tag:blogger.com,1999:blog-87977780764702356832024-03-08T07:44:05.805-08:00Accounting and Finance is Easy Here..!Accounting and finance is always a relevant topic. Every one should have some basic idea about this subject as it is an integral part of our day to day life. My intention is to present the topic in a simple way which may help even a common man to have a basic idea about the topic.Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.comBlogger22125tag:blogger.com,1999:blog-8797778076470235683.post-84054023064665113792014-05-15T17:58:00.000-07:002014-05-15T17:58:42.345-07:00Practice Questions - Issue, forfeiture, reissue and valuation of rights<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]-->1.<span style="font-size: 7pt;">
</span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">The
Bharat Trading Co. Ltd with a registered capital of Rs.100000 issued 5000
equity shares of Rs.10 each payable Rs.2 on application, Rs.2 on allotment,
Rs.3 on first call and Rs.3 on final call. Pass journal entries assuming the
shares issued were fully subscribed and the money has been received.</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">2.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">P
Ltd issued a prospectus inviting applications for 100000 equity shares of Rs.10
each, payable as Rs.2 with application, Rs.3 on allotment and the balance on
first and final call. Applications were received for 80000 shares. The call was
also made in due course of time. All the money were duly received. Journalize
the transactions including cash transactions.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]-->3.<span style="font-size: 7pt;">
</span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">On
1<sup>st</sup> march 2001 Alpha Co. Ltd issued 25000 10% preference shares of
Rs.25 each payable as Rs.4 with application, Rs.6 with allotment and balance in
two equal calls of Rs.7.50 each. Applications were received 51000 shares. The
Board of Directors rejected applications for 1000 shares and allotted shares on
the remaining applications on prorate basis on 1<sup>st</sup> April 2001. First
call was made three months after allotment where as second call was made four
months after first call. In each case 14 days notice was served. All the money
was duly received. Pass journal entries.</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]-->4.<span style="font-size: 7pt;">
</span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Sunshine
Ltd makes an issue of 100000 equity shares of Rs.10 each payable Rs.3 on
application, Rs.5 on allotment and Rs.2 on first and final call. Applications
were received for 250000 shares. The directors returned the application money
on 24000 shares and the excess application money received from the remaining
applicants was carried forward in part satisfaction on the accounts due on
allotment on the shares allotted to them. The company did not make first and
final call. Show journal entries.</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">5.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">A
Ltd issued a prospectus inviting application for 100000 equity shares of Rs.10
each payable as to Rs.2 with application, Rs.3 on allotment and balance at the
discretion of directors. The number of applications amounted to 120000 shares.
The allotment was made as follows;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">To applicants of 80000 shares - full allotment<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">To applicants of 30000 shares - 20000 shares<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">To applicants of 10000 shares -
nil<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify; text-indent: .5in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Give journal entries assuming the entire sum due on allotment has been
received and no call has been made. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">6.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Beta
Ltd. having a nominal capital of Rs.2000000 in shares payable as follows:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On application Rs.25<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On allotment Rs.25<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On first call Rs.20<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On final call Rs.20<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify; text-indent: .5in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">The company received applications for 9000 shares. All the applications
were accepted. All money due are received with the exception of final call in
200 shares, later these shares were forfeited and reissued as fully paid at
Rs.90 per shares. Give journal entries.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]-->7.<span style="font-size: 7pt;">
</span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">The
Directors of ABC Ltd. resolved on 1<sup>st</sup> May 2002 that 2000 ordinary
shares of Rs.10 each, Rs.7.50 paid, be forfeited for nonpayment of final call
of Rs.2.50. On June 10, 2002 1800 of the above shares were reissued for Rs.6
per share. Show journal entries required to give effect to the above
transactions.</span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">8.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">A
Ltd, had its issued share capital comprising 20000 equity shares of Rs.10 each
payable as Rs.2 on application, Rs.3 on allotment (including premium) Rs.3 on
first call and Rs.3 on final call. The shares were called up to first call. All
the money was received except from A holding 300 shares, who paid only up to
application and except from B holding 100 shares who paid up to allotment. All
these shares are forfeited. All these shares were reissued to C on payment of
Rs.6 per share and as paid up to the same extent as other shares. Pass journal
entries for forfeiture and reissue of shares.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">9.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">X
Ltd issued 10000 equity shares of Rs.10 each payable as under;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Rs.2 on application<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Rs.5 on allotment<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Rs.3 on first and final call<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify; text-indent: .5in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">The public applied for 8000 shares which were allotted. All the money due
on shares was received except the first and final call on 100 shares. These
shares were forfeited and reissued at Rs.8 per share. Show the journal entries
in the books of the company.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">10.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Give
journal entries for the above forfeiture and reissue of shares.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">a) X Ltd
forfeited 30 shares of Rs.10 each fully called up, held by Karim for nonpayment
of allotment money of Rs.3 per share and final call of Rs.4 per share. He had
paid the application of Rs.3 per share. These shares were reissued to Salim for
Rs.8 per share.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">b) X Ltd
forfeited 10 shares of Rs.10 each (Rs.6 called up) issued at a discount of 10%
to Neeta on which she had paid Rs.2 per share. Out of these, 8 shares were
reissued as Rs 8 called up for Rs.6 per share.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">11.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">A
company issue 10000 shares of face value Rs.10 each payable Rs.3 on
application, Rs.3 on allotment, Rs.2 on first call and Rs.2 on final call. All
cash is duly received, except the final call on 200 shares. These are
subsequently forfeited and later on issued as fully paid at Rs.7 per share.
Pass journal entries.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">12.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">A
Ltd issued 10000 shares of Rs.100 each at a premium of 5% payable as follows;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-indent: .5in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On application Rs.25, on allotment Rs.45 (including premium) on final
call Rs.35. The applications were received for 9000 shares and all of these
shares were accepted. All money due were received except final call on 100
shares, which were forfeited. Of these 50 shares were reissued at Rs.90 as
fully paid. Draft journal entries.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">13.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">A
Ltd forfeited 100 shares of Rs.10 each issued at a premium of Re.1 per share to
Hameed who had applied for 150 shares for nonpayment of allotment money of Rs.4
per share (including premium) and the first and final call of Rs.5 per share.
Out of these 60 shares were re issued to Sasi credited as fully paid for Rs.8
per share. Give journal entries relating to forfeiture and re issue of shares.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">14.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">A
company forfeits 100 shares of Rs.10 each, originally issued at a premium of
Rs.2 per share. The shareholder paid Rs.4 per share on application did not pay
the allotment money of Rs.4 per share (including premium) and call money of
Rs.4 per share. The company takes credit for the premium as soon as it becomes
due. The shares were subsequently re issued at Rs.11 per share fully paid up.
Pass journal entries.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">15.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">300
shares of Rs.10 each fully called up were forfeited by Bharat Ltd. for
nonpayment of first call of Rs.3 and final call of Rs.4 per share. Of these 100
shares were reissued at Rs.8 per share and 80 shares at Rs.8.50 per share. Show
journal entries for forfeiture and issue.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">16.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">A
company offers to its equity shareholders the right to buy one equity share of
Rs.100 each at Rs.120 for every four equity shares of Rs.100 each held. The
market value of one equity share is Rs.180. Calculate the value of right.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">17.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">A
Ltd has a share capital of 5000 equity shares of Rs.100 each having market
value of Rs.150 per share. The company wants to raise additional funds of
Rs.120000 and offers to
equity shareholders the right to apply for new shares at Rs.120 for every 5
shares held. You are required to calculate value of right.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">18.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">100
shares of Rs.100 each issued at 5% discount are forfeited by a company for
non-payment of allotment money of Rs.20 per share. All these shares were
reissued at Rs.80 per share. Give journal entries for forfeiture and reissue of
shares.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">19.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Bhim
Sen Ltd. issued 60000 equity shares of Rs.20 each at a discount of 5% and 9000
10% preference shares of Rs.100 each at 3% discount. The amounts payable in
respect of the shares were as under:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Equity shares
– Rs.10 on application, Rs.5 on allotment, and the balance on a call to be made
in 3 months time, <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Preference
shares - Rs.60 on application, Rs.25 on a call to be made in 3 months time, the
balance due is payable at the time of allotment.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">All moneys
were duly received. Journalize the transactions (excluding calls) in the
company’s books.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">20.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">The
following particulars are given from the books and records of Standard Products
Ltd. relating to issue and forfeiture of equity shares during January to April
2006.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">The amount per
share was payable as under:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Rs.3 on
application, Rs.5 on allotment (including Rs.2 as premium) Rs.4 on first and
final call.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"> No.
of shares No. of
Shares <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 3.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"> allotted for applied for<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"> Category
I 20000 30000<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"> Category
II 10000 10000<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"> Category
III NIL 5000<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"> Allotment
were made prorate to category I<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"> Mr. Giri who applied for 450 shares
in category I failed to pay allotment and call money and his shares were
forfeited by the Directors. Subsequently, 200 forfeited shares were reissued to
Mr. Puri as fully paid for Rs.9 per share.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Show journal
entries to record the above transactions.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">21.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Dhananjay
Ltd. had issued 50000 equity shares of Rs.50 each at par, payable as Rs.25 on
application, Rs.10 on allotment, Rs.10 on first call and Rs.5 on second and
final call. Applications were received for all the shares and the company made
the allotment to all applicants and also made allthe calls. The company
received all the amounts except;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">a.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">First
call on 1200 shares.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 1.0in; mso-add-space: auto; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">b.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Second
call on 2000 shares (including the above 1200 shares)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Having passed
the necessary resolution, the company forfeited the above shares. All the
forfeited shares were reissued at Rs.12 per share. Pass journal entries.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">22.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">A
Ltd Co issued a prospectus inviting
applications for 2000 shares of Rs.10 each at a premium Rs.2 per share payable
as follows;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On application Rs.2<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On allotment Rs.5 (including premium)<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On first call Rs.3<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On second call Rs.2<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify; text-indent: .5in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Applications were received for 3000 shares and allotment made pro rata to
the applicants of 2400 shares. Money over paid on application was employed on
account of sum due on allotment.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify; text-indent: .5in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Kumar, to whom 40 shares were allotted, failed to pay the allotment money
and on his subsequent failure to pay the first call, his shares were forfeited.
Raja, the holder of 60 shares, failed to pay the two calls, and his shares were
forfeited after the second call. Of these shares forfeited 80 shares were sold
to Albert credited as fully paid for Rs.9 per share, the whole of Kumar’s
shares being included.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Show journal, cash book and the
balance sheet.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">23.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Madan
and Co. Ltd issued 12000 equity shares of Rs.10 each at a premium of Rs.2 per
share payable as follows;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On application Rs.2
per share<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On allotment (including premium) Rs.5 per share<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 1.0in; mso-add-space: auto; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On first call Rs.5
per share<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify; text-indent: .5in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Applications were received for 20000 shares. 5000 applications were
rejected and application money refunded. Allotment was made pro rata to the
applicants of 15000 shares and money over paid on application was applied
towards amount due on allotment.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-left: .5in; text-align: justify; text-indent: .5in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Jain to whom 1200 shares were allotted failed to pay the allotment and
first call money. His shares were forfeited. Give entries in the books of the
company.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">24.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">M/s
Blue Chips Ltd. issued 5000 equity shares of Rs.100 each at a premium of Rs.25
per share. On 1<sup>st</sup> January 2000, the company received 12000
applications on which 2000 applications were totally rejected and their amount
was refunded on 1<sup>st</sup> February 2000 when the remaining applicants were
allotted shares on pro rata basis. The amount of shares received is as under:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">On application
Rs.30, on allotment Rs.45 (including premium), on first call Rs.25 and on
second call Rs.25.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Allotment
money was received in full on 15<sup>th</sup> February.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">First call was
made on 15<sup>th</sup> May, 2000 and received on 1<sup>st</sup> June 2000
except on 25 shares held by Mr. Govind. His shares were forfeited on 1<sup>st</sup>
October 2000 and reissued on 15<sup>th</sup> October2000 credited at Rs.75 paid
for Rs.110 per share to Mr. Anand. Final call was made on 1<sup>st</sup>
November and received on 15<sup>th</sup> November except on 100 shares held by Mr.
