Basic Terms and Concepts

Basic Terms and Concepts

There are a few (and only a few) things you need to understand in order to make setting up your accounting system easier. They're basic (trust me), and they will probably clear up any confusion you may have had in the past when talking with your CPA or other technical accounting types.

Debits and Credits
These are the backbone of any accounting system. Understand how debits and credits work and you'll understand the whole system. Every accounting entry in the general ledger contains both a debit and a credit. Further, all debits must equal all credits. If they don't, the entry is out of balance. That's not good. Out-of-balance entries throw your balance sheet out of balance.

Therefore, the accounting system must have a mechanism to ensure that all entries balance. Indeed, most automated accounting systems won't let you enter an out-of-balance entry-they'll just beep at you until you fix your error.

Depending on what type of account you are dealing with, a debit or credit will either increase or decrease the account balance. (Here comes the hardest part of accounting for most beginners, so pay attention.) 

Figure 1 illustrates the entries that increase or decrease each type of account.

Figure 1
Debits and Credits vs. Account Types

Account         Type Debit          Credit
Assets             Increases          Decreases
Liabilities         Decreases          Increases
Income            Decreases          Increases
Expenses         Increases          Decreases

Notice that for every increase in one account, there is an opposite (and equal) decrease in another. That's what keeps the entry in balance. Also notice that debits always go on the left and credits on the right.

Let's take a look at two sample entries and try out these debits and credits:

In the first stage of the example we'll record a credit sale:

Accounts Receivable          1,000 
Sales Income                        1,000

If you looked at the general ledger right now, you would see that receivables had a balance of 1,000 and income also had a balance of 1,000.

Now we'll record the collection of the receivable:

Cash                                 1,000 
Accounts Receivable          1,000

Notice how both parts of each entry balance? See how in the end, the receivables balance is back to zero? That's as it should be once the balance is paid. The net result is the same as if we conducted the whole transaction in cash:

Cash                     1,000 
Sales Income         1,000

Of course, there would probably be a period of time between the recording of the receivable and its collection.

That's it. Accounting doesn't really get much harder. Everything else is just a variation on the same theme. Make sure you understand debits and credits and how they increase and decrease each type of account.

Assets and Liabilities
Balance sheet accounts are the assets and liabilities. When we set up your chart of accounts, there will be separate sections and numbering schemes for the assets and liabilities that make up the balance sheet.

A quick reminder: Increase assets with a debit and decrease them with a credit. Increase liabilities with a credit and decrease them with a debit.

Identifying assets
Simply stated, assets are those things of value that your company owns. The cash in your bank account is an asset. So is the company car you drive. Assets are the objects, rights and claims owned by and having value for the firm.

Since your company has a right to the future collection of money, accounts receivable are an asset-probably a major asset, at that. The machinery on your production floor is also an asset. If your firm owns real estate or other tangible property, those are considered assets as well. If you were a bank, the loans you make would be considered assets since they represent a right of future collection.

There may also be intangible assets owned by your company. Patents, the exclusive right to use a trademark, and goodwill from the acquisition of another company are such intangible assets. Their value can be somewhat hazy.

Generally, the value of intangible assets is whatever both parties agree to when the assets are created. In the case of a patent, the value is often linked to its development costs. Goodwill is often the difference between the purchase price of a company and the value of the assets acquired (net of accumulated depreciation).

Identifying liabilities
Think of liabilities as the opposite of assets. These are the obligations of one company to another. Accounts payable are liabilities, since they represent your company's future duty to pay a vendor. So is the loan you took from your bank. If you were a bank, your customer's deposits would be a liability, since they represent future claims against the bank.

We segregate liabilities into short-term and long-term categories on the balance sheet. This division is nothing more than separating those liabilities scheduled for payment within the next accounting period (usually the next twelve months) from those not to be paid until later. We often separate debt like this. It gives readers a clearer picture of how much the company owes and when.

Owners' equity
After the liability section in both the chart of accounts and the balance sheet comes owners' equity. This is the difference between assets and liabilities. Hopefully, it's positive-assets exceed liabilities and we have a positive owners' equity. In this section we'll put in things like

·   Partners' capital accounts

·   Stock

·   Retained earnings

Another quick reminder: Owners' equity is increased and decreased just like a liability:

·   Debits decrease

·   Credits increase

Most automated accounting systems require identification of the retained earnings account. Many of them will beep at you if you don't do so.

By the way, retained earnings are the accumulated profits from prior years. At the end of one accounting year, all the income and expense accounts are netted against one another, and a single number (profit or loss for the year) is moved into the retained earnings account. This is what belongs to the company's owners-that's why it's in the owners' equity section. The income and expense accounts go to zero. That's how we're able to begin the new year with a clean slate against which to track income and expense.

The balance sheet, on the other hand, does not get zeroed out at year-end. The balance in each asset, liability, and owners' equity account rolls into the next year. So the ending balance of one year becomes the beginning balance of the next.

Think of the balance sheet as today's snapshot of the assets and liabilities the company has acquired since the first day of business. The income statement, in contrast, is a summation of the income and expenses from the first day of this accounting period (probably from the beginning of this fiscal year).

Income and Expenses
Further down in the chart of accounts (usually after the owners' equity section) come the income and expense accounts. Most companies want to keep track of just where they get income and where it goes, and these accounts tell you.

A final reminder: For income accounts, use credits to increase them and debits to decrease them. For expense accounts, use debits to increase them and credits to decrease them.

Income accounts
If you have several lines of business, you'll probably want to establish an income account for each. In that way, you can identify exactly where your income is coming from. Adding them together yields total revenue.

Typical income accounts would be

·   Sales revenue from product A

·   Sales revenue from product B (and so on for each product you want to track)

·   Interest income

·   Income from sale of assets

·   Consulting income

Most companies have only a few income accounts. That's really the way you want it. Too many accounts are a burden for the accounting department and probably don't tell management what it wants to know. Nevertheless, if there's a source of income you want to track, create an account for it in the chart of accounts and use it.

Expense accounts
Most companies have a separate account for each type of expense they incur. Your company probably incurs pretty much the same expenses month after month, so once they are established, the expense accounts won't vary much from month to month. Typical expense accounts include

·   Salaries and wages

·   Telephone

·   Electric utilities

·   Repairs

·   Maintenance

·   Depreciation

·   Amortization

·   Interest

·   Rent

Income Statement

Marilyn points out that an income statement will show how profitable Direct Delivery has been during the time interval shown in the statement's heading. This period of time might be a week, a month, three months, five weeks, or a year—Joe can choose whatever time period he deems most useful.

The reporting of profitability involves two things: the amount that was earned (revenues) and the expenses necessary to earn the revenues. As you will see next, the term revenues is not the same as receipts, and the term expenses involves more than just writing a check to pay a bill.

A. Revenues

The main revenues for Direct Delivery are the fees it earns for delivering parcels. Under the accrual basis of accounting(as opposed to the less-preferred cash method of accounting), revenues are recorded when they are earned, not when the company receives the money. Recording revenues when they are earned is the result of one of the basic accounting principles known as the revenue recognition principle.

For example, if Joe delivers 1,000 parcels in December for 4 per delivery, he has technically earned fees totaling 4,000 for that month. He sends invoices to his clients for these fees and his terms require that his clients must pay by January 10. Even though his clients won't be paying Direct Delivery until January 10, the accrual basis of accounting requires that the 4,000 be recorded as December revenues, since that is when the delivery work actually took place. After expenses are matched with these revenues, the income statement for December will show just how profitable the company was in delivering parcels in December.

When Joe receives the 4,000 worth of payment checks from his customers on January 10, he will make an accounting entry to show the money was received. This 4,000 of receipts will not be considered to be January revenues, since therevenues were already reported as revenues in December when they were earned. This 4,000 of receipts will be recorded in January as a reduction in Accounts Receivable. (In December Joe had made an entry to Accounts Receivable and toSales.)

(A) Assets

Assets are things that a company owns and are sometimes referred to as the resources of the company. Joe readily understands this—off the top of his head he names things such as the company's vehicle, its cash in the bank, all of the supplies he has on hand, and the dolly he uses to help move the heavier parcels. Marilyn nods and shows Joe how these are reported in accounts called Vehicles, Cash, Supplies, and Equipment. She mentions one asset Joe hadn't considered—Accounts Receivable. If Joe delivers parcels, but isn't paid immediately for the delivery, the amount owed to Direct Delivery is an asset known as Accounts Receivable.

Prepaids

Marilyn brings up another less obvious asset—the unexpired portion of prepaid expenses. Suppose Direct Delivery pays 1,200 on December 1 for a six-month insurance premium on its delivery vehicle. That divides out to be 200 per month (1,200 ÷ 6 months). Between December 1 and December 31, 200 worth of insurance premium is "used up" or "expires". The expired amount will be reported as Insurance Expense on December's income statement. Joe asks Marilyn where the remaining 1,000 of unexpired insurance premium would be reported. On the December 31 balance sheet, Marilyn tells him, in an asset account called Prepaid Insurance.

Other examples of things that might be paid for before they are used include supplies and annual dues to a trade association. The portion that expires in the current accounting period is listed as an expense on the income statement; the part that has not yet expired is listed as an asset on the balance sheet.

Marilyn assures Joe that he will soon see a significant link between the income statement and balance sheet, but for now she continues with her explanation of assets.

Cost Principle and Conservatism

Joe learns that each of his company's assets was recorded at its original cost, and even if the fair market value of an item increases, an accountant will not increase the recorded amount of that asset on the balance sheet. This is the result of another basic accounting principle known as the cost principle.

Although accountants generally do not increase the value of an asset, they might decrease its value as a result of a concept known as conservatism. For example, after a few months in business, Joe may decide that he can help out some customers—as well as earn additional revenues—by carrying an inventory of packing boxes to sell. Let's say that Direct Delivery purchased 100 boxes wholesale for 1.00 each. Since the time when Joe bought them, however, the wholesale price of boxes has been cut by 40% and at today's price he could purchase them for 0.60 each. Because the replacement cost of his inventory (60) is less than the original recorded cost (100), the principle of conservatism directs the accountant to report the lower amount (60) as the asset's value on the balance sheet.

In short, the cost principle generally prevents assets from being reported at more than cost, while conservatism might require assets to be reported at less then their cost.

(B) Liabilities

The balance sheet reports Direct Delivery's liabilities as of the date noted in the heading of the balance sheet. Liabilities are obligations of the company; they are amounts owed to others as of the balance sheet date. Marilyn gives Joe some examples of liabilities: the loan he received from his aunt (Notes Payable or Loan Payable), the interest on the loan he owes to his aunt (Interest Payable), the amount he owes to the supply store for items purchased on credit (Accounts Payable), the wages he owes an employee but hasn't yet paid to him (Wages Payable).

Another liability is money received in advance of actually earning the money. For example, suppose that Direct Delivery enters into an agreement with one of its customers stipulating that the customer prepays 600 in return for the delivery of 30 parcels every month for 6 months. Assume Direct Delivery receives that 600 payment on December 1 for deliveries to be made between December 1 and May 31. Direct Delivery has a cash receipt of 600 on December 1, but it does nothave revenues of 600 at this point. It will have revenues only when it earns them by delivering the parcels. On December 1, Direct Delivery will show that its asset Cash increased by 600, but it will also have to show that it has a liability of 600. (It has the liability to deliver 600 of parcels within 6 months, or return the money.)

The liability account involved in the 600 received on December 1 is Unearned Revenue. Each month, as the 30 parcels are delivered, Direct Delivery will be earning 100, and as a result, each month 100 moves from the account Unearned Revenue to Service Revenues. Each month Direct Delivery's liability decreases by 100 as it fulfills the agreement by delivering parcels and each month its revenues on the income statement increase by 100.

(C) Stockholders' Equity

If the company is a corporation, the third section of a corporation's balance sheet is Stockholders' Equity. (If the company is a sole proprietorship, it is referred to as Owner's Equity.) The amount of Stockholders' Equity is exactly the difference between the asset amounts and the liability amounts. As a result accountants often refer to Stockholders' Equity as the difference (or residual) of assets minus liabilities. Stockholders' Equity is also the "book value" of the corporation.

Since the corporation's assets are shown at cost or lower (and not at their market values) it is important that you do notassociate the reported amount of Stockholders' Equity with the market value of the corporation. (Hence, it is a poor choice of words to refer to Stockholders' Equity as the corporation's "net worth".) To find the market value of a corporation, you should obtain the services of a professional familiar with valuing businesses.

Within the Stockholders' Equity section you may see accounts such as Common Stock, Paid-in Capital in Excess of Par Value-Common Stock, Preferred Stock, Retained Earnings, and Current Year's Net Income.

The account Common Stock will be increased when the corporation issues shares of stock in exchange for cash (or some other asset). Another account Retained Earnings will increase when the corporation earns a profit. There will be a decrease when the corporation has a net loss. This means that revenues will automatically cause an increase in Stockholders' Equity and expenses will automatically cause a decrease in Stockholders' Equity. This illustrates a link between a company's balance sheet and income statement.

BASIC ACCOUNTING CONCEPTS

ACCOUNTING INTRODUCTION

Operating Information

This is the information that is needed on a day-to-day basis in order for the organization to conduct its business. Employees need to get paid, sales need to be tracked, the amounts owed to other organizations or individuals need to be tracked, the amount of money the organization has needs to be monitored, the amounts that customers owe the organization need to be checked, any inventory needs to be accounted for: the list goes on and on. Operating information is what constitutes the greatest amount of accounting information and it provides the basis for the other two types of accounting information.

Financial Accounting Information

This is the information that is used by managers, shareholders, banks, creditors, the government, the public, etc… to make decisions involving the organization and its operations. Shareholders want information about what their investment is worth and whether they should buy or sell shares, bankers and other creditors want to know whether the organization has an ability to pay back money lent, managers want to know how the company is doing compared to other companies. This type of information would be very difficult to extract if every company used a different system for recording their financial position. Financial accounting information is subject to a set of ground rules that dictate how the information is reported and this ensures uniformity.

Managerial Accounting Information

In order for the managers of a company to make the best decisions for a company they need to have specific information prepared. They use this information for three main management functions: planning, implementation and control. Financial information is used to set budgets, analyze different options on a cost basis, modify plans as the need arises, and control and monitor the work that is being done.

As you can see, accounting is a multifaceted system involving different people with different needs and after analyzing the various uses and applications of accounting information the American Accounting Association has come up with this definition: “the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information.”

In order to facilitate the informed use of this financial information, accounting has come to be based on specified rules or conventions called “principles.” These principles provide general laws or rules that are used to guide accounting activity and are called Generally Accepted Accounting Principles, or GAAP for short. These principles are established by the Financial Accounting Standards Board (FASB) which is a nongovernmental agency funded by the accounting profession and contributions from business organizations. While there is no legal obligation for companies to adhere to GAAP, there are strong practical reasons to do so. From auditing to reporting earning to the US Securities Exchange Commission to applying for a loan, there are very compelling reasons for organizations to conform to the generally accepted standard.

