er R.s. Technologies ba OF EMME MeCN Re cana Vise Opp.Harshini Rankers Campus, Beside Ayyappa Swamy Temple, Mangamoor Road, ONGOLE, Call us : 91828 66779, Prepared by Suresh. Page 1ACCOUNTING TERMINOLOGY Business Transaction: Any sale or purchase of goods or services is called the transaction, Clarify given below. i) Cash Transaction: Cash Transaction is one where cash receipt or payment is involved in the exchange. Cash Ale Dr To Sales Ale ii) Credit Transaction: Credit Transaction will not have cash either received or paid for something given or received respectively. It arise Creditor & Debtor relationship. Purchases A/c Dr To R& P Traders A/c ii) Non Cash Transaction : It is a Transaction where the question of receipt or payment of cash does not arise atall, Eg: Depreciation, return of goods etc., Depreiation A/c Dr To Fixed Assets A/c Account: A summarized statement of transaction relating to a particular person, thing, expense Accounting: The process of recording, classifying, summarizing and reporting the financial information (transactions) in business. Assets: The valuable things owned by the business are known as Assets. These are: Assets eerie rear iic Assets Cy ere re ee sae See oe pete oe eres 1) Fixed Assets: ‘These Assets are acquired for long term use in the Business. They are not meant for resale. Eg: Plant & Machinery, Furniture, Vehicles ete Fixed Acconts A/e Dr To Cash/Bank A/c 2)" Current/Liquid Assets: These Assts can be converted into cash as early as possible. Is also known as current, circulating, fluctuating assets. Eg: Cash, Bank balances, debtors, stocks etc, Current Assets (Cash) Ave Dr To Ramana & Co A/c 3). Intangible Assets: Intangible Assets those having no physical existence Eg: Goodwill, Patents, Trade marks etc Prepared by Suresh Page 2Liabilities: Liabilities are the obligations or debts payable by the enterprise in future in the form of money or goods. Liabilities can be classified: i) Fixed Liabilities : These Liabilities are payable generally after along period, Eg: Capital, loans, debentures etc, i) Current Liabilities: Liabilities payable with in one year are called as Current Liabilities. Eg: Creditors, Bills payable, expenses ete. ii) _ Contingent Liabilities : These are not real Liabilities. Future events can only decide whether it is a really a Liability or not. These Liabilities are termed as Contingent! Doubtful Liabilities. Capital: It is owner’s fund, which is initial amount to start & run the business. Cash Ale Dr To Capital Ale These are can be divided into: ') Fixed Capital: The amount invested in acquiring fixed assets called Fixed Capital. Eg: Plant & Machinery, Furniture, Vehicles etc. Plant & Machinery A/C Dr To Cash / Bank Ave i) Working Capital: The part of capital ayailable with the firm day to day working of the business is known as working capital. Itcan also be expressed under, Working Capital = Current Assets ~ Current Liabilities Drawings: Cash or goods withdrawa by the proprietor from business for his personal or household use is termed as drawings. Drawings A/eD To Cash Ale. Sundry Debtors: Debtor means a person, who pays money (in future) to the trader, regarding Credit Sales. Debtors A’e Dr To Sales A/c. (Credit Sales) Sundry Creditor: A Creditor is a person who is received something from business, regarding credit purchases. Purchases A/c Dr To Sundry Creditors A/e (Credit Purchases) Revenue: Revenue in accounting means the amount realized (or) receivable from the sale of goods. Cash A’e Dr To Sales A/c. Prepared by Suresh Page 3Expense:It is the cost of use of things or services for the purpose of generating revenue. Expenses A/c Dr To Cash A/c. Discount: Two types of Discounts in Accountaney * Cash Discount: An allowance made to encourage prompt payment or before the ending of the period allowed for credit. Cash A/c Dr Discount Allowed A/e Dr To Debtor A/c * Trade Discount: A deduction from the gross or catalogue price allowed to tradets who buys them resale. In the case of Trade discount, there is no entry made in the books of aeeounts of the buyer and seller. Opening Stock: The quantity of goods! products held by an organization at the beginning of an accounting or financial year is known as opening stock. Trading A/c Dr. To Opening Stock A/c Closing Stock: The goods that a business has available for sale at the end of an accounting period. Closing Stock Ave Dr. To Trading A/c. Deficit: In financial terms, a deficit Oecurs When expenses exceed revenues, imports exceed exports, or liabilities exceed assets. Double Entry System: The double-entry system has two equal and corresponding sides known as debit and credit, It means to record every business transaction in two aspects (debit and credit) Accounting Concepts: Accounting concept refers to the basic assumptions and rules