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Atricle Dump - Classification of Accounts - Hints for Journalizing - Advantages of Journal
A home typing service is an ideal venture to get into on a part-time basis. While it won’t make you a millionaire, you can expect a few hundred dollars per month. I’m sure you could use that. However, if you are fast and good at it, you will find plenty of business coming your way from referrals and recommendations and your monthly income could very well skyrocket, making it a great home business idea.There are thousands of typing possibilities and even more people looking for the services of a typing agency. Typing requests will come from business people, doctors, lawyers, authors, students and even job seekers. Some possible typing jobs may include resumes, sales letters, flyers, lawyers letters, student assignments, announcements, manuscripts, newsletters, etc.What’s RequiredIn order to be successful in this home business concept, you need to obviously be able to type quite well. You don’t have to be a fast typist but rather a meticulous and professional one. You need to be dependable and finish typing assignments on time.You obviously need to have a reliable computer and printer. An excellent word processing program like Word or similar is required. As the output quality of your finished assignment is crucial to your success, you might want to ensure that you have a printer that is capable of high-quality printing.Demarcate a section in your home as your “office”. You might consider keeping your clients’ documents to be typed in a secure, preferably lock-up drawer or cupboard. This will ensure t
13. Treatment of depreciation charged on fixed assets.
Fixed assets are those properties/ possessions of the business which are used for carrying on of business viz. plant, machinery, building etc. Depreciation is the permanent decrease in the value of an asset due to wear and tear, passage of time and obsolescence. Depreciation is treated as a business expenditure. Depreciation account is debited and the respective asset account is credited.
14. Treatment of payment/ receipt of representative personal accounts.
At the close of the previous accounting year a business might have incurred expenditure which remained unpaid. It is known as 'Outstanding expenditure'. It is a representative personal account. When actual payment is made in current accounting period the concerned account is debited and cash account is credited.
Advantages of Journal
(1) Transactions are recorded in the chronological order, thus reducing the chances of omitting any transaction.
(2) Transactions, invariably, are accompanied by narration. Thus, the entry is supplemented with basic information regarding the transactions.
(3) Debit and credit amounts are written side by side. It minimizes the chances of entering wrong amount.
Restricted use of Journal
Originally the system of recording the financial transactions developed consisted of (1) writing each transaction, with narration, in the book of original entry, i.e.. Journal and then (2) posting therefrom to the respective accounts in the principal book, i.e., ledger. As the number of transactions' grew the system was modified and the transactions of similar nature say purchases, sales, cash etc. were recorded in sub-journal instead of journal for the following reasons:
(i) If
Browsing through the internet I noticed all the pretty girls sporting items like facial cream, nice cars, clothing and even sitting atop bull dozers. With their silky thighs exposed and their beautiful hair glistening in the sun I learned that sells. It not only sells but it also catches our attention and motivates us to pull out our wallets.Why does sex sell? According to Doctor Richard Taflinger, “Sex is the second strongest of the psychological appeals, right behind self-preservation. Its strength is biological and instinctive, the genetic imperative to reproduction (Taflinger, 1996).”Sex sells because men have a deep biological urge to reproduce. By showing a beautiful woman in skimpy clothing we are telling men “if you buy this product you can get sexy woman like this”. The message is clear to us on a subconscious level even though we may not be aware of it consciously.Since the beginning of time men have been endowed with basic instincts of survival, reproduction and influence. Women are often symbols for a man’s success in life. The better looking the women the more the public associates her man as powerful, intelligent, influential and attractive.Therefore, beautiful woman are attached to a man’s sense of self-worth and his basic instincts of survival. The power of sex in advertising is so strong that it sometimes overpowers men’s common sense and pushes them to make a purchase they do not need. Thus, using a little sexiness in an advertising campaign is bound to product results. Of course there is
Accounts recording transactions relating to individuals or firms or company are known as personal accounts. Personal accounts may further be classified as :
(1) Natural person's personal accounts: The accounts recording transactions relating to individual human beings e.g., Anand's A/c, Remesh's A/c, Pankaj's A/c are classified as natural person's personal accounts.
