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Accounts is debit, credit and Assets & Liability, income and Expenses it should be included finance is
nothing but only for future element it should be included for the data.
Answered by: vijen on: Dec 23rd, 2011
In simple language accounts is recording, classification, summarizing of all types of money transactions.
Finance work is taking important decision on the basis of accounts.
What is a chargeback?
Chargeback means refund / return of funds to the buyer. Here the bank reverts back the transaction
between the buyer and seller when chargeback is initiated
Why rule of nominal account is exactly opposite with the rule of personal and
real account?
The reason why rule of nominal account is opposite with the rule of personal and real account is that
Nominal Accounts CANNOT be SEEN & TOUCHED.
Obviously the first thing you’ll need to do is to obtain both the bank statement for the period of interest and your
accounting records. If the ending bank statement and your accounting records match, then you’re done!
Chances are you’ll have an outstanding check that has not cleared with the bank. When we say it hasn’t cleared, this
usually means that the person with the check has not deposited it and thus the bank has not recorded it. For any
outstanding checks like this you will need to deduct them from the bank’s number.
On some occasions your company’s records will reflect a deposit that the bank has not recorded yet in its accounts.
This usually happens when you take a deposit to the bank late on a night when the bank is not opened. Your records
will indicate the deposit, but obviously the bank’s will not. In these situations you need to add the deposits to the bank’s
ending balance number.
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What is letter of credit?
A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for
the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank
will be required to cover the full or remaining amount of the purchase.
Liabilities are on Left side and assets on right side in balance sheet
Why always liabilities are on Left side and assets on right side in balance sheet?
The accounting equation is Assets= Liabilities + Stockholders Equity As you can see the assets are on
the left and Liabilities are on the right.
Types of Ledgers?
The book that contains the accounts in book keeping is known as ledger. Ledgers are also referred to in accounting
as the principal books of accounts. Accounts are basically of three types; real, personal and nominal. The Real
accounts are those that are concerned with property and assets. Personal accounts are those that refer to accounts
of a person and nominal accounts are concerned with incomes, gains and expenses and losses. The purchase and
sales books are not ledgers but are records of those transactions, whereas a cash or bank book is a kind of
subsidiary book. Journals are books in which the entries are originally made and then transferred to the respective
accounts of the ledgers. There can be a whole range of ledger accounts including goods account, creditors account,
profit and loss account,trading account, salaries account etc. At the end of the year a statement of the position of
assets and liabilities is prepared known as the balance sheet.
However the answer is that we will transfer the amount to the Suspense account.
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Audit trail
An audit trail allows an individual to track a transaction from the journal entry to the general ledger
through to the financial statements. The audit trail can also find all the transactions that comprise the
dollar amount for each account listed on the income statement and balance sheet.
Audit trial is a chronological sequence of audit records, each of which contains evidence directly
pertaining to and resulting from the execution of a business process or system function
If an asset is purchased and the same is not used for the financial year, should
the company charge the depreciation and the reason for the same
Yes, we will charge depreciation on that asset which is not used in financial year because after some
some time its value will be reduced by obsolescences.
In this case, we will consider that asset which is not used in the financial year but depreciation will not
be considered.
Depreciation
Amortization
Amortisation is a concept very similar to depreciation.In case of depreciation, it is charged to assets
marking reduction in their value.In case of loans the repayment means amortisation.
Why net profit is shown in the liability side of the balance sheet?(important)
Net Profit is the amount earned by the Owner and it is always added to the Capital. As Capital is liabilty
of the firm/Co. therefore it is shown on the liability side of the balance sheet.
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What is debtors reconciliation?
A Debtor's reconciliation involves adding the total of your subsidiary Debtors (Accounts Receivable)
Accounts and agreeing that total to the amount in Trade Debtors (Current Assets) on the Balance Sheet
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What is operative accounts ?
An operative accounts means an account for day-to-day operations of the business.
Control account
General ledger account whose balance reflects the total of balances of related subsidiary
ledger accounts. Accounts receivable and accounts payable are the most commonly
used control accounts, and their balances serve as a crosscheck (control) of the accuracy of
the associatedsubsidiary records. Also called controlling account.
