Accounting Concepts and Practices

Accounting Concepts are some assumptions or ideas as a base for preparing the financial statements.

Ledger may be defined as a statement showing the summary of all the transactions relating to a person, asset, expense or income which have occurred and shows their net effect during a given period.

<p>A final account includes preparation of Trading &amp; Profit &amp; Loss a/c and Balance Sheet. These two statements are collectively called final accounts and are prepared at the end of the financial year.</p> Signup and view all the answers

<p>This is a real a/c prepared at the end of a year showing a summary of cash for a particular period. The a/c opens with cash &amp; bank balance along with all cash receipts on the debit side and all cash payments on the credit side.</p> Signup and view all the answers

<p>The partnership firm’s accounts are recorded on the double entry system of bookkeeping. These a/cs are maintained in the same manner as a sole trade. Since there are two or more partners in partnership, each partner's capital a/c is to be maintained separately.</p> Signup and view all the answers

<p>When a new partner is admitted, the old partners surrender a part of their old share. This surrender in the form of proportion is called sacrificing ratio.</p> Signup and view all the answers

<p>Goodwill is the current value of expected future income in excess of a normal return on the investment in net tangible assets, not a recorded or reported amount unless paid for.</p> Signup and view all the answers

<p>The causes of depreciation are (1) Usage, (2) Passage of time, (3) Improper maintenance, (4) Non-usage, (5) Obsolescence, (6) Exhaustion, (7) Accidents.</p> Signup and view all the answers

<p>Adopted by small traders, no definite rules and procedures are adopted; the transactions are mixed in cash book with personal transactions, there is no uniformity in this system since they differ from one business to another business.</p> Signup and view all the answers

<p>When fire occurs, apart from the direct loss of stock and assets, there is also consequential loss because, for some time, the business has to be discontinued, and during that period, the standing expenses of the business like rent, salaries etc. have to be incurred; there is a loss of profit which the business would have earned during that period.</p> Signup and view all the answers

<p>In the net worth method, the result of a business is not provided clearly. This method does not provide clear information about the real business situation. To overcome this, businesses which keep records under single entry convert them into double entry.</p> Signup and view all the answers

<p>This is a nominal account. It is prepared instead of Profit &amp; Loss Account. This account takes only the revenue incomes and expenditures and excludes those not relating to the current period.</p> Signup and view all the answers

<p>Cash book may be defined as the record of transactions concerning cash receipts and cash payments for a particular period of time.</p> Signup and view all the answers

<p>Capital receipts are those amounts received permanently or received on sale of asset used in carrying of the organization.</p> Signup and view all the answers

<p>Partnership is the relation between persons who have agreed to share the profit of them acting for all.</p> Signup and view all the answers

<p>Depreciation is the permanent decrease in the value of an asset through wear and tear in use or the passage of time.</p> Signup and view all the answers

<p>Whenever a fire occurs; there can be a destruction and damage to the stock. The business, if they have insured their stock in the go down or stores against the risk of fire, they are entitled to claim the amount of such loss.</p> Signup and view all the answers

<p>Single Entry system is a defective double entry system where no proper accounts are maintained. This system is usually taken by small traders and professionals.</p> Signup and view all the answers

<p>According to business entity concept the business is treated as a separate entity from persons who initiate, provide capital, and manage the business.</p> Signup and view all the answers

<ol> <li>Only partial information is obtained, since incomplete records are maintained. 2. There can be risk of fraud and errors, as these cannot be discovered. 3. Trading &amp; Profit &amp; Loss a/c cannot be prepared.</li> </ol> Signup and view all the answers

<p>Straight Line method, Written Down Value method, Sinking Fund method.</p> Signup and view all the answers