Saturday 31 March 2012

Examples of Journal entries in a simplified way - 2


6,Bought Stamps Rs.10

Account to be debited            Postage A/c.(Nominal A/c - Debit losses and expenses)
Account to be credited           Cash A/c(Real A/c-Credit What goes out)

Reason - 
(a)Postage is an expense.. 
(b)Cash goes out. 


7.Withdrew cash from business for personal use Rs. 100

Account to be debited            Drawings A/c (Personal A/c - Debit the receiver of benefit)
Account to be credited           Cash A/c   (Real A/c-Credit What goes out)

Reason - 
(a)Proprietor is the receiver of benefit, when he withdraws cash from business for his personal use. 
(b)Cash goes out. 

8.Paid salary to manager Rs. 300

Account to be debited            Salaries A/c (Nominal A/c - Debit  losses and expenses)
Account to be credited           Cash A/c   (Real A/c-Credit What goes out)

Reason - 
(a)Salaries is an expense.
(b)Cash goes out. 

9.Paid rent to landlord to Rs. 200.

Account to be debited            Rent A/c (Nominal A/c - Debit  losses and expenses)
Account to be credited           Cash A/c   (Real A/c-Credit What goes out)

Reason - 
(a)Rent paid is an expense.
(b)Cash goes out. 

10.Received commission from George Rs. 50

Account to be debited            Cash A/c (Real A/c - Debit  what comes in)
Account to be credited           Commission A/c   (Nominal A/c-Credit Incomes and gains)

Reason - 
(a)Cash comes in 
(b)Commission received is an income.

11.Paid for repairing machinery Rs. 30

Account to be debited            Repairs A/c (Nominal A/c - Debit  losses and expenses)
Account to be credited           Cash A/c   (Real A/c-Credit What goes out)

Reason - 
(a)Repairs to machinery is an expense.
(b)Cash goes out.

12.Received cash from Raghav on account Rs. 400

Account to be debited            Cash A/c (Real A/c - Debit  What comes in)
Account to be credited           Raghav A/c   (Personal A/c-Credit the giver of benefit)

Reason - 
(a)Cash comes in 
(b)Raghav is the giver of benefit

13.Gave loan to Bhasker Rs.500.

Account to be debited            Bhasker's Loan A/c (Personal A/c - Debit  the receiver of benefit)
Account to be credited           Cash A/c   (Real A/c-Credit what goes out)

Reason - 
(a)Bhasker is the receiver of benefit, i.e., loan.
(b)Cash goes out.

14.Purchased goods from Raghu Rs. 300

Account to be debited            Purchases A/c (Real A/c - Debit what comes in 
                                                                  or Nominal A/c - Debit losses and expenses) 
Account to be credited           Raghu A/c   (Personal A/c-Credit the giver of benefit)

Reason - 
(a)Goods come in on purchase or goods purchased are an expense for the business.
(b)Raghu is the giver of benefit.

15.Opened a bank account with Rs. 600.

Account to be debited            Bank A/c (Personal A/c - Debit the receiver of benefit)                                                                 
Account to be credited           Cash A/c   (Nominal A/c-Credit what goes out)

Reason - 
(a)Bank is the receiver of benefit i.e., cash
(b)Cash goes out.

Friday 23 March 2012

Examples of Journal entries in a simplified way

Journal entries explained in a simplified way.

1. X commenced business with cash. Rs. 5000.
2. Bought goods from Keshav for cash rs. 1,000.
3. Sold furniture to Raghav on credit Rs. 5,000.
4. Sold goods for cash Rs. 800.
5. Cash purchases Rs. 600.

1.X commenced business with cash. Rs. 5000.

Account to be debited            Cash A/c.(Real A/c - Debit what comes in)
Account to be credited           Capital A/c(Personal A/c-Credit the giver of benefit)

Reason - 
(a)Cash comes in. 
(b)Proprietor is the giver of benefit, when he gives cash to that business. 

2. Bought goods from Keshav for cash rs. 1,000. 

Account to be debited             Purchases A/c(Real A.c- Debit what comes in or Nominal A/c -   
                                                                      Debit losses and expenses)
Account to be credited            Cash A/c (Real A/c - Credit what goes out)

Reason
(a)Goods come in on purchase or goods purchases are expenses for the business 
(b)Cash goes out by.

3. Sold furniture to Raghav on credit Rs. 5,000. 

Account to be debited               Raghav's A/c(Personal A/c- Debit the receiver of benefit)
Account to be credited              Furniture A/c(Real A/c- Credit what goes out)

Reason
(a).Raghav is the receiver of benefit.
(b).Furniture goes out.

4. Sold goods for cash Rs. 800. 

Account to be debited                 Cash A/c (Real A/c - Debit what comes in)
Account to be credited                Sales A/c (Real A/c - Credit what goes out or Nominal A/c - Credit      
                                                   incomes and gains)

Reason
(a).Cash comes in.
(b).Goods go out on sale or goods sold are incomes for the business

5. Cash purchases Rs. 600. 

Account to be debited                   Purchases A/c (Real A/c - Debit what comes in or Nominal A/c -
                                                                              Debit losses and expenses)
Account to be credited                  Cash A/c (Real A/c - Credit what goes out)

Reason -
(a).Goods come in on purchase or goods purchases are expenses for the business.
(b).Cash goes out.

