The basic of accounting is the part of my book "The system of accounting" volume III enlightened on payment and receipt made by cash and accrual as well as cash flow and fund flow concept in accounting.
meaning of accounting
meaning of book-keeping
difference between accounting and book-keeping
meaning of double entry system of book-keeping
accounting equation
accounting principles, concepts and conventions
parties interested in accounting information
accounting cycle
classification/types of accounts
golden rules of accounting
The document discusses accounting principles and concepts including the cost principle, revenue principle, matching principle, adequate disclosure principle, business entity principle, going concern principle, monetary unit principle, accounting period principle, conservatism principle, and objectivity principle. It also covers topics like cash flow statements, their components and format, as well as definitions and pricing methods for marketable securities.
Bookkeeping should not be confused with accounting or accountancy. Persons with little knowledge of accounting may fail to understand the difference between these terms and often used to mean the same thing. Therefore, it is useful to make a distinction.
The document discusses internal controls related to cash, including separation of duties, authorization of payments, bank reconciliations, and analysis of cash balances and flows. It notes key elements of internal controls like control environment, accounting systems, and control procedures. It also summarizes processes for petty cash funds, bank accounts, and reconciling accounting records to bank statements.
Bookkeeping means systematic recording of day-to-day activities such as financial transactions and expense accrual for a business. The company needs to track such details for making well operational decisions.
The document discusses various books of original entry used in accounting, including journals, cash book, petty cash book, and their purposes. It explains how transactions are recorded in these books, such as recording sales, purchases, payments and receipts in the general journal and cash book. It also discusses accounting for cash discounts, bank transactions like overdraft, and loans.
Introduction to financial accounting jan 2014KarnatakaOER
This document provides an introduction to financial accounting. It defines accounting as recording, classifying, and summarizing financial transactions and interpreting results. Key groups interested in accounting information are identified. Accounting is required to determine profit/loss, financial position, amounts owed and due, and information for decision making. The document outlines the basic types of accounts, rules for debit and credit entries, books of accounts, accounting concepts and conventions, and the preparation of trial balance, balance sheet and income statement.
meaning of accounting
meaning of book-keeping
difference between accounting and book-keeping
meaning of double entry system of book-keeping
accounting equation
accounting principles, concepts and conventions
parties interested in accounting information
accounting cycle
classification/types of accounts
golden rules of accounting
The document discusses accounting principles and concepts including the cost principle, revenue principle, matching principle, adequate disclosure principle, business entity principle, going concern principle, monetary unit principle, accounting period principle, conservatism principle, and objectivity principle. It also covers topics like cash flow statements, their components and format, as well as definitions and pricing methods for marketable securities.
Bookkeeping should not be confused with accounting or accountancy. Persons with little knowledge of accounting may fail to understand the difference between these terms and often used to mean the same thing. Therefore, it is useful to make a distinction.
The document discusses internal controls related to cash, including separation of duties, authorization of payments, bank reconciliations, and analysis of cash balances and flows. It notes key elements of internal controls like control environment, accounting systems, and control procedures. It also summarizes processes for petty cash funds, bank accounts, and reconciling accounting records to bank statements.
Bookkeeping means systematic recording of day-to-day activities such as financial transactions and expense accrual for a business. The company needs to track such details for making well operational decisions.
The document discusses various books of original entry used in accounting, including journals, cash book, petty cash book, and their purposes. It explains how transactions are recorded in these books, such as recording sales, purchases, payments and receipts in the general journal and cash book. It also discusses accounting for cash discounts, bank transactions like overdraft, and loans.
Introduction to financial accounting jan 2014KarnatakaOER
This document provides an introduction to financial accounting. It defines accounting as recording, classifying, and summarizing financial transactions and interpreting results. Key groups interested in accounting information are identified. Accounting is required to determine profit/loss, financial position, amounts owed and due, and information for decision making. The document outlines the basic types of accounts, rules for debit and credit entries, books of accounts, accounting concepts and conventions, and the preparation of trial balance, balance sheet and income statement.
1. The document provides an introduction to financial accounting, outlining key concepts such as identifying, recording, and communicating relevant and reliable accounting information to help users make better decisions.
2. It discusses the different types of accounting (financial and management), users of accounting information (external and internal), and basic financial statements (balance sheet, income statement, statement of cash flows, and statement of stockholders' equity).
3. The document uses examples to demonstrate accounting transactions and how they affect accounts, and prepares basic financial statements from sample business transactions to illustrate accounting principles.
Introduction to double entry bookkeeping.ofpKaung Myat Tun
The document provides an introduction to double entry bookkeeping and accounting. It explains the accounting equation of Assets = Capital + Liabilities and how business transactions affect the balance sheet through increases and decreases to different accounts. Several examples are provided to illustrate how specific transactions like purchasing inventory, making sales, and paying creditors impact the balance sheet by changing at least two accounts to maintain the equality of the accounting equation.
Journalising- easy way to learn journal entries for beginners in Accounting S...Sarat Kumar Budumuru
June 1, 2011: Started business with cash Rs. 45,000. Cash account debited and capital account credited.
June 3, 2011: Sold goods for cash Rs. 8,500 and purchased goods for Rs. 7,000. Cash and sales accounts debited and credited respectively for sale. Purchases account debited and personal account credited for purchase.
June 5, 2011: Withdrew cash from bank for personal and business use. Drawings and cash accounts debited and bank account credited in a compound journal entry.
The document discusses various accounting principles and rules for journalizing transactions like expenses, gains, cash/credit transactions, opening entries, discounts, purchases/sales of investments and
The second chapter of my book "The System of Accounting" named ledger making is presenting on slide share with the hope of getting rewards and comments by readers.
1. Remove personal cash from assets
2. Add note payable for remaining furniture cost to liabilities
3. Remove donated computer from assets
The balance sheet contains errors that do not comply with GAAP. It includes Simon's personal cash in assets and omits a note payable for the remaining cost of office furniture from liabilities, since it is not yet due. It also incorrectly includes a donated computer in the asset amount for office furniture.
This document provides an overview of financial accounting. It defines accounting and describes its objectives and approaches. There are two main forms of accounting: financial accounting and management accounting. Financial accounting provides summarized information to external users primarily through financial statements, while management accounting provides detailed internal information for decision making. The document also discusses the various users of accounting information, both internal and external, and their different information needs. It provides multiple choice questions to test understanding of these concepts.
The document discusses the accounting cycle which includes recording transactions, classifying entries in ledger accounts, and summarizing accounts to prepare financial statements. It provides details on steps like journalizing, posting to ledger accounts, preparing a trial balance to check the accuracy of the ledger, and rules for balancing accounts. The accounting cycle ensures all business transactions are recorded and reported in a systematic manner.
The document discusses the importance of managing cash flow for small businesses. It notes that cash flow problems are a leading cause of business failures. The summary explains that managing cash flow involves forecasting cash receipts from sales and cash disbursements for expenses to create a pro forma budget. It also involves reconciling the business's bookkeeping records with its bank statements to accurately track available cash balances. Preparing accurate cash flow projections and controlling the timing of payments received and made can help prevent cash flow problems.
- An account receivable represents money owed to a company for goods or services sold on credit. When an account receivable becomes uncollectible, it is recorded as a bad debt expense.
- There is an upside to offering credit sales by encouraging purchases, but there is a downside in that some customers will delay payment or not pay at all, creating bad debts.
