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.
Outstanding Income is the income that is due and is being earned but not yet received. The person/ firm has the legal rights to receive that part of the income which it has earned. Outstanding Income is an Asset Account for the business/ the person. According to the modern approach, for Asset AccounRead more
Outstanding Income is the income that is due and is being earned but not yet received. The person/ firm has the legal rights to receive that part of the income which it has earned.
Outstanding Income is an Asset Account for the business/ the person.
According to the modern approach, for Asset Account:
When there is an increase in the Asset, it is Debited.
When there is a decrease in Asset, it is Credited.
So the journal entry will be-
For Example, Mr. Rashid works as a laborer in a factory and he earns wages @Rs 500/day.
So by the end of the week, he receives a payment of Rs 3000 of Rs 3500 i.e. he receives payment of 6 days instead of 7 days. So here Rs 500 would be an outstanding income of Mr. Rashid as he has earned that income but has not received it yet.
Journal Entry –
Another example, Yes Bank gave a loan of Rs 10,00,000 to company Ford @ 10% as interest payable monthly. The interest for one month i.e. Rs 1,00,000 has not been received by Yes Bank which is being due. So it will be outstanding income for Yes Bank since it is due but not yet received.
Journal entry-
Accounting Treatment for Outstanding Income-
Treatment in Income Statement
The Outstanding Income is shown on the credit side of the income statement as the income is earned for the current year but not yet received.
Treatment in Balance Sheet
Outstanding Income is an Asset for the business and hence shown on the Assets side of the balance sheet.
Sundry Debtors Sundry Debtors are those persons or firms to whom goods have been sold or services rendered on credit and the payment has not been received from them. In other words, Debtors are the persons or firms from whom the payment is to be received by the business. For Example, Ramen Sold goodRead more
Sundry Debtors
Sundry Debtors are those persons or firms to whom goods have been sold or services rendered on credit and the payment has not been received from them. In other words, Debtors are the persons or firms from whom the payment is to be received by the business.
For Example, Ramen Sold goods to Sam on credit, Sam did not pay for the goods immediately, so here Sam is the debtor for Ramen because he owes the amount to Ramen.
Another Example, If goods worth Rs 7000 have been sold to Sid on credit, he will continue to remain as debtor of the business so long as he does not make the full payment.
Treatment:
Sundry Debtor is considered as a current asset and hence it is shown on the assets side of the balance sheet under the Current Assets heading.
Sundry Debtors are not considered as an item of profit and loss because it is not considered as an item of income or expense. However, the items associated with sundry debtors such as bad debts or provision for doubtful debts or bad debts recovered are shown in profit and loss accounts in the debit and credit sides respectively.
Sundry Creditors
Sundry creditors are those persons or firms from whom goods have been purchased or services rendered on credit and for which payment has not been made. In other words, Creditors are the person or firms to whom some money has to be paid by the business.
For Example, Ramen purchased goods from Sam on credit, Ramen did not pay for the goods immediately, so here Ramen is the creditor for Sam because he owes money to Sam.
Another Example, If Mr. Johnson purchased goods worth Rs 3000 from M/s. Rick & Co. on credit, Mr. Johnson will continue to remain as a creditor of M/s. Rick & Co. as long as the full payment is made by Mr. Johnson.
Treatment:
Sundry Creditor is shown in the liabilities side of the balance sheet under the heading Current Liabilities.
The journal entry for Cash Sales is- Particulars Amount Amount Cash A/c Dr $$$ To Sales A/c $$$ Sales Account is a Revenue Account and Cash Account is an Asset Account for the business. So, According to the modern approach for Sales account:Read more
The journal entry for Cash Sales is-
Particulars
Amount
Amount
Cash A/c Dr
$$$
To Sales A/c
$$$
Sales Account is a Revenue Account and Cash Account is an Asset Account for the business.
So, According to the modern approach for Sales account:
When there is an increase in the Revenue, it is ‘Credited’.
When there is a decrease in the Revenue, it is ‘Debited’.
According to the Modern approach for Cash 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 cash sales and since there is an increase in Revenue on account of goods being sold, the sales account will be credited as per the modern rule and due to the increase in cash on account of sales, cash account will be debited.