Debt securities
Any debt instrument that can be bought or sold between two parties and has basic terms defined,
such as notional amount (amount borrowed), interest rate and maturity/renewal date. Debt securities
include government bonds, corporate bonds, CDs, municipal bonds, preferred stock, collateralized
securities (such as CDOs, CMOs, GNMAs) and zero-coupon securities.
Minority interest
Minority interest (also known as Non-controlling interest) in business is an accountingconcept that
refers to the portion of a subsidiary corporation's stock that is not owned by the parent corporation. The
magnitude of the minority interest in the subsidiary company is generally less than 50% of outstanding
shares, else the corporation would generally cease to be a subsidiary of the parent.Ordinary shares
and preference shares
Letters of credit
Letter of credit is always backed by Fixed Deposit. Bank does not issue letter of credit unless and until it
has tangible securities provided by you pledged in bank's favour.
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Capital receipt is a receipt when you sold any business asset like building, machine, furniture etc. Where
as revenue receipt refers to receipt of sale proceeds, comission received, tax refund etc.
Accounting objectives
1. To ascertain the profit or loss earned by the firm
2. To know the financial position of the firm
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Q: Is it possible for a company to show positive cash flows but be in grave
trouble?
A cash flow statement shows the net change in cash flows for the company's
operating, investing and financing activities during a given period. While each
category affects overall cash flow, operating cash flow is especially critical
because it shows changes in cash from the company's primary business
activities. The culmination of the cash flow statemen t is the cash flow for the
period end date after positive or negative changes have been recorded.
Bad Debt
In his October 2010 article "Advance America -- Where High Cash Flow Is
Misleading" for GuruFocus.com, Saj Karsan points out an example of a company
that predicts and writes off significant bad debt accounts when formulating its
net income statement. However, the company's cash flow statement does not
account for these bad debts and shows a much higher positive cash flow than
the company will ever collect. In essence, it has millions of dollars of expected
cash it knows it will never receive.
Profitability Concerns
Sales and profits are two very distinct business concepts. Sales or revenue
simply means the company collects cash in exchange for the sale of products or
services. However, companies often sell products for less than they actually
paid for them. When this is done in desperation to generate cash to pay bills, to
avoid bankruptcy, or to drive immediate traffic, although it produces cash flow
the company is not profitable and is selling its inventory at a loss.
Short-Term Focus
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generate more cash and income. Thus, comparing cash to long-term liabilities is
important.
How can a company make profit but still be cash flow negative?
You generate (or lose) cash from your operations (income statement). Yes,
that's definitely one of the components. But it is not an exact one to one
correlation.
Aren't there things included in your income statement that have nothing to do
with cash, such as depreciation and amortization? These non-cash items
included in your income statement are adjusted by those amounts.
Secondly, you have working capital (current liabilities and current assets)
changes. Even though you made sales (included in your income statement),
that doesn't mean you collected all the cash related to them. Similarly, you
incurred expenses (included in your income statement), but that doesn't mean
you paid all of the related cash (i.e. accounts payable would represented the
unpaid portion of expenses incurred). So those types of items, among others,
appear on the cash flows statement as changes in working capital.
Thirdly, you have may have used (or received ) cash for things that do not
appear on your income statement. Paid $1 million in capital expenditures to
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build your store that hasn't even opened yet? Borrowed $2 million in
preparation for new production equipment? Obviously, those balance sheet
items (assets and liabiltiies) affected whether cash went up or down, but had
nothing to do with your operations (income statement).
A: Initially, there is no impact (income statement); cash goes down, while PP&E
goes up (balance sheet), and the purchase of PP&E is a cash outflow (cash flow
statement)
Over the life of the asset: depreciation reduces net income (income statement);
PP&E goes down by depreciation, while retained earnings go down (balance
sheet); and depreciation is added back (because it is a non -cash expense that
reduced net income) in the cash from opera tions section (cash flow statement).
Q-What is a debit note and credit note? What are the journal entries for
these?
When the purchaser returns the goods to the seller the Purchaser sends a Debit
Note to the seller (ie. the purchaser debits the seller in his books ie. Purchasers
Books) and the Seller sends a Credit Note to the purchaser (ie. the seller credits
the Purchaser in his Books ie. Sellers Boo ks).
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