Commerce Wallah

  Bills of Exchange and Promissory Notes 1. Definition and Key Features Bills of Exchange and Promissory Notes are essential instruments used in trade and accounting for the settlement of debts. Bills of Exchange A Bill of Exchange is a negotiable instrument in writing, containing an unconditional order, directing one person to pay a certain sum of money to another person or their order, at a future date. Parties Involved : Drawer : The person who writes and issues the bill (the creditor). Drawee : The person on whom the bill is drawn (the debtor). Payee : The person to whom the payment is to be made, which can be the drawer or a third party. Key Features : Unconditional Order : The drawer directs the drawee to pay a certain sum without any conditions. Payable on Demand or Future Date : It can be payable immediately or after a specified time. Transferability : Bills of exchange are negotiable instruments, meaning they can be transferred to another party. Example : A supplier (dr...

Depreciation and it's Accounting: A Detailed Summary  1. Introduction to Depreciation Depreciation is a key concept in accounting that represents the gradual reduction in the value of tangible fixed assets over time. This decline is due to factors such as wear and tear, usage, or obsolescence. Depreciation is crucial for accurate financial reporting as it impacts both the balance sheet and the income statement. 2. Purpose of Depreciation The main purposes of depreciation are: Expense Matching : Depreciation spreads the cost of an asset over its useful life, matching expenses with the revenue generated by the asset. This aligns with the accrual accounting principle. Asset Valuation : It provides a more realistic value of the asset on the balance sheet. Tax Benefits : Depreciation reduces taxable income, as depreciation expense is deductible for tax purposes. 3. Depreciation Methods Different methods are used to calculate depreciation, each affecting financial statements in various w...

  Bank Reconciliation Statement (BRS) Summary: A Bank Reconciliation Statement (BRS) is a document prepared to reconcile the balance as per the bank statement (or passbook) with the balance as per the cash book maintained by the company. Differences arise due to timing issues in recording transactions between the company’s records and the bank’s records. BRS helps identify discrepancies and ensures the accuracy of accounting records. Key Components of BRS: Deposits in Transit : Amounts deposited by the company but not yet reflected in the bank statement. Outstanding Cheques : Cheques issued by the company but not yet cleared by the bank. Bank Charges : Fees deducted by the bank but not recorded in the company’s cash book. Direct Deposits and Collections : Amounts collected or deposited by the bank on behalf of the company but not yet recorded in the company’s cash book. Errors : Mistakes in recording transactions by either the company or the bank. Process of Preparing BRS: Start w...

 what are Accounting Principles? Types of Accounting principles . 

Golden rules of accounting  are the rules for passing / making Journal Entries in the books of account. Requirement for applying golden rules of accounting :- First , recognize the type of account Then , apply the requisite rules to pass the journal entries. Account are classified into three different types , which are explained below :-    PERSONAL ACCOUNT  - An account which relates to the person which may be real ( e.g. Ram ) or artificial ( Any company or Firm ). REAL ACCOUNT - An account which relates to any assets or properties like Furniture , Building etc.         - Tangible real account ( e.g., Building )       - Intangible real account  ( e.g., Goodwill , patent , Trademark ) NOMINAL ACCOUNT - An account which relates to expenses or losses and incomes or gains         Rules for different accounts are :-  PERSONAL ACCOUNT DEBIT THE RECEIVER  CREDIT THE GIVER  E.g., - Ram pai...

What is Accounting Standard?  Accounting standards(ASs) are written policy documents issued by the Government with the support of other regulatory bodies e.g., Ministry of Corporate Affairs (MCA) issuing Accounting standards for corporates in consultation with National Financial Reporting Authority (NFRA) covering the following aspects of accounting transactions in the financial statements : :- Recognition  :- Measurement  :- Presentation  :- Disclosure  The ostensible purpose of the standard setting bodies is to promote the dissemination of timely and useful financial information to investors and certain other stakeholders , having an interest in the company's economic performance .  Accounting Standard reduce the accounting alternatives in the preparation  of financial statements within the bounds of rationality , thereby ensuring comparability of financial statements of different enterprises .  Different Accounting Standards deals with differen...

Mudit, Sudhir and Uday are partners in a firm sharing profits in the ratio of 3 : 1 : 1. Their fixed capital balances are    ₹4,00,000,   ₹  1,60,000 and   ₹  1,20,000 respectively. Net profit for the year ended 31st March, 2023 distributed amongst the partners was   ₹  1,00,000, without taking into account the following adjustments: (a) Interest on capitals @ 2.5% p.a.; (b) Salary to Mudit   ₹  18,000 p.a. and commission to Uday   -  ₹12,000. (c) Mudit was allowed a commission of 6% of divisible profit after charging such commission. Pass a rectifying Journal entry in the books of the firm. Show workings clearly.                                                                  👇 Answer👇

On 31st March, 2023, after the closing of the accounts, the Capital Accounts of  P, Q  and  R  stood in the books of the firm  at   ₹ 40,000;   ₹ 30,000 and   ₹ 20,000 respectively. Subsequently, it was noticed that interest on capital @ 5% had been omitted. Profit for the year ended 31st March, 2023   was   ₹ 60,000 and the partners' drawings had been  P  –   ₹ 10,000,  Q  –   ₹  7,500 and  R  –   ₹  4,500. Profit-sharing ratio of  P, Q  and  R  is  3 :  2 : 1.                                                     👇 Answer👇