(2) Artificial person's personal account: The accounts recording transactions relating to limited companies. bank, firm, institution, club. etc. e.g. Delhi Cloth Mill; Hans Raj College; Gymkhana Club are classified as artificial persons' personal accounts.
(3) Representative personal accounts: The accounts recording transactions relating to the expenses and incomes are classified as nominal accounts. But in certain cases due to the matching concept of accounting the amount, on a particular date, is payable to the individuals or recoverable from individuals.
Such amount (a) relates to the particular head of expenditure or income and (b) represents persons to whom itis payable or from whom it is recoverable. Such accounts are classified as representative personal accounts e.g. "Wages Outstanding Account", Pre-paid Insurance Account. etc.
Real Accounts
The accounts recording transactions relating to tangible things (which can be touched, purchased and sold) such as goods, cash, building. machinery etc., are classified as tangible real accounts.
Whereas the accounts recording transactions relating to. intangible things (which do not have physical shape) such as goodwill, patents and copy rights. trade marks etc., are classified as intangible real accounts.
Nominal Accounts
The accounts recording transactions relating to the losses, gains. expenses and incomes e.g., Rent, salaries, wages, commission, interest, bad debts etc. are classified as nominal accounts. As already discussed, wherever a nominal account represents the amount payable to or receivable from certain persons it is known as representative personal account.
Rules of Debit and Credit (classification based)
1. Personal Accounts: Debit the receiver, Credit the giver (supplier)
2. Real Accounts: Debit what comes in, Credit what goes out
3. Nominal Accounts: Debit expenses and losses, Credit incomes and gains.,
Hints for Journalizing
The following discussion will help in diagnosing the transaction with a view to find out which accounts are relevant for passing the journal entry.
1. Treatment of cash/credit transaction.
Read carefully the following transactions:
(i) Purchased goods for Rs. 1,200 cash. . (ii) Purchased goods for Rs. 1,200. (iii) Purchased goods for Rs. 1,200 from Arun. (iv) Purchased goods for Rs. 1,200 from Arun on cash.
Transaction (i) and (iv) are clear as it has been specifically stated that purchases have been made on cash. Thus the entry is :
Purchases account Dr. 1,200 To Cash account 1,200
Transaction (ii) and (iii) are not specific as to whether the purchases are for cash or on credit. However transaction (ii) does not mention any name of the supplier; therefore it implies that the purchases are for cash. Similarly transaction (iii) mentions the name of the supplier but is silent regarding cash-it implies that purchases are on credit: Thus the entry for transaction (iii) is
Purchases account Dr. 1,200 To Amex 1200.
2. Treatment of payment on personal/expenses account.
When payment is made to a person against amount due to him as per his ledger account-the personal account of the creditor should be debited. However if the payment is being made to a person representing business expenditure then the particular expenditure (nominal) account should be debited.
3. Treatment of receipt on personal/ income account.
When amount is received from a person against amount recoverable from him as per ledger account-the personal account of the debtor should be credited. However if the amount received represents business income, then the particular income (nominal) account should be credited.
4. Treatment of trade discount.
In many cases the seller allows to the buyer deduction off the list price. Such deduction is known as 'trade discount'. Trade discount as such is not recorded in the books. The transaction is recorded with only the net amount i.e. (list price -trade discount).
5. Treatment- of cash discount (full settlement).
In some cases creditor may allow some concession to his debtor to prompt him to make the payment within the period of credit allowed. Such concession is known as 'cash discount'. It is allowed by the person receiving the payment and represents, expenditure. It is availed by the person making the payment and represents income.
6. Treatment of Bad debts (debtor becoming insolvent).
An amount due from a debtor may become irrecoverable either partially or wholly. Reason may be that he has been declared insolvent or any other. Such irrecoverable amount represents loss to the business and is debited to Bad debts amount.
