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To prepare a bank reconciliation for a company that never prepared one previously, you need to first make a list of outstanding checks. For example, if the company's recent bank statement is dated August 31, you should look at the bank statements from June through August and make a list of the check numbers that had been written after June 1 but had not appeared on any of the bank statements from June through August. Next to each check number write the Taka amount of each check. Subtract the total of the outstanding checks as of August 31 from the bank statement balance as of August 31. The resulting amount is the adjusted balance per bank. Next, look at the general account ledger that is associated with the bank statement. Let's assume it is the cash account. Be certain that the cash account shows items that appear on the recent bank statements. For example, Have the bank service charges been entered into the cash account? Have the electronic transfers been entered? If not, yo...

First, it's essential to have all the required documentation and information in hand. That means, if all the required documentation and information are at your disposal you get a better view of things. Second, avoiding common errors, such as: a. Error relating to duplication of entries. b. Not accounting for a transaction that would cause a difference equal to the missed amount c. Errors while entering commas and dots, which cause discrepancies that, could be of significant value. For instance, instead of entering LRS 3,502.40, enter LRS 350.24. d. Transposition errors while entering figures in the books. For instance, instead of entering LRS 661,300, enter INR 616,300. Third, it is possible that your bank might have committed a mistake. They might debit incorrect amounts from your account, or credit deposits which doesn't belong to you. For this reason, in case you find errors for which you don't find any explanations, or for which you're in doubt, the best thing is to...

In the missing approach, first of all, we dig out missing or error items. After that find that it is missing of cash book or bank statement. Finally, analyze whether it is missing debit or credit. Represented / Outstanding / Not cashed or Uncashed cheques Cheque issued (for payments) by business but not presented for payment. A cashier may send cheques out to suppliers, some of whom may present cheques at the bank immediately while others may keep the cheque for several days. The cashier will have recorded all the payments in the cash book immediately when issuing the cheques. However, the bank records will only show the cheques that have actually been presented by the suppliers. Uncredited / Uncollected / Uncleared or Outstation cheques Check deposited (for receipts) but not collected by the bank. The firm's cashier records a receipt in the cash book as he or she prepares the bank paying-in slip. However, the receipt may not be recorded by the bank on the bank statement for a day ...

The followings are the transactions that usually appear in the company's records but not in the bank statement: Deposits in transit: Deposits that have been sent by the company to the bank but have not been received by the bank at the proper time before the issuance of the bank statement. Checks outstanding: Checks which have been issued by the company but were not presented or cleared before the issuance of the bank statement. The followings are the transactions that usually appear in bank statements but not in the company's cash account: Service charges: Service charges may have been deducted by the bank. Such charges are usually not known to the company before the issuance of a bank statement. Interest income: If any interest income has been earned by the company on its bank account, it is not usually entered into the company's cash account before the issuance of a bank statement. NSF checks: NSF stands for "not sufficient funds". These are the checks deposited...

The following steps are to be followed to prepare a bank reconciliation statement:  (a) The first step is to compare the opening balances of both the bank column of the cash book as well as bank statement; these could be different due to un-credited or un-presented cheques from a previous period. (b) Now, compare the credit side of the bank statement with the debit side of the bank column of cash book and the debit side of the bank statement with the credit side of the bank column of the cash book. Place a tick against all the items appearing in both records. (c) Analyze the entries both in the bank column of the cash book as well as the passbook and look for entries that have been missed to be posted in the bank column of the cash book. Make a list of such entries and make the necessary adjustments in the cash book. (d) Correct if any mistakes or errors appear in the cash book. (e) Calculate the corrected and revised balance of the cash book's bank column. (f) Now, start the bank ...

Bank reconciliations are an important accounting procedure, performed by companies of all sizes, to match the cash balance of the bank with the balance found on the company's financial records. Reconciliations can detect and prevent intentional fraud, along with errors by bank tellers, accountants, employees, and management. Although bank reconciliation is typically a month-end procedure, companies with smaller cash resources might perform it daily. Detects fraud Because bank reconciliations match a company's disbursed checks with the cleared checks on the company's bank statement, a careful review based on appropriate controls and procedures helps to reveal fraudulent activities. These could include payments for illegitimate business purposes, payments to unauthorized employees or unauthorized vendors, and amended check amounts and details. Prevents overdraft The lag time between cash outflows to vendors and employees - and payments coming in from clients and customers - c...

In accounting, reconciliation is the process of ensuring that two sets of records (usually the balances of two accounts) are in agreement. Reconciliation is used to ensure that the money leaving an account matches the actual money spent. This is done by making sure the balances match at the end of a particular accounting period. A bank reconciliation is a process that explains the difference on a specified date between the bank balance shown in an organization's bank statement, as supplied by the bank, and the corresponding amount shown in the organization's own accounting records. A bank reconciliation statement is a summary of banking and business activity that reconciles an entity's bank account with its financial records. The statement outlines the deposits, withdrawals, and other activities impacting a bank account for a specific period. A bank reconciliation statement is a useful financial internal control tool used to thwart fraud.