- Companies must investigate outstanding accounts receivable to identify bad debts, which are difficult to determine if a customer is merely late or unable to pay. Accounting standards provide two methods to account for doubtful accounts and bad debts.
1) The document discusses accounting principles and provides examples of accounting transactions for a computer programming business called Softbyte.
2) Softbyte's owner, Marc Doucet, invests $15,000 to start the business and purchases $7,000 of computer equipment. Softbyte also buys supplies on account.
3) The accounting equation and building blocks are explained. Revenues, expenses, assets, liabilities and owner's equity are defined and various transactions are analyzed to demonstrate how they affect the accounting equation.
The document provides information about financial statements including profit and loss account and balance sheet. It discusses the preparation, components, and purpose of profit and loss account and balance sheet. Some key points include:
1) Profit and loss account is prepared to ascertain the net profit or loss of a business over an accounting period. It includes income and expenses that are used to determine the net profit or loss.
2) Balance sheet provides the financial position of a business on a particular date by listing assets, liabilities, and capital. It categorizes assets as current and fixed and liabilities as current and long term.
3) Various items included in the profit and loss account and balance sheet are explained such as treatment
This document provides definitions and explanations of key concepts in bookkeeping and accounting. It defines bookkeeping as recording business transactions in an organized manner. The double-entry system is described as recording each transaction with two entries, one as a debit and one as a credit. Advantages of the double-entry system include ensuring accuracy, enabling calculation of profits, and preventing fraud. Disadvantages include the cost and complexity of maintaining multiple accounting records.
This document summarizes a presentation on the double entry system and its governing rules. It begins with an acknowledgement of the group members who worked on the project. The content section then outlines key accounting concepts like the definition of accounting, types of accounts according to the traditional approach (personal, real, nominal accounts) and modern approach (assets, liabilities, capital, expenses, revenue). It also describes the rules of debit and credit for different account types. The document concludes by thanking their teacher and families for their support and guidance.
Keeping accurate financial records is essential for running a successful small business. Good records allow business owners to monitor the financial performance and profitability of the business, make informed decisions, obtain financing, prepare tax filings, comply with payroll regulations, and determine distributions to owners. Without proper record keeping, business owners risk making poor decisions, paying unnecessary taxes and penalties, and not having the financial information needed to expand or obtain capital. It is recommended that small business owners hire an accountant or bookkeeping service to properly maintain their financial records.
This document provides an overview of basic bookkeeping concepts including debits and credits, cash vs. accrual accounting, T-accounts, the chart of accounts, income and expense accounts, and how to set up journals, income statements, and a balance sheet. It discusses the importance of keeping accurate financial records for a business and introduces key accounting principles and terminology.
This software allows users to manage invoices, payments, purchase orders, inventory, customers, vendors, and accounts. It includes features to create and track inventory items, customers, vendors, purchase orders, invoices, payments, and financial reports. The administrator can control user permissions and access within the software.
How to completing accounting cycle with worksheet.
This for you that interest to lean how to completing accounting system with manual. You gonna learn about basic off accounting a lot.
This document discusses single entry bookkeeping systems used by small businesses that lack complete accounting records. Single entry systems only record one side of transactions. Net profit can be calculated using asset and liability account balances at the start and end of a period. The income statement is prepared using cash receipts and payments as well as changes in asset and liability account balances. Control accounts must be created for debtors/sales and creditors/purchases to calculate credit transactions when opening and closing account balances are provided. The balance sheet will balance only when both debit and credit aspects of all accounts are recorded.
I have recently relocated to the Denver, Colorado area and I am actively seeking a position, in research, that can challenge and utilize the professional knowledge I have acquired over the past four years. I am a self motivated, ambitious young professional who has worked very hard to become an effective asset and team member to each organization which I have been a part of. Since my graduation with a BS Clinical Research, I have worked in a variety of positions including corporate CRO research (INC Research), direct clinical care (Nursing Assistant at UNC and Duke Hospitals), and most recently, Clinical Research on the site level with the Duke University Cardiothoracic Surgery Research Team. My previous team lead and research practice manager, included as references on my resume, will likely cite my ability and willingness to learn quickly, interact with subjects/patients in a personable manner, and develop productive working relationships with my team members. I pride myself on my work ethic and enjoy working around others that inspire that same dedication.
Chase Barnett is seeking a sales position and has over 10 years of sales experience in various industries. He has held roles as an inside sales representative, acoustic mechanic, tournament director, legal intern, and sales representative for sports equipment. Barnett has a background in criminal justice and played varsity baseball in college while making Dean's List. He has strong communication, problem-solving, and teamwork skills.
This shot list details scenes for a film depicting a man, Matt, struggling with alcohol and drug addiction. It includes 7 shooting locations and over 100 shots. The shots progress from Matt being distressed in a tunnel to scenes of him drinking, taking drugs, and considering suicide in the bath. Later scenes show Matt's relationship deteriorating and him looking distraught on a bridge. Technical elements like camera movements, angles, and editing techniques are specified to capture Matt's emotional state and deterioration over the course of the film.
1. The document provides an introduction to financial accounting, outlining key concepts such as identifying, recording, and communicating relevant and reliable accounting information to help users make better decisions.
2. It discusses the different types of accounting (financial and management), users of accounting information (external and internal), and basic financial statements (balance sheet, income statement, statement of cash flows, and statement of stockholders' equity).
3. The document uses examples to demonstrate accounting transactions and how they affect accounts, and prepares basic financial statements from sample business transactions to illustrate accounting principles.
Introduction to double entry bookkeeping.ofpKaung Myat Tun
The document provides an introduction to double entry bookkeeping and accounting. It explains the accounting equation of Assets = Capital + Liabilities and how business transactions affect the balance sheet through increases and decreases to different accounts. Several examples are provided to illustrate how specific transactions like purchasing inventory, making sales, and paying creditors impact the balance sheet by changing at least two accounts to maintain the equality of the accounting equation.
Journalising- easy way to learn journal entries for beginners in Accounting S...Sarat Kumar Budumuru
June 1, 2011: Started business with cash Rs. 45,000. Cash account debited and capital account credited.
June 3, 2011: Sold goods for cash Rs. 8,500 and purchased goods for Rs. 7,000. Cash and sales accounts debited and credited respectively for sale. Purchases account debited and personal account credited for purchase.
June 5, 2011: Withdrew cash from bank for personal and business use. Drawings and cash accounts debited and bank account credited in a compound journal entry.
The document discusses various accounting principles and rules for journalizing transactions like expenses, gains, cash/credit transactions, opening entries, discounts, purchases/sales of investments and
The second chapter of my book "The System of Accounting" named ledger making is presenting on slide share with the hope of getting rewards and comments by readers.
1. Remove personal cash from assets
2. Add note payable for remaining furniture cost to liabilities
3. Remove donated computer from assets
The balance sheet contains errors that do not comply with GAAP. It includes Simon's personal cash in assets and omits a note payable for the remaining cost of office furniture from liabilities, since it is not yet due. It also incorrectly includes a donated computer in the asset amount for office furniture.
This document provides an overview of financial accounting. It defines accounting and describes its objectives and approaches. There are two main forms of accounting: financial accounting and management accounting. Financial accounting provides summarized information to external users primarily through financial statements, while management accounting provides detailed internal information for decision making. The document also discusses the various users of accounting information, both internal and external, and their different information needs. It provides multiple choice questions to test understanding of these concepts.