and principles which work as the basis of recording. of business transactions and preparing accounts. Business entity concept ‘Money measurement concept Going concer concept Accounting period concept Accounting cost concept Dual aspect concept Realization concept Accrual concept Matching concept Prepared by Suresh Page 4Business entity concept: A business and its owner should be treated separately as far as their financial transactions are concerned. . Money measurement concept: Only business transactions that can be expressed in terms of ‘money are recorded in accounting, though records of other types of transactions may be kept separately. . Dual aspect concept: For every credit, a comesponding debit is made. The recording of a transaction is complete only with this dual aspect. Going concern concept: In accounting, a business is expected to continue for a fairly long’ time and carry out its commitments and obligations. This assumes that the business, will not be forced to stop funetioning and liquidate its assets at“fire-sale” prices. Accounting Cost concept: The fixed assets of a business are recorded on the basis of their original cost in the first year of accounting. Subsequently, these assets are recorded minus depreciation. No rise o fall in market price is taken info accountThe concept applies only to fixed assets. . Accounting year concept: Each business chooses a specific time period to complete a cycle of the accounting process—for example, monthly, quarterly, or annually—as per a fiscal or a calendar year. Matching concept: This principle dictates that for every entry of revenue recorded in a given accounting period, an equal expense entry has tobe recorded for correctly calculating profit, or loss in a given period. Realisation concept: According to this concept, profit is recognised only when it is earned. An advance or fee paid is-not considered a profit until the goods or services have been delivered to the buyer. Accrual Concept: According to Accrual Accounting, the transaction is recorded on a mercantile basis. In other words, transactions are to be recorded as and when they occur, not as and when the cash is received or paid, and for the period to which the transaction pertains. Prepared by Suresh Page 5There are three types of accounts. ‘© Personal Account ‘+ Real Account Nominal Account Golden Rules of Accounting To understand the Golden Rules of Accounting we must first understand the types of accounts. le A J+ A [Nominal account [> A Personal_accound]is @ General ledger account connected to all persons like individuals, firms and associations. An example of a Personal Account is a Creditor Account. [Real Account] is a general ledger account relating to Assets and Liabilities other than] people accounts. These are accounts that don’t close at year-end and are carried forward. An| example ofa Real Account is a Bank Account. is a General ledger account pertaining fo allhincdme, éxpenses, losses| and gains. An example ofa Nominal Account is an Interest Account, ey ererett iat eet iat: Bereta? Transaction, Deposit Rs.10,000 in Bank ere Taleo nty eet redit what g from the busines redit the gain Accounts involved Bank Account Cash Account ere eat erica ras PeINaag etter wey Tat aa f the be ‘Type of Accounts Real Account - Asset account Real Account - Asset account Prepared by Suresh. Page 6Transaction Purchase goods worth Rs,50,000 from Apple Lid. Sale of goods worth Rs. 35,000 to Melon Ltd, Pays Rs.12,000 as rent Earn Rs.3,000 as interest on Bank account Accounts involved Purchase Account Apple Ltd Account Sales Account Melon Ltd, Account Rent Account Bank Account Interestreceived Bank Account ‘Type of Accounts Nominal Account - Expense account Personal Account - Creditors account Nominal Account Income Account Personal’Account™ Debtors Account Nominal Account Real Account - Asset account Nominal Account - Income Account Real Account - Asset Account [Now applying tie golden riles To each of the ransactions we will get the Tollowing joumal entries - + Deposit Rs.10,000 in Bank] jon Bank and Cashare realaccounts and so the Golden rule is: * Debit what@omes into the business + Credit what goes out from the business [So the entry will be Bank A/C To Cash A/C Dr. 10,000 10,000 Prepared by Suresh Page 7© [Purchase goods worth Rs.50,000 from Apple Ltd] he Purchase Account isa Nominal account and the Creditors Account 1s a Personal account Applying Golden Rule for Nominal account and Personal account + Debit the expense or loss + Credit the giver Tieetywilte———SSS—S—CCCTCTCTCTCTTTTC—*Y: Purchase A/C Dr 50,000 To Apple Ltd. A/C 50,000 + [Sale of goods worth R5.35,000 to Melon Lid] ie sale account is a Nominal account and the Deblors Account 1s a Personal account, Hence the |Golden Rule to be applied is « Debit the receiver + Credit the