Frequently Asked Questions
Where to find equity in accounting?
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Equity in accounting refers to the sum of money that...
Where are preliminary expenses shown in the financial statements?
In simple words, all the expenses that are incidental to the incorporation or commencement of a business are known as preliminary expenses. For example,...
Is Inventory a current asset?
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Yes, inventory is a current asset. Before moving to the...
How to calculate provision for discount on debtors?
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Provision for Discount on Debtors
The entity in order to encourage...
How to calculate days sales outstanding, any example?
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Meaning of days sales outstanding
Days sales outstanding (DSO) refers to...
Can you give me a list of all liabilities in accounting?
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Short-Term Liabilities
Meaning
The term short-term liabilities refers to the short-term financial...
Can you show 30 transactions of journal, ledger, trial balance, and financial statements?
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Yes.
Let's take a set of transactions and prepare all the...
What is the Journal Entry for Cash Deposit in Bank?
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Every entity deposits its idle cash in its bank account....
What is the journal entry for cash withdrawn from bank for office use?
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Cash Withdrawn from Bank for Office Use
The cash withdrawn from...
What is journal entry for commission received?
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Commission Received refers to a percentage amount received by the...
What is the journal entry for outstanding salary?
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Outstanding Salary
Example- Company A Ltd pays their employees a monthly...
What is started business with cash journal entry?
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To begin with, three types of businesses can be commenced,...
What is the journal entry for cash withdrawn from bank?
In this modern business world, Banks performs various functions to an organization such as it accepts various deposits from the debtors, making payment to...
What is the journal entry for sold goods on credit?
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In the modern business world, sales are made on a...
Can you give me a list of debit and credit items in trial balance?
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Trial Balance
Are you facing difficulty in understanding the crux of...
What is the journal entry for purchased goods on credit?
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It is believed that every organization requires goods for running...
What is paid electricity bill journal entry?
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There are various operating and Non-operating expenses incurred by an...
What is the journal entry for salary paid in advance?
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Salary paid in advance
The term salary paid in advance is also...
What is the journal entry for purchase of machinery?
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A customer can purchase on two grounds: cash or credit....
What is the journal entry for unbilled revenue?
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Meaning of Unbilled Revenue
Unbilled Revenue refers to the revenue earned...
What is paid telephone bill journal entry?
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A company incurs several expenses arising from its operating activities....
What is interest received from bank journal entry?
Overview of Interest received from Bank
When a business has excess funds, it invests these funds by depositing them in the bank rather than keeping...
What is paid salary by cheque journal entry?
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Salary is an indirect expense incurred by every organization as...
What is the journal entry for salary due?
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Salary due is the amount of salary payable for a...
What is the need, importance, and purpose of final accounts?
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Need and Importance of Final Accounts
Final accounts are considered as...
What type of account is Purchase Return and Sales Return?
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Purchase Returns
Type of Account
Purchase returns is a nominal account....
What is paid wages in cash journal entry?
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In this growing competitive world, every organization needs to retain...
Is Income received in advance a liability or asset?
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Meaning of "Income received in advance"
Income received in advance refers...
How to do bad debts adjustment in final accounts?
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Adjustment in final accounts
Adjustment of bad debts is often a...
How to know if opening balance of an account should be debit or credit
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Opening Balance
The opening balance of an account can be found...
Is capital an asset or liability?
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The simple meaning of capital, as known by many, is...
What is the journal entry for investment in subsidiary?
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To begin with, let me explain to you the meaning...
What is the journal entry for payment to vendor?
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As we all know, a payment is made when we...
What is salary received journal entry?
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Individuals employed in an organization receive a salary but salaried...
How to show outstanding expense in trial balance?
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Outstanding expenses such as outstanding salary, rent, wages, etc. are...
What is another name for balance sheet?
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Another name of Balance Sheet
There are several names given to...
What is the beginning and ending balance of an account?
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In accounting, beginning and ending balances are used interchangeably with...
What are some difficult adjustments in final accounts?
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In my opinion, the following are some of the difficult...
What is the formula for net credit sales?
Meaning and Definition
Sales refer to the number of goods or services sold by a business entity.
Sales can be of two types :
Cash sales
...
What are service center examples?
Meaning of Service Center
A service centre is a small unit or a department of an organization that provides services to other departments or units...
