Journal Practice question 3

11.abc  company made 5% allowance on its receivable based on past experiences.the journal  entry will be

Debit	bad debt accounts
Credit	receivable allowance

Rules & calculation for receivable allowance

*john Stamp has opening balances at 1 January 2016 on his trade receivables account and allowance for receivables account of $68,000 and $3,400 respectively. During the year to 31 December 2016 John Stamp makes credit sales of $354,000 and receives cash from his receivables of $340,000.

FA1 Practice question set 6

1.rafe & Co have total accounts receivable at the end of their accounting period of $45,000. Of these it is discovered that one, Mr Xiun who owes $790, has been declared bankrupt, and another who gave his name as Mr Jones has totally disappeared owing Araf & Co $1,240.

The provision of credit facilities

The majority of businesses will sell to their customers on credit and state a defined time within which they must pay (a credit period). 

The main benefits and costs of doing so are as follows:

The Allowance for Doubtful Accounts

Allowance

1.The allowance for doubtful accounts is a reduction of the total amount of accounts receivable appearing on a company’s balance sheet, and is listed as a deduction immediately below the accounts receivable line item

2.The allowance for doubtful accounts represents management’s best estimate of the amount of accounts receivable that will not be paid by customers. 

What is 'Accounting' and 'accountant'

What is an 'Accountant'

An accountant is a professional person who performs accounting functions such as

audits or financial statement analysis .

Accountants can either  be employed with an accounting firm, a large company with an internal accounting department, or can set up an individual practice

OurMission and Vision

Our Vision

To implement accounting standards of credit open tuition bd at professional level  student in order to enhance the knowledge of global student and eventually to up-gradate the accounting and financial management of  international level.

What is Credit Rating? How is it different from auditing?

Credit Rating is an independent opinion on the ability and willingness of a borrower in discharging its obligations as principal and interest as per time schedule. These opinions are provided by the rating agencies that have a license from the regulatory body, Securities and Exchange Commission.

Auditing provides an opinion as to whether the books of accounts are maintained as per the accounting standard and how far the accounts reflect true and fair position of an organization on a particular date.

Who are the primary users of Credit Rating Services?

The rating service can be used by the following entities:

• 1.Banks
• 2.Financial Institutions such as leasing and house financing companies
• 3.Governments and Regulators
• 4.Financial Intermediaries/Merchant Banks/ Issue Managers
• 5.Loan syndicators
• 6.Business Houses
• 7.Corporate Entities
• 8.Investors

what are the benefits of credit reting

To the Ratings Entities

• Branding your organization with international standards
• Good rating will assist to source finance at cheaper rate while bad rating will assist an organization to take right step for improvement
• Know your business through the eye of independent professionals of high standard
• Increase cost effectiveness of an organization

What does Credit Rating actually mean?

Credit RatingRatings are the opinion of rating agencies on the creditworthiness of issuers or issues in terms of their/ its ability and willingness of discharging its obligations in timely manner. Ratings are issued on the basis of information supplied to CRISL by the issuer or its officials and also on the basis of information CRISL believes to be reliable.

Effect of revenue expenditure and correction

When revenue expenditure treated/recorded as capital expenditure the following error/effect  will incur

Asset           Expense          Profit

increase                           decrease                                     increase

Effect of capital expenditure and correction

When capital expenditure treated/recorded as revenue expenditure the following error/effect  will incur

Asset           Expense          Profit

decrease                           increase                                     decrease

Rules for bank statement

When the company receives its bank statement, the company should verify that the amounts on the bank statement are consistent or compatible with the amounts in the company's Cash account in its general ledger and vice versa.

What is Outstanding check

Outstanding check 

1.An outstanding check is a check that has been written by a company (and deducted from the appropriate general ledger cash account) but it has not yet cleared the bank account on which it is drawn.

2.Hence, outstanding checks will mean that the balance in the bank account will be greater than the balance in the general ledger account (or in an individual's check register).

What is Outstanding deposit

Outstanding deposit

1.An outstanding deposit refers to a company's receipts (cash, checks from customers, etc.) which have been recorded by the company, but the amount will appear on its bank statement at a later date. An outstanding deposit is also known as a deposit in transit.

What is Bank statement &Bank reconciliation?

 

Bank statement 
1.it  is a summary of financial transactions which have occurred over a given period on a bank account held by a person or business with a financial institution.

2.A bank statement is a record, usually sent to the account holder once per month, summarizing all transactions in an account during the time from the previous statement to the current statement.

BANK STATEMENT

Ways to increase revenue and profit

Revenue is the income earned by the business entity through its day to day operations. Profit is the gain of the company i.e. when the amount earned exceeds the amount spent, the result would be profit. If revenue is the backbone then profit is the lifeblood of the business.

Difference Between Revenue and Profit

Revenue is the income earned by the business entity through its day to day operations. Profit is the gain of the company i.e. when the amount earned exceeds the amount spent, the result would be profit. If revenue is the backbone then profit is the lifeblood of the business.

Key Differences Between Capital and Revenue Expenditure

The benefit generated by the revenue expenditure is for the current accounting year. The examples of revenue expenditure is as under – Wages & Salary, Printing & Stationery, Electricity Expenses, Repairs and Maintenance Expenses, Inventory, Postage, Insurance, taxes etc.

Capital Expenditure Vs Revenue Expenditure

The amount spent by the company for possessing any long term capital asset or to enhance the working capacity of any existing capital asset, or to increase its lifespan in order to generate future cash flows or to decrease the cost of production, is known as Capital expenditure. As a huge amount is spent on it, the expenditure is capitalized, i.e. the amount of expenditure is spread over the remaining useful life of the asset.