In a double entry system, due to its dual aspect, every transaction affects two accounts, one of which is debited and the other is credited. To record the transactions in the journal, in a sequential way, certain rules are required, and these rules are called as Golden Rules of Accounting. Golden rules of accounting are used to record economic activity in books of accounts. These rules are formulated on the basis of three basic accounts, personal, real and nominal account. An account is a summarized record of the transactions relating to one person or thing or one class of income and expense. Debit is abbreviated Dr. and credit is abbreviated Cr. The term debit means left, and credit means right. They do not mean an increase or decrease. The act of entering an amount on the left side of an account is called debiting. Making an entry on the right side is called crediting. Golden rules of accounting are based on the following basic accounts: (a) Personal account: Accounts that deal with ...

  A single-entry system records each accounting transaction with a single entry to the accounting records, rather than the vastly more widespread double-entry system. The single-entry system is centered on the results of a business that are reported in the income statement. The core information tracked in a single-entry system is cash disbursements and cash receipts. Asset and liability records are usually not tracked in a single-entry system; these items must be tracked separately. The double entry system means that every business transaction will involve two accounts. For example, when a company borrows money from its bank, the company's Cash account will increase and its liability account Loans Payable will increase. The basic principle of a double entry system is that there are always two entries for every transaction. One entry is known as a credit entry and the other is a debit entry.

Bookkeeping and accounting can appear to be the same profession to the untrained eye. Both bookkeepers and accountants work with financial data. To enter either profession, you must have basic accounting knowledge. Bookkeepers in smaller companies often handle more of the accounting process than simply recording transactions. They also classify and generate reports using the financial transactions. They may not have the education required to handle these tasks, but this is possible because most accounting software automates reports and memorizes transactions making transaction classification easier. Sometimes, an accountant records the financial transactions for a company, handling the bookkeeping portion of the accounting process.

Do you want to be a good bookkeeper? Some of the qualities that will help you to be a great bookkeeper are as follows: Being organized. Bookkeeping involves carrying out repetitive and routine tasks, and a need to complete those jobs in a timely fashion - often with deadlines associated with them. As a bookkeeper, you need to be organized and have good time management skills. You also need to be able to prioritize the important tasks and identify those tasks that you need to do first. Often, using checklists helps you to ensure that you complete tasks and allows you to keep abreast of progress throughout the month. Possessing good communication skills. As a bookkeeper, you'll be expected to discuss the finances with the owner/manager of the business. They will expect the basic financial reports, such as the Profit and Loss and Balance Sheet, and updates with regard to cash flow. Having an inquiring mind. Bookkeepers are often required to investigate why certain costs are higher tha...

Bookkeeping is the recording of financial transactions and is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization. There are several standard methods of bookkeeping, such as the single-entry bookkeeping system and the double-entry bookkeeping system.

Accounting standards allow accountant to provide information through financial statements in a manner that can be understood by people important to the organization, management board of directors, investors and stakeholders. This information must be presented accurately so that decisions taken on the basis of the given information are made appropriately. To fulfill this purpose, accounting standards serve the following major roles. Comparability: The role of accounting standards is that it brings to financial record keeping. Governmental organizations must follow accounting procedures that are the same as their counterparts, and non-governmental organizations must do the same. Transparency: Accounting standards are designed to enforce transparency in organizations. Standards limit the freedom and flexibility of entities to use clever accounting to move items around or even to hide them. Relevance: Accounting standards play an important role to help entities by providing the most rele...

International Financial Reporting Standards (IFRS) is a set of accounting standards developed by an independent, not-for-profit organization called the International Accounting Standards Board (IASB). The goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements. IFRS provides general guidance for the preparation of financial statements, rather than setting rules for industry-specific reporting. Having an international standard is especially important for large companies that have subsidiaries in different countries. Adopting a single set of worldwide standards will simplify accounting procedures by allowing a company to use one reporting language throughout. A single standard will also provide investors and auditors with a cohesive view of finances. Currently, over 100 countries permit or require IFRS for public companies, with more countries expected to transition to IFRS by 2015. Proponents of IFRS as an international stan...

International Accounting Standards (IAS) refers to a certain level of quality that should be adhered to while drawing financial statements. The older set of standards, issued by the International Accounting Standards Committee (IASC), was formulated in 1973 through a consensus of the professional accountancy bodies from Australia, Canada, France, Germany, Japan, Mexico, Netherlands, United Kingdom, Ireland, and the United States of America. The IASC passed a substantial number of standards, interpretations, and other guidelines which were adopted by many companies in coming up with national accounting standards. The organizational structure of the IASC was changed in 2001, leading to the formation of the International Accounting Standards Board (IASB). The changes came into play on 1st April of the same year. In a memorandum of understanding between IASB and the International Federation of Accountants, the objectives of the board include coming up with financial reporting standards wit...