Is deferred revenue a liability?
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Meaning of a Deferred Revenue
Deferred revenue is an amount received...
What is the formula for working capital?
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Working capital = Current Assets - Current Liabilities
I believe if...
Are non current liabilities debt?
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Meaning of Non-Current Liabilities
Non-current liabilities are obligations of an entity...
Why is financial reporting important?
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Importance of Financial Reporting
The importance of financial reporting cannot be...
What is the difference between asset and inventory?
Difference between Assets and Inventory
S.No.
Basis of Difference
Assets
Inventory
1.
Meaning
Asset refers to the economic resources that are owned or controlled by an entity or business for deriving...
What are components of financial reporting?
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To begin with, financial reporting is mainly of two types:...
What all is included in equity?
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Equity is the capital raised by a company for the...
Is depreciation an operating expense?
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Depreciation as an Operating Expense
Yes, depreciation is an operating expense.
To...
How to calculate days payable outstanding, formula and example?
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Meaning of Days Payable Outstanding
Days Payable Outstanding (DPO) refers to...
Difference between purchase requisition and purchase order?
What is a Purchase Requisition?
In the case of larger organisations, it may so happen that the procurement department places an order of purchase only...
Which contra account is used in recording depreciation?
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"Accumulated Depreciation" is the contra account used to record depreciation.
Let...
Can you share a petty cash book format in pdf?
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In simple words, a petty cash book which is usually...
What are different types of financial statements?
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Types of Financial Statements
Statement of financial position
A statement of...
Is invoice a receipt?
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No, an invoice is not a receipt. To make the...
Is goodwill a fictitious asset?
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No, Goodwill is not a fictitious asset.
What is Goodwill?
The goodwill...
Is advance received from customer treated as revenue?
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When a sum of money is received by the company...
Can you share a Debit and Credit Format?
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A ledger account consists of the financial transactions of a...
Can goodwill be negative?
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Negative Goodwill
Yes, I believe goodwill can have a negative balance....
What are branches of accounting?
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Branches of accounting
The types or branches of accounting are as...
Are accounts receivable asset or revenue?
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Accounts receivable as an asset
I think before getting onto this...
What are some examples of a cost center?
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I think firstly you should have a glance over the...
What is the process of preparing income statement from trial balance?
process-of-preparing-income-statement-from-trial-balance
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In the Income Statement, the Trading account represents the first...
Is investment an asset?
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Yes, investments are assets.
First, let me familiarize you with the...
What is Debit and Credit in Accounting?
This topic was approached differently and simplified so that even a 5-year-old can understand what a "Debit and Credit in Accounting" means. There's more...
What are some examples of chart of accounts?
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Yes. But first, let me familiarize you with the meaning...
List of Tangible and Intangible assets
Meaning
Tangible assets are those assets that can be measured, touched, and felt. These are long-term assets. These assets are used to help produce goods...
Can you help me with a month-end close checklist?
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Let's first interpret the meaning and importance of the month-end...
What are core business operations?
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Meaning of Core Business Operations
In layman's language, the term "core...
Why should a ledger be balanced?
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Let me start with the term ledger balancing.
What is Ledger...
Who is bank reconciliation statement prepared by?
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The bank reconciliation statement (BRS) is prepared by the accountant...
Where is Amortization shown in financial statements?
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What is Amortization?
Amortization can be referred to as the depreciation...
When, Where and How to disclose contingent asset?
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An entity should not recognize a contingent asset in the...
Is accumulated depreciation an asset or liability?
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Accumulated Depreciation
Depreciation is a wear and tear of an asset...
Are Bad Debts Liabilities?
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A question often asked is, "Is bad debt an asset...
What is the meaning of negative working capital?
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The term negative working capital is derived from the concept...
Is purchase return a debit or credit?
Overview of Purchase Return
When the buyer of goods returns the goods purchased back to the seller, the transaction is referred to as purchases return....
What are sales returns and allowances?
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Sales Return and Allowances
When the goods or commodities are sold...
Is Income Debit or Credit?
Overview of Income
Income is the money received by a business in exchange for goods or services sold. It could be both, received or yet...
Why is income received in advance treated as a current liability?
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What is Income Received in Advance?
Income received in advance is...