Binu.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;">Pass journal
entries.<o:p></o:p></span></div>
<br />
<div class="MsoListParagraphCxSpLast" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
</div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-51295286013136607492014-05-14T18:52:00.001-07:002014-05-14T18:52:17.207-07:00Journal Entries - Issue of Shares<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
<b><span style="font-size: 16.0pt; line-height: 115%;">Journal Entries for Issue of Shares<o:p></o:p></span></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-padding-alt: 0in 5.4pt 0in 5.4pt; width: 655px;">
<tbody>
<tr style="height: 68.35pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid black 1.0pt; height: 68.35pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: .25in;" valign="top" width="24">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
1</div>
</td>
<td style="border-left: none; border: solid black 1.0pt; height: 68.35pt; mso-border-alt: solid black .5pt; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-themecolor: text1; mso-border-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoListParagraph" style="margin: 0.1in 0in 0.1in 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><b><i>1.<span style="font-size: 7pt; font-style: normal; font-weight: normal;"> </span></i></b><!--[endif]--><b><i>On receipt of application money<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<i> </i><b>Bank A/c Dr</b>
( for the full amount received on application)</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b>To Share application A/c<o:p></o:p></b></div>
</td>
</tr>
<tr style="height: 70.8pt; mso-yfti-irow: 1;">
<td rowspan="3" style="border-top: none; border: solid black 1.0pt; height: 70.8pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: .25in;" valign="top" width="24">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
2</div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 70.8pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoListParagraph" style="margin: 0.1in 0in 0.1in 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><b><i>2.<span style="font-size: 7pt; font-style: normal; font-weight: normal;"> </span></i></b><!--[endif]--><b><i>On acceptance of application<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<i> </i><b>Share
application A/c Dr </b>(
with the application money on allotted shares)</div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b> To
Share capital A/c</b></div>
</td>
</tr>
<tr style="height: 99.85pt; mso-yfti-irow: 2;">
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 99.85pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b><i>When shares are issued at
premium, and premium is payable with application money<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
Share application A/c Dr ( with the
application money + premium on allotted shares)</div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
To Share capital ( application money only)</div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
To Security
Premium A/c (amount of premium)<b><i><o:p></o:p></i></b></div>
</td>
</tr>
<tr style="height: 62.5pt; mso-yfti-irow: 3;">
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 62.5pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b>When excess of application
money is returned<o:p></o:p></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
Share application A/c Dr </div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
To Bank A/c<b><i><o:p></o:p></i></b></div>
</td>
</tr>
<tr style="height: 69.1pt; mso-yfti-irow: 4;">
<td rowspan="3" style="border-top: none; border: solid black 1.0pt; height: 69.1pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: .25in;" valign="top" width="24">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
3</div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 69.1pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoListParagraph" style="margin: 0.1in 0in 0.1in 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><b><i>3.<span style="font-size: 7pt; font-style: normal; font-weight: normal;"> </span></i></b><!--[endif]--><b><i>On making allotment due<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<i> </i><b>Share
allotment A/c Dr </b>(
with the allotment money on allotted shares)</div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b> To
Share capital</b></div>
</td>
</tr>
<tr style="height: 83.25pt; mso-yfti-irow: 5;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 83.25pt; mso-border-alt: solid black .5pt; mso-border-bottom-alt: solid windowtext .5pt; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b><i>When shares are issued at
premium, and premium is payable with allotment money<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
Share allotment A/c Dr ( with the
allotment money + premium on allotted shares)</div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
To Share capital ( allotment money
only)</div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
To Security Premium A/c (amount of premium)</div>
</td>
</tr>
<tr style="height: 123.25pt; mso-yfti-irow: 6;">
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 123.25pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b><i>When shares are issued at
discount<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
Share allotment A/c Dr (with the
allotment money on allotted shares)</div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
Discount on issue of shares A/c Dr (amount of discount)</div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
To Share capital ( allotment money +
discount )<b><i><o:p></o:p></i></b></div>
</td>
</tr>
<tr style="height: 66.0pt; mso-yfti-irow: 7;">
<td rowspan="3" style="border-top: none; border: solid black 1.0pt; height: 66.0pt; mso-border-bottom-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-alt: solid black .5pt; mso-border-right-themecolor: text1; mso-border-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: .25in;" valign="top" width="24">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
4</div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 66.0pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b><i>When excess application money
if any is adjusted towards allotment<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
Share application A/c Dr (amount adjusted
to allotment) </div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
To Share
allotment A/c</div>
</td>
</tr>
<tr style="height: 69.25pt; mso-yfti-irow: 8;">
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 69.25pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoListParagraph" style="margin: 0.1in 0in 0.1in 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><b><i>4.<span style="font-size: 7pt; font-style: normal; font-weight: normal;"> </span></i></b><!--[endif]--><b><i>On receipt of allotment money<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b>Bank A/c Dr
</b>(with the actual amount received)</div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b> To
Share allotment A/c<i><o:p></o:p></i></b></div>
</td>
</tr>
<tr style="height: 89.5pt; mso-yfti-irow: 9;">
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 89.5pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b><i>When any advance money is paid
towards any calls together with the allotment money<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
Bank A/c Dr
(with the actual amount received)</div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
To Share allotment A/c</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
To
Calls in advance A/c (advance
amount received)<b><i><o:p></o:p></i></b></div>
</td>
</tr>
<tr style="height: .5in; mso-yfti-irow: 10;">
<td style="border-top: none; border: solid black 1.0pt; height: .5in; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: .25in;" valign="top" width="24">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
5</div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: .5in; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoListParagraph" style="margin: 0.1in 0in 0.1in 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><b><i>5.<span style="font-size: 7pt; font-style: normal; font-weight: normal;"> </span></i></b><!--[endif]--><b><i>On making first/second/final call<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b>Share first
call A/c Dr </b>(
with the call money on allotted shares<b>)<o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b> To
Share capital A/c</b></div>
</td>
</tr>
<tr style="height: 69.0pt; mso-yfti-irow: 11;">
<td rowspan="3" style="border-top: none; border: solid black 1.0pt; height: 69.0pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: .25in;" valign="top" width="24">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
6</div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 69.0pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b><i>When excess application money
if any is adjusted towards call<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
Share application A/c Dr (amount adjusted
to call) </div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
To Share
first/second/final A/c</div>
</td>
</tr>
<tr style="height: 81.75pt; mso-yfti-irow: 12;">
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 81.75pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b><i>When adjusting calls in advance
to first/second/final call<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
Calls in advance A/c Dr (advance amount) </div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
To Share
first/second/final A/c<b><i><o:p></o:p></i></b></div>
</td>
</tr>
<tr style="height: 107.85pt; mso-yfti-irow: 13; mso-yfti-lastrow: yes;">
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 107.85pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 473.4pt;" valign="top" width="631">
<div class="MsoListParagraph" style="margin: 0.1in 0in 0.1in 0.5in; text-align: justify; text-indent: -0.25in;">
<!--[if !supportLists]--><b><i>6.<span style="font-size: 7pt; font-style: normal; font-weight: normal;"> </span></i></b><!--[endif]--><b><i>On receipt of first/second/final call
money<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin: 0.1in 0in; text-align: justify;">
<b> Bank A/c Dr
</b>(with the actual amount received)<b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<b> To Share first/second/final call<o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 16.0pt; line-height: 115%;">Journal entries for the issue of shares for consideration other than cash<o:p></o:p></span></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 20.25pt; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt;">
<tbody>
<tr style="height: 77.35pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 77.35pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 421.65pt;" valign="top" width="562">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 2.85pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
<b><i>a. When
property is acquired<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 2.85pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
Property or Asset A/c Dr (with cost)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 2.85pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
To
Vendor</div>
</td>
</tr>
<tr style="height: 102.75pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 102.75pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 421.65pt;" valign="top" width="562">
<div class="MsoNormal">
<b><i>b. When
shares are issued in exchange for the value of property<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
Vendor A/c Dr<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
Discount on Issue A/c Dr
(in case of discount)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
To
Share Capital (face value)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 2.85pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
To Security Premium A/c (in case of premium)</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 16.0pt; line-height: 115%;">Journal For forfeiture of shares<o:p></o:p></span></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 18.9pt; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt;">
<tbody>
<tr style="height: 76.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0; mso-yfti-lastrow: yes;">
<td style="border: solid windowtext 1.0pt; height: 76.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 423.75pt;" valign="top" width="565">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
<b> </b>Share
Capital A/c Dr
<span style="font-size: 10.0pt; line-height: 115%; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;">(with the amount called up</span><span style="font-size: 10.0pt; line-height: 115%;">, ie amount paid +unpaid</span><span style="font-size: 10.0pt; line-height: 115%; mso-ascii-font-family: Calibri; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-font-family: Calibri;">)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
Security
Premium A/c Dr (with
the unpaid amount of premium)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
To
Share Allotment (with the unpaid amount on allotment)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
To
Share Call (with the unpaid amount on call)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
To
Discount on Issue of Shares A/c (if shares are issued at discount)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
To
Forfeited Shares A/c (with the
amount paid excluding premium)</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 16.0pt; line-height: 115%;"> </span></b><b><span style="font-size: 16.0pt; line-height: 115%;">Journal For re issue of forfeited shares</span></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
Bank A/c Dr (amount received on re-issue)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
Discount on Issue of Shares A/c Dr (with the amount of original
discount if the </div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
Shares originally were issued at
discount) <o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
<b> </b>Forfeited
Shares A/c Dr
(with the discount or loss on re-issue)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
To Share Capital
A/c (with the amount credited as paid up)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
To Security
Premium A/c (with the amount of premium on re-issue)<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
If all
forfeited shares have been re-issued, the credit balance left in the Forfeited
Shares A/c being a capital profit should be transferred to Capital Reserve A/c
by passing the following journal entry:<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
Forfeited Shares A/c Dr<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
To Capital
Reserve A/c<o:p></o:p></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify; text-justify: inter-ideograph;">
If only a part of the forfeited
shares have been re-issued, only the profit on shares which have been re-issued
is transferred to Capital Reserve A/c.<o:p></o:p></div>
<br />
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
</div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-4044201614319132652013-08-17T02:26:00.000-07:002014-04-30T07:30:19.574-07:00Equivalent Units<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
<span style="font-family: inherit;">The Concept of equivalent units is used in process costing. Process costing is used when the manufacturing of product consists of several repetitive processes and the products are homogeneous. The output of preceding process will be the input of succeeding process. The inputs like raw material, labor will be added into the processes at different time intervals as per the requirement</span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">Equivalent unit is the expression of partly completed unit (work in progress) in to a notional quantity of completed units. For example; we have 1000 partly completely units and it is assumed that they are 60% complete with regard to material and conversion costs (labor and overheads), equivalent units will be 600 units (1000 X 60%)</span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: inherit;">Equivalent units are measured to find out the cost per unit of output, value of finished production, value of work-in-progress at the end of a period</span></div>
</div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-3870002294491959352013-02-28T00:44:00.001-08:002014-04-30T07:31:30.422-07:00UNDERWRITING OF SHARES AND DEBENTURES<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="line-height: 115%; text-align: justify;">Underwriting is an agreement where
by the underwriters ensure the company that in case the shares and debentures
offered to the public, are not subscribed by the public to the extent, the
balance of shares and debentures will be taken up by the underwriters.</span><br />
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<br />
The firms or persons who are engaged
in underwriting are called<b><i> underwriters</i></b>. The commission payable
to underwriters for underwriting is known as <b><i>underwriting commission</i></b>.</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><br /></b>
<b>Advantages of
Underwriting</b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
1. The company
is sure of getting the value of shares issued</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
2. It enhances
goodwill of the company</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
3. It
facilitates wide distribution of securities</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
4. The company
gets expert advice from underwriters in the matter of marketing securities</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
5. It fulfills
requirement of minimum subscription</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><br /></b>
<b>Provisions
regarding Underwriting<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
1. A company
cannot pay any commission on the issue of shares unless permitted by its
Articles.</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
2. Commission
cannot be paid to any person for shares or debentures which are not offered to
the public for subscription.</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
3. The
commission is limited to 5% of issue price in case of shares and 2 ½ % in case
of debentures. However, in practice, SEBI has allowed underwriting commission
only at the rate of 2.5% of issue price of equity shares.</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
4. The amount or
rate of commission should be disclosed in the prospectus.</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
5. The directors
must state in the prospectus that the underwriters are capable of meeting their
obligations under the underwriting contract.</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><br /></b>
<b>Types of
Underwriting<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><i>1. Open
Underwriting (Conditional Underwriting)<o:p></o:p></i></b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
Under
this type of underwriting, the underwriter agrees to take up shares or
debentures only when the issue is not subscribed by the public in full.</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><i>2. Firm
Underwriting<o:p></o:p></i></b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
When an underwriter agrees to buy a
definite number of shares or debentures in addition to the shares or debentures
he has to take under the underwriting agreement, it is called firm
underwriting. Even if the issue is over subscribed, underwriters are liable to
take up the agreed number of shares in case of firm underwriting.</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><br /></b>
<b>Marked or
Unmarked Application<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
Generally shares or debentures of a
company are underwritten by two or more underwriters in an agreed ratio.
