User talk:Bl sndr

Transaction Reference Number : 9981042174

Double Entry

Every transaction consists of two aspects.

1. The receiving Aspect

2. The giving aspect.

The recording of this two-fold effect of each transaction is called double entry. The principle of double entry is for every debit there must be an equal and a corresponding credit & vice versa.

JOURNAL

Journal is a daily record of business transactions. It is also called as a Daybook. It is used for recording all day today transaction in the order. In which they occur. It is a book of prime entry because all transactions are recorded first in this book. The process of recording transactions in the journal is called journalizing.

TRADE DISCOUNT

Trade discount is a reduction in selling price allowed at the time of sale. The buyer pays only the net price. No entry is made in books for the trade discount.

Bad debts

When a debtor becomes insolvent the trader will not be able to realize full amount due from him. A part of if will remain utilized. The unrealized amount is called bad debts.

Debit note

Debit note is a statement sent by the purchaser to the seller giving the particulars of the goods returned. It indicates the supplier that is account has been debited with the value of goods returned.

Credit note

When the seller receives back goods from the purchaser along with a debit note the seller has to acknowledge the same by sending a credit note conforming the acceptance of the debit note.

Contra entry

Contra entry means recording the tow aspect of the transaction at both side of same account.

Petty cash book

Petty cash book is maintained to record petty cash expenses of the business such as postage, telegrams, stationery, carriage, cartage etc.

BRS

When the cash book and pass book are compared. It is often found that the balances shown by these two books are do not agree. Then a reconciliation statement is prepared to explain the difference. The statement is called “BRS”

Reasons


 * Cheques issued but not presented for payment.


 * Cheques deposited but not collected.


 * Direct payment into bank on behalf of the customer


 * Bank charges. Interest debited in pass book


 * Cheques dishonor


 * Collections made by the banker on behalf of the customer


 * Payment made by the banker on behalf of the customer


 * Cheques drawn but not recorded in cashbook.

Trail balance

Trail balance is a list of all balances standing on the ledger accounts and cashbook of a concern at any given date. It indicates whether or not the books of accounts have been written in accordance with the rules of double entry.

Suspense account

Suspense account is an imaginary opened for the purpose of tallying the trail balance. It the total of credit side of TB is short Suspense account is credited.

Profit and loss account

The main objective of P&L account is to ascertain the net profit or net loss made by the business of a particular period.

Closing Stock

Unsold stock with the trader on the last day of accounting period. Generally it is given credit side of the trail balance.

Balance sheet

To know the financial position of the business house on a particular date, a statement is prepared it is called balance sheet, or assets and liabilities on a particular date, which is known as balance sheet.

Accounting

American institute of Certified accounts defined as the art of recording classifying and summarizing in a significant manner and in terms of monitory transactions.

Trade accounting

Financial Accounting:- The main object of financial accounting is to find out the profitability and to provide information about financial position of the concern.

Cost Accounting:- The main object of cost accounting is to find out the cost of goods produced or services    rendered by business.

Management Accounting:- The primary object of management accounting is to supply relevant information at appropriate time to enable it to take decision and affect control. Management accounting provides information to the management for planning and coordinating the activities of the business.

Accounting Concepts

Business Entity concept:- This concept is implies that a business unit is regard as separate and district from the persons who supply the capital to it.

EX:- It the proprietor invests Rs. 20000/- into business it will be shown as a liability in the books of business. The proprietor will be treated as creditor to the extent of capital provided by him.

Dual aspect concept:- every financial transaction involves two fold aspects, one is receiving the benefit and another one is giving the benefit. Hence every business transaction has dual effect.

Depreciation

Fixed assets of a business concern like buildings, machinery etc are acquired of use in business. These assets are gradually lose their value on account of wear & tear or due to lapse of time. This loss or decrease in value of fixed assets is called depreciation.

Trading account

Trading account is a part of profit & loss account. Usually P& L account is divided into tow parts. The first part termed as trading account. It is prepared to show the amount of profit or loss on account of purchasing the goods and selling them. Such profit termed as gross profit.