What Is The End Result Of All This Accounting Information?We’ve talked about the reason for maintaining accounting information and the end result of all of this recording is the preparation of financial statements. These statements let people see, at a glance, the financial position of an organization. These statements provide summaries of the operating information and are used extensively by people within and external to the company. The statements fall into one of two categories:

·         Status/Stock – these statements show the financial status of an organization at one specified instant in time. Stock reports = a snapshot.

·         Flow Report – these statements show the flow of financial information over a period of time. Flow reports = motion picture

GAAP requires the preparation of three different statements:

Balance Sheet

A Balance Sheet is a status report that shows information about the organization’s resources at one given time. Examples of information found on a balance sheet are how much cash is in the bank, what is owed to creditors, and the value of the company’s assets.

Income Statement

An Income Statement (also called a Statement of Earnings, Statement of Operations, or a Profit and Loss Statement) is a report that shows the flow of revenues (amounts earned from business activity) and expenses (amounts paid in the course of operations) over a given period of time, typically a month, quarter, or year.

Statement of Cash Flow

As the name suggests, this is also a flow statement that details the movement of cash through the organization over a specified period.

The whole purpose of accounting is to provide information that is useful and relevant for interested parities when making decisions regarding the company and its operations. In order to do that effectively, a specific language and subsequent rules have been developed for users of the information. By learning accounting you learn these rules and can then communicate financial information with others in a comprehensible and comparable manner.

Basic key words n meanings of accounts

Basic key words n meanings of accounts

this is very useful for commerce and account professionals,
this is like a accounts dictionary, where we can find all meaning of accounts, i have taken this meaning from oxford software,

Above the line : This term can be applied to many aspects of accounting. It means transactions, assets etc., that are associated with the everyday running of a business. See below the line.
Account: A section in a ledger devoted to a single aspect of a business (eg. a Bank account, Wages account, Office expenses account).
Accounting cycle: This covers everything from opening the books at the start of the year to closing them at the end. In other words, everything you need to do in one accounting year accounting wise.
Accounting equation: The formula used to prepare a balance sheet: assets = liability + equity .
Accounts Payable: An account in the nominal ledger which contains the overall balance of the Purchase Ledger.
Accounts Payable Ledger: A subsidiary ledger which holds the accounts of a business's suppliers. A single control account is held in the nominal ledger which shows the total balance of all the accounts in the purchase ledger.
Accounts Receivable: An account in the nominal ledger which contains the overall balance of the Sales Ledger.
Accounts Receivable Ledger: A subsidiary ledger which holds the accounts of a business's customers. A single control account is held in the nominal ledger which shows the total balance of all the accounts in the sales ledger.
Accretive: If a company acquires another and says the deal is 'accretive to earnings', it means that the resulting PE ratio (price/earnings) of the acquired company is less than the acquiring company. Example: Company 'A' has an earnings per share (EPS) of $1. The current share price is $10. This gives a P/E ratio of 10 (current share price is 10 times the EPS). Company 'B' has made a net profit for the year of $20,000. If company 'A' values 'B' at, say, $180,000 (P/E ratio=9 [180,000 valuation/20,000 profit]) then the deal is accretive because company 'A' is effectively increasing its EPS (because it now has more shares and it paid less for them compared with its own share price). (see dilutive )
Accruals: If during the course of a business certain charges are incurred but no invoice is received then these charges are referred to as accruals (they 'accrue' or increase in value). A typical example is interest payable on a loan where you have not yet received a bank statement. These items (or an estimate of their value) should still be included in the profit & loss account. When the real invoice is received, an adjustment can be made to correct the estimate. Accruals can also apply to the income side.
Accrual method of accounting: Most businesses use the accrual method of accounting (because it is usually required by law). When you issue an invoice on credit (ie. regardless of whether it is paid or not), it is treated as a taxable supply on the date it was issued for income tax purposes (or corporation tax for limited companies). The same applies to bills received from suppliers. (This does not mean you pay income tax immediately, just that it must be included in that year's profit and loss account).
Accumulated Depreciation Account: This is an account held in the nominal ledger which holds the depreciation of a fixed asset until the end of the asset's useful life (either because it has been scrapped or sold). It is credited each year with that year's depreciation, hence the balance increases (ie. accumulates) over a period of time. Each fixed asset will have its own accumulated depreciation account.
Advanced Corporation Tax (ACT - UK only - no longer in use): This is corporation tax paid in advance when a limited company issues a dividend. ACT is then deducted from the total corporation tax due when it has been calculated at year end. ACT was abolished in April 1999. See Corporation Tax .
Amortization: The depreciation (or repayment) of an (usually) intangible asset (eg. loan, mortgage) over a fixed period of time. Example: if a loan of 12,000 is amortized over 1 year with no interest, the monthly payments would be 1000 a month.
Annualize: To convert anything into a yearly figure. Eg. if profits are reported as running at £10k a quarter, then they would be £40k if annualized. If a credit card interest rate was quoted as 1% a month, it would be annualized as 12%.
Appropriation Account: An account in the nominal ledger which shows how the net profits of a business (usually a partnership, limited company or corporation) have been used.
Arrears: Bills which should have been paid. For example, if you have forgotten to pay your last 3 months rent, then you are said to be 3 months in arrears on your rent.
Assets: Assets represent what a business owns or is due. Equipment, vehicles, buildings, creditors, money in the bank, cash are all examples of the assets of a business. Typical breakdown includes 'Fixed assets', 'Current assets' and 'non-current assets'. Fixed refers to equipment, buildings, plant, vehicles etc. Current refers to cash, money in the bank, debtors etc. Non-current refers to any assets which do not easily fit into the previous categories (such as Deferred expenditure ).
At cost: The 'at cost' price usually refers to the price originally paid for something, as opposed to, say, the retail price.
Audit: The process of checking every entry in a set of books to make sure they agree with the original paperwork (eg. checking a journal's entries against the original purchase and sales invoices).
Audit Trail: A list of transactions in the order they occurred.
Bad Debts Account: An account in the nominal ledger to record the value of un-recoverable debts from customers. Real bad debts or those that are likely to happen can be deducted as expenses against tax liability (provided they refer specifically to a customer).
Bad Debts Reserve Account: An account used to record an estimate of bad debts for the year (usually as a percentage of sales). This cannot be deducted as an expense against tax liability.
Balance Sheet: A summary of all the accounts of a business. Usually prepared at the end of each financial year. The term 'balance sheet' implies that the combined balances of assets exactly equals the liabilities and equity (aka net worth).
Balancing Charge: When a fixed asset is sold or disposed of, any loss or gain on the asset can be reclaimed against (or added to) any profits for income tax purposes. This is called a balancing charge.
Bankrupt: If an individual or unincorporated company has greater liabilities than it has assets, the person or business can petition for, or be declared by its creditors, bankrupt. In the case of a limited company or corporation in the same position, the term used is insolvent .
Below the line: This term is applied to items within a business which would not normally be associated with the everyday running of a business. See above the line .
Bill: A term typically used to describe a purchase invoice (eg. an invoice from a supplier).
Bought Ledger: See Purchase Ledger .
Burn Rate: The rate at which a company spends its money. Example: if a company had cash reserves of $120m and it was currently spending $10m a month, then you could say that at the current 'burn rate' the company will run out of cash in 1 year.
CAGR: (Compound Annual Growth Rate) The year on year growth rate required to show the change in value (of an investment) from its initial value to its final value. If a $1 investment was worth $1.52 over three years, the CAGR would be 15% [(1 x 1.15) x 1.15 x 1.15]
Called-up Share capital: The value of unpaid (but issued shares) which a company has requested payment for. See Paid-up Share capital .
Capital: An amount of money put into the business (often by way of a loan) as opposed to money earned by the business.
Capital account: A term usually applied to the owners equity in the business.
Capital Allowances (UK specific): The depreciation on a fixed asset is shown in the Profit and Loss account, but is added back again for income tax purposes. In order to be able to claim the depreciation against any profits the Inland Revenue allow a proportion of the value of fixed assets to be claimed before working out the tax bill. These proportions (usually calculated as a percentage of the value of the fixed assets) are called Capital Allowances.
Capital Assets: See Fixed Assets .
Capital Employed (CE): Gross CE=Total assets, Net CE=Fixed assets plus (current assets less current liabilities).
Capital Gains Tax: When a fixed asset is sold at a profit, the profit may be liable to a tax called Capital Gains Tax. Calculating the tax can be a complicated affair (capital gains allowances, adjustments for inflation and different computations depending on the age of the asset are all considerations you will need to take on board).
Cash Accounting: This term describes an accounting method whereby only invoices and bills which have been paid are accounted for. However, for most types of business in the UK, as far as the Inland Revenue are concerned as soon as you issue an invoice (paid or not), it is treated as revenue and must be accounted for. An exception is VAT : Customs & Excise normally require you to account for VAT on an accrual basis, however there is an option called 'Cash Accounting' whereby only paid items are included as far as VAT is concerned (eg. if most of your sales are on credit, you may benefit from this scheme - contact your local Customs & Excise office for the current rules and turnover limits).
Cash Book: A journal where a business's cash sales and purchases are entered. A cash book can also be used to record the transactions of a bank account. The side of the cash book which refers to the cash or bank account can be used as a part of the nominal ledger (rather than posting the entries to cash or bank accounts held directly in the nominal ledger - see 'Three column cash book').
Cash Flow: A report which shows the flow of money in and out of the business over a period of time.
Cash Flow Forecast: A report which estimates the cash flow in the future (usually required by a bank before it will lend you money, or take on your account).
Cash in Hand: See Undeposited funds account .
Charge Back: Refers to a credit card order which has been processed and is subsequently cancelled by the cardholder contacting the credit card company directly (rather than through the seller). This results in the amount being 'charged back' to the seller (often incurs a small penalty or administration fee to the seller).
Chart of Accounts: A list of all the accounts held in the nominal ledger.
CIF (Cost, Insurance, Freight [c.i.f.]): A contract (international) for the sale of goods where the seller agrees to supply the goods, pay the insurance, and pay the freight charges until the goods reach the destination (usually a port - rather than the actual buyers address). After that point, the responsibility for the goods passes to the buyer.
Circulating assets: The opposite to Fixed assets . Circulating assets describe those assets that turn from cash to goods and back again (hence the term circulating). Typically, you buy some raw materials, start to manufacture a product (the asset is called work in progress at this point), produce a product (it is now stock ), sell it (it is now back to cash again).
Closing the books: A term used to describe the journal entries necessary to close the sales and expense accounts of a business at year end by posting their balances to the profit and loss account, and ultimately to close the profit & loss account too by posting its balance to a capital or other account.
Companies House (UK only): The title given to the government department which collects and stores information supplied by limited companies. A limited company must supply Companies House with a statement of its final accounts every year (eg. trading and profit and loss accounts, and balance sheet).
Compensating error: A double-entry term applied to a mistake which has cancelled out another mistake.
Compound interest: Apply interest on the capital plus all interest accrued to date. Eg. A loan with an annually applied rate of 10% for 1000 over two years would yield a gross total of 1210 at the end of the period (year 1 interest=100, year two interest=110). The same loan with simple interest applied would yield 1200 (interest on both years is 100 per year).
Contra account: An account created to offset another account. Eg: a Sales contra account would be Sales Discounts. They are accounts included in the same section of a set of books, which when compared together, give the net balance. Example: Sales=10,000 Sales Discounts=1,000 therefore Net Sales=9,000. This example, affecting the revenue side of a business, is also referred to as Contra revenue . The tell-tale sign of a contra account is that it has the oposite balance to that expected for an account in that section (in the above example, the Sales Discounts balance would be shown in brackets - eg. it has a debit balance where Sales has a credit balance).
Control Account: An account held in a ledger which summarises the balance of all the accounts in the same or another ledger. Typically each subsidiary ledger will have a control account which will be mirrored by another control account in the nominal ledger (see 'Self-balancing ledgers').
Cook the books: Falsify a set of accounts. See also creative accounting .
Corporation Tax (CT - UK only): The tax paid by a limited company on its profits. At present this is calculated at year end and due within 9 months of that date. From April 1999 Advanced Corporation Tax was abolished and large (UK) companies now pay CT in instalments. Small and medium-sized companies are exempted from the instalment plan.
Cost accounting: An area of management accounting which deals with the costs of a business in terms of enabling the management to manage the business more effectively.
Cost-based pricing: Where a company bases its pricing policy solely on the costs of manufacturing rather than current market conditions.
Cost-benefit: Calculating not only the financial costs of a project, but also the cost of the effects it will have from a social point of view. This is not easy to do since it requires valuations of intangible items like the cost of job losses or the effects on the environment. Genetically modified crops are a good example of where cost-benefits would be calculated - and also impossible to answer with any degree of certainty!
Cost centre: Splitting up your expenses by department. Eg. rather than having one account to handle all power costs for a company, a power account would be opened for each depatrment. You can then analyse which department is using the most power, and hopefully find of way of reducing those costs.
Cost of finished goods: The value (at cost) of newly manufactured goods shown in a business's manufacturing account. The valuation is based on the opening raw materials balance, less direct costs involved in manufacturing, less the closing raw materials balance, and less any other overheads. This balance is subsequently transferred to the trading account.
Cost of Goods Sold (COGS): A formula for working out the direct costs of your stock sold over a particular period. The result represents the gross profit. The formula is: Opening stock + purchases - closing stock.
Cost of Sales: A formula for working out the direct costs of your sales (including stock) over a particular period. The result represents the gross profit. The formula is: Opening stock + purchases + direct expenses - closing stock. Also, see Cost of Goods Sold .
Creative accounting: A questionable! means of making a companies figures appear more (or less) appealing to shareholders etc. An example is 'branding' where the 'value' of a brand name is added to intangible assets which increases shareholders funds (and therefore decreases the gearing ). Capitalizing expenses is another method (ie. moving them to the assets section rather than declaring them in the Profit & Loss account).
Credit: A column in a journal or ledger to record the 'From' side of a transaction (eg. if you buy some petrol using a cheque then the money is paid from the bank to the petrol account, you would therefore credit the bank when making the journal entry).
Credit Note: A sales invoice in reverse. A typical example is where you issue an invoice for £100, the customer then returns £25 worth of the goods, so you issue the customer with a credit note to say that you owe the customer £25.
Creditors: A list of suppliers to whom the business owes money.
Creditors (control account): An account in the nominal ledger which contains the overall balance of the Purchase Ledger.
Current Assets: These include money in the bank, petty cash, money received but not yet banked (see 'cash in hand'), money owed to the business by its customers, raw materials for manufacturing, and stock bought for re-sale. They are termed 'current' because they are active accounts. Money flows in and out of them each financial year and we will need frequent reports of their balances if the business is to survive (eg. 'do we need more stock and have we got enough money in the bank to buy it?').
Current cost accounting: The valuing of assets, stock, raw materials etc. at current market value as opposed to its historical cost .
Current Liabilities: These include bank overdrafts, short term loans (less than a year), and what the business owes its suppliers. They are termed 'current' for the same reasons outlined under 'current assets' in the previous paragraph.
Customs and Excise: The government department usually responsible for collecting sales tax (eg. VAT in the UK).
Days Sales Outstanding (DSO): How long on average it takes a company to collect the money owed to it.
Debenture: This is a type of share issued by a limited company. It is the safest type of share in that it is really a loan to the company and is usually tied to some of the company's assets so should the company fail, the debenture holder will have first call on any assets left after the company has been wound up.
Debit: A column in a journal or ledger to record the 'To' side of a transaction (eg. if you are paying money into your bank account you would debit the bank when making the journal entry).
Debtors: A list of customers who owe money to the business.
Debtors (control account): An account in the nominal ledger which contains the overall balance of the Sales Ledger.
Deferred expenditure: Expenses incurred which do not apply to the current accounting period. Instead, they are debited to a 'Deferred expenditure' account in the non-current assets area of your chart of accounts . When they become current, they can then be transferred to the profit and loss account as normal.
Depreciation: The value of assets usually decreases as time goes by. The amount or percentage it decreases by is called depreciation. This is normally calculated at the end of every accounting period (usually a year) at a typical rate of 25% of its last value. It is shown in both the profit & loss account and balance sheet of a business. See straight-line depreciation .
Dilutive: If a company acquires another and says the deal is 'dilutive to earnings', it means that the resulting P/E (price/earnings) ratio of the acquired company is greater than the acquiring company. Example: Company 'A' has an earnings per share (EPS) of $1. The current share price is $10. This gives a P/E ratio of 10 (current share price is 10 times the EPS). Company 'B' has made a net profit for the year of $20,000. If company 'A' values 'B' at, say, $220,000 (P/E ratio=11 [220,000 valuation/20,000 profit]) then the deal is dilutive because company 'A' is effectively decreasing its EPS (because it now has more shares and it paid more for them in comparison with its own share price). (see Accretive )
Dividends: These are payments to the shareholders of a limited company.
Double-entry book-keeping: A system which accounts for every aspect of a transaction - where it came from and where it went to. This from and to aspect of a transaction (called crediting and debiting) is what the term double-entry means. Modern double-entry was first mentioned by G Cotrugli, then expanded upon by L Paccioli in the 15th century.
Drawings: The money taken out of a business by its owner(s) for personal use. This is entirely different to wages paid to a business's employees or the wages or remuneration of a limited company's directors (see 'Wages').