Usually the forms are stamped with the name of the underwriters in order to
distinguish the forms of one underwriter from that of others. Such stamped
applications when received are called <b><i>marked applications</i></b>. The
application forms which are received by the company without any name of the
underwriter are called <b><i>unmarked applications<o:p></o:p></i></b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><br /></b>
<b>Journal Entries
in the books of the Company<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<i>1. In case
the whole of shares or debentures are not taken up by the public, the remaining
is allotted to underwriters. The entry is:<o:p></o:p></i></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;">Underwriters <st1:street w:st="on"><st1:address w:st="on">A/c Dr</st1:address></st1:street><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;"> To
Share Capital A/c<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;"> To
Debentures A/c<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;"> (Balance
of shares and debentures allotted to underwriters)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<i>2. For
commission due:<o:p></o:p></i></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;">Underwriting <st1:street w:st="on"><st1:address w:st="on">Commission
A/c Dr</st1:address></st1:street><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;"> To
Underwriters<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<i>3. For
payment of commission:<o:p></o:p></i></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;"> Underwriter
A/c Dr<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;"> To
Bank (cheque)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;"> To
Share Capital A/c (shares)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;"> To
Debentures A/c (debentures)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<i>4. For the
balance amount due from underwriters received:<o:p></o:p></i></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;"> Bank
A/c Dr<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span style="font-size: 10.0pt; line-height: 115%;"> To
Underwriters A/c<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><br /></b>
<b>Determination
of Liability in respect of Underwriting Contract<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><i>a) When
issue is fully underwritten (without Firm Underwriting)<o:p></o:p></i></b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
When the entire issue has been
underwritten by one underwriter, the liability of the underwriter is calculated
as follows:</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
Liability
= No. of shares underwritten – Total no. of application</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
If
the entire issue has been underwritten by two or more underwriters, all
unmarked applications are divided between them in the ratio of gross liability
of individual underwriter.</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
Liability
of each underwriter is calculated as follows:</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
Gross
liability according to the agreed ratio ………..</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
<i>Less:</i>
Marked applications ………..</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
<!--[if gte vml 1]><v:line
id="_x0000_s1026" style='position:absolute;left:0;text-align:left;z-index:251654656'
from="356.25pt,2.8pt" to="404.7pt,2.8pt"/><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 474px; margin-top: 3px; mso-ignore: vglayout; position: absolute; width: 67px; z-index: 251654656;"><img height="2" src="file:///C:/Users/Naser/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" v:shapes="_x0000_s1026" width="67" /></span><!--[endif]--> Balance
left ………..</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
<i>Less:</i>
Unmarked application in the ratio of gross liability ………..</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<!--[if gte vml 1]><v:line
id="_x0000_s1028" style='position:absolute;left:0;text-align:left;flip:x;
z-index:251656704' from="356.25pt,2.25pt" to="361.95pt,2.25pt"/><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 474px; margin-top: 2px; mso-ignore: vglayout; position: absolute; width: 10px; z-index: 251656704;"><img height="2" src="file:///C:/Users/Naser/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif" v:shapes="_x0000_s1028" width="10" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1027"
style='position:absolute;left:0;text-align:left;z-index:251655680' from="359.1pt,2.25pt"
to="404.7pt,2.25pt"/><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 478px; margin-top: 2px; mso-ignore: vglayout; position: absolute; width: 63px; z-index: 251655680;"><img height="2" src="file:///C:/Users/Naser/AppData/Local/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1027" width="63" /></span><!--[endif]-->
Net liability ………...</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><i>b) When
the issue is fully underwritten (with Firm Underwriting)</i></b> </div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
Liability
of each underwriter is calculated as follows:</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
Gross
liability according to the agreed ratio ………..</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
<i>Less:</i>
Marked applications (<span style="font-size: 10.0pt; line-height: 115%;">excluding
firm underwriting</span>) ………..</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
<!--[if gte vml 1]><v:line
id="_x0000_s1029" style='position:absolute;left:0;text-align:left;z-index:251657728'
from="356.25pt,2.8pt" to="404.7pt,2.8pt"/><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 474px; margin-top: 3px; mso-ignore: vglayout; position: absolute; width: 67px; z-index: 251657728;"><img height="2" src="file:///C:/Users/Naser/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" v:shapes="_x0000_s1029" width="67" /></span><!--[endif]--> Balance
left ………..</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
<i>Less:</i>
*Unmarked application in the ratio of gross liability ………..</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<!--[if gte vml 1]><v:line
id="_x0000_s1031" style='position:absolute;left:0;text-align:left;flip:x;
z-index:251659776' from="356.25pt,2.25pt" to="361.95pt,2.25pt"/><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 474px; margin-top: 2px; mso-ignore: vglayout; position: absolute; width: 10px; z-index: 251659776;"><img height="2" src="file:///C:/Users/Naser/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif" v:shapes="_x0000_s1031" width="10" /></span><!--[endif]--><!--[if gte vml 1]><v:line id="_x0000_s1030"
style='position:absolute;left:0;text-align:left;z-index:251658752' from="359.1pt,2.25pt"
to="404.7pt,2.25pt"/><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 478px; margin-top: 2px; mso-ignore: vglayout; position: absolute; width: 63px; z-index: 251658752;"><img height="2" src="file:///C:/Users/Naser/AppData/Local/Temp/msohtmlclip1/01/clip_image003.gif" v:shapes="_x0000_s1030" width="63" /></span><!--[endif]-->
Net liability ………...</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<!--[if gte vml 1]><v:line
id="_x0000_s1032" style='position:absolute;left:0;text-align:left;z-index:251660800'
from="356.25pt,17.85pt" to="404.7pt,17.85pt"/><![endif]--><!--[if !vml]--><span style="height: 2px; left: 0px; margin-left: 474px; margin-top: 23px; mso-ignore: vglayout; position: absolute; width: 67px; z-index: 251660800;"><img height="2" src="file:///C:/Users/Naser/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" v:shapes="_x0000_s1032" width="67" /></span><!--[endif]--> <i>Add:</i>
Firm underwriting ……....... </div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
Total
liability …………</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
* No. of
Unmarked application = Total subscription excluding firm underwriting – Marked
application excluding firm underwriting + Application under firm underwriting.</div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<i>c) <b>When
the issue is partially underwritten<o:p></o:p></b></i></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
Liability =
Gross Liability – Marked application + Firm underwriting <span style="font-size: 10.0pt; line-height: 115%;">(if there is firm underwriting)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b><span style="font-size: 10.0pt; line-height: 115%;">Note:</span></b><span style="font-size: 10.0pt; line-height: 115%;"> If no information is given regarding
marked and unmarked application, marked application is calculated as follows:<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify; text-indent: .5in;">
<span style="font-size: 10.0pt; line-height: 115%;">Marked applications = Total No. of
application received x % of underwriting<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b>Underwriting
Account<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<b> </b>This account is prepared by the
underwriter to ascertain the profit or loss on underwriting. It is a nominal
account and is prepared like a P/L A/c </div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<br /></div>
<div align="center" class="MsoNormal" style="line-height: 115%; text-align: center;">
<span style="font-family: Chiller;">FROM VARIOUS FINANCIAL ACCPUNTING BOOKS<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
</div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-77877100402456782692013-02-19T02:32:00.000-08:002013-02-19T02:32:06.916-08:00ISSUE OF BONUS SHARES<br />
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify; text-indent: .5in;">
Bonus
may be paid in <b><i>cash</i></b> or <b><i>in shares</i></b>:</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><i>Cash bonus</i></b> is given
when the company has sufficient cash to pay without affecting the working
capital</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b>Capital Bonus
(Bonus Share)<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b> </b>If cash is insufficient and if
payment of cash bonus is likely to affect the working capital the company may
issue bonus shares instead of cash bonus. <b><i>Capital</i></b><i> <b>bonus</b>
is given by making partly paid shares fully paid without getting cash from the
shareholders or it is given by issue of fully paid shares.<o:p></o:p></i></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<i> <b>Bonus shares </b>are those shares
which are issued by a company free of charge to the existing shareholders of a
company out of its large reserves created out of past profits.</i></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b>Circumstances
of issuing Bonus Shares<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
1. When the
company wishes to capitalize its reserves</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
2. When the
company has not sufficient cash reserves</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
3. When value of
fixed assets of a company exceeded its capital, the difference is capitalized
by issuing bonus shares</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
4. To avoid
problems like demand by the workers for higher wages</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b>SEBI
Guidelines for Issue of Bonus Shares<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
1. The bonus
issue can be made only out of free reserves built out of the genuine profits or
securities premium collected in cash.</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
2. Reserves
created by revaluation of fixed assets are not available for issue of bonus
shares</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
3. The bonus
issue cannot be made unless the partly-paid shares, if any, existing, are made
fully paid-up</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
4. The
declaration of bonus issue, in lieu of dividend, cannot be made</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
5. Once the
company announces bonus issue after the approval of Board of Directors, the proposal
must be implemented within a period of six months from the date of such approval
and it does not have option of changing the decision</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
6. If there is
no provision in the Articles for the capitalization of reserves, the company
must pass a Resolution at its General Body Meeting to make provisions in the
Articles</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
7. If consequent
to the issue of bonus shares, the subscribe and paid-up capital exceeds the
authorized capital, a Resolution shall be passed by the company at its General
Body Meeting for increasing the authorized capital </div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b>Funds or
Sources for Bonus Issue</b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><i>A .Revenue
Reserves/Profits<o:p></o:p></i></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
1. Credit balance in the profit and
loss account</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
2. General Reserves</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
3. Credit balance in the Sinking
Fund Account for the redemption of a liability after the redemption of the liability</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
4. Dividend equalization reserve</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><i> B. Capital Reserves/profits<o:p></o:p></i></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
1. Profit prior to incorporation</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
2. Profit on sale of fixed assets or
business</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
3. Capital Redemption Reserve
created for redemption of preference share</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
4. Security Premium collected in
cash only</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><span style="font-size: 10.0pt; line-height: 150%;">Note: <i>Capital Redemption Reserve
Account</i></span></b><i><span style="font-size: 10.0pt; line-height: 150%;"> and <b>Security
Premium Account</b> can be utilized <b>only for issuing fully paid bonus shares<o:p></o:p></b></span></i></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b>Accounting
Treatment<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
Bonus share can be issued at par or
at premium. Bonus share can be given:</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
a) By making
partly paid shares as fully paid</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
b) By issuing
fully paid shares</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b>When fully
paid bonus shares are issued<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<i>1. For the
transfer of amount for the issue of bonus shares (on declaration of bonus)<o:p></o:p></i></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
Profit and Loss A/c Dr</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<st1:street w:st="on">General Reserve A/c Dr</st1:street></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
Capital Redemption Reserve A/c Dr</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
Security Premium A/c Dr</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
Capital Reserve A/c Dr</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<i>Any other</i> Reserve A/c Dr</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b> </b>To
Bonus to Shareholders A/c</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<i>2. on issue of bonus shares<o:p></o:p></i></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
Bonus to <st1:street w:st="on">Shareholders A/c Dr</st1:street></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
To Share Capital</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
To Security Premium A/c (<span style="font-size: 10.0pt; line-height: 150%;">if bonus shares are issued at premium</span>)</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b>When Bonus is
given to convert partly paid shares into fully paid<o:p></o:p></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<i>1.</i> <i>On
the declaration of bonus<o:p></o:p></i></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify; text-indent: .5in;">
Profit
and Loss A/c Dr</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<st1:street w:st="on">General Reserve A/c Dr</st1:street></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
Capital Reserve A/c Dr</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b> </b>To
Bonus to Shareholders A/c</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<i>2. On making
the final call due</i></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
Share <st1:street w:st="on">Final Call A/c Dr</st1:street></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
To Share Capital</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<i>3. On
utilization of bonus to make the share paid-up<o:p></o:p></i></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
Bonus to <st1:street w:st="on">Shareholders A/c Dr</st1:street></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
To Share Final Call A/c</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b>Journal Entry
for Cash Bonus</b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<st1:street w:st="on">1) P&L Appropriation A/c Dr</st1:street></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
To Bonus Payable</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<st1:street w:st="on">2) Bonus Payable A/c Dr</st1:street></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
To Bank</div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<i><span style="font-family: "Blackadder ITC"; font-size: 16.0pt;">Based on
Financial Accounting Books<o:p></o:p></span></i></div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com1tag:blogger.com,1999:blog-8797778076470235683.post-63282022840156618112013-02-10T01:42:00.001-08:002013-02-10T01:42:38.964-08:00Budgeting and Budgetary Control<div class="separator" style="clear: both; text-align: center;">
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<br />Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-91774440187877303672013-02-07T09:17:00.000-08:002013-02-07T09:17:54.648-08:00What is the meaning of useful life of a non-current (fixed) asset?<br />
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt -0.25in; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">In the calculation of depreciation of a non current asset, we need
to know about the useful life of the asset.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt -0.25in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt -0.25in; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">Depreciation is the diminution in the value of an asset over
period of time by internal factors (like wear and tear) or/and by external
factors (like technology advancement).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt -0.25in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt -0.25in; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 12pt;">The useful life
of an asset means the period of time during which the asset can be used in a
profitable way. That mean after this period, the cost of maintaining an asset
will exceed the benefits expected to be achieved by the use of that asset.<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt -0.25in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt -0.25in; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">Estimated or actual useful life can be used in the calculation of
depreciation.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0.0001pt -0.25in; text-align: justify;">
<br /></div>
<span style="font-family: Cambria, serif; font-size: 12pt; line-height: 115%;">So, after the useful life of an asset it is better to consider
replacement of the asset</span>Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-65152954792888219062013-02-01T01:25:00.000-08:002013-02-01T01:25:26.815-08:00Company Accounts - Basics<br />
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd;">
<b style="text-align: justify;"><span style="font-size: 14.0pt;">Meaning and Definition of Company</span></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b> </b>A company is a voluntary association of many persons.