  A, B and C were partners. Their fixed capitals were  ₹ 60,000,  ₹ 40,000 and  ₹ 20,000 respectively. Their profit sharing ratio was  2 : 2 : 1. According to the Partnership Deed, they were entitled to interest on capital @ 5% pa. In addition, B was also entitled to draw a salary of  ₹ 1,500 per month. C was entitled to a commission of 5% on the profits after charging the interest on capital, but before charging the salary payable to B. The net profits for the year,  ₹ 80,000, were distributed in the ratio of their capitals without providing for any of the above adjustments. Showing your workings clearly, pass the necessary adjustment entry.                                                                   👇 Answer👇

  Profit earned by a partnership firm for the year ended 31st March, 2023 were distributed equally between the partners – Pankaj and  Anu  – without allowing interest on capital. Interest due on capital was Pankaj  – ₹ 3,000 and  Anu  –   ₹ 1,000. Pass necessary adjustment entry.                                                                              👇 Answer👇

Ram, Mohan and  Sohan  were partners sharing profits in the ratio of 2:1:1. Ram withdrew  ₹ 3,000 every month and Mohan withdrew  ₹ 4,000 every month. Interest on drawings @ 6% p.a. was charged, whereas the partnership deed was silent about interest on drawings. Showing your working clearly, pass the necessary adjustment entry to rectify the error. 👇 Answer👇

 Do you like finance ?  Do your mind gets tickled whenever you hear about business , sales or profit?  If yes , then we are bit similar. Hello , I am Abhishek keshri , currently in kirori mal college, Delhi University ,pursuing B.com(Hons)  along with chartered accountancy course . I belong to a family where Business is the primary source of income , so I used to visit at the place of business and loves to deal with customers ,  that had generated a lot of interest in finance and commerce .  When I become senior student , i was also inclined towards science , like everyone (as society places it superior to everything) . So when the result of standard 10th was declared , i got a whopping 97 and 99 marks in science and maths respectively , which acted as a catalyst in compelling me to take science in class 11th , so I decided after discussing with my father that I will go for science background and will prepare jee mains & advance to get admission in...

  Simrat and Bir are partners in a firm sharing profits and losses in the ratio of 3 : 2. On 31st March, 2023 after closing the books of account, their Capital Accounts stood at   ₹ 4,80,000 and     ₹6,00,000 respectively. On 1st May, 2022, Simrat introduced an additional capital of     ₹1,20,000 and Bir withdrew     ₹60,000 from his capital. On 1st October, 2022, Simrat withdrew     ₹2,40,000 from her capital and Bir introduced   ₹ 3,00,000. Interest on capital is allowed at 6% p.a. Subsequently, it was noticed that interest on capital @ 6% p.a. had been omitted. Profit for the year ended 31st March, 2023 amounted to     ₹2,40,000 and the partners' drawings had been: Simrat –   ₹ 1,20,000 and Bir –   ₹ 60,000. Compute the interest on capital if the capitals are (a) fixed, and (b) fluctuating.   👇 Answer👇

Ram, Shyam and Mohan were partners in a firm sharing profits and losses in the ratio of 2 : 1 : 2. Their capitals were fixed at   ₹ 3,00,000,     ₹1,00,000,     ₹2,00,000. For the year ended 31st March, 2023, interest on capital was credited to them @ 9% instead of 10% p.a. The profit for the year before charging interest was     ₹2,50,000. Show your working notes clearly and pass necessary adjustment entry. 👇 Answer👇

  Azad and Benny are equal partners. Their capitals are ₹ 40,000 and   ₹ 80,000 respectively. After the accounts for the year had been prepared, it was noticed that interest @ 5% p.a. as provided in the Partnership Deed was not credited to their Capital Accounts before distribution of profits. It is decided to pass an adjustment entry in the beginning of the next year. Record the necessary Journal entry. 👇 Answer👇

  P and Q were partners in a firm sharing profits and losses equally. Their fixed capitals were  ₹ 2,00,000 and   ₹ 3,00,000 respectively. The Partnership Deed provided for interest on capital @ 12% per annum. For the year ended 31st March, 2023, the profits of the firm were distributed without providing interest on capital. Pass necessary adjustment entry to rectify the error.   👇 Answer👇

  Reya, Mona and Nisha shared profits in the ratio of 3 : 2 : 1. The profits for the last three year were   ₹ 1,40,000;   ₹ 84,000 and     ₹1,06,000 respectively. These profits were by mistake shared equally for all the give necessary Journal entry for the same. 👇 Answer👇

  Ram and Shyam are partners in a firm sharing profits in the ratio of 3:2. On 1st April, 2022, their fixed capitals were ₹ 3,00,000 and ₹ 2,50,000 respectively. On 1st October, they decided that their total capital (Fixed) should be ₹ 6,00,000 in their profit-sharing ratio. Accordingly, they introduced extra capital or withdrew excess capital. The Partnership Deed provided for the following: (i) Interest on capital @ 12% p.a. (ii) Interest on Drawings @ 18% p.a. (iii) A monthly salary of   ₹ 2,000 to Ram and a quarterly salary of  ₹ 4,500 to Shyam. The drawings of Ram and Shyam were as follows: Particulars Ram ₹ Shyam ₹ On 31th September, 2022 On 31st December, 2022 20,000 20,000 15,000 25,000 During the year ended 31st March, 2023, the firm earned a net profit of   ₹ 1,50,000. 10% of this profit was to be transferred to General Reserve. You are required to prepare: (i) Profit and Loss Appropriation Account; (ii) Partners' Capital Accounts, and Partners' C...