In double entry mechanism, every transaction affects and recorded in two accounts. While recording the transactions in double entry, it is ensured that the total amount debited equals to the total amount credited

A schedule showing the items of difference between the bank statement and the bank column of Cash Book is known as Bank Reconciliation Statement.

Date PARTICULAR. RS.
1.4.2014. COST OF MACHINERY. 50000

31.3.2015. LESS : DEPRECIATION.
50000×10÷100. 5000

1.4.2015. BOOK VALUE. 45000

31.3.2016. LESS : DEPRECIATION.
45000×10÷100. 4500

1.4.2016. BOOK VALUE. 40500

31.3.2017. LESS : DEPRECIATION.
40500×10÷100. 4050

1.4.2017. BOOK VALUE. 36450

30.6.2017. LESS : DEPRECIATION
36450×10÷100×3÷12. 911.25

30.6.2017. BOOK VALUE. 35539(it's 35538.75)

Book value=35539
selling price=20000
since BOOK VALUE is greater than the SELLING PRICE IT'S LOSS.

LOSS ON SALE OF MACHINERY=35539-20000=15539


Furniture account

Debit: Date. particulars. RS. Date. particulars. RS
1.4.2014. To bank. 50000. 31.3.2015. By depreciation. 5000
31.3.2015. By balance c/d. 45000

Total 50000 Total. 50000


1.4.2015. To balance b/d. 45000. 31.3.2016. By depreciation. 4500
31.3.2016. By balance c/d. 40500

Total. 45000. Total. 45000

1.4.2016. To balance b/d. 40500. 31.3.2017. By depreciation. 4050
31.3.2017. By balance c/d. 36450

Total. 40500. Total. 40500

1.4.2017. To balance b/d. 36450. 30.6.2017. By depreciation. 911.25
30.6.2017. By Bank. 20000

30.6.2017. By profit and loss. 15539

Total. 36450. Total. 36450(it's 36450.25)

Prepare an Accounting Equation from the following:
i. Started business with cash Rs.1,00,000.
ii. Purchased goods for cash Rs.20,000 and on credit Rs.30,000.
iii. Sold goods for cash costing Rs.10,000 and on credit costing Rs.15,000 both at a profit of 20%.
Solution:

 

'Matching concept ' is one of the fundamental assumptions and has a significance in accounting. It entails that expenses should be matched with the income of that accounting period in order to obtain/ascertain the financial result of that period.....So for this purpose..we will match expenses with revenue of that period...

Given Revenue= 21000
Expenses = 15000

Income will be = revenue - expenses= 21000 - 15000 = 6000

The going concern concept

• It is one of the most fundamental concepts
• It forms the assumption on which all accounting operations are carried out
• According to this concept all accounting transactions must be recorded and reported  with the assumption that the business will continue to operate for the foreseeable future
• It is assumed that the business will keep Fixed Assets and Current Assets as well as
• Liabilities
• it is assumed that the entity will realize its assets and settle its obligations in the normal course of the business
• If this changes assets should be recorded at their Net realizable value instead of at cost

The consistency concept

• Due to the nature that a number of transactions can be treated in a number of alternative ways
• It is possible to constantly create a favorable set of financial statements simply by changing the way these items are created
• For example depreciation can be accounted for using either the straight line and reducing balance method
• A business may be tempted hop from method to method depending on which method enhances it’s profit for example
• The consistency concept prevents this from happening
• It dictates that once the business adopts an accounting principle or method, it must continue to follow it consistently in future accounting periods
• Any change in accounting policies/principles must be disclosed
• This ensures consistent accounting records are comparable from period to period

Debits and credits are used to monitor incoming and outgoing money in your business account. In a simple system, a debit is money going out of the account, whereas a credit is money coming in. 

Debits are money going out of the account; they increase the balance of dividends, expenses, assets and losses. Credits are money coming into the account; they increase the balance of gains, income, revenues, liabilities, and shareholder equity.

Every Business transaction which is to be considered for accounting i.e. every Accounting transaction, has its effect on the fundamental accounting equation.

Each transaction alters the expressions forming the equation in such a way that the accounting equation is satisfied after every such alteration.

The values forming the various terms of the expressions within the equation are altered in such a way that the basic fact, rule or equation, Capital + Liabilities = Assets is always satisfied.

A Voucher in Accounting is a document , which provides the evidence of the occurrence of a transactions is called Voucher. Voucher is also called the Source Document . A voucher is also prepared to show the necessary details in respect of a transaction where there may not be any documentary evidence, particularly in respect of small transactions like petty expenses.

Fixed Assets− These are those assets that are hold for the long term and increase the profit earning capacity and productive capacity of the business. These assets are not meant for sale, for example, land, building machinery, etc.

Current Assets− Assets that can be easily converted into cash or cash equivalents are termed as current assets. These are required to run day to day business activities; for example, cash, debtors, stock, etc.

Tangible Assets− Assets that have physical existence, i.e., which can be seen and touched, are tangible assets; for example, car, furniture, building, etc.

Intangible Assets− Assets that cannot be seen or touched, i.e. those assets that do not have physical existence, are intangible assets; for example, goodwill, patents, trade mark, etc.

Liquid Assets− Assets that are kept either in cash or cash equivalents are regarded as liquid assets. These can be converted into cash in a very short period of time; for example, cash, bank, bills receivable,Flexible Investments etc.

Fictitious Assets− These are the heavy revenue expenditures, the benefit of whose can be derived in more than one year. They represent loss or expense that are written off over a period of time, for example, if Research and Development expenditure is Rs 1,00,000 for 5 years, then each year Rs 2,00,000 will be written off.

An accounting standard is a common set of principles, standards and procedures that define the basis of financial accounting policies and practices. Accounting standards improve the transparency of financial reporting in all countries. These are written statements specifying uniform rules and practices for preparing the financial statement. 

 The objectives of an accounting standard are. 

• To guarantee evenness in the development and display of financial statements.
• To provide data to the users about the policies used in the formation of a financial statement
• To eliminate the effect of diverse accounting policies and practices.
• To guarantee uniformity, clarity, and comparability of financial statement
• To enhance the safety and   of financial statement

Business Entity Concept: The concept of business entity says that a business is a separate entity from its owners. Therefore, for the objective of accounting, the firm and its owners are considered as 2 distinct persons. Hence, when an owner brings in capital into the firm, it is considered as a liability of the business