Consignment account is a combination of— The value of abnormal loss is calculated like
and profit and loss account.
loss is not recoverable from insurance company.
Goods dispatched by a manufacturer or whole seller to an agent for the purpose of sale
Delcredre commission is normally calculated on
Consignee account is of the nature of a
Consignor account is of the nature of a
sales.
account.
account.
Consignment account is of the nature of a account.
Goods sent on consignment account is a — account.
The consignee — be treated as consignor's debtor for the goods rec
consignment.
Stock on consignment appears in the balance sheet of ,
account will be debited in oaccount will be c
The bill which is drawn by consignee is known as bill.
For goods sent on consignment to consignee
hook.
For goods sent on consignment to consignee consignor's book.
For expenses paid by consignor —
account will be debited and
account will credited in consignor's book.
account will be ci
On payment of advance by consignee to consignor
—: account will be debited in consignee's book.
account will be c
On receiving advance from consignee by consignor
account will be credited in consignor's book.
On the acceptance of bill of exchange in favour of consignor by consignee, consignor abe and bill payable account will be in consignee's book.
accc
On receiving the bill of exchange by consignor from consignee
debited and account will be credited in consignor's book.
account will be de
On payment of expenses by consignee for consignor
account will be in consignee's book.
On payment of expenses by consignee for consignor
account will be
account will be credited in consignor's book.
acc<
account will be
When goods are sold by consignee for cash
account will be credited in consignee's book. •
When goods are sold for cash by consignee account will be
account will be credited in consignor's book.
Tuesday, March 31, 2009
IMPORTANT TERMS AND CONCEPTS:
(a) PROFORMA INVOICE:
Invoice is the forwarding letter sent along with the goods containing particulars ; item; number (quantity or weight or measurement) and the price. As the consignmen consignee is not the buyer therefore the 'forwarding letter* sent along with the consigi for his information. This forwarding letter is a substitute of invoice but it is drawn i invoice and termed a "Performa Invoice".
(b) DELCREDERE COMMISSION:
When such commission is paid to the consignee, the loss on account of ba consignee. This commission will save consignor from loss of bad debts only. If any customer is not in the nature of bad debt (Non-payment due to credit unworthiness ol will be borne by consignor, even if delcredere commission is being paid to consignee.
(C) EXPENSES BORNE BY CONSIGNEE:
If as per agreement, any expense is borne by consignee, or any loss occurs i consignee, such expense or loss will not be debited in consignment account by com will be debited in the profit and loss account of the consignee.
(d) DISCOUNT PAID ON BILLS RECEIVABLE DISCOUNTED BY CONSIGThere are two alternative treatments for this item:
(i) When discount is treated as "consignment expense" it is debited to consig(ii) When discount is treated as "financial charge", it is debited to profit;
(e) GOODS INVOICED AT A PRICE ABOVE COST:
If consignor sends Performa invoice to consignee at a price above cost, profit the basis of cost. Therefore, adjustment shall be made for excess of invoice price ovc value of "goods sent on consignment" and "consignment stock".
(a) PROFORMA INVOICE:
Invoice is the forwarding letter sent along with the goods containing particulars ; item; number (quantity or weight or measurement) and the price. As the consignmen consignee is not the buyer therefore the 'forwarding letter* sent along with the consigi for his information. This forwarding letter is a substitute of invoice but it is drawn i invoice and termed a "Performa Invoice".
(b) DELCREDERE COMMISSION:
When such commission is paid to the consignee, the loss on account of ba consignee. This commission will save consignor from loss of bad debts only. If any customer is not in the nature of bad debt (Non-payment due to credit unworthiness ol will be borne by consignor, even if delcredere commission is being paid to consignee.
(C) EXPENSES BORNE BY CONSIGNEE:
If as per agreement, any expense is borne by consignee, or any loss occurs i consignee, such expense or loss will not be debited in consignment account by com will be debited in the profit and loss account of the consignee.
(d) DISCOUNT PAID ON BILLS RECEIVABLE DISCOUNTED BY CONSIGThere are two alternative treatments for this item:
(i) When discount is treated as "consignment expense" it is debited to consig(ii) When discount is treated as "financial charge", it is debited to profit;
(e) GOODS INVOICED AT A PRICE ABOVE COST:
If consignor sends Performa invoice to consignee at a price above cost, profit the basis of cost. Therefore, adjustment shall be made for excess of invoice price ovc value of "goods sent on consignment" and "consignment stock".
The contents of the memorandum of association as required by Sections 16, 17 and 18 of the mpanies. Ordinance include the following clauses (1) Name clause (2) situation clause (3) object clause liability clause (5) capital clause and (6) subscription clause.
ARTICLES OF ASSOCIATION:
The articles of association is the second important document in the incorporation of a company. It is 1 document which contains the rules and regulations for the internal management of the company. The icles of association embody the power of directors and other officers of the company, the right of voting the shareholders, the procedure of holding meeting, the manner of transferring the shares, the procedure issuing the shares debenture, the payment of dividends, maintenance of accounts, alteration of capital, ading up etc. etc.
The articles of association is subordinate to the memorandum. It cannot include any power which is >hibited or excluded by the Memorandum and the Companies Ordinance.
According to Section 26 of the Companies Ordinance, a company limited by shares can choose to opt table 'A' in the First Schedule which contains model rules and regulations.
The articles of association shall be printed, divided into paragraphs, numbered consecutively, signed each subscriber and dated.
The articles of association subject to the provisions of Ordinance can be altered or added by special solution.
PROSPECTUS:
It is a valuable document issued by the company for raising of the capital.
Prospectus has been defined as "any document described or issued as prospectus and includes any-bce, circular, advertisement or other communication, inviting offers from the public fcr the subscription purchase of any shares".
The main object of prospectus is to arouse the interest of the investors in the proposed company and induce them to invest in its shares and bonds etc.
The prospectus gives the details of die amount issued, the rights attached to the shares the property rchased; information about directors, auditors, bankers etc.
SHARE CAPITAL OF A JOINT STOCK COMPANY
In today's world large scale operations of a company call for a large amount of capital, The total cunt of capital is divided into smaller units. These units are called shares. Each share is assigned a iue. This value is called the par value of the share. The total capital is thus divided into a large number shares. This pool is, therefore, called share capital. This scheme of raising capital through shares (i) Ips the company to raise a large amount, and (ii) helps a larger section of the investment population to Befit from the operations of large scale business concerns.
A company has to fulfil certain legal requirements if, in later yeas, it decides to either increase or crease its share capital. And it has to state its maximum capital in the memorandum. To minimize the ances of undergoing legal formalities in later years, therefore, it is customary to state a reasonable lount as the maximum capital. This amount is incorporated in the memorandum of association and is own as the authorized capital, nominal capital, or registered capital of the company. Various terms used relation to share capital are explained in the following paragraphs.
ARTICLES OF ASSOCIATION:
The articles of association is the second important document in the incorporation of a company. It is 1 document which contains the rules and regulations for the internal management of the company. The icles of association embody the power of directors and other officers of the company, the right of voting the shareholders, the procedure of holding meeting, the manner of transferring the shares, the procedure issuing the shares debenture, the payment of dividends, maintenance of accounts, alteration of capital, ading up etc. etc.
The articles of association is subordinate to the memorandum. It cannot include any power which is >hibited or excluded by the Memorandum and the Companies Ordinance.
According to Section 26 of the Companies Ordinance, a company limited by shares can choose to opt table 'A' in the First Schedule which contains model rules and regulations.
The articles of association shall be printed, divided into paragraphs, numbered consecutively, signed each subscriber and dated.
The articles of association subject to the provisions of Ordinance can be altered or added by special solution.
PROSPECTUS:
It is a valuable document issued by the company for raising of the capital.
Prospectus has been defined as "any document described or issued as prospectus and includes any-bce, circular, advertisement or other communication, inviting offers from the public fcr the subscription purchase of any shares".
The main object of prospectus is to arouse the interest of the investors in the proposed company and induce them to invest in its shares and bonds etc.
The prospectus gives the details of die amount issued, the rights attached to the shares the property rchased; information about directors, auditors, bankers etc.
SHARE CAPITAL OF A JOINT STOCK COMPANY
In today's world large scale operations of a company call for a large amount of capital, The total cunt of capital is divided into smaller units. These units are called shares. Each share is assigned a iue. This value is called the par value of the share. The total capital is thus divided into a large number shares. This pool is, therefore, called share capital. This scheme of raising capital through shares (i) Ips the company to raise a large amount, and (ii) helps a larger section of the investment population to Befit from the operations of large scale business concerns.
A company has to fulfil certain legal requirements if, in later yeas, it decides to either increase or crease its share capital. And it has to state its maximum capital in the memorandum. To minimize the ances of undergoing legal formalities in later years, therefore, it is customary to state a reasonable lount as the maximum capital. This amount is incorporated in the memorandum of association and is own as the authorized capital, nominal capital, or registered capital of the company. Various terms used relation to share capital are explained in the following paragraphs.
Consigment
llauf & Co. of Lahore consigned to Farooq of Gujrat, 60 boxes of toys at Rs. 400
The consignor paid carriage and insurance of Rs. 2,000. Farooq sent Rs. 10,0< payment. Rauf & Co. received an Account Sales from Farooq containing particulars:
Gross sales proceeds are Rs. 34,000.
Transportation and warehousing charges are Rs. 1,500.
Commission at 15 % on gross proceeds.
Rauf & Co. received bank remittance for the balance due from Farooq on the Pass the Journal entries and the necessary Ledger Accounts in the books of < consignee.
Ans: [Consignment Profit Rs. 1400]
2. Karim & Co. of Karachi sent on consignment to Salman & Sons, of Lahore 60 cgoods costing Rs. 175 per case. Expenses incurred by the consignor at Karachi ar
Freight Rs. 275; Insurance Rs. 55; Loading Charges Rs. 20. Karim & Co. Draw on Salman & Sons. 2 months bill at sight for Rs. 7,000 wl accepts. The charges paid by Salman & Sons, at Lahore were: unloading ch storage Rs. 85; Insurance Rs. 15. Commission is payable to Salman & Sons, at 2 in addition to Ij % delcredere commission.
