Explanation
Prepaid (Unexpired) expense is a personal account and is shown on the Assets side of a balance sheet.
According to the accrual concept of accounting, transactions are recorded in the books of accounts at the time of their occurrence and not when the actual cash or a cash equivalent is received or paid.
A bill payable is a document which shows the amount owed for goods or services received on credit (meaning not paid at the time that the goods or services were received). The provider of the goods or services is referred to as the supplier or vendor. Hence, a bill payable is also known as an unpaid vendor invoice.
'Wages paid' for the 'installation of machinery' should be debited to machinery account. Explanation: It is the amount incurred for buying and installing the machine. The 'machinery account' is debited since the machine has to be put to use.
Rule for nominal account describe that all expense and losses should be debited and all incomes and gains should be credited. Payment of rent to landlord is an expense which need to be debited to rent account by crediting cash account.
The transaction is based on the separate entity concept which signifies that business and its proprietor are treated two separate legal entity. Withdrawal of cash by proprietor should be debited to drawing account in the books of the business. Same amount should be credited by the proprietor in cash account.
Ram is the Receiver of goods, as such, his personal account has been debited According to the rule of personal account, i.e., “Debit the Receiver”. Sales A/c will be credited according to the rule of Nominal account i.e., “Credit all incomes”.
In bookkeeping and accounting, a ledger is a book (or record) for collecting historical transaction data from a journal and organizing entries by account. The ledger provides the transaction history and current balance in each accounting system account, throughout the accounting period.
A joint venture is an arrangement in which two or more parties agree to pool their resources for the purpose of a specific task or transaction.
A joint venture account is prepared for measurement of venture profit. This account is debited with all venture expenses and credited with all sales or collections. The excess balance of credit side over the debit side shows the profit on joint venture and vice versa. Profit /Loss are transferred to co-venturers’ accounts in the profit-sharing ratio.
Goods bought on joint venture as well as expenses incurred in connection with the business are debited to the joint venture account and credited to the seller's account or the joint bank account.
Ledger Folio , abbreviated as L.F., is a column in the journal where in the page number of the ledger book on which the relevant account appears is recorded. In the journal, this column is filled up at the time of posting and not at the time of making journal entry.
Golden Rules of Accounting :-
Dual aspect is the foundation or basic principle of accounting. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places.
The duality principle is commonly expressed in terms of fundamental Accounting Equation, which is as follows :
Assets = Liabilities + Capital
In other words, the equation states that the assets of a business are always equal to the claims of owners and the outsiders. The claims also called equity of owners is termed as Capital(owners’ equity) and that of outsiders, as Liabilities(creditors equity).
The term credit has its roots set in the latin word 'creditum' which means "that which is entrusted or loaned" which also came from 'credere' which means "to trust or entrust".
'Debit' is a formal bookkeeping and accounting term that comes from the Latin word "debere", which means "to owe".
In bookkeeping, a debit is an entry on the left side of a double-entry bookkeeping system that represents the addition of an asset or expense or the reduction to a liability or revenue.
The account Sales is credited because a corporation's sales of products will cause its stockholders equity to increase. A sole proprietorship's sales will cause the owners equity to increase.The Sales account is used in order to keep a tally of the sales made during an accounting year.
However, when the accounting year is completed, the credit balance will be moved via closing entries to the corporation's retained earnings account or in case of a sole proprietorship, to the owner's capital account.
The installation expenses for a new machinery will be debited to machinery account.
All the incidental expenses incurred in reference to an asset till the asset is ready for put to use are treated part of the asset cost and to be debited to the respective asset account.
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