ABCD OF BALANCE SHEET

ABCD OF BALANCE SHEET

BALANCE SHEET

Balance sheet is a statement which shows assets and liabilities of the business firm on a particular date. Balance sheet is not an account, it is only a statement. At the end of the year, the balances of all accounts relating to income and expenditures are transferred to profit and loss account and the balances of remaining accounts are shown in the balance sheet. The balances shown in balance sheet are shown as opening balances in next financial year.

Balance sheet is prepared annually or at the end of the financial year. In India, financial year is from 1^stApril to 31^st March. In some countries, financial year is the calendar year i.e. 1^st January to 31^stDecember.

In India there are two formats of preparing of the balance sheet:-

1)      Horizontal format:- In horizontal format of balance sheet, the figures are shown in two parts of balance sheet as under:-

·         Liabilities.

·         Assets.

2)      Vertical format:- In vertical format of balance sheet the figures are shown in two parts of balance sheet as under:-

·         Sources of Funds:- All the liabilities are shown under this head.

·         Application of Funds:- All the assets are shown under this head.

In both formats, the difference is only the presentation. The figures and accounts heads are not affected at all.

CONTENT OF BALANCE SHEET

Following items are shown in balance sheet:-

LIABILITIES

1. CAPITAL (Owner’s Equity)

The structure of Capital or owner’s equity differs according to the different type of business organizations. For example:-

In Limited Companies, the capital is shown as share capital. Again, Share capital shows  separate details of equity shares and preference shares.

In Partnership Firm, the capital is shown as Partner’s Capital.

In Proprietorship Firm, the capital is shown as Proprietor’s Capital account.

2. RESERVES AND SURPLUSES

Reserve and surplus is shown in the balance sheet of limited companies only. This is the part of shareholder’s fund. Reserve and surplus is again divided in following parts:-

·         Capital Reserves

·         Capital Redemption Reserves

·         Share Premium Account or Securities Premium Account

·         General Reserves   (Reserves for any specific reasons etc.)

·         Surplus (Balance in profit and loss account after providing for  proposed allocations, namely, dividend, bonus or reserves

·         Sinking Fund

3.  SECURED LOANS

Secured loans are those loans which are accepted by the business firm against any specific or rolling assets of the company. We can classify the secured loans as follow:-

·         Debentures

·         Loans from banks

·         Loans subsidiaries

·         Other loans

·         Interest accrued and due on secured loans

4. UNSECURED LOANS (No Security)

Unsecured loans are those loans which are accepted by the business firms without any charge or mortgage of any property. For example:-

·         Loans from subsidiaries

·         Personal loans

·         Loans From Friends & Relatives

5. CURRENT LIABILITIES & PROVISIONS

A)    CURRENT LIABILITIES

Current liabilities are those liabilities which are normally settled within one year. We call them as rolling liabilities also. Current liabilities include the followings:-

·         Bills payable

·         Sundry creditors

·         Bank overdraft

·         Cash credit facilities

·         Subsidiaries Companies

·         Credit balances of debtors.

·         Outstanding expenses or Expenses payable

·         Unclaimed dividends

·         Other liabilities (if any)

·         Interest accrued but not due on loans

B).  PROVISIONS

Provision means when any amount is kept separate for certain purpose and also debited in profit and loss account but not paid in current financial year. For example:-

·         Provision for taxation

·         Proposed dividend

·         For contingencies

·         For provident fund scheme, pension and similar staff benefit scheme

·         Other provisions.

 ASSETS

1. FIXED ASSETS

These assets are also called long term assets. Fixed assets are shown in balance sheet at their historical cost less depreciation. The depreciation rates are determined in income tax rules or companies act. Following are the examples of fixed assets:-

·         Goodwill

·         Land

·         Building

·         Leaseholds

·         Railway sidings

·         Plant and machinery

·         Furniture and fittings

·         Development of property

·         Patents, trade marks and design

·         Livestock

·          Vehicles

2. INVESTMENTS

When any business firm invests some money other than its business activities then it will treated as investments. Normally, the investment is made in marketable securities or bonds or mutual funds or debentures etc.

