The business environment is the sum total of all external and internal factors that influence an organization’s operations and its decision-making. Understanding the different components of the business environment is essential for organizations to develop strategies that will help them adapt to changes in the market, leverage opportunities, and mitigate risks. The three components of …

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Working capital is the amount of money that a business needs to fund its day-to-day operations. It is calculated by subtracting current liabilities from current assets. Current assets are those that can be converted into cash within a year, such as inventory, accounts receivable, and cash. Current liabilities are those that are due within a …

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Departmental accounts refer to a system of accounting where a company’s financial transactions are recorded and tracked separately for each department or division. This method is particularly useful for large organizations with multiple departments, as it allows for a more detailed analysis of each department’s financial performance. One advantage of departmental accounts is that they …

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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, …

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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 …

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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 …

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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 …

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