It is an artificial person recognized by law with a distinctive name, a common
seal, a common capital and having perpetual succession.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
Indian Companies Act 1956 defines a company as “Company
formed and registered under this Act or an existing company”</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><span style="font-size: 14.0pt;">Characteristics of a company<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b> </b>Refer above</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><span style="font-size: 14.0pt;">Types of companie</span>s: - </b>can be classified --</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>A. On the basis of
incorporation<o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>1. Chartered company</i></b>:-incorporated
under a special charter by the Head of the State</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>2. Statutory company</i></b>:-created
by special Act in Parliament. Eg: SBI, RBI, LIC</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>3. Registered company</i></b>:
- formed and registered in <st1:country-region w:st="on">India</st1:country-region>
with the Registrar of Companies under the provisions of the Companies Act</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>B. On the basis of
liability of members</b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>1. Company limited by
shares</i></b>: - here the members’ liability is limited to the extent of value
of shares held by them</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>2. Company limited by
guarantee</i></b>: - liability of member is limited to the amount of guarantee
stated in the memorandum</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>3. Unlimited company</i></b>:
- liability of member is unlimited</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>C. On the basis of public
interest<o:p></o:p></b></div>
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<b><i>1. Private company</i></b>:
A private company is one which by its Articles,</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
a) Limits the number of members to 50</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
b) Prohibits the invitation to the public to subscribe
its shares or debentures &</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
c) Restricts the transferability of its shares.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>2. Public company</i></b>:
- one which is not a private company</div>
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<b><span style="font-size: 14.0pt;">Minimum Subscription<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b> </b>It is the minimum amount of capital fixed by the
directors to be raised from the members by way of subscription. It must be
stated in the Articles of Association and Prospectus. No allotment of shares
can be made unless the minimum subscription is realized from the applicants of
shares.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
The amount of minimum
subscription must cover the following:</div>
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1. The purchase price of any
property purchased or to be purchased which is to be met out of the proceeds of
the issue.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
2. Preliminary expenses
payable by the company.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
3. Commission on shares
payable by the company.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
4. Repayment of loans taken
by the company in respect of the above mentioned matters.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
5. Working capital</div>
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<b><span style="font-size: 14.0pt;">Share Capital</span></b><span style="font-size: 14.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
The capital of a company known as share capital and is
divided in to different units with definite value called shares. The main
divisions of share capital are:</div>
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<b><i> </i></b><b><i>1.
Nominal or Registered or Authorized Capital</i></b>: - the capital with which
accompany is registered is called the authorized capital. It is the maximum
amount of capital that a company can issue.<b><o:p></o:p></b></div>
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<b><i>2. Issued capital</i></b>: - part of authorized capital which is
offered to the public for subscription. Remaining part is unissued capital<b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>3. Subscribed</i></b><i> capital</i>: - part of issued capital for
which applications are received from the public. Remaining part is unsubscribed
capital</div>
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<b><i>4. Called up capital</i></b>: -The amount on the shares which is
actually demanded by the company to be paid</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>5. Paid up capital</i></b>: -part of called up capital which has
actually been paid up by the shareholders. The sum still to be paid is known as
calls in arrears</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>6. Reserve capital</i>:</b> - that portion of the uncalled capital
which is kept in reserve and which will be called up only on winding up of the
company. A limited company by passing a special resolution may set apart a
portion of the uncalled capital as reserve capital</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><span style="font-size: 14.0pt;">Types of shares</span>: </b>can be classified in to Preference Shares
and Equity Shares<b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>Preference Shares</i></b>:
-those shares which carry preferential right in respect of payment of dividend
and repayment of capital in the event of winding up. The rate of dividend on
preference share is fixed. This dividend is payable before any dividend is paid
on equity shares. Preference share may of the following types:</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>1. Cumulative Preference
Shares</i>: In the case of this type of shares, the arrears of dividend, if
any, are carried forward and paid out of the profits of subsequent years</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>2. Non- Cumulative
Preference Shares</i>:</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>3. Participating Preference
Shares</i>: In addition to fixed rate of dividend, these shares have the right
to participate in the surplus profit left after paying a reasonable rate of
dividend on equity shares</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>4. Non-Participating Preference Shares</i>: These shares get only
fixed rate of dividend</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>5. Redeemable Preference
Shares</i>: - are repayable after the expiry of the fixed period or at the
option of the company.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>6. Convertible Preference
Shares</i>: These shares are given right of conversion into equity shares
within a specified period or at a specified date according to the terms of
issue.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>Equity Shares (ordinary
shares)<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i> </i></b>Equity shares are those which are not preference
shares. They do not carry any preferential right in respect of dividend or repayment
of capital. Dividend is paid after the payment on preference shares. The rate
of dividend is not fixed. Equity shareholders get full voting power.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>Sweat Equity Shares<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
These are equity shares issued by the company to employees
or directors at a discount or for consideration other than cash for providing
know-how or making available rights in the nature of intellectual property
rights or value additions.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Stock<o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b> </b>It is a consolidation of fully paid shares. Lord Hatherly
defines “Stock is a set of shares put together in a bundle” It has no definite
value</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Differences between Stock
and Shares</b></div>
<a name='more'></a><br />
<table align="left" border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 6.75pt; margin-right: 6.75pt; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-table-anchor-horizontal: margin; mso-table-anchor-vertical: page; mso-table-layout-alt: fixed; mso-table-left: left; mso-table-lspace: 9.0pt; mso-table-rspace: 9.0pt; mso-table-top: 254.75pt; mso-yfti-tbllook: 480;">
<tbody>
<tr style="height: 18.4pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 18.4pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 188.8pt;" valign="top" width="252">
<div class="MsoNormal">
<b><i>Share<o:p></o:p></i></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 18.4pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 269.75pt;" valign="top" width="360">
<div class="MsoNormal">
<b><i>Stock<o:p></o:p></i></b></div>
</td>
</tr>
<tr style="height: 41.8pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 41.8pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 188.8pt;" valign="top" width="252">
<div class="MsoNormal">
1. It has a face
value</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
2. It may be fully
paid or partly paid</div>
<div class="MsoNormal">
3. It can issued
directly</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
4. It has a
distinctive number</div>
<div class="MsoNormal">
5. In cannot be
issued or transferred in fractions</div>
<div class="MsoNormal">
6. It can be issued
by any company</div>
<div class="MsoNormal">
7. It is always
registered</div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 41.8pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 269.75pt;" valign="top" width="360">
<div class="MsoNormal">
1. It has no face
value. It can be of any denomination</div>
<div class="MsoNormal">
2. It is fully paid</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
3. It cannot be
issued directly</div>
<div class="MsoNormal">
4. It has no such
number</div>
<div class="MsoNormal">
5. It can be transferred
in fractions subject to a minimum value</div>
<div class="MsoNormal">
6.Only limited
companies can convert shares into stock</div>
<div class="MsoNormal">
7. It may be
registered or unregistered</div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><span style="font-size: 14.0pt;">Issue of Shares<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b> </b>The shares of a company issued in three ways:</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>a) By private placement
of shares: -</i></b>issue of securities of a company direct to one investor or
a small group of investors. Investors are financial institutions, other
companies, friends or relatives. In this case no prospectus is issued.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>b) By right issue of
shares –</i></b>It is an issue of shares to the existing shareholders in
proportion to their existing shareholding. In a right issue no prospectus is
issued.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>c) By public issue of
shares:- </i></b>means selling of shares or securities to public by issue of
prospectus. Public issue is of two types- i) initial public offer and ii) offer
for sale</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Shares Payable by
Installments: </b>Usually the company receives the price of securities in
installments. A part of the price is received along with application-<i>termed
as <b>application money</b></i>. Another part is received at the time of allotment
of shares-<i>termed as <b>allotment money</b></i>. The balance is generally
demanded from the shareholders either in full or in installment. Each
installment is called a <b><i>call.</i></b> Calls may be termed as <b><i>first
call, second call</i></b> etc and the last call is termed as <b><i>final call</i><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Accounting treatment: </b>A
company can issue shares in the following two ways:<b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
1. For cash 2. For consideration other than cash</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Journal Entries for Issue
of Shares for Cash<o:p></o:p></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 5.4pt; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt; width: 604px;">
<tbody>
<tr style="height: 57.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 57.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 239.4pt;" valign="top" width="319">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i><span style="font-size: 10.0pt;">1. On receipt of application money<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i><span style="font-size: 10.0pt;"> </span></i><span style="font-size: 10.0pt;">Bank A/c Dr<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> To
Share application<i><o:p></o:p></i></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 57.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 213.75pt;" valign="top" width="285">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i><span style="font-size: 10.0pt;">2. On acceptance of application<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i><span style="font-size: 10.0pt;"> </span></i><span style="font-size: 10.0pt;">Share application <st1:street w:st="on"><st1:address w:st="on">A/c Dr</st1:address></st1:street><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> To
Share capital<o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 56.25pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 56.25pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 239.4pt;" valign="top" width="319">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i><span style="font-size: 10.0pt;">3. On making allotment due<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i><span style="font-size: 10.0pt;"> </span></i><span style="font-size: 10.0pt;">Share allotment <st1:street w:st="on"><st1:address w:st="on">A/c Dr</st1:address></st1:street><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> To
Share capital<i><o:p></o:p></i></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 56.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 213.75pt;" valign="top" width="285">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i><span style="font-size: 10.0pt;">4. On receipt of allotment money<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> Bank
A/c Dr<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> To
Share allotment<i><o:p></o:p></i></span></div>
</td>
</tr>
<tr style="height: 92.25pt; mso-yfti-irow: 2; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 92.25pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 239.4pt;" valign="top" width="319">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i><span style="font-size: 10.0pt;">5. On making first call<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> Share
first call <st1:street w:st="on"><st1:address w:st="on">A/c Dr</st1:address></st1:street><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> To
Share capital<i><o:p></o:p></i></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 92.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 213.75pt;" valign="top" width="285">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i><span style="font-size: 10.0pt;">6. On receipt of first call money<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> Bank
A/c Dr<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> To
Share first call<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;">(Similar entries may be made for the second and
third call)<i><o:p></o:p></i></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i><span style="font-size: 14.0pt;">Shares can be issued in any of the following three ways</span>:</i></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
1. At par 2). At
premium 3). At discount</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Issue of Shares at Par: </b>When
shares are issued at a price equal to their nominal value, it is called issue
of shares at par<b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Issue of Shares at a
Premium</b>: When shares are issued at a price higher than their face value, it
is called issue of shares at a premium. The premium amount is a capital
receipt. It should be credited to <i>Security Premium Account </i>and shown on
the liability side of Balance Sheet.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
According to Companies Act, the security premium may be
applied only for the following purposes: </div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
i) To issue fully paid bonus
shares to the shareholders</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
ii) To write off preliminary
expenses of the company</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
iii) To write off the
expenses of the commission paid or discount allowed on issue of shares or
debentures of the company</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
iv)To provide premium payable
on the redemption of any redeemable preference shares or debentures of the
company.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Journal entries (Accounting Treatment)<o:p></o:p></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt; width: 657px;">
<tbody>
<tr style="height: 132.75pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0; mso-yfti-lastrow: yes;">
<td style="border: solid windowtext 1.0pt; height: 132.75pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 256.5pt;" valign="top" width="342">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<i><span style="font-size: 10.0pt;">a) When premium is
payable with application money</span></i><span style="font-size: 10.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> 1. Bank A/c Dr
(with the total)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To Share application<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> 2. Share
application A/c
Dr (with the total)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To Share capital (with application money)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To Security Premium A/c (with premium)<i><o:p></o:p></i></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 132.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 236.55pt;" valign="top" width="315">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> b) <i>When premium is payable with allotment
money<o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> <st1:street w:st="on"><st1:address w:st="on">1.Share
Allotment A/c Dr</st1:address></st1:street> (with the
total)<i><o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To Share capital (with allotment money)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To Security Premium A/c (with premium)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> 2.Bank
A/c Dr (with the total)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To Share allotment<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<b><span style="font-size: 10.0pt;">Note: </span></b><i><span style="font-size: 10.0pt;">If
nothing is specified premium is deemed to have been received with allotment
money</span></i><b><span style="font-size: 10.0pt;"><o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<b>Issue of
Shares at a discount<o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<b> </b>When shares are issued at a
price lower than their face value, it is called issue of shares at discount.
