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Contra entry example

Contra Entry:- If a transaction requires entries on both the debit and the credit sides simultaneously, it is called 'Contra entry'.

Example:- When the cheques previously received are deposited now in the bank, They should be recorded in the bank column on the debit side and the cash column on the credit sided of the cash book. Contra entries do not have ledger folio. To indicate that it is a contra entry, the alphabet 'C' is mentioned in the ledger folio column on both the debit and the credit sides. 'C' means contra entry.

Note :-  If cash is withdrawn from the bank for the proprietors personal use, then it is not a contra entry.

Usually, the contra entries will appear in the following occasions.

a. When an account is opened with a bank.
b. The firm's cash is deposited in the bank.
c. The cash is withdrawn from bank for office use.
d. The cheques received from debtors, are deposited in the bank.

In transactions a&b, the cash balance available with the f…
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Accounts Quiz 3

The process of communicating financial information to people outside of an organization.The expanded accounting equation includes revenues, expenses, common stock, dividends, paid in capital, and ________.Resource accounts with the same balance as expenses.A formula used to compute and balance double entry accounting.Unearned revenues are what type of account?Paid in capital is what type of account?What do journal entries record?The concept that debits will always equal credits.A record or document that contains account summaries for accounts used by a company.An account with an opposite balance.            Post your answers in the comments section. 

Best Practices for Account Reconciliation

Account reconciliation is an under appreciated yet critical control to help ensure an organization's financial integrity. Weaknesses and inefficiencies in the reconciliation process often lead to mistakes on the balance sheet and overall inaccuracies in the financial close.  Since the enactment of Sarbanes Oxley (SOX) in 2002 and other rules and regulations that have followed, ensuring the accuracy of account reconciliations has become increasingly important. In the past, if an external auditor found a material error during review of a company's financial statements, it could still be corrected by the company with an adjusting entry. In most cases, the controller wouldn't have to issue a restatement, nor would the auditor have to report the error.  With the advent of SOX, the call for compliance has risen to another level. If the auditor finds a material error, the company may be required to disclose a failure of controls. And, if the auditor finds a misstatement while revie…

What is 401(k) plan?

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Definition of notes receivable

Note receivableis a claim that requires a formal instrument as proof of debt and usually provides for payment of interest by the debtor.

Notes receivable are also called promissory notes. That is, they require the debtor to pay the promised amount at a definite time or on demand. One making the promise (i.e., debtor) is called the maker, while one to whom the note is payable (i.e., the creditor) is called the payee. Due (maturity) date is the date when the note receivable is to be paid.
Let’s assume that on April 1, 20X3 Vapaus Company (a fictitious entity) has a $10,000 past due account from Aanbod Company. Vacaus accepts a 60-day, 12% note receivable from Aanbod for $10,000. On April 1, 20X3 Vapaus would make the following journal entry to record the receipt of note receivable:
Account Titles Debit Credit Notes Receivable-Aanbod $10,000       Accounts Receivable-Aanbod $10,000
On May 30,20X3 – when the note receivable matures -- Vapaus Company would record interest revenue of $200 (i.e., $10,…

Accounting for cash (sales) discounts

Let's see how the credit term of 2/10, n/30 works in an example. Michael & Co Ltd. ships $1,000 of goods to a customer. If the customer pays Michael & Co Ltd. within 10 days of the invoice date, the customer is allowed to deduct $20 (2% of $1,000) from the purchase of $1,000. In other words, the $1,000 amount can be settled for $980 if it is paid within the 10-day discount period. In the situation when the buyer is paying the account payable to Michael & Co Ltd. for $1,000 early enough to receive a 2% discount, the following entry is made by the buyer: Account Titles Debit Credit Accounts Payable 1,000
      Purchases Discount
20       Cash 980 On the other hand, in the case when we are receiving payment from the Customer for a $1,000 account receivable early enough to offer a 2% discount, the seller would make the following entry: Account Titles Debit Credit Cash 980
Sales Discount 20
      Accounts Receivable 1,000 The method of recording the cash (sales) discounts …

Explanation of 2/10, n/30 credit terms

Indication "2/10, n/30" (or "2/10 net 30") on an invoice represents a cash (sales) discount provided by the seller to the buyer for prompt payment. The term 2/10, n/30 is a typical credit term and means the following: "2" shows the discount percentage offered by the seller."10" indicates the number of days (from the invoice date) within which the buyer should pay the invoice in order to receive the discount."n/30" states that if the buyer does not pay the (full) invoice amount within the 10 days to qualify for the discount, then the net amount is due within 30 days after the sales invoice date. The terms offered by the seller usually depend on the trade custom. Some variations of the cash discount terms, among others, may be "2/15, n/30" (2% discount for the payment within 15 days and the full amount to be paid within 30 days) or "n/10 EOM" (the invoice is due and payable 10 days after the end of the month in which t…