Refer the data given below −TransactionsFeb 1          Cash balance                                                               $120000Feb 1          Bank account balance                                                  $200000Feb 2          Received cheque from Mr. B                         ... Read More

Refer the data given below to prepare a bank account in a ledger with a single column cashbook −DATEPARTICULARSVNLF$DATEPARTICULARSVNLF$2010Balance b/d700002010Mar 1Customer(Beingcheque A/creceived)20000Mar 1Bank A/c(Beingcheque deposited)22000Mar 5Bank A/c(Being amount withdrawn)25000Mar 12Purchases(Being goods bought for cash)47000Mar 9Sales A/C(Beinggoods sold for cash)35000Mar 24Bank A/c (Beingcash deposited)17500Mar 20Sales A/c(Beinggoods sold for cash)38000Mar 31Salary A/c(Beingsalary paid)14000Mar 31Balance c/d87500188000188000April 1Balance b/d87500Mar 1 - Bank balance $180000Mar 21 - Paid Mr.B by cheque $20000Mar 31 - Paid rent by cheque $8000Mar 5 - Deposited cheque from A $22000May 25 - Deposited into bank $17500SolutionThe solution is as follows −DATEReferenceJ/F$DATEPARTICULARSJ/F$20102010Mar 1Balance b/d18000mar 5Cash A/c25000Mar 5Cash A/c22000mar 21Mr.B20000Mar 25Cash A/c17500mar 31Rent ... Read More

Let us understand how to make the respective entries in the single column cash book with the help of the given data.May 1 Cash in hand $50000May 1 Bank balance $160000May 4 Received a cheque from a customer “A” of $18000May 5 Deposited customer “A” cheque in Bank.May 8 Cash withdrawn from bank for business purpose is $15000May 11 Goods sold for cash $28000May 14 Goods bought for cash $53000May 19 Goods sold for cash $40000May 21 Paid Mr.B by cheque $16000May 25 Deposited into bank $18000May 30 Paid salary in cash $12000May 31 Paid rent by cheque $7500SolutionThe solution ... Read More

Single column cash book is a T shaped cash book. It is called a single column cash book because; it has only a money column on both credit and debit sides and records cash transactions.It is divided into two parts having debit on the left hand side and credit on the right hand side.FormatThe format of a single column cash book is as follows −DebitCreditDateDescriptionVRPRAmountDateDescriptionVRPRAmountPurposeThe purpose of each column in single column cash book is explained below −DateIt records date, month and year of transaction (both receipts and payments). If more than one transaction happened in the same month and ... Read More

Cash book records all the transactions related to cash in an organization. Transactions are recorded according to their type (debit or credit). These are recorded in chronological order. Cash book can be both a journal and a ledgerFeatures of cash bookThe features of cash book are explained below −Act as both journal and ledger − Cash books records transactions as it happens and posts the transactions.Substitution − It serves as an alternative for cash accounts.Dual entry − Cash book has two sides namely, debit side and credit side.Identical − Debit side (total) = credit side (total).Debit balance − Business will ... Read More

The word “cash” represents the monetary instruments (currency etc.) and the word “book” represents the record available in written format. Thus, a cash book can be defined as the record of business transactions in a particular period.In other words, a cash book records all transactions of cash receipts and disbursements (includes both bank deposits and withdrawals). Cash book is divided into two parts namely, cash payments and cash receipts.Transactions which are not recorded or are excluded in cash book are as follows −Transactions related to bank (payments made through checks in receiving or paid).Non-cash transactions.Discount making or discount received.Cash book ... Read More

This is the final step in the accounting cycle. Reversing entries are made at the start of an accounting period to reverse the adjusting journal entries made at the end of the previous period.These are made because of last year’s accruals. Also, the prepayments which will be paid during the New Year are no longer needed to be recorded as liabilities and assets.These entries will make bookkeeping simple or simplify the bookkeeping. If the entry is not reversed, the amounts recorded in previous years are adjusted and account for the new portion. For new adjusted entries, the keeper can’t keep ... Read More

There is a lawsuit between company A and company B. Company A sued company B in violating patent rights of technology. Company A claimed $ 3 billion, when the lawsuit began in 2010 but in the final verdict in 2016, company A won $ 400 million. (Company B estimated contingent liability as $800 million in their books)SolutionPrepare journal entry for year end 2010 as shown below −ParticularsDebt (million $)Credit (million $)Lawsuit loss A/c    To Lawsuit liability800800Being estimated amount of lawsuit losses recordedProbability of occurrenceIf the liability is not probable and will arise soon (journal entry is not passed)Disclosure is ... Read More

A finance institution has loan portfolio and the respective details are as given below −Loan portfolio (%)31-12-15Rate to calculate (%)On schedule5286914Loan in arrearsFor first 30 days2851472Next 30 days17582322Next 30 days7525922Next 90 days6523153Next 180 days46327100360 days up25423100SolutionCalculations of provisions are as follows −Loan portfolio31-12-15Rate to calculate (%)On schedule528691400For first 30 days28514725702.94Next 30 days1758232238681.06Next 30 days752592216556.98Next 90 days652315334572.43Next 180 days4632710046327360 days up2542310025423Total5960124167263.41The journal entry for the provision expenses as per the above calculations is as follows −AccountDebitCreditProvision expenses    Loan loss reserves167263.41167263.41

Contingent liabilities include different liabilities like warranty costs, injury claims, lawsuits etc. Each of the expenses are treated differently and it should satisfy a set of conditions before realizing.General accepted accounting principles (GAAP) have some guidelines for recognition, measurement and reporting for contingent liabilities. These are explained below −IdentificationFirst step in identification is to determine the odds of each contingency occurring and then, they should be classified based on probable, possible or remote.Reevaluate the items, if there are any changes (if increase in percentage of contingency or not).Write the reasonable liabilities in footnotes.Finally, probable liabilities are listed in financial statements ... Read More