7. Treatment of Bad debts recovered
It is evident from the above entry that whenever irrecoverable amount is written off the personal account is credited. If after some time any paymentis received against a debt previously written of then it represents income and as such should be credited to an account styled as 'Bad debts recovered account'. Personal account must not be credited.
8. Treatment of personal expenses of the owner
It is quite common for the proprietor to withdraw cash or goods from the business for personal or domestic use. Sometimes premium on the life policy of the owner may also be paid by the business. Similarly income tax payable by the proprietor may be paid by business. All this represents owner's personal expenses and are debited to his personal account viz. Drawings account.
9. Treatment of payment/ receipt on behalf of customer or supplier.
In some cases business might pay expenses on behalf of its customers. Such payments do not constitute the expenditure of business. Hence it should be debited to the personal account of the concerned customer.
10. Treatment or exchange or new asset with old one.
Sometimes business may exchange its old asset with new one-only the difference in value is paid in cash. In such cases asset account needs debit only with the actual amount paid.
11. Treatment of goods given as charity/ advertisement.
Business might distribute goods as 'free samples' to advertise its products. In some cases it may also distribute goods as charity to boost its image. Both 'advertisement' and 'charity' are expenses of the business, hence should be debited and purchases account should be credited.
12. Treatment of goods lost in accident/ fire.
In certain case a business might suffer loss of goods due to some accident or fire etc., destroyed or damaged goods might have been insured also. In such cases total value of goods lost or destroyed is credited to purchases account and the (i) insurance claim admitted is debited to Insurance Company (ii) balance is debited to loss by accident/ fire account.
13. Treatment of depreciation charged on fixed assets.
Fixed assets are those properties/ possessions of the business which are used for carrying on of business viz. plant, machinery, building etc. Depreciation is the permanent decrease in the value of an asset due to wear and tear, passage of time and obsolescence. Depreciation is treated as a business expenditure. Depreciation account is debited and the respective asset account is credited.
14. Treatment of payment/ receipt of representative personal accounts.
At the close of the previous accounting year a business might have incurred expenditure which remained unpaid. It is known as 'Outstanding expenditure'. It is a representative personal account. When actual payment is made in current accounting period the concerned account is debited and cash account is credited.
Advantages of Journal
(1) Transactions are recorded in the chronological order, thus reducing the chances of omitting any transaction.
(2) Transactions, invariably, are accompanied by narration. Thus, the entry is supplemented with basic information regarding the transactions.
(3) Debit and credit amounts are written side by side. It minimizes the chances of entering wrong amount.
Restricted use of Journal
Originally the system of recording the financial transactions developed consisted of (1) writing each transaction, with narration, in the book of original entry, i.e.. Journal and then (2) posting therefrom to the respective accounts in the principal book, i.e., ledger. As the number of transactions' grew the system was modified and the transactions of similar nature say purchases, sales, cash etc. were recorded in sub-journal instead of journal for the following reasons:
(i) If t
In the five and half years I have been in the networking and home based business industry, I have seen and heard a lot of hype and many polar opposite views of the network marketing industry.Some people are passionate about the industry, while others condemn it. Some claim all companies are pyramid schemes and scams. Celebrity authors such as Robert Allen, Mark Victor Hansen and Robert Kiyosaki advocate the industry.Network marketing is, in its most fundamental sense, a franchise business model. Such a model provides a duplicable system that involves the continuous repetition of certain activities.One key test of a network marketing or home based business company is whether there are large numbers of repeat customers who order and use real products even if they do not get a check. The fact is that Amway/Quixtar, Melaleuca, PrePaid Legal, USANA, and many others have sold millions upon millions of dollars of products to happy customers, many of whom are NOT also getting checks.There are twelve critical factors that are required for a company to provide a legitimate opportunity for the average person to succeed with a home based business. Most important, is needed, are real customers ordering and using real products with value month after month even if they do not get a check. Learn more here:http://tinyurl.com/39da67So why does the industry seem to have a black eye? The problem does not seem to lie with the overall franchise business model. Network marketing is just a business model, and it real
Rules of Debit and Credit (classification based)
1. Personal Accounts: Debit the receiver, Credit the giver (supplier)
2. Real Accounts: Debit what comes in, Credit what goes out
3. Nominal Accounts: Debit expenses and losses, Credit incomes and gains.,
Hints for Journalizing
The following discussion will help in diagnosing the transaction with a view to find out which accounts are relevant for passing the journal entry.
