Explain Bank Reconciliation Statement.
Why is it prepared: - Bank Reconciliation Statement is a
statement prepared to reconcile the balances of cash book maintained by the concern and pass book
maintained by the bank at periodical intervals. At the end of every month entries in the cash book are
compared with the entries in the pass book. The causes of differences in balances of both the books
are scrutinized and then reconciliation statement is prepared. This statement is prepared for a special
purpose and once in a month.
Bank Reconciliation Example
ABC International is closing its books for the month ended April 30. ABC's controller must prepare a
bank reconciliation based on the following issues:
1.
The bank statement contains an ending bank balance of $320,000.
2.
The bank statement contains a $200 check printing charge for new checks that the company
ordered.
3.
The bank statement contains a $150 service charge for operating the bank account.
4.
The bank statement rejects a deposit of $500 due to not sufficient funds, and charges the
company a $10 fee associated with the rejection.
5.
The bank statement contains interest income of $30.
6.
ABC issued $80,000 of checks that have not yet cleared the bank.
7.
ABC deposited $25,000 of checks at month-end that were not deposited in time to appear on
the bank statement.
What is Journalizing? What are the columns of a journal?
Journalizing is the process of recoding business transactions in the Journal in chronological
order, as and when the transactions take place. Journal is also known as Book of Original Entry
or the Book of Prime Entry.
Journal has following five columns:
Date
-Particulars
-Ledger Folio
-Amount Debited
-Amount Credited
Explain Compound Journal Entry. In day to day business, various similar transactions take place on
the same day and every account is either debited or credited. Thus instead of passing different
entries, a compound entry can be passed, which involves more than one debit or more than one credit
or both. This makes the journal less bulky and avoids duplication.
What are subsidiary books? Why are they maintained?
Subsidiary book is the sub division of Journal. These are known as books of prime entry or books of
original entry as all the transactions are recorded in their original form. In these books the details of
the transactions are recorded as they take place from day to day in a classified manner.
The important subsidiary books used are as following:-Cash Book: Used to record all the cash receipts and payments.
-Purchase Book: Used to record all the credit purchases.
-Sales Book: Used to record all the credit sales
-Purchase Return Book: Used to record all goods returned by business to the supplier
-Sales Return Book: Used to record all good returned by the customer to the business.
-Bills Receivable Book: Used to record all accepted bills received by business.
-Bills Payable Book: Used to record all bill accepted by us to our creditors.
-Journal Proper: Used to record those transactions for which there is no separate book
List the type of transactions entered in Journal proper.
The Journal proper is used to record following transactions:-Opening Entries: are the entries which are made at the starting of the financial year.
-Closing Entries: At the close of the accounting period balances from the various accounts are
transferred in order to balance the books of accounts. Thus, this process of transferring balances of
the trading and profit and loss account at the end of year is called closing the books and entries
passed at that time are called closing entries.
-Transfer Entries: are the entries which are passed in order to transfer one account to another
account.
- Adjustment Entries: are passed at the end of an accounting period in order to modify the accounts.
-Rectification Entries: are passed to rectify the error detected the books through an entry in journal
proper.
-Entries for rare transactions: Journal proper is used for rare transactions.
-Entries for which there is no special journal: When the transactions cannot be recorded in the above
sub journals then the same are entered in the journal proper.
Examples of such transactions are: Distribution of goods as free sample, Goods destroyed by fire, etc
Define Cash book.
Cash book is a book of original entry in which all the transactions relating to cash receipts and
payments are recorded in chronological order. Cash receipt is entered on the debit side and cash
payment is recorded on credit side of the cash book. There are three types of cash book:
-Single Column Cash Book: This record only cash receipts and payments. It has only one money
column on debit and credit side. Cash received is entered on the debit side and cash payments are
entered on the credit side.
-Double/ Two Column Cash Book: This type of Cash book has two columns of cash and discount on
both the debit and credit side.
-Three Column Cash Book: This cash book has three columns of cash, bank and discount on both the
debit and credit side.
At the end of specified period the cash book is balanced. Excess of debit balance is posted on credit
side as By balance C/D to balance both the sides. From the start of the next period the balance on
the credit side is brought down on the debit side by To balance b/d
Explain Sundry Debtors and Sundry Creditors.
Debit the Receiver
Credit the Giver
Sundry debtors is nothing but a person who received service and goods from us, therefore he has to
pay the service and good received from us.
