Question

-This question was submitted by a user and answered by a volunteer of our choice. Purchase Returns Type of Account Purchase returns is a nominal account. Generally, purchase returns show zero or unfavorable balance (Credit balance). It can also be termed as a contra-expense account as purchase returns reduce our purchase expenses.   Accounting approaches […]

-This question was submitted by a user and answered by a volunteer of our choice. In this growing competitive world, every organization needs to retain its loyal and trustworthy staff members and make a timely payment towards wages and salaries to its workers and employees. Timely payment not only motivates and built the confidence of […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of “Income received in advance“ Income received in advance refers to an income that has been received by the entity in the current accounting period but it actually relates to the future accounting period. The entity has just received […]

-This question was submitted by a user and answered by a volunteer of our choice. Adjustment in final accounts Adjustment of bad debts is often a tedious task for the students which ultimately leads to an error and false representation of the financial position of the business. They are adjusted in two ways depending on […]

-This question was submitted by a user and answered by a volunteer of our choice. Opening Balance The opening balance of an account can be found on the credit or debit side of the ledger account. Opening balance is represented by “Balance b/d”. When the opening balance is shown on the debit side then it […]

-This question was submitted by a user and answered by a volunteer of our choice. The simple meaning of capital, as known by many, is the sum of money invested in the business by the owner/shareholder/partners. It can be in the form of cash or assets. From the accounting perspective, capital is generally of three […]

-This question was submitted by a user and answered by a volunteer of our choice. To begin with, let me explain to you the meaning of a Subsidiary. Meaning of Subsidiary A subsidiary is a business entity in which another company termed as the parent/holding company owns & controls more than 50% of the share […]

-This question was submitted by a user and answered by a volunteer of our choice. As we all know, a payment is made when we purchase a good or service on credit or cash basis. In terms of a business, a vendor (supplier/creditor) is a person who sells goods to the company on a cash […]

-This question was submitted by a user and answered by a volunteer of our choice. Individuals employed in an organization receive a salary but salaried individuals do not maintain books of accounts. They are not required to pass any journal entry and prepare financial statements. So, it is assumed that the question asked is “journal […]

-This question was submitted by a user and answered by a volunteer of our choice. Outstanding expenses such as outstanding salary, rent, wages, etc. are shown in the trial balance on the credit side as they are a liability for the business. I would like to explain this further with the help of an example […]

-This question was submitted by a user and answered by a volunteer of our choice. Another name of Balance Sheet There are several names given to the balance sheet such as Statement of financial position, Statement of financial affairs, Net worth statement etc., In American history balance sheet was referred by various other names such […]

-This question was submitted by a user and answered by a volunteer of our choice. In accounting, beginning and ending balances are used interchangeably with opening and closing. For the sake of easy understanding, I am assuming the beginning and ending balance of an account to be the opening and closing balance of a ledger […]

-This question was submitted by a user and answered by a volunteer of our choice. In my opinion, the following are some of the difficult adjustments in the final accounts. Sr No. Adjustments 1st effect 2nd effect 1 Uninsured goods destroyed by fire/accident Trading A/c – Credit side (Gross amount) Profit & Loss A/c – […]

Meaning and Definition Sales refer to the number of goods or services sold by a business entity. Sales can be of two types : Cash sales Credit sales Sales where the buyer’s payment obligation is settled immediately with the help of currency notes, bank cards, etc. are called cash sales. Cash sales reduce the risk […]

Meaning of Service Center A service centre is a small unit or a department of an organization that provides services to other departments or units within the organization. The cost incurred by the service centre for providing services is charged to the department using such service.   Examples of Service Center Case 1 ABC Ltd […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of a Deferred Revenue Deferred revenue is an amount received by an entity in advance before delivering the goods or transferring the title to goods or before rendering the services. The concept of deferred revenue applies only if an […]

-This question was submitted by a user and answered by a volunteer of our choice. Working capital = Current Assets – Current Liabilities I believe if you want to understand how the above formula works you will need to understand each part of this formula i.e you will first need to have a clear understanding […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of Non-Current Liabilities Non-current liabilities are obligations of an entity that becomes due at a future date and such future date falls beyond 12 months. Whereas current liabilities are those obligations wherein an entity is liable to honour such […]

-This question was submitted by a user and answered by a volunteer of our choice. Importance of Financial Reporting The importance of financial reporting cannot be exaggerated. It is considered a primary requirement of all the stakeholders for many reasons and purposes. Financial reporting discloses the position, liquidity and performance of the company. The following […]

Difference between Assets and Inventory S.No. Basis of Difference Assets Inventory 1. Meaning Asset refers to the economic resources that are owned or controlled by an entity or business for deriving short-term and long-term future benefits. Inventory refers to the set of finished goods (or) raw materials used for manufacturing goods to sell them in […]

-This question was submitted by a user and answered by a volunteer of our choice. To begin with, financial reporting is mainly of two types: External and Internal. Reports are prepared for stakeholders (external) as well as the managers (internal) of the organization. The different components of financial reporting are as follows: 1. The financial […]

-This question was submitted by a user and answered by a volunteer of our choice. Equity is the capital raised by a company for the purpose of purchase of assets or for making an investment in a specific project or for the smooth functioning of operations. It’s important as it represents the value of an […]

-This question was submitted by a user and answered by a volunteer of our choice. Depreciation as an Operating Expense Yes, depreciation is an operating expense. To understand this you might want to check the illustrative case given below; You have an entity providing financial services to your clients. You had commenced it 4 years […]

-This question was submitted by a user and answered by a volunteer of our choice. Meaning of Days Payable Outstanding Days Payable Outstanding (DPO) refers to the average number of days taken by an organization (or) company to pay to its outstanding suppliers/vendors. It is calculated on the credit purchases made by an organization. It […]

What is a Purchase Requisition? In the case of larger organisations, it may so happen that the procurement department places an order of purchase only once such requirement is approved by another department. When the procurement department intends to procure goods it will have to issue a purchase requisition to its financial wing. Thus the […]