Blog

-This question was submitted by a user and answered by a volunteer of our choice. Every business organization uses inventory to generate sales. Inventory includes the raw material used to produce the goods, the goods which are yet to be completed (work-in-progress), and the finished goods which are ready to be sold. If an organization […]

-This question was submitted by a user and answered by a volunteer of our choice. Examples of Bank Reconciliation Statement Illustration 1, From the following particulars prepare a Bank Reconciliation Statement on 31st January XXXX Debit Balance as per Cash Book 48,000. A cheque of 37,000 was deposited and collected by the bank but not […]

-This question was submitted by a user and answered by a volunteer of our choice. Zero Working Capital Before diving into the concept of Zero Working Capital, let me help you understand the meaning of Working Capital. Working Capital is the term used to demonstrate whether the company possesses adequate current assets to discharge off […]

-This question was submitted by a user and answered by a volunteer of our choice. What is a Suspense Account? A Suspense account is maintained by a business to record transactions that are doubtful and unidentifiable for the time being. It is a temporary account that records certain transactions that have occurred, but there is […]

-This question was submitted by a user and answered by a volunteer of our choice. What is a Debit balance? While preparing a ledger account (T-account), if the sum of the debit side is greater than the sum of the credit side, then we say that the account has a “debit balance“. Debit side > Credit side Assets have […]

-This question was submitted by a user and answered by a volunteer of our choice. The differences between cost centre and cost unit are as follows: PARTICULARS COST CENTRE COST UNIT MEANING A cost centre refers to the costs incurred about any part of the organisation such as activities, different functions, service or production location, […]

-This question was submitted by a user and answered by a volunteer of our choice Every year or after a certain period, the ledger accounts are balanced after posting the transactions. The difference in the totals of the two sides of an account is written on the side with the smaller total. The credit balance […]

-This question was submitted by a user and answered by a volunteer of our choice. For a better understanding of the concept, let us first have an insight into the meaning of debit and credit accounts. The following image shows the Balance Sheet Equation: In the above equation, all the accounts covered on the left-hand […]

-This question was submitted by a user and answered by a volunteer of our choice. List of Current Assets and Current Liabilities  S.no Current Assets Current Liabilities 1. Sundry Debtors Sundry Creditors 2. Bills Receivables Bills Payables 3. Closing Stock Bank Loan 4. Short-term Investments Outstanding Expenses 5. Prepaid/Unexpired Expenses Salaries and Wages Payable 6. […]

-This question was submitted by a user and answered by a volunteer of our choice. No, Prepaid Expense is Not a Fictitious Asset. Meaning of Prepaid Expense A prepaid expense is an expense incurred by an entity in advance before receiving such goods or services. The payment pertains to the future reporting period and is […]

-This question was submitted by a user and answered by a volunteer of our choice. Charging Depreciation in the Year of the Sale The answer to your question is yes, one can charge depreciation in the year of sale. I guess reading the below para you will be able to interpret as to why it […]

-This question was submitted by a user and answered by a volunteer of our choice. Yes, there are a few assets that show the credit balance. Those assets generally hold zero or unfavourable balances. Assets that have a credit balance From accounting perspective assets and expenses generally have a debit balance whereas liabilities, revenue and […]

-This question was submitted by a user and answered by a volunteer of our choice. Why is Debit written as Dr? They say Debit is denoted by “Dr” but if you see the word “Debit”  you will realise that there is no “R” in it then from where is it derived or what does it […]

-This question was submitted by a user and answered by a volunteer of our choice. To understand the Presentation of Accumulated Depreciation in the Trial Balance, it is crucial first to understand the concept and meaning of Depreciation. What is Depreciation? Depreciation is the fall in the value of an asset due to use, wear […]

-This question was submitted by a user and answered by a volunteer of our choice. Purpose of subsidiary books Big business concerns have recorded numerous financial transactions in one accounting period and journalizing them all in one single book can be very difficult such organizations choose subsidiary books for maintaining many transactions of similar nature in […]

-This question was submitted by a user and answered by a volunteer of our choice. Return Inwards The return inwards arises when goods sold are returned back by the customers. They might return the entire order or only a part of it. It is also known as Sales Returns. Such returns are deducted from sales […]

-This question was submitted by a user and answered by a volunteer of our choice. Introduction In the world of business, most of the transactions take place on credit rather than cash. This involves risk as the guarantee to repay might be low due to the financial instability of the company. To minimize this risk […]

-This question was submitted by a user and answered by a volunteer of our choice. The normal balance of dividends is “Debit”. Firstly, you should know what a normal balance in accounting means. What is the normal balance of dividends? In accounting, dividends typically have a normal balance on the equity side of the balance […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of Provision for Discount on Debtors Debtors are the entities who have purchased goods from the company on credit. They owe money to the business for such goods purchased. In order to receive early payment from the debtors in […]

-This question was submitted by a user and answered by a volunteer of our choice. I have answered this question on the assumption that “Trading Expenses are those expenses which are covered in the Trading Account”. Meaning of Trading Expenses Trading Expenses are direct expenses incurred for the purchase and production of goods. They are […]

-This question was submitted by a user and answered by a volunteer of our choice. What is Rent Received in Advance? Rent Received in Advance is an amount received by the landlord from the tenant before the actual due date. It’s an income received in advance. Income received in advance refers to the amount received […]

-This question was submitted by a user and answered by a volunteer of our choice. To begin with, let me help you understand the meaning of the term Contingent Assets. Meaning of Contingent Assets Contingent Assets are possible assets or potential economic benefits because they do not currently exist but may arise in the near […]

  Prepaid rent includes the word rent. Therefore, one might think that it is an expense, right? But, Prepaid rent is a current asset and not an expense. Let us break it down for you. What are Current Assets? Current assets are the assets that a business owns and expects to realize within 12 months or […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of Closing Stock Closing stock refers to the value of the goods or products that remain unsold and are held by a business at the end of a specific accounting period, such as a month, quarter, or year. It […]

Overview of Expenses The costs paid by a business in order to generate revenue are called expenses. In other words, it is an outflow of funds in exchange for the acquisition of a product or service. For example, rent payments, interest payments, electricity bills, administration expenses, selling expenses, etc. There are different types of expenses […]