Archive about 'Basic Accounting Concepts and Regulatory Framework'

Cash Versus Accrual Accounting.

Earlier articles describe both the accrual concept and profit versus cash concept.
Append below is a simple test to understand the cash versus accrual accounting.

Jim Co is a consulting company which have the following revenue and expenses for the month of October 2008

 

The company earned $10,000 but received only $8,000 in cash

Expenses were as follows

(i)  Rent [...]

Difference/Distinction Between Profit And Loss Account And Income And Expenditure Account

Append below are the main differences/distinction between:
 

Profit And Loss Account

Income And Expenditure Account

Prepare by business undertakings

Prepared by non-trading organizations

Credit balance of this account is known as “Net profit” and added to opening capital

Credit balance is known as “excess of income over expenditure or surplus” and added to opening capital fund

Debit balance of this account is [...]

Difference/Distinction Between Receipts And Payments Accounts And Income And Expenditure Account

Append below are the main differences/distinction between:
 

Receipts & Payments Account

Income & Expenditure Account

Receipts are shown on debit side and payment shown on credit side

Expenses are shown on debit side and Incomes are shown on credit side

Starts with the opening balance of cash in hand and at bank

It has no opening balance

Only cash transactions takes [...]

Difference/Distinction Between Bill Of Exchange And Promissory Note

Append below are the main differences/distinction between:
 

Bill Of Exchange

Promissory Note

There are three parties namely drawer, drawee and payee

There are only two parties viz maker and payee

The drawer and payee may be the same person

Maker cannot be the payee

There is an unconditional order to drawee to pay according to the drawer’s direction

Contains an unconditional promise by [...]

Difference/Distinction Between Trade Bill And Accomodation Bill

Append below are the main differences/distinction between:
 

Trade Bill

Accomodation Bill

Arises from an indebtedness arising from the purchase of goods or taking of a loan

Is drawn and accepted only for providing funds to one of the parties or both the parties of the bill

On discounting a trade bill, full amount is retained by the drawer

Shared in an [...]

Content Page On Basic Accounting Concepts and Regulatory Framework

Click to the respective topic:

Content Page

 
Accounting Period Concept               Business Entity Concept   
 
Consistency Concept                         Dual Aspect Concept
 
Full Disclosure Concept                     Going Concern Concept
 
Historical Cost Concept                      Matching Concept  
             
Materiality Concept                             Money Measurement Concept                   
 
Prudence Or Conservative Concept    Substance Over Form                 
 

Understand the difference between Accounting And Bookkeeping

Understand What Is An Accounting Cycle

Understand the difference between Capital [...]

Discontinued Operation & Contingencies

In the annual report of a listed entity, we sometimes see term like “ discontinued operation”  and Contingencies This article explains the aforesaid terms 

 

DISCONTINUED OPERATION
 

A discontinued operation is a component of an entity that either has been disposed of, or that is classified as held for sale and

 

(a)

  Represents a separate major line of business [...]

Difference Between Capital Receipts And Revenue Receipts

Capital Receipts

Revenue Receipts

(a) Receipts derived from activities which are not part of the normal trading activities of the business

(a) Receipts related to NORMAL ACTIVITIES of the business

(b) Appears as capital or liabilities in the Balance Sheet

(b) Credited as revenue to Trading and Profit & Loss Account

© Examples: receipts of cash brought [...]

Changes In Accounting Policies

In the earlier articles, we have discussed Changes in accounting estimates and fundamental errors.

This article explained what is this Changes In accounting Policies

Changes In Accounting Policies

As we know Accounting policies are the specific principles, bases, methods, conventions, rule and practices that an enterprise adopts in the preparation and presentation of its financial statements.

Based on consistency [...]

Understand Accounting Fundamental Errors

Earlier we have discussed in details changes in accounting estimates and changes in accounting policies.

In this article, we look at what are Fundamental Errors and how do we deal with them. Next we compare Fundamental errors with errors in accounting estimates.

Fundamental Errors

Basics:

Errors are bound to arise whenever judgement has to be exercised.

However, fundamental errors are [...]