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Accounts Fundamentals

Jerryland Lyngdoh

1 What are financial statements and how these are prepared from trial balance?

A written report which quantitatively describes the financial health of a company. This includes an income statement and a balance sheet, and often also includes a cash flow statement. Financial statements are usually compiled on a quarterly and annual basis. The financial statement can be prepared by rearranging the items on the worksheet. The income statement is typically prepared first and then the balance sheet. The worksheet does not eliminate the need to journalize and post the adjusting journal entries. This must still be done in order for the

information to enter the accounting system .Journalizing and posting the adjusting journal entries will bring the ledger into agreement with the adjusted trial balance amounts shown on the worksheet. Trial balance is a statement which is prepared to check the Arthematical accuracy of the accounts. It will be prepared with the help of balances of different accounts in ledger. Or it can be prepared based on following principle.

Debit: All expenses, losses and assets Credit: All Incomes, gains and liabilities

3.

Explain

a. Current assets and non current assets

An asset which is not easily convertible to cash or not expected to become cash within the next year. Examples include fixed assets, leasehold improvements, and intangible assets. This is known as non current assets. An asset which is near cash (for ex- pen of market steers) an asset which is convertible into cash within one year without disrupting the business. This is known as current assets.

b. Long term liabilities and current liabilities? Long Term Liabilities- These are obligations that are reasonably expected to be liquidated at some date beyond one year or one operating cycle. Long-term obligations are reported as the present value of all future cash payments. Current Liabilities- A company's debts or obligations that are due within one year. Current liabilities appear on the company's balance sheet and include short term debt, accounts payable, accrued liabilities and other debts. These are debts that are due to be paid within one year or the operating cycle, whichever is longer; further, such obligations will typically involve the use of current assets, the creation of another current liability or the provision of some service.

  • 4. What is BRS? Why should be prepared?

A form that allows individuals to compare their personal bank account records to the bank's records of the individual's account balance in order to uncover any possible discrepancies Since there are timing differences between when data is entered in the banks systems and when data is entered in the individual's system, there is sometimes a normal discrepancy between account balances. The goal of

reconciliation is to determine if the discrepancy is due to error rather than timing. 'Bank reconciliation statement' means verifying / realizing every transaction done with bank. It may be related with payment made or credit received or particular interest charged or received

reconciliation is to determine if the discrepancy is due to error rather than timing. 'Bank reconciliation

5.Explain meaning of non –trading organization? List out the non trading concern?

Unlike a normal trading concern, non trading concerns like clubs, societies and association are incorporated without the motive of making profits.

Their main objective is to promote amongst its members recreational interest.

However, some clubs and societies which run bars or restaurant for the convenient of the member on a permanent basis with the intention of profit

The following statement has been prepared for the XYZ Social Club:

Receipts and Payments Account for the year ended 30 April 2007

 

$

 

$

Balance at bank at 1 May 2006

1,950

Payment for food and drink

6,320

Subscriptions

4,975

Wages

8,790

Cafeteria takings

11,860

New furniture

600

Receipt from members for trip to Bangkok

10,900

Insurance

430

   

Annual social

 

Letting of club premises

3,100

expenses

760

Sale of tickets-annual

720

Lighting and

510

social

heating

   

Purchase of new video machine

420

   

Publicity expenses

335

   

Expenditure for trip to Bangkok

10,650

   

General Expenses

215

   

Repairs &

870

maintenance

   

Balance at bank at 30 April 2007

3,605

 

33,505

 

33,505

Following additional information at 1 May 2006

 

$

Club premises, valued at cost

32,000

Furniture

1,800

Equipment(including old video machine valued at $40)

860

Stock of food and drink

1,800

Insurance prepaid

40

Creditors for food and drink

165

Lighting and heating accrued

130

Subscriptions: in arrears(paid in May 2006)

170

Subscription : in advance

120

Following additional information at 30 April 2007

 

$

Stock of food and drink

1,650

Creditors for food and drink

470

Insurance prepaid

55

Lighting and heating accrued

110

Subscriptions in arrears

290

Subscription in advance

90

During the year, the club wrote off the old video machine. Depreciation is calculated at 25% of the book value of furniture and equipment at 30 April 2007. Charge 60% of wages to the cafeteria.