The consignee sells all the cases @ Rs. 240 per case.
Pass the journal entries and consignment account in the books of Karim & Co.
Ans: [Profit on Consignment Rs. 2916]
3. Global Co. of Karachi sent 1,000 cases of Homeopathic medicines to ZahiRawalpindi at Rs. 100 per case. Expenses on the Consignment incurred byamounted to Rs. 3,000. Zahid & Bros, in Rawalpindi were working as delcredencommission is 5 % ; Delcredere Commission is 7 1/2 %.
Exactly after six months an 'Account Sales' was received by Global Co. giving information:
Sale proceeds of 750 cases Rs. 1,50,000
Stock of unsold goods in hand, 250 cases
Consignee's expenses amounted to Rs. 1,200
A Bank draft for Rs. 1,00,000 was sent by Zahid Bros, along with the accoi
You are asked to give the necessary entries in the books of the consignor to rec transactions.
Ai-.: [Profit on Consignment Rs. 52,800]
The consignor paid carriage and insurance of Rs. 2,000. Farooq sent Rs. 10,0< payment. Rauf & Co. received an Account Sales from Farooq containing particulars:
Gross sales proceeds are Rs. 34,000.
Transportation and warehousing charges are Rs. 1,500.
Commission at 15 % on gross proceeds.
Rauf & Co. received bank remittance for the balance due from Farooq on the Pass the Journal entries and the necessary Ledger Accounts in the books of < consignee.
Ans: [Consignment Profit Rs. 1400]
2. Karim & Co. of Karachi sent on consignment to Salman & Sons, of Lahore 60 cgoods costing Rs. 175 per case. Expenses incurred by the consignor at Karachi ar
Freight Rs. 275; Insurance Rs. 55; Loading Charges Rs. 20. Karim & Co. Draw on Salman & Sons. 2 months bill at sight for Rs. 7,000 wl accepts. The charges paid by Salman & Sons, at Lahore were: unloading ch storage Rs. 85; Insurance Rs. 15. Commission is payable to Salman & Sons, at 2 in addition to Ij % delcredere commission.
The consignee sells all the cases @ Rs. 240 per case.
Pass the journal entries and consignment account in the books of Karim & Co.
Ans: [Profit on Consignment Rs. 2916]
3. Global Co. of Karachi sent 1,000 cases of Homeopathic medicines to ZahiRawalpindi at Rs. 100 per case. Expenses on the Consignment incurred byamounted to Rs. 3,000. Zahid & Bros, in Rawalpindi were working as delcredencommission is 5 % ; Delcredere Commission is 7 1/2 %.
Exactly after six months an 'Account Sales' was received by Global Co. giving information:
Sale proceeds of 750 cases Rs. 1,50,000
Stock of unsold goods in hand, 250 cases
Consignee's expenses amounted to Rs. 1,200
A Bank draft for Rs. 1,00,000 was sent by Zahid Bros, along with the accoi
You are asked to give the necessary entries in the books of the consignor to rec transactions.
Ai-.: [Profit on Consignment Rs. 52,800]
Monday, March 30, 2009
Definitions 100% work
2. Only cash transactions are recorded here.
3. The portion of income or expenditure whichhas been received or paid in cash this year,is recorded here.
4. Transactions involving cash receipts arerecorded on Debit side and those involvingcash payments are recorded on Credit side.
5. Transactions—both capital and revenue—are recorded here.
6. Its balance can never be credit.
7. Its .balance is carried over to Receipts &Payments Account of the next year.
8. This account shows opening balance exceptin the first year.
9. The closing balance of this accountrepresent in the first year.
It is not confined to cash transactions onH, i.e. non-cash transactions are also included in it.
The whole amount of income oil expenditure—whether received or paid iij cash or not—is recorded in it.
All expenditures are recorded on Debit side and all incomes on Credit side.
5. Only revenue transactions are recorded here.
6. Its balance may be either debit or credit.
7. Its balance is transferred to Capital Fund.
8. It has no opening balance.
9. Its closing balance represents either surplus Ior deficit. Credit balance indicates surplus, jwhile debit balance indicates deficit.
10. This account records transactions relating topast, present and future years. Hence, noadjustment is made for pre-received oraccrued incomes and pre-paid oroutstanding expenses. In a word, it isprepared on cash basis.
11. It is, in fact, an abridged Cash Book.
10. Transactions relating to the current yearonly are recorded in it. Hence, adjustmentsare invariably made for pre-received oraccrued incomes and pre-paid oroutstanding expenses. In a word, it mprepared on Accrual basis.*
11. It is, infect, similar to Profit & Loss Accountof a profit-seeking business concern.
12. It is outside the Double Entry system.
13. It is not accompanied by Balance Sheet.
14. Its preparation is not compulsory.
12. It is within the Double Entry system.
13. It is accompanied by Balance SheetIt is compulsory. It must be prepared iiorder to ascertain the true result of tconcern
3. The portion of income or expenditure whichhas been received or paid in cash this year,is recorded here.
4. Transactions involving cash receipts arerecorded on Debit side and those involvingcash payments are recorded on Credit side.
5. Transactions—both capital and revenue—are recorded here.
6. Its balance can never be credit.
7. Its .balance is carried over to Receipts &Payments Account of the next year.
8. This account shows opening balance exceptin the first year.
9. The closing balance of this accountrepresent in the first year.
It is not confined to cash transactions onH, i.e. non-cash transactions are also included in it.
The whole amount of income oil expenditure—whether received or paid iij cash or not—is recorded in it.
All expenditures are recorded on Debit side and all incomes on Credit side.
5. Only revenue transactions are recorded here.
6. Its balance may be either debit or credit.
7. Its balance is transferred to Capital Fund.
8. It has no opening balance.
9. Its closing balance represents either surplus Ior deficit. Credit balance indicates surplus, jwhile debit balance indicates deficit.
10. This account records transactions relating topast, present and future years. Hence, noadjustment is made for pre-received oraccrued incomes and pre-paid oroutstanding expenses. In a word, it isprepared on cash basis.
11. It is, in fact, an abridged Cash Book.
10. Transactions relating to the current yearonly are recorded in it. Hence, adjustmentsare invariably made for pre-received oraccrued incomes and pre-paid oroutstanding expenses. In a word, it mprepared on Accrual basis.*
11. It is, infect, similar to Profit & Loss Accountof a profit-seeking business concern.
12. It is outside the Double Entry system.
13. It is not accompanied by Balance Sheet.
14. Its preparation is not compulsory.
12. It is within the Double Entry system.
13. It is accompanied by Balance SheetIt is compulsory. It must be prepared iiorder to ascertain the true result of tconcern
Solved problem
On 1st July 2005 P & Co. sends 300 cases of medicines to Teeshan on consignment'basin The cost of each case was Rs. 1,000. P &Ctf. incurred the following expenses on the consignment: Rs. 750 on railway freight and Rs. 450 on insurance.
200 cases were sold by Zeeshan uniformly at Rs. 2000 per case. The expenses of Zeeshan amounted to Rs. 1,200. He sent an account sale on 31st December 2005 which revealed that he charged 5 % as ordinary commission and 10 % as delcreder commission. He sent a bank draft for Rs. 90,000.
You are required to prepare Consignment Account, Zeeshan's Account and goods sent on consignment Account in the books of P & Co.
ins: [Profit on consignment Rs. 1,38,000}
On 1st March 2005 Karini Bux consigned cloth to the value of Rs. 6,50,000 at cost to Afzal & Sons, his agent in Multan. Who accepted a 3 months draft for Its.7.80,000. The draft was discounted at a cost of Rs. 13,000.
Karim Bux paid Rs. 35,000 as freight and Rs. 6,500 as insurance on 30th September 2005, Afzal & Sons notified Karim Bux that 4/5th of the goods had been sold for Rs. 8,24,000 and that the selling expenses were Rs. 12,100.
Afzal & Sons' were entitled to a commission at the rate of 10 % on sales. Show these transactions in the necessary ledgers of both the parties.
: fConsignment Profit Rs. 176,300]
On 1st July 2005 Mr. M in Sialkot consigned to Mr. R in Swat, goods to the value of Rs. 60,000, paying freight charges Rs. 5,000 and draws a bill on Mr. R for Rs. 30,000.3/4the of this consignment was sold by Mr. R for Rs. 70,000 and expenses Rs. 6,000 were incurred. Mr. R is also entitled to a commission of 6 % on sales. Mr. R remitted to Mr. M, the net amount held for his account by means of a sight draft. Show the ledger accounts in the books of Mr. M.
mms. [Profit on Consignment Rs. 11,050]
On 1st January 2005 Mr. C of Lahore consigned to D of Sargodha goods for sale. Mr. D Is entitled to a commission of 5%. Goods costing Rs. 24,000 were consigned to Sargodha . The expenses of consignment amounted to Rs. 2,000. On 31st March 2005 an Account Sales was received from Mr. D showing that he had affected sates of Rs. 24,000 in respect of 3/4 of the quantity of goods consigned to him. The expenses incurred by him amounted to Rs. 1,200. Mr. D remitted the amount due by a bank draft
Prepare consignment account, goods sent on consignment account and Mr. D's account in the Books of Mr. C.
[Profit on Consignment Rs. 2,100]
200 cases were sold by Zeeshan uniformly at Rs. 2000 per case. The expenses of Zeeshan amounted to Rs. 1,200. He sent an account sale on 31st December 2005 which revealed that he charged 5 % as ordinary commission and 10 % as delcreder commission. He sent a bank draft for Rs. 90,000.
You are required to prepare Consignment Account, Zeeshan's Account and goods sent on consignment Account in the books of P & Co.
ins: [Profit on consignment Rs. 1,38,000}
On 1st March 2005 Karini Bux consigned cloth to the value of Rs. 6,50,000 at cost to Afzal & Sons, his agent in Multan. Who accepted a 3 months draft for Its.7.80,000. The draft was discounted at a cost of Rs. 13,000.
