Account & finance


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Information about Method of keeping accounts

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Account & finance

  1. 1.
  2. 2. ACCOUNTING & FINANCE -2<br />
  3. 3. Methods of keeping Accounts<br />1.Cash system<br />2.Mercantile system<br />Solicitor’s account<br />Books of Accounts of A solicitor<br />
  4. 4. Introduction<br /><ul><li> The professional persons like solicitors,lawyer,doctors,chartered accountants, etc.consist of cash receipts and payments only, they do not maintain elaborate accounts as in ordinary commercial concerns. Thus the method of keeping accounts is different from that of other business concerns. </li></li></ul><li>1. Cash system<br /><ul><li>Under this system only actual cash received and actual cash paid are regarded In the books of accounts.
  5. 5. No notice is taken of income due but not received or expenses due but not paid.
  6. 6. In cash of professional person, most of the transactions are cash transactions and moreover they have neither time nor need for maintaining accounts on elaborate mercantile system.
  7. 7. Even non-trading institutions keep their accounts on cash basis.</li></li></ul><li>2. Mercantile system<br /><ul><li>It is also known as accruals system.
  8. 8. In this method both cash and credit transactions are dully recorded in the books of accounts.
  9. 9. At the end of the financial year all expenses due but not paid and those paid in advance are given .
  10. 10. As well as income due but not revived or rec. in advance. Is taken into consideration . This system will give correct profit or loss.</li></li></ul><li>Solicitor’s account<br /><ul><li>Solicitor’s transactions, mainly consist off. Recovering money from clients and making payment on their behalf, recovering their fees from client making patty distribution of behalf of clients etc.
  11. 11. The position of a Solicitor is that of trustee. He keeps two bank account. one for his own money and other for client’s money at the end of financial year the b/s of both the bank account would appear on assets side of b/s
  12. 12. No client account should be allow to become over drawn in the process.</li></li></ul><li><ul><li>There must be an accurate record of all moneys received and paid. The moneys received on account of clients and the payments on their behalf out of the moneys so received should be kept separate from the general moneys of the firm.
  13. 13. There must be a system record of the work done on behalf of clients. From which the bills of costs can be prepared.</li></ul>Books of accounts of a solicitor<br />
  14. 14. <ul><li>There must be an equally systematic and reliable record of all expenditure paid or incurred on behalf of clients or on behalf of the business generally.
  15. 15. There must be ledger accounts of clients showing the position of the firm with regard to each client separately. There should also be accounts properly analysing and classifying the various item of income and expenditur</li></li></ul><li>