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Casual Articles - Classification of Accounts - Hints for Journalizing - Advantages of Journal
Managing a business is not as simple as one might think it is. As a matter of fact, in order for your business to succeed, one must exert extra effort. Also, you must always monitor the current condition of your business. In order to know how well your business is doing is by monitoring the monetary flow of your business. When we say "monetary flow" or more known by many as "cash flow", it represents the entire gross sales and revenues. Also, you must always keep track of your net income or "net profit" so as to know how to enhance the performance of your business.One of the essential factors in making your business successful is by creating a financial scheme and periodically checking its status against certain particulars that will pop up monthly. If certain problems are encountered, it is essential that you must solve the problems immediately. Listed below are some of the actions that you must take so that your business will run smoothly and for it to succeed eventually:Design a financial scheme. Estimate the profit that you expect to earn on a monthly basis and calculate your expenses.Also, bear in mind that the profits that you have lost can not be recovered. Once businessmen assess their estimated calculations to the actual calculations and discover that the profits are much lower than they expect it would be or the expenses are higher than projected, they would normally decide to “make it up later”. The truth is that, on each month or months when the projections are either too low or too high – low for prof
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 ma
Late payments can produce serious financial problems. The effect on businesses who suffer from high debtor days has been well documented. According to official statistic it is directly linked to business failure. Less has been written however about why paying invoices late can be disadvantageous for the person who owes money.This article seeks to redress the balance.Paying your bills late can cause you economic problems. It can strain your relationship with your suppliers who:-Might decide not to continue doing business with you; or-Might impose tough new payment terms on you- including compensation claims and late payment fees.The UK government introduced the Late Payment of Commercial Debts Act in 1998 to enable businesses to claim interest from companies who owed them money. As a result, your suppliers are able to charge you extra for late payment very easily.In addition to this, paying late can also damage your reputation which can have serious consequences for your company.Conversely you might find that if you commit to paying on time or even early, that you are able to get a more favorable price from your suppliers in return. This can help to reduce your costs and bolster your profit margin.Moreover, if you do find yourself in financial difficulties, your suppliers are more likely to be accommodating if you have a track record of paying promptly.Ultimately, if you pay your suppliers on time you are going to have a much better relationship with them than if they have
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 mak
We hear how difficult it can be to be a single mother and hold a career. A few fathers may have this problem so it applies equally to all those single fathers out there as well. Few of us know really how many hurdles these woman (single parents) have to go through in order to advance in their careers. Hurdles often include skills, wages and competing interests.The Department of Labor states that about 69% of all single mothers are working. This number shows some indication of decline as the economy sours. Since such woman have competing interests, have more problems, often less skills, and must balance between work & family they are typically one of the first groups to lose their jobs. Even while working they have some of the lowest income levels. The problems these woman face can be summarized as follows:SkillsMany of the working mothers have only sporadic prior experience. Since they have been busy raising children many of these mothers have not had the opportunity to attend trade schools or colleges. Furthermore, a career is developed over time and in many cases these woman have moved in and out of the workforce thereby they are unable to maintain a career.Competing InterestsBusinesses love when employees are committed to the company’s success. The problem is that mothers sometimes come in late, must leave early and take additional days off to either recover themselves or take care of a sick child. If the babysitter calls off they are required to stay at home to watch their children. The more reso
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 ma
When businesses think of team building, business owners usually associate it with building their company’s internal workforce into a lean-mean fighting machine. Team building, however, should be extended to include external relationships such as those with other businesses. Enter joint ventures or JVs for short.Joint ventures generally are business partnerships established between two or more parties (individuals, business groups, companies, corporations) for the purposes of expanding the business and achieving merits by joining forces and working as a team. The parties involved in joint venture agreements complement each other, leverage each other’s assets assets, compensate each other’s weaknesses, and at times equally share risks.Less than 5% of businesses actually use joint ventures effectively and most don’t even use it at all. In order to get the most out of joint ventures correctly, multiple factors such as choosing who to partner with, approaching potential partners correctly, negotiating a win-win deal for all parties involved, and having a well-coordinated execution need to be taken into consideration.There are several types of joint ventures. Big companies may join forces to become even more powerful and thus dominate the market, while small companies may team up to build a stronger presence in their market niche in order to fend off bigger, resource-rich companies. JVs can also be used to gain access into foreign markets. Foreign companies often form joint ventures with indigenous companies that are
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 ma
The accurate and standardized collection of data plays a vital role in the success of a clinical trial. An important step in electronic clinical data management (eCDM) is electronic data capture (EDC).However, the success of EDC is dependent on how well-trained and knowledgeable the clinical research coordinators and associates are in the use of EDC. There are many options for training on an EDC solution – printed materials, but these can quickly become out of date and the success is dependent on how the individual uses the material, classroom training, but this can be expensive to conduct or webcasts, which can be more cost effective to conduct, but participants can get lost in the large number of participants that webcast can have.What other options are out there to offer good EDC training to your attendees? eLearning, or computer-based training, is a good option to incorporate into your overall training plan. It may not be best to completely replace classroom or other types of training with eLearning, but by allowing attendees to work at their own pace on their own time, eLearning can be a valuable learning experience. The perfect platform to conduct EDC training is an Investigator Meeting, where attendees can receive one on one attention while going through the training process at their own pace.eLearning solutions are more efficient and are easy to use. Many options are web-based, meaning they don’t require user to install anything on their own computers. This also means that the system can be accessed from any loca
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 ma
Packaging tape is a very important and useful item in the entire process of packaging items. There are many different kinds of packaging tape which are available for use by the customers.Carton sealing tape is used to seal large cardboard cartons. Colored carton sealing tape is often considered to be ideal for identifying inventories, sorting shipments and dating the products. Filament tape is considered to be ideal for bundling tubes, sealing cartons, palletizing, unitizing and repairing. The fiberglass strands give the filament tape tear resistance as well as extra strength for holding heavy loads and packages. The different kinds of filament tape are utility grade filament tape, medium grade filament tape, high grade filament tape, premium grade filament tape and paper backed filament tape.Duct tape is also divided into many subcategories which are utility grade duct tape, medium grade duct tape, high grade duct tape and premium grade duct tape. Duct tape is designed to strengthen, repair as well as create a water tight seal. There are many kinds of double sided tapes as well. There is double sided masking tape which is manufactured with adhesive on both sides with an easy remove liner. Vinyl based double sided tape is rugged yet flexible and bonds to all kinds of surfaces. Foam based double sided tape is designed for indoor mounting and joining applications. Adhesive transfer tape is considered to be perfect for splicing paper, foil and film.There are a variety of tape dispensers which are available, which eas
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
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