Discount on issue of shares is a capital loss. Hence it should be debited to <i>“Discount
on Issue of Shares Account”</i> and shown on the Assets side of the Balance
Sheet. A company can issue shares at a discount subject to the following
conditions:</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
1. The rate
of discount should not exceed 10% of the nominal value of shares.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
2. The
share must belong to a class already issued.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 416.1pt; text-align: justify;">
3. The
issue must be authorized by an ordinary resolution in general meeting.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
4. The
issue must be sanctioned by the Company Law Board</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
5. One year
must have elapsed since the date at which the company was allowed to commence
business.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
6. The
issue must be completed within two months from the date of the sanction of the
Company Law Board or within such extended time as the Company Law Board may
allow</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
Usually <b><i>the discount on
issue is recorded at the time allotment</i></b>:</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
The entry is:</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> </span>Share
Allotment A/c
Dr (with the allotment money due)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
Discount on Issue of Shares A/c Dr (with discount on issue)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
To Share
Capital (with
total) </div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<b>Under
Subscription of Shares: </b> When the
applications received for shares is less than the number of shares issued, it
is under subscription. In such a case, the allotment will be equal to the
number of shares subscribed and not to the shares issued. <b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<b>Over
Subscription of Shares:</b> When applications received for shares is more than
the number of shares issued, it is called over subscription. In such case the
company allots shares only up to the number of shares issued. Under such a
situation company may reject some applications altogether, allots in full on
some applications and makes pro-rata allotment on some applications.<b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<b><i> Pro-rata </i></b>means
proportionately. <b><i>Pro-rata allotment</i></b> means that allotment on every
application is made in the ratio which the number of shares allotted bears to
number of shares applied</div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<b>Accounting
Treatment (Journal Entries)<o:p></o:p></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: -14.55pt; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt; width: 638px;">
<tbody>
<tr style="height: 79.5pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0; mso-yfti-lastrow: yes;">
<td style="border: solid windowtext 1.0pt; height: 79.5pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 190.95pt;" valign="top" width="255">
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 2.85pt; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<i><span style="font-size: 10.0pt;">1. When application
money returned<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 2.85pt; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> Share Application A/c Dr<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 2.85pt; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To Bank<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 2.85pt; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<br /></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 79.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 287.85pt;" valign="top" width="384">
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<i><span style="font-size: 10.0pt;">2. When excess
application money is adjusted towards allotment or call<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> Share
Application A/c
Dr (with the total)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To Share Allotment (with the sum
adjusted towards allotment)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To Call (if any) (with the sum adjusted towards
call)<i><o:p></o:p></i></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<b>Calls in
Arrears: </b>refer to the amount called up by the company but not paid by the
shareholders. In short these are unpaid calls. Directors are authorized to
charge interest on calls in arrears at a rate specified in the Articles. If
nothing is specified, they can charge at a rate not exceeding 5% p.a</div>
<div class="MsoNormal" style="margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 6.0pt; mso-para-margin-bottom: .5gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .5gd; tab-stops: 274.5pt; text-align: justify;">
<b>Calls in
Advance: </b>refer to the amount paid by the shareholders in advance of it
becoming due. The company must pay interest in calls in advance at a rate
specified in the Articles. If the Articles is silent, the company is liable to
pay interest @ 6% p.a from the date of receipt to the due date</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<b>Journal
entries in respect of calls in advance<o:p></o:p></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: -.3pt; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt; width: 620px;">
<tbody>
<tr style="height: 55.5pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0; mso-yfti-lastrow: yes;">
<td style="border: solid windowtext 1.0pt; height: 55.5pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 233.25pt;" valign="top" width="311">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 5.7pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 5.7pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<i><span style="font-size: 10.0pt;">1. When the company
receives calls in advance<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 5.7pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 5.7pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> Bank A/c Dr<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 5.7pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 5.7pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To calls in advance
A/c<i><o:p></o:p></i></span></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 55.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 231.75pt;" valign="top" width="309">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<i><span style="font-size: 10.0pt;">2. When the call really
becomes due<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> Calls in advance <st1:street w:st="on"><st1:address w:st="on">A/c Dr</st1:address></st1:street><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; tab-stops: 274.5pt; text-align: justify;">
<span style="font-size: 10.0pt;"> To Call A/c<i><o:p></o:p></i></span></div>
</td>
</tr>
</tbody></table>
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<b>Forfeiture of Shares:</b>
simply means cancellation of shares due to non-payment of allotment money or
call money within a specified period. The shareholder whose shares have been
forfeited ceases to be member of the company. The company does not refund the
amount he has already paid to the company.<b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Journal Entries<o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b> </b>Share Capital A/c Dr
(with the amount called up)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
Security Premium A/c Dr
(with the unpaid amount of premium)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
To Share Allotment (with the unpaid
amount on allotment)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
To Share Call (with the unpaid amount on call)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
To Discount on Issue of Shares A/c (if shares
are issued at discount)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
To Forfeited Shares A/c (with the amount paid excluding premium)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Note: </b>Security Premium A/c should be debited only
when an entry has already been passed for security premium when it becomes due</div>
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<b>Re-issue of Forfeited
Shares: </b>If the Articles permit, the company can re-issue the forfeited
shares at par, at premium, or at discount. But the discount on re-issue should
not exceed the amount forfeited.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<br /></div>
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<b>Accounting Treatment (Journal
Entries)<o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b> </b>Bank A/c
Dr (amount received on
re-issue)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
Discount on Issue of Shares A/c Dr (with the amount of original discount if the </div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
Shares originally were issued at discount) </div>
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<b> </b>Forfeited Shares A/c Dr
(with the discount or loss on re-issue)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
To Share Capital A/c (with the
amount credited as paid up)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
To Security Premium A/c
(with the amount of premium on re-issue)</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
If all forfeited shares have been re-issued, the credit
balance left in the Forfeited Shares A/c being capital profit will be
transferred to Capital Reserve A/c by passing the following journal entry:</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
Forfeited Shares A/c Dr</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
To Capital Reserve A/c</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
If only a part of the forfeited shares have been
re-issued, only the profit on shares which have been re-issued is transferred
to Capital Reserve A/c.</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Forfeiture and Re-issue of
Shares when there is Over-subscription and Pro-rata Allotment: </b>in this case
following procedures may be adopted-</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>1. Calculate total number
of shares applied for<o:p></o:p></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>2. Calculate the
application money paid by the defaulter<o:p></o:p></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>3. Calculate actual
application money due on allotted shares<o:p></o:p></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>4. Calculate excess
application money to be adjusted towards allotment<o:p></o:p></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i>5. Calculate the amount
due on allotment or call<o:p></o:p></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i> 6. Calculate the unpaid amount<o:p></o:p></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Surrender of Shares: </b>When
a shareholder finds that he cannot pay the call money on shares held by him, he
may voluntarily return his shares to the company. Such voluntary return of
shares to the company by the shareholder is called surrender of shares. The
accounting treatment will be the same as that of forfeiture. The shareholder
does not get back the amount already paid by him.<b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Issue of Shares for Consideration
other than Cash (</b>Journal entries)<b><o:p></o:p></b></div>
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<tbody>
<tr style="height: 93.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0; mso-yfti-lastrow: yes;">
<td style="border: solid windowtext 1.0pt; height: 93.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 208.05pt;" valign="top" width="277">
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 2.85pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<i><span style="font-size: 10.0pt;">a. When property is acquired<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 2.85pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> Property or
Asset A/c Dr (with cost)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 2.85pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> To
Vendor<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 2.85pt; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 2.85pt; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<br /></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 93.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 265.2pt;" valign="top" width="354">
<div class="MsoNormal">
<i><span style="font-size: 10.0pt;">b. When shares are
issued in exchange for the value of property<o:p></o:p></span></i></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> Vendor
A/c Dr<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> Discount
on <st1:street w:st="on"><st1:address w:st="on">Issue A/c Dr</st1:address></st1:street>
(in case of discount)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;"> To
Share Capital (face value)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<span style="font-size: 10.0pt;">
To Security Premium A/c (in case of premium)<i><o:p></o:p></i></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Lien on Shares: </b>It is
the right of the company to retain the possession of shares for the debts due
by the member to the company.<b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: -3.2pt; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: -3.2pt; mso-para-margin-top: .6gd; text-align: justify;">
<b>Right
Shares: </b>According to Section 81 (1) of the Companies Act, when the company
wants to increase the subscribed capital by issue of further shares, such
shares must be issued first of all to existing shareholders in proportion to
their existing shareholding. These share are called <i>Right Shares</i><b><o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b>Value of Right: </b>is the
excess of market price over average price in respect of right shares</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i>Value of right =Market Price – Average price<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b><i> </i>Or<o:p></o:p></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b> <i>Fresh right shares ÷ (fresh + existing) shares X
(market price – issue price)<o:p></o:p></i></b></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 150.7pt; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 150.7pt; mso-para-margin-top: .6gd; tab-stops: 415.75pt; text-align: justify;">
</div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .1in; margin-left: 0in; margin-right: 0in; margin-top: .1in; mso-para-margin-bottom: .6gd; mso-para-margin-left: 0in; mso-para-margin-right: 0in; mso-para-margin-top: .6gd; text-align: justify;">
<b> </b> <i> </i><b style="text-indent: 0.5in;"><i><span style="font-size: 14.0pt;">Adopted from books of Financial Accounting </span></i></b></div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-13110935666425718752013-01-30T18:35:00.001-08:002013-01-30T18:35:44.415-08:00WHAT IS A BUDGET?<br />
<div style="direction: ltr; language: en-US; margin-bottom: 0pt; margin-left: .4in; margin-top: 4.0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: justify; text-indent: -.28in; text-justify: inter-ideograph; unicode-bidi: embed; word-break: normal;">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: -20.15pt;">
<span style="font-family: Cambria, serif; font-size: 12pt;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: -20.15pt;">
<span style="font-family: Cambria, serif; font-size: 12pt;">A
budget is a quantitative expression of a plan of action prepared in advance of
the period to which it relates.</span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: -20.15pt;">
<span style="font-family: Cambria, serif; font-size: 12pt;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-indent: -20.15pt;">
<span style="font-family: Cambria, serif; font-size: 12pt;">It
usually shows planned income to be generated and/ or expenditure to be incurred
during a period and capital to be employed to attain a given objective.</span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
</div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-89041582977768268322013-01-24T01:28:00.000-08:002013-01-24T01:28:28.236-08:00Applying the rule of debit and credit- Example 8<br />
<div style="margin-bottom: .0001pt; margin: 0in; text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-family: Cambria, serif; font-size: 16pt;">Example-7 </span></b><b><span style="font-family: Cambria, serif; font-size: 16pt;"> Sold goods worth £4000 to Mr. Ambar on credit</span></b><b><span style="font-family: Cambria, serif; font-size: 16pt;"><o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 14pt;">Step 1- Identify
the two accounts involved in this transaction<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">1. Asset
Account (Goods are assets)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">2. Asset Account (</span><span style="font-family: Cambria, serif; font-size: 12pt;">Mr.
Ambar is an asset account (Trade Debtors/Receivable) because, as a result of
the above transaction the business has the right to receive </span><span style="font-family: Cambria, serif; font-size: 12pt;">£4000 from Mr.