1. Treatment of cash/credit transaction.
Read carefully the following transactions:
(i) Purchased goods for Rs. 1,200 cash. . (ii) Purchased goods for Rs. 1,200. (iii) Purchased goods for Rs. 1,200 from Arun. (iv) Purchased goods for Rs. 1,200 from Arun on cash.
Transaction (i) and (iv) are clear as it has been specifically stated that purchases have been made on cash. Thus the entry is :
Purchases account Dr. 1,200 To Cash account 1,200
Transaction (ii) and (iii) are not specific as to whether the purchases are for cash or on credit. However transaction (ii) does not mention any name of the supplier; therefore it implies that the purchases are for cash. Similarly transaction (iii) mentions the name of the supplier but is silent regarding cash-it implies that purchases are on credit: Thus the entry for transaction (iii) is
Purchases account Dr. 1,200 To Amex 1200.
2. Treatment of payment on personal/expenses account.
When payment is made to a person against amount due to him as per his ledger account-the personal account of the creditor should be debited. However if the payment is being made to a person representing business expenditure then the particular expenditure (nominal) account should be debited.
3. Treatment of receipt on personal/ income account.
When amount is received from a person against amount recoverable from him as per ledger account-the personal account of the debtor should be credited. However if the amount received represents business income, then the particular income (nominal) account should be credited.
4. Treatment of trade discount.
In many cases the seller allows to the buyer deduction off the list price. Such deduction is known as 'trade discount'. Trade discount as such is not recorded in the books. The transaction is recorded with only the net amount i.e. (list price -trade discount).
5. Treatment- of cash discount (full settlement).
In some cases creditor may allow some concession to his debtor to prompt him to make the payment within the period of credit allowed. Such concession is known as 'cash discount'. It is allowed by the person receiving the payment and represents, expenditure. It is availed by the person making the payment and represents income.
6. Treatment of Bad debts (debtor becoming insolvent).
An amount due from a debtor may become irrecoverable either partially or wholly. Reason may be that he has been declared insolvent or any other. Such irrecoverable amount represents loss to the business and is debited to Bad debts amount.
7. Treatment of Bad debts recovered
It is evident from the above entry that whenever irrecoverable amount is written off the personal account is credited. If after some time any paymentis received against a debt previously written of then it represents income and as such should be credited to an account styled as 'Bad debts recovered account'. Personal account must not be credited.
8. Treatment of personal expenses of the owner
It is quite common for the proprietor to withdraw cash or goods from the business for personal or domestic use. Sometimes premium on the life policy of the owner may also be paid by the business. Similarly income tax payable by the proprietor may be paid by business. All this represents owner's personal expenses and are debited to his personal account viz. Drawings account.
9. Treatment of payment/ receipt on behalf of customer or supplier.
In some cases business might pay expenses on behalf of its customers. Such payments do not constitute the expenditure of business. Hence it should be debited to the personal account of the concerned customer.
10. Treatment or exchange or new asset with old one.
Sometimes business may exchange its old asset with new one-only the difference in value is paid in cash. In such cases asset account needs debit only with the actual amount paid.