Sundry creditor is a person whom we received service and good from them, we have to pay for them
What is the meaning of single entry system and double
entry system ? double entry -- a method of bookkeeping in which there are
two entries for each transaction, one as a debit and the
other as a credit, that check and balance each other
single entry -- a method of bookkeeping in which each
transaction is entered only once on the account books
What are direct and indirect taxes?
Direct taxes are those which are tax on individuals or persons.
Indirect taxes are those which are taxes on goods and services.
What is a Ledger? What do you mean by Ledger Posting?
Ledger is the book where the transactions of similar nature pertaining to a person, asset, liability,
income or expenditure are drawn from the journal or subsidiary books where the transactions are
recorded in a chronological order and posted account wise in the Ledger account. Ledger maintains all
types of accounts i.e. Personal, Real and Nominal Account
Nominal Accounts: The accounts recording transactions relating to the losses, gains, expenses and
incomes e.g. Rent, salaries, wages, commission, interest, bad debts etc., are classified as nominal
accounts. Rules of debit and credit (classification based)
1. Personal accounts: Debit the receiver Credit the giver (supplier)
2. Real accounts: Debit what comes in Credit what goes out
3. Nominal accounts: Debit expenses and losses Credit incomes and gains Let us consider the
following example to illustrate how the.
Assets Accounts: These accounts relate to tangible and intangible assets. e.g., Land a/c, building
a/c, cash a/goodwill, patents etc.
b) Liabilities Accounts: These accounts relate to the financial obligations of an enterprise towards
outsiders.e.g. Trade creditors, outstanding expenses, bank overdraft, long-term loans.
c) Capital Accounts: These accounts relate to the owners ofan enterprise. e.g., Capital a/c, drawing
a/c.
d) Revenue Accounts: These accounts relate to the amount charged for goods sold or services
rendered or permitting others to use enterprises resources yielding interest, royalty or dividend. e.g.,
Sales a/c, discount received a/c, dividend received a/c, interest received a/c.
e) Expenses Account: These accounts relate to the amount spent or lost in the process of earning
revenue. E.g. Purchases a/c, discount allowed a/c, royalty paid a/interest payable a/c, loss by fire a/c.
1. what is the journal entry for cheque received from our
clients?
Ans. Bank a/c dr.
To party or clients a/c
2. What are the difference between P/l a/c and income and
expenditure
Ans. income and expenditure account is created by non profit
making organizations (NPO) and P&L account is created by
business like trading and manufacturing etc..
3. Bank reconcile statement
Ans. Bank reconcilation system. A bank reconciliation statement
is a statement prepared by organizations to reconcile the
balance of cash at bank in a company's own records with the
bank statement on a particular date. Bank Reconciliation
Statement process is being outsourced to professional
accounting firms by large organizations. This helps them
have an accurate view and also ensure that the company's
bookkeeping is good. Accounting firms make monthly
reconciliation statements for clients and help them
determine any discrepancy.
4. Account Books and Documents to be maintained accounts management in
NGOs NGO Financial Management Policy
a)
Cash Payment/Receipt Vouchers & Book
b)
Bank Payment/Receipt Vouchers & Book
c)
Summary/Daily Petty Cash Book
d)
Journal Vouchers and Journal
e)
General Ledger
f)
Fixed Assets Register
g)
Contract/Registration Documents
h)
Attendance Register
i)
Budget Copies of various grants
j)
Utilization Certificates
k)
FCRA and other relevant Registration papers
l)
m)
Copies of Consultancy agreements
Capital assets approvals
n)
File of original bills of assets purchased
o)
Copies of all Contracts and agreements.
p)
Stationery Register
q)
File containing Bank Mandate and authorized signatories.
r)
Quotation file for all purchases
s)
Advance Payment Register (Advance to third parties & Staff Advances)
t)
Check issue register
u)
Cancelled check register
v)
Donation receipt issue register
5. what is the golden rules of accounting
Ans. personal a/c:debit the reciver
credit the giver
Real a/c:Debit what comes in
credit what goes out
Nominal a/c:Debit all expenses and losess
credit all incomes and gains.
6. what will come under debit and credit side in trial balance
please give me answer
Ans. in debit side : fixed asset, current asset, purchase.
in credit side: share capital, loan, liability, sales
