Accounts are divided into two types namely primary accounts and secondary accounts. In books of primary entry, there are special books called subsidiary books.Purchase day book is a type of subsidiary book. Its main purpose is to record all business credit purchases (meant for resale). This book does not record purchase transactions (by cash) and purchases which are not meant for resale purchases.Cash purchase transactions are recorded in the cash book. Balance is debited to purchase account and supplier of goods is credited to individual amounts. This book shows the total amount of credit purchases for a period.Purchase book is ... Read More

It is the form filled by taxpayers by the month of September of the assessment year. This audit report form consists of two variants, form 3CA and form 3CB. Form 3CA is the compulsory form filed by business persons or business professionals. Form 3CB filled by persons, who come under the section 44AD and 44AE.Audit requirementsAudit is compulsory for a business individual, if total sales/turnover/gross receipts exceeds more than Rs. 1 crore.Audit is compulsory for a professional individual, if gross receipts exceed more than Rs.50 lakhs.Under section 44AE (presumptive income scheme), audit is compulsory when business income is less than ... Read More

Books of accounts are defined as "a place where all financial information is related to a person or a business". Books of accounts are maintained under Income tax Act, companies Act 2013 and GST Act.Maintaining books of accounts is compulsory if the turnover/gross receipts/sales from profession or business is above Rs.2500000/-. As per rule 6F, cash books, ledgers, bills/receipts (Bills), journals and daily cash registers come under books of accounts.TypesThe two main types of the books of accounts are journal and ledger.Journal is sub classified into the following −Purchase Day book − Original book of entry which records credit purchases ... Read More

Books of accounts are the records, which maintain the day to day business operations of all the business establishments and taxpayers, to know results of their operations.Books of accounts should be registered annually. For certificates like certificate of registration (COR) with the Bureau of Internal Revenue (BIR), these books of accounts are required. They are maintained for six years from the end of the relevant assessment year. These are maintained at the head offices or at each of the offices.Maintaining books of accountsProfessionals like legal, medical, engineering, architectural, accountancy, technical consultancy, interior decorations and who are notified by the Central ... Read More

There are two types of error rectifications while preparing the final balance. These are single side error and double side error respectively.Single side errorNominal accounts are preplaced by P&L (Profit & Loss) adjustment accounts.Example − Discount allowed of Rs.750 is not posted to a discount account.After trial balance, the error rectification is as follows −ParticularsDebitCreditDiscount allowed A/c    To suspense A/c750750After final account, the error rectification is as follows −ParticularsDebitCreditP&L adjustment A/c    To suspense A/c750750Double side errorWrong entries are identified and rectification is made by making the appropriate entries.Nominal accounts are replaced by P&L adjustment accounts.Suspense accounts, real and personal ... Read More

There are two types of error rectifications while preparing trial balance. These are single side error and double side error respectively, if the error is detected after preparing trial balance.Single side errorErrors in particular accounts are rectified by applying a suspense account.Suspense account − To prepare final accounts, the difference in trial balance is posted in the suspense account. If an error is rectified in trial balance, then the suspense account is closed. In the balance sheet, the suspense account appears in the asset side, if it appears in the debit side of the balance sheet and vice versa.Example − ... Read More

Rectification of errors can be classified into two types, namely single side error and double side error, if the error is identified before preparing trial balance.Single side errorEntry is rectified by an appropriate posting in an affected account.Example − Entry in purchase account over casted by Rs. 15, 000/-Correction −Dr.Cr Purchase accountParticularsAmount (in rupees)ParticularsAmount (in rupees)ToBy error− wrong posting15000Double side errorWhile correcting the error, following principles are followed −Identify the correct entry.The entry is recorded.Rectification of entry.Example − Company purchased a building worth of Rs.5, 00, 000/- and while recording, they wrongly passed in the purchased account.The rectification is as ... Read More

Let us understand the concepts of balance sheet and trial balance, before learning how to prepare a balance sheet from the trial balance.Balance sheetBalance sheet is one of the important fundamental financial statements for both accounting and financial modeling. This sheet consists of the company’s assets, liabilities and equity.Balance sheet consists of two sides. One side consists of company assets and the other side consists of both liabilities and equity.Trial balanceIn simple words, trial balance is the summary of all business activities and indicates business financial health. Investors decide whether to invest or not based on the company’s trial balance.For ... Read More

Balance sheet is also called a position statement. It consists of assets, liabilities of owners and company. On the other hand, a profit and loss account is called an income statement. It shows the company's earned revenue and sustained expenses during the respective financial year.Both are part of a financial statement and are useful for the parties such as investors, financial institutes etc. to know a company's profitability, financial position and overall performance. By analysing these, they can make decisions regarding investing or for approving the loans.Balance sheetIt shows the financial position of a company. Also, it consists of assets ... Read More

Let us understand the concept and importance of a trial balance and a balance sheet, before learning about their differences.Concept of Trial balanceCompany's accounting department will generate this internal report. Trial balance consists of the list of general ledger accounts and their balances. It shows the credit and debit balances amounts.Later these columns are summed up and consolidated to show that the credit balances and debit balances are equal.Importance -It provides arithmetical accuracy and acts as a precursor in preparing the financial statements. Trial balance is used for verification of amounts from various ledgers. It also determines the balances of ... Read More