3. CURRENT ASSETS, LOANS AND ADVANCES

A).  CURRENT ASSETS

Current assets are those assets which are mostly settled within a year and according to business trade the net amount of these assets keeps changing on through out the year. For example:-

·         Sundry debtors

·         Bills receivables

·         Closing Stock

·         Interest accrued on investments

·         Cash balance on hand

·         Bank balances

·         Security Deposits

·         Fixed Deposits with banks

B).  LOANS AND ADVANCES

When the loans are given or the amount is paid in advance, by a business firm, shall come under this category.

·         Advances and loans to subsidiaries

·         Advances and loans to partnership firm in which the company or any of its subsidiaries is a partner

·         Taxes paid in advance

·         Advances paid to suppliers.

·         Prepaid Expenses

4. MISCELLANEOUS EXPENDITURE

These are basically, revenue expenditures but these expenditures are written off in more than two years because the effect of these expenditures is seen in more than one years. These expenditures are also called as deferred revenue expenditures. Following are the examples of these expenditures:-

·         Preliminary expenses

·         Expenses including commission or brokerage on underwriting or subscription of shares or debentures

·         Discount allowed on the issue of shares or debentures

·         Interest paid out of capital during construction (also stating the rate of interest)

·         Development expenditure not adjusted

·         Other sums (Specifying nature)

5. PROFIT AND LOSS ACCOUNT

This is shown only when its debit balance could not be written off out of uncommitted reserves.

FORMAT OF THE DETAILED BALANCE SHEET IN A HORIZONTAL FORM

Horizontal Form of Balance Sheet

Balance Sheet of..... (Name of the company) as on.....

Figures for the Previous year Rs.	Liabilities	Figures for the current year Rs.	Figures for the previous year Rs.	Assets	Figures for the current year Rs.
	Share Capital: Authorised …shares of Rs…each Preference Equity Issued : …shares of Rs…each Preference Equity Less: Calls Unpaid: Add: Forfeited Shares Reserves and Surplus: Capital Reserve Capital Redemption Reserve Securities Premium Other Reserves Profit and Loss Account Secured Loans: Debentures Loans and Advance from Banks Loans and Advances from subsidiary Companies Other Loans and Advances Unsecured Loans: Fixed Deposits Loans and Advances     from subsidiary companies Short Term Loans and Advances Personal Loan Loan from Friends & Relatives Other Loans and Advances Current Liabilities and Provisions: A.    Current Liabilities Acceptances Sundry Creditors Expenses Payable Duties & Taxes Outstanding Expenses Advance from Customers B. Provisions: For Taxation For Dividends For Contingencies For Provident Fund Schemes   For Insurance, Pension and   Other similar benefits			Fixed Assets: Goodwill Land Building Leasehold Premises Railway Sidings Plant and Machinery Furniture Patents and Trademarks Live stock Vehicles Investments: Government or Trust Securities, Shares, Debentures, Bonds, Fixed deposits Current Assets, Loans and Advances: (A) Current Assets: Interest Accrued on investments Stores and Spare parts Loose Tools Stock in Trade Work in Progress Sundry Debtors Cash and Bank balances (B) Loans and Advances: Advances and Loans to Subsidiaries Bills Receivable Advance Payments and unexpired discounts Advance Taxes Advance to Suppliers Miscellaneous - Expenditure: Preliminary Expenses Discount on Issue of Shares and Other Deferred Expenses Profit and Loss Account (debit Balance: if any)

Accounting Entries for Purchase of Goods & Fixed Assets

Accounting Entries for Purchase of Goods & Fixed Assets

Accounting Entries for Purchase of Goods & Fixed Assets

किसी भी organisation में generally purchase दो चीजों कि होती है – पहली Purchase of Goods और दूसरी Purchase of Fixed Assets. Accounting Entry करते समय हमें यह बात ध्यान में रखनी चहिये कि Purchase of Goods के लिए Purchase A/c को Debit  किया जाता है, जब्कि Purchase of Fixed Assets के लिए Fixed Assets A/c को Debit किया जाता है!  

Purchase can be made in Cash as well as on Credit. But here you need to know that organization may make purchase of Goods and Fixed assets. For Purchase of Goods, Entry would be different from Purchase of Fixed Assets.

Entry for Purchase of Goods in Cash/Bank:-

Purchase A/c                Dr.

      To Cash/Bank A/c

(Being goods purchased in Cash/Bank)

Entry for Purchase of Goods on Credit:-

Purchase A/c                        Dr.