Ambar)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> </span><b><i><span style="font-family: Cambria, serif; font-size: 14pt;">When goods are sold we credit “Sales Account” not
“Goods Account”</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 14pt;">Step 2- Understand
the nature of the impact of the transaction on the two accounts [</span></b><span style="font-family: Cambria, serif; font-size: 14pt;">goods (Asset)<b> and Debtors- Mr. Ambar (</b>Asset)<b>]<o:p></o:p></b></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> Sale of goods decrease the asset by £4000</span><span style="font-family: Cambria, serif; font-size: 12pt;"> <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> </span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> <b>The
amount owed by others to business is termed as Debtors/Receivables</b>. So such
amount receivable is arisen/increases as the result of credit sales- that is the value
of asset is increased</span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 14pt;">Step 3- Decide
which account is to be debited and which is to be credited.<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">
We know that;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">When asset account (goods-termed
as sales) decreases it is to be Credited</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"> and,<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">When Asser account
(Debtors- Mr. Ambar) increases it is to be debited</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">So, entry is:</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 36.9pt; mso-padding-alt: 0in 0in 0in 0in; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 44.6pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 44.6pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340">
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;">Debit
Mr. Ambar Account with £4000</span></b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;"><o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 41.35pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 41.35pt; mso-border-top-alt: solid windowtext 1.0pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340">
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;">Credit
Sales Account with £4000</span></b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;"><o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-84960951131231988142013-01-22T18:20:00.000-08:002013-01-22T18:20:32.183-08:00Applying the rule of debit and credit- Example 7<br />
<div style="margin-bottom: .0001pt; margin: 0in; text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-family: Cambria, serif; font-size: 16pt;">Example-7 </span></b><b><span style="font-family: Cambria, serif; font-size: 16pt;"> Sold goods worth £4000 for cash</span></b><b><span style="font-family: Cambria, serif; font-size: 16pt;"><o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 14pt;">Step 1- Identify
the two accounts involved in this transaction<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">1. Asset
Account (Goods are assets)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">2. Asset Account (</span><span style="font-family: Cambria, serif; font-size: 12pt;">cash)</span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> </span><b><i><span style="font-family: Cambria, serif; font-size: 14pt;">When goods are sold we credit “Sales Account” not
“Goods Account”</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 14pt;">Step 2- Understand
the nature of the impact of the transaction on the two accounts [</span></b><span style="font-family: Cambria, serif; font-size: 14pt;">goods (Asset)<b> and cash (</b>Asset)<b>]<o:p></o:p></b></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> Sale of goods decrease the asset by £4000</span><span style="font-family: Cambria, serif; font-size: 12pt;"> <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> </span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> Cash balance will increase by £4000 as a
result of cash sales </span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 14pt;">Step 3- Decide
which account is to be debited and which is to be credited.<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">
We know that;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">When asset account (goods-termed
as sales) decreases it is to be Credited</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"> and,<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">When Asset account
(Cash) increases it is to be debited</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">So, entry is:</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 36.9pt; mso-padding-alt: 0in 0in 0in 0in; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 44.6pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 44.6pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340">
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;">Debit
Cash Account with £4000</span></b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;"><o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 41.35pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 41.35pt; mso-border-top-alt: solid windowtext 1.0pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340">
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;">Credit
Sales Account with £4000</span></b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;"><o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-71836359771722381462013-01-21T21:54:00.000-08:002013-01-21T21:54:27.876-08:00Applying the rule of debit and credit- Example-6<br />
<div style="margin-bottom: .0001pt; margin: 0in; text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-family: Cambria, serif; font-size: 16pt;">Example-6. </span></b><b><span style="font-family: Cambria, serif; font-size: 16pt;"> Goods worth £500 returned to Jammy Traders as it was faulty.</span></b><b><span style="font-family: Cambria, serif; font-size: 16pt;"><o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 14pt;">Step 1- Identify
the two accounts involved in this transaction</span></b><span style="font-family: Cambria, serif; font-size: 14pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">1. Asset
Account (Goods are assets)</span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">2. Liabilities
Account (</span><span style="font-family: Cambria, serif; font-size: 12pt;">here the liability account is Jammy Traders). </span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> We know that;<i><o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> <b><i>When goods are purchased we debit “Purchases
Account” <o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;"> So when purchased goods are returned we
have to credit “Purchases Returns Account”<o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> Purchases returns also known as” Return
Outwards”<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 14pt;">Step 2- Understand
the nature of the impact of the transaction on the two accounts [asset </span></b><span style="font-family: Cambria, serif; font-size: 14pt;">(goods)<b> and liability </b>(Jammy Traders)<b>]<o:p></o:p></b></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> Returning of purchased goods decrease the
asset by £500</span><span style="font-family: Cambria, serif; font-size: 12pt;"> <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> </span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> Liability of business is decreased by £500
as we returned the purchased goods</span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 14pt;">Step 3- Decide
which account is to be debited and which is to be credited.<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">
We know that;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">When asset account decreases
it is to be Credited</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"> and,<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">When liability
account (Jammy Traders) decreases it is to be debited</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">So, entry is:</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 36.9pt; mso-padding-alt: 0in 0in 0in 0in; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 44.6pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 44.6pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340">
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;">Debit
Jammy Traders Account with £500</span></b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;"><o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 41.35pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 41.35pt; mso-border-top-alt: solid windowtext 1.0pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340">
<div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;">Credit
Purchases Returns Account with £500</span></b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;"><o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-14477831931494626992013-01-19T21:11:00.000-08:002013-01-21T06:48:00.663-08:00Applying the rule of debit and credit - Example 5<br />
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-size: large;"><b><span style="font-family: Cambria, serif; line-height: 115%;">Example-5. </span></b><span style="font-family: Cambria, serif; line-height: 115%;">Purchased goods worth £5000
from Jammy Traders on credit</span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 12pt;">Step 1- Identify
the two accounts involved in this transaction</span></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Cambria, serif; font-size: 12pt;">1. Asset
Account (Goods are assets)</span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Cambria, serif; font-size: 12pt;">2. Liabilities
Account (</span><span style="font-family: Cambria, serif; font-size: 12pt;">here the liability accounts is Jammy Traders. As the
purchase is on credit, business is having liability to pay </span><span style="font-family: Cambria, serif; font-size: 12pt;">£5000 </span><span style="font-family: Cambria, serif; font-size: 12pt;">in future to </span><span style="font-family: Cambria, serif; font-size: 12pt;">Traders Account)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> <i>Goods
are items which are purchased by a business for using as a raw material in the
manufacturing process or to sell at a higher price. It includes raw material
work in progress and finished goods.<o:p></o:p></i></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> <b><i>When goods are purchased we debit “Purchases
Account” not “Goods Account”.<o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;"> When goods are sold we credit “Sales
Account” not “Goods Account”.<o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 12pt;">Step 2- Understand
the nature of the impact of the transaction on the two accounts (asset and liability)</span></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> Purchase
of Goods made the asset increase by £5000</span><span style="font-family: Cambria, serif; font-size: 12pt;"> </span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;"> Liability of Business is increased by £5000
as a result of the purchase on credit. </span><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: Cambria, serif; font-size: 12pt;">Step 3- Decide
which account is to be debited and which is to be credited.<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: Cambria, serif; font-size: 12pt;">
We know that;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">When asset account
(Goods-termed as Purchases) increases it is to be Debited</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"> and,<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">When liability
account (Jammy Traders) increases it is to be credited</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: Cambria, serif; font-size: 12pt;">So, entry is:</span></i></b><span style="font-family: Cambria, serif; font-size: 12pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 36.9pt; mso-padding-alt: 0in 0in 0in 0in; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 44.6pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 44.6pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;">Debit
Purchases Account with £5000</span></b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;"><o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 41.35pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 41.35pt; mso-border-top-alt: solid windowtext 1.0pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Courier New"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;">Credit
Jammy Traders Account with £5000</span></b><span style="font-family: "Cambria","serif"; font-size: 12.0pt; mso-ascii-theme-font: major-latin; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-hansi-theme-font: major-latin;"><o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-204093342197599892013-01-15T08:00:00.000-08:002013-01-15T20:22:43.389-08:00Trading account Vs Manufacturing Account<br />
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><u><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Trading
Account<o:p></o:p></span></span></u></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><u><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></u></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">A trading account is prepared to find out the
results (profit or loss) of trading activities. Cost of goods Sold is deducted
from the value of sales to find out the trading result, i.e. gross profit. Cost
of Goods Sold is calculated as follows,<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Opening inventory xxx<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Add purchase(less returns) xxx<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Add expenses related to purchases <u>xxx</u><o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> xxx <o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Less Closing Inventory <u>xxx<o:p></o:p></u></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Cost
of Goods Sold xxx<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">So,<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Gross
Profit = Sales – Cost of Goods Sold<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">If cost of goods sold is more than value of
sales, it will result in Gross Loss.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><u><span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Manufacturing
Account<o:p></o:p></span></span></u></b></div>
<div class="MsoNormal" style="text-align: justify;">
<b><u><span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></u></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">It is assumed that a trading account is
prepared when the trader undertakes only purchasing and selling. I.e. no
manufacturing is under taken.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 14.0pt; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">A manufacturing account is prepared to find
out cost of production. That is a manufacturing account is relevant when there
is manufacturing activities. Cost of production is calculated as follows,<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Courier New, Courier, monospace; font-size: x-small;">Direct cost of raw material xxx<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<i><span style="font-family: Courier New, Courier, monospace; font-size: x-small;">(Opening
stock of r.m + purchases of r.m +expenses related to that purchase – closing stock
of r.m)<o:p></o:p></span></i></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Courier New, Courier, monospace; font-size: x-small;">Direct cost of Labour (wages) xxx<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Courier New, Courier, monospace; font-size: x-small;">Direct expenses <u>xxx<o:p></o:p></u></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Courier New, Courier, monospace; font-size: x-small;">Prime
Cost xxx<o:p></o:p></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Courier New, Courier, monospace; font-size: x-small;"><u>Add</u> manufacturing
overhead <u>xxx</u><o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Courier New, Courier, monospace; font-size: x-small;">(Indirect expenses related to production)</span><br />
<span style="font-family: Courier New, Courier, monospace; font-size: x-small;">Add opening work in progress xxx</span><br />
<span style="font-family: Courier New, Courier, monospace; font-size: x-small;">Less closing work in progress (xxx)</span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-family: Courier New, Courier, monospace; font-size: x-small;">Cost
of Production xxx</span><span style="font-size: medium;"><o:p></o:p></span></b></div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-89129422360474012832013-01-11T05:51:00.000-08:002013-01-11T05:51:18.226-08:00What is Inventory?<br />
<div style="direction: ltr; language: en-US; line-height: 150%; margin-bottom: 0pt; margin-left: .3in; margin-top: 6.0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: justify; text-indent: -.3in; text-justify: inter-ideograph; unicode-bidi: embed; word-break: normal;">
<span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 28pt;"> </span>Inventory is a term for the raw materials, goods in process, and finished goods that a business plans to sell.</span></div>
<div style="direction: ltr; language: en-US; line-height: 150%; margin-bottom: 0pt; margin-left: .3in; margin-top: 6.0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: justify; text-indent: -.3in; text-justify: inter-ideograph; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Century Schoolbook'; font-size: 28pt;"> </span></div>
<div style="direction: ltr; language: en-US; margin-bottom: 0pt; margin-left: .3in; margin-top: 6.0pt; mso-line-break-override: none; punctuation-wrap: hanging; text-align: justify; text-indent: -.3in; text-justify: inter-ideograph; unicode-bidi: embed; word-break: normal;">
<span style="font-family: 'Century Schoolbook'; font-size: 24pt; text-align: center; text-indent: -0.3in;"> </span><span style="color: red; text-align: center; text-indent: -0.3in;"><span style="font-family: Courier New, Courier, monospace; font-size: large;">Inventory is an Asset</span></span><span style="color: red; font-family: 'Century Schoolbook'; font-size: 40pt; text-align: center; text-indent: -0.3in;">.</span><span style="color: red; font-family: 'Century Schoolbook'; font-size: 40pt; text-align: center; text-indent: -0.3in;"></span></div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-31662673190057736172013-01-07T17:41:00.000-08:002013-01-21T06:48:58.641-08:00Applying The Rule of Debit and Credit- Example 4 <br />
<div style="margin-bottom: .0001pt; margin: 0in; text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-family: 'Courier New'; font-size: 14pt;">Example-4. </span></b><span style="font-family: 'Courier New'; font-size: 14pt;">Purchased goods worth</span><span style="font-family: 'Courier New';"> £5000 for cash</span><span style="font-size: 13.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: 'Courier New'; font-size: 12pt;">Step 1- Identify the two accounts involved in this transaction</span></b><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: 'Courier New'; font-size: 12pt;">1.</span><span style="font-family: 'Courier New'; font-size: 7pt;"> </span><span style="font-family: 'Courier New'; font-size: 12pt;">Asset Account (Goods are assets)</span><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: 'Courier New'; font-size: 12pt;">2.</span><span style="font-family: 'Courier New'; font-size: 7pt;"> </span><span style="font-family: 'Courier New'; font-size: 12pt;">Asset Account (Cash Account)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: Courier New; font-size: small;"> Goods are items which are
purchased by a business for using as a raw material in the manufacturing process
or to sell at a higher price and not for </span><span style="font-family: Courier New;">permanent</span><span style="font-family: Courier New; font-size: small;"> use in the business It includes raw material work in progress and
finished goods.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<span style="font-family: 'Courier New'; font-size: 12pt;"> </span><b><i><span style="font-family: 'Courier New'; font-size: 14pt;">When
goods are purchased we debit “Purchases Account” not “Goods Account”.<o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<b><i><span style="font-family: 'Courier New'; font-size: 14pt;"> When goods are sold we credit
“Sales Account” not “Goods Account”.<o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: -0.25in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: 'Courier New'; font-size: 12pt;">Step 2- Understand the nature of the impact of the transaction on
the two accounts (Assets- Goods and cash)</span></b><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: 'Courier New'; font-size: 12pt;"> Purchase of Goods made the asset
increase by £5000</span><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<span style="font-family: 'Courier New'; font-size: 12pt;">Cash is decreased by £5000 by the payment for goods</span><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify; text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><span style="font-family: 'Courier New'; font-size: 12pt;">Step 3- Decide which account is to be debited and which is to be
credited.<o:p></o:p></span></b></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: 'Courier New'; font-size: 12pt;">
We know that;<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: 'Courier New'; font-size: 12pt;">When asset account (Goods-termed as Purchases)increases it is to
be Debited</span></i></b><span style="font-family: Courier; font-size: 12pt;"> and,</span><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: 'Courier New'; font-size: 12pt;">When asset account (cash) decreases it is to be credited</span></i></b><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<b><i><span style="font-family: 'Courier New'; font-size: 12pt;">So, entry is:</span></i></b><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt;"><o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: 36.9pt; mso-padding-alt: 0in 0in 0in 0in; mso-yfti-tbllook: 1184;">
<tbody>
<tr style="height: 44.6pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 44.6pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Courier New"; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Debit
Purchases Account with </span></b><b><span style="font-family: "Courier New"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">£5000</span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
</td>
</tr>
<tr style="height: 41.35pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 41.35pt; mso-border-top-alt: solid windowtext 1.0pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340"><div align="center" class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-family: "Courier New"; font-size: 14.0pt; mso-fareast-font-family: "Times New Roman";">Credit