Is Loan a current asset?
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Firstly, Nancy, the question put up by you is a...
Can someone give examples of deferred revenue?
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Before I give you the examples of deferred revenue I...
Where is suspense account shown in the financial statements?
What is Suspense account?
A suspense account is a general ledger account prepared in the following situations;
1. Transactions are unidentified or unclassified at the time...
Can someone share a list of fixed assets and current assets?
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Fixed Assets
Fixed assets are those assets that can be in...
Liability is debited or credited?
Overview of Liabilities
From a business perspective, a liability is defined as money owed to third parties. It may be external (3rd parties) or internal...
Is Income received in advance taxable?
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Meaning of Income received in advance
It refers to an income...
Why bank reconciliation statement is made?
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Objectives of Bank Reconciliation Statement
Bank Reconciliation statement refers to the...
What is the journal entry for trade discount?
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In layman’s language, a trade discount refers to a reduction/fall...
What are posting references in a journal?
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Posting Reference
A posting reference column is used to indicate that...
What is the difference between debt and liability?
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In the business world, the terms "Debt" and "Liability" are...
Where do contra assets go on a balance sheet?
Meaning of Contra Assets
The word contra means “opposite”. So, contra assets have a credit balance, whereas assets normally have a debit balance. A contra-asset...
Is prepaid insurance a debit or credit?
Overview of Prepaid Insurance
Prepaid Insurance is the amount of insurance premium which has been paid in advance in the current accounting period. However, the...
What is the process of preparing balance sheet from trial balance?
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Balance Sheet is a statement showing the financial position of...
What is the meaning of debit balance of trading account?
Every year or after a certain period, the ledger accounts are balanced after posting the transactions. The difference in the totals of the two...
Are bad debts recorded in income statement?
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Meaning of Bad debts
As we can see, the term ‘Bad...
Is retained earnings a debit or credit?
What are Retained Earnings?
Retained Earnings are the accumulated net income of an entity at the end of an accounting period that is retained by...
Can you share a list of direct and indirect expenses?
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Direct and Indirect expenses-
Direct expenses include all those expenses which...
Is cash book both a journal and ledger?
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Yes, the cash book is both a journal and a...
What is the journal entry for inventory purchased?
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Every business organization uses inventory to generate sales. Inventory includes...
Can I get cash book and bank reconciliation examples?
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Examples of Bank Reconciliation Statement
Illustration 1,
From the following particulars prepare...
What is zero working capital?
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Zero Working Capital
Before diving into the concept of Zero Working...
Where is suspense account entered if shown in trial balance?
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What is a Suspense Account?
A Suspense account is maintained by...
What is the meaning of assets have debit balance and liabilities have credit balance?
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What is a Debit balance?
While preparing a ledger account (T-account),...
What is the difference between cost center and cost unit?
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The differences between cost centre and cost unit are as...
What is the meaning of credit balance of trading account?
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Every year or after a certain period, the ledger accounts...
Is debit balance positive and credit balance negative?
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For a better understanding of the concept, let us first...
Can you please share a list of current assets & current liabilities?
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List of Current Assets and Current Liabilities
S.no
Current Assets
Current Liabilities
1.
Sundry Debtors
Sundry...
Is prepaid expense a fictitious asset?
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No, Prepaid Expense is Not a Fictitious Asset.
Meaning of Prepaid...
Can depreciation be charged in the year of sale?
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Charging Depreciation in the Year of the Sale
The answer to...
Can assets have a credit balance?
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Yes, there are a few assets that show the credit...
Why is debit written as Dr and Credit written as Cr?
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Why is Debit written as Dr?
They say Debit is denoted...
How is accumulated depreciation shown in trial balance?
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To understand the Presentation of Accumulated Depreciation in the Trial...
Why are subsidiary books maintained in accounting?
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Purpose of subsidiary books
Big business concerns have recorded numerous financial...
Return inwards and Return outwards are deducted from?
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Return Inwards
The return inwards arises when goods sold are returned...
Why is provision for doubtful debts created?
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Introduction
In the world of business, most of the transactions take...
What is the normal balance of dividends?
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The normal balance of dividends is "Debit".
Firstly, you should know...
Can you show treatment of provision for discount on debtors in final accounts?
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Meaning of Provision for Discount on Debtors
Debtors are the entities...