The document discusses the accounting cycle which includes recording transactions, classifying entries in ledger accounts, and summarizing accounts to prepare financial statements. It provides details on steps like journalizing, posting to ledger accounts, preparing a trial balance to check the accuracy of the ledger, and rules for balancing accounts. The accounting cycle ensures all business transactions are recorded and reported in a systematic manner.
The document discusses the importance of managing cash flow for small businesses. It notes that cash flow problems are a leading cause of business failures. The summary explains that managing cash flow involves forecasting cash receipts from sales and cash disbursements for expenses to create a pro forma budget. It also involves reconciling the business's bookkeeping records with its bank statements to accurately track available cash balances. Preparing accurate cash flow projections and controlling the timing of payments received and made can help prevent cash flow problems.
- An account receivable represents money owed to a company for goods or services sold on credit. When an account receivable becomes uncollectible, it is recorded as a bad debt expense.
- There is an upside to offering credit sales by encouraging purchases, but there is a downside in that some customers will delay payment or not pay at all, creating bad debts.
- Companies must investigate outstanding accounts receivable to identify bad debts, which are difficult to determine if a customer is merely late or unable to pay. Accounting standards provide two methods to account for doubtful accounts and bad debts.
1) The document discusses accounting principles and provides examples of accounting transactions for a computer programming business called Softbyte.
2) Softbyte's owner, Marc Doucet, invests $15,000 to start the business and purchases $7,000 of computer equipment. Softbyte also buys supplies on account.
3) The accounting equation and building blocks are explained. Revenues, expenses, assets, liabilities and owner's equity are defined and various transactions are analyzed to demonstrate how they affect the accounting equation.
The document provides information about financial statements including profit and loss account and balance sheet. It discusses the preparation, components, and purpose of profit and loss account and balance sheet. Some key points include:
1) Profit and loss account is prepared to ascertain the net profit or loss of a business over an accounting period. It includes income and expenses that are used to determine the net profit or loss.
2) Balance sheet provides the financial position of a business on a particular date by listing assets, liabilities, and capital. It categorizes assets as current and fixed and liabilities as current and long term.
3) Various items included in the profit and loss account and balance sheet are explained such as treatment
This document provides definitions and explanations of key concepts in bookkeeping and accounting. It defines bookkeeping as recording business transactions in an organized manner. The double-entry system is described as recording each transaction with two entries, one as a debit and one as a credit. Advantages of the double-entry system include ensuring accuracy, enabling calculation of profits, and preventing fraud. Disadvantages include the cost and complexity of maintaining multiple accounting records.
This document summarizes a presentation on the double entry system and its governing rules. It begins with an acknowledgement of the group members who worked on the project. The content section then outlines key accounting concepts like the definition of accounting, types of accounts according to the traditional approach (personal, real, nominal accounts) and modern approach (assets, liabilities, capital, expenses, revenue). It also describes the rules of debit and credit for different account types. The document concludes by thanking their teacher and families for their support and guidance.
Keeping accurate financial records is essential for running a successful small business. Good records allow business owners to monitor the financial performance and profitability of the business, make informed decisions, obtain financing, prepare tax filings, comply with payroll regulations, and determine distributions to owners. Without proper record keeping, business owners risk making poor decisions, paying unnecessary taxes and penalties, and not having the financial information needed to expand or obtain capital. It is recommended that small business owners hire an accountant or bookkeeping service to properly maintain their financial records.
This document provides an overview of basic bookkeeping concepts including debits and credits, cash vs. accrual accounting, T-accounts, the chart of accounts, income and expense accounts, and how to set up journals, income statements, and a balance sheet. It discusses the importance of keeping accurate financial records for a business and introduces key accounting principles and terminology.
This software allows users to manage invoices, payments, purchase orders, inventory, customers, vendors, and accounts. It includes features to create and track inventory items, customers, vendors, purchase orders, invoices, payments, and financial reports. The administrator can control user permissions and access within the software.
How to completing accounting cycle with worksheet.
This for you that interest to lean how to completing accounting system with manual. You gonna learn about basic off accounting a lot.
This document discusses single entry bookkeeping systems used by small businesses that lack complete accounting records. Single entry systems only record one side of transactions. Net profit can be calculated using asset and liability account balances at the start and end of a period. The income statement is prepared using cash receipts and payments as well as changes in asset and liability account balances. Control accounts must be created for debtors/sales and creditors/purchases to calculate credit transactions when opening and closing account balances are provided. The balance sheet will balance only when both debit and credit aspects of all accounts are recorded.
I have recently relocated to the Denver, Colorado area and I am actively seeking a position, in research, that can challenge and utilize the professional knowledge I have acquired over the past four years. I am a self motivated, ambitious young professional who has worked very hard to become an effective asset and team member to each organization which I have been a part of. Since my graduation with a BS Clinical Research, I have worked in a variety of positions including corporate CRO research (INC Research), direct clinical care (Nursing Assistant at UNC and Duke Hospitals), and most recently, Clinical Research on the site level with the Duke University Cardiothoracic Surgery Research Team. My previous team lead and research practice manager, included as references on my resume, will likely cite my ability and willingness to learn quickly, interact with subjects/patients in a personable manner, and develop productive working relationships with my team members. I pride myself on my work ethic and enjoy working around others that inspire that same dedication.
Chase Barnett is seeking a sales position and has over 10 years of sales experience in various industries. He has held roles as an inside sales representative, acoustic mechanic, tournament director, legal intern, and sales representative for sports equipment. Barnett has a background in criminal justice and played varsity baseball in college while making Dean's List. He has strong communication, problem-solving, and teamwork skills.
This shot list details scenes for a film depicting a man, Matt, struggling with alcohol and drug addiction. It includes 7 shooting locations and over 100 shots. The shots progress from Matt being distressed in a tunnel to scenes of him drinking, taking drugs, and considering suicide in the bath. Later scenes show Matt's relationship deteriorating and him looking distraught on a bridge. Technical elements like camera movements, angles, and editing techniques are specified to capture Matt's emotional state and deterioration over the course of the film.
Representações sociais ainda dominantes sobre a velhice. Caraterísticas deste grupo etário, abordando-se as idades cronológica, biológica, psicológica e social a que se referem Schneider e Irigaray.
The document discusses research into the target audience for a Digipak and advertisement for an indie rock band. A questionnaire was administered to 25 people of various ages to gather information. The results showed that the target audience is mostly 16-24 years old, predominantly male but including some females. The materials will aim to appeal to this age group by featuring fashion, drinking, relationships and promoting the music over the band. Most associated the color blue with indie rock, so blue will be the main color used in the designs.
Budgeting involves planning spending and saving based on expected future income over a defined period. A good monthly budget helps overcome unexpected expenses and reach financial goals by comparing revenues and expenses. It includes all cash inflows like income, assets, and liabilities, as well as cash outflows like expenses. When creating a monthly budget, one lists total income from sources like salary and investments, then allocates finances to both fixed expenses like housing and flexible expenses like entertainment. The total expenses, including debt payments, should not exceed the monthly income amount. Budgeting can be done for an individual, business, or specific areas like sales.
San Agustin es sinduda uno de los Padres de la antigüedad con mayor profundidad espiritual y existencial. Saborear sus pensamientos es como dar al alma un aroma que difícilmente se pierde.
