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Found 1120 Articles for Banking & Finance
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Trial balance records and categorizes all the ledger balances into debit and credit in a particular period.ObjectivesThe objectives of trial balances are explained below −Arithmetical accuracyArithmetical accuracy of transactions is provided, if trial balance is balanced. If it is not balanced, there may be some error and need for rectification.Error rectificationError rectification in trial balance refers to the following −Postings in various ledger accounts are checked and also their appearances are verified.Subsidiary books are checked.Opening balances are checked and necessary corrections (if any) are made.If the balances are still not balanced, repeat the process.SummarisationTrial balance summarises ledger accounts.Final accountsWithout trial ... Read More
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Trial balance records and categorizes all the ledger balances into debit and credit in a particular period. A trial balance includes items like assets, revenues, liabilities, gains, expenses, losses and equity.Usually, trial balance is prepared at the end of the reporting period. Each business transaction is recorded in credit and debit.Quality trial balance shows the sum of transactions recorded in debit is equal to sum of transactions recorded in credits. If there is any error in balancing the credit and debit column, then there must be an error in recording the transaction in trial balance.The errors are rectified by correcting ... Read More
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Maintaining two or more accounts for every single business transaction is called a double entry system. Let us now learn about its advantages and disadvantages.AdvantagesThe advantages of double entry system are explained below −Records debit and credit simultaneously.In the double entry system, there will be a dual aspect of every transaction, which means it records both credit and debit transactions simultaneously. This completes accounts of transactions.VerificationUnder the double entry system, arithmetical accuracy (total amount in debit side is equal to total amount in credit side) is verified by preparing trial balance.Profit or lossUnder the double entry system, company profit or ... Read More
388 Views
Maintaining two or more accounts for every single business transaction is called a double entry system. Each financial transaction has an effect on, at least, two accounts which are equal and opposite.For example, suppose, if a debit transaction has happened in a business, then the same transaction has the opposite effect in other (credit) accounts.The two essentials in the double entry system are debit and credit. Every debit entry is recorded on the left side of the ledger and every credit entry is recorded on the right side of the ledger. At the end, the amount on the debit side ... Read More
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The interdependent nature of the world allows people to obtain goods and services from producers to consumers. Some of them include transactions and exchanges. Though both sound similar and interchangeable, they differ in various aspects.TransactionsIn this mode, provision of goods and services exchanged for money is done between firms. This results in movement of value from one to another. In business context, recording these transactions helps in business performance and planning.Business transactions can occur in both cash and credit transactions. These transactions have a direct impact on the company’s financial position and financial records.ExchangeIn this mode, goods and services will ... Read More
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During the course operations, every business will have several transactions, which have an impact on business finances and are recorded in books.Cash transactionsCash transactions are those transactions, which are settled at the time of occurrence of transaction. Sometimes, they are settled in cash at the time of occurrence or sometimes they are paid with debit card, credit card, through bank transfer or cheque payment at the time of occurrence.In simple words, a business transaction is said to be a cash transaction, when it is settled immediately at time of occurrence. These transactions show an immediate effect on business cash flows. ... Read More
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Let us understand what is an event and a transaction, before learning about their differences.TransactionsIt involves exchange of goods/services for value between more than one party, firm or accounts and is called financial transactions. A transaction has monetary impact on the financial statements. Transactions are recorded in books of accounts.A transaction which is related to purchasing of goods or selling of goods, payments to creditors etc. are called business transactions. Types of accounting transactions are cash transactions and credit transactions.EventEvent is nothing but the final outcome of business activity, which affects the account balances of a company. If there is ... Read More
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The journal entries for imprest petty cash system are recorded as follows −Fund establishment − (Imprest petty cash fund = 150)AccountDebitCreditPetty cash150Cash150Total150150Payments− (Postage payment = 35, stationery payment = 50)AccountStartEndCash held15065Postage payment35Stationery payment50Total150150Fund replenished − (Postage payment = 35, stationery payment = 50)AccountDebitCreditcash85Postage payment35Stationery payment50Total8585Errors − (Postage payment = 25, stationery payment = 50, error = 10)AccountDebitCreditcash85Postage payment25Stationery payment50Sundry expenses10Total8585Increase in petty cash − (Increased petty cash = 50)AccountDebitCreditPetty cash50Cash50Total5050
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In this imprest cash system, the balance of petty cash funds always remains fixed or constant. The amount to be fixed is decided at the start or first time at a fund established. During the period, the petty cashier pays the expenses and maintains vouchers for that.At the end, the cashier submits the vouchers to the chief cashier along with vouchers. After reconciliation, cash spent on expenses is reimbursed and maintains the imprest cash fund to the initial fixed amount. Float is the term used for a granted amount.At any time, cash held plus petty cash vouchers should be equal ... Read More
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Refer the data given below to prepare a ledger balance − Analysis columns CrReceiptFolioDateParticularsVNTotalPostageStationaryTravelling expensesOffice expensesLedger folioLedger account15000CBMar1Cash Mar3Bus fare11200 1200 Mar5stamps2800800 Mar10Stationary32200 2200 Mar 15Office messenger42800 2800 Mar 17Mr. V53800 PL13800 Mar 18telegrams6900900 Mar23Train fares72100 2100 Mar 24Carbon papers8700 700 Mar 27Office expenses91150 1150 15650 Jan 31Cash 156501700290033003950 3800 15000 Jan 31Balance 30620 SolutionGiven below is the ledger balance as on March 31 2011, by using the columnar petty cash book −General ledger as on 31.03.2011DebitCreditPostage accountPg1Amount31.03.2011Petty cashPCB11700DebitCreditStationery accountPg2Amount31.03.2011Petty cashPCB12900DebitCreditTravelling expensesPg3Amount31.03.2011Petty cashPCB13300DebitCreditOffice expenses accountPg1Amount31.03.2011Petty cashPCB13950