Karim Bux paid Rs. 35,000 as freight and Rs. 6,500 as insurance on 30th September 2005, Afzal & Sons notified Karim Bux that 4/5th of the goods had been sold for Rs. 8,24,000 and that the selling expenses were Rs. 12,100.
Afzal & Sons' were entitled to a commission at the rate of 10 % on sales. Show these transactions in the necessary ledgers of both the parties.
: fConsignment Profit Rs. 176,300]
On 1st July 2005 Mr. M in Sialkot consigned to Mr. R in Swat, goods to the value of Rs. 60,000, paying freight charges Rs. 5,000 and draws a bill on Mr. R for Rs. 30,000.3/4the of this consignment was sold by Mr. R for Rs. 70,000 and expenses Rs. 6,000 were incurred. Mr. R is also entitled to a commission of 6 % on sales. Mr. R remitted to Mr. M, the net amount held for his account by means of a sight draft. Show the ledger accounts in the books of Mr. M.
mms. [Profit on Consignment Rs. 11,050]
On 1st January 2005 Mr. C of Lahore consigned to D of Sargodha goods for sale. Mr. D Is entitled to a commission of 5%. Goods costing Rs. 24,000 were consigned to Sargodha . The expenses of consignment amounted to Rs. 2,000. On 31st March 2005 an Account Sales was received from Mr. D showing that he had affected sates of Rs. 24,000 in respect of 3/4 of the quantity of goods consigned to him. The expenses incurred by him amounted to Rs. 1,200. Mr. D remitted the amount due by a bank draft
Prepare consignment account, goods sent on consignment account and Mr. D's account in the Books of Mr. C.
[Profit on Consignment Rs. 2,100]
Accounting
COMPANY LIMITED BY GUARANTEE. SECTION 15(2) (b)
It is the company in which the liability of its members is limited by the memorandum of association such amount as the members may respectively undertake to contribute to the assets of the company in event of its being wound up. This type of company is formed mostly when work is of non-profit nature.
UNLIMITED COMPANY:
An unlimited company is that in which the liability of its members is unlimited. Every member of company is personally liable to the full extent of his personal assets for all the debts of the company lile he was a member. The unlimited companies due to great risk do not exist here.
ASSOCIATION NOT FOR PROFIT:
Association not for profit is registered under Section 42 of the Companies Ordinance. It enjoys all privileges of a limited company without using the word limited or private limited. This association is ly formed for the promotion of commerce, art, religion, charity etc. The Federal Government grants licence for the association.
)TE:
In this chapter, the whole discussion is about the accounting of Public Limited Companies. IMATION OF A PUBLIC LIMITED COMPANY:
The establishment of Public Limited Company is not an easy job. A number of steps need to be for the formation of a public company. However, these are split up into three stages (1) Promotion (2) joration and (3) Commencement of business.
PROMOTION OF A COMPANY:
The important steps in the promotion of a company are (1) Discovery of business idea (2) vestigation of the business project (3) Verification of the results of investigation. (4) Chalking out a lite course of action for establishing a company (5) Financing of the business,
INCORPORATION OF A COMPANY:
The promoters have to prepare and file a number of documents with the registrar for the ' corporation of a company. These documents are as under:
The memorandum of association.
The articles of association.
Notice of the address at which the registered office of the company will be situated.
A statutory declaration by the secretary or a chartered accountant that all the provisions of tlieCompanies Ordinance with regard to registration have been fulfilled.
Original copies of the receipted challans in respect of payment of duty on share capital andthe prescribed filing fee.
The above documents when submitted must be accompanied with requisite filing fee. The registrar ceipt of all the documents will scrutinize them If he is satisfied that the requirements of law have been met with, he will register the company on the Register of Companies and issue a certificate of jration. The certificate of incorporation is a proof of the fact that all the requirements of the u'es Ordinance have been complied with.
It is the company in which the liability of its members is limited by the memorandum of association such amount as the members may respectively undertake to contribute to the assets of the company in event of its being wound up. This type of company is formed mostly when work is of non-profit nature.
UNLIMITED COMPANY:
An unlimited company is that in which the liability of its members is unlimited. Every member of company is personally liable to the full extent of his personal assets for all the debts of the company lile he was a member. The unlimited companies due to great risk do not exist here.
ASSOCIATION NOT FOR PROFIT:
Association not for profit is registered under Section 42 of the Companies Ordinance. It enjoys all privileges of a limited company without using the word limited or private limited. This association is ly formed for the promotion of commerce, art, religion, charity etc. The Federal Government grants licence for the association.
)TE:
In this chapter, the whole discussion is about the accounting of Public Limited Companies. IMATION OF A PUBLIC LIMITED COMPANY:
The establishment of Public Limited Company is not an easy job. A number of steps need to be for the formation of a public company. However, these are split up into three stages (1) Promotion (2) joration and (3) Commencement of business.
PROMOTION OF A COMPANY:
The important steps in the promotion of a company are (1) Discovery of business idea (2) vestigation of the business project (3) Verification of the results of investigation. (4) Chalking out a lite course of action for establishing a company (5) Financing of the business,
INCORPORATION OF A COMPANY:
The promoters have to prepare and file a number of documents with the registrar for the ' corporation of a company. These documents are as under:
The memorandum of association.
The articles of association.
Notice of the address at which the registered office of the company will be situated.
A statutory declaration by the secretary or a chartered accountant that all the provisions of tlieCompanies Ordinance with regard to registration have been fulfilled.
Original copies of the receipted challans in respect of payment of duty on share capital andthe prescribed filing fee.
The above documents when submitted must be accompanied with requisite filing fee. The registrar ceipt of all the documents will scrutinize them If he is satisfied that the requirements of law have been met with, he will register the company on the Register of Companies and issue a certificate of jration. The certificate of incorporation is a proof of the fact that all the requirements of the u'es Ordinance have been complied with.
The contents of the memorandum of association as required by Sections 16, 17 and 18 of the mpanies. Ordinance include the following clauses (1) Name clause (2) situation clause (3) object clause liability clause (5) capital clause and (6) subscription clause.
ARTICLES OF ASSOCIATION:
The articles of association is the second important document in the incorporation of a company. It is 1 document which contains the rules and regulations for the internal management of the company. The icles of association embody the power of directors and other officers of the company, the right of voting the shareholders, the procedure of holding meeting, the manner of transferring the shares, the procedure issuing the shares debenture, the payment of dividends, maintenance of accounts, alteration of capital, ading up etc. etc.
The articles of association is subordinate to the memorandum. It cannot include any power which is >hibited or excluded by the Memorandum and the Companies Ordinance.
According to Section 26 of the Companies Ordinance, a company limited by shares can choose to opt table 'A' in the First Schedule which contains model rules and regulations.
The articles of association shall be printed, divided into paragraphs, numbered consecutively, signed each subscriber and dated.
The articles of association subject to the provisions of Ordinance can be altered or added by special solution.
PROSPECTUS:
It is a valuable document issued by the company for raising of the capital.
Prospectus has been defined as "any document described or issued as prospectus and includes any-bce, circular, advertisement or other communication, inviting offers from the public fcr the subscription purchase of any shares".
The main object of prospectus is to arouse the interest of the investors in the proposed company and induce them to invest in its shares and bonds etc.
The prospectus gives the details of die amount issued, the rights attached to the shares the property rchased; information about directors, auditors, bankers etc.
SHARE CAPITAL OF A JOINT STOCK COMPANY
In today's world large scale operations of a company call for a large amount of capital, The total cunt of capital is divided into smaller units. These units are called shares. Each share is assigned a iue. This value is called the par value of the share. The total capital is thus divided into a large number shares. This pool is, therefore, called share capital. This scheme of raising capital through shares (i) Ips the company to raise a large amount, and (ii) helps a larger section of the investment population to Befit from the operations of large scale business concerns.
A company has to fulfil certain legal requirements if, in later yeas, it decides to either increase or crease its share capital. And it has to state its maximum capital in the memorandum. To minimize the ances of undergoing legal formalities in later years, therefore, it is customary to state a reasonable lount as the maximum capital. This amount is incorporated in the memorandum of association and is own as the authorized capital, nominal capital, or registered capital of the company. Various terms used relation to share capital are explained in the following paragraphs.
ARTICLES OF ASSOCIATION:
The articles of association is the second important document in the incorporation of a company. It is 1 document which contains the rules and regulations for the internal management of the company. The icles of association embody the power of directors and other officers of the company, the right of voting the shareholders, the procedure of holding meeting, the manner of transferring the shares, the procedure issuing the shares debenture, the payment of dividends, maintenance of accounts, alteration of capital, ading up etc. etc.
The articles of association is subordinate to the memorandum. It cannot include any power which is >hibited or excluded by the Memorandum and the Companies Ordinance.
According to Section 26 of the Companies Ordinance, a company limited by shares can choose to opt table 'A' in the First Schedule which contains model rules and regulations.
The articles of association shall be printed, divided into paragraphs, numbered consecutively, signed each subscriber and dated.
The articles of association subject to the provisions of Ordinance can be altered or added by special solution.
PROSPECTUS:
It is a valuable document issued by the company for raising of the capital.
Prospectus has been defined as "any document described or issued as prospectus and includes any-bce, circular, advertisement or other communication, inviting offers from the public fcr the subscription purchase of any shares".
The main object of prospectus is to arouse the interest of the investors in the proposed company and induce them to invest in its shares and bonds etc.
The prospectus gives the details of die amount issued, the rights attached to the shares the property rchased; information about directors, auditors, bankers etc.
SHARE CAPITAL OF A JOINT STOCK COMPANY
In today's world large scale operations of a company call for a large amount of capital, The total cunt of capital is divided into smaller units. These units are called shares. Each share is assigned a iue. This value is called the par value of the share. The total capital is thus divided into a large number shares. This pool is, therefore, called share capital. This scheme of raising capital through shares (i) Ips the company to raise a large amount, and (ii) helps a larger section of the investment population to Befit from the operations of large scale business concerns.