Flow of funds

The Term flow means change. Flow of funds means change in funds or change in working capital.

Cash flow statements

It is a statement defecting changes in each position from one period to another period.

Cost Sheet

A statement, which is prepared to ascertain the cost of sales.

Break Even point

The point of sales volume at which total revenue is equal to total cost is called Break-even-point. It is a point of no profit or no loss.

Working capital

The excess of current assets over current has is called working capital.

Voucher

Any written document in support of business transaction is called voucher.

Accounts

It is the language of business it is the process of recording, classifying, and summarizing business transactions and presenting economic information about a business.

Book – keeping

Bookkeeping is the science and art of correctly recording in the books of accounts all those transactions that results in the transfer of money or moneys worth.

Capital

The amount of money or money worth introduced into the business is called capital.

Double entry accounting

Double entry accounting is a system of recording transactions in a manner that maintains the equality of accounting equations. It records each transaction as a debit & credit.

Current assets

Which assets can be realized & readily available to discharge the liabilities with in the current assessment year is called current assets.

EX: Coalmine, Oil Etc…

Drawings

Any amount or goods withdrawn less the owner of business for his personal use is called drawings.

Free sample of goods

Some times in order to promotion of sales of goods some of the produced goods are distributed as free samples.

Depreciation methods

Straight line method

Written down method

Annual method

Depreciation fund method

Change of methods

Adjustment entries

To shown the true & fair value of P & L Account for that we will pass some adjustment entries.

Operating expenses

Expenses which are incurred for running of the business & which are directly related to companies production are called operating expenses.

EX:- Admin Exp, Selling Exp, and Distribution Expenses.

Operating profit

The excess of gross profit over operating expenses called operating profit.

Gross Profit-operating expenses=operating profit and loss account.

Revenue expenditure

An expenditure which is consumed during the current period and which effects the income of the current period is called revenue expenditure.

EX:- Administration Expenses, goods purchased for sale Depreciation, interest on loan.

Capital profit

Capital profit is a profit made on the sale of fixed assets or profit earned on getting capital for the business.

Revenue profit

Profits earned by trading are called revenue profit.

EX:- Sale of goods, income from investments Revenue profits are taken to Profit & loss account.

Revenue receipts

Money obtained from sale of goods transfer fees is called revenue receipts.

Capital receipts

Money obtained from the sale of business assets or fixed assets, investments, issue of shares, debentures are called capital receipts, theses receipts are shown in Balance sheet.

Revenue losses

Which losses occur at trading operations is called revenue losses. Revenue losses shown on the Profit & loss Account Debit side.

Capital Expenditure

Which expenditures benefit which is not fully consumed in one period but spread over several periods.

Ex:- Purpose of fixed assets.

Ratio analysis

It is an analysis of financial statement done with the help of ratios.

Debt equity ratio

This ratio indicates the preparation between the shareholders funds and borrowed founds.

Debt equity ratio=Debt/Equities

Proprietary Ratio

This ratio establishes the relation ship between proprietor’s funds and the total tangible assets. The general financial strength of a firm can be understood from this ratio.

Proprietary Ratio=Networths/Total assets

Operating cycle

The average period times between the purchase of goods or raw material are the realization of cash from the sale of goods.

Deferred Expenditure

It is a heavy expenditure, which this benefits, or service survey for so many years.

Ex:-Advertisement

Ratio analysis

Ratio express numerical relationship between tow numbers. The relation ship of one item to another expressed in simple mathematical form is known as a ratio. Accounting ratios are expressed in the form of time proportion, Percentage or per one rupee.

Objectives of Ratio Analysis

·        To simplify the comparative picture of financial statements

·        To assist the management in decision-making.

·        To gauge the profitability, solvency and efficiency of an enterprises.

·        To ascertain the rate & direction of change and future potentiality.