                To Sundry Creditors A/c

(Being Goods Purchased on credit)

Entry for Purchase of Fixed Assets in Cash/Bank:-

Fixed Assets A/c  Dr.

                To Cash/Bank A/c

(Being Fixed Assets purchased in Cash/Bank)

Entry for Purchase of Fixed Assets on credit:-

Fixed Assets A/c  Dr.

                To Vendor A/c

(Being Fixed Assets Purchased o

Concept of Debit Note & Credit Note in the Books of Accounts

Concept of Debit Note & Credit Note in the Books of Accounts

CONCEPT OF DEBIT NOTE & CREDIT NOTE IN THE BOOKS OF ACCOUNTS

Business के अन्दर हम Purchase और Sale दोनों करते है! जब हम Purchase करते है तो पहले हम Purchase का बिल Receive करते है और फिर हम Purchase की entry करते है :-

Purchase A/c        Dr.

       To Sundry Creditors A/c

इसी तरह जब हम Sale करते है तो पहले Sales का Invoice issue करते है और फिर entry करते है :-

Debtor A/c          Dr.

       To Sales A/c

यहाँ तक कोई issue? नहीं Sir, कोई issue नहीं! चलिए फिर आगे चलते है 

जिस तरह हम purchase करते है उसी तरह हमे goods पसंद ना आने पर या goods के defective होने पर हम goods return भी करते है जिसे हम Purchase Return या (GR)के नाम से भी जानते है! और अन्दर कि बात बताऊ तो कभी कभी ऐसा भी होत है कि हमें goods किसी दूसरी जगह से और भी सस्ते rate पर मिल रहे होते है तो इसलिए भी हम कई बार चालाकी करते है और goods जो purchase कि थी उन्हें return कर देते है, मगर आप ऐसी चालाकी बिलकुल मत करना!

जब हम purchase return करते है तो हम entry pass करते है :-

Creditor A/c         Dr.

       To Purchase Return     

इस entry में हमने creditors के account को debit किया है जिसके लिए हम creditors को debit note issue करेंगे जिसका मतलब ये हुआ कि अब हमें हमारे creditors को कम payment करनी होगी! In Simple words, जो भी व्यक्ति debit note issue करता है वो अपनी books में दूसरी पार्टी का account debit करता है! Generally purchase return के लिए हम अपने creditors को debit note issue करते है!

Debit Note issued to Creditors

कभी कभी ऐसा भी होता है कि जो हमने purchase कि है उसमे goods का rate jyada लग कर आ गया है For eg. Banta Santa से Rs.28/kg के हिसाब से चीनी खरीदता था मगर Santa ने इस बार गलती से Rs.30/kg के हिसाब से 1000 kg चीनी और उसका बिल भेज दिया! जैसे ही bill Banta के पास पंहुचा Banta आग बबूला हो गया और बोला कि oye Santa! तेरी ये मजाल कि तू Rs.2/kg के हिसाब से 1000 kg चीनी के Rs. 2000/- मुझसे फालतू ले! अब देख मैं क्या करता हूँ! Banta ने झट से Laptop निकाला और फट से अपनी books में entry pass कर दी :-

Santa (Creditor) A/c        Dr.    2,000.00

       To Rate Differences              2,000.00

और Rs. 2,000.00 का debit note Santa को issue कर दिया!

इस तरह rate difference के लिए भी creditors को debit note issue किया जाता है!

आइए अब हम बात करते है Credit note की:-

Credit Note Issued to our Debtors

जब भी हमारे Debtor हमें goods return करते है तो हम entry pass करते है :-

Sales Return A/c           Dr.

       To Debtor A/c

इस तरह हम अपनी books में Debtor का account credit कर देते है जिसका मतलब ये हुआ कि ऐ हमारे debtor हमें आपसे अब कम पैसा लेना है और हम अपने debtor को credit note issue कर देते है!

In a nutshell, Generally, creditors को debit note issue किया जाता है और Debtors को credit note.

चलिए अब इन दोनों concept को एक example से समझते है :-

मान लीजिये हमारी firm का नाम है Ramesh Enterprises

हम Suresh Enterprises को goods sold करते है तो Suresh Enterprises हमारा debtor हुआ!

इसी तरह हम Vikas Trading Co. से goods purchase करते है तो Vikas Trading Co. हमारा creditor हुआ!  