A company has to fulfil certain legal requirements if, in later yeas, it decides to either increase or crease its share capital. And it has to state its maximum capital in the memorandum. To minimize the ances of undergoing legal formalities in later years, therefore, it is customary to state a reasonable lount as the maximum capital. This amount is incorporated in the memorandum of association and is own as the authorized capital, nominal capital, or registered capital of the company. Various terms used relation to share capital are explained in the following paragraphs.
RECEIPTS AND PAYMENTS
METHOD OF CONVERSION OF RECEIPTS AND PAYMENTS ACCOUNT INTO INCOME AND EXPENDITURE ACCOUNT
At first, Receipts and Payments Account is prepared by analyzing the Cash Book — subsequently, :ome and Expenditure Account is prepared in the following manner:
2. 3.
4.
Exclude the opening and closing balances of Receipts and Payments Account,
Exclude all the capital items.
Exclude all revenue items relating to last or next year.
5. (NTS:
Include all items of income or expenditure relating to the current year, if they are not received or paid in the current year.
Charge depreciation on all wasting assets.
While preparing Income and Expenditure Account from Receipts and Payments Account apply the (fcUowing two rules;
Exclude all capital items.
Adjust all revenue items with outstanding and advance items in the following manner:(i) If relates to current year: Add
(ii) If relates to last or next year: Deduct.
DISTINCTION BETWEEN RECEIPTS AND PAYMENTS ACCOUNT AND INCOME AND
EXPENDITURE ACCOUNT
Non-profit-seeking institutions repair the above two accounts and submit them at the annual general for the information of the members. There are sharp differences between the two accounts. It general Receipts and Payments Account may be called abridged Cash Book — all the cash transactions of pe whole year are recorded in it in a summarized form. On the other hand, the Income and Expenditure -,;count may be compared with the Profit and Loss Account of a business concern. These two accounts are-prepared on the same lines.
The points of distinction between Receipts and Payments Account and Income and Expenditure Account are given below in Tabular form:
Receipts & Payments Account
Income & Expenditure Account
It is a summarized statement of all cash transactions during an accounting year.
It is the account of revenue income and revenue expenditure of an accounting year.
At first, Receipts and Payments Account is prepared by analyzing the Cash Book — subsequently, :ome and Expenditure Account is prepared in the following manner:
2. 3.
4.
Exclude the opening and closing balances of Receipts and Payments Account,
Exclude all the capital items.
Exclude all revenue items relating to last or next year.
5. (NTS:
Include all items of income or expenditure relating to the current year, if they are not received or paid in the current year.
Charge depreciation on all wasting assets.
While preparing Income and Expenditure Account from Receipts and Payments Account apply the (fcUowing two rules;
Exclude all capital items.
Adjust all revenue items with outstanding and advance items in the following manner:(i) If relates to current year: Add
(ii) If relates to last or next year: Deduct.
DISTINCTION BETWEEN RECEIPTS AND PAYMENTS ACCOUNT AND INCOME AND
EXPENDITURE ACCOUNT
Non-profit-seeking institutions repair the above two accounts and submit them at the annual general for the information of the members. There are sharp differences between the two accounts. It general Receipts and Payments Account may be called abridged Cash Book — all the cash transactions of pe whole year are recorded in it in a summarized form. On the other hand, the Income and Expenditure -,;count may be compared with the Profit and Loss Account of a business concern. These two accounts are-prepared on the same lines.
The points of distinction between Receipts and Payments Account and Income and Expenditure Account are given below in Tabular form:
Receipts & Payments Account
Income & Expenditure Account
It is a summarized statement of all cash transactions during an accounting year.
It is the account of revenue income and revenue expenditure of an accounting year.
accounting
ACCOUNTS OF JOINT STOCK COMPANIES
INTRODUCTION:
A Joint Stock Company is a type of business organisation which is formed under Companies Ordinance 1984, whose capital is contributed by members who are accorded the privilege of limited jability. This means that they are liable for the debts of the company to the extent of the shareholding that they have contributed. Beyond that sum they are not liable for the company's debts. The Joint Stock Company is the only practicable way of collecting the vast sum of capital required for the complex industrial projects of the modern world.
DEFINITION OF A JOINT STOCK COMPANY:
A joint stock company may be defined as an artificial person recognized by law, with a distinctive name, a common seal, a common capital comprising transferable snares carrying limited liability and having a perpetual succession.
The main characteristics of a company which distinguish it from other forms of organizations are as iws:
CHARACTERISTICS OF A JOINT STOCK COMPANY: I. SEPARATE LEGAL ENTITY:
A-joint stock company is the creation of law. It has a separate legal entity of its own which is recognized by law as distinct from the persons forming it. The company enjoys many of the rights of catural person. For example, it can use or be used in its name. It can own and transfer the title to property.
Z. FINANCING;
A joint stock company is an effective organization for raising a large amount of capital. It issues prospectus and invites people to purchase the shares of the company. The persons who purchase shares ine part owners of the company with liability limited to the value of the shares they have purchased.
PERPETUAL EXISTENCE:
A joint stock company has a long life compared to other forms of business organizations. When rompany is formed and commences business, it has then a continuous life. The shareholder can withdraw tie capital by selling shares in the market. The company can, however, be winded up through compliance *ith the provisions of Companies Ordinance 1984.
4. LIMITED LIABILITY:
The liability of each shareholder of the company is limited only to the extent of the face value of the •iares he holds or any part thereof which is unpaid
INTRODUCTION:
A Joint Stock Company is a type of business organisation which is formed under Companies Ordinance 1984, whose capital is contributed by members who are accorded the privilege of limited jability. This means that they are liable for the debts of the company to the extent of the shareholding that they have contributed. Beyond that sum they are not liable for the company's debts. The Joint Stock Company is the only practicable way of collecting the vast sum of capital required for the complex industrial projects of the modern world.
DEFINITION OF A JOINT STOCK COMPANY:
A joint stock company may be defined as an artificial person recognized by law, with a distinctive name, a common seal, a common capital comprising transferable snares carrying limited liability and having a perpetual succession.
The main characteristics of a company which distinguish it from other forms of organizations are as iws:
CHARACTERISTICS OF A JOINT STOCK COMPANY: I. SEPARATE LEGAL ENTITY:
A-joint stock company is the creation of law. It has a separate legal entity of its own which is recognized by law as distinct from the persons forming it. The company enjoys many of the rights of catural person. For example, it can use or be used in its name. It can own and transfer the title to property.
Z. FINANCING;
A joint stock company is an effective organization for raising a large amount of capital. It issues prospectus and invites people to purchase the shares of the company. The persons who purchase shares ine part owners of the company with liability limited to the value of the shares they have purchased.
PERPETUAL EXISTENCE:
A joint stock company has a long life compared to other forms of business organizations. When rompany is formed and commences business, it has then a continuous life. The shareholder can withdraw tie capital by selling shares in the market. The company can, however, be winded up through compliance *ith the provisions of Companies Ordinance 1984.
4. LIMITED LIABILITY:
The liability of each shareholder of the company is limited only to the extent of the face value of the •iares he holds or any part thereof which is unpaid
Accounting
There are — parties involved in consignment.
In consignment al! the expenses either paid by consignor himself or by the consignee are borne by
13. Goods sent on consignment do not become the of the consignee.
14. — is a report prepared by the consignee and sent to the consignor, which shows
detail about the sales of goods, expenses paid by the consignee etc.
In consignment — — remains with the consignor.
In sale ownership is transferred from to .
In sales expenses after delivery of gods are borne by the —.
Forwarding document in consignment is known as .
Forwarding document in sales is known as .
In consignment loss of goods fall on .
The consignee sells the goods according to the instructions of .
The consignor acts as a .
The consignee acts as an .
In sale, the relationship between the seller and the buyer is that of and
25. The remuneration of the consignee for selling the goods of consignor is called — .
26. is paid to consignee, if the loss on account of bad debts is borne by consignee.
27. — is paid to consignee to work hard to push a new line of product in the market.
Loss occurs due to the negligence of consignee will be debited to of the consignee.
In consignment, when discount is treated as 'consignment expense' it is debited to
account.
30. In consignment, when discount is treated as 'financial charge' it is debited to :—
account.
31. Loss occurs due to fire, accident, theft is known as .
loss can be controlled.
; loss reduce the value of stock.
Loss occurs due to natural causes is known as loss.
Loss due to leakage, loss in weight due to nature of goods is known as-1 loss.
36. — loss cannot be controlled.'
Normal loss the value of closing stock.
Abnormal loss the actual profit on consignment
Closing stock with consignee is valued at cost or market price whichever is — —.
40. expenses include all such expenses which have been incurred upto the time goods
have reached to agents selling place.
41. Consignment account is by nature a account
42. account shows profit or loss in consignment.
In consignment al! the expenses either paid by consignor himself or by the consignee are borne by
13. Goods sent on consignment do not become the of the consignee.
14. — is a report prepared by the consignee and sent to the consignor, which shows
detail about the sales of goods, expenses paid by the consignee etc.
In consignment — — remains with the consignor.
In sale ownership is transferred from to .
In sales expenses after delivery of gods are borne by the —.
Forwarding document in consignment is known as .
Forwarding document in sales is known as .
In consignment loss of goods fall on .
The consignee sells the goods according to the instructions of .
The consignor acts as a .
The consignee acts as an .
In sale, the relationship between the seller and the buyer is that of and
25. The remuneration of the consignee for selling the goods of consignor is called — .
26. is paid to consignee, if the loss on account of bad debts is borne by consignee.
27. — is paid to consignee to work hard to push a new line of product in the market.
Loss occurs due to the negligence of consignee will be debited to of the consignee.
In consignment, when discount is treated as 'consignment expense' it is debited to
account.