Financial ratios

The financial ratios may be categorized in various ways. Viz liquidity debt, profitability & coverage ratios. The first two types of ratios are computed from balance sheet. The last two are computed from the income statement

The ratios have been categorized under the following headings.

·        Ratios for analysis of capital structure or leverage.

·        Ratios for analysis of turnover.

·        Ratios for analysis of liquidity position

·        Ratios for analysis of profitability.

·        Ratios for analysis operational efficiency.

Capital structure or leverage ratios

Financial strength indicates the soundness of the financial resources of an organization to perform its operations in the long run. The parties associated with the organization are interested in knowing the financial strength of the organization.

Debt Equity ratio

Debt equity ratio is determined to ascertain the soundness of the long-term financial policies of the company. This ratio indicates the proportion between the shareholders funds and the total borrowed funds. Shareholders include share capital, reserves & surplus & borrowed funds, which includes both long-term funds.

Debt equity ratio=Debt / Equity

Capital gearing ratio

This ratio establishes the relation ship between the fixed interest bearing securities & equity shares of a company.

Capital Gearing Ratio = Fixed interest-beating securities / Equity shareholders funds

Interest coverage

This ratio measures the debt serving capacity of a firm in so far as fixed interest on long-term loan is concerned. It is determined by dividing the operating profits or earning before interest and taxes (EBIT) by the fixed interest charges on loans.

Interest coverage = EBIT / Interest

Prepaid expenses

Expenses relating to the subsequent period paid in advances in current period.

Retained earnings

Accumulated excess of earnings over losses and divided is retained earnings

Accounts Receivables

It consists of receivable amounts to the enterprises from its customers.

Long term Investments

Shares, debenture, bonds, etc which investments retained more than one year are called long term investments.

Account Payable

This amount represents the claims of suppliers relating to goods supplied or services rendered by them to the business for which they have not yet been paid.

Long term Liabilities

Which liabilities due for payment more than one year called long-term liabilities.

Contingent Liabilities

Which liabilities may or may not result in liabilities are called contingent liabilities. It

Would show as a footnote in the balance sheet.

Example: Legal suit pending against the business enterprises for compensation.

Favorable Balance As per Pass book

Add

Cheques deposited but not cleared

Charges made by the bank

Less

Cheques issued but not presented for payment

Favorable Balance As per Cash book

Add

Cheques issued but not presented for payment

Less

Cheques deposited but not cleared.

Amount wrongly debited.

Fixed Assets Turn Over Ratio

The fixed assets turn over ratio measures the efficiency with which the firm is utilizing its investment in fixed assets such as land, buildings, Plant & machinery, furniture etc. It also indicated the adequacy of sales in relation to investment in fixed assets.

Fixed Assets Turn Over Ration=Sales/Net Fixed Assets

Current Assets Turn Over Ratio

The Current assets turnover ratio ascertains the efficiency with which current assets are used in business.

“Current Assets is to give an over all impression of how rapidly the total investment in current assets is being turned”

Prof. Guthamann

Working Capital Turnover Ration

This Ratio shows the number of times working capital is turned over in a stated period. This reflects the extent to which a business is operating on a small amount of working capital in relation to sales.

Working capital turnover ratio=Sales / Net working capital

Inventory Turn over Ration

This is also known as stock turnover ration, normally established the relationship between cost of goods sold and average inventory. This ratio indicates whether investment in inventory is with in proper limit or not.

Inventory Turn over Ratio=Cost of goods sold/Average inventory

Liquidity

The term liquidity is described as convertibility of assets ultimately into cash in the course of normal business operations and maintenance of regular cash slow. Liquidity position of a firm depends upon the amount invested in current assets and the nature of current assets.

Current Ratio

The most widely used measures of liquid position of an enterprise are the current ratio i.e. the ratio of the firms current assets to current liabilities. It is calculated by dividing current assets by clias.

Current Ration=Current assets/Current liabilities

Liquid or Quick Ratio

Liquid or quick ratio is a measurement of firms ability to convert its current assets quickly into cash in order to meet its current liabilities. It is a measure of judging the immediate ability of the firm to pay off its current obligations.

