Why depreciation is not charged on land?
Land does not get depreciated. The reason being that, the depreciation is supposed to be the reduction in value of an asset because of –
a) Usage, b) extraction c) Obsolesce etc.
Either the capital asset is used and can no more provide as much level of output or some asset from which minerals, coal etc are extracted are getting exhausted or some technology etc are getting obsolete so they are depreciated.
Land is not subject to either of the things. The market value of the land may go down because of seasonal reasons, but land cannot get depreciated
Rates and Ratios are often interpreted as same. Differentiate between the two giving at least two examples?
Rates and ratios have utterly different meanings.
Rates may mean the charges per unit, while ratios mean the ratio of one variable to other.
Rates are expenses which are debited to profit and loss account while ratios are used in interpreting business efficiency. Ratios are income or expenses.
Examples of rates: Depreciation (charged at particular rate), machine operator charges (if based on output), rent and rates (if based on usage of land/plant) etc
Examples of ratios: Ratios are classified in 5 categories.
a. Liquidity
b. Leverage
c. Profitability
d. Turnover
e. valuation
Liquidity ratios: Current Asset Ratio and Quick Ratio
current asset ratio = Current Assets/Current Liabilities
Quick Ratio= Current Assets-Bank Overdraft/Current Liabilities
Leverage ratios: Leverage means risk so the ratios which measure operational or financial risk are leverage ratios
Debt Equity ratio = Total debt / Total equity
Interest coverage ratio = Interest on loan payable / net profit
When can costs subsequent to acquisition of Property Plant and equipment are capitalized?
When any fixed asset is purchased then all costs related to installation of the machinery and repair (only major repair) is capitalized.
There can be quite number of expenses associated with the asset which are of revenue type expenses. They would be incurred as and when production starts.
Examples of revenue expenses are:
a. oiling
b. cleaning
c. painting that part which gets eroded with use
d. changing spare parts which need replacement after specific hours of use etc.
The above expenses are not capitalized. They are debited to profit and loss account.
While all other type of expenses which are incurred very infrequently are capitalized.
Differeciate between Cost Accounting and Management Accounting.
Cost accounting is related only to the cost factors. And management accounting is related to the managerial decision making based on accounting details.
Cost accounting include:
Cost Sheet,
Variance Analysis,
Standard costing,
Cost Budget,
Reconciliation between cost profit/loss and accounting profit/loss,
Job costing,
Contract costing,
Batch costing,
etc.
While management accounting include:
funds flow statement,
cash flow statement,
ratio analysis,
capital budgeting,
working capital management,
budgeting,
dividend policy,
project selection,
NPV/IRR,
etc.
This is for any of you who have worked in a role of BA Hedge Accounting. I need to get an idea of your role in that position. Who are the stakeholders? Do you need to have an in depth knowledge of derivative products?
Even I want to work as Business Analyst. I am looking for BA position. As far as derivatives are concerned they are very simple to study. Obtaining in-depth knowledge of derivatives is not much difficult.
What is contribution margin and how it is calculated?
Contribution is the difference of Revenue over variable costs. Contribution Margin higher than fixed costs will result into profits. Any increase in revenue will earn higher profits as fixed costs will remain same.
Explain what is money market?
It’s a Global financial market for short term borrowing and lending. The money market is where short-term obligations such as treasury bills, commercial paper and banker's acceptances are bought and sold.
What is the importance of the profit and loss account? What is the most important item of the P&L A/C?
A company's profit and loss account shows revenue, expenditure and the profit and/or loss resulting from operations for a given 'financial year'. So it is necessary for the company to know the profit and loss after deducting / adding all direct and indirect expenses or income.
What is meaning of Stale Cheque?
If the cheque dates is older than the six month to current date that is called Stale Cheque. This is not a valid cheque and banker will not accept.
For Ex: Current date 05-Jun-2008 if cheque date is 4-Dec-2007 or before cheque will be stale.
What is miscellaneous expenses & why they carry forward every year?
Miscellaneous expenses are the petty expenses, which every business incurs in their day to day transaction, these could be refreshment expenses, conveyance, postage etc. for accounting these expenses are generally debited to single account i.e. miscellaneous or sundry expenses account which record all these petty expenses.
Prepaid expenses are those expenses which are paid in advance for e.g. rent paid for factory for next 5 years or insurance, that' these are carry forward every year.
What is the difference between financial account and financial statement?
Financial Account is an Individual ledger of an account (Ex: Sales A/c, Purchase A/c, Vendor A/c, Customer A/c), whereas Financial Statement is a final picture of an organization like Profit & Loss Account and Balance Sheet.