30. In consignment, when discount is treated as 'financial charge' it is debited to :—
account.
31. Loss occurs due to fire, accident, theft is known as .
loss can be controlled.
; loss reduce the value of stock.
Loss occurs due to natural causes is known as loss.
Loss due to leakage, loss in weight due to nature of goods is known as-1 loss.
36. — loss cannot be controlled.'
Normal loss the value of closing stock.
Abnormal loss the actual profit on consignment
Closing stock with consignee is valued at cost or market price whichever is — —.
40. expenses include all such expenses which have been incurred upto the time goods
have reached to agents selling place.
41. Consignment account is by nature a account
42. account shows profit or loss in consignment.
Accounting Model Paper
with a bank or invested in Government Papers or in gilt-edged securities. Income derived from such investment is credited to concerned Fund Account and all relative expenses are debited to the Fund Account. Such incomes-expenses will not be taken to Income & Expenditure Account. Fund is a liability -it will be shown on-Liabilities side of Balance Sheet. But investment of fund money is an asset and hence it a shown on Assets side of Balance Sheet. 7. ADMISSION FEE / ENTRANCE FEE:
At the time of admission every new member is to pay admission fee in addition to subscription. It is ist like the admission fee that you pay in addition to monthly tuition fee at the time of your admission into i school or college. There is a difference of opinion among the Accountants as to whether the income on account of admission fee is to be treated as capital income or revenue income. Generally, admission fee is regarded as revenue income and credited to Income & Expenditure Account. If, however, there is any stipulation in the bye—laws of the institution, it must be observed, if it is stipulated that admission fee will be regarded as capita! income, it cannot be included in Income & Expenditure Account - it will be credited to Capital Fund Account and shown on Liabilities side of Balance Sheet as an addition to that fund. Again, ;: may be so stipulated that admission fee is to be regarded partly as capital and partly revenue. The reatment will be clear from the following illustration.
ILLUSTRATION NO. 4
Admission fee received during 2005, Rs. 800. The bye-laws of the club provided that 40 % of admission fee is to capitalized.
Show how the above items will be treated in the Final Accounts of the club for the year-ended 31.12.2005.
Solution;
INCOME & EXPENDITURE ACCOUNT For the year ended 31st Dec. 2005
Cr.
Expenditure
Rs.
Income'
Rs.
Admission Fee [60% of 800]
480
BALANCE SHEET AS AT 31ST DEC. 2005
Assets
Rs.
Liabilities
Rs.
Capital Fund xxx Add Admission Fee 320 [40%of800J
At the time of admission every new member is to pay admission fee in addition to subscription. It is ist like the admission fee that you pay in addition to monthly tuition fee at the time of your admission into i school or college. There is a difference of opinion among the Accountants as to whether the income on account of admission fee is to be treated as capital income or revenue income. Generally, admission fee is regarded as revenue income and credited to Income & Expenditure Account. If, however, there is any stipulation in the bye—laws of the institution, it must be observed, if it is stipulated that admission fee will be regarded as capita! income, it cannot be included in Income & Expenditure Account - it will be credited to Capital Fund Account and shown on Liabilities side of Balance Sheet as an addition to that fund. Again, ;: may be so stipulated that admission fee is to be regarded partly as capital and partly revenue. The reatment will be clear from the following illustration.
ILLUSTRATION NO. 4
Admission fee received during 2005, Rs. 800. The bye-laws of the club provided that 40 % of admission fee is to capitalized.
Show how the above items will be treated in the Final Accounts of the club for the year-ended 31.12.2005.
Solution;
INCOME & EXPENDITURE ACCOUNT For the year ended 31st Dec. 2005
Cr.
Expenditure
Rs.
Income'
Rs.
Admission Fee [60% of 800]
480
BALANCE SHEET AS AT 31ST DEC. 2005
Assets
Rs.
Liabilities
Rs.
Capital Fund xxx Add Admission Fee 320 [40%of800J
CONSIGNMENT
CONSIGNMENT
8. On 1st January, 2005 Ahmad of Lahore consigned to Babar of Multan goods for ssentitled to commission of 5%. Goods sent to Babar at Rs. 144,000 . The expconsignment amounted to Rs. 7,500. On 31st March, 2005, an Account Sales was nBabar showing that he had effected sales of Rs. 120,000 in respect of 2/3 of th
9. Rizwan of Gujranwala sent 100 sewing machines to Astam of Hong Kong atmachine. The consignor paid Rs. 2,000 for packing and dispatching chaimmediately after receiving the consignment accepted a bill for Rs. 40,000. AflAslam reported that 80 machines were sold for Rs. 875 each and expenses being <3,000, on godown rent, Rs. 750 and on insurance Rs. 500. Aslam is entitled to a \9 % on sales. Due to insolvency of a customer who purchased 4 machinesanything.
Show consignment'Account, Aslam Account and goods sent on Consignment Ace Ans: [Profit on consignment Rs. 3,450]
10. On 1st Jan. 2005 Razaq & Co. of Lahore consigned to M ushtaq & Co. of MardaRs. 500 each. Razaq & Co. had paid Rs. 200 for packing etc., Rs. 50 for insuranfor carriage. On 1st March 2005, Mushtaq & Co. sold 75 cycles for Rs. 45,001thereon being Rs. 2000. Mustaq & Co. are entitled for commission of 5(delcredere) on sales and they remitted Rs. 30,000 on account. One customer w1cycles failed to pay his debts due to his insolvency. Pass the necessary entries anecessary ledger accounts in books of Razaq & Co.
Ans: [Profit on consignment Rs. 1,975]
11. Zaheer & Sons of Karachi dispatched a consignment of 400 cases of Electric bt of Kohat on 1st December 2005. The cost price was quoted at Rs. 1,80,000 . On Hammad sent an account sales with the following details:
75 % of the goods were sold for Rs. 135,000.
Hammad paid unloading changes Rs. 1200.
Advertisement and selling expenses paid by Hammad amounted to Rs. 71
Hammad is to receive a commission of 5 % on sales.
At the time of dispatch Zaheer & Sons incurred an expenditure of Rs. 2,000 and insurance charges.
Prepare necessary ledger accounts in the books of the consignor. Ans: [Loss on consignment Rs. 9,850]
8. On 1st January, 2005 Ahmad of Lahore consigned to Babar of Multan goods for ssentitled to commission of 5%. Goods sent to Babar at Rs. 144,000 . The expconsignment amounted to Rs. 7,500. On 31st March, 2005, an Account Sales was nBabar showing that he had effected sales of Rs. 120,000 in respect of 2/3 of th
9. Rizwan of Gujranwala sent 100 sewing machines to Astam of Hong Kong atmachine. The consignor paid Rs. 2,000 for packing and dispatching chaimmediately after receiving the consignment accepted a bill for Rs. 40,000. AflAslam reported that 80 machines were sold for Rs. 875 each and expenses being <3,000, on godown rent, Rs. 750 and on insurance Rs. 500. Aslam is entitled to a \9 % on sales. Due to insolvency of a customer who purchased 4 machinesanything.
Show consignment'Account, Aslam Account and goods sent on Consignment Ace Ans: [Profit on consignment Rs. 3,450]
10. On 1st Jan. 2005 Razaq & Co. of Lahore consigned to M ushtaq & Co. of MardaRs. 500 each. Razaq & Co. had paid Rs. 200 for packing etc., Rs. 50 for insuranfor carriage. On 1st March 2005, Mushtaq & Co. sold 75 cycles for Rs. 45,001thereon being Rs. 2000. Mustaq & Co. are entitled for commission of 5(delcredere) on sales and they remitted Rs. 30,000 on account. One customer w1cycles failed to pay his debts due to his insolvency. Pass the necessary entries anecessary ledger accounts in books of Razaq & Co.
Ans: [Profit on consignment Rs. 1,975]
11. Zaheer & Sons of Karachi dispatched a consignment of 400 cases of Electric bt of Kohat on 1st December 2005. The cost price was quoted at Rs. 1,80,000 . On Hammad sent an account sales with the following details:
75 % of the goods were sold for Rs. 135,000.
Hammad paid unloading changes Rs. 1200.
Advertisement and selling expenses paid by Hammad amounted to Rs. 71
Hammad is to receive a commission of 5 % on sales.
At the time of dispatch Zaheer & Sons incurred an expenditure of Rs. 2,000 and insurance charges.
Prepare necessary ledger accounts in the books of the consignor. Ans: [Loss on consignment Rs. 9,850]
Sunday, March 29, 2009
OBJECTIVE QUESTIONS ACCOUNTING
OBJECTIVE QUESTIONS
• True/False.
1. Consignment signifies forwarded of goods from one place to another.
2. Manufacturers acts as a principal in consignment.
3. Consignee acts as an agent in consignment.
4. The relationship between consignor and consignee is that of seller and buyer.
5. In sales, the relationship between buyer and seller is that of debtor and creditor.
6. Consignment is an act of sending goods by owner to his- agent for sale purpose.
7. Consignment outward book treatment is similar to cash book.
8. The remuneration of the consignee for selling the goods of consignor is known as con
9. Del- credre commission is calculated on total sales.
10. Stock on consignment is the asset of the consignee.
11. Stock on consignment is the unsold stock of goods with the consignee.
12. Normal loss occurs due to leakage.
13. Abnormal loss occurs due to evaporation.
14. Normal loss and abnormal loss does not affect on the working of stock on consignme
15. Account sales is prepared by consignee.
16. Proforma invoice send by consignor to the consignee,
17. Consignment account is a nominal account.
18. Goods sent on consignment is a nominal account.
19. Consignee and consignor are personal accounts.
20. Forwarding letter in consignment is known as proforma invoice.
• Kill in the Blanks.
1. -------------------- is an act of sending the goods by the owner to his agent for the purp
2. is a person who sends his goods for sale purpose in consignment
3. is a person to whom goods are consigned for sale purpose in consig
4. In consignment, generally the manufacturers or producers are the------------------- .
5. The relationship between consignor and consignee is that of-------------------- and —
6. The dispatch of goods by the consignor to the consignee will be a--------------------- 1
view point.
