Winning Notes - Accounts - Basics

Winning Notes - Accounts - Basics — Presentation Transcript

• 1. CA - Accounts basicsFinal accountswww.winningnotes.com
• 2. Agenda2Final AccountsAdjustmentsGlossaryTrading Account FormatWhat more is in store
• 3. Final Accounts3Set of accounts prepared to know the final state of affairs of a business at the end of the Financial YearFinal Accounts include the preparation ofi) Trading and Profit and Loss Account ; andii) Balance sheet.prepared every year for a completed periodPrepared as per the basic accounting principles - keeping matching principle, double entry system and accrual concept in mind
• 4. Adjustments4To adjust the books of accounts as per the principles listed before there can be items which need to be brought into books of account at the time of preparing final accounts – These are called ADJUSTMENTS. Given below are some adjustments which can be normally required:Closing stockOutstanding expensesPrepaid Expenses / Accrued incomesIncomes received in advanceInterest on capital, drawings, loan, investment DepreciationBad DebtsProvision for bad and doubtful debts etc
• 5. Glossary of Adjustments5Closing Stock - goods lying unsold in stock at the end of the financial yearOutstanding expenses - incurred but not yet paid during the accounting periodPrepaid expenses - which have been paid in advanceAccrued Income- Income which has been earned but not received during the accounting periodAdvance Income- Income received during a particular accounting period for the work to be done in future periodInterest on capital– Interest charged on the capital invested in the business. Where it is owner’s self capital, then a notional interest can be charged to ascertain the real profitability.Interest on drawings– When owner withdraws an amount from the business for his self use, then an interest is charged on these drawings.
• 6. Glossary of Adjustments6Depreciation - reduction in the value of fixed assets due to its use, wear and tear or the asset becoming obsolete.Bad Debts– When debtors cannot return the money they owe, this is called bad debtsProvision for bad debts– To account for the potential loss that may happen in a year due to bad debts, businesses need to provide for the same. This is provided on Sundry debtors less Bad debtsDiscount on Bad debts- to encourage payment of bad debts, business sometime can offer discount to the debtors, though this is loss to business, it helps recover some amount from the debtorsProvision for discount on creditors that can be provided by creditors, will be treated as an income for the business
• 7. Final accounts – Trading Account7
• 8. Final Accounts what’s more8Journal entriesProfit and Loss Account Balance sheetMaking Adjustments FootnotesQuestions and ExercisesAll India Tests
• 9. Other Courses9Personality DevelopmentEnglish Communication People ManagerNegotiating & InfluencingFinance and AccountsCA – CPTMBA EntranceSoft skillsWinning Notes – Your Ladder of Success