income or gain Thus the entry will be: Melon Ltd. A/C Dr 35,000 To Sales A/C 35,000 : Rent is a Nominal account and Bank is a real account. he len Rule to be applied is: + Debit the expense or loss « Credit what goes out of business’ [heanyhswilbe Rent A/C Dr. 12000 To Bank A/C 12000 + Earn Rs.3,000 as interest on Bank Account [Interest and Bank are Nominal account and Real Account, The Golden rule to be applied Is: Debitwhat comes into’the business + Credit the income or gain a aS 1 Bank A/C Dr 3,000 To Interest Received A/C 3000 Prepared by Suresh Page 8Bookkeeping: Bookkeeping is the process of recording your company’s financial transactions into organized accounts on a daily basis. Methods of bookkeeping Single-entry bookkeeping Single-entry bookkeeping is a straightforward method where one entry is made for each transaction in your books. These transactions are usually maintained in a cash book to track incoming revenue and outgoing expenses. Double-entry bookkeeping Double-entry bookkeeping is more robust. It follows the principle that every transaction affeets at least two accounts, and they are recorded as debits and credits Cash-based or accrual-based The next step is choosing between a cash or accrual basis for your bookkeeping. This decision will depend on when your business recognizes its revenue and expenses. In other Words, any time cash enters or exits your accounts, they are recognized in the books. How to record entries in bookkeeping / Accounting Cycle Recording transactions begins with source documents like purchase and sales orders, bills, invoices, and cash register tapes. Once you gather these documents, yowvean record the transactions using journals, ledgers, and the trial balance, = > me a & e © me ‘The journal is called the book of original entry.it is a day book where in records day to day business transactions. A journal can be either physical (in the form of a book or diary), or digital (stored as spreadsheets, or data in accounting software), Proforma of Journal Date Particulars Le] De O | chO xx-xx-xxxx |Name of the a/e Dr. XXNX fo Name of the a/e XXX ng > Prepared by Suresh Page 9A ledger is a book or a compilation of accounts. It is also called the book of second entry. After you enter transactions in a journal, they are classified into separate accounts and then transferred into the ledger. These records are transcribed by accounts in the order: assets, liabilities, equity, income, and expenses. Like the journal, the ledger can also be physical or electronic spreadsheets. Proforma of Ledger Dr. Cash ae Cr Date] Particulars [LF | Amount Q | Date Particulars LE | Amount 0 To Name of By Name of Credit a/c Debit a/c = Left side Right side The trial balance is produced from the compiled anid summarized ledger entries. The trial balance is a statement of all the debit and credit balances \\ extracted from the ledger account in the following order: assets liabilities, equity, income, and expenses with the ending account balance. Racount Tile Capital Land and Buildings Plant and Machinery Equipment Furniture and Fixtures: Cash in Hand Cash at Bank Debtors: Bills Receivable Stock of Raw Materials Stock of Finished Goods Purchases Carriage Inwaras Carriage Outwards Sales Sales Return Purchases Return Interest Pai Commission/Discount Received ‘Salaries: Long Term Loan Bills Payable Greditors Advances from Customers Drawings Coe erenranenvecoee S SRLS Pee tA veeeee Prepared by Suresh Page 10Financial statements / Annual Reports: The next, and probably the most important, step in bookkeeping is to generate financial statements, These statements are prepared by consolidating information from the entries you have recorded on a day-to-day basis. Trading account It is a statement which is prepared by a business firm. It shows the gross profit of business oclivities during a specific period. Itis a part of the final accounts of the entity, In other words, the trading account gives details of total sales, total purchases and direct expenses relating to purchase and sales. Specimen of Tading Account Dr Q Particulars Rs Rs Particulars Rs Rs To Opening Stock ERT — By Sales | To Purchases aunt Less: Returns << prt Less: Retturns wee | e* | By Closing/Stock a To Carriage inwards ae To Wages ad To Fright «| By Gross loss. ee To Customs Duty “ To Gas, Fuel e To other manufacturing Exp... was: To Gross Profit * The income statement / profit and loss A/c. The income statement, algo called the profit and loss statement, focuses on the revenue gained and expenses incurred by a business over time. There are two parts in a typical income statement. The upper Half lists operating income while the lower half lists expenditures. Prepared by Suresh Page 11Specimen of Proft & Loss Account Dr cr Particulars Rs | Rs Particulars Rs_| Rs ‘To Management