EBIT: Earnings before interest and tax (profit before any interest or taxes have been deducted).
EBITA: Earnings before interest, tax and amortization (profit before any interest, taxes or amortization have been deducted).
EBITDA: Earnings before interest, tax, depreciation and amortization (profit before any interest, taxes, depreciation or amortization have been deducted).
Encumbrance: A liability (eg. a mortgage is an encumbrance on a property). Also, any money set aside (ie. reserved) for any purpose.
Entry: Part of a transaction recorded in a journal or posted to a ledger.
Equity: The value of the business to the owner of the business (which is the difference between the business's assets and liabilities).
Error of Commission: A double-entry term which means that one or both sides of a double-entry has been posted to the wrong account (but is within the same class of account). Example: Petrol expense posted to Vehicle maintenance expense.
Error of Ommission: A double-entry term which means that a transaction has been ommitted from the books entirely.
Error of Original Entry: A double-entry term which means that a transaction has been entered with the wrong amount.
Error of Principle: A double-entry term which means that one or both sides of a double-entry has been posted to the wrong account (which is also a different class of account). Example: Petrol expense posted to Fixtures and Fittings.
Expenses: Goods or services purchased directly for the running of the business. This does not include goods bought for re-sale or any items of a capital nature (see Stock and Fixed Assets ).
FIFO: First In First Out. A method of valuing stock.
Fiscal year: The term used for a business's accounting year. The period is usually twelve months which can begin during any month of the calendar year (eg. 1st April 2001 to 31st March 2002).
Fixed Assets: These consist of anything which a business owns or buys for use within the business and which still retains a value at year end. They usually consist of major items like land, buildings, equipment and vehicles but can include smaller items like tools. (see Depreciation )
Fixtures & Fittings: This is a class of fixed asset which includes office furniture, filing cabinets, display cases, warehouse shelving and the like.
Flash earnings: A news release issued by a company that shows its latest quarterly results.
Flow of Funds: This is a report which shows how a balance sheet has changed from one period to the next.
FOB: An abbreviation of Free On Board. It generally forms part of an export contract where the seller pays all the costs and insurance of sending the goods to the port of shipment. After that, the buyer then takes full responsibility. If the goods are to travel by train, it's called FOR (Free On Rail).
Freight collect: The buyer pays the shipping costs.
Gearing (AKA: leverage): The comparison of a company's long term fixed interest loans compared to its assets. In general two different methods are used: 1. Balance sheet gearing is calculated by dividing long term loans with the equity (or proprietor's net worth). 2. Profit and Loss gearing: Fixed interest payments for the period divided by the profit for the period.
General Ledger: See Nominal Ledger .
Goodwill: This is an extra value placed on a business if the owner of a business decides it is worth more than the value of its assets. It is usually included where the business is to be sold as a going concern.
Gross loss: The balance of the trading account assuming it has a debit balance.
Gross margin: The difference between the selling price of a product or service and the cost of that product or service often shown as a percentage. Eg. if a product sold for 100 and cost 60 to buy or manufacture, the gross margin would be 40%. Gross margin can also be expressed on a the total revenue and costs of producing that revenue as well as on an item by item basis.
Gross profit: The balance of the trading account assuming it has a credit balance.
Growth and Acquisition (G & A): Describes a way a company can grow. Growth means expanding through its normal operations, Acquisition means growth through buying up other companies.
Historical Cost: Assets, stock, raw materials etc. can be valued at what they originally cost (which is what the term 'historical cost' means), or what they would cost to replace at today's prices (see Price change accounting ).
Impersonal Accounts: These are accounts not held in the name of persons (ie. they do not relate directly to a business's customers and suppliers). There are two types, see Real and Nominal .
Imprest System: A method of topping up petty cash. A fixed sum of petty cash is placed in the petty cash box. When the petty cash balance is nearing zero, it is topped up back to its original level again (known as 'restoring the Imprest').
Income: Money received by a business from its commercial activities. See 'Revenue'.
Inland Revenue: The government department usually responsible for collecting your tax.
Insolvent: A company is insolvent if it has insufficient funds (all of its assets) to pay its debts (all of its liabilities). If a company's liabilities are greater than its assets and it continues to trade, it is not only insolvent, but in the UK, is operating illegally (Insolvency act 1986).
Intangible assets: Assets of a non-physical or financial nature. An asset such as a loan or an endowment policy are good examples. See tangible assets .
Integration Account: See Control Account .
Inventory: A subsidiary ledger which is usually used to record the details of individual items of stock. Inventories can also be used to hold the details of other assets of a business. See Perpetual , Periodic .
Invoice: A term describing an original document either issued by a business for the sale of goods on credit (a sales invoice) or received by the business for goods bought (a purchase invoice).
Journal(s): A book or set of books where your transactions are first entered.
Journal entries: A term used to describe the transactions recorded in a journal.
Journal Proper: A term used to describe the main or general journal where other journals specific to subsidiary ledgers are also used.
K - no entries
Landed Costs: The total costs involved when importing goods. They include buying, shipping, insuring and associated taxes.
Ledger: A book in which entries posted from the journals are re-organised into accounts.
Leverage: See Gearing .
Liabilities: This includes bank overdrafts, loans taken out for the business and money owed by the business to its suppliers. Liabilities are included on the right hand side of the balance sheet and normally consist of accounts which have a credit balance.
LIFO: Last In First Out. A method of valuing stock .
LILO: Last In Last Out. A method of valuing stock .
Long term liabilities: These usually refer to long term loans (ie. a loan which lasts for more than one year such as a mortgage).
Loss: See Net loss .
Management accounting: Accounts and reports are tailor made for the use of the managers and directors of a business (in any form they see fit - there are no rules) as opposed to financial accounts which are prepared for the Inland Revenue and any other parties not directly connected with the business. See Cost accounting .
Manufacturing account: An account used to show what it cost to produce the finished goods made by a manufacturing business.
Matching principle: A method of analysing the sales and expenses which make up those sales to a particular period (eg. if a builder sells a house then the builder will tie in all the raw materials and expenses incurred in building and selling the house to one period - usually in order to see how much profit was made).
Maturity value: The (usually projected) value of an intangible asset on the date it becomes due.
MD & A: Management Discussion and Analysis. Usually seen in a financial report. The information disclosed has deen derived from analysis and discussions held by the management (and is presented usually for the benefit of shareholders).
Memo billing (aka memo invoicing): Goods ordered and invoiced on approval. There is no obligation to buy.
Memorandum accounts: A name for the accounts held in a subsidiary ledger. Eg. the accounts in a sales ledger .
Minority interest: A minority interest represents a minority of shares not held by the holding company of a subsidiary. It means that the subsidiary is not wholly owned by the holding company. The minority shareholdings are shown in the holding company accounts as long term liabilities .
Moving average: A way of smoothing out (i.e. removing the highs and lows) of a series of figures (usually shown as a graph). If you have, say, 12 months of sales figures and you decide on a moving average period of 3 months, you would add three months together, divide that by three and end up with an average for each month of the three month period. You would then plot that single figure in place of the original monthly points on your graph. A moving average is useful for displaying trends. See Normalize .
Multiple-step income statement (aka Multi-step): An income statement (aka Profit and Loss ) which has had its revenue section split up into sub-sections in order to give a more detailed view of its sales operations. Example: a company sells services and goods. The statement could show revenue from services and associated costs of those revenues at the start of the revenue section, then show goods sold and cost of goods sold underneath. The two sections totals can then be amalgamted at the end to show overall sales (or gross profit). See Single-step income statement .
Narrative: A comment appended to an entry in a journal. It can be used to describe the nature of the transaction, and often in particular, where the other side of the entry went to (or came from).
Net loss: The value of expenses less sales assuming that the expenses are greater (ie. if the profit and loss account shows a debit balance).
Net of Tax: The price less any tax. Eg. if you sold some goods for $12 inclusive of $2 sales tax, then the 'net of tax' price would be $10
Net profit: The value of sales less expenses assuming that the sales are greater (ie. if the profit and loss account shows a credit balance).
Net worth: See Equity .
Nominal Accounts: A set of accounts held in the nominal ledger. They are termed 'nominal' because they don't usually relate to an individual person. The accounts which make up a Profit and Loss account are nominal accounts (as is the Profit and Loss account itself), whereas an account opened for a specific customer is usually held in a subsidiary ledger (the sales ledger in this case) and these are referred to as personal accounts.
Nominal Ledger: A ledger which holds all the nominal accounts of a business. Where the business uses a subsidiary ledger like the sales ledger to hold customer details, the nominal ledger will usually include a control account to show the total balance of the subsidiary ledger (a control account can be termed 'nominal' because it doesn't relate to a specific person).
Normalize: This term can be applied to many aspects of accounting. It means to average or smooth out a set of figures so they are more consistent with the general trend of the business. This is usually done using a Moving average .
Opening the books: Every time a business closes the books for a year, it opens a new set. The new set of books will be empty, therefore the balances from the last balance sheet must be copied into them (via journal entries) so that the business is ready to start the new year.
Ordinary Share: This is a type of share issued by a limited company. It carries the highest risk but usually attracts the highest rewards.
Original book of entry: A book which contains the details of the day to day transactions of a business (see Journal ).
Overheads: These are the costs involved in running a business. They consist entirely of expense accounts (eg. rent, insurance, petrol, staff wages etc.).
Paid-up Share capital: The value of issued shares which have been paid for. See Called-up Share capital .
P.A.Y.E (UK only): 'Pay as you earn'. The name given to the income tax system where an employee's tax and national insurance contributions are deducted before the wages are paid.
Pareto optimum: An economic theory by Vilfredo Pareto. It states that the optimum allocation of a society's resources will not happen whilst at least one person thinks he is better off and where others perceive themselves to be no worse.
Pay on delivery: The buyer pays the cost of the goods (to the carrier) on receipt of them.
Periodic inventory: A Periodic Inventory is one whose balance is updated on a periodic basis, ie. every week/month/year. See Inventory .
PE ratio: An equation which gives you a very rough estimate as to how much confidence there is in a company's shares (the higher it is the more confidence). The equation is: current share price multiplied by earnings and divided by the number of shares . 'Earnings' means the last published net profit of the company.
Perpetual inventory: A Perpetual Inventory is one whose balance is updated after each and every transaction. See Inventory .
Personal Accounts: These are the accounts of a business's customers and suppliers. They are usually held in the Sales and Purchase Ledgers.
Petty Cash: A small amount of money held in reserve (normally used to purchase items of small value where a cheque or other form of payment is not suitable).
Petty Cash Slip: A document used to record petty cash payments where an original receipt was not obtained (sometimes called a petty cash voucher).
Point of Sale (POS): The place where a sale of goods takes place, eg. a shop counter.
Post Closing Trial Balance: This is a trial balance prepared after the balance sheet has been drawn up, and only includes balance sheet accounts.
Posting: The copying of entries from the journals to the ledgers.
Preference Shares: This is a type of share issued by a limited company. It carries a medium risk but has the advantage over ordinary shares in that preference shareholders get the first slice of the dividend 'pie' (but usually at a fixed rate).
Pre-payments: One or more accounts set up to account for money paid in advance (eg. insurance, where part of the premium applies to the current financial year, and the remainder to the following year).
Price change accounting: Accounting for the value of assets, stock, raw materials etc. by their current market value instead of the more traditional Historic Cost .
Prime book of entry: See Original book of entry .
Profit: See Gross profit , Net profit , and Profit and Loss Account .
Profit and Loss Account: An account made up of revenue and expense accounts which shows the current profit or loss of a business (ie. whether a business has earned more than it has spent in the current year).
Profit margin: The percentage difference between the costs of a product and the price you sell it for. Eg. if a product costs you $10 to buy and you sell it for $20, then you have a 100% profit margin. This is also known as your 'mark-up'.
Pro-forma accounts (pro-forma financial statements): A set of accounts prepared before the accounts have been officially audited. Often done for internal purposes or to brief shareholders or the press.
Pro-forma invoice: An invoice sent that requires payment before any goods or services have been despatched.
Provisions: One or more accounts set up to account for expected future payments (eg. where a business is expecting a bill, but hasn't yet received it).
Purchase Invoice: See Invoice .
Purchase Ledger: A subsidiary ledger which holds the accounts of a business's suppliers. A single control account is held in the nominal ledger which shows the total balance of all the accounts in the purchase ledger.
Q no entries
Raw Materials: This refers to the materials bought by a manufacturing business in order to manufacture its products.
Real accounts: These are accounts which deal with money such as bank and cash accounts. They also include those dealing with property and investments. In the case of bank and cash accounts they can be held in the nominal ledger, or balanced in a journal (eg. the cash book) where they can then be looked upon as a part of the nominal ledger when compiling a balance sheet. Property and investments can be held in subsidiary ledgers (with associated control accounts if necessary) or directly in the nominal ledger itself.
Realisation principle: The principle whereby the value of an asset can only be determined when it is sold or otherwise disposed of, ie. its 'real' (or realised) value.
Rebate: If you pay for a service, then cancel it, you may receive a 'rebate'. That is, you may be refunded some of the money you paid for the service. (eg. if you cancel a 1 year insurance policy after 3 months, you may get a rebate for the remaining 9 months)
Receipt: A term typically used to describe confirmation of a payment - if you buy some petrol you will normally ask for a receipt to prove that the money was spent legitimately.
Reconciling: The procedure of checking entries made in a business's books with those on a statement sent by a third person (eg. checking a bank statement against your own records).
Refund: If you return some goods you have just bought (for whatever reason), the company you bought them from may give you your money back. This is called a 'refund'.
Reserve accounts: Reserve accounts are usually set up to make a balance sheet clearer by reserving or apportioning some of a business's capital against future purchases or liabilities (such as the replacement of capital equipment or estimates of bad debts).
A typical example is a company where they are used to hold the residue of any profit after all the dividends have been paid. This balance is then carried forward to the following year to be considered, together with the profits for that year, for any further dividends.
Retail: A term usually applied to a shop which re-sells other people's goods. This type of business will require a trading account as well as a profit and loss account.
Retained earnings: This is the amount of money held in a business after its owner(s) have taken their share of the profits.
Retainer: A sum of money paid in order to ensure a person or company is available when required.
Retention ratio: The proportion of the profits retained in a business after all the expenses (usually including tax and interest) are taken into account. The algorithm is retained profits divided by profits available for ordinary shareholders (or available for the proprietor/partners in the case of unincorporated companies).
Revenue: The sales and any other taxable income of a business (eg. interest earned from money on deposit).
Run Rate: A forecast for the year based on the current year to date figures. If a company's 1st quarter profits were, say, $25m, they may announce that the run rate for the year is $100m.
Sales: Income received from selling goods or a service. See Revenue .
Sales Invoice: See Invoice .
Sales Ledger: A subsidiary ledger which holds the accounts of a business's customers. A control account is held in the nominal ledger (usually called a debtors' control account) which shows the total balance of all the accounts in the sales ledger.
Self Assessment (UK only): A new style of income tax return introduced for the 1996/1997 tax year. If you are self-employed, or receive an income which is un-taxed at source, you will need to register with the Inland Revenue so that the relevant self assessment forms can be sent to you. The idea of self assessment is to allow you to calculate your own income tax.
Self-balancing ledgers: A system which makes use of control accounts so that each ledger will balance on its own. A control account in a subsidiary ledger will be mirrored with a control account in the nominal ledger.
Self-employed: The owner (or partner) of a business who is legally liable for all the debts of the business (ie. the owner(s) of a non-limited company).
Selling, General & Administrative expense (SG & A): The expenses involved in running a business.
Service: A term usually applied to a business which sells a service rather than manufactures or sells goods (eg. an architect or a window cleaner).
Shareholders: The owners of a limited company or corporation.
Share premium: The extra paid above the face value of a share. Example: if a company issues its shares at $10 each, and later on you buy 1 share on the open market at $12, you will be paying a share premium of $2
Shares: These are documents issued by a company to its owners (the shareholders) which state how many shares in the company each shareholder has bought and what percentage of the company the shareholder owns. Shares can also be called 'Stock'.
Shares issued (aka Shares outstanding): The number of shares a company has issued to shareholders.
Simple interest: Interest applied to the original sum invested (as opposed to compound interest ). Eg. 1000 invested over two years at 10% per year simple interest will yield a gross total of 1200 at the end of the period (10% of 1000=100 per year).
Single-step income statement: An income statement where all the revenues are shown as a single total rather than being split up into different types of revenue (this is the most common format for very small businesses). See Profit and Loss , Multiple-step income statement .
Sinking fund: An account set up to reduce another account to zero over time (using the principles of amortization or straight line depreciation). Once the sinking fund reaches the same value as the other account, both can be removed from the balance sheet.
SME: Small and Medium Enterprises (ie. small and medium size businesses). The distinction between what is 'small' and what is 'medium' varies depending on where you are and who you talk to.
Sole trader: See Sole-proprietor .
Sole-proprietor: The self-employed owner of a business (see Self-employed ).
Source document: An original invoice, bill or receipt to which journal entries refer.
Stock: This can refer to the shares of a limited company (see Shares ) or goods manufactured or bought for re-sale by a business.
Stock control account: An account held in the nominal ledger which holds the value of all the stock held in the inventory subsidiary ledger.
Stockholders: See Shareholders .
Stock Taking: Physically checking a business's stock for total quantities and value.
Stock valuation: Valuing a stock of goods bought for manufacturing or re-sale.
Straight-line depreciation: Depreciating something by the same (ie. fixed) amount every year rather than as a percentage of its previous value. Example: a vehicle initially costs $10,000. If you depreciate it at a rate of $2000 a year, it will depreciate to zero in exactly 5 years. See Depreciation .
Subordinated debt: If a company is liquidated (i.e. becomes insolvent ), the secured creditors are paid first. If any money is left, the unsecured creditors are then paid. The amount of money owed to the unsecured creditors is termed the 'subordinated debt' of the company.
Subsidiary ledgers: Ledgers opened in addition to a business's nominal ledger. They are used to keep sections of a business separate from each other (eg. a Sales ledger for the customers, and a Purchase ledger for the suppliers). (See Control Accounts )
Suspense Account: A temporary account used to force a trial balance to balance if there is only a small discrepancy (or if an account's balance is simply wrong, and you don't know why). A typical example would be a small error in petty cash. In this case a transfer would be made to a suspense account to balance the cash account. Once the person knows what happened to the money, a transfer entry will be made in the journal to credit or debit the suspense account back to zero and debit or credit the correct account.
T Account: A particular method of displaying an account where the debits and associated information are shown on the left, and credits and associated information on the right.
Tangible assets: Assets of a physical nature. Examples include buildings, motor vehicles, plant and equipment, fixtures and fittings. See Intangible assets .
Three column cash book: A journal which deals with the day to day cash and bank transactions of a business. The side of a transaction which relates directly to the cash or bank account is usually balanced within the journal and used as a part of the nominal ledger when compiling a balance sheet (ie. only the side which details the sale or purchase needs to be posted to the nominal ledger ).
Total Cost of Ownership (TCO): The real amount an asset will cost. Example: An accounting application retails at $1000. Support - which is mandatory, costs a further $200 per annum. Assuming the software will be in use for 5 years, TCO will be $2000 (1000+5x200=2000).
Trading account: An account which shows the gross profit or loss of a manufacturing or retail business, i.e. sales less the cost of sales.
Transaction: Two or more entries made in a journal which when looked at together reflect an original document such as a sales invoice or purchase receipt.
Trial Balance: A statement showing all the accounts used in a business and their balances.
Turnover: The income of a business over a period of time (usually a year).
Undeposited Funds Account: An account used to show the current total of money received (ie. not yet banked or spent). The 'funds' can include money, cheques, credit card payments, bankers drafts etc. This type of account is also commonly referred to as a 'cash in hand' account.
Value Added Tax (VAT - applies to many countries): Value Added Tax, or VAT as it is usually called is a sales tax which increases the price of goods. At the time of writing the UK VAT standard rate is 17.5%, there is also a rate for fuel which is 5% (this refers to heating fuels like coal, electricity and gas and not 'road fuels' like petrol which is still rated at 17.5%).
VAT is added to the price of goods so in the UK, an item that sells at £10 will be priced £11.75 when 17.5% VAT is added.
Wages: Payments made to the employees of a business for their work on behalf of the business. These are classed as expense items and must not be confused with 'drawings' taken by sole-proprietors and partnerships (see Drawings ).
Work in Progress: The value of partly finished (ie. partly manufactured) goods.
Write-off: Depreciating an asset to zero in one go.
X no entries
Y no entries
Zero Based Account (ZBA): Usually applied to a personal account (checking) where the balance is kept as close to zero as possible by transferring money between that account and, say, a deposit account.
Zero Based Budget (ZBB): Starting a budget at zero and justifying every cost that increases that budget. 
sureshmba005@gmail.com

