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Showing posts from September, 2015

PASS OPENING ENTRY INTO NEW ACCOUNTING SOFTWARE

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Hello everyone! Here we are learning how to pass opening entry. To pass opening entry we need require sufficient data such as previous year balance sheet and trail balance. As balance sheet consist of group items such as fixed assets and current asset etc. have to be cross verify with trail balance and from trail balance we can extract the required ledgers to be created in new software. The following steps should be followed while passing opening entry
Step 1 Get the previous year audited balance sheet:-








CLOSING PREVIOUS YEAR TAX PROVISION BY ADJUSTING ADVANCE TAX, TDS AND TCS RECEIVABLE

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Companies, firms and sole proprietor who are doing business has to pay income tax on profits. There are some transaction in which third party will deduct TDS and will pay the balance amount to us and the party will issue a certificate for TDS/TCS. The journal for the same was explained in previous article. For TDS receivable article click here We have understood in our previous article regarding closing entries it consist provision for income tax entry, and this provision have to be closed in beginning of next year(april) or on date of income tax payment(i.e. july or sep) For CLOSING ENTRIES article click here
Usually in normal course we used to pass one compound journal entry for closing income tax provision account. Let us understand this concept by taking illustration Income tax provision = Rs.100000/- Advance tax = Rs.60000/- TDS & TCS =Rs.20000/-
Journal for Closing Income tax provision
SL.NO PARTICULAR DEBIT CREDIT 1 Income tax Provision A/c      Dr          To Advance tax  A/c      …

ACCOUNTING FOR DIVIDEND AND DIVIDEND DISTRIBUTION TAX

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Dividend is share of profit after tax given to shareholders (owners) of the company, it is appropriation of profit after tax not an expense . It is clearly explained in the below table:
Particular Amount Net Profit 1000000 Less:- Income Tax  300000 Net profit after tax  700000 Appropriation:- Dividend Amount transferred to general Reserve
 100000
600000
  Journal for dividend
SL.NO PARTICULAR DEBIT CREDIT 1 Dividend A/c      Dr          To Shareholders  A/c 100000
100000

DEPRECIATION BASICS AND DIFFERENT TYPES OF METHODS

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A business or entity doing business requires some assets for regular use and not for resale. The life of asset is not unlimited except for land, all other assets have a limited useful life. The benefit of a asset is received throughout its life. So, the cost paid for the machine to be enjoyed from it over a number of years and spread over such years.
Depreciation means continuing decrease in the value of an asset due to normal wear and tear, Obsolescence (out of fashion or outdated). A certain percentage of total cost of fixed assets which has expired and as such turned into expense during the process of its use in a particular accounting period.
Layman view:- The purchase of assets and raw material both are having flow of funds from the organization but the benefit from both are different as raw material is consumed immediately to produce the product and the same can be treated as expense in profit and loss account but in case of fixed assets like machinery will have benefits more tha…

BANK RECONCILIATION STATEMENT IN SIMPLE MANNER

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We have studied the cash book which has two coulmns i.e. cash and bank. The majority if transactions get settled through cash or bank. For the cash received or paid the effect in cash books is instant. The transactions settled through medium of bank take longer time. If customer pays by cheque , it is deposited in the bank and the same will be sent for clearance and then only it will be credited by the bank into our account. This may take about two to three days. Similarly when a cheque is issued to supplier(creditor) , he will deposit in his bank which in turn will clear it. Because of time lag, there would be difference in the records.



PREPARE CONSOLIDATED BALANCE SHEET IN 9 STEPS

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CONSOLIDATED FINANCIAL STATEMENTSCompanies can combine and operate in groups by acquiring control over the resources of the other entities , through the mechanism of subsidiaries
The external shareholders have to be made aware of a) Resource controlled by the parent b) Obligation of the group and c) the performance of the group with using such resources . This objective is possible only through consolidated financial statement 
The companies which are having subsidiaries, Joint ventures and associates shall have to prepare consolidated financial statement, it presents the financial position, operating results and statement of cash flow of a group of companies. Consolidation provides reporting as one single economic entity, the financial position and performance of a parent and its subsidiaries.
The consolidated financial statement shall be presented to the extent possible , in the same format as that adopted by parent company.
The Consolidated financial statement comprises of following : …

AMALGAMATION INTER COMPANY OWING (PURCHASING COMPANY HAVING SHARES IN SELLING COMPANY)

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AMALGAMATION INTER COMPANY HOLDINGSInter company holdings are divided into three types Purchasing company holding shares in selling companySelling company holding shares in purchasing companyPurchasing company and selling company hold shares in each other

Purchasing company holding shares in selling company








Purchasing company is holding 20% shares in selling company, let us assume fair value of net assets of selling ltd Rs.80 lakhs

CLOSING ENTRIES FOR THE FINANCIAL YEAR ENDING

Closing entries for the financial year ending
Hello everyone, Here we are going to learn how to close books of accounts on the financial year ending by considering following things:- Closing stockDepreciationProvision for expense

Closing stockLet us start to understand why it is required to pass journal entry for closing stock because to know the material consumed during the period(12 Months) , the value of closing stock includes raw material ,Work in progress , finished goods and loose tools etc . The amount for the stock will be derived by the store keeper from the rates available from market, generally as per accounting standard the stock is valued at cost or net realizable value whichever is less. Now we need to learn how to pass journal entry for closing stock ,
Illustration: Value of stock as on 31st march 2015 Raw material Rs.100000 Work in progress Rs.500000 Finished goods Rs.1000000  Lose Tools Rs.25000