7. The dispatch of goods by the consignor to the consignee will be a -----
consignee's view point.
8. The book which is maintained by consignor for the goods consigned is known as -
9. The accounting treatment of consignment outward book is similar to----------------
10. The book which is maintained by consignee for goods received from differiknown as-------------------- .
• True/False.
1. Consignment signifies forwarded of goods from one place to another.
2. Manufacturers acts as a principal in consignment.
3. Consignee acts as an agent in consignment.
4. The relationship between consignor and consignee is that of seller and buyer.
5. In sales, the relationship between buyer and seller is that of debtor and creditor.
6. Consignment is an act of sending goods by owner to his- agent for sale purpose.
7. Consignment outward book treatment is similar to cash book.
8. The remuneration of the consignee for selling the goods of consignor is known as con
9. Del- credre commission is calculated on total sales.
10. Stock on consignment is the asset of the consignee.
11. Stock on consignment is the unsold stock of goods with the consignee.
12. Normal loss occurs due to leakage.
13. Abnormal loss occurs due to evaporation.
14. Normal loss and abnormal loss does not affect on the working of stock on consignme
15. Account sales is prepared by consignee.
16. Proforma invoice send by consignor to the consignee,
17. Consignment account is a nominal account.
18. Goods sent on consignment is a nominal account.
19. Consignee and consignor are personal accounts.
20. Forwarding letter in consignment is known as proforma invoice.
• Kill in the Blanks.
1. -------------------- is an act of sending the goods by the owner to his agent for the purp
2. is a person who sends his goods for sale purpose in consignment
3. is a person to whom goods are consigned for sale purpose in consig
4. In consignment, generally the manufacturers or producers are the------------------- .
5. The relationship between consignor and consignee is that of-------------------- and —
6. The dispatch of goods by the consignor to the consignee will be a--------------------- 1
view point.
7. The dispatch of goods by the consignor to the consignee will be a -----
consignee's view point.
8. The book which is maintained by consignor for the goods consigned is known as -
9. The accounting treatment of consignment outward book is similar to----------------
10. The book which is maintained by consignee for goods received from differiknown as-------------------- .
Accounting Exam Paper 2009 100%work
OBJECTIVE QUESTIONS
true / False.
Non profit making organizations provide services.
Sugar industry is an example of non profit making organizations.
Non profit making organizations are established to earn profit.
Non profit making organizations are also known as non profit seeking organizations.
Treasurer is a person who is elected to run the club.
There is no difference between receipts and payments account and income and expenditure account.
Income and expenditure account is a nominal account.
Receipts and payments account consists of both capital and revenue nature items.
Income and expenditure account contains only capital nature items.
The difference of debit and credit side of income and expenditure account may be surplus or deficit.
Subscription is treated as capital receipt.
Legacy is usually capitalized.
Excess of incomes over expenditures indicates deficit.
Receipts and payments account contain both cash and credit transactions.
Receipts and payments account is a nominal account.
Fill in the blanks.
----------------------- do not buy/manufacture and sell goods.
In non-profit making organizations----------------------- object in not to earn profit.
Non-profit seeking concerns are established for------------------------ of the people.
disclose the true result of a concern.
Receipts and payments account---------------------
Receipts and payments account is a summarized-
receipts and
payments are
In receipts and payments account-------------------
recorded.
Receipts and payments account is an--------------
edition of cash book.
side, whereas
In receipts and payments account receipts are recorded onpayments are recorded on----------------------- side.
and
nature are
Cash receipts and cash payments of both---
transactions are recorded.------------- balance.
recorded in receipts and payments account.
In receipts and payments account only----------------
system.
Receipts and payments account generally shows — Receipts and payments account is not an account within the
true / False.
Non profit making organizations provide services.
Sugar industry is an example of non profit making organizations.
Non profit making organizations are established to earn profit.
Non profit making organizations are also known as non profit seeking organizations.
Treasurer is a person who is elected to run the club.
There is no difference between receipts and payments account and income and expenditure account.
Income and expenditure account is a nominal account.
Receipts and payments account consists of both capital and revenue nature items.
Income and expenditure account contains only capital nature items.
The difference of debit and credit side of income and expenditure account may be surplus or deficit.
Subscription is treated as capital receipt.
Legacy is usually capitalized.
Excess of incomes over expenditures indicates deficit.
Receipts and payments account contain both cash and credit transactions.
Receipts and payments account is a nominal account.
Fill in the blanks.
----------------------- do not buy/manufacture and sell goods.
In non-profit making organizations----------------------- object in not to earn profit.
Non-profit seeking concerns are established for------------------------ of the people.
disclose the true result of a concern.
Receipts and payments account---------------------
Receipts and payments account is a summarized-
receipts and
payments are
In receipts and payments account-------------------
recorded.
Receipts and payments account is an--------------
edition of cash book.
side, whereas
In receipts and payments account receipts are recorded onpayments are recorded on----------------------- side.
and
nature are
Cash receipts and cash payments of both---
transactions are recorded.------------- balance.
recorded in receipts and payments account.
In receipts and payments account only----------------
system.
Receipts and payments account generally shows — Receipts and payments account is not an account within the
Definitions 100% work
THE ACCOUNTS OF NON-PROFIT MAKING ORGANISATIONS
8. LEGACY:
Legacy refers to property received by virtue of a will of a person after his death. Acquisition of such property by an institution is regarded as capital receipt. Hence it will not appear in Income & Expenditure Account. Properties or cash received on account of Legacy is shown on asset side on the balance sheet on one hand and on the other hand it is added to the capital fund account on the liabilities side of the balance sheet.
9. LIFE MEMBERSHIP FEE:
In some institutions one may become a life member by paying a lump sum at a tune - he is not required to pay monthly or annual subscription. So life membership fee is in effect regular subscription paid in advance. The subscriptions collected from the members are utilized for rendering services to them, so it is revenue income. If, however, there is any stipulation in the bye-laws of the institution, it must be observed, if it is stipulated that life membership fee will be regarded as capital income, it cannot be included in income and expenditure account, it will be credited to capital fund account and shown on the liabilities side of balance sheet as an addition to that fund. Again, it may be stipulated that admission fee i$j to be regarded partly as capital and partly revenue.
10. DONATION:
Sometimes institution like Club, Hospital etc. collect donation from members and general pubbcj "Whether such donation is to be treated as capital or revenue depends upon the purpose for which donation is collected. If the donation is collected for any special purpose, it must be treated as capital credited to a special fund account and shown on Liabilities side of Balance Sheet, e.g., Building Fi Charity Fund, Prize Fund etc. On the other hand, if the donation is collected not for any special purpose, i is treated as revenue and credited to Income & Expenditure Account.
11. CAPITAL FUND:
Any concern - whether profit-seeking or non-profit-seeking - requires money for conducting da> day functions. In the case of profit-seeking concerns such money is called Capital, while in the case non-profit-seeking concerns it is called Capital Fund. The excess of total assets over total exte liabilities of a concern is called Capital Fund. Capital Fund is created with surplus revenue and ca; receipts and incomes, such as surplus (excess of income over expenditure). Donation, Life Member Fee, Admission Fee, Profit on Sale of Fixed Assets etc. It is also called General Fund or Accumi Fund or surplus Account. It is shown on Liabilities side of Balance Sheet as the first item. In pare Capital Fund is the capital of a non profit-seeking concern.
8. LEGACY:
Legacy refers to property received by virtue of a will of a person after his death. Acquisition of such property by an institution is regarded as capital receipt. Hence it will not appear in Income & Expenditure Account. Properties or cash received on account of Legacy is shown on asset side on the balance sheet on one hand and on the other hand it is added to the capital fund account on the liabilities side of the balance sheet.
9. LIFE MEMBERSHIP FEE:
In some institutions one may become a life member by paying a lump sum at a tune - he is not required to pay monthly or annual subscription. So life membership fee is in effect regular subscription paid in advance. The subscriptions collected from the members are utilized for rendering services to them, so it is revenue income. If, however, there is any stipulation in the bye-laws of the institution, it must be observed, if it is stipulated that life membership fee will be regarded as capital income, it cannot be included in income and expenditure account, it will be credited to capital fund account and shown on the liabilities side of balance sheet as an addition to that fund. Again, it may be stipulated that admission fee i$j to be regarded partly as capital and partly revenue.
10. DONATION:
Sometimes institution like Club, Hospital etc. collect donation from members and general pubbcj "Whether such donation is to be treated as capital or revenue depends upon the purpose for which donation is collected. If the donation is collected for any special purpose, it must be treated as capital credited to a special fund account and shown on Liabilities side of Balance Sheet, e.g., Building Fi Charity Fund, Prize Fund etc. On the other hand, if the donation is collected not for any special purpose, i is treated as revenue and credited to Income & Expenditure Account.
11. CAPITAL FUND:
Any concern - whether profit-seeking or non-profit-seeking - requires money for conducting da> day functions. In the case of profit-seeking concerns such money is called Capital, while in the case non-profit-seeking concerns it is called Capital Fund. The excess of total assets over total exte liabilities of a concern is called Capital Fund. Capital Fund is created with surplus revenue and ca; receipts and incomes, such as surplus (excess of income over expenditure). Donation, Life Member Fee, Admission Fee, Profit on Sale of Fixed Assets etc. It is also called General Fund or Accumi Fund or surplus Account. It is shown on Liabilities side of Balance Sheet as the first item. In pare Capital Fund is the capital of a non profit-seeking concern.
Definitions
JOINT STOCK Definitions
5. TRANSFERABILITY OF SHARES:
The shareholders of a company have full freedom to transfer their shares to consulting other shareholders.
6. SEPARATION OF OWNERSHIP FROM MANAGEMENT:
The shareholders, who are the owners of the company, are large in number. They a over the country. Being absentee owners, they cannot manage the affairs of the company. Tr. therefore, elect Board of Directors in the annual general meeting and entrust the mani company to them. The ownership and management of the company are thus in two separate ri
7. STATUTORY REGULATIONS:
A company right from its inception, has to comply with a number of statutory requ also to submit returns and report during its lifetime to the Government.