Este capítulo describe cómo recordar las heridas y llagas de Cristo puede ayudar a superar las tentaciones. Al recordar el sufrimiento de Cristo, se puede encontrar consuelo durante pensamientos impuros, la opresión de la carne, y los lazos del diablo. Las llagas de Cristo apagan el fuego de la concupiscencia y brindan paz y reposo durante las adversidades. La muerte de Cristo salva de la muerte todo aquello que está destinado a morir.
W@=D@ is a cross-media cross-cultural children’s edutainment project by SANCTA. In 4x4x25' docufiction TV-shows 2 cultural adventurers search for understanding of 4 objects of cultural significance in Mexico, Mali, India and China. W@=D@ consisted of a weekly docufiction TV-show, an online platform, a theatre play, a print magazine, school packages and city sculptures, … The project’s multipartner set-up engaged 4 major national media groups. Return on investment: “difficult” cultural and educational content turned into acclaimed edutainment during 4 years of cross media market presence, incl. 40% TV market share, 1.500 daily views of online clips, 80.000 print magazine copies in 4 editions, WOM among parents, … + lots of earned media attention… turning the world’s most frequently asked question into a brand.
The document discusses accounting for debts and notes payable/receivable. It defines debt as an amount borrowed that must be repaid later, often with interest. It describes how to record accounts receivable from sales on credit and accounts payable for purchases on credit using journals. It also discusses aging reports to track payment timelines and calculates allowance for doubtful debts. Notes payable and receivable are current liabilities and assets, with interest expense/income recorded on interest-bearing notes.
Este documento presenta los resultados de una encuesta realizada en Argentina a 1200 personas de entre 14 y 55 años sobre su uso de dispositivos móviles. Los principales hallazgos son: 1) El smartphone es el dispositivo más común, poseído por el 100% de la muestra, mientras que solo el 49% posee una tableta; 2) La mayoría se conecta principalmente desde su casa usando WiFi, aunque también usan datos móviles con frecuencia; 3) En promedio las personas usan internet 3 horas diarias desde la computadora y 2.5 horas desde el celular,
This CV is for Hesham Azizieh, a Syrian national born in 1985 who is seeking a position as an Accounts Supervisor. He has a Bachelor's degree in accounting from Damascus University and is preparing to take the CMA exam. He has over 8 years of experience in accounting roles in Saudi Arabia, most recently as an Accounts Supervisor at Philips Lighting Saudi Arabia where he manages accounts payable operations and internal controls. Prior to that he held senior accountant roles with other companies in Saudi Arabia and Syria. He is proficient in SAP, Oracle, and Navision systems and is skilled in accounting, problem solving, and teamwork.
El documento presenta una nueva aplicación móvil que ha sido desarrollada siguiendo las mejores prácticas. Explica la importancia de optimizar la aplicación en las tiendas de aplicaciones y utilizar estrategias de marketing de aplicaciones para aumentar las descargas y retener a los usuarios. También advierte que la competencia en el mercado de aplicaciones es feroz, por lo que se requiere un enfoque integral para tener éxito.
The document discusses bank reconciliation statements (BRS). A BRS reconciles the differences between a business's cash book balance and bank passbook balance. It is prepared by the business/customer to identify reasons for any differences, such as outstanding deposits/checks. The key reasons for differences and methods for preparing a BRS are outlined, including an example problem demonstrating how to prepare a BRS.
1. Solicitors and other professional service providers typically use a cash-based accounting system rather than an accrual-based system due to the nature of their business transactions being primarily cash-based with little credit involved.
2. Under the cash system, only actual cash received and paid is recorded, while the accrual system records both cash and credit transactions along with expenses due but not paid and income due but not received at the end of the financial year.
3. A solicitor maintains separate bank accounts for client funds and their own funds to avoid commingling. They also keep detailed records of all money received and paid on behalf of clients as well as work completed to prepare bills.
The document discusses the need for internal auditing in accounting. It states that just as anything left idle will become faulty, accounting records also need checking to catch mistakes early and present accurate accounting. An internal auditor is needed to check transactions with an overview, examining source documents and recordings. Some of the internal auditor's responsibilities mentioned are checking purchase orders, invoices, bills, cash memos, inventory and consumables. The summary conveys that the document advocates for internal auditing to ensure accurate accounting by catching errors early.
My book "the system of accounting" volume iii having twelve chapters; the basis of accounting, employment, budgeting, depreciation, debts, purchases, sales, inventories, tax, import and export, consignment and questions and answers.
1) The document discusses the responsibilities of those who handle cash transactions and banking activities in an organization. This includes the accountant-cash, who is responsible for receiving and paying cash, maintaining daily cash reports and balances, and the accountant-bank, who prepares cheques and ensures proper documentation.
2) Maintaining proper documentation of cash receipts and payments through daily reports, vouchers, and recording in the cash book and ledger is emphasized. Security measures for cash handling are also addressed.
3) The roles of the accountant-cash and accountant-bank are defined in processing cash transactions according to accounting principles and ensuring accurate recording and auditing of financial activities.
Order to Cash Overview slides can be used for high level training for O2C Or Accounts Receivable department in any organization. Anyone can use it as standard template and make necessary changes for their use. This is not just for providing designed slides, I've included desired sample data which ideally should be a part of O2C Function overview & training deck. I believe design is just to make it look nice, important aspect is which relevant information/data to be included based on the topic.
If you like it, I would be happy to help you in further topics as these are readily available with me. In case it seems interested to you, do not forget to Like It and comment with your suggestion for improvisation.
Thanks
Koushik Bagchi
ikoushik@gmail.com
This document defines key terms related to cash and cash management. It discusses how cash belongs to the broader category of financial assets, and defines cash items and cash equivalents. It also describes the establishment and use of petty cash funds, bank reconciliation procedures, and various adjustments that may reconcile the bank balance to the company's records.
This document discusses the differences between accrual and cash basis accounting methods and provides guidance on which method is better for organizations. Accrual accounting records transactions when economic events occur, while cash basis accounting only records cash receipts and payments. Accrual basis provides a more accurate financial picture but can result in cash flow issues, while cash basis is simpler but does not account for unpaid expenses or uncollected revenue. The document recommends accrual basis for large organizations and provides techniques for choosing the most appropriate method.
This document provides examples of accounting entries for uncollectible accounts (bad debts) using both the direct write-off method and provision method. Under the direct write-off method, uncollectible accounts are directly expensed against accounts receivable when deemed uncollectible. The provision method estimates bad debts at the end of each period by debiting bad debt expense and crediting an allowance account to match expenses with revenues. When debts are written off, the allowance is reduced and receivables are credited.
This document provides instructions for accounting and bookkeeping procedures for internal control. It details how to reconcile bank account balances through a monthly process. It includes preparing the bank statement, entering deposits and withdrawals, reconciling any discrepancies between the bank balance and book balance, and documenting the reconciliation. Sample forms and a sample bank reconciliation procedure are also included to demonstrate the reconciliation process. The goal is to ensure accurate accounting of the company's bank accounts through monthly reconciliation of balances.
Accrual accounting is a type of commercial accounting that allows a company to monitor revenue and expenses as they happen, rather than as money changes hands.
The document discusses bank reconciliation statements. It defines a bank reconciliation statement as a report that compares a company's bank balance in its accounting records to the balance in its bank statement. Common reasons for discrepancies between these balances are time lags in recording transactions and errors made by either the company or bank. Preparing bank reconciliation statements is important for monitoring cash flows, identifying errors or irregularities, and confirming the accuracy of bank account balances recorded by the company.
