Accounting

To record a sale to an account customer Account Debit Credit Accounts receivable XXX Revenue XXX To receive a cash payment from an account customer Account Debit Credit Cash XXX Accounts receivable XXX To receive a cash payment from an account customer taking cash discount Account Debit Credit Cash XXX Discount allowed XXX Accounts receivable XXX A credit note is issued to a customer Account Debit Credit Revenue XXX Accounts receivable XXX To write off an accounts receivable as a bad debt Account Debit Credit Bad debt expense XXX ...

Depreciation is the expense therefore we need to decrease in the value of any fixed asset. The reduction in value of an asset due to normal usage, wear and tear, new technology or unfavorable market conditions is called Depreciation. Assets such as plant and machinery, buildings, vehicles etc. which are expected to last more than one year, but not for the infinity are subject to depreciation. Example :- Journal entry for depreciation Depreciation A/C               Debit    To Asset A/C                                   Credit (Assuming no provision is maintained) Rules applied in the above journal entry •          Depreciation – Nominal Account – Dr. All expenses & losses •...

The Cost of Goods Sold sometimes abbreviated to COGS or referred to as Cost of Sales, is the costs associated with producing the goods which have been sold during an accounting period. The items must have been sold otherwise there is no Cost of Goods Sold. Cost of Goods Sold can equally refer to a service as well as a physical product hence the uses of the more general term Cost of Sales. The costs included in Cost of Goods sold are those necessary to bring the product to its present state and condition prior to sale. They do not include selling expenses, distribution costs, marketing etc such costs are termed costs of selling or selling costs or sales and marketing costs. For a manufacturing, retailing or distribution business the cost of the goods sold refers to the physical product and the costs of bringing it to the point of sale. This might include direct material and labor costs, product costs, purchase returns and allowances, purchase discounts, freight inwards (th...

There are Some of the common types of costs incurred such as: Cleaning services; Security; Water; Electricity; Heating-ventilation-and-air-conditioning (HVAC); Payroll; Insurance; Repairs and maintenance; Leasing costs; Loan closing costs; Management fees; Property taxes; Sales and use taxes; Additional services bill-backs. 1. Cleaning Expenses Cleaning involves the cost of cleaning both inside and outside of the property. This service is either provided by the property owner’s personnel or outsourced to third-party cleaning companies. If it is performed by the owner’s personnel, this cost would be part of payroll expenses. Cleaning cost is a period cost and should be expensed during the applicable periods. Therefore, the journal entry to record this type of expense would be: [Debit] Cleaning expense = $xx [Credit]. Cash or Accounts Payable = $xx However, in an outsourced cleaning scenario, the parties might agree that the owner would pay in advance every six month...

Amortization expense is the write-off of an intangible asset over its expected period of use, which reflects the consumption of the asset. This write-off results in the residual asset balance declining over time. The amount of this write-off appears in the income statement, usually within the "depreciation and amortization" line item. The accounting for amortization expense is a debit to the amortization expense account and a credit to the accumulated amortization account. The accumulated amortization account appears on the balance sheet as a contra account, and is paired with and positioned after the intangible assets line item. In some balance sheets, it may be aggregated with the accumulated depreciation line item, so only the net balance is reported. Amortization is almost always calculated on a straight-line basis. Accelerated amortization methods make little sense, since it is difficult to prove that intangible assets are used more quickly in the early y...

Intercompany eliminations are used to remove from the financial statements of a group of companies any transactions involving dealings between the companies in the group. There are three types of intercompany eliminations, which are: •Intercompany debt. Eliminates any loans made from one entity to another within the group, since these only results in offsetting notes payable and receivable, as well as offsetting interest expense and interest income. These issues most commonly arise when funds are being moved between entities by a centralized treasury department. •Intercompany revenue and expenses. Eliminates the sale of goods or services from one entity to another within the group. This means that the related revenues, cost of goods sold, and profits are all eliminated. The reason for these eliminations is that a company cannot recognize revenue from sales to itself; all sales must be to external entities. These issues most commonly arise when a company is vertically integr...

Interpreting the impact of intercompany transactions on the financial records of the units involved begins with understanding how the transactions are initially recognized on each unit’s financial records. It is also important to understand how each intercompany transaction impacts the income statement and balance sheet of the units involved in the period of the intercompany transaction as well as in subsequent periods. From this understanding it is possible to determine how to adjust the consolidated financial statements for intercompany transactions using worksheet eliminations. This section presents the journal entries that would be recorded by each entity when selected intercompany transactions occur. Accompanying the journal entries are the worksheet eliminations that are necessary to prepare the consolidated financial statements. Fixed Asset Transaction at the End of the Period The following data pertain to the sale of a machine from Pratt to Sterling. Example :- Assume a m...