\Let us discuss on some more journal entries in the coming post :-)
                                             

Friday 16 March 2012

Branch Accounts

Introduction :

Large manufacturing and trading concerns operate at different places in the same country as well as in foreign countries through their own establishments for promoting sales and eliminating middlemen. The system of operating at several places through one's own establishments is called 'branch organisation'. The parent or the main establishment located at the main place of activity and which exercises control over the other establishments is called the Head Office, and the subsidiary establishments located at various places are called the Branches.

Need for Branch Accounting :

A concern which has branches is always interested in knowing the final results (i.e., the profits or losses) of its branches. (if the final results of the branches are good, they may be allowed to operate. If not, either some improvements will be made in their working or they will be closed down.) So, naturally, a suitable accounting system capable of indicating the final results of the branches is required to be adopted by a branch organisation.

Objectives of Branch Accounting :
The main objectives of keeping branch accounts are :
1. To know the final result (i.e., the profit or loss) of each branch separately.
2. To ascertain the real financial position of each branch.
3. To exercise proper control over each branch.
4. To ascertain and to meet the goods and cash requirements of each branch.
5. To meet the requirements of special acts. For instance, the Companies Act of 1956 requires that accounts should be kept by all the branches of a company for the purposes of audit.

Branch Accounting Procedure :

The branch accounting procedure to be adopted by a concern depends upon the size of the branches, the nature of the goods dealt in by them, degree of control desired to be exercised on them and the country in which the branches are located. Therefore, for the purpose of understanding the accounting procedure to be adopted for the branches. branches may be divided into three categories. They are "

1. Dependent Branches
2. Independent Branches
3. Foreign Branches




Sunday 4 March 2012

Recruitments in Reserve Bank of India - 1000 Vacancies

Introduction :

Large manufacturing and trading concerns operate at different places in the same country as well as in foreign countries through their own establishments for promoting sales and eliminating middlemen. The system of operating at several places through one's own establishments is called 'branch organisation'. The parent or the main establishment located at the main place of activity and which exercises control over the other establishments is called the Head Office, and the subsidiary establishments located at various places are called the Branches.

Need for Branch Accounting :

A concern which has branches is always interested in knowing the final results (i.e., the profits or losses) of its branches. (if the final results of the branches are good, they may be allowed to operate. If not, either some improvements will be made in their working or they will be closed down.) So, naturally, a suitable accounting system capable of indicating the final results of the branches is required to be adopted by a branch organisation.

Objectives of Branch Accounting :
The main objectives of keeping branch accounts are :
1. To know the final result (i.e., the profit or loss) of each branch separately.
2. To ascertain the real financial position of each branch.
3. To exercise proper control over each branch.
4. To ascertain and to meet the goods and cash requirements of each branch.
5. To meet the requirements of special acts. For instance, the Companies Act of 1956 requires that accounts should be kept by all the branches of a company for the purposes of audit.

Branch Accounting Procedure :

The branch accounting procedure to be adopted by a concern depends upon the size of the branches, the nature of the goods dealt in by them, degree of control desired to be exercised on them and the country in which the branches are located. Therefore, for the purpose of understanding the accounting procedure to be adopted for the branches. branches may be divided into three categories. They are "

1. Dependent Branches
2. Independent Branches
3. Foreign Branches




Points to be noted while preparing final accounts

1. Trial Balance items
All items given in the trial balance should appear only once, i.e., either in the trading account or in the profit and loss account or in the Balance Sheet.

2. Adjustments:
All items given under adjustments should appear twice(i.e., first in the trading account or in the profit and loss account, and secondly, in the balance sheet) to complete the debit and credit aspects of the transactions given under adjustments.

3. Outstanding Expenses in Adjustments
All outstanding expenses in the adjustments should be added to the respective expenses either in the trading account or in the profit and loss account. Then, they should be entered on the liabilities side of the balance sheet.

4. Outstanding Incomes in Adjustments
All outstanding incomes in the adjustments should be added to the respective incomes in the profit and loss account. Then, they should be entered on the assets side of the balance sheet.

5. Prepaid Expenses in Adjustments
All prepaid expenses in the adjustments should be deducted from the respective expenses either in the trading account or in the profit and loss account. Then, they should be entered on the assets side of the balance sheet.

6.Income Received in advance in Adjustments
All incomes received in advance given in the adjustments should be deducted from the respective incomes in the profit and loss account. Then, they should be entered on the liabilities side of the balance sheet.

7. Outstanding Expenses in Trial Balance
If any outstanding expense is given in the trial balance, it implies that it has already been adjusted with (i.e, added to) the concerned expense. So, it should not be entered in the trading account or profit and loss account. It should be entered only in the balance sheet. In the balance sheet, it should be entered on the liabilities side.