11. Treatment of goods given as charity/ advertisement.
Business might distribute goods as 'free samples' to advertise its products. In some cases it may also distribute goods as charity to boost its image. Both 'advertisement' and 'charity' are expenses of the business, hence should be debited and purchases account should be credited.
12. Treatment of goods lost in accident/ fire.
In certain case a business might suffer loss of goods due to some accident or fire etc., destroyed or damaged goods might have been insured also. In such cases total value of goods lost or destroyed is credited to purchases account and the (i) insurance claim admitted is debited to Insurance Company (ii) balance is debited to loss by accident/ fire account.
13. Treatment of depreciation charged on fixed assets.
Fixed assets are those properties/ possessions of the business which are used for carrying on of business viz. plant, machinery, building etc. Depreciation is the permanent decrease in the value of an asset due to wear and tear, passage of time and obsolescence. Depreciation is treated as a business expenditure. Depreciation account is debited and the respective asset account is credited.
14. Treatment of payment/ receipt of representative personal accounts.
At the close of the previous accounting year a business might have incurred expenditure which remained unpaid. It is known as 'Outstanding expenditure'. It is a representative personal account. When actual payment is made in current accounting period the concerned account is debited and cash account is credited.
Advantages of Journal
(1) Transactions are recorded in the chronological order, thus reducing the chances of omitting any transaction.
(2) Transactions, invariably, are accompanied by narration. Thus, the entry is supplemented with basic information regarding the transactions.
(3) Debit and credit amounts are written side by side. It minimizes the chances of entering wrong amount.
Restricted use of Journal
Originally the system of recording the financial transactions developed consisted of (1) writing each transaction, with narration, in the book of original entry, i.e.. Journal and then (2) posting therefrom to the respective accounts in the principal book, i.e., ledger. As the number of transactions' grew the system was modified and the transactions of similar nature say purchases, sales, cash etc. were recorded in sub-journal instead of journal for the following reasons:
(i) If
What to do if. . . You Find Money: If it's a few cents, put it on the nearest desk or table. If it's $5, $10 or more, put it in an envelope (if possible) with a note as to where it was found and leave it on the Receptionist desk. You Break Something: First clean it up, and then leave a note. ("I accidentally broke the _____ while dusting. Please call XYZ Company at 555-0123 so we can replace it,") . Then call your supervisor so they know what happened. If you own up to it right away, often-times people say "Oh, don't worry about it". Plus, they appreciate your honesty. You Get Locked Out: You set your keys down and get locked out of an office. Call your supervisor or someone with a key. Remember, ALWAYS keep the keys on you at all times - never set them down. You Find Something Personal Left Out: If you put it away, be sure to leave a note saying . . . "Found your wallet lying on the desk while cleaning, locked it in the Janitor Closet." If you find something and there's no place to put it safely, put it in a clean sack and lock it in the Janitor Closet; then call your supervisor so they can let the client know that the cleaning company has it. Whatever you do, don't take it out of the building. You Are Tempted by Something Put in the Trash: Resist temptation. Your job is to take out the trash, not remove things from the trash for your own use. If someone sees you removing something from the building without knowing
3. Treatment of receipt on personal/ income account.
When amount is received from a person against amount recoverable from him as per ledger account-the personal account of the debtor should be credited. However if the amount received represents business income, then the particular income (nominal) account should be credited.
4. Treatment of trade discount.
In many cases the seller allows to the buyer deduction off the list price. Such deduction is known as 'trade discount'. Trade discount as such is not recorded in the books. The transaction is recorded with only the net amount i.e. (list price -trade discount).
5. Treatment- of cash discount (full settlement).
In some cases creditor may allow some concession to his debtor to prompt him to make the payment within the period of credit allowed. Such concession is known as 'cash discount'. It is allowed by the person receiving the payment and represents, expenditure. It is availed by the person making the payment and represents income.
6. Treatment of Bad debts (debtor becoming insolvent).
An amount due from a debtor may become irrecoverable either partially or wholly. Reason may be that he has been declared insolvent or any other. Such irrecoverable amount represents loss to the business and is debited to Bad debts amount.
