Tag: o level revision notes

Control account is an account which checks the arithmetical accuracy of a ledger. Control accounts enable the errors to be traced down to the ledgers which do not balance and so there wouldn't be any need to check all the books to find a minute error.

Stock taking is checking whether the stock shown on paper rally exists or not and a Store keeper is one who records things coming in or going out of the stock of a business .

Bank reconciliation statement is a method of clearing out ambiguities. Keep in mind that the cash we give to a bank is a liability for the bank. So when the liability increases, the bank account is credited.

Uptill now, you have studied that we deduct all the expenses from the gross profit to find the net profit of the time period. But what if, the expenses belong to some other time period – that is that they are accrued(pending to be paid) or prepaid for the future time period.

Fixed assets such as buildings, machinery ,etc do not last forever. When the amount received by disposal of a fixed asset is deducted from the cost of purchasing it, the difference is known as depreciation. Depreciation is the price we pay for using the fixed asset over time. E.g a van was bought for $5000 and used for 5 years. It was sold for $1000. That is to say its value had depreciated by $4000 over 5 years.

Mostly, large scale businesses make sales on credit; that is they do not receive cash at the spot for the goods they sell. The parties which owe the business an amount are called debtors and the amount is called debt.

Capital expenditure includes the cost of acquiring a fixed asset, bringing it into business, legal cost incurred on that asset, carriage inwards, any other cost needed to get a fixed asset ready for use.

It is a statement drawn up at the end of each period stating there in all the assets and liabilities of a business arranged in the customary order to exhibit the true and correct state of affairs of a business on a particular date.

The cash book consists of a cash account and bank account put together in one book. In a cash book, debit and credit columns of both the accounts are shown together as shown below. The bank account contains all the information about the transactions made by cheques, and cash account deals with the transactions done in cash.