This document provides an overview of accounting and financial reporting for businesses in Namibia. It discusses the importance of accounting, key accounting concepts like the accounting equation and double-entry bookkeeping, preparing common financial statements, and tax compliance requirements. Maintaining proper accounting records and financial reporting helps businesses ensure statutory compliance, make informed decisions, and measure performance.
Discover the five easiest steps for cash to accrual conversion! Clear your confusion fro conversion. Transtutors presents five steps to follow to convert cash accounting into accrual accounting.
For accounting homework help or any type of questions on accounting, ask Transtutors' experts available 24x7 to help students.
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This document outlines the goals, procedures, and activities of a credit and receivables management team. The team aims to decrease overdue accounts, increase security deposit collection, and improve efficiency in collecting various accounts receivables. Key procedures include drawing from security deposits for unpaid bills, notifying customers, and requesting replenishment. The team works to reconcile accounts, pursue legal actions, and implement write-offs for delinquent customers according to documented policies and procedures.
This document discusses cash and receivable management. It defines cash management as the process of collecting and managing cash flows, which is important for both individuals and businesses. It then discusses various types of cash management including cash flows from operating activities, free cash flow to equity, free cash flow to the firm, and the net change in cash. The document also discusses the importance and functions of cash management, as well as the objectives and benefits of cash management. Finally, it defines receivable management and discusses the receivable management process, including customer invoicing, monitoring, and collection steps.
This document discusses key accounting principles and concepts, including:
- The purpose of key financial statements like the income statement, balance sheet, and cash flow statement.
- Accounting principles like relevance, reliability, and comparability.
- Key terms used in accounting like assets, liabilities, revenues, and expenses.
- The accounting equation that balances assets with liabilities and owner's equity.
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Denis is a dynamic and results-driven Chief Information Officer (CIO) with a distinguished career spanning information systems analysis and technical project management. With a proven track record of spearheading the design and delivery of cutting-edge Information Management solutions, he has consistently elevated business operations, streamlined reporting functions, and maximized process efficiency.
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Date: May 29, 2024
Tags: Information Security, ISO/IEC 27001, ISO/IEC 42001, Artificial Intelligence, GDPR
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Liberal Approach to the Study of Indian Politics.pdf
The basic of accounting
1. THE SYSTEM OF ACCOUNTING
Volume III
THE BASIS OF ACCOUNTING
WRITTEN BY:
SYED AQEEL RAZA
MASTER OF COMMERCE & POLITICS
2. THE BASIS OF ACCOUNTING
ACCOUNTING FOR BASES
All accounting system is based on payment and receipt by cash and bank which depends
on cash and accrual base accounting and sometime requires cash and accrual base mix
accounting to remove draw backs of cash accounting.
CASH BASE ACCOUNTING
In general, any item which a bank accepts at the face valve of deposit or
which may be transferred to another party at face value may be considered
cash.
In cash base accounting system, transactions are recognized on receipt and
payment of cash or a company records cash receipts in the period that they
are received and expenses in the period in which they are paid. Revenues
and expenses are reported in income statement when the cash is received
and expenses occurred.
It is usually applied or followed by individual or small and non-
manufacturing businesses. If a business expands, it may move to accrual
method of accounting.
Cash accounting is the opposite of accrual accounting wherein revenue and
expenses are recorded when they are incurred but controlled under cash
accounting because the revenue and expense which were recorded in their
respective accounts as they incurred and the effect in their accounts
receivable or payable is paid by cash or bank.
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
3. THE BASIS OF ACCOUNTING
Cash accounting has some draw backs;
- Daley in recognition of income
If a cheque from customer and a cheque to supplier is received and given
on the 30th
of the month but could not cashed or deposited at the bank, it
will be recognized in next month.
- Delay in recognition of taxable income
A business receives a cheque from a customer near the end of it fiscal year,
but does not cash it until the next year will make cause of recognition of
taxable income in the current year.
- Delay of expenses in recognition of taxable income.
A business pays its suppliers early in order to recognize more expenses in
the current fiscal year which will reduce its taxable income in the current
year.
- Unable to present profitability
The delay in recording revenue and expenses will make the cause of
presenting accurate profitability which will also affect on company’s
budget.
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
THE BASIS OF ACCOUNTING
4. THE BASIS OF ACCOUNTING
How to remove draw-backs?
- As soon as the cheque from customer and the cheque to supplier is
received or given must be accounted for either cashed or not in their
accounts. The Invoices of sale and purchase must be accrued as and
when they incurred. As far as the expenses are concerned, they may be
taken or accrued at the end of the year enable account to show clear
picture somehow.
Hence, we can say that the draw backs of cash accounting can be removed
by mix accounting system “cash and accrual accounting.”
Advantage of cash accounting;
- Cash accounting can also be cost-effective in case of sole proprietorship
or partnership and for companies that conduct mostly cash transactions.
- Cash accounting requires less staff, financial resources and easy to
understand.
- Cash accounting clearly represents cash flows and outflows in business
than the accrual method of accounting.
- Cash accounting provides tax benefits of payments received in 2015 for
the work of previous year would be counted as income for 2015 tax year
and reduced net income for the year 2015 tax year.
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
5. THE BASIS OF ACCOUNTING
Many devices for cash and receipt has been described such as cash book,
petty cash book, General Journal and special journals; cash receipt journal,
cash payment journal, purchase journal, sales journal, purchase return and
allowances journal, sales return and allowances journal etc. on which we
have discussed on our previous version.
All payments and receipt are done by cash with the company and the cash
with bank. The cash in the company is applied in small cash payments and
small receipts in cash is also used in it but the payment to suppliers from
whom we purchase goods is paid by bank issuing cheque in the name of
supplier which goes in clearing and after processing the amount is
transferred to supplier account and so on the cheque we deposit of the
customer which we receive against sale or services rendered comes to our
account.
Therefore, cash and bank are two name of one thing “cash” must be
compared with company cash book and bank book and it is also necessary
to have a complete knowledge regarding the bank procedures and
documents used for banking.
There are many kinds of bank accounts used for keeping cash and operating
for personal and business but profit and loss sharing account (PLS) and
Current Account (CD) are mostly used in business which are described
below to have complete knowledge of them;
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
6. THE BASIS OF ACCOUNTING
PROFIT AND LOSS SHARING ACCOUNT (PLS A/C)
This kind of account can be operated by any person, firm or organization by
depositing minimum balance Rs.100/=or above which allows profit variable
on the amount deposited over a specified period and keeps in share the
loss as the case may be to the account holder. The account holder can
withdraw or deposit the amount up to the limit prescribed.
This account is operated under interest free system but the interest is
under question.
CURRENT ACCOUNT (CD A/C)
This accountis usually operated by the business man and can be opened by
Rs.1000/= as an initial deposit at the time of opening the account. The bank
issues cheque book 25, 50, 100 leafs as per requirement.
There is no interest on this account.
Besides, profit and loss sharing account and current account, bank
introduces many other accounts like;
- Home safe accounts
- Student saving account
- Saving account
- Islami Banking account
- Fixed Deposit Account
- Credit card
- Debit card
- Visa card
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
7. THE BASIS OF ACCOUNTING
Banks also issues certificates having interest on completion of specified
period.
