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Accounts thoroughly
These slides
Are prepared By Only
Only to Difficult
Clarify major Professors Augustin Amaladas Adjustments
Doubts and Shanthi Augustin are
To students M.Com(Loyola, Chennai)., AICWA explained
And staff.
Alternative work is rest
Why does Equity shares and fixed
assets appear first in the Balance
sheet
• The balance sheet is prepared in order. Left hand side
liabilities and right hand side Assets. If business
comes to an end the liability which is paid last is
share capital. The last asset which is sold out will be
fixed asset. Among fixed assets goodwill(good name)
is sold out last.No one wants to sell one’s name unless
everything is lost.The order of arrangement is known
as order of permanence.
• What is the Order of Liquidity?
Order of Liquidity?
• The liability which is disposed off first comes
first in the balance sheet. The asset which is used
to pay liability first appears first in the assets side.
• Therefore cash appears first in the balance sheet
asset side. And Creditors should appear in the
liability side first.
• The above two orders are known as marshalling
Income tax paid by sole proprietor and
partnership business-Journal entry?
• Income tax does not recognise sole proprietor or firm as a
unit but the individuals who run the organisation are
recognised.
• Income tax is a direct tax. Direct taxes such as Income tax,
wealth tax are to be paid by the individual who runs such
organisation.It is a personal liability even such incomes from
business.
• If business money is used for personal use of paying tax, then
such payment to be treated as drawings.
• Journal entry: Debit drawings and credit Cash.
• Note: do not debit incometax account.
• If you debit income tax account it means that its treated as
business expenditure. It is wrong in this case.
If Income tax paid by company?
• Company is a separate legal entity.The
payment of tax is the liability of the
company. It is not the liability of
Shareholders. SHARE HOLDERS ARE
DIFFERENT FROM COMPANY.
• It is a business expenditure.
• Journal entry: Debit Income tax account
and credit Cash account.
How do you deal indirect taxes?
• Indirect taxes such as sales tax, excise duty, Octroi
duty, import duty, export duty are actually
imposed on the individual who buys such article.
It is not the responsibility of the individuals who
run the business but by the business itself. It is a
business expenditure.
• Journal entry: Debit sales tax a/c Credit cash a/c
5.Double entry / Single entry
Profit = Debtors
Cost +
Add to Closing
stock in trading a/c and Reduce from debtors
Balance sheet
What is the JE when goods are
received by consignee from
consignor?
• No journal entry. Why?
• Owner ship is not transferred from consignor to
consignee. Even though the goods are physically in
the hands of consignee but there is no transfer of
goods taken place from consignor to
consignee.Owner ship should be transferred to pass
journal entry.
• The concept is that one person can not transfer to
oneself.
When branch sends goods to
head office or vice versa, what is
the journal entry?
• No journal entry as ownership is not transferred.In
fact there can not be any sales tax, income tax.
• One person can not earn profit by transferring to
one self.Unless goods are transferred to third party
no profits can be realised.
If sales return given in the
adjustment?
• It means we have to pass a fresh journal
entry.
• JE: Sales a/c Debit
Debtors account credit
We have to reduce sales and debtors once
goods are returned.
What is the JE when normal loss
occur?
• No Journal entry. Why.
• Cost per unit will be inflated.You make
customer to bear the total cost.
• If abnormal loss occurs why do we pass
journal entry?
• It is because some portion will be recovered
from insurance and some portion will be the
loss to be written of against profit.
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