Cash Account with </span></b><b><span style="font-family: "Courier New"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">£5000</span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-20677124155155199792013-01-05T19:29:00.001-08:002013-01-21T06:50:58.873-08:00Applying The Rule of Debit and Credit - Example 3<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Courier New, Courier, monospace;"><b><span style="font-size: 14pt; line-height: 21px;">Example 3. </span></b><span style="font-size: 14pt; line-height: 21px;">Bought furniture worth</span><span style="font-size: 12pt; line-height: 18px;"> </span><span style="font-size: 12pt; line-height: 18px;">£6000 on credit (ie,payment will be made later)from GK Furniture<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12pt; line-height: 18px;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;">Step 1- Identify the two accounts involved in this transaction<o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="text-align: justify; text-indent: -0.25in;">
<span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12pt; line-height: 18px;">1.<span style="font-size: 7pt; line-height: normal;"> </span></span><span style="font-size: 12pt; line-height: 18px;">Asset Account (furniture is an asset)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="text-align: justify; text-indent: -0.25in;">
<span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12pt; line-height: 18px;">2.<span style="font-size: 7pt; line-height: normal;"> </span></span><span style="font-size: small;"><span style="line-height: 18px;">liability Account (here the liability account is GK </span></span><span style="line-height: 18px;">furniture. As the purchase is on credit, business is having liability to pay in future to GK Furniture</span><span style="font-size: small;"><span style="line-height: 18px;">)<o:p></o:p></span></span></span></div>
<div class="MsoListParagraphCxSpLast" style="text-align: justify; text-indent: -0.25in;">
<span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12pt; line-height: 18px;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;">Step 2- Understand the nature of the impact of the transaction on the two accounts (furniture(asset) and </span></span></b><b><span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;">GK Furniture</span></span></b><b><span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;"> (</span></span></b><b><span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;">Liability</span></span></b><b><span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;">))</span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;"> Purchase of furniture made the asset increase by £6000<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-indent: 0.5in;">
<span style="font-family: Courier New, Courier, monospace;"><span style="font-size: small;"><span style="line-height: 18px;">Liability towards GK Furniture has arisen(</span></span><span style="line-height: 18px;">increased</span><span style="font-size: small;"><span style="line-height: 18px;">) by £6000<o:p></o:p></span></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-indent: 0.5in;">
<span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b><span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;">Step 3- Decide which account is to be debited and which is to be credited.<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;"> We know that;</span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<b style="font-family: 'Courier New', Courier, monospace; text-indent: 0.5in;"><i><span style="font-size: 12pt; line-height: 18px;">When asset account (furniture) increases it is to be Debited</span></i></b><span style="font-family: 'Courier New', Courier, monospace; font-size: 12pt; line-height: 18px; text-indent: 0.5in;"> and,</span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;"><b><i>When liability account (GK Furniture) increases it is to be credited<o:p></o:p></i></b></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;"><b><i><br /></i></b></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;"><b><i>So, entry is:</i></b></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-size: 12pt; line-height: 18px;"><span style="font-family: Courier New, Courier, monospace;"><b><i><br /></i></b></span></span></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 36.9pt; text-align: justify;"><tbody>
<tr style="height: 44.6pt;"><td style="border: 1pt solid windowtext; height: 44.6pt; padding: 0in 5.4pt; width: 254.95pt;" valign="top" width="340"><div class="MsoNormal" style="text-align: center;">
<span style="font-family: Courier New, Courier, monospace;"><b><span style="font-size: 14pt; line-height: 21px;">Debit Furniture Account with </span></b><b><span style="font-size: 12pt; line-height: 18px;">£6000<i><o:p></o:p></i></span></b></span></div>
</td></tr>
<tr style="height: 41.35pt;"><td style="border: 1pt solid windowtext; height: 41.35pt; padding: 0in 5.4pt; width: 254.95pt;" valign="top" width="340"><div class="MsoNormal" style="text-align: center;">
<span style="font-family: Courier New, Courier, monospace;"><b><span style="font-size: 14pt; line-height: 21px;">Credit GK Furniture Account with </span></b><b><span style="font-size: 12pt; line-height: 18px;">£6000</span></b><b><span style="font-size: 14pt; line-height: 21px;"><o:p></o:p></span></b></span></div>
</td></tr>
</tbody></table>
</div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-73301657319253443292013-01-05T01:03:00.000-08:002013-01-21T06:51:43.890-08:00Applying the Rule of Debit and Credit- Example 2<br />
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: Courier New, Courier, monospace;"><b><span style="font-size: 14.0pt; line-height: 115%;">Example 2. </span></b><span style="font-size: 14.0pt; line-height: 115%;">Bought furniture worth</span><span style="font-size: 12.0pt; line-height: 115%;"> </span><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">£5000
for cash<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Step 1-
Identify the two accounts involved in this transaction<o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">1.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Asset Account (furniture
is an asset)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">2.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Asset Account
(cash is an asset)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Step 2-
Understand the nature of the impact of the transaction on the two accounts
(assets- furniture and cash)<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> Purchase
of furniture made the asset increase by £5000<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-indent: .5in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Cash is decreased by £5000<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-indent: .5in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Step 3-
Decide which account is to be debited and which is to be credited.<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> We
know that;</span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b style="font-family: 'Courier New', Courier, monospace; text-indent: 0.5in;"><i><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">When asset account (furniture)
increases it is to be Debited</span></i></b><span style="font-family: 'Courier New', Courier, monospace; font-size: 12pt; line-height: 115%; text-indent: 0.5in;">
and,</span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><b><i>When
asset account (here it is cash) decreases it is to be credited<o:p></o:p></i></b></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><b><i><br /></i></b></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><b><i>So, entry is:</i></b></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><b><i><br /></i></b></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 36.9pt; text-align: justify;">
<tbody>
<tr style="height: 44.6pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 44.6pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340"><div class="MsoNormal" style="text-align: center;">
<span style="font-family: Courier New, Courier, monospace;"><b><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Debit
Furniture Account with </span></b><b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">£5000<i><o:p></o:p></i></span></b></span></div>
</td>
</tr>
<tr style="height: 41.35pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 41.35pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340"><div class="MsoNormal" style="text-align: center;">
<span style="font-family: Courier New, Courier, monospace;"><b><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Credit
Cash Account with </span></b><b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">£5000</span></b><b><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><o:p></o:p></span></b></span></div>
</td>
</tr>
</tbody></table>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-37845739168312635422013-01-03T04:47:00.000-08:002013-01-03T04:47:06.650-08:00Applying Rule of Debit and Credit- Example 1<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: Courier New, Courier, monospace;"><b><span style="font-size: 14pt; line-height: 115%;">Example 1</span></b><span style="font-size: 12pt; line-height: 115%;">. Mr.
Kevin started a business with </span><span style="font-size: 12pt; line-height: 115%;">£50000.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Step 1-
Identify the two accounts involved in this transaction<o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">1.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Capital Account <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">2.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Asset Account
(cash is an asset)<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Step 2-
Understand the nature of the impact of the transaction on the two accounts
(capital and cash)<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> For
the business the amount of capital is increased by £50000 as result of the
transaction <o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> Cash
is also increased by £50000<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Step 3-
Decide which account is to be debited and which is to be credited.<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> We
know that <b><i>when capital account increases it is to be Credited</i></b> and,<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> <b><i>When
asset account (here it is cash) increases it is to be Debited<o:p></o:p></i></b></span></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 36.9pt; text-align: justify;">
<tbody>
<tr style="height: 44.6pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 44.6pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340">
<div class="MsoNormal" style="text-align: center;">
<span style="font-family: Courier New, Courier, monospace;"><b><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Debit Cash
Account with </span></b><b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">£50000<i><o:p></o:p></i></span></b></span></div>
</td>
</tr>
<tr style="height: 41.35pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 41.35pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340">
<div class="MsoNormal" style="text-align: center;">
<span style="font-family: Courier New, Courier, monospace;"><b><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Credit
Capital Account with </span></b><b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">£50000</span></b><b><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><o:p></o:p></span></b></span></div>
</td>
</tr>
</tbody></table>
</div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com2tag:blogger.com,1999:blog-8797778076470235683.post-9538706993676131212013-01-02T02:20:00.000-08:002013-01-03T01:22:36.413-08:00Classification of accounts and Rules of Debit and Credit<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: left;">
</div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Normally there are five categories of
accounts <b>(First category).</b> They are;<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l1 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">1.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Asset
Accounts (Buildings, plant, furniture, cash, inventory, debtors etc.)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">2.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Expense
Accounts (salary, rent, electricity, depreciation etc. <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">3.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Liability
Accounts (debentures, loans, creditors, outstanding expenses etc.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">4.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Income
Accounts (interest, dividend, commission, fees etc. received)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">5.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Capital
Accounts. (Equity share capital, preference share capital etc.)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">There is another categorization of accounts. (second category)<o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo2; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">1.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Personal
Accounts<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo2; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">2.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Real
Accounts<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo2; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">3.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Nominal
Accounts<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo2; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-family: Courier New, Courier, monospace;"><b><u><span style="font-size: 16.0pt; line-height: 115%;">Rules of debit and credit (when to debit an account and when
to credit an account)</span></u></b><span style="font-size: 12.0pt; line-height: 115%;"><o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><u><span style="font-size: 16.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></u></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 14.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Rule of debit and credit based on first categorization;<o:p></o:p></span></span></b></div>
<table align="left" border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 6.75pt; margin-right: 6.75pt; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-table-anchor-horizontal: margin; mso-table-anchor-vertical: paragraph; mso-table-left: 60.25pt; mso-table-lspace: 9.0pt; mso-table-rspace: 9.0pt; mso-table-top: 4.6pt;">
<tbody>
<tr style="height: 15.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Account<o:p></o:p></span></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Effect<o:p></o:p></span></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Debit/Credit<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr style="height: .25in; mso-yfti-irow: 1;">
<td rowspan="2" style="border-top: none; border: solid windowtext 1.0pt; height: .25in; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Assets<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: .25in; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">increase<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: .25in; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">debit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 16.5pt; mso-yfti-irow: 2;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 16.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">decrease<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 16.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">credit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 21.0pt; mso-yfti-irow: 3;">
<td rowspan="2" style="border-top: none; border: solid windowtext 1.0pt; height: 21.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Expenses<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 21.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">increase<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 21.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">debit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 16.5pt; mso-yfti-irow: 4;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 16.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">decrease<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 16.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">credit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 13.5pt; mso-yfti-irow: 5;">
<td rowspan="2" style="border-top: none; border: solid windowtext 1.0pt; height: 13.5pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">liabilities<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 13.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">increase<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 13.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">credit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 12.75pt; mso-yfti-irow: 6;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 12.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">decrease<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 12.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">debit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 12.75pt; mso-yfti-irow: 7;">
<td rowspan="2" style="border-top: none; border: solid windowtext 1.0pt; height: 12.75pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Incomes/revenue<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 12.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">increase<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 12.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">credit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 13.35pt; mso-yfti-irow: 8;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 13.35pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">decrease<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 13.35pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">debit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 9;">
<td rowspan="2" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">capital<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">increase<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">credit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 11.1pt; mso-yfti-irow: 10; mso-yfti-lastrow: yes;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 11.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">decrease<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 11.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div align="center" class="MsoNormal" style="mso-element-anchor-horizontal: margin; mso-element-anchor-vertical: paragraph; mso-element-frame-hspace: 9.0pt; mso-element-left: 60.3pt; mso-element-top: 4.6pt; mso-element-wrap: around; mso-element: frame; mso-height-rule: exactly; text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">debit<o:p></o:p></span></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 14.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 14.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 14.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 14.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 14.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 14.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Rule of debit and credit based on second categorization;<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-size: 14.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: .45in; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt;">
<tbody>
<tr style="height: 24.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 24.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150"><div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Name of Account as per first categorization<o:p></o:p></span></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 24.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 121.5pt;" valign="top" width="162"><div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Name of Account as per second categorization<o:p></o:p></span></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 24.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 2.5in;" valign="top" width="240"><div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Rule<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr style="height: 49.5pt; mso-yfti-irow: 1;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 49.5pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150"><div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Capital Account<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Liabilities Accounts<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 49.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 121.5pt;" valign="top" width="162"><div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Personal Account<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 49.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 2.5in;" valign="top" width="240"><div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Debit the Receiver<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Credit the Giver<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 47.25pt; mso-yfti-irow: 2;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 47.25pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150"><div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Assets<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 47.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 121.5pt;" valign="top" width="162"><div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Real Account<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 47.25pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 2.5in;" valign="top" width="240"><div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Debit What Comes In<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Credit What Goes Out<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 57.75pt; mso-yfti-irow: 3; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 57.75pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150"><div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Income/Revenue<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Expenses<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 57.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 121.5pt;" valign="top" width="162"><div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Nominal Account<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 57.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 2.5in;" valign="top" width="240"><div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Debit All Expenses and Losses<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Credit All Incomes and Gain<o:p></o:p></span></span></div>
</td>
</tr>
</tbody></table>
<br /><div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><span style="font-family: Courier New, Courier, monospace; font-size: large;">Let us go through some examples</span></b><br />
<br />
<div class="MsoNormal">
<span style="font-family: Courier New, Courier, monospace;"><b><span style="font-size: 14.0pt; line-height: 115%;">Example 1</span></b><span style="font-size: 12.0pt; line-height: 115%;">. Mr.
