Jamy has purchased a car for Rs. 5,00,000 which he got financed from a bank the extent of Rs. 4,00,000. How will it be shown in the accounting equation?
A n s w e r :
Car increase by 5,00,000.
Loan increase by 4,00,000.

Balance 1,00,000 is paid in cash.. hence, bank balance is reduced by 1,00,000.

Cash A/c Dr. 1940

Cash discount A/c Dr. 60

Roma's A/c Dr. 2000

To sales A/c 4000

( being goods sold to Roma )

Explanation:

Trade discount = 20% of 5000 = 1000

Trade discount is not recorded in the books of accounts.

Cash discount is only allowed on the amount which is being paid in cash at the time of transition.

Cash discount = 3 % of 2000 = 60

Accrued interest is the amount of loan interest that has already occurred, but has not yet been paid by the borrower and not yet received by the lender.

The capital which is not disclosed in the balance sheet is the secret reserve. A secret reserve is the quantity that underestimates an organization's assets or overestimates its liabilities.

The debit balance of a personal account indicated debt owing by the person and credit balance indicates debts owing to the person concerned. For the business, the first one is account receivable or asset, while the second is accounts payable or liability. Every personal account showing debit balance (i.e. excess of debit side over credit side) will reveal the amount by which the debit side is more than the credit side. Debit balance is recoverable from the person whose account shows a debit balance. A debit balance to a personal account is an asset and therefore the more debit balance to a personal account is an asset and therefore the more debit balances to personal accounts, more the assets are in the form of outstanding recoverables. The debit balance of a personal account shows the amount receivable.

Closing stock is the goods that remain unsold at the end of the year. It is valued at Cost price or Realisable Value, whichever is less.

It is based on the principle of Conservatism or prudence, According to which all anticipated losses should be recorded in the books of accounts, but all anticipated or unrealized gains should be ignored.

Bank Reconciliation Statement is a record book of the transactions of a bank account. This statement helps the account holders to check and keep track of their funds and update the transaction record that they have made. Bank Reconciliation statement is also known as bank passbook. The balance mentioned in the bank passbook of the statement must tally with the balance mentioned in the cash book. In the statement, all the deposit will be shown in the credit column and withdrawals will be shown in the debit column. However, if the withdrawal exceeds deposit it will show a debit balance (overdraft).

Accounting as a Source of Information:

 Accounting is regarded as the language of a business. It is used as a means of communication between a business organization and its shareholders. The accounting process is a source of information, it uses business data and processes it to generate relevant information

Accounting is regarded as the language of a business. It is used as a means of communication between a business organization and its shareholders. The accounting process is a source of information, it uses business data and processes it to generate relevant information.

• The accounting records business transaction which is the source of generating information.
• Proper accounting system makes information more reliable.
• Accounting ensures it is a reliable source of information.
• Accounting works as a management information system to the organization. It helps the management to manage the organization in a proper way.
• Accounting system generator various information in the form of different accounts. These documents have to be to true and fair.

In a business transaction, the source document is the first recorded document for the transaction. In this document, all the important details like date, amount, parties name involved, and the nature of the account is reported. Only from the source document, all the entries in other books are recorded.