Bank uses many forms or documents to make transaction from him but the
following forms are used mainly to operate any account or doing
transaction:
- Cheque book
- Pay-in-slip/deposit slip book
- Pay order/demand draft making form
- On line transfer form
BANK’S INTEREST AND CHARGES
The bankers enjoys higher rate of interest or profit and allows small rate of
interest or profit to the account holder by whose money he enjoys big
income. The bank deposit or transfer the amount of interest in the account
and informs the account holder by credit memo.
The bank also deducts charges of different nature from his account holders
in making transaction through bank from which some are mentioned here;
Cheque book charges
Minimum balance charges
Commission
Excise duty
Withholding tax – filler
Withholding tax- non-filler
Pay order making charges
Demand draft making charges
On line transfer charges
Postage charges
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
8. THE BASIS OF ACCOUNTING
BANK STATEMENT
A copy of the account for a period, monthly, half yearly or annually is sent
by the bank to the account holder for checking of withdrawals, deposits
and balance which is reconciled by company’s cash book.
BANK RECONCILIATION
The bank reconciliation is the matching statement of two balances at the
end of the month or year such as cash book balance and bank statement
balance. It is made to search the causes of disagreement in balances and to
test the accuracy of the transactions posted in cash book. In case of any
unknown discrepancy or difference, the bank is informed within a
reasonable time.
The balance in cash book and in bank statement may differ;
- Cheques issued but not presented to the bank for payment on the end
date of the bank statement.
- Cheques deposited into the bank but not collected the amount till the
end of the date of bank statement.
- Interest of the bank not recorded into cash book.
- Bank charges, mark-up on over draft are not recorded in the cash book.
- Cheques issued but not recorded in the cash book.
- Wrong posting of amount by the bank in the account.
- Wrong positing of amount in the cash book.
- Unknown collection or credit shown in bank statement.
- Unknown payment or debit shown in bank statement.
- Bank commission, excise duty, cheque book charges, pay order charges,
demand draft charges, any instrument making charges, and tax on cash
withdrawn are ascertained on seeing the bank statement.
- Many other causes of disagreement with cash and bank.
- <THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
9. THE BASIS OF ACCOUNTING
METHOD OF BANK RECONCILIATION STATEMENT
There are two method are applied for bank reconciliation wherein;
o Correct method
o Adjusted method
In corrected method, the items which are shown in bank statement but not
in cash book will be recorded in cash book before making bank
reconciliation or on the way of finding out difference at once and in
adjusting method after making bank reconciliation statement but the main
object is to determine the correct balance of both cash book and the bank
statement.
PROCEDUTURE OF BANK RECONCILIATION
Keep two books before you and examine each other by ticking the amount,
cheque number, bank deposit slip number and any other reference match
with cash book and bank statement. The ticked items are agreed but un-
ticked items are under question and need clarification.
Following are the steps and points for making bank reconciliation
statement;
- At first, both the balances are written like balance as per cash book
(business record) and balance as per bank statement (Bank record) for
example;
Bank statement Cash book
Balances 24,750 18,000
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
10. THE BASIS OF ACCOUNTING
1- Out-standing cheques, unpaid cheques, un-presented cheques
Out-standing cheques or unpaid cheques are the cheques which are issued
for payment but not presented or collected by the party to whom the
cheque is issued remained unpaid by the bank before the end of the month
or end date of bank statement June 30, 2015.
The out-standing cheques or unpaid cheques are reduced by the bank as
and when they are presented by the party. The Cash book had already been
reduced by the cheques as and when they were issued and the bank book
would be reduced as and when they were presented in bank.
Cheques issued for payment, but not presented for payment before June
30, 2015 as detailed below;
Cheque No. 500500 Rs. 1, 000
Cheque No. 500510 Rs.2, 000
Cheque No. 500515 Rs.3, 000
Cheque No. 500518 Rs. 5,000
Bank statement Cash book
Balances 24,750 18,000
Less: un-presented cheques
Cheque No. 500500 Rs. 1, 000
Cheque No. 500510 Rs.2, 000
Cheque No. 500515 Rs.3, 000
Cheque No. 500518 Rs. 5,000 (-) 11, 000
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
11. THE BASIS OF ACCOUNTING
2- Deposit in transit, uncollected cheques
The deposit in-transit or uncollected cheques are the cheques which will be
added in bank book but added in cash book and as and when the amount
will be transferred from the bank of other branch or bank. Hence, the
cheques which are in transit or uncollected are added in the column of
bank statement. The reason of not showing in bank statement is deposit to
near date of end date of statement or some reasons having objections
wherein insufficient balance, wrong date, amount difference in figures and
words and many other reasons.
Cheque deposited into bank but not shown in bank statement or bank
collection;
No.130025 dt: 28/6 Rs.3000/=
No.313454 dt: 29/6 Rs.2000/=
No. 505352 dt: 30/6 Rs. 1500/=
Bank statement Cash book
Balances 24,750 18,000
Less: un-presented cheques
Cheque No. 500500 Rs. 1, 000
Cheque No. 500510 Rs.2, 000
Cheque No. 500515 Rs.3, 000
Cheque No. 500518 Rs. 5,000 (-) 11, 000
Add: deposit-in-transit
No.130025 DT: 28/6 Rs.3000/=
No.313454 DT: 29/6 Rs.2000/=
No. 505352 DT: 30/6 Rs. 1500/= (+) 6,500
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
12. THE BASIS OF ACCOUNTING
3- Bank deductions such as collection charges, commission, excise duty,
withholding tax, postage, cheque book charges, etc.
On viewing bank statement, we ascertained that bank has deducted many
charges in shape of collection charges, commission, excise duty,
withholding tax, postage, cheque book charges, pay order making charges,
demand draft making charges, on line transfer charges, etc. etc. if these
charges are not recorded in cash book, we record them and they will
reduce the balance of cash book.
Bank deducted following charges during the month of June 2015 which are
not shown in cash book;
10/6 Cheque Book charges 150/=
15/6 Bank commission Rs.100/=
16/6 Tax on Cash withdrawn Rs.50/=
25/6 on line transfer charges Rs.100/= (-) 400
Bank statement Cash book
Balances 24,750 18,000
Less: un-presented cheques
Cheque No. 500500 Rs. 1, 000
Cheque No. 500510 Rs.2, 000
Cheque No. 500515 Rs.3, 000
Cheque No. 500518 Rs. 5,000 (-) 11, 000
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
13. THE BASIS OF ACCOUNTING
Add: deposit-in-transit
No.130025 dt: 28/6 Rs.3000/=
No.313454 dt: 29/6 Rs.2000/=
No. 505352 dt. 30/6 Rs. 1500/= (+) 6,500
10/6 Cheque Bookcharges150/=
Less:Bank chargesand Tax
10/6 Cheque Book charges 150/=
15/6 Bank commissionRs.100/=
16/6 Tax on Cash withdrawnRs.50/=
25/6 on line transferchargesRs.100/= (-) 400
4- Bank collection not recorded in cash book.
The bank collections such as bank interest on deposit, notes receivable,
interest on notes receivable and bank interest on notes if shown in bank
statement but not shown in cash book shall increase the balance of cash
book.
Bank collected following but not recorded in cash book.
