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Maneet Kaur
In:
30 transactionsfinancial statementsjournalledgertrial balance
  1. Vaishnavi_Shetty
    This answer was edited.

    Yes. Let's take a set of transactions and prepare all the requisite information asked. Following are the transactions for the period April 20x1 to March 20x2 in the books of Michael Traders 1-Apr Michael started business with cash 600,000, cash at Bank of America 700,000, furniture 200,000. 1-Apr PuRead more

    Yes.

    Let’s take a set of transactions and prepare all the requisite information asked.

    Following are the transactions for the period April 20×1 to March 20×2 in the books of Michael Traders

    1-Apr Michael started business with cash 600,000, cash at Bank of America 700,000, furniture 200,000.
    1-Apr Purchased Plant & Machinery worth 250,000 by cheque.
    25-Apr Purchased goods from ABC Ltd worth 800,000 @10% trade discount.
    5-May Cash Sales 1,000,000 @5% trade discount to XYZ Traders
    15-May Deposited cash with Bank of America 500,000.
    5-Jun Paid ABC Ltd 300,000 in cash.
    10-Jun Received commission 75,000 by cheque.
    25-Jun Cash Purchases 250,000.
    5-Jul Sold goods to XYZ Traders 475,000.
    15-Jul Received 275,000 by cheque from XYZ Traders.
    5-Aug Loan taken from Bank of America 200,000
    25-Aug Purchased goods from ABC Ltd 50,000.
    27-Aug Withdrew cash from bank 10,000.
    5-Sep Received commission 55,000 in cash.
    10-Sep Paid ABC Ltd 70,000 by cheque.
    20-Sep Received 90,000 in cash from XYZ Traders.
    1-Oct Bank loan repaid 50,000.
    25-Oct Cash Purchases 25,000.
    5-Nov Sold goods to XYZ Traders 47,000.
    15-Nov Withdrew cash from bank 15,000.
    5-Dec Received interest from bank 5,000.
    25-Dec Purchased goods from ABC Ltd 75,000.
    5-Jan Cash Sales 100,000.
    15-Jan Deposited cash with Bank of America 35,000.
    25-Feb Cash Purchases 450,000.
    28-Feb Office was taken on rent in the month of Feb. Office rent paid in cash 50,000.
    28-Feb Employees were hired in the month of Feb. Paid salary by cheque 30,000 & cash 30,000 for the month of Feb 20×2.
    5-Mar Sold goods to XYZ Traders 675,000.
    31-Mar Paid office rent by cheque 50,000.
    31-Mar Paid salary in cash 30,000 for the month of March 20×2.

    You are required to:
    (i) Journalize the above transactions and post them in Ledgers and prepare a Trial Balance.

    (ii) Prepare Trading A/c, Profit & Loss A/c and Balance Sheet taking into consideration:
    1. Closing Stock as on 31st March 20×2 is 200,000.
    2. Salary outstanding for the month of March 20×2 is 30,000.
    3. [email protected]% to be charged on Furniture & Fixtures and @15% on Plant & Machinery.

    1. Journal Entries

    April & May Journal

    June-Aug Journal

    Sep-Nov Journal

    Dec-Jan Journal

    Feb-March Journal

    2. Ledgers

    Ledger-Micheal Capital A/c

    Ledger-Purchases & Sales A/c

    Ledger-Furniture A/c & Plant & Machinery A/c

    Ledger-Creditor & Debtor A/c

    Ledger-Bank Loan A/c

    Ledger-Salary & Office Rent A/c

    Ledger-Interest & Commission received A/c

    Ledger-Cash A/c

    Ledger-Bank of America A/c

    3. Trial Balance

    Trial Balance

    4. Trading A/c & Profit and Loss A/c

    Trading A/c and Profit & Loss A/c

    5. Balance Sheet

    Balance Sheet

    An excel sheet of the entire transactions along with the requisite information asked has been attached for your reference.

    30-transactions-of-Journal-Ledger-Trial-Balance-Financial-Statements

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    • 147
John Hay
In:
financial statementspreliminary expenses
  1. Palaktripathi
    This answer was edited.