8. Outstanding Incomes in Trial Balance
If any outstanding income given in the trial balance, it signifies that it has already been adjusted with (i.e, added to) the concerned income. So, it should not appear in the profit and loss account. It should appear only in the balance sheet. In the balance sheet, it should appear on the assets side.

9. Prepaid Expenses in Trial Balance
If any prepaid expense is given in the trial balance, it implies that it has already been adjusted with (i.e., deducted from) the concerned expense. So, it should not appear in the trading account or profit and loss account. It should appear only in the balance sheet. In the balance sheet, it should appear on the assets side.

10. Incomes Received in advance in Trial Balance
If any income received in advance is given in the trial balance, it signifies that it has already been adjusted with(i.e., deducted from) the concerned income. So, it should not appear in the profit and loss account. It should appear only in the balance sheet. In the balance sheet, it should appear on the liabilities side.


Let us look at some more adjustments in the coming posts.....:)




Saturday 3 March 2012

Balance Sheet


Balance sheet is concerned with reporting the financial position of an entity at a particular point of time. This position is conveyed in terms of listing all the things of value owned by the entity as also the claims against these things of value i.e. Liabilities.

We can come to know the NET WORTH of a business with the help of a Balance Sheet.

Net worth is the value that a company has. It is easily determined using a balance sheet. Your balance sheet will list the company's assets, things the company owns, and its liabilities, which are debts that a company owes. The net worth is the difference between these two amounts. On a balance sheet, a company's assets equals liabilities plus owners equity, so unless you have negative owner's equity, your net worth will always be positive.

Balance Sheet is a sheet containing the balances of real and personal accounts (i.e., balances of assets and liabilities) of a business.

Important features of Balance Sheet.

As regards Balance Sheet, the following points may be noted:

1. A Balance Sheet is prepared only after the completion of the trading and profit and loss account, because the net profit or net-loss as shown by the trading and profit and loss account is to be adjusted in the capital of the proprietor in the Balance Sheet.

2. A Balance Sheet is prepared with the help of all the balances of real and personal accounts appearing in the trial balance and the various adjustments made at the time of the preparation of the trading and profit and loss account.

3. A Balance Sheet consists of two sides, viz., (1) left-hand side and (2) right-hand side. The left-hand side is called "liabilities side" as it contains the various liabilities. The right-hand side is called "assets side", as it contains the various assets. It should be noted that the two sides of the Balance Sheet, viz., the left - hand side and the right-hand side, are not called "debit side" and "credit side", because the Balance Sheet is only a statement, and not an account.

4. The arrangement of debit balances (i.e., assets) and credit balances (i.e., liabilities), in a Balance Sheet is just a reverse of a ledger account. In a ledger account, debit balances appear in the left hand side and credit balances appear on the right hand side. But in a Balance Sheet, debit balances (i.e., assets) appear on the right-hand side and credit balances (i.e., liabilities) appear on the left-hand side.

5. The total of all the assets must be equal to the total of all the liabilities (including the proprietor's capital). In other words, the two sides of the Balance Sheet must agree i.e., balance. It is for this reason that the statement of assets and liabilities is called a balance sheet.

6. The balance sheet is merely a statement and not an account. Therefore, the words "To" and "By" are not used before the various items in the Balance Sheet.

7. The Balance Sheet is prepared as on a particular date and not for a particular period. Therefore, it indicates the true financial positions only on the particular date, and not on any other date.


8. As the Balance Sheet is prepared as on a particular date, it should be headed "Balance Sheet as on or as at".


Let us now look at the proforma of a Balance Sheet.

Balance Sheet as of ………………
Liabilities
Rs
Assets
Rs
Capital
XXX
Fixed Assets:



Good will
XXX
Fixed Liabilities

Patents
XXX
Long-term loans
XXX
copy rights
XXX
Long-termm Deposits
XXX
Land and Building
XXX


Plant and Machinery
XXX
Current Liabilities

Vehicles
XXX
Incomes received in advance
XXX
Furniture and Fixtures
XXX
Liabilities for expenses
XXX
Loose Tools
XXX
Sundry creditors
XXX
Long-term Investments

Bills payable
XXX
Current Assets

Bank Overdraft
XXX
Short-term Investments
XXX
Short-term Loans
XXX
Outstanding incomes
XXX


Prepaid Expenses
XXX


Closing Stock
XXX


Sundry Debtors
XXX


Bills Receivable
XXX


Cash at Bank
XXX


Cash in hand
XXX

XXXXX

XXXXX

credit default swap

A specific kind of counterparty agreement which allows the transfer of third party credit risk from oneparty to the other. One party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange of regular periodicpayments (essentially an insurance premium). If the third party defaults, the party providing insurance will have to purchase from the insured party the defaulted asset. In turn, the insurer pays the insured the remaining interest on the debt, as well as the principal.

Contra entry example

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