What iscapital expenditure and revenue expenditure

A capital expenditure

1.It is an amount spent to acquire or improve a long-term asset such as equipment or buildings. Usually the cost is recorded in an account classified as Property, Plant and Equipment. 

2.It is an expenditure which results in the acquisition of non-current asset or improvement in their earning capacity.

Journal Practice question 2

11.When supplier make sales on Credit

Debit	Receivable (Increase current Asset)
Credit	Sales Revenue (Increase income)

12.When customer return goods to supplier,the supplier record the following entry

Debit	Sales Return (decrease in income)
Credit	Receivable (decrease in asset)

What is Books of Prime entry

Books of Prime entry

*Books of Prime entry are the books in which we first record transactions.

*These are not accounts; they are simply books that records the details of a transactions, almost like a diary. 

*The firm will have a separate book for each kind of transaction. The type of the transaction will affect which book it, is entered into.

FA1 Practice question set 5

41 In Dalveer’s cash receipts book for the month of June the trade receivables column totalled $6,570.


What does this amount represent? 
A The amount invoiced to Dalveer’s customers during June 
B The amount owed by Dalveer’s customers at the end of June 
C The amount received from Dalveer’s customers during June 
D The amount of discounts given to Dalveer’s customers during June

FA1 Practice question set 3

21 Which one of the following is the correct posting from the purchase day book? 

A Dr Purchases account Cr Payable's ledger control account 

B Dr Purchases account Cr Cash book 

C Dr Payable's ledger control account Cr Purchases account 

D Dr Cash book Cr Purchases account

FA1 Practice question set 2

11 Marvin has a balance of $3,350 on his sales ledger control account but his list of customer balances totals $3,500. 

Which of the following balances would explain the difference? 

A The total of sales day book was overstated by $150 

B A contra of $150 has been posted in the customer’s individual account but not the control account C A credit note of $150 has not been recorded in the sales day book

D An irrecoverable debt has been accounted for in the control account but not the individual customer account

FA1 Practice question set 4

31 Walter sells goods to Ninevah with a list price (exclusive of sales tax) of $4,300, offering a 4% trade discount. Sales tax is 17·5% 

What amount should be recorded for this transaction in the sales account (to the nearest $1)?

A $4,850 

B $4,128 

C $5,053 

D $3,513

What is debit note &credit note

*Debit note


*When the purchaser returns the goods to the seller the Purchaser sends a Debit Note to the seller & the Seller sends a Credit Note to the purchaser.

*A debit note or debit memorandum (memo) is a commercial document issued by a buyer to a seller as a means of formally requesting a credit note

FA1 Practice question set 1

ALL 25 questions are compulsory and MUST be attempted Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to each multiple choice question. Each question is worth 2 marks.

1 Which of the following is an example of capital expenditure? 

A Paying for refurbishment as part of upgrading a building 

B Paying carriage outwards in respect of selling goods 

C Paying legal fees in order to recover customer debts 

D Paying bonuses to production operatives

*What are sundry expenses?

* sundry expenses are expenses that are small in amount and do not occur often. Since these items are not significant, a company might use one general ledger account with the title Sundry Expenses for recording the debit amounts.

*If some items recorded in Sundry Expenses begin to occur frequently and/or become significant, the related amounts should be transferred to a new separate general ledger account.

Current & Non-current asset

Asset

*an asset is defined as a "resource controlled by an entity as a result of past event and from which future economic benefits are expected to flow to the entity"

*An asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit.

What is sales tax

Sales tax

* A sales tax  is added to the price of goods and services taken by customer

*A sales tax is a consumption tax  imposed by the government on the sale of goods and services.

* A conventional sales tax is levied at the point of sale, collected by the retailer and passed on to the government.

What is discount allow & discount receive

*Discount Allowed

*There is discount allowed when the seller of goods or services gives a discount to the buyer upon payment. 

*Sellers commonly give price reductions as incentives to encourage early payment on credit sales.

*Sellers also allow discounts for other reasons, such as cash up-front payments, volume orders, promotional offers, clearance sales and as a loyalty reward. 

what is discount

*Discount

*An amount or rate by which the catalog, list, or retail price of an item 

is reduced when sold to a re-seller.

*A discount specifically refers to terms which is used when goods are sold at a less than its nominal or par value.

What is a 'Journal' with practice question 1

*Journal

*. In accounting, a first recording of financial transactions as they occur in time, so that they can then be used for future reconciling and transfer to other official accounting records such as the general ledger.

* A journal will state the date of the transaction, which account(s) were affected and the amounts, usually in a double-entry bookkeeping method.

Concept of Double Entry

Double Entry

*Every transaction has two effects. For example, if someone transacts a purchase of a drink from a local store, he pays cash to the shopkeeper and in return, he gets a bottle of dink.

*Double entry is the fundamental concept underlying present-day bookkeeping and accounting. 

What is a Liability

*Liability


1.A liability is a company's legal debt or obligation that arises during the course of business operations. 

2.Liabilities are settled over time through the transfer of economic benefits including money, goods or services.

what is expense

*Expense

1.the amount of money that is needed to pay for buying something

2.the amount of money that must be spent especially regularly to pay for something

3.An expense consists of the economic costs that a business incurs through its operations to earn revenue.

1.ABC Co. Ltd, a construction company, purchases raw materials for use in its ongoing projects. Which of the following may be included in the cost of inventory?

what is inventory

*Inventory

Inventories are assets:

(a) Which is held for sale in the ordinary course of business;

(b) Which would result in the process of production for such sale; or

(c) in the form of materials or supplies to be consumed in the production process or in the rendering of services. (IAS2)

JOURNAL

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