For Example, Polard sold goods for cash worth Rs 2,000 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. Cash A/c and Sales A/c.
Step 2: To Classify the account heads.
According to the modern approach: Sales A/c is a Revenue account and Cash A/c is an Asset account.
Step 3: Application of Rules for Debit and Credit:
According to the modern approach: As Sales increases, because goods have been sold, ‘Sales A/c’ will be credited. (Rule – increase in Revenue is credited).
Cash account is an Asset account. As cash has been received on account of goods sold, there is an increase in assets and hence Cash account will be debited (Rule – increase in Asset is debited).
So from the above explanation, the Journal Entry will be-
Journal Entry for Interest on Drawings is- Particulars Amount Amount Drawings A/c Dr $$$ To Interest on Drawings A/c $$$ So as per the modern approach: From the point of view of business, Interest on Drawings is an Income. When there is an inRead more
Journal Entry for Interest on Drawings is-
Particulars
Amount
Amount
Drawings A/c Dr
$$$
To Interest on Drawings A/c
$$$
So as per the modern approach: From the point of view of business, Interest on Drawings is an Income.
When there is an increase in the Income, it is credited.
When there is a decrease in the Income, it is debited.
From the point of view of the proprietor, Interest on Drawings is a Liability.
So as per the modern approach:
When there is an increase in the Liability, it is credited.
When there is a decrease in the Liability, it is debited.
So as per the modern approach, Interest on Drawings is credited because with Interest the income increases for the business. Whereas, the amount of such interest is a loss from the point of view of the owner/ Proprietor, as such the amount of drawings is increased by the amount of interest and hence the Drawings account is debited.
For Example, Harry charged interest on drawings on Rs 10,000 @ 12% for one year.
Explanation:
Step 1: To identify the account heads.
In this transaction, two accounts are involved, i.e. Drawings A/c and Interest on Drawings A/c.
Step 2: To Classify the account heads.
According to the modern approach: From the point of view of business, Interest on Drawings is a Revenue A/c and Drawings A/c is an Expense A/c.
Step 3: Application of Rules for Debit and Credit:
According to the modern approach: As Revenue increases because of interest on drawings received by the business, Interest on Drawings A/c will be Credited. (Rule – increase in Revenue is credited).
Drawings A/c is an expense account for the business and as expense increases, Drawings A/c will be debited. (Rule – increase in the expenses is debited).
So from the above explanation, the Journal Entry will be-
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-
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.
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.
Sales Return is shown on the debit side of the Trial Balance. Sales Return is also called Return Inward. Sales Return refers to those goods which are returned by the customer to the seller of the goods. The goods can be returned due to various reasons. For example, due to defects, quality differenceRead more
Sales Return is shown on the debit side of the Trial Balance.
Sales Return is also called Return Inward.
Sales Return refers to those goods which are returned by the customer to the seller of the goods. The goods can be returned due to various reasons. For example, due to defects, quality differences, damaged products, and so on.
In a business, sales is a form of income as it generates revenue. So, when the customer sends back those goods sold earlier, it reduces the income generated from sales and hence goes on the debit side of the trial balance as per the modern rule of accounting Debit the increases and Credit the decreases.
For Example, Mr. Sam sold goods to Mr. John for Rs 500. Mr. John found the goods damaged and returned those goods to Mr. Sam.
So, here Sam is the seller and John is the customer.
The journal entry for sales return in the books of Mr. Sam will be
The correct option is (b) and (d) As the internal analysis is done for the internal assessment of the firm, only those persons can carry out the assessment who has access to the internal accounting records of a business firm. As the owners or managers are the members of the top-level management execRead more
The correct option is (b) and (d)
As the internal analysis is done for the internal assessment of the firm, only those persons can carry out the assessment who has access to the internal accounting records of a business firm. As the owners or managers are the members of the top-level management executives they can carry out the work of internal analysis. Also, the government agencies can carry out internal analysis as they have been given the statutory powers of doing such works.
To make it clear, let me explain a little about internal analysis-
To determine the profitability of various activities and operations or to know the performance of the business concern, the top-level executives along with the management accountant carry out an internal assessment of the financial statements within the concern, this process is known as internal analysis.
