ACCOUNTING CYCLE:

ACCOUNTING CYCLE:

*RECORDING
*CLASSIFYING
*SUMMARIZING
*ANALYSING
*INTERPRETING

Bank reconciliation

Remember in BAnk reconciliation statement alwayz the cash book means bank column of cash book.....

dont termed it as cash a/c

Traditional approach VS Modern approach

**Traditional approach::::----

Personal A/C
Real A/c
NOmial A/c

**Modern Approach::::---

Assets
Liability
Income
Expenditure
Capital

Partnership accounts: Calculation of Goodwill (average profit method)

Calculation of Goodwill (average profit method)

Click to enlarge

There are various method to calculate goodwill. But in this method we get to know how to calculate goodwill in average profits method.

Income and Expenditure Account items

Income and Expenditure Account items

Note:- The following steps will be necessary to convert a receipt and payment account into an income and expenditure account:

    Opening and closing balances of receipt and payment account should be excluded.

    All items of capital receipts and payments should be excluded.

    All incomes of previous years or for years to come should be excluded.

    All expenditures of previous years and years to come should be excluded.

    All accrued income and outstanding expenditures relating to the period should be included.

    Item such as bad debts, depreciation, etc. will have to be provided.

Treatment of Peculiar Items:

Generally in exercises the instructions are given as to the treatment of special items. Such instructions are based on the rules of the concern. These should be followed while solving questions. Incases where no specific instructions are given the following guidelines may be considered.

Legacy:

It is the amount received by the concern as per the will of the donor. It appears in the receipt side of receipt and payment account. It should not be considered as as an income but should be treated as capital receipt i.e., credited to capital fund account.

Donation:

Amount received from any source by way of gift is described as donation. It appears on the receipts side of receipt and payment account. Donations are usually credited to income. Rules of the association may provide that a part of donations are to be treated as capital. However, if donations are received for a specific purpose viz., building, free dispensary etc., then it should require special treatment. Donations for specific purposes should not be credited to income and expenditure account. Similarly donations representing heavy amount may also be treated as capital receipts.

Subscription:

The members of the associations, as per rules, are generally required to make annual subscription to enable it to serve the purpose for which it was created. It appears on the receipts side of the receipt and payment account and is usually credited to income. Care must be exercised to take credit for only those subscriptions which are relevant.

Life Membership Fees:

Generally the members are required to make the payment in a lump sum only once which enables them the members for whole of life. Life members are not required to pay the annual membership fees. As life membership fees is substitute for annual membership fees therefore, it is desirable that life membership fees should be credited to separate fund and fair portion be credited to income in subsequent years. In the examination question if there is no instruction as to what portion be treated as income then whole of it should be treated as capital.

Entrance Fees:

Entrance fees is also an item to be found on the receipt side of receipts and payments account. There are arguments that it should be treated as capital receipt because entrance fees is to be paid by every member only once (i.e., when enrolled as member) hence it is non-recurring in nature. But another argument is that since members to be enrolled every year and receipt of entrance fees is a regular item, therefore, it should be credited to income. In the absence of the instructions any one of the above treatment may be followed but students should append a note justifying their treatment.

Sale of News Papers, Periodicals etc.

As the old newspapers, magazines, and periodicals etc. are to be disposed of every year, the receipts on account of such sales should be treated as income, and therefore to be credited to income and expenditure account.

Sales of Sports Material:

Sale of support materials (used) is also a regular feature of the clubs. Sales proceeds should be treated as income, and therefore to be credited to income and expenditure account.

Honorarium:

Persons may be invited to deliver lectures or artists may be invited to give their performance by a club (for its members). Any money so paid is termed as honorarium and not salary. Such honorarium represents expenditure and will be debited to income and expenditure account.

Special Fund:

Legacies and donations may be received for specified purchases. As discussed above these should be credited to special fund and all expenses related to such fund are shown by way of deduction from the respective fund and not as expenditure in income and expenditure account.
Capital Fund:

Any concern - whether profit seeking or non profit seeking - requires money for conducting day to day functions. In the case of profit seeking concerns such money is called "capital", while in the case of non - profit seeking concerns it is called "capital fund". The excess of total assets over total external liabilities of a concern is called capital fund. Capital fund is created with surplus revenue and capital receipts and incomes. It is shown on liabilities side of balance sheet. Source:- management 4 accounting.

Fix installment method or Straight line method of depreciation

NOTE:- in fix installment method depreciation value will b same in every year. It may differ, when changes in months

Diminishing balance method of Depreciation

NOTE:- in diminishing balance method depreciation value will b different in every year.

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Accounting Bookkeeping - Fixed Assets Depreciation

 Accounting Bookkeeping - Fixed Assets Depreciation