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-This question was submitted by a user and answered by a volunteer of our choice. Principles of Accounting I would like to share with you the five basic principles of accounting, followed by an example each. I hope this answer enhance your basic accounting knowledge.   Business-Entity Principle This principle states that the organization has […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of Petty Cash Book A petty cash book is like a ledger account that records small day-to-day expenses. Once the set amount for the petty cash book is used up for minor expenses it is replenished with the same […]

-This question was submitted by a user and answered by a volunteer of our choice. To understand the calculation for Provision for Bad and Doubtful Debts, one should first be familiar with the meaning of the term Provision for doubtful debts and why it is maintained by an organization. Provision for Bad and Doubtful Debt […]

Meaning of Capital Capital refers to the financial resources of a business that are used to pay for its operations. The financial assets invested in the business by the owners form a part of the capital. It includes cash or cash equivalents, plant, machinery, etc. Generally, there are four types of capital: Debt Capital: The […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of Provision for Doubtful Debts Almost every business entity has some debtors. Debtors are the entities that owe money to the business. In some cases, the debtors may or may not pay the money owed by them. To prevent […]

-This question was submitted by a user and answered by a volunteer of our choice. Introduction In simple words, the term Sale of services means providing services to a customer in exchange for compensation. Various organizations offer services in various domains such as Education, Consultancy, Finance, Healthcare, Transportation, and many more. A service is anything […]

-This question was submitted by a user and answered by a volunteer of our choice. Closing Stock refers to the unsold goods held at the end of the financial year. To ascertain the true financial position of a company it is necessary to adjust the closing stock at the end of an accounting year. Closing […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of Net Current Assets To understand net current assets, we need to understand current assets and current liabilities. Current assets are those assets that are used for operating activities and it is used within a year. It is liquid […]

Overview of Fees Earned Fees earned signify the revenue generated by an entity that is engaged in rendering services to its clients. When an entity deals in both goods and services it charges fees for the part of services rendered and for the goods delivered it charges the predetermined price. It generally forms a major […]

-This question was submitted by a user and answered by a volunteer of our choice. Debenture Suspense Account It’s basically a temporary account prepared by an entity to record the transaction of debenture when such an entity issues or agrees to issue a certain amount worth debentures as collateral security. As soon as the entity […]

-This question was submitted by a user and answered by a volunteer of our choice. Yes, it is possible for a company to show positive cash flows but still be in grave trouble. To begin with, let me explain to you the meaning of positive cash flows.   Meaning of Positive Cash flows Positive Cash […]

-This question was submitted by a user and answered by a volunteer of our choice. First, let me help you interpret the difference between Receipts & Income along with the help of an example. Difference between Income & Receipts  Income Receipts Income refers to the amount received by an entity from its core business operations […]

Overview of Purchase Ledger Control Account Purchase Ledger Control Account (PLCA) is a summarized ledger of all the trade creditors of the entity. This Control Account typically looks like a “T-account” or a replica of an Individual Trade Payable (Creditor) account. But instead of containing transactions of invoices, returns, and payments related to one creditor, […]

Meaning & Definition Set-off means discharging reciprocal monetary obligations by counterbalancing debt or claim. The set-off is carried out by debiting one account against a credit on another. The word “set-off” gives us the idea that it is related to writing off or reducing the value. In simple accounting terms, when a debtor can decrease […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of Outstanding Subscriptions In the context of non-profit organizations, a subscription is an amount paid by every member of the organization as membership fees. It is the main source of income of a non-profit entity.  It is usually collected […]

-This question was submitted by a user and answered by a volunteer of our choice. Introduction In simple words, provision for doubtful debts refers to the amount set aside as a provision from the profits of the business for the amount that is doubtful to be received in the future. The provision for doubtful debts […]

-This question was submitted by a user and answered by a volunteer of our choice. Before answering this question you should first have a glance over the concept of interest on capital. Interest on Capital An organisation or an entity is considered separate from its partners or proprietor or shareholders for that matter. Since the […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of Prepaid Expenses Prepaid expenses refer to the advance payment of goods or services the benefits of which shall be received in the future. Prepaid expenses are considered assets on the balance sheet because they represent items paid for […]

-This question was submitted by a user and answered by a volunteer of our choice. What is Petty Cash Book? A petty cash book is a specialized accounting ledger used to record small and miscellaneous expenditures that are typically paid for in cash. It helps in maintaining a record of all such expenses in an […]

-This question was submitted by a user and answered by a volunteer of our choice. Return Inwards Return inwards is also called sales returns or sales allowances, it refers to the customers returning their products to the company. These returns happen when the customer is dissatisfied with the product or receives a defective product. In […]

-This question was submitted by a user and answered by a volunteer of our choice. Provision for Depreciation in the Trial Balance A trial balance shows provision for depreciation as a “credit item”. The value of most of the assets reduces over a period of time. It’s a common practice to record the assets at […]

-This question was submitted by a user and answered by a volunteer of our choice. Cash is commonly received by the business under the following situations: 1. Receipt of payment by a debtor in cash. 2. Sale of goods by the business on a cash basis. 3. Withdrawal of cash from the bank. 4. Cash […]

-This question was submitted by a user and answered by a volunteer of our choice. Purchase Order Purchase Order is a commercial document issued by a buyer to the seller specifying the quantity, price, description, quality of goods required, the payment terms, etc. It is the first step and a very integral part of an […]

-This question was submitted by a user and answered by a volunteer of our choice. Introduction There are certain accounts that are not closed at the end of an accounting year and their balances are carried forward to the next year. These may be Permanent accounts or Real accounts depending on the approach of accounting […]

Profit and Loss Suspense Account An entity prepares a profit and loss suspense account when either the partner is retired or in case of the death of a partner at any time before the end of the reporting period. It is a temporary account created to record the estimated profit for the current financial year […]