Anil Kumar Gupta Articles

Trading and Profit and Loss Account - Click To Read Article
It is the summary of such accounts which effect the profit or loss of the concern. These are prepared by transferring from the trial balance all nominal accounts and accounts relating to goods by means of journal entries called 'closing entries'. All remaining accounts i.e. real and personal, relating to properties, assets, debtors and creditors are shown in the balance sheet. In order to know the overall picture of the effect of these accounts they are grouped at one place. Items' increasing profit (revenue) are put on one side (credit) and those decreasing profits (losses and expenses) un the other side (debit). The balance is either net profit or net loss. This income statement is normally divided into two parts - first part is called trading account.

Steps to prepare income and expenditure account - Click To Read Article
In the absence of the trial balance, the income and expenditure account will be prepared on the basis of the receipts and payments account. The steps are as follows:

Single Entry Bookkeeping Accounting System - Click To Read Article
Under the double entry system of book-keeping, both aspects of every transaction are recorded, i.e. one on the debit side and the other on the credit side. Under the single entry system of bookkeeping, both aspects of every transaction are not recorded in the books of accounts. Under this system, the personal accounts of the debtors and creditors are maintained.

Secret Reserves - Click To Read Article
It has been defined as "any reserve which is not apparent on the face of the balance sheet". It is sometimes called "hidden reserve", or 'internal reserve' or 'inner reserve.' This reserve represents the surplus of assets over liabilities and capital. It does not appear in the ledger. The creation of secret reserves strengthens the financial position of the concern. Its financial position would be better than what it would appear on the face of the balance sheet. Secret reserve is created usually by joint stock companies especially banking, insurance and financial concerns.

Revenue - Click To Read Article
According to Paton and Littleon, "Revenue is the product of the entity which refers to the goods and services created during a specific time span by an enterprise."

Reserves and Provisions - Click To Read Article
Every prudently and systematically managed business concern makes some provision out of current profits for meeting an anticipated liability, redeeming a liability, replacing an asset or for some other important business purpose.

Rectification Of Accounting Errors - Click To Read Article
Every businessman is interested in finding out the true profit and correct financial position of his business at the close of the trading period. The effort of the accountant is to prepare the final accounts in such a fashion which exhibits true picture of the business. Accounts are considered to be authentic proof of true financial position of a concern. But in spite of best efforts there are certain transactions which are omitted to be recorded or entered wrongly in the books. Such errors affect the final accounts. An accountant should, therefore, try to locate such errors and rectify them before the preparation of final accounts.

Preparation of Profit and Loss Account - Click To Read Article
As already stated profit and loss account is commenced with gross profit or gross loss as ascertained by trading account. Then the profit and loss account is debited with all indirect expenses and losses. This results in closing of indirect expenses and losses account. The profit and loss account is then credited with various incomes and gains accounts by which all these accounts are closed.

Non Profit Organization Accounting - Click To Read Article
Its aim may not be profit-making, yet it cannot avoid account keeping. It must maintain proper accounts of its receipts, payments, incomes and expenses, because those who have donated money to such institution must know that their money is being used properly and fruitfully. So, profit or no profit accounting is a must. Its sole object is to do good to the society or members through welfare activities. Such institutions are clubs, societies, schools, colleges, hospitals and libraries etc.

Nature of ReservesFunds or Provisions - Click To Read Article
A trader considers it to be prudent to reduce intentionally, the amount available for distribution as profit and to set aside the amount thus, saved for some worthwhile business purpose. should be noted in this connection:

Distinction between provisions and reserves - Click To Read Article
The differences between reserves and provisions are outlined in this article.

Capital and Revenue - Click To Read Article
One of the objects of accounting is to determine whether the business has earned profit or it has suffered loss. For this purpose, profit and loss account is prepared. Total expenditure incurred by the business is divided in two categories: One portion is charged against revenue while the other is shown in the balance sheet as asset. The former is known as revenue expenditure and the latter as capital expenditure. While preparing the final accounts, all revenue items are included in the revenue account i.e., manufacturing, trading and profit and loss account and all capital items in the balance sheet. Any error committed in distinguishing between 'Capital' and 'Revenue' will affect the ascertainment of profit.

Balance Sheet and Profit and Loss Account - Click To Read Article
While introducing the subject of accounting to the readers previously it was stated that one of the main objectives of financial accounting is to provide information about the profits earned or loss suffered by the business during a particular period.

Adjustments of Final Accounts - Click To Read Article
The object of preparing final accounts is to find out the profits earned or losses suffered during a particular accounting period and to present the true picture of final position of the firm. While drawing the final accounts we have taken only those items of income and expenditure that are both earned and received and incurred and paid respectively.


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