    In simple words, all the expenses that are incidental to the incorporation or commencement of a business are known as preliminary expenses. For example, statutory fees, stamp duty, registration fees, etc. Treatment in Financial Statements In case the value of preliminary expenses is less we write ofRead more

    In simple words, all the expenses that are incidental to the incorporation or commencement of a business are known as preliminary expenses. For example, statutory fees, stamp duty, registration fees, etc.

    Treatment in Financial Statements

    In case the value of preliminary expenses is less we write off the same at once however, they are shown as an intangible asset in the balance sheet and written off at regular intervals over a fiscal period when the value of the expenses is high. I would like to explain this concept further with the help of an example.

    Example

    ABC Ltd. incurs an expense of 4,00,00 before the commencement of its business. They decide to write off the preliminary expense of 4,00,000 within the next 4 financial years. The journal entries in the books of ABC Ltd. are as follows:

    Preliminary expenses a/c Debit 4,00,000 Debit the increase in asset
    To Bank a/c Credit 4,00,000 Credit the decrease in asset

    (being expenses paid)

    Preliminary expenses written off a/c Debit 1,00,000 Debit the increase in expenses
    To Preliminary expenses a/c Credit 1,00,000 Credit the decrease in asset

    (being expenses written off)

    Note: As the company has decided to write off the preliminary expenses within the next 4 financial years, therefore only 1/4th of the amount (4,00,000 x 1/4 = 1,00,000) will be recorded in the current years income statement and the remaining balance of (3,00,000) shall be recorded in the balance sheet of the same financial period.

    Profit and Loss a/c Debit 1,00,000 Debit the increase in expenses
    To Preliminary expenses a/c Credit 1,00,000 Credit the decrease in expenses

    (being expenses transferred to p/l a/c)

    Placement in Balance Sheet

    (Image to be inserted here)

    Hope this helps.

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Natalia Alva
In:
amortizationfinancial statements
  1. Vaishnavi
    This answer was edited.

    What is Amortization? Amortization can be referred to as the depreciation of intangible assets such as goodwill, patent, trademarks, copyrights, computer software, etc. It is the reduction in the value of intangible assets over a period of time. Intangible assets having definite useful life lose theRead more

    What is Amortization?

    Amortization can be referred to as the depreciation of intangible assets such as goodwill, patent, trademarks, copyrights, computer software, etc. It is the reduction in the value of intangible assets over a period of time.

    Intangible assets having definite useful life lose their value over time due to technological changes, contract expirations, etc. So, finite-life intangible assets are amortized on a straight-line basis over the period of their estimated useful lives.

    Journal Entry

    The journal entry for charging amortization expenses in the books of accounts is as follows-

    Amortization Expense A/c Debit Debit the increase in expenses
     To Intangible Assets/Accumulated Amortization Expenses A/c Credit Credit the decrease in assets

    Treatment in the Financial Statements

    Amortization expenses are shown in both the Balance Sheet and Profit and Loss account.

    Financial Statement Treatment
    Profit and Loss account Presented as “Depreciation and Amortization Expenses” under the head Expenses
    Balance Sheet Reduced from the respective Intangible Assets under the head “Non-Current assets”

    Let me also help you understand the same with the help of an example.

    Example

    Suppose Infosys Inc. acquired a new computer software for 1,000,000 in the month of January 20×1. The estimated useful life of the software is 5 years.

    In this case, computer software worth 1,000,000 will be recorded as an intangible asset at the time of acquiring the software.

    However, it will be amortized at the end of each year for 5 years on a straight-line basis ie. 200,000 will be recorded as an expense and will be written-off from the amount of software each year for 5 consecutive years.

    An extract of Profit & Loss A/c and Balance Sheet has been attached for a better understanding of the presentation of amortization expenses.

    Amortization presented in P&L A/c

    The above profit & loss extract shows 200,000 has been recorded as amortization expenses for the period Jan-Dec 20×1.

    Amortization presented in balance sheet

    The above balance sheet extract shows 200,000 amortization expenses written-off from the amount of computer software for the period Jan-Dec 20×1. The balance of 800,000 will be proportionately written-off in the next 4 years.

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