7. Treatment of Bad debts recovered
It is evident from the above entry that whenever irrecoverable amount is written off the personal account is credited. If after some time any paymentis received against a debt previously written of then it represents income and as such should be credited to an account styled as 'Bad debts recovered account'. Personal account must not be credited.
8. Treatment of personal expenses of the owner
It is quite common for the proprietor to withdraw cash or goods from the business for personal or domestic use. Sometimes premium on the life policy of the owner may also be paid by the business. Similarly income tax payable by the proprietor may be paid by business. All this represents owner's personal expenses and are debited to his personal account viz. Drawings account.
9. Treatment of payment/ receipt on behalf of customer or supplier.
In some cases business might pay expenses on behalf of its customers. Such payments do not constitute the expenditure of business. Hence it should be debited to the personal account of the concerned customer.
10. Treatment or exchange or new asset with old one.
Sometimes business may exchange its old asset with new one-only the difference in value is paid in cash. In such cases asset account needs debit only with the actual amount paid.
11. Treatment of goods given as charity/ advertisement.
Business might distribute goods as 'free samples' to advertise its products. In some cases it may also distribute goods as charity to boost its image. Both 'advertisement' and 'charity' are expenses of the business, hence should be debited and purchases account should be credited.
12. Treatment of goods lost in accident/ fire.
In certain case a business might suffer loss of goods due to some accident or fire etc., destroyed or damaged goods might have been insured also. In such cases total value of goods lost or destroyed is credited to purchases account and the (i) insurance claim admitted is debited to Insurance Company (ii) balance is debited to loss by accident/ fire account.
13. Treatment of depreciation charged on fixed assets.
Fixed assets are those properties/ possessions of the business which are used for carrying on of business viz. plant, machinery, building etc. Depreciation is the permanent decrease in the value of an asset due to wear and tear, passage of time and obsolescence. Depreciation is treated as a business expenditure. Depreciation account is debited and the respective asset account is credited.
14. Treatment of payment/ receipt of representative personal accounts.
At the close of the previous accounting year a business might have incurred expenditure which remained unpaid. It is known as 'Outstanding expenditure'. It is a representative personal account. When actual payment is made in current accounting period the concerned account is debited and cash account is credited.
Advantages of Journal
(1) Transactions are recorded in the chronological order, thus reducing the chances of omitting any transaction.
(2) Transactions, invariably, are accompanied by narration. Thus, the entry is supplemented with basic information regarding the transactions.
(3) Debit and credit amounts are written side by side. It minimizes the chances of entering wrong amount.
Restricted use of Journal
Originally the system of recording the financial transactions developed consisted of (1) writing each transaction, with narration, in the book of original entry, i.e.. Journal and then (2) posting therefrom to the respective accounts in the principal book, i.e., ledger. As the number of transactions' grew the system was modified and the transactions of similar nature say purchases, sales, cash etc. were recorded in sub-journal instead of journal for the following reasons:
(i) If
If you own or operate a business in California or another state that is besieged with complex business regulations and a burdensome tax system, you may wish to consider relocating your business to Incline Village. Nevada offers a much more business friendly environment than virtually anywhere else in America and there are no corporate or personal income taxes payable at the State level. The tax savings alone can make it beneficial to relocate a business to Nevada and purchase a nice home in many communities.One of the primary benefits of relocating to Northern Nevada and Incline Village in particular is that we have a very safe community in which to live and work. We also do not suffer from traffic congestion, air pollution, gang violence or many of the other problems afflicting urban areas. This feature is extremely attractive especially to workers who currently live in urban areas in California, New York and other locations where you would find a similar cost of living for housing. Why put up with traffic jams, noise, crime and crowds everyday when you can enjoy the beauty of Lake Tahoe for about the same cost of living elsewhere?Currently, there is a surplus of commercial office space in Incline Village and many other communities in Northern Nevada. The quality of these properties combined with very reasonable rents makes them quite attractive for business owners. Many of these local commercial properties are newly built or recently renovated. So you can move to a high quality office building and very often l
8. Treatment of personal expenses of the owner
It is quite common for the proprietor to withdraw cash or goods from the business for personal or domestic use. Sometimes premium on the life policy of the owner may also be paid by the business. Similarly income tax payable by the proprietor may be paid by business. All this represents owner's personal expenses and are debited to his personal account viz. Drawings account.