Accounting Entries for Sale of Goods & Fixed Assets

Accounting Entries for Sale of Goods & Fixed Assets

ACCOUNTING ENTRIES FOR SALE OF GOODS & FIXED ASSETS

जब भी कभी goods बेची जाती है तो वो दो तरह से बेची जा सकती है –

1.) या तो cash मे जिसे Cash Sale कहते है! (जो लोग सिर्फ cash sale करते है, आपने उनकी दुकानों पर ये लिखा हुआ भी देखा होगा “नकद बड़े शोक से, उधार अगले चौक से”

 2.) या फिर कुछ दानवीर लोग भी होते है जो दुसरो को उधार माल भी बेचते है ऐसी उधारsale को credit Sale कहते है!

3.) कभी कभी जब assets पुरानी हो जाती है तो वो काम कम करती है और खर्चा ज्यादा मांगती है तो Businessman सोचता है की क्यूँ न इस पुरानी Machine को बेच दू और नईMachine खरीद लू! इस तरह वो अपनी पुरानी assets को OLX पर बेच देता है!

Entries for Cash Sale:-                  Entries for Credit Sale:-          Entry for Fixed Assets Sale

Cash A/c                     Dr.              Debtor A/c                   Dr.       Bank/Cash/Party A/c          Dr

            To Sales A/c                                To Sales A/c                            To Fixed Assets A/c

  

v  हमें यह बात हमेशा ध्यान में रखनी चहिये की Fixed Assets को हम regularly Sale नहीं करते इसी लिए Fixed Assets को sale करते समय Fixed assets A/c credit होता है नाकिSales A/c.

v  दूसरा Fixed Assets हमारा Real Account होता है जबकि Sales Account हमारा Nominal A/c hota है!

v  तीसरा जब Fixed Assets को Purchase करते है तो Fixed Assets Account  डेबिट किया जाता है नाकि Purchase Account.

Concept of Payment Advice

Concept of Payment Advice

CONCEPT OF PAYMENT ADVICE

Payment Advice एक important concept है और इसके बारे में हम सभी को पता भी होना चहिये! Let’s understand this concept.

जब भी हम किसी को उधार माल (Credit Sale)  बेचते है तो entry करते है :-

Debtor A/c          Dr.

       To Sales A/c

Practically जब भी हम उधार माल बेचते है तो अपने debtor को credit period allowed करते है generally 1-2 months.

Assume that Mr. Santa (Seller) Sold Goods to Mr. Banta (Buyer)

जब भी Santa (Seller) Mr. Banta को goods sold करता है तो उसे Sales invoice/bill issue करता है. Assume that Mr. Santa has issued the following bills to Mr. Banta:-

Sr. No.	Bill Date	Invoice No.	Bill Amount (In Rs.)
1	02/12/2014	0873	28,400.00
2	04/12/2014	0914	26,700.00
3	09/12/2014	1050	30,872.00
4	17/12/2014	1278	29,338.00
5	23/12/2014	1419	27,690.00
6	26/12/2014	1782	27,800.00
7	31/12/2014	2218	29,300.00
		Total	2,00,100.00

 अब Mr. Banta, Mr. Santa को या तो Cash में या फिर Cheque से और अगर jyada ही smart हुआ तो फिर Neft/RTGS से भी payment कर सकता है! जब भी Mr. Banta Mr. Santa को payment करेगा तो वो यह भी बताएगा कि मैंने कौन – कौन से bill के against payment कि है या फिर कौन कौन से bill Clear कर दिए है. इस सबके लिए Mr. Banta Payment के साथ साथ एक Detail भी भेजता है जिसे Payment Advice कहते है!

Payment Advice issued by Abc Co. to M/s Bangalore Chemicals & Fertilizers

In a nutshell, Payment advice is issued by debtors to their creditors at the time of making payment to them.

Use of Payment Advice for seller:-

Payment Advice का seller के लिए बहुत ज्यादा use है! इसी के Basis पर seller को पता चलता है कि Debtors ने कौन कौन से bill कि payment कर दी है और कौन कौन से bill अभी pending है!

Please consider the sales invoice details given above.

मान लीजिये Mr. Santa को December month में जो उसने sale कि थी उसकी पूरी payment Rs. 2,00,100/- मिलनी थी! लेकिन उसे Rs. 1,70,762/- कि payment receive हुई! जिसके लिए Santa ने Banta को Phone करके उससे Payment Advice मंगा ली! जैसे ही उसने Payment Advice को देखा तो उसने पाया कि इस Payment Advice में Bill No.1278 missing है और उसने तुरंत Banta को phone कर दिया

Tring....Tring........Tring........ Tring................

