Bill of Exchange

Bill of Exchange

What is Bill of exchange? Nowadays these instruments of credit are called bills of exchange or promissory notes. The bill of exchange contains an unconditional order to pay a particular amount on an agreed date while the note contains an unconditional promise to pay a particular sum of money on a certain date. In India, these instruments … Read more

Difference between Provisions & Reserves

Difference between Provisions & Reserves

Provisions are certain expenses/losses which are related to the current accounting period but the amount of which is not known with certainty because they are not yet incurred. It is necessary to form a provision for such items for ascertaining true net income. For example, a trader who sells on a credit basis knows that … Read more

Petty Cash Book in Accounting

Petty Cash Book in Accounting

In every organization, Petty Cash Book in accounting is maintained a large number of small payments such as conveyance, cartage, postage, telegrams and other expenses (collectively recorded under miscellaneous expenses) are made. These are generally repetitive in nature. If all these payments are handled by the cashier and are recorded in the main cash book, … Read more

Trial Balance

Trial Balance

Contents1 To ascertain the arithmetical accuracy of the ledger accounts2 To help in the preparation of the financial statements (Profit & Loss account and Balance Sheet)3 Totals Method4 Balances Method5 Totals-cum-balances Method6 Errors of Commission7 Errors of Omission8 Errors of Principle9 Compensating Errors10 Rectification of Errors that do not affect the Trial Balance11 Rectification of … Read more

Bank Reconciliation Statement

Bank-Reconciliation

Contents1 Timing Difference1.1 a) Cheques issued by the bank but not yet presented for payment1.2 b) Cheques paid into the bank but not yet collected1.3 c) Direct debits made by the bank on behalf of the customer1.4 d) Amounts directly deposited in the bank account1.5 e) Interest and dividends collected by the bank1.6 f) Direct … Read more

Books of Accounts

Debit-Credit & books of entry

Contents1 Journal2  Cash Book3 Others daybook3.1 Purchase Book3.2 Sales Book3.3 Purchase Return Book It means determining what transactions to record, i.e., to identify events that are to be recorded. It involves observing activities and selecting those events that are of a considered financial character and relate to the organisation. The business transactions and other economic … Read more

Recording of Transaction

Recording of Transaction

Contents1 Business Transaction2 Source of Document3 Arrangement of Accounting Voucher We will discuss the transaction of involvement in recording & preparing the source documents. Which are successively recorded within the basic book of original entry called Journal and are posted to individual accounts within the principal book called Ledger. Now we’ll discuss each transaction involving … Read more