Finance & Accounting Services

• Accounts reconciliation

One of the first tools you will need for effective account reconciliation is documentation for each transaction conducted in the period of time under consideration. Keep all deposit slips, records of withdrawals from ATMs, electronic payments, canceled checks and the last set of bank statements together until you have reconciled the period in question. Being able to quickly verify the beginning balance for the period and then account for each transaction with a document will speed up the process of either affirming that you and the bank are in agreement, or will help you to quickly spot any discrepancies.
Should you find a discrepancy of any kind, use your documents to isolate the origin of the issue and get in touch with your bank immediately. For example, you notice that the beginning balance for the period does not match the ending balance for the previous period, even though everything reconciled at that time. This is a sign that you may need to speak with your financial institution and find out what occurred. Chances are that it is a simple error that will be corrected once it is brought to the attention of the bank. However, without having your documents in order and engaging in the process of account reconciliation, the discrepancy could go unnoticed for months and become very hard to track down.

Bank Reconciliation Process

Step 1. Adjusting the Balance per Bank

We will demonstrate the bank reconciliation process in several steps. The first step is to adjust the balance on the bank statement to the true, adjusted, or corrected balance. The items necessary for this step are listed in the following schedule:

Step 1.	Balance per Bank Statement on Aug. 31, 2008
	Adjustments:
	Add: Deposits in transit
	Deduct: Outstanding checks
	Add or Deduct: Bank errors
	Adjusted/Corrected Balance per Bank

Deposits in transit are amounts already received and recorded by the company, but are not yet recorded by the bank. For example, a retail store deposits its cash receipts of August 31 into the bank's night depository at 10:00 p.m. on August 31. The bank will process this deposit on the morning of September 1. As of August 31 (the bank statement date) this is a deposit in transit.

Because deposits in transit are already included in the company's Cash account, there is no need to adjust the company's records. However, deposits in transit are not yet on the bank statement. Therefore, they need to be listed on the bank reconciliation as an increase to the balance per bank in order to report the true amount of cash.

A helpful rule of thumb is "put it where it isn't." A deposit in transit is on the company's books, but it isn't on the bank statement. Put it where it isn't: as an adjustment to the balance on the bank statement.

Outstanding checks are checks that have been written and recorded in the company's Cash account, but have not yet cleared the bank account. Checks written during the last few days of the month plus a few older checks are likely to be among the outstanding checks.

Because all checks that have been written are immediately recorded in the company's Cash account, there is no need to adjust the company's records for the outstanding checks. However, the outstanding checks have not yet reached the bank and the bank statement. Therefore, outstanding checks are listed on the bank reconciliation as a decrease in the balance per bank.

Recall the helpful tip "put it where it isn't." An outstanding check is on the company's books, but it isn't on the bank statement. Put it where it isn't: as an adjustment to the balance on the bank statement.

Bank errors are mistakes made by the bank. Bank errors could include the bank recording an incorrect amount, entering an amount that does not belong on a company's bank statement, or omitting an amount from a company's bank statement. The company should notify the bank of its errors. Depending on the error, the correction could increase ordecrease the balance shown on the bank statement. (Since the company did not make the error, the company's records are not changed.)

Step 2. Adjusting the Balance per Books

The second step of the bank reconciliation is to adjust the balance in the company's Cash account so that it is the true, adjusted, or corrected balance. Examples of the items involved are shown in the following schedule:

Step 2.	Balance per Books on Aug. 31, 2008
	Adjustments:
	Deduct: Bank service charges
	Deduct: NSF checks & fees
	Deduct: Check printing charges
	Add: Interest earned
	Add: Notes Receivable collected by bank
	Add or Deduct: Errors in company's Cash account
	Adjusted/Corrected Balance per Books

Bank service charges are fees deducted from the bank statement for the bank's processing of the checking account activity (accepting deposits, posting checks, mailing the bank statement, etc.) Other types of bank service charges include the fee charged when a company overdraws its checking account and the bank fee for processing a stop payment order on a company's check. The bank might deduct these charges or fees on the bank statement without notifying the company. When that occurs the company usually learns of the amounts only after receiving its bank statement.

Because the bank service charges have already been deducted on the bank statement, there is no adjustment to the balance per bank. However, the service charges will have to be entered as an adjustment to the company's books. The company's Cash account will need to be decreased by the amount of the service charges.

Recall the helpful tip "put it where it isn't." A bank service charge is already listed on the bank statement, but it isn't on the company's books. Put it where it isn't: as an adjustment to the Cash account on the company's books.

An NSF check is a check that was not honored by the bank of the person or company writing the check because that account did not have a sufficient balance. As a result, the check is returned without being honored or paid. (NSF is the acronym for not sufficient funds. Often the bank describes thechecketurned as a return item. Others refer to the NSF check as a "rubber check" because the check "bounced" back from the bank on which it was written.) When the NSF check comes back to the bank in which it was deposited, the bank will decrease the checking account of the company that had deposited the check. The amount charged will be the amount of the check plus a bank fee.

Because the NSF check and the related bank fee have already been deducted on the bank statement, there is no need to adjust the balance per the bank. However, if the company has not yet decreased its Cash account balance for the returned check and the bank fee, the company must decrease the balance per books in order to reconcile.

Check printing charges occur when a company arranges for its bank to handle the reordering of its checks. The cost of the printed checks will automatically be deducted from the company's checking account.

Because the check printing charges have already been deducted on the bank statement, there is no adjustment to the balance per bank. However, the check printing charges need to be an adjustment on the company's books. They will be a deduction to the company's Cash account.

Recall the general rule, "put it where it isn't." A check printing charge is on the bank statement, but it isn't on the company's books. Put it where it isn't: as an adjustment to the Cash account on the company's books.

Interest earned will appear on the bank statement when a bank gives a company interest on its account balances. The amount is added to the checking account balance and is automatically on the bank statement. Hence there is no need to adjust the balance per the bank statement. However, the amount of interest earned will increase the balance in the company's Cash account on its books.

Recall "put it where it isn't." Interest received from the bank is on the bank statement, but it isn't on the company's books. Put it where it isn't: as an adjustment to the Cash account on the company's books.

Notes Receivables are assets of a company. When notes come due, the company might ask its bank to collect the notes receivable. For this service the bank will charge a fee. The bank will increase the company's checking account for the amount it collected (principal and interest) and will decrease the account by the collection fee it charges.Since these amounts are already on the bank statement, the company must be certain that the amounts appear on the company's books in its Cash account.

