AccountingQA Latest Questions

Ishika Pandey
Ishika PandeyCurious
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  2. SidharthBadlani CA Inter Student
    This answer was edited.

    Yes, the account receivable is a sub ledger account. It is an account that is used to record the payment history of each and every customer to whom the business has sold goods or provided services on credit. Accounts receivable represent the amount that the customers owe to the business with respectRead more

    Yes, the account receivable is a sub ledger account. It is an account that is used to record the payment history of each and every customer to whom the business has sold goods or provided services on credit.

    Accounts receivable represent the amount that the customers owe to the business with respect to the goods sold or services provided to them on credit. They are also known as trade receivable or debtors.

    The accounts receivable subledger shows various details of every transaction like the invoice number, amount due, date of payment, discount allowed etc. The subledger accounts are also known as the subsidiary accounts.

     

    Difference between general ledger and subledger accounts

    Here is a list of the major differences between sub-ledgers and the general ledger:

    • The subsidiary accounts or the sub ledger are a subset of the general ledger. In other words we can say that subsidiary accounts are a part of the general ledger.
    • The trial balance is prepared with the help of the general ledger and not with the help of subsidiary accounts.
    • The trial balance is prepared with the help of the general ledger and not with the help of subsidiary accounts.
    • The subledger accounts help us to store large volumes of data. They provide us with detailed and comprehensive analysis of each item of financial statements. On the other hand, a general ledger provides us with superficial information about every item in one place.

    Importance/ use of Subsidiary Account

    The usefulness of an accounts receivable sub ledger account lies in the fact that it provides detailed information about the money different customers owe to the business.

    For example, the general ledger account may show that the total balance of trade receivable is 1 lakh without indicating the individual amount that each customer owes to the business. The subsidiary account can help us by showing that customer A owes 50000 rupees, customer B owes 30000 rupees while customer C owes 20000 rupees.

    In short, the subsidiary accounts provide detailed information about each and every transaction. They help us to find useful information quickly and easily. They help us analyze the business policies and take corrective actions.

    Thus, we can conclude that accounts receivable is a subledger account that provides us detailed information about the various credit transactions and the amount that each customer owes to the business. It helps us analyze our credit policies and take corrective actions. It helps us identify and classify bad debts as such on

     

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Radha
Radha
In: >

Interest on investmentTrial Balance
  2. Rahul_Jose Aspiring CA currently doing Bcom
    This answer was edited.

    Interest on Investment is to be shown on the Credit side of a Trial Balance. Interest on investment refers to the income received on investment in securities. These securities can be shares, debentures etc. of another company. When one invests in securities, they are expected to receive a return onRead more

    Interest on Investment is to be shown on the Credit side of a Trial Balance.

    Interest on investment refers to the income received on investment in securities. These securities can be shares, debentures etc. of another company. When one invests in securities, they are expected to receive a return on investment (ROI).

    Since interest on investment is an income, it is shown on the credit side of the Trial Balance. This is based on the accounting rule that all increase in incomes are credited and all increase in expenses are debited. A Trial Balance is a worksheet where the balances of all assets, expenses and drawings are shown on the debit side while the balances of all liabilities, incomes and capital are shown on the credit side.

    For example, if Jack bought Corporate Bonds of Amazon, worth $50,000 with a 10% interest on investment, then the accounting treatment for interest on investment would be

    Cash/Bank A/C Dr     5,000
    To Interest on Investment in Corporate Bonds (Amazon) 5,000

    As per the above entry, since interest on investment is credited, it will show a credit balance and hence be shown on the credit side of the Trial Balance. Interest on investment account is not to be confused with an Investment account. Investment is an asset whereas interest on investment is an income.

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Simerpreet
SimerpreetHelpful
In: >

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

    Definition The trial balance is a list of all the closing balances of the general ledger at the end of the year. Or in other words, I can say that it is a statement showing debit and credit balances. A trial balance is prepared on a particular date and not on a particular period. What does trial balRead more

    Definition

    The trial balance is a list of all the closing balances of the general ledger at the end of the year. Or in other words, I can say that it is a statement showing debit and credit balances.

    A trial balance is prepared on a particular date and not on a particular period.

    What does trial balance include?

    As in each double-entry system, each account has two aspects debit and credit.

    Hence the following trial balance includes:
    • Debit or credit of the reporting period.
    • The amount which is to be debited or credited to each account.
    • The account numbers.
    • The dates of the reporting period.
    • The totaled sums of debits and credits entered during that time.

    When we prepare a trial balance from the given list of ledger balances, these need to be included which are as follows :

    The balance of all
    • Assets accounts
    • Expenses accounts
    • Losses
    • Drawings
    • Cash and bank balances
    Are placed in the debit column of the trial balance.

    • The balances of
    • liabilities accounts
    • income accounts
    • profits
    • capital
    Are placed in the credit column of the trial balance.

    Importance

    As the trial balance is prepared at the end of the year so it is important for the preparation of financial statements like balance sheets or profit and loss.

    The purpose of the trial balance is as follows:

    • To verify the arithmetical accuracy of the ledger accounts
    This means trial balance indicates that equal debits and credits have been recorded in the ledger accounts.
    It enables one to establish whether the posting and other accounting processes have been carried out without any arithmetical errors.

    • To help in locating errors
    There can be some errors if the trial balance is untallied therefore to get error-free financial statements trial balance is prepared.

    • To facilitate the preparation of financial statements
    A trial balance helps us to directly prepare the financial statements and then which gives us the right to not look or no need to refer to the ledger accounts.

    Structure of trial balance

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A_Team
A_Team
In: >

  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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