Banta ने caller tune लगाई हुई है..............

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“Yaar tera Superstar --------- Desi Kalakaar” Main putt (putra) jatt da.........maanda ni main kavi haar..... “Yaar tera Superstar --------- Desi Kalakaar”

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एकदम से phone उठता है ......

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Banta:- Yes, Who’s this?

Santa:- Santa Here..................................

Banta:- O haanji Paaji bolo ki Haal Chaal

Santa:- Ki Haal Chaal

Banta:- o nai paaji aap batao Haau aare You?

Santa:- Chal hat pagle ab rulayega kya, mujhse aisi senty senty baatein na poocha kar

Banta:- Ok Ok My Mistake paaji...... aur batao kaise yaad kiya?

Santa:- Yaar jo tumne payment advice bheji hai ussey pata chala ki tumne Bill no. 1278 ki payment nahi ki.

जिस पर Banta ने Santa को कहा कि Sir, हमारी books में तो Bill No. 1278 hai hi nahi. फिर क्या था Santa ने Bill No. 1278 कि Duplicate copy निकलवाई और उसे Scan करवाकर Banta को Mail करवा दी! जिसके बाद Banta ने Bill No. 1278 को अपनी books में record कर लिया और next payment में Bill No. 1278 ki payment करने कि assurance भी दी!

इस तरह payment advice कि वजह से Santa के जो invoice Banta ने गलती से record नहीं किये थे वो समय रहते record हो गए! और अब अगली payment के साथ साथ Santa को Bill No. 1278 की payment भी मिल जाएगी!

BASIC ASSUMPTIONS OF ACCOUNTING

BASIC ASSUMPTIONS OF ACCOUNTING

 BASIC ASSUMPTION OF ACCOUNTING
 

 Accounting कि कुछ Basic Assumptions होती है जिनके basis पर हम Accounting करते hai. These assumptions are as follows:-

1.) Going Concern Concept:-

Going Concern

Going concern concept के according हम ये मानते है कि हमारा business लम्बे समय तक चलेगा औरइसलिए हम business कि Accounting करते है! अगर हम ये assumption नहीं मानेंगे और सोचेंगे कि अरेयार business का तो पता नहीं कल चलेगा या नहीं तो फिर ऐसे business कि एकाउंटिंग करने से क्याफायेदा? Remember “Positive always supersede Negative”. ये assumption हमसे कहती है Be Positive & Have Faith कि लम्बे समय तक business चलेगा ही चलेगा !

2.) Matching Concept:-`

 Matching Concept means Match करो. अबसवाल ये है कि क्या मैच करें या किसको किस से मैचकरें! Shirt को Pent से Match करें या Nail polishको Dress से ! अरे भाई, जब हम Accountingके बारे मैं बात कर रहे है तो Accounts कि हीचीजों को मैच करेंगे ना ! हाँ जी, All the Expenses Should be matched with Revenue. It Means जितने period ki Sale याIncome, Profit & Loss Account में लेते हैउतने ही period के  Expenses भी Profit & Loss Account मे लेने चाहिए! For Eg.अगरहमने 31st March  तक की Sales या  Incomeको  Profit & Loss Account  मे लिया है तो हमे  Expenses भी 31st March तक के लेने है!  नातो 31st March से कम ना ही इससे ज़यादा!  

3.) Accrual Basis Concept:-

Accrual Basis Concept means हमें Income & Expenses Due Basis पर Record करने चहिये! Meaning thereby Business करते समय सारी कि सारी Sale cash में नहीं होती, कुछ Sale उधार भीहोती है! उधार Sale से हमे Paise बाद में receive होंगे, मगर accrual basis concept कि वजह से हमउधार Sale को भी Profit & Loss Account में Show करते है और अपनी Sale का Part मानते हैं! इसीतरह हम सभी खर्चो कि Payment तुरंत नहीं कर देते और उनकी Payment बाद में करते हैं, लेकिनAccrual basis concept कि वजह से हम उन खर्चो को भी Profit & Loss Account में Show करते है! Accrual basis concept से Net Profit more accurately show होता हैं!