Why always Liabilities are on left side and Assets on right side in Balance Sheet?
Should the Cash Discounts GL hit the Balance Sheet in SAP from US concept. If yes then why? Or If No, they why? Please explain how the entry flows and also how would you clear the Open item in cash discount GL and analyze the reason for the same.
Why do we prepare Trail Balance?
Trial balance will show Net balances of all accounts irrespective of nature of account such as Assets, Liabilities, Income and Expenses. Once the Credit and Debit balances of a Trial Balance will tally then only we can proceed for Profit & Loss A/c and Balance Sheet.
Which items belong in income statement and do not belong in balance sheet statement?
All the expenses, incomes and COGS are in the income statement.
How do you calculate sensex points?
SENSEX is calculated using the "Free-float Market Capitalization" methodology. As per this methodology, the level of index at any point of time reflects the Free-float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization.
The base period of SENSEX is 1978-79 and the base value is 100 index points. This is often indicated by the notation 1978-79=100. The calculation of SENSEX involves dividing the Free-float market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scripts etc. During market hours, prices of the index scripts, at which latest trades are executed, are used by the trading system to calculate SENSEX every 15 seconds and disseminated in real time
What is meant by reserves?
Reserve is nothing but money keeping a side for future expenses/payments i.e. unknown expenses
Explain Inter-Company Account.
Inter Company means two or more Companies less than one Group Company. For Example Reliance have different companies like Mobiles, Oil products, malls, telecom, etc., all these companies called Reliance Group. If the same Vendor is supplying material to all companies we can make the payment from one company code that is called Inter Company Account.
How do you prepare MIS Report?
That depends on management requirement.....what ever the management asks we have to present that report.
What is the difference between Traveling and Conveyance?
Traveling means going from one place to another place where as conveyance means arranging a vehicle for transportation purpose.
What are the objectives of Accounting?
There are two main objectives of accounting:
1. to ascertain the profit or loss earned by the firm
2. To know the financial position of the firm
What is Amortization?
1. the paying off of debt in regular installments over a period of time.
2. The deduction of capital expenses over a specific period of time (usually over the asset's life). More specifically, this method measures the consumption of the value of intangible assets, such as a patent or a copyright.
3. Suppose XYZ Biotech spent $30 million dollars on a piece of medical equipment and that the patent on the equipment lasts 15 years, this would mean that $2 million would be recorded each year as an amortization expense.
While amortization and depreciation are often used interchangeably, technically this is an incorrect practice because amortization refers to intangible assets and depreciation refers to tangible assets.
What is meant by Bridge Loan?
Bridge loans are an effective vehicle to immediately capitalize on a purchase opportunity. It is a form of short-term financing which is expected to be paid back - generally within the range of 6 to 36 months - once the borrower obtains more permanent, lower cost financing. Bridge loans in corporate finance are sometimes called "gap financing", and used to cover the time between redemption of one bond issue and its replacement by a new issue. They can also be operating loans for periods between LOI and acquisition, or quiet period and IPO.
What is minority interest?
Firstly we have to understand the meaning of Holding company &Subsidiary company.
Holding Company is that Company who holds majority (51%of share) or more than that of another Company is called as Holding company. And the company the shares of which are held is called Subsidiary Company.
Holding company may not purchase all the shares of it's Subsidiary company when some of the shares of the Subsidiary company are held by outsider's the interest of that Subsidiary company is known as Minority interest
The Minority interest must be calculated and shown on the Liability side of the Consolidated Balance Sheet.
What is the difference between a Provisions and Reserves?
PROVISIONS: These are made against charge. Provisions are made if there is profit or not for companies: Bad debts, income tax. RESERVES these are made on profits and every minimum 10% as reserves.
What is prepaid expense and what are its effects?
Prepaid expenses are those expenses which are paid in advance, and whose benefit will be available in future.
What are premises in accounting sense? What is VAT adjustment?
Premises is and Fixed Assed in the accounting sense which is shown in the balance sheet in final accounts
Vat adjustment is out put tax - input tax the vat which is paid on purchase will be deducted from vat collected from sales this adjustment is known as vat adjustment.
What is the Provision? What is the Entry for Provision?
Provision means liabilities it means payable account  it’s an very useful for controlling payable accounts like telephone charges, ESIC accounts, EPF accounts,
EPF payable accounts Dr
to EPF accounts
ESIC payable accounts Dr
to ESIC account
What are the advantages of Computer accounting over Paper accounting?