Where are trading expenses in final accounts?
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I have answered this question on the assumption that "Trading...
Is rent received in advance included in taxable income?
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What is Rent Received in Advance?
Rent Received in Advance is...
What are the examples of contingent assets?
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To begin with, let me help you understand the meaning...
Is Prepaid Rent a Current Asset?
Prepaid rent includes the word rent. Therefore, one might think that it is an expense, right? But, Prepaid rent is a current asset and...
What is the treatment of closing stock in trading account?
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Meaning of Closing Stock
Closing stock refers to the value of...
Expense is Debit or Credit?
Overview of Expenses
The costs paid by a business in order to generate revenue are called expenses. In other words, it is an outflow of...
Can you explain 5 principles of accounting with examples?
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Principles of Accounting
I would like to share with you the...
What is the type of account and normal balance of petty cash book?
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Meaning of Petty Cash Book
A petty cash book is like...
How to calculate provision for doubtful debts?
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To understand the calculation for Provision for Bad and Doubtful...
Capital is debit or credit?
Meaning of Capital
Capital refers to the financial resources of a business that are used to pay for its operations. The financial assets invested in...
Can you show treatment of provision for doubtful debts in balance sheet?
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Meaning of Provision for Doubtful Debts
Almost every business entity has...
What is the journal entry for sale of services on credit?
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Introduction
In simple words, the term Sale of services means providing...
How to do closing stock adjustment entry?
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Closing Stock refers to the unsold goods held at the...
What is the formula to calculate net current assets?
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Meaning of Net Current Assets
To understand net current assets, we...
Is fees earned a debit or credit?
Overview of Fees Earned
Fees earned signify the revenue generated by an entity that is engaged in rendering services to its clients. When an entity...
What is debenture suspense account?
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Debenture Suspense Account
It's basically a temporary account prepared by an...
Is it possible for a company to show positive cash flows but still be in trouble?
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Yes, it is possible for a company to show positive...
What is the difference between receipt, income, payment and expenditure?
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First, let me help you interpret the difference between Receipts...
Is purchase ledger control account a debit or credit?
Overview of Purchase Ledger Control Account
Purchase Ledger Control Account (PLCA) is a summarized ledger of all the trade creditors of the entity. This Control...
What is the meaning of set-off in accounting?
Meaning & Definition
Set-off means discharging reciprocal monetary obligations by counterbalancing debt or claim. The set-off is carried out by debiting one account against a...
What is the journal entry for outstanding subscription?
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Meaning of Outstanding Subscriptions
In the context of non-profit organizations, a...
How are provision for doubtful debts treated in trial balance?
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Introduction
In simple words, provision for doubtful debts refers to the...
How to do interest on capital adjustment in final accounts?
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Before answering this question you should first have a glance...
How to show prepaid expense inside trial balance?
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Meaning of Prepaid Expenses
Prepaid expenses refer to the advance payment...
The balance of petty cash book is an asset or income?
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What is Petty Cash Book?
A petty cash book is a...
How is return inwards treated in trial balance?
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Return Inwards
Return inwards is also called sales returns or sales...
How is provision for depreciation shown in trial balance?
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Provision for Depreciation in the Trial Balance
A trial balance shows...
What is received cash journal entry?
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Cash is commonly received by the business under the following...
Is purchase order legally binding or can we cancel it?
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Purchase Order
Purchase Order is a commercial document issued by a...
Which accounts are not closed at the end of an accounting period?
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Introduction
There are certain accounts that are not closed at the...
What is a profit and loss suspense account?
Profit and Loss Suspense Account
An entity prepares a profit and loss suspense account when either the partner is retired or in case of the...
What is the journal entry for rent paid in advance?
Overview of Rent Paid in Advance
Rent paid in advance means the payment of any rent obligation prior to the rental period in which it...
Is sales return a debit or credit?
Overview of Sales Return
When the customer returns the goods purchased back to the seller, the transaction is referred to as a sales return. It...
How is return outwards treated in trial balance?
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Return Outwards
In layman's language, return outwards refers to the goods...
Is sales ledger control account a debit or credit?
Overview of Sales Ledger Control Account
A sales Ledger Control Account (SLCA) is a summarized ledger of all the trade debtors of the entity. This...