the investment earned but not received, etc.

    Journal entry

    • The commission that is to be received is debited, indicating the increase in assets whereas, the commission account (which will be giving you the commission) is credited.
      • Later on, upon receiving the cash an entry is passed crediting the commission receivable as shown below:

     

    • These are adjusted while making the final accounts for the business.

    Simplifying with an example

    If the rent earned was $1,000 and it’s yet to be received, we’ll be passing this entry-

    When it’s received, this entry is passed

     

     

     

    See less
    • 0
Anushka Lalwani
Anushka Lalwani
In: >

  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)

    Meaning of Workmen's Compensation Reserve Workmen compensation reserve is a reserve created to compensate the labourers and employees of a firm in case of an uncertain future event in the line with their work. For example, if a labourer or group of labourers get injured seriously while working on thRead more

    Meaning of Workmen’s Compensation Reserve

    Workmen compensation reserve is a reserve created to compensate the labourers and employees of a firm in case of an uncertain future event in the line with their work. For example, if a labourer or group of labourers get injured seriously while working on the premises of the firm, then they will be compensated from the money kept aside in the workmen’s compensation reserve.

    Workmen’s compensation reserve is created using the profits of a business. The journal entry for the creation of workmen compensation reserve is as follows:

    When a claim arises, the claim amount is transferred to Provision for workmen compensation claim A/c

    Treatment of workmen compensation reserve in revaluation account

    At the time of admission, retirement or death of partner or change in profit sharing ratio, the reserve is distributed among the old or existing partners or kept intact.

    Workmen’s compensation reserve is also distributed among the old or existing partners subject to the claim arising on the reserve.

    Here are the three situations:

     

    The revaluation account comes into the picture only when the claim is more than the amount available in the reserve. For example, the claim is Rs. 20,000 but the amount in the reserve is only Rs. 15,000.

    In such a case, the excess claim will be met by debiting the revaluation account.

    The journal will as  given below:

    Since the revaluation account is debited, it is a loss and this loss will be written from old or existing partners’ capital in the old profit sharing ratio. The journal entry is given below:

    See less
    • 0
Anushka Lalwani
Anushka Lalwani
In: >

  2. Radhika
    This answer was edited.

    Unrecorded Assets are the assets that are completely written off but still physically available in the company or assets that are not shown in the books of the company. Unrecorded assets are generally recorded or recognized at the event of admission, retirement, death of a partner when all the assetRead more

    Unrecorded Assets are the assets that are completely written off but still physically available in the company or assets that are not shown in the books of the company.

    Unrecorded assets are generally recorded or recognized at the event of admission, retirement, death of a partner when all the assets and liabilities are revalued or dissolution of the firm.

    Since Accounting Standards require firms to record all the assets and liabilities in their books, it is therefore mandatory to record such unrecorded assets.

    There can be two cases for treatment of such unrecorded assets:

    • Unrecorded Asset entered into the business and recorded in books
    Unrecorded Asset A/c (Dr.) Amt
     To Revaluation A/c Amt

    The unrecorded asset is now debited since it has to be recorded in the books now and Revaluation Account is credited since it is again for the business which will eventually be transferred to Partners’ Capital Account.

    • Unrecorded Asset taken over by a partner and paid cash   
    Cash A/c (Dr.) Amt
     To Partners’ Capital A/c Amt

    If a partner decides to take over an unrecorded asset then his account is credited with that amount and since cash paid by the partner comes into business Cash Account is debited.

    • Unrecorded Asset discovered during Dissolution
    Cash/ A/c (Dr) Amt
     To Realization A/c Amt

    When an unrecorded asset is discovered during the dissolution of the firm, such an asset is sold directly to the outsider and as a result, cash A/c is debited since the cash is entering the business. The entry is made through the Revaluation A/c and it is hence credited.

    Example:

    At the time of revaluation, firms find a typewriter that has not been recorded in the books and is valued at Rs 10,000.  The journal entry to record that typewriter will be:

    Typewriter A/c (Dr.) 10,000
      To Revaluation A/c 10,000

     

    See less
    • 0

Most Helping Users

Astha

Astha

Leader
Simerpreet

Simerpreet

Helpful
AbhishekBatabyal

AbhishekBatabyal

Helpful