There are many advantages from computer accounting over manual accounting. You can get automatically the creditors data, debtors’ data, sale proceeds, balance sheet, and many more information in the desired manner.
How to prepare finalization accounts?
First of all post all the journals in the ledger and then post in the trial balance and from that prepare trading account and manufacturing account (if necessary) and profit and loss account and then prepare profit and loss adjustment account and with the help of the trial balance prepare balance sheet and also show the profit under reserves after deducting the previous year losses and show contingencies (if any) in the notes to accounts.
What is Departmental Accounting? Give an example
Departmental accounting means account prepared separately for the department and here ledgers will be opened trial balance will be prepared and also p&l account will be prepared and profit or loss is included in the main p&l account and also shown in the balance sheet.
What is Service Tax & Excise? How it will be charge?
Service Tax is a form of indirect tax imposed on specified services called “taxable services. Presently it covers 58 services. A service tax shall be paid by the service provider but  collected from the service receiver.
Excise is also a form of indirect tax levied on  goods produced or manufactured in
What is Capital Budget?
Capital Budgeting is a way to justify capital expenditures. It's done to see if the added benefit of a capital purchase, i.e. increased revenue or decreased expense, exceeds the cost of capital.
What is purchasing order?
Purchasing order means order given to purchase anything.
What is vendor?
Vendor means the one who sells
What is
What is debit and credit note?
Debit and credit note: while making entry in your books of accounts you need the documentary voucher. So the voucher made stating what entry and why it is made is
called debit/credit note.
Difference between Accounts and Finance.
ACCOUNT is the detailed record of a particular asset, liability, owners' equity, revenue or expense.
FINANCIAL ACCOUNTING is the area of accounting concerned with reporting financial information to interested external parties
What is dual aspect concept?
Dual aspect concept: each and every transaction has two sides. Example: when you buy a shirt, then shirt comes to you while cash leaves you
similarly if you sell the same shirt to anyone then cash comes to you while shirt leaves you.Recording both aspects of coming and going is called dual aspect concept
What are depreciation and how many types and details?
Depreciation and its types: Depreciation means reducing/lowering value of an asset because of its use. Like machines/vehicles gets rusty/slow because of consistent use.
What is cash flow and funds flow?
Cash flow and funds flow: cash flow means direct entry of cash in your business and exit of the samefunds flow means entry of funds (cash funds or non cash funds) and their exit
non cash funds may mean rise in current assets or fall in current liabilities which was not due to any cash movement
What is capital gain?
Capital gain: when any capital asset is sold and it is sold at a higher price than its book value then that extra gain is called capital gain. The word profit generally means revenue profits. While capital gain is generally received infrequently
What are bills receivable?
BILLS RECEIVABLE, in merchant accounts, are all promissory notes, bills of exchange, bonds, and other evidences or securities which a merchant or trader holds, and which are payable to him.
What is deferred account?
A best example of a deferred account is advertisement expense account. This account are those where an investment or expense is don’t with an expectation of making a intangible profit which cannot be measured or directly linked to expense.
What are MIS reports and do you prepare it?
MIS is management information system. And MIS report is reporting information of reports like efficiency of wing or a department of a company.
IF we take BPO (Call center) sector as example, MIS consists of efficiency of agents, Average timetaken hold time etc and passing this to the management level for their analysis.
What is your role in planning?
It is a common question in interview, on the basis of CV Planning is a group work, so we find what work we done on the planning process. Every work is group work so we find what work we done in every part of Accounting.
How to do credit control?
1) Make the creditor, your debtor
2) For good creditor, give discounts & offers
3) For bad creditor, inform your position of willingness but inability to sustain relationship keeping in mind our business position.
What is bank reconciliation statement?
A Bank reconciliation statements are prepared if balance of bank account as shown in cash bookdiffers from balance as shown in passbook. This statement shows the reasons or transactions because of which balances as shown in cash book and pass book are not tallying with each other.
What the functions of manger -accounts and manager-finance. Explain in detail.
When we see their difference from broad organizational review, the function of accounts manager are- The approval of the accounting system utilization and calculated amounts in supportable documents ,for example in journal vouchers and the approval of the accounting method. Also change of the accounting procedures of the company.
But regarding the manager
1. Controls the over all activity of the organization including the account manger.
What are the extraordinary items?
Transactions which happened due to catastrophic events i.e. unusual circumstance example: earthquake, flood, tsunami etc are called extraordinary items.
What are the fictitious assets?