Exp.. By Gross Profit bid sees office Salaries& Wages +ssx | By Interest Received sees Rent, Rates & Taxes er By Discount Received bia Printing & Stationary vee | By Commission Received vies By Income from Legal Charges sess | Tovestments sate Audit Fee ae By Dividend on Shares HHO Insurance ++ | By Misllaneous incomes ne General Exp. ae To Selling& Dis. Exp By Net Loss Trasferred Advertisements sees | to Capital Alc eee Bad Debts. sees Carriage outwards ssanual To Repairs see To Depreciation ve To Financial Exp... seat Interest on Capital bebed Interest on Loans, aad Discount allowed — To Net Profit Tranferred to Capital Ale ps‘ The cash flow statement The casi flow sfatementis exactly what its name suggests. It is a financial report that tracks incoming and outgoing cash in your business. The fund flow statement A fund flow statement is a statement prepared to analyse the reasons for changes in the financial position of a company between two balance sheets. It portrays the inflow and outflow of funds ice. sources of funds and applications of funds for a particular period. The balance sheet The balance sheet reports a business’ assets, liabilities, and shareholder's equity at a given point in time, However, the balance sheet is only a snapshot of a business’ financial position for a particular date. In this follow the Principle of Total Assets ~ Total Liabilities (including Capital fimd). Prepared by Suresh Page 12,Specimen of Balane Sheet Rs_|__Rs Assets Rs Capital : Fixed Assets: Capital seed Goodwill weet Add: Net Profit aad Land& Buildings wee Less: Draweings euen Plant & Machinery ausee Less: Income Tax | **** | **** | Furniture & Fittings weeee Current Liabilities : Leesehold Lands wee Patents & Sundry Creditors wen | Trademarks wanes Bills Payable weer | Investments used Loans seer | Current Assets : Moragage seit | Closing Stock (fe, Reservefund weer | Accured Income Oy Bank Overdraft ween | Unexpired Exp. Ws Sundry Debtors rt Bills Receivable Base Cash in Hand anne Cash at Bank nen Total se hee Bank reconciliation is the process of findifig congruence between the transactions in your bank account and the transactions in your bookkeeping records. Bank reconciliation helps you ensure that there is nothing amiss when it comes to your money. Why is it mandatory? Bank reconciliation is a mst because it: + Provides the exact financial situation of your company + Comparing and knowing the status of Cash and pass book accurately # Tracks cash flow accurately + Helps detect fraud or bank errors Prepared by Suresh Page 13Subsidiary Books: Subsidiary Books are the books that record the transactions which are similar in nature in an orderly manner. They are also known as special journals or Daybooks. In big business institutions, it is not easy to record all the transactions in one journal and post them into various accounts. The advantages of subsidiary books are as follows: 1. Itprovides a proper and systematic recording of transactions. Convenient while posting transactions. Establishes efficiency. ‘Helps in the process of decision-making, Error and frauds canbe eliminated to an extent. Information can be found out ata single glance, thus no wastage of time. AuawED Types of Subsidiary Books There are basically 8 types of subsidiary books that are used for recording different types of transactions. So, let us know the types. The 8 Subsidiary books are as follows: 1. CashBook 2. Purchase Book Sales Book Purchase Return Book Sales Retun Book Bills Receivable Book Bills Payable Books eh ew Journal Proper 1. Cash Book The first and most important subsidiary book is the cash book. It records all the transactions related to cash and bank receipts and payments, There are 3 types of cash books that are maintained by an organization. They are: Single Column Cash Book Double Column Cash Book Triple Column Cash Book 2. Purchase Book Purchase Book is a subsidiary book that is used to record all the transactions related to credit purchases. The purchases of the asset are never recorded in the purchase book. 3. Sales Book The Sales Book records all the transactions related to credit sales. The sales book cannot record the sale of assets Prepared by Suresh Page 145 6 1 8 Purchase Return Book The purchase return book, also known as the return outward book, is used to record transactions of all the returns made to the supplier. A debit note is issued against every return and is recorded in the Purchase Return Book. Sales Return Book The sales return book records all the transactions related to inward returns. It is also.known as a retum inward book. When the customer returns goods, a credit note is issued to the customer for every return, and it is recorded in the Sales Return Book Bills Receivable Book The Bills Receivable Book records all the transactions of bills