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Page 147 of 160
How to prepare a single column cash book?
Let us understand how to make the respective entries in the single column cash book with the help of the given data.May 1 Cash in hand $50000May 1 Bank balance $160000May 4 Received a cheque from a customer “A” of $18000May 5 Deposited customer “A” cheque in Bank.May 8 Cash withdrawn from bank for business purpose is $15000May 11 Goods sold for cash $28000May 14 Goods bought for cash $53000May 19 Goods sold for cash $40000May 21 Paid Mr.B by cheque $16000May 25 Deposited into bank $18000May 30 Paid salary in cash $12000May 31 Paid rent by cheque $7500SolutionThe solution ...
Read MoreWhat are reversing entries and their journal entries?
This is the final step in the accounting cycle. Reversing entries are made at the start of an accounting period to reverse the adjusting journal entries made at the end of the previous period.These are made because of last year’s accruals. Also, the prepayments which will be paid during the New Year are no longer needed to be recorded as liabilities and assets.These entries will make bookkeeping simple or simplify the bookkeeping. If the entry is not reversed, the amounts recorded in previous years are adjusted and account for the new portion. For new adjusted entries, the keeper can’t keep ...
Read MoreCalculate provision expenses and write its journal entry
A finance institution has loan portfolio and the respective details are as given below −Loan portfolio (%)31-12-15Rate to calculate (%)On schedule5286914Loan in arrearsFor first 30 days2851472Next 30 days17582322Next 30 days7525922Next 90 days6523153Next 180 days46327100360 days up25423100SolutionCalculations of provisions are as follows −Loan portfolio31-12-15Rate to calculate (%)On schedule528691400For first 30 days28514725702.94Next 30 days1758232238681.06Next 30 days752592216556.98Next 90 days652315334572.43Next 180 days4632710046327360 days up2542310025423Total5960124167263.41The journal entry for the provision expenses as per the above calculations is as follows −AccountDebitCreditProvision expenses Loan loss reserves167263.41167263.41
Read MoreHow postings are made in ledger accounts with single column cash books?
Following steps are followed while making entries in ledger account −Opening balance and closing balance in cash books are not posted in ledger accounts.Debit side entries of the cash book are posted in relevant accounts on the credit side in the ledger.Credit side entries of the cash book are posted in relevant accounts on the debit side in the ledger.Page numbers or account numbers of ledger accounts of respective entries are recorded and written in PR or posting reference columns of single column cash books.ExampleConsider an example for using the below cash book column to prepare general ledger (salaries)DebitCreditDateDescriptionVRPRAmountDateDescriptionVRPRAmountYYYY July ...
Read MoreWhat is a single column cash book and explain its format?
Single column cash book is a T shaped cash book. It is called a single column cash book because; it has only a money column on both credit and debit sides and records cash transactions.It is divided into two parts having debit on the left hand side and credit on the right hand side.FormatThe format of a single column cash book is as follows −DebitCreditDateDescriptionVRPRAmountDateDescriptionVRPRAmountPurposeThe purpose of each column in single column cash book is explained below −DateIt records date, month and year of transaction (both receipts and payments). If more than one transaction happened in the same month and ...
Read MoreHow are the journal entries and legal entries recorded for contingent liabilities?
There is a lawsuit between company A and company B. Company A sued company B in violating patent rights of technology. Company A claimed $ 3 billion, when the lawsuit began in 2010 but in the final verdict in 2016, company A won $ 400 million. (Company B estimated contingent liability as $800 million in their books)SolutionPrepare journal entry for year end 2010 as shown below −ParticularsDebt (million $)Credit (million $)Lawsuit loss A/c To Lawsuit liability800800Being estimated amount of lawsuit losses recordedProbability of occurrenceIf the liability is not probable and will arise soon (journal entry is not passed)Disclosure is ...
Read MoreWhat are contra entries and how are they recorded?
The word “contra” means opposite or against. This entry involves both a cash account and bank account. In this, entries are recorded on the debit and credit sides of the cash book at same time.These entries are not recorded in ledger accounts because both aspects (credit and debit) are in double column cash books. Letter “C” is written in the posting reference column which represents contra entry.If cash is taken from the bank, due to business purposes then contra entry is made. If cash is taken for personal use, then it is recorded in the credit side of the bank ...
Read MoreState the importance and features of cash books
Cash book records all the transactions related to cash in an organization. Transactions are recorded according to their type (debit or credit). These are recorded in chronological order. Cash book can be both a journal and a ledgerFeatures of cash bookThe features of cash book are explained below −Act as both journal and ledger − Cash books records transactions as it happens and posts the transactions.Substitution − It serves as an alternative for cash accounts.Dual entry − Cash book has two sides namely, debit side and credit side.Identical − Debit side (total) = credit side (total).Debit balance − Business will ...
Read MoreExplain GAAP guidelines for contingent liabilities
Contingent liabilities include different liabilities like warranty costs, injury claims, lawsuits etc. Each of the expenses are treated differently and it should satisfy a set of conditions before realizing.General accepted accounting principles (GAAP) have some guidelines for recognition, measurement and reporting for contingent liabilities. These are explained below −IdentificationFirst step in identification is to determine the odds of each contingency occurring and then, they should be classified based on probable, possible or remote.Reevaluate the items, if there are any changes (if increase in percentage of contingency or not).Write the reasonable liabilities in footnotes.Finally, probable liabilities are listed in financial statements ...
Read MoreDistinguish between contingent liabilities and provisions
Contingent liabilities and provisions are governed by the international accounting standards 37 (IAS 37). The main objective is to match asset and liabilities = income and expenses in a particular financial year, so that the financial statements reflect in a realistic manner.ProvisionIt is the present obligation that arises due to previous events. Provision decreases asset values. This is for bad debts and doubtful debts are commonly recorded debts.Over provision or under provision are recognised by comparing with the previous years and are charged in an income statement. Provision amount is decided on the company’s policy.The basic accounting treatment for provision ...
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