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

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

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

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

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

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

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

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

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

Refer the data given below−Transactions (Year 2015) (*in rupees)Jan 1       Received cash float       25000Jan 3       Paid for bus fare            1500Jan 5       Bought stamps             1000Jan 10    Paid for stationary          2800Jan 15    Paid office messenger   2200Jan 17    Paid to Mr. V                  3200Jan 18    Paid for telegrams         800Jan 23 Paid for train fares           1750SolutionThe solution for columnar petty cash book as per the above mentioned data is as follows −      Analysis columns CrReceiptFolioDateParticularsVNTotalPostageStationaryTravelling expensesOffice expensesLedger folioLedger account25000CBJan1Cash          Jan 3Bus fare11500  1500     Jan 5stamps210001000       Jan 10Stationary32800 2800      Jan 15Office messenger42200   2200    Jan 17Mr. V53200    PL13200  Jan 18telegrams6800800       Jan 23Train fares71750  1750