What is the difference between personal accounts, real accounts and nominal accounts?
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-
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
See lessWhat is outstanding income?
Outstanding Income is the income that is due and is being earned but not yet received. The person/ firm has the legal rights to receive that part of the income which it has earned. Outstanding Income is an Asset Account for the business/ the person. According to the modern approach, for Asset AccounRead more
Outstanding Income is the income that is due and is being earned but not yet received. The person/ firm has the legal rights to receive that part of the income which it has earned.
Outstanding Income is an Asset Account for the business/ the person.
According to the modern approach, for Asset Account:
So the journal entry will be-
For Example, Mr. Rashid works as a laborer in a factory and he earns wages @Rs 500/day.
So by the end of the week, he receives a payment of Rs 3000 of Rs 3500 i.e. he receives payment of 6 days instead of 7 days. So here Rs 500 would be an outstanding income of Mr. Rashid as he has earned that income but has not received it yet.
Journal Entry –
Another example, Yes Bank gave a loan of Rs 10,00,000 to company Ford @ 10% as interest payable monthly. The interest for one month i.e. Rs 1,00,000 has not been received by Yes Bank which is being due. So it will be outstanding income for Yes Bank since it is due but not yet received.
Journal entry-
Accounting Treatment for Outstanding Income-
The Outstanding Income is shown on the credit side of the income statement as the income is earned for the current year but not yet received.
Outstanding Income is an Asset for the business and hence shown on the Assets side of the balance sheet.
See lessWhat are sundry debtors and sundry creditors?
Sundry Debtors Sundry Debtors are those persons or firms to whom goods have been sold or services rendered on credit and the payment has not been received from them. In other words, Debtors are the persons or firms from whom the payment is to be received by the business. For Example, Ramen Sold goodRead more
Sundry Debtors
Sundry Debtors are those persons or firms to whom goods have been sold or services rendered on credit and the payment has not been received from them. In other words, Debtors are the persons or firms from whom the payment is to be received by the business.
For Example, Ramen Sold goods to Sam on credit, Sam did not pay for the goods immediately, so here Sam is the debtor for Ramen because he owes the amount to Ramen.
Another Example, If goods worth Rs 7000 have been sold to Sid on credit, he will continue to remain as debtor of the business so long as he does not make the full payment.
Treatment:
Sundry Debtor is considered as a current asset and hence it is shown on the assets side of the balance sheet under the Current Assets heading.
Sundry Debtors are not considered as an item of profit and loss because it is not considered as an item of income or expense. However, the items associated with sundry debtors such as bad debts or provision for doubtful debts or bad debts recovered are shown in profit and loss accounts in the debit and credit sides respectively.
Sundry Creditors
Sundry creditors are those persons or firms from whom goods have been purchased or services rendered on credit and for which payment has not been made. In other words, Creditors are the person or firms to whom some money has to be paid by the business.
For Example, Ramen purchased goods from Sam on credit, Ramen did not pay for the goods immediately, so here Ramen is the creditor for Sam because he owes money to Sam.
Another Example, If Mr. Johnson purchased goods worth Rs 3000 from M/s. Rick & Co. on credit, Mr. Johnson will continue to remain as a creditor of M/s. Rick & Co. as long as the full payment is made by Mr. Johnson.
Treatment:
Sundry Creditor is shown in the liabilities side of the balance sheet under the heading Current Liabilities.
See lessWhat is the journal entry for cash sales?
The journal entry for Cash Sales is- Particulars Amount Amount Cash A/c Dr $$$ To Sales A/c $$$ Sales Account is a Revenue Account and Cash Account is an Asset Account for the business. So, According to the modern approach for Sales account:Read more
The journal entry for Cash Sales is-
Sales Account is a Revenue Account and Cash Account is an Asset Account for the business.
So, According to the modern approach for Sales account:
According to the Modern approach for Cash account:
So, the journal entry here is about cash sales and since there is an increase in Revenue on account of goods being sold, the sales account will be credited as per the modern rule and due to the increase in cash on account of sales, cash account will be debited.