drawn in favour of the business. The total of the bills receivable book is posted on the debit side of the Bills Receivable account. Bills Payable Book The Bills Payable Book records all the transactions felated to bills that are drawn on the business and are payable by the business. Journal Proper There are certain transactions that cannot be revordedin atty of the above-mentioned books; these transactions are termed miscellaneous transactions. So, the Journal Proper is used to record all the miscellaneous transactions. It includes transactions such as credit purchase and sale of assets, depreciation, etc. Depreciation In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner, ‘An example of fixed asses are \buildings, furniture, office equipment, machinery etc. The land is the only exception from depreciation regarding it is natural asset could not manufacturing. There are three methods commonly used to calculate depreciation. These are: L 2 3 Straight-line method Unit of production method Double-declining balance method ‘Three main inputs are required to calculate depreciation: L 2. 3 ‘Useful: tif this is the time period over which the organisation considers the fixed asset to be productive. Beyond its useful life, the fixed asset is no longer cost-effective to continue the ‘operation. of the asset. Salvage value ~ Post the useful life of the fixed asset, the company may consider selling it at a reduced amount. This is known as the salvage value of the asset. ‘The cost of the asset —this includes taxes, shipping, and preparation/Setup expenses 1) Straight-line depreciation method This is the simplest method of all. It involves the simple allocation of an even rate of depreciation every year over the useful life of the asset. The formula for straight-line depreciation is: Annual Depreciation expense = (Asset cost ~ Residual Value) / Useful life of the asset Prepared by Suresh Page 152) Unit of Production method This is a two-step process, unlike the straight-line method. Here, equal expense rates are assigned to each unit produced. This assignment makes the method very useful in assembly for production lines. Hence, the calculation is based on the output capability of the asset rather than the number of years 3) Double declining method This is one of the two common methods a company uses to account for the expenses of a fixed’ asset. This is an accelerated depreciation method. As the name suggests, it counts expense twice as‘much as the book value of the asset every year. The formula is: Depreciation = 2 * Straight line depreciation percent * book value at the begitining of thé accounting period Book value = Cost of the asset— accumulated depreciation ‘CAUSES FOR DEPRECIATION 1, Wear aind Tear: The value of capital assets like plant, machinery, building ete. deerease in value due to constant use. The wear and tear of an asset depends on the usage of asset 2 Exhaustion; These assets have a definite period of life after which they exhaust in value and become useless. 3. Depletion: Naturalresources such as mines, quarries and oil wells are of a wasting character and are called as wasting asset Prepared by Suresh Page 164, Deterioration: Deterioration means erosion in value of those assets which have a very short period of life. External Causes: 1. Effluxion or Passage of Time: The utility of some fixed assets like patents, copyrights, trademarks, leasehold property ete. is confined to a time frame 2. Obsolescence: The value of an asset decreases due to —(a) inventions of new and improved techniques or production methods, for example, old machines become out dated with the introduction of new machines 3. Due to Weather and Natural Calamities: Some assets lose in value when"they aré'constantly exposed to rain, sun, wind ete. 4. Permanent fall in the Market Value: Assets like investments lose in valtie-due-to permanent fall in market value of the asset, Accumulated depreciation isthe total amount a) company depreciates its assets, while depreciation expense is the amount a company’s assets-are depreciated for a single period. The accumulated depreciation account is a contra asset account on a company's balance sheet, meaning it has a credit balance. Date ‘Account Name Debit [Credit December 31 Depreciation Expense 1,000.00 -Accumulated Depreciation 1,000.00 To record vehicle depreciation expense. What is revenue? IReventie is the income a business eams by selling goods or services to a customer. It is typically a {key indieator of a company's financial health. A company's revenue may include: Sales of goods or services Tnterest Dividends Rental income Prepared by Suresh. Page 17[Operating revenue (Operating revenue is the income a company eams by conducting its core business operations. It is| Iypically a company's largest source of income. For example, a