A cash flow statement is a financial report that presents the inflow and outflow of cash during a specific period in a business. The cash flow statement is a crucial tool that investors, analysts, and creditors use to assess a company’s liquidity and financial health. The statement is divided into three main categories: operating activities, …
Stock turnover ratio is a financial metric that measures the number of times a company’s inventory is sold and replaced over a specific period, typically a year. The ratio is calculated by dividing the cost of goods sold by the average inventory level during the same period. A higher stock turnover ratio indicates that a …
The Profit and Loss Account, also known as the income statement, is an important financial statement that summarizes a company’s revenues, costs, and expenses over a specific period. It provides insights into a company’s profitability and financial performance, making it an essential document for investors, shareholders, and management. There are several special features of the …
To prepare the Profit and Loss Appropriation Account, we need to follow the following steps: Step 1: Calculate the total profit earned during the year. Total profit = Rs. 42,000 Step 2: Calculate the interest on capital for Hari and Giri. Interest on Hari’s capital = 5% of Rs. 60,000 = Rs. 3,000Interest on Giri’s …
Partnership is a type of business entity where two or more individuals come together to jointly own and operate a business for profit. This type of business is common in professions such as law, accounting, and medicine, where individuals can pool their skills and resources to create a successful business. A partnership deed is a …
A suspense account is a type of temporary account that is used in accounting and bookkeeping. Its purpose is to hold transactions or balances that cannot be immediately classified or identified. The account acts as a placeholder until further information is available, or until an appropriate account can be determined. The use of a suspense …
(i) Capital receipts and revenue receipts: Capital receipts refer to the inflow of funds that result in the creation or acquisition of an asset or reduction in liabilities, resulting in long-term benefits to the entity. These receipts are not recurring in nature and are generated by selling fixed assets, issuing long-term loans, or raising share …
A Bank Reconciliation Statement is a vital document that companies use to compare the balances of their bank account in the cash book and the bank statement. It is crucial to identify any discrepancies or errors between these balances. The primary objective is to ensure that the company’s bank account balance in the cash book …
To journalize the transactions: 1. April 1, 2022:Cash Account Dr. 1,20,000To Capital Account 1,20,000(Being business commenced with cash) 2. April 3, 2022:Furniture Account Dr. 24,000To Cash Account 24,000(Being furniture purchased for cash) 3. April 4, 2022:Purchase Account Dr. 36,000To Vijay Account 36,000(Being goods purchased from Vijay) 4. April 5, 2022:Cash Account Dr. 4,800To Sales Account …
Classification of accounts refers to the process of categorizing financial transactions into different groups based on their nature, purpose, and characteristics. These categories are important because they help businesses to organize their financial data and gain valuable insights into their financial health. Various categories of accounts are used in accounting to group financial transactions based …
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