8. COMMON SEAL:
Since the company is an artificial person created by law, it therefore cannot sign itself. The common seal with the name of the company engraved on it is, therefore, used as its signature.
9. RIGIDITY OF OBJECTS:
In a company form of organization, the objects and powers of the company art memorandum of association of the company. A change in the object and powers of a comp made after complying with the relevant provisions of the Companies Ordinance.
KINDS OF COMPANIES
There are four kinds of companies registered under companies ordinance, 1984. (1) COMPANY LIMITED BY SHARES:
This is the principal form of company which is registered with the registrar of joint under the Companies Ordinance. In a company limited by shares, the capital is divided i shares. A person who buys one or more than one shares becomes a member of the company be freely transferred and sold. The liability of the members is limited to the amount if an shares held by them. A company limited by shares is further divided into (a) private c Public company.
(a) Private Limited Company:
According to the' Companies Ordinance 1984 it can be formed (a) at least by its total membership cannot exceed 50. (b) The company by its articles also rest transfer its shares, (c) It also prohibits any invitation to the public to invest their mo debentures of the company.
(b) Public Limited Company:
It can be formed by at least seven members and there is no limit to the maximum nu limited company invites applications from investors through advertisement in the newspi details of the objects, share capital, method of applying for the procedure to be adopted fo
the shares etc.
5. TRANSFERABILITY OF SHARES:
The shareholders of a company have full freedom to transfer their shares to consulting other shareholders.
6. SEPARATION OF OWNERSHIP FROM MANAGEMENT:
The shareholders, who are the owners of the company, are large in number. They a over the country. Being absentee owners, they cannot manage the affairs of the company. Tr. therefore, elect Board of Directors in the annual general meeting and entrust the mani company to them. The ownership and management of the company are thus in two separate ri
7. STATUTORY REGULATIONS:
A company right from its inception, has to comply with a number of statutory requ also to submit returns and report during its lifetime to the Government.
8. COMMON SEAL:
Since the company is an artificial person created by law, it therefore cannot sign itself. The common seal with the name of the company engraved on it is, therefore, used as its signature.
9. RIGIDITY OF OBJECTS:
In a company form of organization, the objects and powers of the company art memorandum of association of the company. A change in the object and powers of a comp made after complying with the relevant provisions of the Companies Ordinance.
KINDS OF COMPANIES
There are four kinds of companies registered under companies ordinance, 1984. (1) COMPANY LIMITED BY SHARES:
This is the principal form of company which is registered with the registrar of joint under the Companies Ordinance. In a company limited by shares, the capital is divided i shares. A person who buys one or more than one shares becomes a member of the company be freely transferred and sold. The liability of the members is limited to the amount if an shares held by them. A company limited by shares is further divided into (a) private c Public company.
(a) Private Limited Company:
According to the' Companies Ordinance 1984 it can be formed (a) at least by its total membership cannot exceed 50. (b) The company by its articles also rest transfer its shares, (c) It also prohibits any invitation to the public to invest their mo debentures of the company.
(b) Public Limited Company:
It can be formed by at least seven members and there is no limit to the maximum nu limited company invites applications from investors through advertisement in the newspi details of the objects, share capital, method of applying for the procedure to be adopted fo
the shares etc.
Accounting
LEGACY:
Legacy refers to property received by virtue of a will of a person after his death. Acquisition of such property by an institution is regarded as capital receipt. Hence it will not appear in Income & Expenditure Account. Properties or cash received on account of Legacy is shown on asset side on the balance sheet on one hand and on the other hand it is added to the capital fund account on the liabilities side of the balance sheet.
9. LIFE MEMBERSHIP FEE:
In some institutions one may become a life member by paying a lump sum at a tune - he is not required to pay monthly or annual subscription. So life membership fee is in effect regular subscription paid in advance. The subscriptions collected from the members are utilized for rendering services to them, so it is revenue income. If, however, there is any stipulation in the bye-laws of the institution, it must be observed, if it is stipulated that life membership fee will be regarded as capital income, it cannot be included in income and expenditure account, it will be credited to capital fund account and shown on the liabilities side of balance sheet as an addition to that fund. Again, it may be stipulated that admission fee i$j to be regarded partly as capital and partly revenue.
10. DONATION:
Sometimes institution like Club, Hospital etc. collect donation from members and general pubbcj "Whether such donation is to be treated as capital or revenue depends upon the purpose for which donation is collected. If the donation is collected for any special purpose, it must be treated as capital credited to a special fund account and shown on Liabilities side of Balance Sheet, e.g., Building Fi Charity Fund, Prize Fund etc. On the other hand, if the donation is collected not for any special purpose, i is treated as revenue and credited to Income & Expenditure Account.
11. CAPITAL FUND:Any concern - whether profit-seeking or non-profit-seeking - requires money for conducting da> day functions. In the case of profit-seeking concerns such money is called Capital, while in the case non-profit-seeking concerns it is called Capital Fund. The excess of total assets over total exte liabilities of a concern is called Capital Fund. Capital Fund is created with surplus revenue and ca; receipts and incomes, such as surplus (excess of income over expenditure). Donation, Life Member Fee, Admission Fee, Profit on Sale of Fixed Assets etc. It is also called General Fund or Accumi Fund or surplus Account. It is shown on Liabilities side of Balance Sheet as the first item. In prae Capital Fund is the capital of a non profit-seeking concern
Legacy refers to property received by virtue of a will of a person after his death. Acquisition of such property by an institution is regarded as capital receipt. Hence it will not appear in Income & Expenditure Account. Properties or cash received on account of Legacy is shown on asset side on the balance sheet on one hand and on the other hand it is added to the capital fund account on the liabilities side of the balance sheet.
9. LIFE MEMBERSHIP FEE:
In some institutions one may become a life member by paying a lump sum at a tune - he is not required to pay monthly or annual subscription. So life membership fee is in effect regular subscription paid in advance. The subscriptions collected from the members are utilized for rendering services to them, so it is revenue income. If, however, there is any stipulation in the bye-laws of the institution, it must be observed, if it is stipulated that life membership fee will be regarded as capital income, it cannot be included in income and expenditure account, it will be credited to capital fund account and shown on the liabilities side of balance sheet as an addition to that fund. Again, it may be stipulated that admission fee i$j to be regarded partly as capital and partly revenue.
10. DONATION:
Sometimes institution like Club, Hospital etc. collect donation from members and general pubbcj "Whether such donation is to be treated as capital or revenue depends upon the purpose for which donation is collected. If the donation is collected for any special purpose, it must be treated as capital credited to a special fund account and shown on Liabilities side of Balance Sheet, e.g., Building Fi Charity Fund, Prize Fund etc. On the other hand, if the donation is collected not for any special purpose, i is treated as revenue and credited to Income & Expenditure Account.
11. CAPITAL FUND:Any concern - whether profit-seeking or non-profit-seeking - requires money for conducting da> day functions. In the case of profit-seeking concerns such money is called Capital, while in the case non-profit-seeking concerns it is called Capital Fund. The excess of total assets over total exte liabilities of a concern is called Capital Fund. Capital Fund is created with surplus revenue and ca; receipts and incomes, such as surplus (excess of income over expenditure). Donation, Life Member Fee, Admission Fee, Profit on Sale of Fixed Assets etc. It is also called General Fund or Accumi Fund or surplus Account. It is shown on Liabilities side of Balance Sheet as the first item. In prae Capital Fund is the capital of a non profit-seeking concern
Accounting
The following are the characteristics of Income and Expenditure Account:
(1) It is in. fact the Profit and Loss Account of a profit-seeking concern.
(2) All expenses are recorded on Debit side and all revenues on Credit side.
Only revenue transactions are included in it. No capital items is taken into account.
(4) All the items of income/revenue concerning current year — whether received in cash or not
— and all items of expense — whether paid in cash or not — are taken into account. But no, item of income or expense concerning last year or next year is included in it.
(5) Surplus or deficit of a concern is ascertained through this account. Credit balance indicatessurplus, while debit balance indicates deficit.
(6) Its balance is transferred to Capital Fund Account.
(7) It is prepared on the last day of an accounting year..(8) It does not start with any opening balance.
METHOD OF PREPARATION:
The following points are to be noted, while preparing the above account:
1. Surplus or deficit of a fixed period of time is ascertained through this account. So it's heading willbe:
Income and Expenditure Account for the year ended 31.12.2005.
(If the accounting year closes on 31.12.2005).
2. Income and Expenditure Account is a Nominal Account. Hence, only revenue (no capital) items willfind place in it.
3. All items of revenue income and expenditure relating to the .current year will appear in it. In otherwords, all items of income relating to the current year - whether received in cash or not - and allitems of expenditure relating to the current year - whether paid in cash or not - will find place in thisaccount. No itrms of income or expenditure relating to last year or next year will be included in thisaccount.
SOME PECULIAR ITEMS OF A NON-PROFIT SEEKING CONCERNS
1. DEPRECIATION:Depreciation means loss on account of use of an asset or decrease in its value on account of passage of time. Suppose, an almirah is bought for Rs. 1,000. Its value must diminish gradually on account of use -the more it is used, the more will it diminish in value. After sometime it will become unfit for use. Then a new almirah is to be bought. Suppose, the almirah can be used for 10 yrars. In that case the annual loss on account of depreciation will be Rs. 100 (1,000 + 10). It must be debited to Income and Expenditure Account; otherwise the true result cannot be obtained, Similarly, depreciation must be taken into account in respect of all other assets like building, typewriter, furniture etc
(1) It is in. fact the Profit and Loss Account of a profit-seeking concern.
(2) All expenses are recorded on Debit side and all revenues on Credit side.
Only revenue transactions are included in it. No capital items is taken into account.