Liquid or quick ratio=quick assets/current liabilities

Analysis of profitability

Profitability is a measure of efficiency and control. It indicated the efficiency or effectiveness with which the operations of the business are carried on poor operational performance may result in poor sales and therefore low profits low profitability may due to lack of control over expenses resulting in low profits.

The following ratios are used to measure the profitability position from various angles.

Gross profit Ratio

Net profit Ratio

Return on capital employed

Operating Ratio

Operating profit Ration

Return on owner’s equity Ratio

Earning per share

Dividends pay out Ration

Gross profit Ration

The GP Ratio Or GP margin ratio express the relationship of GP of on sales

“GP margin ratio indicates the gross margin of profits on the net sales and from this margin only all expenses are met and finally net income emerges.

B.R.Rao

Net sales=Total sales-Sales returns

Gross profits= Difference between sales and cost of goods sold

Gross profit=Gross profit/sales*100

Net profit Ratio

Net profit is a good indicator of the efficiency of a firm. Net Profit ratio or NP margin Ration is determined by relating net income after taxes to net sales Net profit here is the balances of profit and loss account which is arrived at after considering all know

ating incomes such as interest on investment, dividends received et. And non operating expenses like loss on sales of investment, provisions for contingent liabilities etc.

Net Profit=Net profit/sales*100

Return on Capital employed

The prime objective of making investment in any business is to obtain satisfactory return on invested. Hence the return on capital employed is used as a measure of success of a business in realizing this objective.

Return on capital employed=operating profits/capital employed*100

The term capital employed means share capital + reserves & surplus + long term loans – (non business liabilities + fictitious assets) and the term profit means profit before interest & tax. Interest means on long term borrowings.

Operating Ratio

This ratio establishes the relationship between total operating expenses & Sales, the total expenses includes cost of goods sold + other operating expenses. A higher ratio indicates that operating expenses are high.

Operating profit ratio= Net operating Profit/sales*100

Return on owners equity or Share holders funds

The ratio of return on owner’s equity is a valuable measure for judging the profitability of an organization. This ration helps the shareholders are always interested in knowing as to what return they earned on their invested capital since they bear all the risk.

Net profit after interest and tax/owners equity net worth*100

Earning Per Share

It measures the profit available to the equity shareholders on a per share basic, i.e. the amount that they can get on every share held. It is calculated by dividing the profits available to the shareholders by the number of the outstanding shares.

Earning per share= Net profit after tax – preference dividend/No. of equity share

What is VAT? What type of VAT? In tally 7.2 how’s work VAT?

What is VAT? What type of VAT? In tally 7.2 how’s work VAT?

VAT is value Added Tax in European Countries. It’s a Sales Tax levied on the sale of goods and services. It is an Indirect Tax.

Tally 7.2 simplifies every aspect of VAT:

1.   Determine user-defined VAT rates on products, classification of purchase and sales transactions based on VAT DEFINITIONS.

2.   Generate VAT – complaint invoices.

3.   Collate VAT reports containing input tax paid, output tax collected, carry forward balance and net tax payable.

4.   File specific monthly/quarterly and annual Statutory Returns and forms complaints wit the laws of your state

Tell us about your experience in cost accounting.

In a manufacturing company different shop they will send docket for the no. of hours they are worked. We feed the docket and have to prepare the labour cost ledger. Material accounting section will provide information regarding the material consumed, so we have to prepare material cost ledger. Finally we have to prepare cost ledger by combining material and labour cost.

What is chargeback?

A process in the industry where a wholesaler requests an amount that is the difference between the manufacturer’s price to the wholesaler and the contract price to the resale customer.

The actual chargeback occurs when the wholesaler sells the manufacturer’s product at contract price that is below wholesaler acquisition cost (WAC).

Especially evident in pharmaceutical industry

What are fixed costs?

