Professional Documents
Culture Documents
M Syed Kunmir
SPBT College
BANK RECONCILIATION
• The bank pass book indicates the amount paid
into the bank and the amount withdrawn there
from. The pass book balance on any given date
must be the same as the balance shown by the
bank column of the cash book on the same date.
But in actual practice the bank pass book balance
seldom agrees with the balance shown by the
bank column of the cash book. This happens
when some of the transactions appear in the cash
book but not in the pass book or in the pass book
but not in the cashbook.
Reasons For Difference
• 1. Cheques issued but not presented for
payment. When cheques are issued, the entry in
the cash book is made immediately. In the books of
the bank, the entry is made only when the cheque is
presented for payment..
• 2. Cheques paid into the bank but not yet
cleared. As soon as the cheques arc deposited into
the bank, the entry is passed on the debit side of
the bank column in the cash book. The customer's
account is credited by the bank only when the
cheques are cleared.
• 3. Interest allowed by the bank. Bank might
have credited the account of the customer with the
interest and may have made the entry in the pass
bk.
Reasons For Difference
• 4. Interest and bank charges debited by
bank. The bank debits the account of the
customer by way of interest on overdraft. It also
debits the account of the customers by way of
incidental charges and collection charges.
• 5. Interest, dividend etc. collected by the
bank. Sometimes interest on government
securities or dividend on shares is collected by
the bank and is credited to customer's account. If
the entry for these do not appear in the cash
book, the balance will differ.
Reasons For Difference
• 6. Direct payment by the bank Sometimes under
standing instructions from the client, certain payments
like insurance premium, club fees etc. are made by
the bank.
• 7. Direct payment into the bank by a customer.
Sometimes our customers deposit money direct into
the account in the bank, the corresponding entry for
which may not appear in the cash book, due to delay
in necessary instructions by the customers.
Reasons For Difference
• 8. Dishonor of bill discounted with the bank.
Sometimes customers get their bills discounted with the
bank. If the bank is not able to get payment of these bills
on the due date, it will debit the customers accounts with
the amount of the bills together with the noting charges, if
any. The customer will pass the entry in his books on
receipt of the information from the bank.
• 9. Any error committed by the bank Or Customer
Besides the above reasons if any error is committed either
by the bank or by the customer himself while recording
the transactions in their respective books it will cause
disagreement between the two balances.
BASICS OF ACCOUNTING
• 3 TYPES OF ACCOUNTS:
RULES:
-- REAL : DEBIT THE ACCOUNT WHEN WE PURCHASE
AN ASSET & CREDIT WHEN WE SELL OR
DEPRECIATE.
. PREVENTS FRAUDS
• DEFINITION
FINAL ACCOUNTS.
TRIAL BALANCE
• BASIC PRINCIPLE :
• TYPES OF ERRORS:
• A) CLERICAL ERRORS
• -- ERRORS OF OMISSION
• -- ERRORS OF COMMISSION
-- COMPENSATING ERRORS
. B) ERRORS OF PRINCIPLE
• TYPICAL ERRORS:
• -- CLERICAL:
•
• A) SALARY PAID 1000/- BUT POSTED AS 10, 000/-.
• RECTIFICATION: CREDIT SALARY WITH 9000/-.
BASIC PRINCIPLE:
REVENUE RECEIPTS/PAYMENTS :
• CAPITAL RECEIPTS/PAYMENTS:
• REVENUE NATURE:
• METHODS OF VALUATION:
• -- FIFO
• -- LIFO
• -- AVERAGE OR WEIGHTED AVERAGE COST METHOD
• -- BASE STOCK METHOD
• -- ADJUSTED SELLING PRICE METHOD
INVENTORY VALUATION
• FIFO :
-- IN RISING MARKET FIFO RESULTS IN HIGHER
PROFITS LOCKING UP OF SCARCE W. C.
-- GOODS ARE SOLD AT CURRENT HIGHER PRICES
WHILE COST OF GOODS REFLECTS LOWER THAN
CURRENT COSTS
-- IN FALLING MARKET FIFO RESULTS IN LOWER
PROFITS
.
INVENTORY VALUATION
• -- LIFO :
Beginning Inventory = 1,000 units purchased at Rs8 each (a total of 4,000 units)
.
BILLS OF EXCHANGE
• TYPICAL ENTRIES:
. THE ENTRIES IN THE BOOKS OF DRAWER ‘A’ ARE:
• DIRECT BILL TRANSACTION
• BILLS RECEIVABLE a/c DR.
TO DRAWEE ‘B’
BILL ENDORSED TO C
. C’s a/c DR.
TO BILLS RECEIVABLE
( NO ENTRY WHEN BILL IS MET)
IN CASE OF DISCOUNTING
CASH a/c DR.
DISCOUNT a/c DR.
TO BILLS RECEIVABLE
( NO ENTRY WHEN BILL IS MET)
• NOTES:
• CLOSING STOCK IS VALUED AT COST/INVOICE PRICE +
PROPORTIONATE AMOUNT OF COST INCURRED BY
CONSIGNOR IN TRANSPORTING.
• JOINT VENTURE ACCOUNTS ARE TEMPORARY IN NATURE ; FOR THE AD HOC PURPOSE OF
AN ASSIGNMENT UNDERTAKEN.
-- CO-VENTURER’S ACCOUNT
» Operating Lease
» Service Lease
» Leveraged Lease
LEASING AND HIRE PURCHASE
• NOTES:
Explanation
• The concept of lease equalisation account is an
equaliser between the capital recovery inherent in
lease rentals and the depreciation chargeable as
per Companies Act.
•
The objective of the lessor is to write-off an
amount equal to the capital recovery inherent in
lease rentals, so as to leave in the revenue
statement only the financing charges
LEASING AND HIRE PURCHASE
.
LEASING AND HIRE PURCHASE
• MISHAPS
• OBSOLESCENCE
• PASSAGE OF TIME
• FALL IN VALUE
DEPRECIATION
• METHODS OF DEPRECIATION :
. STRAIGHT LINE METHOD. EQUAL FRACTION OF THE
NET COST(COST OF THE ASSET LESS THE RESIDUAL
VALUE) IS CHARGED EACH YEAR.