What is the difference between residual value, salvage value, and scrap value? The terms residual value, salvage value, and scrap value are often used when referring to the estimated value that is expected at the end of the useful life of the property, plant and equipment used in a business. This estimated amount is used to calculate […]
Difference between Reserves and Provisions
Reserves Reserves are the investment derived from the dividend itself. When an owner of the company reinvests his dividend back into the same company itself can be called as reserves. Provision Provision is an amount accounted in books to cover a future liability. The following table will give you a clear picture of reserves and […]
Contingent Asset & Liability
Contingent Asset & Liability Contingent Asset Is a possible asset that may arise from a future event, and that is not under the business’s control. Its be realised asset only after it becomes certain. Eg. A lawsuit filed against a competitor for infringement of design/trademark, and chances of getting one crore as compensation. Contingent Liability […]
What is the journal entry for goods given for CSR activity/Charity?
When a business decides to give goods in charity it also needs to account for those goods in the appropriate financial statement(s), in this case, stock/purchases are reduced with the exact cost of goods donated. Journal entry
What are Fictitious Assets?
The Fictitious word, itself says “fake”. So Fictitious Assets are not an asset in the true sense but this is a huge amount of expenses or losses which are unclaimed in profit/loss account during the year in which they are incurred. Bind this to your memory fictitious assets are not assets they are fake or deceptive they are actually expenses & losses […]
What is Amortization?
Reduction in the value of an intangible asset by prorating its cost over a period of time (generally in multiple accounting periods) is called Amortization. Point worth remembering is that it can only be done for intangible assets such as copyrights, patents, trademarks, goodwill, etc. It is used for writing-off intangible assets whereas depreciation is used for tangible assets. If related to obligations, it can also […]
Why is Closing Stock not Shown in Trial Balance?
Not all goods purchased in beginning & during the accounting period are sold until the end of that period, this results in a remainder balance known as closing stock. Closing stock is a part of purchases & trial balance already includes purchases, hence if the closing stock is shown as a separate item it will double count and […]
Golden Rules of Accounting
What are the Three Golden Rules of Accounting? Golden rules are used to prepare an accurate journal entry which forms the very basis of accounting and act as a cornerstone for all bookkeeping. This is also known as the traditional rules of accounting or the rules of debit and credit. Easy Interpretation of 3 golden rules of accounting Real Account If the item (real […]