20/6 Bank interest on deposit 100/=
25/6 notes receivable 1000/=
25/6 interest on notes receivable 50/=
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
14. THE BASIS OF ACCOUNTING
Bank statement Cash book
Balances 24,750 18,000
Less: un-presented cheques
Cheque No. 500500 Rs. 1, 000
Cheque No. 500510 Rs.2, 000
Cheque No. 500515 Rs.3, 000
Cheque No. 500518 Rs. 5,000 (-) 11, 000
Add: deposit-in-transit
No.130025 dt: 28/6 Rs.3000/=
No.313454 dt: 29/6 Rs.2000/=
No. 505352 dt: 30/6 Rs. 1500/= (+) 6,500
Less:Bank chargesand Tax (C. Book)
10/6 Cheque Book charges 150/=
15/6 Bank commissionRs.100/=
16/6 Tax on Cash withdrawnRs.50/=
25/6 on line transferchargesRs.100/= (-) 400
Add: Bank collection not record in C. Book
20/6 Bank interest on deposit 100/=
25/6 notes receivable 1000/=
25/6 interest on notes receivable 50/= (+) 1,150
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
15. THE BASIS OF ACCOUNTING
5- Bank debit and credit not known
Because of having on line most of the transactions, the amount could not
be identified by some reasons and needs to be settled later but made the
cause of increase and decrease in balance of bank book not in cash book.
The difference of two balances may keep on temporary in bank
reconciliation shortly and later on in suspense account as “unknown
parties” and find out the difference of the matter. As soon they are
identified must be moved to their right place.
Bank can also debit the amount of any cheque of the other party wrongly in
bank statement must be notified to bank for correction immediately.
Less: unknown debit (Cash Book)
Unknown debit shown in bank book)
# 430449 18/6 Rs. 2000/=
Add: unknown credit (in cash book)
Unknown credit shown in bank book
# 535383 28/6 Rs.1000/=
# 494693 30/6 Rs.1500/=
Bank statement Cash book
Balances 24,750 18,000
Less: un-presented cheques
Cheque No. 500500 Rs. 1, 000
Cheque No. 500510 Rs.2, 000
Cheque No. 500515 Rs.3, 000
Cheque No. 500518 Rs. 5,000 (-) 11, 000
Add: deposit-in-transit
No.130025 dt: 28/6 Rs.3000/=
No.313454 dt: 29/6 Rs.2000/=
No. 505352 dt: 30/6 Rs. 1500/= (+) 6,500
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
16. THE BASIS OF ACCOUNTING
Less:Bank chargesand Tax (C .Book)
10/6 Cheque Book charges 150/=
15/6 Bank commissionRs.100/=
16/6 Tax on Cash withdrawnRs.50/=
25/6 on line transferchargesRs.100/= (-) 400
Add: Bank collection not record in C. Book
20/6 Bank interest on deposit 100/=
25/6 notes receivable 1000/=
25/6 interest on notes receivable 50/= 1,150
Less: unknown debit (Cash Book)
Unknown debit shown in bank book)
# 430449 18/6 Rs.2000/= (-) 2,000
Add: unknown credit (in cash book)
Unknown credit shown in bank book
# 535383 28/6 Rs.1000/=
# 494693 30/6 Rs.1500/= 3,500
Corrected balance 20,250 20,250
BANK RECONCILIATION STATEMENT
Balance as per cash Bank Statement 24,750.-
Less: Un-present/out-standing cheques 11,000.-
Add: Deposit-in-transit 6,500.-
----------
Balance as per Bank statement 20,250.-
======
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
17. THE BASIS OF ACCOUNTING
Balance as per Cash book 18,000.-
Less: Bank charges 350 + 50 Tax - 400.-
Add: Bank interest on deposit 100-
Notes receivable 1,000.-
Interest on notes receivable 50
Less: Unknown debit -2000
Add: Unknown credit 3500
--------
Balance as per Cash book 20,250
======
The journal entries of the amount that could not be shown in ledger
account must be recorded in order to match balances with cash book and
bank book and provide balance for issuing cheques.
Adjusting Entries;
Bank charges 350
Tax on cash withdrawn 50
Bank 400
Bank 1,150
Bank profit 100
Notes receivable 1000
Interest on notes receivable 50
Unknown parties 2000
Bank 2000
Bank 3500
Unknown parties 3500
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
18. THE BASIS OF ACCOUNTING
ACCRUAL BASE ACCOUNTING
In accrual base accounting, transactions are recorded in ledger under
journalizing and as when they transact and reported in income statement
when they earned or occurred of the period that closes accounting. Now,
the cash received or paid will have no concern with revenues and expenses
but receivable and payable which is the result of accrual base accounting.
As far as usually expenses are concerned, the accrual of them daily is not in
practice. Now, this question can be arisen that will the profit cover the
transaction of the date? The answer will be no, then the accrual base
accounting need to accrue all transactions on accrual basis if we require
profit and loss and balance sheet on daily basis.
CASH AND ACCRUAL BASE MIX ACCOUNTING
In cash base accounting cash is received or paid against transactions as and
when they occurred and in accrual base accounting, the journal entry of the
transactions is recorded as and when it occurred before cash receipt and
payment.
In cash and accrual mix base accounting, usually cash is received or paid
against transactions but the transactions relate to receivable or payable are
journalized and remaining transactions of the date of accounting period are
recorded at the time of closing accounts.
It is up to entity’s requirement that it adopts the system among cash,
accrual and mix accounting system.
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
19. THE BASIS OF ACCOUNTING
CASH FLOW STATEMENT
Generally, the income statement and balance sheet are
prepared under accrual basis of accounting but the cash
flow statement is one of the main financial statements
among balance sheet, income statement and statement of
stock holders’ equity which reports the cash generated or
actual cash-like assets from operating, investing and
financial activities used during the time interval.
The cash flow statement includes only inflows and
outflows of cash and excludes transactions that do not
directly affect cash receipts and payments.
The cash flow statement is the reconciliation of opening
balance of cash and closing balance of cash and cash
equivalent at the beginning of the period and ending of
the period.
The cash flow statement bases on cash report on three
types of financial activities: operating activities, investing
activities and financing activities.
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
20. THE BASIS OF ACCOUNTING
1- OPERATING EXPENSES
Operativeactivities include production, sales and delivery of the company’s
product as well as collecting payment from its customers.
These activities usually deal with current assets and current liabilities and
include;
Cash receipts from customers
Cash paid to suppliers for goods and services
Cash paid to employees/Accrued wages
Interest paid (can be reported under financial activities in IAS 7)
Income tax paid
The receipts are reduced from payments.
2- INVESTING ACTIVITIES
The investing activities deal with sales and purchase of fixed assets and long term
investment as well as any return of investment like dividend and interest receipt and
may include;
Purchase of fixed assets (actual cash paid)
Sale of fixed assets (accrual cash received)
Interest received on investments (actual cash received)
Dividend received (actual cash received)
Dividend paid (actual cash paid)
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
21. THE BASIS OF ACCOUNTING
3- FINANCIAL ACTIVITIES
The financial activities involve in shareholder’s equity and long term
liabilities as well as dividend received and interest paid over it and may
have;
Issue of share capital (actual cash received)
Issue of debenture (actual cash received)
Cash received from long term loans (actual cash received)
Payment of dividends (actual cash paid)
Payment of long term loans (actual cash paid
The balance sheet and income statement are the sourceof making cash
flow statement and enterprises can reportcash flows fromoperating
activities using direct method or indirect method.
1- DIRECT METHOD
Direct method reports major classes of gross cash receipts and gross
cash payments as actual.