Recall the tip "put it where it isn't." The amounts collected by the bank and the bank's fees are on the bank statement, but they are not on the company's books. Put them where they aren't: as adjustments to the Cash account on the company's books.

Errors in the company's Cash account result from the company entering an incorrect amount, entering a transaction that does not belong in the account, or omitting a transaction that should be in the account. Since the company made these errors, the correction of the error will be either an increase or a decrease to the balance in the Cash account on the company's books.

• Accounts payable

Accounts payable is the obligation that a business owes to its creditors for buying goods or services. That is, it is the unpaid invoices, bills or statements for goods or services rendered by outside contractors, vendors or suppliers. Accountspayable are sometimes referred to as "payables." Accounts payable is also used to refer to the unit within an organization's accounting department that manages these payments. The accounts payable unit often oversees a variety of tasking which may include authorizing purchase orders, collecting credit card receipts, organizing account withdrawals, and keeping the general ledger, and auditing expense reports. Other accounting transactions that an organization's accounting department may manage includes accounts receivable, which focuses on the billing of customers, and payroll, which focuses on paying the organization's employees.
The job of the accounts payable administrator is a serious responsibility. Paying bills on time and according to the specific terms and conditions can effect company credit ratings and ultimately business relationships.

Process For Recruitment

The recruitment process

1)       Get Job description from US office

2)       Get number of resources to be Hired in a job category

3)       Place a advertisement on Naukri.com

4)       Refresh our advertisement on Naukri.com

5)       Talk to consultants

6)       Check emails forwarded at HR account

7)       Move emails in relevant folders according to job category

8)       Download Resume

9)       Examine the resumes for relevance

10)    Setup all interviews for Ist round & IInd round.

11)    Points of relevance include

·         Numbers of year of experience

·         Total experience in java or relevant technology

·         Current and past roles played in projects

·         Company working with

·         How frequently changing the job (if changing jobs in less than six months reject the candidate)

·         Current CTC

·         Location

·         If required take help from technical team to finalize resumes

12)    Call final set of resumes to identify interest level and convince them to come to office to take up the technical test and face technical interview.

In case Candidate is not willing to come to office, with help of technical Team conduct technical Interview over phone.

Take feedback from technical team to close on the candidate.

Ask for references of prospective candidates

Any opened Case should be closed within 2 weeks time.

13)    Update excel sheet and Send a report to USA office to conduct final technical and HR round with candidate.

14)    Get feedback from USA office and date of joining of finalized candidates.

15)    Ensure Offer letter has been forwarded to finalized candidates and a copy is returned by them duly signed.

16)    Ask for references from short listed Candidates and follow with them to make sure that they are joining on the Date of joining given by them
.17)    Calculate the salary of all employees for the month.

Qualities of a Manager

 Qualities of a Manager

A good manager has at least 10 good qualities 
There isn't a magic formula for good management, of course, but if you're a manager, perhaps these tips will help you be more effective: 

1. Choose a field thoughtfully. Make it one you enjoy. It's hard to be productive without enthusiasm. This is true whether you're a manager or employee; 

2. Hire carefully and be willing to fire. You need a strong team, because a mediocre team gives mediocre results, no matter how well managed it is. One mistake is holding on to somebody who doesn't measure up. It's easy to keep this person on the job because he's not terrible at what he does. But a good manager will replace him or move him to where he can succeed unambiguously; 

3. Create a productive environment. This is a particular challenge because it requires different approaches depending on the context. Sometimes you maximise productivity by giving everybody his or her own office. Sometimes you achieve it by moving everybody into open space. Sometimes you use financial incentives to stimulate productivity. A combination of approaches is usually required. One element that almost always increases productivity is providing an information system that empowers employees. 

When I was building Microsoft, I set out to create an environment where software developers could thrive. I wanted a company where engineers liked to work. I wanted to create a culture that encouraged them to work together, share ideas and remain motivated. If I hadn't been a software engineer myself, there's no way I could have achieved my goal; 

4. Define success. Make it clear to your employees what constitutes success and how they should measure their achievements. Goals must be realistic. Project schedules, for example, must be set by the people who do the work. People will accept a "bottoms-up" deadline they helped set, but they'll be cynical about a schedule imposed from the top that doesn't map to reality. Unachievable goals undermine an organisation. At my company, in addition to regular team meetings and one-on-one sessions between managers and employees, we use mass gatherings periodically and E-mail routinely to communicate what we expect from employees. If a reviewer or customer chooses another company's product , we analyse the situation. We say to our people, "The next time around we've got to win. What's needed?" The answers to these questions help us define success; 

5. To be a good manager, you have to like people and be good at communicating. This is hard to fake. If you don't enjoy interacting with people, it'll be hard to manage them well. You must have a wide range of personal contacts within your organisation. You need relationships - not necessarily personal friendships - with a fair number of people, including your own employees. You must encourage these people to tell you what's going on and give you feedback about what people are thinking about the company and your role in it; 

6. Develop your people to do their jobs better than you can. Transfer your skills to them. This is an exciting goal, but it can be threatening to a manager who worries that he's training his replacement. If you're concerned, ask your boss: "If I develop somebody who can do my job super well, does the company have some other challenge for me or not?" Many smart managers like to see their employees increase their responsibilities because it frees the managers to tackle new or undone tasks. There's no shortage of jobs for good managers. The world has an infinite amount of work to be done; 

7. Build morale. Make it clear there's plenty of goodwill to go around and that it's not just you or some hotshot manager who's going to look good if things go well. Give people a sense of the importance of what they're working on - its importance to the company, its importance to customers; 

8. Take on projects yourself. You need to do more than communicate. The last thing people want is a boss who just doles out stuff. From time to time, prove you can be hands-on by taking on one of the less attractive tasks and using it as an example of how your employees should meet challenges; 

9. Don't make the same decision twice. Spend the time and thought to make a solid decision the first time so that you don't revisit the issue unnecessarily. If you're too willing to reopen issues, it interferes not only with your execution but also with your motivation to make a decision in the first place. People hate indecisive leadership; However, that doesn't mean you have to decide everything the moment it comes to your attention. Nor that you can't ever reconsider a decision. 

10. Let people know whom to please. Maybe it's you, maybe it's your boss, and maybe it's somebody who works for you. You're in trouble and risking paralysis in your organisation when employees start saying to themselves: "Am I supposed to be making this person happy or this other person happy? They seem to have different priorities." 

I don't pretend that these are the only 10 approaches a manager should keep in mind. There are lots of others. Just a month ago I encouraged leaders to demand bad news before good news from their employees. But these 10 ideas may help you manage well, and I hope they do.

sureshmba005@gmail.com

Difference between IT Recruitment & Non-IT Recruitme

Re: Difference between IT Recruitment & Non-IT Recruitme
According to my knowledge:
Non-IT Recruitment includes many sector, it’s a very vast field. Sectors like: Banking & Insurance, Retail, Pharmaceuticals/Health care, Aviation, Manufacturing, Chemical/Petrochemical, Construction, Advt./Mass Communication/event Management comes under Non-IT Recruitment.

IT Recruitment is basically for Software Companies. An It Recruiter deals different types of IT requirements i.e. requirements related to different IT skills or technologies such as: Java, .Net, Oracle, SAP, Embedded, Linux, UNIX, HTML, DHTML, and XML etc.
One should have knowledge of all these technologies to work as IT recruiter.

HR (recruitment) has been two Kind one is IT recruiter and other one is Non-IT Recruiter , IT is always be related only latest and advance version . we have only good knowledge in IT sector , we will manage and also we have good in all platforms. In ITES we have related to IT , but it is non come IT. It will be non IT only, and other thing Non-IT will come manufacture and banking and sales & marketing and so on…….
All the Best

IMPORTANT ACCOUNTING PRINCIPLE

IMPORTANT ACCOUNTING PRINCIPLE

Objective

The objective of this statement is to prescribe accounting treatment for taxes on income. Taxes on income is one of the significant items in the statement of profit and loss of an enterprise. In accordance with Matching Concept, taxes on income are accrued in the same period as the revenue and expenses to which they relate

Basis for conclusions.

In a situations where an enterprise does not have unabsorbed depreciation or carry forward losses, the degree of certainty required under AS 22 for recognition of deferred tax asset is ‘reasonable certainty’. In contrast, as a measure of greater recognition of deferred tax asset in a situation where an enterprise has unabsorbed depreciation or carry forward of losses. Therefore, the level of certainty required for recognition of deferred tax asset in a situation where an enterprise has unabsorbed depreciation or carry forward of losses is much more than the situation where the enterprise does not have the same.

Accounting Standard Interpretation (ASI) 6

Accounting for Taxes on Income in the context of section 115JB of the Income tax Act, 1961

• The payment of tax under section 115JB of the Act is a current tax for the period.
• In a period in which a company pays tax under section 115JB of the Act, the deferred tax assets and liabilities in respect of timing differences arising during the period, tax effect of which is required to be recognized under AS 22, should be measured using the regular tax rates and not the tax rate under section 115JB of the Act.
• In case an enterprise expects that the timing differences arising in the current period would reverse in a period in which it may pay tax under section 115JB of the Act, the deferred tax assets and liabilities in respect of timing differences arising during the current period, tax effect of which is required to be recognized under AS 22, should be measured using the regular tax rates and not the tax rate under section 115JB of the Act.

Accounting Standard Interpretation (ASI) 7

Disclosure of deferred tax assets and deferred tax liabilities in the balance sheet of a company, Accounting Standard (AS) 22, Accounting for Taxes on Income.

• In case of a company, deferred tax assets should be disclosed on the face of the balance sheet separately after the head ‘Investments” and deferred tax liabilities should be disclosed on the face of the balance sheet separately after the head “Unsecured Loans’
• Part I of Schedule VI to the Companies Act, 1956, doesn’t contain specific head for disclosure of deferred tax assets/liabilities. Section 211(1) of the Companies Act, 196, provides that every balance sheet of a company shall be prepared in the form set out in Part I of Schedule VI, or as near thereto as circumstances admit. It is, there fore, clear that format of balance sheet as set out in Part I of Schedule VI to the companies Act, 1956, has in-built flexibility to accommodate necessary modifications.

ACCOUNT SYSTEM USED IN HEALTH CARE OR HOSPITALS

1,ExpertPM Account Management Suite provides the core modules of practice management to efficiently manage your practice. The suite features e-Business Manager, a powerful collection module with electronic queues for real time information as to account status.

Patient Accounting module is the core of the Experior ExpertPM. It integrates with all other ExpertPM modules and programs. Patient Accounting is a comprehensive system designed to maximize collections, process data efficiently, and improve patient services.Patient Accounting lets you customize billing requir ements. It automatically calculates fees based on varying carriers, physicians, and departments, and its flexibility allows you to define parameters to fit your unique processing and management needs. Accounts receivable and practice management information are provided through extensive and concise reporting capabilities. ExpertPM eases future planning by giving you exact analyses of where your practice is today so you can plan for tomorrow. Patient Accounting module functions include the following: Patient Registration Charge/Payment/Adjustment Entry Insurance Open Item Posting Patient Billing and Credit Collection Insurance Management Multiple Recall Codes Inquiry Information Data Retention Management Information Reporting e-business manager module. Designed for collection specialists, this module allows your specialists to access and enter all information on-line. You can optimize your collection ratio with one easy-to-use collection screen. This collector review screen is a worksheet for contacting accounts and updating activity. Each account automatically queues for review and requires the collection specialist to enter an action code before reviewing the next account. Client-defined criteria determine the assignment of accounts and collection policies. The e-Business Manager module's on-line feature ensures that accounts are never missed for review, and the paperless system eliminates the frustration of lost notes. Statistical reports help you make important decisions on staff performance, requirements, and the effectiveness of your collection techniques. And, by managing collection accounts in-house, you increase revenue by eliminating the cost of large collection agency commissions. Highlights of the e-Business Manager module include automatic assignment of accounts based on client-defined criteria; assigned collection specialist numbers are displayed in frequently used account screens; total balance of bad debt and collection agency are displayed on the collection screen; ability to track contact codes by creating billing messages when code is entered; ability to enter recall code and date in the collection screen; and, automatic assignment of accounts to small or large balance categories. The ExpertPM Financial Suite provides all the tools of financial management.BeyondGeneral Ledger, Payables/Receivables, ExpertPM can transmit Purchase Orders electronically in ANSI standard format, update inventory through electronic remittance, and provide Case Costing for surgeries and procedures. The General Ledger module provides you with financial information critical to determining financial statements. While other financial modules automatically generate accounting entries, leaving only adjusting entries to be entered, the General Ledger module is a byproduct of daily operations, providing a complete financial database. The General Ledger module automatically integrates with other financial modules, and provides either single entry or double entry mode. On-line inquiry capabilities allow you to view journal entries, account balances, account histories, and budget balances. Among the many comprehensive reports and statements available in the General Ledger module are charts of accounts; balance sheet and balance sheet comparisons; journal entries log; income statements and comparative income statements and schedules; monthly budgeting and forecasting; and, comprehensive year-end summaries. Highlights of the General Ledger module include on-line report requesting and system control; multi-company, multi-divisional, and multi-department flexibility; consolidation capabilities; separate fiscal years for each company and client; detail history for entire fiscal year; ten-digit account number capability; automatic integration with other financial modules; and, up to ten years of account balance history. The Inventory module and its subsystem, Purchase Order, maintain and track inventory distribution, and provide flexible entry and maintenance of purchasing information. Automatic and manual purchasing requests and on-line vendor item cataloging helps your staff manage purchasing functions in an easy and cost-effective manner. Among the many comprehensive reports and statements available in the Inventory and Purchase Order module are open purchase order; past due purchase order; purchase order request and advice; receipt history; new purchase orders for warehouse; late delivery orders for warehouse; and, items received into warehouse. Highlights of the Inventory and Purchase Order module include: Automatic and manual purchasing requests Incomplete shipment capabilities Receiving with or without purchase order may be entered Receipt transaction tracking through inventory module Batch order capability at client-specified intervals Automatic price and numbering The Check Reconciliation module helps your staff balance checking accounts quickly and accurately. With the capability of handling multiple banks and multiple accounts, Check Reconciliation is a perfect solution for multiple site organizations. Its interface with the Payroll and Accounts Payable modules simplifies reconciliation. A check reconciliation report displays all checks returned, all checks outstanding, and any errors in reporting. Highlights of the Check Reconciliation module include: Automatic interface with Accounts Payable ExpertPM module Paid check reconciliation Outstanding check reconciliation Capability to handle multiple bank and multiple account requirements Electronic interface with banks for cancelled checks. ExpertPM Chart Management manages the who, what, where, of your paper charts. The suite features an efficient bar-code solution to insure files are accounted for, accessible for the provider, and provides protection and preparedness for audits With Experior’s Chart Tracking modules, lost charts and films are virtually eliminated. Chart Tracking displays information on the date, time, operator, and current location of the chart, and allows staff to access the exact chart location instantly. Chart Tracking greatly enhances the productivity and efficiency of the Medical Records file room, and all areas of clinic operations benefit from the end of potentially disruptive chart searches. Chart Tracking improves quality assurance and patient care by ensuring that the chart is readily available at any given time. Because satellite and ancillary facilities have become so common in health care, today’s physicans often need to manage multiple charts for their patients. The Multiple Patient Chart module identifies and tracks multiple chart records for each patient. With the Multiple Patient Chart module, your staff can match the right chart to the right patient visit instantly. The majority of patient visits require no intervention since the home location is where most of the visits occur. However, when the patient visits an ancillary location, the chart selection process is quick and easy.