The costs that are fixed irrespective of production are fixed costs. Ex: rent, depreciation.

What are variable costs?

Variable costs are depending upon production. U re increases production automatically variable cost is also increased. Decrease in production means automatically variable cost decreased.

OR

Variable Costs are those that are directly proportionate with the quantity of production and or directly associated with the service.

What is marginal cost?

Marginal cost is nothing but you produce additional unit in production. That additional unit cost is called marginal cost.

OR

Marginal Cost is variable cost As Long As your fixed assets can handle the output. If that additional unit forces you to acquire more assets to handle it, your marginal cost can be way out of line with your average variable cost.

What is BEP? BEP-Break Event Point. It indicates no Loss and no Profit.

BEP means Break Even Point. This is the point when the firms total cost= total revenue.

OR

Breakpoint is called as when the production reached to cost. Then production is reached ot cost on you can get the no profit and no loss. BEP sales tell that sales is reached to cost then only u can get the no loss and no profit.

OR

BEP is a point when company is at the position of no profit no loss. In LC-CURVE It is the highest point. Whenever a company comes in existence in the starting it is investing more and earning less slowly it comes in the position when saturation sate comes means its expenses are equals to its earrings. This state is actually known as BEP.

What do you mean by LC?

LC- Letter of Credit means a guarantee given by the bank during the course of International Business.

How much depreciation to be calculated of fixed assets older than 5 years.

10% per year

What is authorized share capital? What is paid up share capital? What is contingent liability?

The capital which is mentioned in the capital clause of the memorandum of association is called as authorized capital.

For example If the capital requirement of the business in the long rung is Rs. 10, 00,000 and current requirement is only Rs. 50,000.

The amount of Rs. 10, 00,000 is called as authorized capital. To collect Rs.50, 000, if you issued shares, that Rs. 50,000 is called as issued capital. If the share holders subscribed only for Rs.40, 000 is called as subscribed capital. If you call only Rs. 25,000 for your current requirement, then this 25,000 is called as called up capital.

Say for example one share holder has not paid his share, you received only Rs. 24,000. this Rs. 24,0000 is called as paid up capital. Dividends are paid only on paid up capital.

The liability may or may nor arise in the future is called as contingent liability. If you discounts a bill in the bank, the bill may honor or dishonor on the due date. In the mean time this is consider as contingent liability. If is shown as foot more to the balance sheet.

What experience have you had in fixed assets accounting?

What is the difference between the different depreciation methods?

In straight line method the amount to be depreciated remains constant where as in written down method the amounts to be depreciated deceases by each passing year.

What are fictitious assets?

Fictitious asset do not have concrete form and it is not realizable by cast. Eg: preliminary expenses, advertising expenses, discount on issue of shares/debenture, dvpt exps.

OR

Fictitious where there on movement of cash, just it is book entry

OR

Fictitious are assets not seeable items like goodwill, patents, copy rights, royalties.

What are the journal entries which get passes from asset purchasing to asset retirement?

To asset clearing accountCR

At the time of retirement

The nbv amount has been moved to the gain & loss account.

In sale case

We need to pass a journal entry to transfer the amounts from gain & loss account cr and asset sale clearing accounts cr.

I hope u will understand the entries.

What is accumulated depreciation?

Accumulated depreciation is the amount of depreciation from day one to till date on an asset. In other words it is the total of depreciation given on fixed asset from its date of purchase.

Gross amt- accumulated depreciation = net value of asset

OR

Accumulated depreciation is the write-down of an asset’s carrying amount on the balance sheet due to loss of value from usage and age.

Explain about customization of Depreciation areas ( Book Depreciation, Tax Depreciation)?

Following are the steps:

1.   First activate the Dep areas (book & tax) in asset class.

2.   Assigning Dep key to Dep Areas either at Asset lass level or Asset master data level.

3.   Assign Screen layout to dep areas.

4.   Determine how Dep Areas post to general ledger.

5.   Assign G/L accounts

6.   Define posting rules and document type for Depreciation