These are like intangible assets which cannot be seen or touched. Actually these are not assets but some expenditure which cannot turn to profit and loss account of a particular period that is why these items are shown on assets side of balance sheet to be written off to P&L account in reasonable years.
What are the Steps involved in Project implementation?
Step involved in project implementation:
a. Identification of the need. b) Idea generation and screening of ideas. c) Feasibility Study. d) ProjectDevelopment e) Implementation. f) Controlling
What are time sheets? How they are maintained?
Timesheet is an approved document by an Authorized person of the particular Project where employee is working, for the work done by the concerned employee/consultant along with the description of work done. Time sheet contains the Billable/Non-Billable hours. Based on the Timesheet the Company will raise the invoice, for the consulting services provided by its employee, on the end-client.
What is mean by Working Capital?
Working capital is a fund which is used to run the organization for minimum actions.
What is shadow balance ?
Shadow Balance in bank accounts is the balance unto which the subsequent debits can be posted unto.
Shadow Balance = Book Balance - Debit (yet to be authorized for posting).
Example: Book balance is 1000. There is a debit of 500. The debit is posted in the system and is sent for authorization. At this juncture the Account shows a Shadow Balance of 500. I hope I am clear.
What is meant by balancing?
Balancing means equalizing debit and credit side totals in a T-account.
If there is a deficit on side that is, debit or credit a suspense account is opened with the balancing figure.
What is the difference between inactive accounts and dormant account?
Dormant accounts are those accounts in which there are transactions in the recent history (the stipulation may vary according to the company's rules). Inactive accounts are those accounts in which transactions are being made for long time.
What is meant by turnover?
The turnover refers to the sales volume for a specific period of time like quarterly, semi annually or annually. It can be measured with sales volume figure or no. of days taken.
What is meant by calendar maintenance?
Calendar maintenance means update the sales, purchase and accounts records. Simply meaning is maintaining the records monthly, quarterly, half yearly and yearly.
What is meant by daily accrual and booking?
Meaning of Accrual: Revenues and costs are accrued (gathered), that is recognized as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate. Accrual basis of accounting is one of the fundamental accounting assumptions underlying the preparation and presentation of financial statements.
What is an operative accounts?
Operative Accounts means Account is running/operating regularly, transaction is running from the account (debit/credit and deposit/withdrawal from account) this is called as Operative Account.
What is balance sheet and offbalance sheet?
Balance sheet is a statement which consists if asset and liabilities balance sheet is not called as account .their are 2 columns in balance sheet left hand side is called liabilities and right hand side is called asset.
What is customer account?
Debtors account and bills receivable account are theoretically same. Both are called asreceivables. When we sold goods to debtors account is debited. If we receive a bill from that debtor, we open bills receivable account by closing that debtor account. Thus, bills receivable account is nothing but debtor account. If the bill is dishonored on the due date, we again debit the debtor account in our books. For information and accounting purpose we use both debtor account and bills receivable account.
What is retail banking?
Retail banking refers to the banking done with the retail client (e.g. the normal people) rather than business or organizational customers.
What is inventory management ?
Inventory management is an automated process of managing the stock of products and the various things involved with it Involves a retailer seeking to acquire and maintain a proper merchandise assortment while ordering, shipping, handling, and related costs are kept in check. Systems and processes that identify inventory requirements, set targets, provide replenishment techniques and report actual and projected inventory status.
What is the difference between personal account real account and nominal account?
The total business transactions are divided in to three They are
Transactions related to persons
Transactions related to Things
Transactions related to incomes & expenditures
In accountancy we have three types of accounts they are - personal, real, nominal
Personal accounts refers to all the transactions related to natural persons, artificial persons and representative persons ex:- rama, ravi, andhra bank, outstanding rent. ,. First category of transactions belongs to personal accounts
RULE: debit the receiver and credit the giver
Real accounts include things in the business i.e. assets. IInd category of transactions related to
Real accounts ex: buildings, machinery, cash etc..
RULE: Debit what comes in and credit what goes out
Nominal accounts includes all the transactions related to expenditures, incomes, losses and profits. Ex: - rent paid, rent received, bad debts, profit on sale of an asset.
RULE: Debit all expenses and losses and credit all incomes and profits
What is meant by partitioning?
Partitioning is nothing but grouping based on the cluster which is similar kind of response by a system.
What are trade bills?
Every transaction must be supported by any document. A trade bill is a supporting document ofbusiness activities like purchases, sales, receipts, payments etc...
What is double entry book keeping?
In double entry book keeping method a journal entry is posted to both respective accounts for each transaction.