Kevin started a business with </span><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">£50000.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Step 1- Identify
the two accounts involved in this transaction<o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">1.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Capital Account <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="text-indent: -0.25in;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">2.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Asset Account
(cash is an asset)<o:p></o:p></span></span></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Step 2- Understand
the nature of the impact of the transaction on the two accounts (capital and
cash)<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> For
the business the amount of capital is increased by £50000 as result of the transaction
<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> Cash
is also increased by £50000<o:p></o:p></span></span></div>
<div class="MsoNormal">
<b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;">Step 3-
Decide which account is to be debited and which is to be credited.<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> We
know that <b><i>when capital account increases it is to be Credited</i></b> and,<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"> <b><i>When asset
account (here it is cash) increases it is to be Debited<o:p></o:p></i></b></span></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><b><i><br /></i></b></span></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><b><i><br /></i></b></span></span></div>
<div class="MsoNormal">
<span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="font-family: Courier New, Courier, monospace;"><b><i>So, </i></b></span></span></div>
<div class="MsoNormal">
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 36.9pt; mso-border-alt: solid windowtext .5pt; mso-border-insideh: .5pt solid windowtext; mso-border-insidev: .5pt solid windowtext; mso-padding-alt: 0in 5.4pt 0in 5.4pt;">
<tbody>
<tr style="height: 44.6pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 44.6pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340">
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Debit Cash
Account with </span></b><b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">£50000<i><o:p></o:p></i></span></b></div>
</td>
</tr>
<tr style="height: 41.35pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid windowtext 1.0pt; height: 41.35pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 254.95pt;" valign="top" width="340">
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">Credit
Capital Account with </span></b><b><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;">£50000</span></b><b><span style="font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><o:p></o:p></span></b></div>
</td>
</tr>
</tbody></table>
</div>
<br />
<br /></div>
</div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com1tag:blogger.com,1999:blog-8797778076470235683.post-35672640942705415202013-01-01T08:08:00.000-08:002013-04-04T01:45:52.094-07:00What Does DEBIT Mean..? What Does CREDIT Mean..?<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Debit means ‘post in the debit side
of an account’ and credit means ‘post in the credit side of an account’.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Debit side is the left hand side of
an account and credit side is the right hand side of an account<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"> ………..Account<o:p></o:p></span></span></b></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoTableGrid" style="border-collapse: collapse; border: none; margin-left: 36.9pt; text-align: justify; width: 558px;">
<tbody>
<tr style="height: 23.35pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid black 1.0pt; height: 23.35pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 203.25pt;" valign="top" width="271"><div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 12.0pt;"><span style="font-family: Courier New, Courier, monospace;">Debit Side<o:p></o:p></span></span></b></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; height: 23.35pt; mso-border-alt: solid black .5pt; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-themecolor: text1; mso-border-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 215.25pt;" valign="top" width="287"><div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: center;">
<b><span style="font-size: 12.0pt;"><span style="font-family: Courier New, Courier, monospace;">Credit Side<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr style="height: 23.25pt; mso-yfti-irow: 1; mso-yfti-lastrow: yes;">
<td style="border-top: none; border: solid black 1.0pt; height: 23.25pt; mso-border-alt: solid black .5pt; mso-border-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 203.25pt;" valign="top" width="271"><div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; height: 23.25pt; mso-border-alt: solid black .5pt; mso-border-bottom-themecolor: text1; mso-border-left-alt: solid black .5pt; mso-border-left-themecolor: text1; mso-border-right-themecolor: text1; mso-border-themecolor: text1; mso-border-top-alt: solid black .5pt; mso-border-top-themecolor: text1; padding: 0in 5.4pt 0in 5.4pt; width: 215.25pt;" valign="top" width="287"><div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<br /></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<br /></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Rule of debit and credit is different
for different accounts. Normally there are five categories of accounts. They are;<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">1.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Asset
Accounts (Buildings, plant, furniture, cash, inventory, debtors etc.)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">2.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Expense
Accounts (salary, rent, electricity, depreciation etc. <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">3.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Liability
Accounts (debentures, loans, creditors, outstanding expenses etc.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">4.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Income
Accounts (interest, dividend, commission, fees etc. received)<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12.0pt; line-height: 115%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;">5.<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">Capital
Accounts. (equity share capital, preference share capital etc.)<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-indent: .25in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Every transaction
in a business organization affects (increase/decrease) any two of above
accounts. </span></span></div>
<div class="MsoNormal" style="text-align: justify; text-indent: .25in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">How it affects? </span></span></div>
<div class="MsoNormal" style="text-align: justify; text-indent: .25in; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">That is the rule of debit and credit.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="text-align: justify; text-justify: inter-ideograph;">
<b><u><span style="font-size: 16.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Rule of debit and credit (when to debit an account and when
to credit an account)<o:p></o:p></span></span></u></b></div>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; margin-left: 6.75pt; margin-right: 6.75pt; text-align: left;">
<tbody>
<tr style="height: 15.0pt; mso-yfti-firstrow: yes; mso-yfti-irow: 0;">
<td style="border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Account<o:p></o:p></span></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Effect<o:p></o:p></span></span></b></div>
</td>
<td style="border-left: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Debit/Credit<o:p></o:p></span></span></b></div>
</td>
</tr>
<tr style="height: .25in; mso-yfti-irow: 1;">
<td rowspan="2" style="border-top: none; border: solid windowtext 1.0pt; height: .25in; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Assets<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: .25in; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">increase<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: .25in; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">debit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 16.5pt; mso-yfti-irow: 2;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 16.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">decrease<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 16.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">credit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 21.0pt; mso-yfti-irow: 3;">
<td rowspan="2" style="border-top: none; border: solid windowtext 1.0pt; height: 21.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Expenses<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 21.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">increase<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 21.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">debit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 16.5pt; mso-yfti-irow: 4;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 16.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">decrease<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 16.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">credit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 13.5pt; mso-yfti-irow: 5;">
<td rowspan="2" style="border-top: none; border: solid windowtext 1.0pt; height: 13.5pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">liabilities<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 13.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">increase<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 13.5pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">credit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 12.75pt; mso-yfti-irow: 6;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 12.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">decrease<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 12.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">debit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 12.75pt; mso-yfti-irow: 7;">
<td rowspan="2" style="border-top: none; border: solid windowtext 1.0pt; height: 12.75pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">Incomes/revenue<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 12.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">increase<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 12.75pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">credit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 13.35pt; mso-yfti-irow: 8;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 13.35pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">decrease<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 13.35pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">debit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 15.0pt; mso-yfti-irow: 9;">
<td rowspan="2" style="border-top: none; border: solid windowtext 1.0pt; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 149.4pt;" valign="top" width="199"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">capital<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">increase<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 15.0pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">credit<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="height: 11.1pt; mso-yfti-irow: 10; mso-yfti-lastrow: yes;">
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 11.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 91.15pt;" valign="top" width="122"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">decrease<o:p></o:p></span></span></div>
</td>
<td style="border-bottom: solid windowtext 1.0pt; border-left: none; border-right: solid windowtext 1.0pt; border-top: none; height: 11.1pt; mso-border-alt: solid windowtext .5pt; mso-border-left-alt: solid windowtext .5pt; mso-border-top-alt: solid windowtext .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 93.35pt;" valign="top" width="124"><div class="MsoNormal" style="text-align: center;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">debit<o:p></o:p></span></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="margin-left: 0.25in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;"><br /></span></span></div>
<div class="MsoNormal" style="margin-left: .25in; text-align: justify; text-justify: inter-ideograph;">
<span style="font-size: 12.0pt; line-height: 115%;"><span style="font-family: Courier New, Courier, monospace;">So,<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpFirst" style="margin-left: 56.25pt; mso-add-space: auto; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12pt; line-height: 115%;">·<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">identify
the two accounts in a transaction,<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 56.25pt; mso-add-space: auto; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12pt; line-height: 115%;">·<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;">then
see the effect of transaction on the accounts,<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 56.25pt; mso-add-space: auto; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -.25in; text-justify: inter-ideograph;">
<!--[if !supportLists]--><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12pt; line-height: 115%;">·<span style="font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-size: 12.0pt; line-height: 115%;"> and decide which account is to be debited and
which account is to be credited<o:p></o:p></span></span></div>
<div style="text-align: justify;">
<br /></div>
</div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0tag:blogger.com,1999:blog-8797778076470235683.post-40956091849668787782013-01-01T02:44:00.000-08:002013-01-01T02:44:45.465-08:00Why do we need Accounting Standards?<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<h2>
<b style="text-align: justify; text-indent: -0.25in;"><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12pt; line-height: 115%;">Accounting
is used everywhere and it covers </span><span style="font-size: 12pt; line-height: 115%; text-indent: -0.25in;">unlimited range of activities.The users need an</span><span style="font-size: 12pt; line-height: 115%; text-indent: -0.25in;"><span style="font-size: 7pt; line-height: normal;"> A</span></span><span style="font-size: 12pt; line-height: 115%; text-indent: -0.25in;">ssurance
that the methods </span><span style="font-size: 16px; line-height: 18px;">adopted </span><span style="font-size: 12pt; line-height: 115%; text-indent: -0.25in;">to calculate revenue, expenses and balance sheet values are reliable. </span><span style="font-size: 12pt; line-height: 115%; text-indent: -0.25in;">Without
such an assurance there will be no faith and sensible decisions cannot be made. So some g</span><span style="font-size: 12pt; line-height: 115%; text-indent: -0.25in;">eneral
principles can be laid, but detailed regulation is not possible. </span></span></b></h2>
<h2>
<b style="text-align: justify; text-indent: -0.25in;"><span style="font-family: Courier New, Courier, monospace;"><span style="font-size: 12pt; line-height: 115%; text-indent: -0.25in;">It can be said that Accounting Standards helps bring such an assurance to some extent. </span><span style="font-size: 12pt; line-height: 115%; text-indent: -0.25in;">It
is impossible to provide 100% assurance of the validity of financial statements
through the creation of single set of rules and procedures.</span></span></b></h2>
<h2>
<span style="font-family: Courier New, Courier, monospace;"><b style="text-align: justify; text-indent: -0.25in;"><span style="font-size: 12pt; line-height: 115%;"><span style="font-size: 7pt; line-height: normal;"> </span></span></b><span style="font-size: 12pt; line-height: 115%; text-align: justify; text-indent: -0.25in;"><b>So
there has to be some flexibility within the rules laid down.</b></span></span></h2>
</div>
Abdul Naser Kodampuzhahttp://www.blogger.com/profile/09867343327882679878noreply@blogger.com0