hospital might eam its operating| Irevenue by providing medical services, while a retail store could produce its operating revenue by| lelling merchandise. Depending on the business and industry, a company's operating revenue may| linclude various elements. Some examples of operating revenue are: [> Sales revenue: a sale occurs when there is an exchange of goods for currency. For example, a fashion company that sells clothing could record clothing sales as revenue J+ Service revenue: service revenue occurs when a company or consultant. provides professional services to a client. For example, a marketing firm may record the revenue it| eams from providing marketing services to its clients. |Nonoperating revenue fonoperating revenue is the income a company eams by conducting’ business/Outside of its core lousiness operations. Some examples of non operating revenue are: [> Rent revenue: rent revenue is the income @ company eams from allowing third parties to rent buildings or equipment. le Interest revenue: this is the income a company-cams from an investment. Interest revenue can also include the interest accrued from accounts receivable. Expense: An expense in account generate revenues Due to the accrual principle in accounting, expenses are recognized when they are incurred, not necessarily when they are paid for. is the money spent, or costs incurred, by a business in their effort to Types of Expenses As the diagram above illustiatesythere are several types of expenses. The most common way to categorize thems inte, operating vs. non-operating and fixed vs. variable «© Operating © Cost of Goods Sold (COGS) ogeMarketing, advertising, and promotion Salaries, benefits, and wages (SG&A) Rent and insurance > Depreciation and amortization © Other + Non-operating © Interest Taxes Impairment charges Prepared by Suresh. Page 18+ Fixed o Rent © Salaries, benefits, and wages (sometimes fixed and sometimes variable) + Variable © Transaction fees o Commissions ‘© Marketing and advertising (sometimes fixed and sometimes variable) Capital expenditure: Capital expenditures (CapEx) are fimds used by a company to acquire, upgrade, and maintain! physical assets. Examples of capital expenditures are as follows: + Buildings (including subsequent costs that extend the useful life of a building) © Computer equipment © Office equipment + Furniture and fixtures (including the cost of furniture that is aggregated and treated as a single unit, such as a group of desks) + Intangible assets (such as @ purchased taxi license or a patent) + Land (including the cost of upgrading the land, suchas the cost of an irrigation system or a parking lot) + Machinery (including the costs required to bring/ the equipinent to its intended location and for its intended use) » Software + Vehicles. Furniture and’Fixture A/c Dr Tio Cash A/c Bad debts: Bad debt is a loss for the business, which is uncollectable amount from the debtors. The closing jotimal entry for bad debts would be as follows Prepared by Suresh. Page 19Carriage in wards: Carriage inwards is the shipping and handling costs incurred by a company that is receiving goods from suppliers. Carriage Inwards A/c Dr. 100 To Cash A/c 100 Carriage outwards is essentially the delivery expense related to selling of goods. Credit Note: The customer, who returns the goods, arises from Sales. (Sales returns memo). ere Me) Debit Note: Daan neg Sales retums A/c Dt To Debtors A/c Itis sent by the purchaser of goods to the seller of goods on retum of goods by the purchaser to the seller. (Purchase retums) Ceau)} Pio SC NOISY Sareea Creditor A/c Dr To Purchase Returns A/c. General reserve: It is referred to as the reserve fund that is created by keeping aside a part of profit. Profit and Loss Appropriation Account Dr To General Reserve) Account Retained earnings: These are the cumulative net earings or profits of a company after accounting for dividend payments. Retained Earnings A/c Dr To Dividends Payable A/c Prepared by Suresh. Page 20Questions arises from Accounting = What are the golden rules? What are the types of Assets & Liabilities What is double entry system? What are accounting concepts? ‘What is book keeping? What is Accounting cycle? ‘Why to prepare final accounts? What is cash flow statement?. What is funds flow statement? 10. Write the entry for opening stock & closing stock? 11. What is importance of BRS? 12. How many types of subsidiary books? 13. What is depreciation? Basis for depreciation? 14. What is revenue & expense? 15. What is capital expenditure entry (example)? 16. What is bad debt? Write entry. 17. Whatis debit note & credit note? Entry. 18, How to treat general reserve? 19. What are the opening entries and closing entries? 20. How to treat retained earnings. 21. What is surplus & deficit? Prepared by Suresh Page 21