The Accounts Payable

Accounts Payable module provides processing and reporting capabilities for complete expense control and cash disbursement management. It automatically interfaces with your General Ledger. The Accounts Payable module validates distribution account numbers, and lets you add, change, inquire, or delete invoice information on-line. Highlights of the Accounts Payable module include multi-company and multi-department flexibility; automatic calculation or manual entry of discount terms; cash or accrual basis; temporary vendor capability and retention of up to 99 months; multiple or single invoice per vendor check; on-line inquiry; on-line check printing; and, vendor name and number cross-reference capability.

HOW MANY ROUNDS IN A INTERVIEW

HOW MANY ROUNDS IN INTERVIEW

In different company there are different rounds will be there, its depends on their company policy's and rules but given below is common process for all interview.

for example HP.I GATE.DELL.,WIPRO.TCS,ALL BPO&KPO.

 

1. SELF INTRODUCTION,

A self introduction nothing but it’s a self confidence.

A self introduction about your name father name and where are from, this is the basic information about your background, main thing is that how you are going to presenting,

For example where you studied and what are the courses you have done in academic year. Projects in which field you have done all those you should involve in self introduction.    

For further information see the blog articles already I published.

2. GD (GROUP DISCUSSION).

 Most of companies will not conduct this round, some company will conduct because if the crude is more means they will conduct this round for filtering purpose, for example if they are expecting 100 candidates in day for interview, if there is 200 candidates attended means they are trying reduce the crude,

   In that there are 2 types of method

1, they will give the topic we should speak on that particular topic not more than that,

2, we should select the topic, whatever it may be, its May personal or general,

    Time limit: some company target the time and some company not.

   Important suggestion: you should speak loudly and clearly, don’t speak about personal matter my best suggestion is that speak on your subject one more thing is most of HR doest know about the your subject its advantage for you people,

   Vocabulary and accent are very important.  

  The way of presentation is very important, grammatical and communication,

3. ESSAY WRITING.

In this particular area they will check your grammatical knowledge, because you are going work for local people, all MNC are looks for grammatical spelling, because you are dealing with foreigners not local board,

Some time they will give the topic otherwise we should select the topic,

In this round time is very important. There will be time limit.

 4. TYPING TEST

This is the alternative option round, almost BPO and KPO companies will conduct this round,

Know a days it’s a common process for all companies, in non voice process after work we should send a mail to authorities concerns, for example all mnc in abroad when we are logout before that we should send an mail to particular person, and some time a employee write email to customer it may be aphorizing or renewing the service whatever it may this is common (typing)

The minimum speed is per minute 30-35 words required with accuracy should 90 above.

Here time is very important,

Those who are willing to work in BPO and KPO you should very well in this particular area ,first round itself typing test , if 1^st round clear means it’s very easy to get in company.

5. APTIUDE TEST

This is round which we called knowledge testing.

It’s very important round, in aptitude test they will ask you about particular your speciation subject,
if your are management student they are going ask you only management side not more than that but there are some extra question will be ,……..

1, Subject question (basic accountancy, bills payable and bills receivable, etc)

2, Grammatical (making sentence or fill in the blank, is that was this)

3, Logical (use your brine in logical test example: there is one tree in that there are 8 birds one gun man will come and he will shoot one bird will fall down and die then how many birds in that  tree)

4, Numerical (mathematical and statistic)

5, Computer (keys of word, excel, power point)

6, Words which not belongs to group (they will give easy type Para we should select which is not belongs to that group (apple, banana, cat,).

 6, OPRATION ROUND OR TECHNICAL ROUND

This is last round; here interview  conduct by not a ordinary employee, this round will be taken by manager another name managerial round, it’s very important round.

Impress to manager that you are mentally and physically fit for this job, manager may be ask about subject or non subjective questions,but give a numinous answer. be smile on your face don't sit like 12 o'clock some time the manager will check your mentality and detections and humbleness.  In this round include, how you are walking, how you are talking, dress séance, behavior, gesture personality all this things will observed in this round , don’t be like foolish! Act like a gentle man,

GENERAL ACCOUNTING

GENERAL ACCOUNTING
General accounting 
handles the bills, 
invoices,
accounts payable, 
customer receipts,
accounts receivable and payroll functions of a business or organization. 
Learn how accounting allows an organiza...

WHAT IS CAPM?

CAPM
CAPITAL ASSEST PRICING MODEL
it provides a logival and quantitative approch for estimating risk.
it measures the systematic risk of an individual security and relate it to the systematic risk of a well diversified portfolio.

STOCK DIVIDEND

What is stock dividend?
stock dividend is dividend payable by stock . an issue of bonus shares in addition to the cash dividend to xeisting shareholders.
% of profite earned to be paid to share holders as dividend.

WHAT IS FINANCIAL RISK

What is financial risk?
It is the risk wich arises on account of use of debt in the capitalisation plan. It is concerned with analysis of income statement between EBIT and FBI, it is also called as risk arising out of not metting financial obligations.

WAHT IS RETURN

What is return?
return is measured by taking income pluse price change where income is either dividend or interest and price change of security is capital gain or loss.

WHAT IS RISK

What is risk?
Risk is defined as a situation where possible consequence of the decision that is taken  are known.
for example if the investment made in business tha certian results we know before investement.

Interview tips or interview questions with answer

FREQUENTLY ASKED QUESTIONS


Tell me about yourself.
When asked this question it's your chance to give a professional snapshot of your talents, qualifications and experience. Allow up to two minutes for this response. Be succinct and keep it relevant.
It's time to sell yourself – but keep focused because you need to give a good overview of what you can do in relation to the position for which you are applying.
You could tell the interviewer where and what you studied – include notable snippets like your majors, significant awards or a distinction average but only if the subjects you studied are relevant to the job.
Don't ramble on: keep to the point (no more than four points in total) and don't waste time on irrelevant information – make sure each point hits the mark for the job. Check with the job description and select four main aspects of the job that you could cover.
Finish off by briefly outlining your career plans and how the job on offer fits into those illustrious schemes.




What do you know about this organization?
Before attaining the interview go through that company profile site, which company you are going to attaining.
Sometime they will ask about their company product or service.
So before going attain the interview, you should know about that company profile.
When asked this question, your research will come into play. Whatever you do, do not say 'nothing' or 'I had a quick look at your website so I know you are a _____'. Spend some time on the company website to find out as much as you can about the company so that you can speak for at least a minute and a half about their business.
Also look at any news features or other websites that come up when you search the company name as this is often information generated by others and not the company singing its own praises.
At the interview, you can discuss a number of aspects such as services, goals, position in the market and other points that you have gleaned from your research. Make sure you show knowledge without coming across as a 'know it all'.
'I was impressed with your growth figures over the past twelve months and it's great that you have a policy to support the local community' is an answer that shows you have done your homework and gives the company a pat on the back for their social policies.


What have you done to improve your knowledge in the last year?
Tell the hr that you are done some use full courses for example: JAVA .SAP ect.
And explain extra activities what you really interest.
Particularly hr wants to check you are sitting idly or you are participating useful things.


Are you applying for other jobs?
Say yes Off course, yes & this is my first interview...really I don’t
Want to waste my time.....I’m in need of finding new things
To gain my experience to develop my career leader


Why do you want to work for this organization?
When answering the question about why you want the job, the comprehensive pre-interview research you have done will become essential. The interviewer wants to know why you are interested in the position so he/she can gauge what skills you are bringing to the position and how it fits into your short- and long-term career plans.
Use your answer to demonstrate your knowledge of the company and re-emphasis’ your suitability for the position. Give specific examples of things that attracted you to the company, so the interviewer can see that you match their culture and will thrive in the position.
While this looks like a question about you, the interviewer wants to know what you can do for the company and that you are a good fit for the job.
In your answer, you might want to elaborate on your strengths and achievements and how they match the position description. You could also talk about your career goals and the objectives of the company (information from your research). In both these instances, you are explaining how and why you would be an asset to the company.


What kind of salary do you need?
If you are a fresher say: as a company standers don’t say that what you are expecting. Even though if they are paying less than your expectation doesn’t revile your expiation, some time hr will check weather really you are looking for job or for money. If you are experience candidate tell him that you are expecting 30% hike salary.
Because 30% is the basic for experience candidates.


Are you a team player?
Don’t say or don’t support one side you should be both side
Tell him that you are team player as well as individual worker.
Often selection you should work both side, so he will check whether he will take risk or not.


How long would you expect to work for us if hired?
Answer positively for this question, tell that your are concentrating for long term goal or commitment
As far as the company need me because company needs some
Expectation from me, other concern is respect for employees Will not be leaving this company because as I Can find my growth and everything in this company


What is your philosophy towards work?
Philosophy of work is a genre on its own! This is definitely a topic to be addressed to the interviewer, to show them a side of deep understanding and thought provocation.


“I think many people take ‘work’ as a means to ‘leisure’. We work to the ultimate goal of ‘vacationing’ and that’s the philosophy that most people have generally accepted. In my opinion, I think work has essential value on its own. I think we all have natural talents and inclinations, which stir us to use our minds cohesively, and produce great works. We want to produce good works that has good purpose for the world. I think work is part of human needs to understand, quantify, the greater part that is us- nature, resource, ideals, philosophy, ethics, and the world. Work is necessary, to understand ourselves better in our endeavors- failure and frustration is a part of the process in which we can appreciate and measure the outcome. It would be too much emphasis on work to say that it is solely our human value (reference to Capitalism). We are not our work, and our value cannot be summed up to the works we produce, it is just a method in which we learn.”


Explain how you would be an asset to this organization.
To obtain a challenging position in progressive and dynamic organization that allows me to apply and enhance my knowledge and reorganization my contribution to the growth of the organization.
I think I give all my efforts towards co. Benefit & I don't
Work like a d the employee of this co, but this is my own
co. & 1 more thing I don't have any depreciation also.




Where do you see yourself in five years?
The 'where do you see yourself in five years?' probe is a must to prepare for in your repertoire of pre-planned interview spiels. Like most other questions thrown your way while you're in the career hot seat, it's just another springboard from which to harp on about why you should be moving into their offices and onto the payroll in the immediate future.
Use it to show that you have decisive career goals, are keen to jump on opportunities as they arise and are aiming for the top.
If kids were held accountable to their responses to the granddaddy of these speculative peelers -'what do you want to be when you grow up?' -then the world would be an interesting place. We would have no shortage of firemen, Teenage Mutant Ninja Turtles, policemen, Transformers, pilots, supermen, doctors, Babies, actresses, Harry Potters, prime ministers, and pop stars. But there would be a severe shortage of bureaucrats and recruitment managers. Perhaps that's not such a bad idea …
A roadmap and itinerary wasn't handed out as part of a 'welcome to your life' orientation session. In fact, if you could foresee the future you probably wouldn't be sitting opposite an unoriginal interviewer; it's more likely that you would have won the lottery axons ago and retired to a life sipping blueberry caprioskas in the south of Spain.
For now, here are a few simple guidelines to stick to in order to get past the question and on with the next five years of your career.




Why should we hire you?
Set yourself apart from the pack! You may find yourself reiterating some of the things you said in response to 'Tell me about yourself', but this time try to be more specific in linking your talents to the requirements of the position.
Give strong examples of your skills and career achievements and, in doing so, explain how you can be beneficial in the new gig.
Make a big statement to start and then support it with an example. 'I am always willing to go the extra mile' is a good opener.
Find an example of an accomplishment that matches one of the key responsibilities outlined in the job description and use the STAR system of response: situation, task, action, result.
'In my previous position, the data management system was not working well and wasn't being used properly. I approached my manager and suggested a very simple way to fix the problem [shows initiative]. She agreed and I implemented the changes and also explained how it all worked to the rest of the team [team player and ability to communicate]. The result was that everyone started using the system [improved data capture] and the company saved huge amounts of time allowing staff to work on core business [improved productivity and profits].'
This shows that you bring valuable skills to the job. Finally, link what you have done to the new position. 'My focus at work is about productivity and profitability and improving the bottom line for the business.




What is your greatest strength?
This is a classic example of how you should tailor your answer to the job. Make a list of the requirements of the job and demonstrate that you possess these, giving examples of how your strengths have helped produce excellent outcomes in previous positions.
For example, if developing business project plans is a job requirement, show how you have managed this in the past and make sure to mention that the result was that the team working on the project were appreciative that they had such a strong plan to work with, that the job was completed within the projected time frame and that you saved your employer $X.
Some generic skills-based answers include:
• 'My time management skills are excellent. I'm organized and take pride in excelling at my work.'
• 'I'm very good with customers and I am efficient at resolving any problems that they have. My customer service skills also help me to get along with other members of the team.'
Suggestions of other valuable strengths include: your leadership skills, problem-solving skills, ability to priorities and work under pressure. Just make sure it correlates directly to the job you are applying for.




Why do you think you would do well at this job?
Describe you skill set and you d0mine knowledge one more important thing is that your strength and knowledge in particular area in which you are export.
My consistency of good track record Inquisitiveness to learn new and quick adaptability for change and finally the support and cooperation required by my team members. sir i have an technical skills where i can involve for doing a good work’s have patience and i can create better output. During the project class lot of problem we have faced i have tried hard for overcome from this problem.
What is more important to you: the money or the work?
Tell him both because money and works are both important for human being it’s a two head of one coin.
Money will not fallow us if we are doing job money will flow us this is theory behind money and works.


Would you be willing to relocate if required?
Answer this question sincerely if you are flexible to relocate say yes otherwise say no.
Some companies will relocate with high post or though giving hike in salary.


Describe your management style.
The best management style for any company is that...........get the max best work output with... less investment.....
Situation and timeliness for the operation/task is the main decisive factor to adopt management style for a job well done
To be sincere & honest at work. Better not to involve in subordinate's personal matters
To provide a friendly environment (but work is first priority)
To be very clear in terms of each person's role in the project (or organization).


