STUDY TO ENLIGHTEN YOURSELF
OBJECTIVES OF ACCOUNTING Accounting is a system which involves the identification of transactions and events which are financial in nature; ensuring measurement of transactions in the monetary terms; recording the transactions in the journal; classifying the entries in ledger, summarizing the entries in final accounts i.e. Trading Account and Profit and Loss Account and Balance…
HISTORY OF ACCOUNTING The history of accounting dates back to the earliest days of human agriculture and civilization when the need to maintain accurate records of the quantities and relative values of agricultural products first arose. Simple Accounting is mentioned in the Christian Bible in the book of Mathew in the parable of the Talents….
FEATURES OF ACCOUNTING Accounting refers to the mechanism of maintaining and keeping the records of the transactions and events and also its analysis and interpretation. It also includes the preparation of final accounts such as Trading and Profit and Loss Account and Balance Sheet at the end of the financial year. It is associated with…
DISSOLUTION OF PARTNERSHIP FIRM Dissolution of Partnership Firm means the firm closes down its operations and comes to an end. On the dissolution of the firm, the assets of the firm are sold and liabilities are paid off. The balance, if any, is paid to the partners in settlement of their accounts. If there is…
ACCOUNTING MEANING AND DEFINITIONS Accounting refers to the mechanism of maintaining and keeping the records of the transactions and events and also its analysis and interpretation. It also includes the preparation of final accounts i.e. Trading and Profit and Loss Account and Balance Sheet at the end of the financial year. It is associated with…
INVESTMENT FLUCTUATION RESERVE Investment Fluctuation Reserve is a reserve created out of the profits to meet the fall in the market value of investments. It is created to adjust the difference between the book value and market value of investment. Excess of IFR over difference between book value and market value is credited to old…
WHAT IS WORKMEN COMPENSATION RESERVE Workmen Compensation Reserve is a reserve created out of firm’s profits to meet possible liability to pay compensation to employees, if it arises. It means, a claim may or may not arise. It also means that claim may be higher than amount of reserve. The Treatment of Workmen Compensation Reserve…
TREATMENT OF GOODWILL ON ADMISSION OF PARTNER Goodwill is an intangible asset which enables a firm to earn higher profit than the normal profit earned by the other firms in the industry. Goodwill is created through the sincere and honest efforts made by the partners in the past. The goodwill so generated is known as…
DIFFERENCE B/W GAINING & SACRIFICING RATIO Before understanding the difference between Gaining & Sacrificing Ratio, one must learn the meaning of both terms which is as follows: SACRIFICING RATIO Sacrificing ratio is the ratio in which old or existing partners forego, i.e., sacrifice their share of profit in favor of the new or incoming partner….
MEANING The ratio in which the continuing partners acquire the outgoing partner’s share is called the Gaining Ratio. It is the ratio in which the remaining partners will pay the amount of goodwill to the retiring partner. This ratio is calculated by deducting old share in profits from the new share in profits. WHY GAINING…