9. Treatment of payment/ receipt on behalf of customer or supplier.
In some cases business might pay expenses on behalf of its customers. Such payments do not constitute the expenditure of business. Hence it should be debited to the personal account of the concerned customer.
10. Treatment or exchange or new asset with old one.
Sometimes business may exchange its old asset with new one-only the difference in value is paid in cash. In such cases asset account needs debit only with the actual amount paid.
11. Treatment of goods given as charity/ advertisement.
Business might distribute goods as 'free samples' to advertise its products. In some cases it may also distribute goods as charity to boost its image. Both 'advertisement' and 'charity' are expenses of the business, hence should be debited and purchases account should be credited.
12. Treatment of goods lost in accident/ fire.
In certain case a business might suffer loss of goods due to some accident or fire etc., destroyed or damaged goods might have been insured also. In such cases total value of goods lost or destroyed is credited to purchases account and the (i) insurance claim admitted is debited to Insurance Company (ii) balance is debited to loss by accident/ fire account.
13. Treatment of depreciation charged on fixed assets.
Fixed assets are those properties/ possessions of the business which are used for carrying on of business viz. plant, machinery, building etc. Depreciation is the permanent decrease in the value of an asset due to wear and tear, passage of time and obsolescence. Depreciation is treated as a business expenditure. Depreciation account is debited and the respective asset account is credited.
14. Treatment of payment/ receipt of representative personal accounts.
At the close of the previous accounting year a business might have incurred expenditure which remained unpaid. It is known as 'Outstanding expenditure'. It is a representative personal account. When actual payment is made in current accounting period the concerned account is debited and cash account is credited.
Advantages of Journal
(1) Transactions are recorded in the chronological order, thus reducing the chances of omitting any transaction.
(2) Transactions, invariably, are accompanied by narration. Thus, the entry is supplemented with basic information regarding the transactions.
(3) Debit and credit amounts are written side by side. It minimizes the chances of entering wrong amount.
Restricted use of Journal
Originally the system of recording the financial transactions developed consisted of (1) writing each transaction, with narration, in the book of original entry, i.e.. Journal and then (2) posting therefrom to the respective accounts in the principal book, i.e., ledger. As the number of transactions' grew the system was modified and the transactions of similar nature say purchases, sales, cash etc. were recorded in sub-journal instead of journal for the following reasons:
(i) If
Wyoming is a good place to incorporate.In fact, when you think ‘limited liability company’ you should take off your hat, pause a while and thank Wyoming. That is because in 1977, Wyoming became the first state to pass legislation authorizing the creation of a special kind of Wyoming Corporation: The limited liability company.This was the first LLC legislation in the entire country. It was not until 1982 that a further state authorized the LLC, and it took a further six years, until 1988 to be precise, for the IRS to issue a ruling that Wyoming LLCs would be taxed as partnerships instead of as corporations. This ruling encouraged other states to enact similar statutes, and in less than a decade after the ruling, all states had followed suit. Wyoming can be very innovative, all things considered.The state adopted the Wyoming Corporation Act providing a unique set of rules for people wanting to incorporate in this state. It may yet be another far-reaching initiative. Although the statute may not be quite as jealously protective of identities and assets as Nevada, it definitely is as willing to promote business. So, what does the Wyoming Corporation have to offer?Corporate finance officers will always want to hear this: The state does not impose state income tax on Wyoming corporations. In addition to not charging corporate income taxes, it does not levy any franchise taxes or taxes on corporate shares. When you are organizing your Wyoming Corporation, your Articles of Incorporation may provide for an unlimited
13. Treatment of depreciation charged on fixed assets.
Fixed assets are those properties/ possessions of the business which are used for carrying on of business viz. plant, machinery, building etc. Depreciation is the permanent decrease in the value of an asset due to wear and tear, passage of time and obsolescence. Depreciation is treated as a business expenditure. Depreciation account is debited and the respective asset account is credited.
