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The Companies Act, 2013 provides various provisions for companies issuing debentures to raise funds for their business activities. A debenture is a type of loan instrument, and the Act provides for their issuance at par, premium, and discount. However, this answer will focus on the provisions for debentures issued at a discount. Section 71 of …

Describe various provisions of Companies Act that deal with the issue of debentures at a discount. Give accounting treatment of debentures issued as a collateral security by the company. Read More »

A cash flow statement is a financial report that presents the inflow and outflow of cash during a specific period in a business. The cash flow statement is a crucial tool that investors, analysts, and creditors use to assess a company’s liquidity and financial health. The statement is divided into three main categories: operating activities, …

What is cash flow statement? What are the various sources and uses of cash? How does it differ from fund flow statement? Read More »

Stock turnover ratio is a financial metric that measures the number of times a company’s inventory is sold and replaced over a specific period, typically a year. The ratio is calculated by dividing the cost of goods sold by the average inventory level during the same period. A higher stock turnover ratio indicates that a …

What is Stock Turnover Ratio? What are the implications of high and low stock turnover ratios? Explain with examples. Read More »

The Profit and Loss Account, also known as the income statement, is an important financial statement that summarizes a company’s revenues, costs, and expenses over a specific period. It provides insights into a company’s profitability and financial performance, making it an essential document for investors, shareholders, and management. There are several special features of the …

What are the special features of the Profit and Loss Account of a Company? What do you understand by Appropriation of Profits. What are the items relevant in that connection? Read More »

To prepare the Profit and Loss Appropriation Account, we need to follow the following steps: Step 1: Calculate the total profit earned during the year. Total profit = Rs. 42,000 Step 2: Calculate the interest on capital for Hari and Giri. Interest on Hari’s capital = 5% of Rs. 60,000 = Rs. 3,000Interest on Giri’s …

Hari and Giri entered into partnership contributing capitals of Rs. 60,000 and Rs. 30,000 respectively. They agreed to share profits and losses in the ratio 2: 1. During the year Hari and Giri withdraw Rs. 10,000 and Rs. 6,000, respectively. The profit for the year ended December 31,1989 was Rs. 42,000. Prepare Profit and Loss Appropriation Account taking into consideration the following: i) Hari is to be allowed a salary of Rs. 3,000 p.a. ii) Interest on capitals is to be provided at 5% pp,. iii) Interest on Giri’s Loan Account of Rs, 20.000 is to be charged for the whole year. iv) Interest on drawings is to be charged at 6% p.n. Read More »

Partnership is a type of business entity where two or more individuals come together to jointly own and operate a business for profit. This type of business is common in professions such as law, accounting, and medicine, where individuals can pool their skills and resources to create a successful business. A partnership deed is a …

What is partnership? Define partnership deed. Read More »

A suspense account is a type of temporary account that is used in accounting and bookkeeping. Its purpose is to hold transactions or balances that cannot be immediately classified or identified. The account acts as a placeholder until further information is available, or until an appropriate account can be determined. The use of a suspense …

What is suspense account? When it is opened? Read More »

(i) Capital receipts and revenue receipts: Capital receipts refer to the inflow of funds that result in the creation or acquisition of an asset or reduction in liabilities, resulting in long-term benefits to the entity. These receipts are not recurring in nature and are generated by selling fixed assets, issuing long-term loans, or raising share …

Distinguish between the following: (i) capital receipts and revenue receipts, (ii) capital profits and revenue profits, and (iii) capital losses and revenue losses. Read More »

A Bank Reconciliation Statement is a vital document that companies use to compare the balances of their bank account in the cash book and the bank statement. It is crucial to identify any discrepancies or errors between these balances. The primary objective is to ensure that the company’s bank account balance in the cash book …

What is a Bank Reconciliation Statement? Discuss the various causes of disagreement between the balances shown by the cash book and the pass book. Read More »

To journalize the transactions: 1. April 1, 2022:Cash Account Dr. 1,20,000To Capital Account 1,20,000(Being business commenced with cash) 2. April 3, 2022:Furniture Account Dr. 24,000To Cash Account 24,000(Being furniture purchased for cash) 3. April 4, 2022:Purchase Account Dr. 36,000To Vijay Account 36,000(Being goods purchased from Vijay) 4. April 5, 2022:Cash Account Dr. 4,800To Sales Account …

Journalise the following transactions, post them into ledger and balance the accounts: 1st April 2022 Ashok commenced business with cash Rs. 1,20,000 3rd April 2022 Purchased furniture for cash Rs. 24,000 4th April 2022 Purhased goods from Vijay Rs. 36,000 5th April 2022 Sold goods Rs. 4,800 7th April 2022 Paid rent Rs. 3,000 Read More »