Describe your work ethic.
• My experience with the phrase is that it describes one's level of commitment to a task/employer/course of study. Ability to go the extra mile, stay the course, persistence to achieve quality, finding resources when stuck, own the problems that arise, etc. Punctuality and showing up fall in there, too.
• I try to learn the mission statement and vision of the organization that I am working for before I commit my time, my passion, and my energy to it. If I believe in the mission/vision statements and I am reasonably sure that the supervisors abide by most of it, I will give my time, my extra hours, and my positive attitude to the agency. I need to be able to transmit that mission even on the worst days and to remember that you must balance your love for work with your love for health and take time to reflect, relax, and play.


What is your weakness?
One of the most dreaded of all interview questions is the ‘greatest weakness’ minefield. Many recruiters are, in fact, moving away from using a question that has become over-used and predictable, yet it is still one you have to prepare for. But how do you answer this without casting yourself in a negative light, while still sounding honest and self-aware? Is it possible to provide an answer that doesn’t sound like spiel or cliché?




Real funda behind interview
Be positive.
It’s all about perception.
Use an example from the past.
Use common sense.
Demonstrate that your skills are transferable.
Use this as an opportunity to elicit more information.
Be honest and bold.
Don’t novas, be cool in interview.
Look on to hr, eye to eye contact.
Don’t murmur, speak clearly and loudly.
Keep smile on your face,

sureshmba005@gmail.com
Personal sharing ,
Answering this question successfully is all about presenting yourself – including your weaknesses – in the most positive light, according to Steve Gunther, a consultant with boutique recruitment firm 2discover.
But this is not just an exercise in spin-doctoring and obfuscation. This is your chance to demonstrate your honesty, self-awareness, and willingness to learn and improve.
While identifying a weakness or deficiency, emphasis that you are aware of the problem and actively working to improve. Answer with enthusiasm and positivity, and show your prospective employer what a great attitude you have. For example, if you say that you sometimes have a tendency to procrastinate, be sure to emphasis’ that you are aware of the problem and have become an ardent planner and list-maker to keep yourself on schedule. Stress how much satisfaction you get from crossing things off your to-do list and getting things done on time, and how happy you are about the improvements you’ve made.
Remember, the same ‘negative’ trait can be turned into a positive depending on how you present it. If you have a tendency to be overly meticulous (i.e. anal) and therefore sometimes take too long to complete tasks, you can highlight the fact that you like to see things done to the highest standard – though you are getting better at letting things go and working more quickly now. Or if you tend to be a little quiet and reserved at work, and are sometimes perceived as aloof, you can say that you are a little shy – but once people get to know you, they soon see that you are loyal, discreet and a good listener.
2discover’s Steve Gunther asserts the importance of using concrete examples from your past as illustration. Instead of speaking in loose generalities and hypothetical’s, talk about your experiences and show how you have improved on your weaknesses in previous jobs. The more specific you can be, the better.
For example, you can tell the interviewer that you used to have a tendency to tardiness, but that once you started setting your alarm clock a half hour earlier and using your mobile phone to remind you of appointments, you haven’t been late once in the last six months!
Think about the key qualities required for the job and make sure you demonstrate strength in those areas – and only cite weaknesses which are less crucial to the role. For example, if you are going for an administrative job, you wouldn’t want to say that your attention to detail is a weakness – whereas if you are going for a creative, big-picture type of role, then lacking attention to detail might not be such a big deal.
If you’re obvious deficiency is a lack of experience in a similar role (such as when you are changing career direction), Gunther advises you to find a link between your previous experience and the present role, showing that your skills can easily be transferred to a new context. Let’s say you come from a background in office administration and are pursuing an entry-level job in marketing and communications. If, in your previous job, you wrote and proofread newsletters and reports, and helped to contribute marketing ideas during staff meetings, then you have relevant experience that can be transferred to your new role. Stress that you are adaptable, and eager to learn and apply yourself to a new environment.
You can even use the fact that you come from a different background to your advantage, by emphasizing that you can bring something new and fresh to the position. Your relative inexperience could inject them with some much-needed fresh blood and be exactly what they need.
Gunther also suggests that you use this question to find out more about the company. See if you’re supposed weakness can complement their business or team. For example, if you are someone who needs and likes structure, find out what their present systems are like. Do they operate like a well-oiled machine that you could easily slot into, or are they in dire need of a systems overhaul that you could help to implement? If their structure is not compatible with your working style, this may not be the company for you – and it’s better for everyone if you figure that out now.
In some cases, it might be acceptable to keep your answer to this question fairly light-hearted – for example, ‘I’m a coffee addict’. However, you’ll have to use your judgment here based on the nature of the role and the personality of the interviewer – you don’t want to come across as flippant.
Keep in mind that your prospective employer will call your referees and ask about any weaknesses, so don’t be caught out saying something untrue that will later call your honesty and integrity into question. Outright lies will usually come back to bite you on the proverbial.
When answering the question about why you want the job, the comprehensive pre-interview research you have done will become essential. The interviewer wants to know why you are interested in the position so he/she can gauge what skills you are bringing to the position and how it fits into your short- and long-term career plans.
Use your answer to demonstrate your knowledge of the company and re-emphasis your suitability for the position. Give specific examples of things that attracted you to the company, so the interviewer can see that you match their culture and will thrive in the position.
While this looks like a question about you, the interviewer wants to know what you can do for the company and that you are a good fit for the job.
In your answer, you might want to elaborate on your strengths and achievements and how they match the position description. You could also talk about your career goals and the objectives of the company (information from your research). In both these instances, you are explaining how and why you would be an asset to the company.

OBJECTIVES OF ACCOUNTING

OBJECTIVES OF ACCOUNTING

1, Maintence of accounting records.

2, Ascertainments of profit or loss.

3, Depication financial position.

4, providing information.

Effect of Errors of Final Accounts

Effect of Errors of Final Accounts

·         1. Errors effecting profit and loss account

·         It is important to note the effect that an en-or shall have on net profit of the firm. One point to remember here is that only those accounts which are transferred to trading and profit and loss account at the time of preparation of final accounts effect the net profit. It means that only mistakes in nominal accounts and goods account will effect the net profit. Error in the these accounts will either increase or decrease the net profit.

·          

·         How the errors or their rectification effect the profit-following rules are helpful in understanding it :

·          

·         (I) If because of an error a nominal account has been given some debit the profit will decrease or losses will increase, and when it is rectified the profits will increase and the losses will decrease. For example, machinery is overhauled for Rs. 10,000 but the amount debited to machinery repairs account -this error will reduce the profit. In rectifying entry the amount shall be transferred to machinery account from machinery repairs account, and it will increase the profits.

·         (il) If because of an error the amount is omitted from recording on the debit side of a nominal account-it results in increase of profits or decrease in losses. The rectification of this error shall have reverse effect, which means the profit will be reduced and losses will be increased. For example, rent paid to landlord but the amount has been debited to personal account of landlord-it will increase the profit as the expense on rent is reduced. When the error is rectified, we will post the necessary amount in rent account which will increase the expenditure on rent and so profits will be reduced.

·         (iil) Profit will increase or losses will decrease if a nominal account is wrongly credited. With the rectification of this error, the profits will decrease and losses will increase. For example, investments were sold and the amount was credited to sales account. This error will increase profits (or reduce losses) when the same error is rectified the amount shall be transferred from sales account to investments account due to which sales will be reduced which will result in decrease in profits (or increase in losses).

·         (iv) Profit will decrease or losses will increase if an account is omitted from posting in the credit side of a nominal or goods account. When the same will be rectified it will increase the profit or reduce the losses.

·         For example, commission received is omitted to be posted to the credit of commission account. This error will decrease profits ( or increase losses) as an income is not credited to profit and loss account. When the error will be rectified, it will have reverse effect on profit and loss as an additional income will be credited to profit and loss account so the profit will increase ( or the losses will decrease).

·         If due to any error the profit or losses are effected, it will have its effect on capital account also because profits are credited and losses are debited in the capital account and so the capital shall also increase or decrease. As capital is shown on the liabilities side of balance sheet so any error in nominal account will effect balance sheet as well. So we can say that an error in nominal account or goods account effects profit and loss account as well as balance sheet.

·          

·         2. Errors effecting balance sheet only

·         If an error is committed in a real or personal account, it will effect assets, liabilities, debtors or creditors of the firm and as a result it will have its impact on balance sheet alone. because these items are shown in balance sheet only and balance sheet is prepared after the profit and loss account has been prepared. So if there is any error in cash account, bank account, asset or liability account it will effect only balance sheet.

Difference in trial balance

·         Difference in trial balance

·         Trial balance is affected by only errors which are rectified with the help of the suspense account. Therefore, in order to calculate the difference in suspense account a table will be prepared. If the suspense account is debited in' the rectification entry the amount will be put on the debit side of the table. On the other hand, if the suspense account is credited, the amount will be put on the credit side of the table. In the end, the balance is calculated and is reversed in the suspense account. If the credit side exceeds, the difference would be put on the debit side of the suspense account. 

Rectification Of Accounting Errors

·         Rectification Of Accounting Errors 

·         Every businessman is interested in finding out the true profit and correct financial position of his business at the close of the trading period. The effort of the accountant is to prepare the final accounts in such a fashion which exhibits true picture of the business. Accounts are considered to be authentic proof of true financial position of a concern. But in spite of best efforts there are certain transactions which are omitted to be recorded or entered wrongly in the books. Such errors affect the final accounts. An accountant should, therefore, try to locate such errors and rectify them before the preparation of final accounts.

·          

·         Accountants prepare trial balance to check the correctness of accounts. If total of debit balances does not agree with the total of credit balances, it is a clear-cut indication that certain errors have been committed while recording the transactions in the books of original entry or subsidiary books. It is our utmost duty to locate these errors and rectify them, only then we should proceed for preparing final accounts. We also know that all types of errors are not revealed by trial balance as some of the errors do not effect the total of trial balance. So these cannot be located with the help of trial balance. An accountant should invest his energy to locate both types of errors and rectify them before preparing trading, profit and loss account and balance sheet. Because if these are prepared before rectification these will not give us the correct result and profit and loss disclosed by them, shall not be the actual profit or loss.

·          

·         All errors of accounting procedure can be classified as follows:

·         1. Errors of Principle

·         When a transaction is recorded against the fundamental principles of accounting, it is an error of principle. For example, if revenue expenditure is treated as capital expenditure or vice versa.

·         2. Clerical Errors

·         These errors can again be sub-divided as follows:

·          

·         (i) Errors of omission

·         When a transaction is either wholly or partially not recorded in the books, it is an error of omission. It may be with regard to omission to enter a transaction in the books of original entry or with regard to omission to post a transaction from the books of original entry to the account concerned in the ledger.

·         (ii) Errors of commission

·         When an entry is incorrectly recorded either wholly or partially-incorrect posting, calculation, casting or balancing. Some of the errors of commission effect the trial balance whereas others do not. Errors effecting the trial balance can be revealed by preparing a trial balance.

·         (iii) Compensating errors

·         Sometimes an error is counter-balanced by another error in such a way that it is not disclosed by the trial balance. Such errors are called compensating errors.

·         From the point of view of rectification of the errors, these can be divided into two groups :

·         (i) Errors affecting one account only, and

·         (ii) Errors affecting two or more accounts.

·          

·         Errors affecting one account

·         Errors which affect can be :

·          

·         (a) Casting errors;

·         (b) error of posting;

·         (c) carry forward;

·         (cl) balancing; and

·         (e) omission from trial balance.

·         Such errors should, first of all, be located and rectified. These are rectified either with the help of journal entry or by giving an explanatory note in the account concerned.

·          

·         Rectification 

·         Stages of correction of accounting errors

·         All types of errors in accounts can be rectified at two stages:

·          

·         (i) before the preparation of the final accounts; and

·         (ii) after the preparation of final accounts.

·          

·         Errors rectified within the accounting period

·         The proper method of correction of an error is to pass journal entry in such a way that it corrects the mistake that has been committed and also gives effect to the entry that should have been passed. But while errors are being rectified before the preparation of final accounts, in certain cases the correction can't be done with the help of journal entry because the errors have been such. Normally, the procedure of rectification, if being done, before the preparation of final accounts is as follows:

·          

·         (a) Correction of errors affecting one side of one account Such errors do not let the trial balance agree as they effect only one side of one account so these can't be corrected with the help of journal entry, if correction is required before the preparation of final accounts. So required amount is put on debit or credit side of the concerned account, as the case maybe. For example:

·         (i) Sales book under cast by Rs. 500 in the month of January. The error is only in sales account, in order to correct the sales account, we should record on the credit side of sales account 'By under casting of. sales book for the month of January Rs. 500".I'Explanation:As sales book was under cast by Rs. 500, it means all accounts other than sales account are correct, only credit balance of sales account is less by Rs. 500. So Rs. 500 have been credited in sales account.

·         (ii) Discount allowed to Marshall Rs. 50, not posted to discount account. It means that the amount of Rs. 50 which should have been debited in discount account has not been debited, so the debit side of discount account has been reduced by the same amount. We should debit Rs. 50 in discount account now, which was omitted previously and the discount account shall be corrected.

·         (iil) Goods sold to X wrongly debited in sales account.

·         This error is effecting only sales account as the amount which should have been posted on the credit side has been wrongly placed on debit side of the same account.

·         For rectifying it, we should put double the amount of transaction on the credit side of sales account by writing "By sales to X wrongly debited previously."

·         (iv) Amount of Rs. 500 paid to Y, not debited to his personal account. This error of effecting the personal account of Y only and its debit side is less by Rs. 500 because of omission to post the amount paid. We shall now write on its debit side. "To cash (omitted to be posted) Rs. 500.
 

·         Correction of errors affecting two sides of two or more accounts

·         As these errors affect two or more accounts, rectification of such errors, if being done before the preparation of final accounts can often be done with the help of a journal entry. While correcting these errors the amount is debited in one account/accounts whereas similar amount is credited to some other account/ accounts.

·         Correction of errors in next accounting period

·         As stated earlier, that it is advisable to locate and rectify the errors before preparing the final accounts for the year. But in certain cases when after considerable search, the accountant fails to locate the errors and he is in a hurry to prepare the final accounts, of the business for filing the return for sales tax or income tax purposes, he transfers the amount of difference of trial balance to a newly opened 'Suspense Account'. In the next accounting period, as and when the errors are located these are corrected with reference to suspense account. When all the errors are discovered and rectified the suspense account shall be closed automatically. We should not forget here that only those errors which effect the totals of trial balance can be corrected with the help of suspense account. Those errors which do not effect the trial balance can't be corrected with the help of suspense account. For example, if it is found that debit total of trial balance was less by Rs. 500 for the reason that Wilson's account was not debited with Rs. 500, the following rectifying entry is required to be passed.

Financial Accounting With Double Entry Bookkeeping - Traditional Methods of Financial Accounting

• Financial Accounting With Double Entry Bookkeeping - Traditional Methods of Financial Accounting
  [Business:Accounting] The following information about a business is very vital, namely, the total earnings during the period, the expenditure during the period on salaries, wages, lighting, insurance, rates and taxes etc, the profit or loss, the capital and causes of its increase or decrease, Nature and value of assets possessed by the business, Nature and amount of liabilities, Customers who owe to the business and the amount in each case, Suppliers to whom the business has to make payments and the amount in each case and Other facts for filing sales tax or income tax returns. The above describes in nutshell the purpose of bookkeeping and financial accounting.