(4) All the items of income/revenue concerning current year — whether received in cash or not
— and all items of expense — whether paid in cash or not — are taken into account. But no, item of income or expense concerning last year or next year is included in it.
(5) Surplus or deficit of a concern is ascertained through this account. Credit balance indicatessurplus, while debit balance indicates deficit.
(6) Its balance is transferred to Capital Fund Account.
(7) It is prepared on the last day of an accounting year..(8) It does not start with any opening balance.
METHOD OF PREPARATION:
The following points are to be noted, while preparing the above account:
1. Surplus or deficit of a fixed period of time is ascertained through this account. So it's heading willbe:
Income and Expenditure Account for the year ended 31.12.2005.
(If the accounting year closes on 31.12.2005).
2. Income and Expenditure Account is a Nominal Account. Hence, only revenue (no capital) items willfind place in it.
3. All items of revenue income and expenditure relating to the .current year will appear in it. In otherwords, all items of income relating to the current year - whether received in cash or not - and allitems of expenditure relating to the current year - whether paid in cash or not - will find place in thisaccount. No itrms of income or expenditure relating to last year or next year will be included in thisaccount.
SOME PECULIAR ITEMS OF A NON-PROFIT SEEKING CONCERNS
1. DEPRECIATION:Depreciation means loss on account of use of an asset or decrease in its value on account of passage of time. Suppose, an almirah is bought for Rs. 1,000. Its value must diminish gradually on account of use -the more it is used, the more will it diminish in value. After sometime it will become unfit for use. Then a new almirah is to be bought. Suppose, the almirah can be used for 10 yrars. In that case the annual loss on account of depreciation will be Rs. 100 (1,000 + 10). It must be debited to Income and Expenditure Account; otherwise the true result cannot be obtained, Similarly, depreciation must be taken into account in respect of all other assets like building, typewriter, furniture etc
The following are the characteristics of Income and Expenditure Account:
(1) It is in. fact the Profit and Loss Account of a profit-seeking concern.
(2) All expenses are recorded on Debit side and all revenues on Credit side.
(3) Only revenue transactions are included in it. No capital items is taken into account.
(4) All the items of income/revenue concerning current year — whether received in cash or not
— and all items of expense — whether paid in cash or not — are taken into account. But no, item of income or expense concerning last year or next year is included in it.
(5) Surplus or deficit of a concern is ascertained through this account. Credit balance indicatessurplus, while debit balance indicates deficit.
(6) Its balance is transferred to Capital Fund Account.
(7) It is prepared on the last day of an accounting year..(8) It does not start with any opening balance.
METHOD OF PREPARATION:
The following points are to be noted, while preparing the above account:
1. Surplus or deficit of a fixed period of time is ascertained through this account. So it's heading willbe:
Income and Expenditure Account for the year ended 31.12.2005.
(If the accounting year closes on 31.12.2005).
2. Income and Expenditure Account is a Nominal Account. Hence, only revenue (no capital) items willfind place in it.
3. All items of revenue income and expenditure relating to the .current year will appear in it. In otherwords, all items of income relating to the current year - whether received in cash or not - and allitems of expenditure relating to the current year - whether paid in cash or not - will find place in thisaccount. No itrms of income or expenditure relating to last year or next year will be included in thisaccount.
SOME PECULIAR ITEMS OF A NON-PROFIT SEEKING CONCERNS
1. DEPRECIATION:Depreciation means loss on account of use of an asset or decrease in its value on account of passage of time. Suppose, an almirah is bought for Rs. 1,000. Its value must diminish gradually on account of use -the more it is used, the more will it diminish in value. After sometime it will become unfit for use. Then a new almirah is to be bought. Suppose, the almirah can be used for 10 yrars. In that case the annual loss on account of depreciation will be Rs. 100 (1,000 + 10). It must be debited to Income and Expenditure Account; otherwise the true result cannot be obtained, Similarly, depreciation must be taken into account in | respect of all other assets like building, typewrite
(1) It is in. fact the Profit and Loss Account of a profit-seeking concern.
(2) All expenses are recorded on Debit side and all revenues on Credit side.
(3) Only revenue transactions are included in it. No capital items is taken into account.
(4) All the items of income/revenue concerning current year — whether received in cash or not
— and all items of expense — whether paid in cash or not — are taken into account. But no, item of income or expense concerning last year or next year is included in it.
(5) Surplus or deficit of a concern is ascertained through this account. Credit balance indicatessurplus, while debit balance indicates deficit.
(6) Its balance is transferred to Capital Fund Account.
(7) It is prepared on the last day of an accounting year..(8) It does not start with any opening balance.
METHOD OF PREPARATION:
The following points are to be noted, while preparing the above account:
1. Surplus or deficit of a fixed period of time is ascertained through this account. So it's heading willbe:
Income and Expenditure Account for the year ended 31.12.2005.
(If the accounting year closes on 31.12.2005).
2. Income and Expenditure Account is a Nominal Account. Hence, only revenue (no capital) items willfind place in it.
3. All items of revenue income and expenditure relating to the .current year will appear in it. In otherwords, all items of income relating to the current year - whether received in cash or not - and allitems of expenditure relating to the current year - whether paid in cash or not - will find place in thisaccount. No itrms of income or expenditure relating to last year or next year will be included in thisaccount.
SOME PECULIAR ITEMS OF A NON-PROFIT SEEKING CONCERNS
1. DEPRECIATION:Depreciation means loss on account of use of an asset or decrease in its value on account of passage of time. Suppose, an almirah is bought for Rs. 1,000. Its value must diminish gradually on account of use -the more it is used, the more will it diminish in value. After sometime it will become unfit for use. Then a new almirah is to be bought. Suppose, the almirah can be used for 10 yrars. In that case the annual loss on account of depreciation will be Rs. 100 (1,000 + 10). It must be debited to Income and Expenditure Account; otherwise the true result cannot be obtained, Similarly, depreciation must be taken into account in | respect of all other assets like building, typewrite
THE ACCOUNTS OF NON - PROFIT MAKING
What Non-Profit Making Organizations are?
People Join together for a number of reasons in voluntary organization: for mutual entertainment, for protection, or for professional reasons. There are sports clubs, trade unions, consumer societies, political associations, and many more. The degree of richness of any society lies partly in the variety of the voluntary organization it promotes.
Non-profit making organization are those, which do not buy/manufacture and sell goods and whose primary object is not to earn profit. Their object is to do good to the society through welfare activities; e.g. clubs, schools, colleges, Hospitals, Libraries etc.
From the book-keeping point of view the aim of such organizations is the pursuit of some interest other than financial benefit, so these may be termed as Non-Profit making Organizations. Although these organization are not meant for profit earning, yet organizations of this sort must have funds to promote their activities, and these funds must be honestly accounted for. For example in case of a club, the official elected for this purpose is called the "Treasurer", one of the key figures on the committee which is elected to run the club. The others are the secretary, responsible for organizing the club's activities, and the chairperson, or president, who controls the meetings.
The treasure's functions are to collect subscriptions, disburse such funds as are needed in the course of the activities, and report to the members when required, but especially at the annual General Meeting — an important occasion in the club's life. At this meeting the activities of the club are reviewed, criticisms are voiced, or praise is accorded the committee.
How Activities are accounted for? — An example of a club
Clubs rarely keep a full set of Ledger Accounts, but some clubs are very large indeed and need just as huge an organization as any other large scale business. Such huge organizations can hardly conduct their affairs with a simple Cash Book, yet many club treasurers in small clubs do exactly’ that, while bigger clubs usually have just a Cash Book with analysis columns. This analytical Cash Book is a basic club record or "book of original entry. But most of the clubs maintain a simple Cash Book as by business concerns.
In this type of book the treasurer keeps a record of all sums received and paid; and analyses them into various sub-headings as he goes along. All cash transactions are first recorded in the Cash Book, then posting is made into the Ledger and Finally Trial Balance is prepared. Rest of the transactions arc entered in General Journal. Now see how we record the transactions of a club in the books of accounts and prepare Final Accounts at the end.
People Join together for a number of reasons in voluntary organization: for mutual entertainment, for protection, or for professional reasons. There are sports clubs, trade unions, consumer societies, political associations, and many more. The degree of richness of any society lies partly in the variety of the voluntary organization it promotes.
Non-profit making organization are those, which do not buy/manufacture and sell goods and whose primary object is not to earn profit. Their object is to do good to the society through welfare activities; e.g. clubs, schools, colleges, Hospitals, Libraries etc.
From the book-keeping point of view the aim of such organizations is the pursuit of some interest other than financial benefit, so these may be termed as Non-Profit making Organizations. Although these organization are not meant for profit earning, yet organizations of this sort must have funds to promote their activities, and these funds must be honestly accounted for. For example in case of a club, the official elected for this purpose is called the "Treasurer", one of the key figures on the committee which is elected to run the club. The others are the secretary, responsible for organizing the club's activities, and the chairperson, or president, who controls the meetings.
The treasure's functions are to collect subscriptions, disburse such funds as are needed in the course of the activities, and report to the members when required, but especially at the annual General Meeting — an important occasion in the club's life. At this meeting the activities of the club are reviewed, criticisms are voiced, or praise is accorded the committee.
How Activities are accounted for? — An example of a club
Clubs rarely keep a full set of Ledger Accounts, but some clubs are very large indeed and need just as huge an organization as any other large scale business. Such huge organizations can hardly conduct their affairs with a simple Cash Book, yet many club treasurers in small clubs do exactly’ that, while bigger clubs usually have just a Cash Book with analysis columns. This analytical Cash Book is a basic club record or "book of original entry. But most of the clubs maintain a simple Cash Book as by business concerns.
In this type of book the treasurer keeps a record of all sums received and paid; and analyses them into various sub-headings as he goes along. All cash transactions are first recorded in the Cash Book, then posting is made into the Ledger and Finally Trial Balance is prepared. Rest of the transactions arc entered in General Journal. Now see how we record the transactions of a club in the books of accounts and prepare Final Accounts at the end.
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