Showing posts with label Accounting Lesson. Show all posts
Showing posts with label Accounting Lesson. Show all posts
Thursday, May 2, 2013
10:40 AM
9:51 AM
Accounting Course: Lesson 1 - Understanding Chart of Accounts
A chart of accounts is the listing of all accounts, a company needs to use for recording of transactions. Chart of accounts is designed by keeping in view the needs of the company.
Accounts are usually listed in chart of accounts as below;
Accounts are usually listed in chart of accounts as below;
Balance Sheet
- Assets
- Liabilities
- Equity/ Capital
Income Statement
- Revenues
- Expenses
- Non Operating Revenues
- Non Operating Expenses
Expenses are usually breakdown into further categories;
Production expenses
Selling Expenses
Marketing expenses
Human Resource Expenses
Sample Chart Of Accounts :
Current Assets: (Account numbers : 0001-0100)
0001 Raw Material 1
0002 Raw Material 2
0003 Raw Material 3
0004 Work in Progress 1
0005 Work In progress 2
0006 Cash
0007 Trade receivables
Sub Ledgers: 0007-001 ABC debtor
0007-002 CDE debtor & so on
Property Plant & Equipment : (Account numbers : 0101-0200)
0101 Vehicles
0102 Furniture
0103 Plant
0104 Land & so on
Current Liabilities :( Account numbers : 0201 -0300)
0201 Bank Loan
0202 Notes
0203 Suppliers
Sub ledger : 0203 -001 ABC Supplier
Long Term Liabilities : (Account numbers 0301-0400)
0301 Bank Loan
0302 Lease Liability
Equity : (Account numbers 0401-0500)
0401 Paid up Share Capital
0402 Retained Earnings
0403 Treasury Stock
Income statement accounts shall be explained in detail in Lesson 2. Keep visiting us for a 1 month Accounting course.
Monday, October 3, 2011
9:46 AM
How to prepare Bank Reconciliation?
Bank reconciliation is one of the major accounting technique to reconcile the ledger with the bank's records. You may find it very difficult but the following tips will make your life happier within minutes.
Understand that there are two books in bank reconciliation.
1) Cash Ledger ( Company's record)
2) Bank Statement ( issued by company's bank)
In bank reconciliation, we try to match the amount of bank statement with our ledger or vice versa. The purpose of this is to make sure that all transactions posted or occurred are in the knowledge of the authorized personnel.
Format:
Balance as per Bank Statement ----------------------------xxxxxx
Add:
Deposit in transit xxxxxx
Bank Charges xxxxxx
Less:
Cheques not cleared yet (xxxxx)
Balance as per company's books xxxxxx
Friday, September 16, 2011
9:37 AM
Tuesday, September 13, 2011
9:53 AM
Basic Accounting Concepts
To understand the accounting you are required to understand some basic concepts of it. These include
1) Going Concern
2) Prudence
3) Matching Concept
4) Consistency
5) Materiality
6) Substance over form
Going Concern
Going concern concept implies that the entity will continue to operate in the foreseeable future and has not any intentions or necessity to liquidate. Assets should not be measured on realizable ( selling) value.
Example:
ABC Foods Pty has acquired a grinding machine costing USD 100 million with nil residual value. Assets has a life of 10 years.
Using the going concern assumption, it is assumed that business will remain in operation and asset will live out its total life of 10 years. A depreciation charge of USD 10 million ( USD 100m/10 years) would be made each year. The value in the balance sheet for the asset would be cost less accumulated depreciation.
Prudence
Prudence concept is about the exercise of the judgement needed in making the estimates. According to the prudence concept, assets or income should not be overstated and expenses or liabilities should not be understated.
Example:
Loss of USD 150m by ABC foods pty due to damage of premises by fire should be accounted for immediately. An accurate estimate is needed to be accounted for.
Profits or incomes should only be recognized when realized in any asset.
Matching Concept
Matching means expenses, income and profits and losses of a certain period should be matched with each other.
Example:
Let say ABC foods pty incurred an expense of USD 450 and earned an income of USD 650. The income and expense should be matched in the relevant period.
Consistency
The presentation and classification of items in the financial statements should remain the same from one period to another except in case of any significant change in the nature of operations.
Materiality
Materiality is an important concept in the accounting which implies that all material information should be disclosed adequately.
What is material information?
Any information which can influence the economic decision of the users taken on the basis of financial statements.
Substance overform
The principle that the transactions are recorded on the basis of their nature and not only with regard to their legal form. In accounting the substance of the transaction is far more important than the legal form of it.
For example a car leased by the company should be recorded in the books of the company as a leased asset not merely rental expense.
1) Going Concern
2) Prudence
3) Matching Concept
4) Consistency
5) Materiality
6) Substance over form
Going Concern
Going concern concept implies that the entity will continue to operate in the foreseeable future and has not any intentions or necessity to liquidate. Assets should not be measured on realizable ( selling) value.
Example:
ABC Foods Pty has acquired a grinding machine costing USD 100 million with nil residual value. Assets has a life of 10 years.
Using the going concern assumption, it is assumed that business will remain in operation and asset will live out its total life of 10 years. A depreciation charge of USD 10 million ( USD 100m/10 years) would be made each year. The value in the balance sheet for the asset would be cost less accumulated depreciation.
Prudence
Prudence concept is about the exercise of the judgement needed in making the estimates. According to the prudence concept, assets or income should not be overstated and expenses or liabilities should not be understated.
Example:
Loss of USD 150m by ABC foods pty due to damage of premises by fire should be accounted for immediately. An accurate estimate is needed to be accounted for.
Profits or incomes should only be recognized when realized in any asset.
Matching Concept
Matching means expenses, income and profits and losses of a certain period should be matched with each other.
Example:
Let say ABC foods pty incurred an expense of USD 450 and earned an income of USD 650. The income and expense should be matched in the relevant period.
Consistency
The presentation and classification of items in the financial statements should remain the same from one period to another except in case of any significant change in the nature of operations.
Materiality
Materiality is an important concept in the accounting which implies that all material information should be disclosed adequately.
What is material information?
Any information which can influence the economic decision of the users taken on the basis of financial statements.
Substance overform
The principle that the transactions are recorded on the basis of their nature and not only with regard to their legal form. In accounting the substance of the transaction is far more important than the legal form of it.
For example a car leased by the company should be recorded in the books of the company as a leased asset not merely rental expense.
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