Let's say for sales transaction, debit entry posted to cash account credit entry posted to sales account.
So it's one of the methods to post accounting transactions.
What is dividend warrants?
Dividend is the part of profits payable to the owners of the company i.e., Shareholders. Some companies issues warrants to its share holders instead of paying dividends in the form of cash in the form of document by mentioning the Warrant Price and other details.
The price mentioned in it is also called exercise price. Some times company may not specify the name of the holder. It can be filled by the holder of the document.
Advantages: It helps to the issuing company from paying the Tax.
It is easy to transfer from one person to other without any formalities
It helps to increase the share/capital of the company
What is Letter of Credit?
LC (Letter of Credit) is a set of documents which are very essential for goods being transported from one country to another. This set includes that of invoices, shipping documents, grantees and others.
What are the four classifications of Bad & Doubtful Debts as per the context of the Bank?
Assets in Banks are Loans and Advances given to borrowers. These Assets are divided into 4 categories. They are
1. Standard Assets: These accounts are good and the borrower is repaying the loan as per stipulation and also the security extended in good.
2. Substandard Asset: These accounts are good as per the security extended is good but the loans repayment is not up to the mark.
3. Doubtful Asset: These accounts have both the security as well the repayment stipulation in irregular method.
4. Bad Asset: These accounts are where the repayment is not forthcoming and the security extended is also become badly.
What is a Comprehensive Income?
Items GAAP does not want us to record in Income Statement. GAAP does not want financial statements provider to mislead users. Ex. items will record in comprehensive income are Unrealized gain or loss on available-for-sales securities; Unrecognized net gain or loss; Unrecognized prior service cost (credit); Unrecognized net gain or loss.
What is the difference between Perpetual & Periodic Inventory systems?
In perpetual inventory system the inventory account is adjusted continually throughout the accounting period.
Whereas in the Periodic Inventory System :- Recording inventory transactions periodically than recording them continually.
What is the difference between provision & reverse?
Provisions are created in books as they are anticipated ex: provision for depreciation
Reserves are created in books as a part of profits which might used to purchase assets or to declare dividends.
What is an adjusting journal entry?
Adjusting entries are those entries that passed to rectify an error or wrong entry already made.... some accounting soft wares have disabled edit function in the accounts, so the only way to undo the mistake is to pass a correction entry or adjusting entry.
What is Contingent Liabilities?
A continental liability may or may not be liability to the company. It is mandatory to show in BalanceSheet. Ex:- Exgratia payable to Workers. Sometimes company has to pay, sometimes may not pay.
What is cost accounting?
Cost accounting is the implementation of accounting techniques, ideas and methods for the utilization of capital or fund in an efficient way while rendering any services or production in the organization. In brief cost accounting is the utilization of the firm’s capital in an efficient way so that the expense remains less than the revenue, which ultimately leads the firm in net profit. It’s a tool which is used to control the cost of production or anything related to money.
What is the difference between Cash Flow & Fund Flow?
Cash flow is a statement that shows that where are you using you cash or bank amount funds and what's profit now. It can be monthly / weekly / yearly also. Cash Flow statement is very useful for the any company who know his direction of flow.
Many times you use current assets for the purchase of fixed assets and paid to creditors. In that condition there is internal transaction between liabilities & assets who do not show cash flow then you prepare Fund Flow statement to see your transferring funds
For e.g.: You sold fixed assets by cash or credit then your assets will be decrease and your current assets will be increase. There are fund flows.
What is service tax?
When any employer provides any service to his customer which income is excess under the tax then company liable for the pay tax.
Service tax charged at rate 12% + 3% E.Cess & H.& E.Cess
=12.36%
And service tax deposited of in under 5 days who you charged service tax to his customers.
In the payment of Service tax amount you can Credit availed during of the month.
And if any company purchased of any item that has Excise duty & E.Cess with E.Cess then you can credit availed when you received excise form to your seller.
Can I take service tax on freight outward?
Yes you can take tax on freight outward. Because you are paid freight inclusive of service tax so you can full credit availed on any expenditure where you paying service tax amount.
Q55: what are the golden rules of accounting?
Personal: Debit the receiver
Credit the Giver
Real : Debit what comes in
: Credit what goes out
Nominal : Debit all expenses and losses
: Credit all income and gains
What is the TDS effect in balance sheet if TDS receipts?
In Assets Side:
Advance In-Come-Tax A/c Dr with TDS received Amount and Party A/c Cr with TDS received Amount
Q56: where TDS received should show in balance sheet?
Assets Side:
Advance In-Come Tax Ledger in current year
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