Trial Balance The statements prepared with the help of ledger balances, at the end of financial year (or at any other date) to find out whether debit total agrees with credit total, is called trial balance. Errors of Trial Balance Normally four types of errors are not revealed by trial balance, so two sides of trial will although agree, even then our accounts may not be free from errors. Such errors are (1) Errors of omission : If a transaction is not recorded in the book of original entry then both debit and credit effects of the transaction are omitted and trial balance shall not be affected, e.g. goods sold to John worth rs 1,000. The entry is not recorded bin the books at all, it means neither John's account is debited nor sales Account is credited. As both sides have been affected by equal amount, so the trial balance shall agree. (2) Errors of Commission : These errors are the result of carelessness of accounting staff and in some of the cases such errors do not affect the to...

Introduction The main objective of Accounting is to ascertain the profit and loss and financial position of the business. The profit and loss  and the financial position of the business can be ascertain by preparing the final accounts. The final Account is prepared on the basis of the various balance accounts in the ledger. The ledger accounts are spread over many pages of ledger or over different ledgers like the debtors ledger,  the creditors ledger and the general ledger. So the various pages of ledger or the different ledgers have to be gone through by the the accountant to ascertain the balance of various ledger accounts. Such a step is inconvenient an takes more time to prepare the final accounts. To overcome this problem a list of balances of various ledger account, called the trial balance is prepared by the accountants as on the closing date  of the accounting year. When there is a trial balance prepared as on the last date of accounting period, the balances of a...

Suspense Account Sometimes, in spite of best efforts of an accountant, all the errors are not located and the Trial Balance does not tally. In such a situation, to avoid the delay in the preparation of final accounts, the difference in the Trial Balance is placed to a newly opened account known as  "Suspense Account" and the Trial Balance Tallies. If the debit side of the Trial Balance exceed the credit side , the difference will be put on credit side of the suspense Account and if the credit side of the Trial Balance exceed the debit side, Suspense Account will be debited. After including the balance of suspense Account in the Trial Balance. It will appear to be tallied. Later, when the errors are located, the rectification entries will be passed with the help of the Suspense Account. Therefore, When all the errors have been located and rectified, the suspense Account will automatically Stand closed. If the suspense Account still shows a balance, it will be to the Balance Sh...

Meaning and Definitions It is a specialized kind of transactions between a person (called consignor) and another person (called consignee), whereby consignor send goods to consignee to be sold by the later on behalf of former for a mutually agreed commission. The basic Relationships between consignor and consignee is that of a principal and an agent. The idea behind consignment is to tap more customers at far flung places, where it may not be practical for the consignor to sell goods directly to customers. Consignment facilitates expansion of business without opening of branches at different localities. It is regarded as a cost savings devices because opening of branches will involve high initial costs. The primary objective of consignment is to enable the business to become a market leader without the help of a wholesaler and retailer because goods are sent by the manufacturer or wholesaler to an agent. Features of Consignment The goods sent on consignment has the following special fe...

Abnormal loss Abnormal loss may arises, due to pilferage, theft, fire, excessive breakage and negligence etc. This loss is not natural and can be avoided with proper care. In case of abnormal loss, value of stock unsold is not inflated. Abnormal loss is calculated after taking into consideration proportionate expenses incurred on it (similar to valuation of consignment closing stock). The same is credited to consignment Account and debited to abnormal loss Account. If goods are insured and claim is accepted by insurance company, then 'Insurance claim'  account will be debited by the amount of claim accepted, the portion of loss not accepted as claim will be debited to profit and loss account and  'abnormal loss' account will be credited. The journal entries are : (1) When goods destroyed were not insured       (a) Abnormal loss  A/c                        Dr           ...

Employment or service When a person undertakes to render personal services under an agreement of employment, he is said to be in service or employment. The service is rendered for a salary or wage and/or other benefits attached to that job. The service may be in a government or a private Organization. Features of employment An employment commences when a person join some Organization for providing personal services. There is a relationship if employer and employee. A person taking up a job is an employee and the person who provides the service is called an employer. The employer assign duties to the employees. An employee is not required to make capital investment. The employees gets salaries/ wages for rendering their services to the Organization. The employees will have to follow service rules and regulations prescribed by the employer. There are no standard qualifications for getting employment. The qualifications are linked to the requirements of particular jobs.

Profession A profession is an occupation which involves rendering of personal services of a specialized nature. The service is based on professional education, knowledge, training etc. This service is provided for a professional fees charged from the clients. The professional are members of professional bodies and conduct their activities according to standard set by those bodies. The professional bodies have their own code of conduct which members will have to obey. Features of profession A person entering a particular profession should have specialized knowledge and training prescribed for entering that profession. One must have a professional degree such as C.A., L.LB., M.B.B.S etc for entering a particular profession. The membership of a particular professional body is compulsory before entering that profession. A Chartered Accountant must be a member of the Institute of Chartered Accountants of India and this is necessary for other professional also. Every professional body has a ...