14. Treatment of payment/ receipt of representative personal accounts.
At the close of the previous accounting year a business might have incurred expenditure which remained unpaid. It is known as 'Outstanding expenditure'. It is a representative personal account. When actual payment is made in current accounting period the concerned account is debited and cash account is credited.
Advantages of Journal
(1) Transactions are recorded in the chronological order, thus reducing the chances of omitting any transaction.
(2) Transactions, invariably, are accompanied by narration. Thus, the entry is supplemented with basic information regarding the transactions.
(3) Debit and credit amounts are written side by side. It minimizes the chances of entering wrong amount.
Restricted use of Journal
Originally the system of recording the financial transactions developed consisted of (1) writing each transaction, with narration, in the book of original entry, i.e.. Journal and then (2) posting therefrom to the respective accounts in the principal book, i.e., ledger. As the number of transactions' grew the system was modified and the transactions of similar nature say purchases, sales, cash etc. were recorded in sub-journal instead of journal for the following reasons:
(i) If too many transactions are recorded in journal it will be unwieldy.
(ii) In every business cash balance is required to be ascertained at frequent intervals, say, everyday: therefore it was found convenient to use a separate book for recording cash transactions.
(iil) By recording transactions of similar nature. in one sub journal, say, purchases of goods in purchases journal saves time and efforts in recording and posting.
Because of the reasons listed above, nowadays, journal is used to record only such transactions which are infrequent. Now a days computerized accounting has made the entry of journal very easy and accurate.
Double Entry System
In the 15th century a Franciscan Monk, Lucas Pacioli, described a method of arranging accounts in such a way that the dual aspect (present in every account transaction) would be expressed by a debit amount and an equal and offsetting credit amount.
Double Entry system is the system under which each transaction is regarded to have two fold aspects and both the aspects are recorded to obtain complete record of dealings. Double Entry system of book keeping adheres to the rule. that for each transactions the debit amount (s) must equal the credit amount(s). That is why this system is called Double Entry.
Advantages of Double Entry System
(i) It enables to keep a complete record of business transactions.
(ii) It provides a check on the arithmetical accuracy of books of accounts based on equality of debit and credit.
(iii) It gives the results of business activities either profit or loss during the accounting period.
(iv) It tells the financial position of the business at a point of time. Total resources of the business, claims of the outsiders, amount due by outsiders etc. are revealed by a statement known as Balance Sheet.
(v) It makes possible comparison of the current year with those of previous years helping the owner to manage his business on better lines.
(vi) It reduces the chances of errors creeping in the accounting records because of its equality principle. .
(vii) It helps to ascertain the details regarding any account easily and accurately. Other systems of book-keeping. In addition to the double entry system, there is also single entry system.
The single-entry system is "a system of book-keeping in which as a rule only records of cash and of personal account are maintained; it is always incomplete double entry varying with circumstances. Such system may be economical but it is incomplete, unscientific and full of defects.
Compound Journal Entries
If in a journal entry only one account is to be debited and only one account is to be credited then such an entry is 'Simple Journal Entry'. However, in some cases the entry may require more than one debit or credit or both. Such entries are known as compound entries. Compound entries should be created where
(i) Transaction occur on the same day
(ii) One aspect of these transactions is common; and
(iii) Accounts involved are more than two In fact compound entry is the combination of two or more simple journal ntries.
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