Computerized Financial Accounting - Methods and Practices - Use of software in Accounting

• Computerized Financial Accounting - Methods and Practices - Use of software in Accounting
  [Business:Accounting] Financial Accounting of bookkeeping is one of very old and basic business method. By way of accounting only a business know whether the activities are profitable or not. With the increasing use of computers in all walks of life accounting system have grown into enterprise resources management systems that not only address to accounting needs of the enterprise but give a complete picture of all other methods and branches of the business. Computers have greatly improved the traditional accounting methods and practices.

Branches of Accounting, Uses of Accounting and Limitations of Financial Accounting

• Branches of Accounting, Uses of Accounting and Limitations of Financial Accounting
  [Business:Accounting] Accounting systems have evolved into different branches as per the requirements of use in trade, business, commerce and industry. While accounting systems have countless benefits and advantages to the business the financial accounting system may not truly portray the exact situation of the business due to many shortcomings.

Definition and Objectives of Bookkeeping and Accounting Systems

• Definition and Objectives of Bookkeeping and Accounting Systems
  [Business:Accounting] The necessity and importance of accounting can be explained by requirement of knowing that how much we have earned this year, how much was earned during the last year, is our business improving, how much cash do we have, how much money we owe, how much others owe to us?

Explanation Of Important Accounting Terms, Accounting Cycle And Responsibilities Of An Accountant

• Explanation Of Important Accounting Terms, Accounting Cycle And Responsibilities Of An Accountant
  [Business:Accounting] The objectives of an accountant are to know the following - What type of expenditure firms should commit? Amount of funds committed by the firm on various projects? What sources should be used to raise the funds for a particular project? Ways and means of getting maximum benefit out of the use of funds? Method and time of repayment of funds borrowed? Of course, the decision on the above-mentioned problems is taken in the light of management policy and objectives of the enterprise.

Importance Of Data In Accounting And Parties Interested In Accounting Information

• Importance Of Data In Accounting And Parties Interested In Accounting Information
  [Business:Accounting] One of the main objectives of financial accounting is to ascertain whether the business operations have been profitable or not. Accounting enables us to find out whether a business has earned profits or suffered losses during the accounting period.

Principles of Accounting and Accounting Assumptions

• Principles of Accounting and Accounting Assumptions
  [Business:Accounting] Certain fundamental accounting principles and assumptions underlie the preparation and presentation of financial statements. There are namely, (a) Going concern, (b) Consistency and (c) Accrual. They are usually not specifically stated because their acceptance and use are assumed.

Accounting Conventions and Accounting Concepts

• Accounting Conventions and Accounting Concepts
  [Business:Accounting] Accounting Conventions - The term convention means 'established usage.' Conventions are based on practicability and usage. For example, the relationship of 12 units forming a dozen is a convention. Accounting Concept - Denotes logical consideration and a notion which is generally and widely accepted. The term is not used in the sense of a set of hard and fast rules but rather of rules of general application which provide guide in selection of accounting methods appropriate in particular circumstances.

Classification of Accounts - Hints for Journalizing - Advantages of Journal

• Classification of Accounts - Hints for Journalizing - Advantages of Journal
  [Business:Accounting] There are many classifications of accounts. The accounts are treated as per their class at the time of posting of entries in Ledger. A set of hints may be used to post Journal. Lastly in this articles the advantages of Journal, a basic book of accounting, are discussed.

Accounting Sub Journals and Cash Book

• Accounting Sub Journals and Cash Book
  [Business:Accounting] Cash book is most important accounting book of entry as transactions relating to cash are recorded here. The balance of cash needs to ascertained every day to tally it with the available cash in hand. For large enterprises, though, it may not be possible until next day to find out the cash transactions for the previous day as entries can be made at a later stage also until the day is closed.

Basic Book of Accounting - Journal - Recording Debit and Credit in Accounting

• Basic Book of Accounting - Journal - Recording Debit and Credit in Accounting
  [Business:Accounting] According to Rowland: "The basic book of accounting is called Journal. Precisely it is the book of prime entry which means - Day Book. Trader records his total daily transactions in it. The process of recording the transaction into journal is called 'Journalizing'.

Maintaining Cash Book, Posting and Balancing

• Maintaining Cash Book, Posting and Balancing
  [Business:Accounting] The various norms followed in Posting and Balancing the cash books are discussed here. A business may like to get more information from the cash book, such as the receipts from different heads of income and payments on different accounts. Analysis of various aspects of cash transaction is important to know real profitability of the business.

Writing Single Column Cash Book, Double Column Cash Book and Triple Column Cash Book

• Writing Single Column Cash Book, Double Column Cash Book and Triple Column Cash Book
  [Business:Accounting] Cash book may have various formats as required by the details of the transactions to be posted. A different format is used for all above three types of cash book as discussed here.

Analytical Cash Receipts and Cash Payments Books

• Analytical Cash Receipts and Cash Payments Books
  [Business:Accounting] A business may like to get more information from the cash book, such as the receipts from different heads of income and payments on .different accounts. In this case book may be split into two parts, one for receipts-Cash Receipts Book and another for payments-Cash Payments Book.

Accounting Verification by Trial Balance, Preparation of Trial Balance

• Accounting Verification by Trial Balance, Preparation of Trial Balance
  [Business:Accounting] The concept of 'dual aspect' is one of the fundamentals to the accounting theory. The 'dual aspect' concept lays down that every transaction has two-sided effect to the extent of same amount. Trial Balance ascertains the accuracy of accounts by comparing debits with credits.

Advantages Objectives of Trial Balance, Trial Balance Limitations - Shortcomings of Trial Balance

• Advantages Objectives of Trial Balance, Trial Balance Limitations - Shortcomings of Trial Balance
  [Business:Accounting] No method is ever perfect and sometimes shortcomings are inherent to the system and have to be accepted along with the various advantages. Trial balance method or report of accounting accuracy is also not fool proof to human errors.

Location of Errors through Trial Balance

• Location of Errors through Trial Balance
  [Business:Accounting] Trial balance, if credit side total equals the debit side total, is a preliminary evidence of the accuracy of accounts. However, errors of posting excluding typing/writing errors for manual accounting can also result in wrong trial balance. Trial balance aids in locating the errors in accounts.

Bank Pass Book or Bank Statement

• Bank Pass Book or Bank Statement
  [Finance:Personal-Finance] The bank provides the customer with the statement of account or passbook. It has details of all transactions with the bank for ready reference. Rules for bank pass book posting are generalized here.

Banking Transactions

• Banking Transactions
  [Finance:Personal-Finance] Going to bank is mostly an happy experience as mostly it is for taking out the cash! However today’s banking has moved online and with automated teller machines the banks have become more accessible and reliable. This article discusses various concepts and terms related with basic banking. The online banking accounts may differ considerably from this traditional method of operation of the banks.

Bank Reconciliation Statement

Bank Reconciliation Statement
[Finance:Personal-Finance] Bank Reconciliation Statement is prepared to check the accuracy of the statement provided by the bank or bank pass book against the various bank account entries posted in ledger. Amount and nature of each transaction raleted with bank is tallied to make sure that the actual bank account and the ledger bank account are in perfect agreement.

• 
  

Depreciation, Causes of Depreciation, Need for Provision of Depreciation

• Depreciation, Causes of Depreciation, Need for Provision of Depreciation
  [Business:Accounting] Depreciation the permanent decrease in the value of an asset due to use and/or the lapse of time. It is treated as a business expenditure. It is very necessary to include depreciation as machinery etc. does not remain same after use and if its value remains same the accounting accuracy and profit and loss calculation shall be affected resulting in inflated profits.

Characteristics of Depreciation, Basic Factors of Determination of Depreciation

• Characteristics of Depreciation, Basic Factors of Determination of Depreciation
  [Business:Accounting] In this article depreciation is explained in details. It is discussed how we can find out the depreciation for a special type of business or industry.

Balancing the Accounts and Necessity of Ledger

Balancing the Accounts and Necessity of Ledger
[Business:Accounting] Balancing the account necessarily validates the mathematical accuracy of the posting of accounts by ensuring that any amount posted on debit side is also reflected by same amount on credit side. The ledger basically keeps the record of these debit and credit entries which are created by equal amount. If each entry is balanced this way any account in ledger will reflect a correct amount as debit or credit

Accounting Ledger and How to Write Ledger

Accounting Ledger and How to Write Ledger
[Business:Accounting] Ledger is the most important book of accounting. It contains summarized, classified description of all the business transactions. It is divided into various parts and each part is termed as 'account'. It is necessary to gather at one place all transactions, during the period, relating to a particular subject-a person, a thing, a class of expenses, incomes etc. It is only then that the net results can be ascertained

Non Profit Organization Accounting

• Non Profit Organization Accounting
  [Business:Accounting] Its aim may not be profit-making, yet it cannot avoid account keeping. It must maintain proper accounts of its receipts, payments, incomes and expenses, because those who have donated money to such institution must know that their money is being used properly and fruitfully. So, profit or no profit accounting is a must. Its sole object is to do good to the society or members through welfare activities. Such institutions are clubs, societies, schools, colleges, hospitals and libraries etc.

Difference Between Journal and Ledger

• Difference Between Journal and Ledger
  [Business:Accounting] Journal and Ledger both are prime book of entries and journal is the first step of writing the transactions and ledger is posting of the entries of journal or transactions. Double entry aspect of accounting entries ensures that each account in ledger reflects correct transactions for the account. In ledger each account has listing of transactions that affected the account being listed. Amount is mentioned against each/part of transaction.

Capital and Revenue

• Capital and Revenue
  [Business:Accounting] One of the objects of accounting is to determine whether the business has earned profit or it has suffered loss. For this purpose, profit and loss account is prepared. Total expenditure incurred by the business is divided in two categories: One portion is charged against revenue while the other is shown in the balance sheet as asset. The former is known as revenue expenditure and the latter as capital expenditure. While preparing the final accounts, all revenue items are included in the revenue account i.e., manufacturing, trading and profit and loss account and all capital items in the balance sheet. Any error committed in distinguishing between 'Capital' and 'Revenue' will affect the ascertainment of profit.

Steps To Prepare Income And Expenditure Account

• Steps To Prepare Income And Expenditure Account
  [Business:Accounting] In the absence of the trial balance, the income and expenditure account will be prepared on the basis of the receipts and payments account.

Revenue

• Revenue
[Business:Accounting] According to Paton and Littleon, "Revenue is the product of the entity which refers to the goods and services created during a specific time span by an enterprise."

Reserves and Provisions

• Reserves and Provisions
  [Business:Accounting] Every prudently and systematically managed business concern makes some provision out of current profits for meeting an anticipated liability, redeeming a liability, replacing an asset or for some other important business purpose.

Nature of Reserves-Funds or Provisions

• Nature of Reserves-Funds or Provisions
  [Business:Accounting] A trader considers it to be prudent to reduce intentionally, the amount available for distribution as profit and to set aside the amount thus, saved for some worthwhile business purpose. should be noted in this connection.

Distinction Between Provisions And Reserves

• Distinction Between Provisions And Reserves
  [Business:Accounting] Profit set aside and used in the business is a reserve. But profit set aside and invested outside the business is a reserve fund. Thus, the use of the term 'fund' indicates investment of reserve outside the business.

Secret Reserves

• Secret Reserves
  [Business:Accounting] It has been defined as "any reserve which is not apparent on the face of the balance sheet". It is sometimes called "hidden reserve", or 'internal reserve' or 'inner reserve.' This reserve represents the surplus of assets over liabilities and capital. It does not appear in the ledger. The creation of secret reserves strengthens the financial position of the concern. Its financial position would be better than what it would appear on the face of the balance sheet. Secret reserve is created usually by joint stock companies especially banking, insurance and financial concerns.

Balance Sheet and Profit and Loss Account

• Balance Sheet and Profit and Loss Account
  [Business:Accounting] While introducing the subject of accounting to the readers in the beginning it was stated that one of the main objectives of financial accounting is to provide information about the profits earned or loss suffered by the business during a particular period.

Single Entry Bookkeeping Accounting System

• Single Entry Bookkeeping Accounting System
  [Business:Accounting] Under the double entry system of book-keeping, both aspects of every transaction are recorded, i.e. one on the debit side and the other on the credit side. Under the single entry system of bookkeeping, both aspects of every transaction are not recorded in the books of accounts. Under this system, the personal accounts of the debtors and creditors are maintained.

Balance Sheet Explained

• Balance Sheet Explained
  [Business:Accounting] Balance sheet is a statement of financial position of a concern at a given date. It shows the financial position of a concern at a given date of accounting period, because the situation may be entirely different on the following day and indeed, might have been quite different a day earlier.

Rectification Of Accounting Errors

Rectification Of Accounting Errors
[Business:Accounting] Every businessman is interested in finding out the true profit and correct financial position of his business at the close of the trading period. The effort of the accountant is to prepare the final accounts in such a fashion which exhibits true picture of the business. Accounts are considered to be authentic proof of true financial position of a concern. But in spite of best efforts there are certain transactions which are omitted to be recorded or entered wrongly in the books. Such errors affect the final accounts. An accountant should, therefore, try to locate such errors and rectify them before the preparation of final accounts

Preparation of Profit and Loss Account

• Preparation of Profit and Loss Account
  [Business:Accounting] As already stated profit and loss account is commenced with gross profit or gross loss as ascertained by trading account. Then the profit and loss account is debited with all indirect expenses and losses. This results in closing of indirect expenses and losses account. The profit and loss account is then credited with various incomes and gains accounts by which all these accounts are closed.

SAP

SAP means Systemanalyse und Programmentwicklung. This is german for System analysis and program development.
The name was later changed into Systeme, Anwendungen und Produkte in der Datenverarbeitung: Systems, application and products in the data processing.

The company is specialized in large application supporting large corporations.
SAP is well known for its ERP solution R/3. The modularity of the product allows a certain fexibility in the implementation and use.

Trading and Profit and Loss Account

• Trading and Profit and Loss Account
  [Business:Accounting] It is the summary of such accounts which effect the profit or loss of the concern. These are prepared by transferring from the trial balance all nominal accounts and accounts relating to goods by means of journal entries called 'closing entries'. All remaining accounts i.e. real and personal, relating to properties, assets, debtors and creditors are shown in the balance sheet. In order to know the overall picture of the effect of these accounts they are grouped at one place. Items' increasing profit (revenue) are put on one side (credit) and those decreasing profits (losses and expenses) on the other side (debit). The balance is either net profit or net loss. This income statement is normally divided into two parts - first part is called trading account and second part is called profit and loss account. The procedure for preparing various accounts is discussed in details in this article.