DIRECT METHOD
Cash flowfrom operations xxxxx
Cash flow from investing (xxxx)
Cash flow from financing (xxxx)
--------
Net Cash flow xxxx
=====
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
22. THE BASIS OF ACCOUNTING
EXAMPLE:
The cash flow statement under direct method is prepared as given balance
sheet and income statement.
BALNACE SHEET
ASSETS 2013 2014 LIABILITIES 2013 2014
Cash & equivalents 4000 5000 Accounts payable 13000 15000
Accounts Receivable 7000 10000 Accrued Wages 2000 3000
Inventory 12000 15000 Accrued taxes 3000 2000
------------------ ------------------
Total Current Assets 23000 30000 Total Current Liabilities 18000 20000
Net fixed assets 40000 40000 Long term debts 20000 20000
Common Stock 10000 10000
Retained earnings 15000 20000
------------------ ------------------
63000 70000 63000 70000
============ ============
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
23. THE BASIS OF ACCOUNTING
INCOME STATEMENT 2014
Sales 85000
Cost of goods sold 50000
Operating Expenses 15000
Depreciation 3000
Interest 2000 70000
------- --------
Net income before taxes 15000
Income tax -10000
---------
Net income 5000
=====
- Cash flow statement direct method
- Find out net profit from balance sheet
- Cash flow statement indirect method
- Statement of changes in working capital
- Funds Flow Statement
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
24. THE BASIS OF ACCOUNTING
CASH FLOW STATEMENT - DIRECT METHOD
Cash flows from operating activities
----------------------------------------------------
Cash received from customers (C-1) + 82000
Less: Cash paid to creditors (C-2) - 51000
Less: Cash paid for expenses (C-3) - 14000
-------
Cash generated from operation 17000
Less: Income tax paid (C-4) - (11000)
-------
Net cash generated from operating activities 6000
Cash flows from investing activities
Purchase of fixed assets (C-5) - 3000
Net cash used by investing activities (3000)
Cash flows from financing activities
Interest paid -2000
Net cash used by financing activities (2000)
--------
Increase in net cash during the period 1000
Add: Cash and cash equivalent at beginning of period 4000
-------
Cash and cash equivalent at ending of period 5000
====
DIRECT METHOD
Cash flowfrom operations 6000
Cash flow from investing (3000)
Cash flow from financing (2000)
--------
Net Cash flow 1000
=====
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
25. THE BASIS OF ACCOUNTING
Calculation 1 – Cash received from customer
Opening balance of a/c receivable 2013 7000
Add: Sales 2014 85000
---------
Total Credit sale 92000
Less: closingbalance of a/c receivable 2014 10000
---------
Cash (balancing) 82000
======
Calculation 2 – Cash paid to creditors
Inventory account
Opening balanceof Inventory 2013 12000
Less: Inventory 2014 15000
-------
Increase in inventory 3000
Add: Cost of goods sold 2014 50000
-------
Purchases (balancing) 53000
=====
Account payable account
Opening of account payable 2013 13000
Add: Purchases 53000
-------
66000
Less: closing of account payable 2014 15000
-------
Cash (balancing) 51000
=====
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
26. THE BASIS OF ACCOUNTING
Calculation 3 - Cash paid for expenses
Opening of accrued expenses 2013 2000
Add: Operating Expenses 15000
-------
Total expenses 17000
Less closing of accrued expenses 2014 3000
-------
Cash (balancing) 14000
======
Calculation 4 – actual tax paid
Opening of accrued expenses 2013 3000
Add: tax paid for the year 2014 10000
-------
Total taxes 13000
Less: closing of accrued taxes 2000
-------
Cash (Balancing) 11000
=====
Calculation 5 – Fixed assets purchased or sold
Opening of fixed assets 2013 40000
Add: depreciation 3000
Less: Closing of fixed assets 2014 (-) 40000
-------
Cash (Balancing) 3000
=====
- Calculation 6- Net profit before
Retained earnings (closing) 20000
Less: Retained earnings (opening) (15000)
---------
5000
Add:
Interest expense for the period 2000
Income tax for the current period 10000
-------
Income before tax and interest 17000
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
27. THE BASIS OF ACCOUNTING
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
28. THE BASIS OF ACCOUNTING
INDIRECTMETHOD
Indirectmethod converts actual bases net income or loss into cash flow
by using a series of additions and deductions changing in operating
activities reporting increaseand decrease in assets and liabilities.
Operating Activities
o Net profitbefore interest and tax
o Adjustment(non cash item)
Add in net profit
Depreciation
Bad debt expenses
Amortization of goodwill, patent or intangible assets
Amortization of discounton debenture or share
Loss on sale of fixed assets
Less in net profit
Gain on sale of fixed assets
Dividend and interest received on investment
The result of addition and deletion in net profit (Assets & Liabilities
o Increase in current Assets (except cash/bank)
o Decrease in current assets (except cash/bank)
o Increase in current liabilities (except tax, interest & dividend p/a)
o Decrease in current liabilities (except tax, interest & dividend p/a)
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
29. THE BASIS OF ACCOUNTING
Cash flows from operating activities
Net profit before interest & tax (C-1) 17000
Adjustment for: (non-cash items)
Add:
Depreciation 3000
-------
Operating profit 20000
Increase in Accounts receivable (3000)
Increase in inventory (3000)
Increase in accounts payable 2000
Increase in accrued wages 1000
-3000
-------- ------
Net cash generated from operating activities 17000
Less: Income Tax paid (C-2) -11000
---------
Net cash generated from operative activities 6000
Cash flows from Investing Activities
Purchase of fixedassets (3000)
Net cash used by investing activities (3000)
Cash flows from financing activities
Interest paid (2000)
Net cash used by financing activities (2000)
-------
Increase in net cash during the period 1000
Add:
Cash and cash equivalent at beginning of period 4000
Cash and cash equivalent at ending of period 5000
=====
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
30. THE BASIS OF ACCOUNTING
FUNDS FLOW STATEMENT:
The prior use of fund flow statement has been converted into cash flow statement
under IAS 7 (Revised 1992) International standard of presenting financial statement.
The fund flow statement is based on accrual base accounting which represents the
cash and cash equivalent in funds flow analysis.
Fund = working capital = current assets - current liabilities
SOURCES OF FUNDS
Net profit before interest & tax (C-6) 17000
Adjustment of (non-cash items) Add:
- Depreciation + 3000
Income from business operation 20000
APPLICATION OF FUNDS
Tax paid -11000
Purchase of fixed assets (C-5) -3000
Interest paid -2000
Net increase in working capital -16000
Net increase in working capital 4000
=====
<THE SYSTEM OF ACCOUNTING < VOLIUM 1< SYED AQEEL RAZA<aqeelraza@live.com>
31. THE BASIS OF ACCOUNTING
All accounting functions are based on payments and receipts and it is up to
the requirement of an entity to adopt cash base accounting systemwherein
cash payments and receipt are made at same time and in accrual base
accounting system requires accruing all payments and receipts before
payment and receipt or payment receipt may differ in time but in cash base
accounting may require accruals at the time of finalization of accounts.
The cash flow and fund flow statements are made under comparison of
balance sheet and income statement and they were prepared under
accrual base accounting based on paid and received cash.
The cash base accounting can be better for small businesses but in the
business like share business, partnership business etc. wherein the capital
of public is involved accrual base accounting may be adopted for actual
position of funds to be paid or to be received.
WRITER’S VIEW
WRITTEN BY:
SYED AQEEL RAZA
MASTER OF COMMERCE & POLITICS