For Example, Polard sold goods for cash worth Rs 2,000 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. Cash A/c and Sales A/c.
Step 2: To Classify the account heads.
According to the modern approach: Sales A/c is a Revenue account and Cash A/c is an Asset account.
Step 3: Application of Rules for Debit and Credit:
According to the modern approach: As Sales increases, because goods have been sold, ‘Sales A/c’ will be credited. (Rule – increase in Revenue is credited).
Cash account is an Asset account. As cash has been received on account of goods sold, there is an increase in assets and hence Cash account will be debited (Rule – increase in Asset is debited).
So from the above explanation, the Journal Entry will be-
See lessWhat is the journal entry for interest on Drawings?
Journal Entry for Interest on Drawings is- Particulars Amount Amount Drawings A/c Dr $$$ To Interest on Drawings A/c $$$ So as per the modern approach: From the point of view of business, Interest on Drawings is an Income. When there is an inRead more
Journal Entry for Interest on Drawings is-
So as per the modern approach: From the point of view of business, Interest on Drawings is an Income.
From the point of view of the proprietor, Interest on Drawings is a Liability.
So as per the modern approach:
So as per the modern approach, Interest on Drawings is credited because with Interest the income increases for the business. Whereas, the amount of such interest is a loss from the point of view of the owner/ Proprietor, as such the amount of drawings is increased by the amount of interest and hence the Drawings account is debited.
For Example, Harry charged interest on drawings on Rs 10,000 @ 12% for one year.
Explanation:
Step 1: To identify the account heads.
In this transaction, two accounts are involved, i.e. Drawings A/c and Interest on Drawings A/c.
Step 2: To Classify the account heads.
According to the modern approach: From the point of view of business, Interest on Drawings is a Revenue A/c and Drawings A/c is an Expense A/c.
Step 3: Application of Rules for Debit and Credit:
According to the modern approach: As Revenue increases because of interest on drawings received by the business, Interest on Drawings A/c will be Credited. (Rule – increase in Revenue is credited).
Drawings A/c is an expense account for the business and as expense increases, Drawings A/c will be debited. (Rule – increase in the expenses is debited).
So from the above explanation, the Journal Entry will be-
See lessWhat is the journal entry for asset purchase?
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-
According to the Modern Approach for Assets Account:
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-
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 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 lessHow to show sales return in trial balance?
Sales Return is shown on the debit side of the Trial Balance. Sales Return is also called Return Inward. Sales Return refers to those goods which are returned by the customer to the seller of the goods. The goods can be returned due to various reasons. For example, due to defects, quality differenceRead more
Sales Return is shown on the debit side of the Trial Balance.
Sales Return is also called Return Inward.
Sales Return refers to those goods which are returned by the customer to the seller of the goods. The goods can be returned due to various reasons. For example, due to defects, quality differences, damaged products, and so on.
In a business, sales is a form of income as it generates revenue. So, when the customer sends back those goods sold earlier, it reduces the income generated from sales and hence goes on the debit side of the trial balance as per the modern rule of accounting Debit the increases and Credit the decreases.
For Example, Mr. Sam sold goods to Mr. John for Rs 500. Mr. John found the goods damaged and returned those goods to Mr. Sam.
So, here Sam is the seller and John is the customer.
The journal entry for sales return in the books of Mr. Sam will be
Treatment in Trial Balance
See lessInternal analysis of financial statements is done by?
The correct option is (b) and (d) As the internal analysis is done for the internal assessment of the firm, only those persons can carry out the assessment who has access to the internal accounting records of a business firm. As the owners or managers are the members of the top-level management execRead more
The correct option is (b) and (d)
As the internal analysis is done for the internal assessment of the firm, only those persons can carry out the assessment who has access to the internal accounting records of a business firm. As the owners or managers are the members of the top-level management executives they can carry out the work of internal analysis. Also, the government agencies can carry out internal analysis as they have been given the statutory powers of doing such works.
To make it clear, let me explain a little about internal analysis-
To determine the profitability of various activities and operations or to know the performance of the business concern, the top-level executives along with the management accountant carry out an internal assessment of the financial statements within the concern, this process is known as internal analysis.
See less