Journal Entries for issue and redemption of Debentures

Debentures A debenture is an instrument of debt executed by the company acknowledging its obligation to repay the sum at a specified rate and also carrying an interest. It is only one of the methods of raising the loan capital of the company. A debenture is thus like a certificate of the loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures become a part of the company’s capital structure, it does…

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Introduction to Accounting

Accounting “Accounting is the art of recording, classifying and summarizing in a significant manner and in term of money, transactions, and events which are, in part at least of financial character, and interpreting the results thereof. ” Accounting Cycle The Accounting cycle is defined as the sum of all process of recording and processing of the accounting events and activities of a company. Accounting Cycle begins when t the transaction happens and ends when the same got entered into the financial statements. Difference between Bookkeeping and Accountancy ObjectiveBasic Basis Book Keeping…

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Depreciation, Provisions and Reserves

Depreciation

Depreciation, Provisions, and Reserves Depreciation Depreciation is the decrease in the book value of the fixed assets due to normal wear and tear, the passage of time, change in economic environment and expiration of legal rights. Factors affecting the amount of Depreciation. Historical cost. Expected useful life. Estimated residual value. Methods of charging Depreciation 1. Straight Line Method This method is also termed as Original cost method because depreciation is charged at a fixed percentage on the original cost of the asset. Advantages Limitations ü Simplicity. ü Equality of depreciation . ü Assets can be completely written off. ü Difficulty in calculation. ü Undue pressure in later years. ü Unapproved by tax authorities. 2. Diminishing Balance Method This method is also termed as Written down value method because the value of depreciation goes on decreasing year after year. Advantages Limitations   ü Easy calculation. ü Approved by tax authorities. ü Equal charge against income.   ü Omission of the interest factor. ü Knowledge of the original cost. ü Assets cannot be completely w/off. Difference Between Provision and Reserve Basis Provision Reserves Purpose Created for a particular purpose. Not necessarily created for a particular purpose. Utilisation Cannot be utilised for the payment of dividends. Can be utilised for the payment of dividends. Disclosure in Income  Statement Shown on the debit side of Profit & Loss Account. Shown on the debit side of Profit &  Loss Appropriation Account. Disclosure in Balance  Sheet Deducted from the amount of item from which it has been created. Shown under Reserves and Surplus. Points to Remember…

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Bank Reconciliation Statement-Meaning

Bank Reconciliation Statement-Meaning “Bank Reconciliation Statement – is the statement which reconciles the bank balance as per the cash book with the balance as per the bank pass book, by showing all causes of differences between the two”. Causes of disagreement between the balances of cash book and pass book. Timingdifference on the recording of transactions. Errorin Cash Book. Errorin Pass Book. Difference between trade Discount and Cash Discount Format of Bank Reconciliation Statement when the Bank Balance as per Cash Book Format of Bank Reconciliation Statement when the Bank Balance as per Passbook  

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Single entry and double entry system

Single entry and double entry system Incomplete Accounting Records -Meaning Incomplete accounting records are those records which are not complete as per the double entry principle of accounting. Reasons of incomplete records. Accountant ignores double entry principles. Destruction in books of accounts. Evasion of taxes.  Limitations of incomplete records. (Click on the link to download ppt) Difficult to conduct audit. Difficult to check the internal system. Difficult to identify the fraud. Helps in ascertaining Trading and Profit & Loss Account. Helps in checking the arithmetical accuracy of accounts. The difference…

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Bill of Exchange Study Notes

Bill of Exchange Definition According to Sec. 5 of negotiable instrument act 1881, “ A bill of exchange is an instrument in writing containing an unconditional order signed by the maker directing to a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument”. Parties to Bills of Exchange. Drawer Drawee Payee  Advantages of Bills of Exchange. Source of finance. Debt discharge instrument. Evidence of indebtedness. Means of remittance. Difference between Bill of Exchange…

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