Closing entries to pass before preparing a Profit and Loss Account
Closing entries in accounting refer to the many entries that are made after an accounting year to eliminate the balances of all temporary accounts established throughout the accounting period and transfer their balances to the appropriate permanent accounts. The process involves resetting the balances of temporary accounts to zero, ensuring their readiness for usage in […]
Methods of Preparing a Trial Balance
A trial balance is a listing of all the general ledger accounts in a company’s accounting system at a specific point in time. It shows the ending balances (debit or credit) for each account. The main purpose of a trial balance is to check for mathematical errors in the bookkeeping. Methods of Preparation of Trial […]
What are the Fundamental Accounting Assumptions?
Fundamentals accounting assumptions are the underlying assumptions that are presumed to have been followed while preparing financial statements. There are three fundamental regards to accounting assumptions: If there is nothing mentioned about the fundamental accounting assumptions in the financial statements, then it shall be presumed that these assumptions have been followed in the preparation of […]
Meaning and Accounting Treatment of Depreciation
Generally, the term ‘depreciation’ denotes a decrease in value, but in accounting, this term denotes a decrease in the book value of a fixed asset. Because fixed assets are used to create periodic income, an appropriate percentage of the cost of fixed assets that are thought to be utilised or expired to generate periodic revenue […]
The Qualitative Characteristics of Financial Information
The qualitative characteristics of financial information refer to the attributes that make it useful for decision-making purposes. These characteristics include relevance, reliability, comparability, consistency, understandability and timeliness. The qualitative characteristic of financial information is to identify the most useful information to investors (existing and potential), lenders and other creditors for making their decision based on […]
Characteristics of an Effective Financial Reporting Framework
In the current world of financial complication, organizations and companies heavily count on financial reports to make suitable decisions. Having a strong framework of financial reporting is critical for generating precise, credible, and useful financial details. This post will explore what the major elements are that can characterize an effective financial reporting framework and their […]
What is a joint venture? | Methods of Recording Transactions
A Joint Venture (JV) is a temporary form of business where two or more people join together to meet short-term objectives. It is quite similar to a Partnership firm but established without name or registration separately under any law. Generally, JVs are formed for some particular purpose of business objective, and once the objective is […]
Causes of disagreement in the Cash Book and Pass Book
1. (a) What is a Bank Reconciliation Statement? Explain the causes of disagreement in the balances shown by the Cash Book and Pass Book. (10) Solution: BANK RECONCILIATION STATEMENT Generally, all the transactions made through Cash or by cheque are not recorded at the same time in the Cash Book and the Pass Book regularly […]
Meaning and Treatment of Bad and Doubtful Debts
While preparing the financial statements, you will frequently reference bad and doubtful debts. Both these accounts are charges against the profit. However, they are not the same. Hence, it is essential to ensure you understand the difference between bad debts and doubtful debts. It is a commonly accepted accounting principle that debts which are considered […]
Audit, Assurance and Compliance – A case study of BHP Billiton
The report provides insight into the annual report of BHP Billiton for assessing, analyzing and evaluating the role, responsibilities and duties of the auditor. The report has developed the requirement for maintaining the independence and the nature of non-audit services. The report has also provided the reason for considering some matters to be key areas […]