The accounting equation also called the balance sheet equation is the most basic principle of financial accounting. It represents the relationship between the assets, liabilities, and shareholders' equity of a business. It is the foundation for the double-entry bookkeeping system. For each transaction, the total debits equal the total credits. It states that at a point in time, the value of the assets of a business is equal to the sum of the value of its liabilities and its shareholders' equity. Thus, the accounting equation is, Asset Liabilities + Shareholders' Equity An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit. Assets are reported on a company's balance sheet, and they are bought or created to increase the value of a firm or benefit the firm's operations. A liability is a company's financial debt or obligations that arise during the course of ...

The financial information presented in financial statements needs to have some key qualities which make it useful for the users. Generally accepted accounting standards normally outline such standards in their frameworks. IASB Conceptual Framework categorizes these into fundamental qualitative characteristics and enhancing qualitative characteristics. These include The fundamental qualitative characteristics: The relevance of financial information is regarded as relevant if it is capable of influencing the decisions of users. Materiality - accountants and auditors should focus on financial information which is expected to affect the decisions of the users. Faithful representation - this means that financial information must be complete, neutral, and free from error. The enhancing qualitative characteristics: Comparability - it should be possible to compare an entity over time and with similar information about other entities. Verifiability - if information can be verified (e.g. through...

The general objective of accounting statements is to provide information about the results of operations, financial position, and cash flows of an organization. This information is used by the readers of accounting statements to make decisions regarding the allocation of resources. At a more refined level, there is a different objective associated with each of the accounting statements. The income statement informs the reader about the ability of a business to generate a profit. In addition, it reveals the volume of sales, and the nature of the various types of expenses, depending on how expense information is aggregated. When reviewed over multiple time periods, the income statement can also be used to analyze trends in the results of company operations. The objective of the balance sheet is to inform the reader about the current status of the business as of the date listed on the balance sheet. This information is used to estimate the liquidity, funding, and debt position of an entit...

Accounting information helps users to make better financial decisions. Users of accounting information may be both internal and external to the organization. (a) Internal users (Primary Users) of accounting information include the following: Management: for analyzing the organization's performance and position and taking appropriate measures to improve the company results. Employees: for assessing the company's profitability and its consequence on their future remuneration and job security. Owners: for analyzing the viability and profitability of their investment and determining any future course of action. (b) External users (Secondary Users) of accounting information include the following: Creditors: for determining the creditworthiness of the organization. Terms of credit are set by creditors according to the assessment of their customers' financial health. Creditors include suppliers as well as lenders of finance such as banks. Tax Authorities: for determining the credi...

The process of financial accounting is composed of some necessary functions, which are outlined herein: Recording: This is the basic function of financial accounting. It is essentially concerned with not only ensuring that all business transactions of financial character are in fact recorded   but also that they are recorded in an orderly manner. The recording is done in the book "Journal". Classifying: Classification is concerned with the systematic analysis of the recorded data, with a view to group transactions or entries of one nature in one place. The work of classification is done in the book termed "Ledger". Summarizing: This involves presenting the classified data in a manner that is understandable and useful to the internal as well as external end-users of accounting statements. This process leads to the preparation of the following statements: Trial Balance, Income statement, and Balance sheet. Interpreting: This is the final function of accounting. The r...

Financial accounting is a field of accounting that treats money as a means of measuring economic performance instead of as a factor of production. It encompasses the entire system of monitoring and control of money as it flows in and out of an organization as assets and liabilities, and revenues and expenses. It gathers and summarizes financial data to prepare financial reports such as balance sheets and income statements for the organization's management, investors, lenders, suppliers, tax authorities, and other stakeholders.

There are several types of functions fulfilled by the accounting department within a business. These accounting functions are: Financial accounting: This group records accounting transactions and converts the resulting information into financial statements. Its primary responsibility is to generate financial statements and related disclosures that fairly reflect the financial results and condition of the organization. Its primary beneficiary is outsiders, such as investors, creditors, and lenders. Management accounting: This group examines the financial and operational results of a business, looking for opportunities to enhance the results and financial position of the entity. They can also advise management in regard to the setting of prices. Their primary beneficiary is the management team. Tax accounting: This group ensures that the business complies with the applicable tax regulations, which usually means ensuring that tax returns are completed correctly and filed in a timely manne...

The transaction initiates every accounting procedure. You buy something, sell something - whatever. The idea is to make a record of every financial transaction. Where you'll record the transaction is in The journals. This is the ground zero of accounting. Every subsequent accounting procedure goes back to a journal, which is the record of each financial transaction as it occurs. You may have separate journals for sales and cash receipts and another journal for disbursements or just one journal that includes all transaction types. Either approach is okay, but the important things to remember are to record every entry and keep the journal(s) up to date. Eventually, you'll group all these entries, using, The general ledger. This is where you'll transfer or "post," each of the journal entries into its appropriate place in the general ledger by transaction type. This makes it faster to look up individual transactions and also provides a basis at some point - often at t...

  MEANING OF ACCOUNTING RECORDS Accounting records are the records of a firm's financial transactions and current financial position. Accounting records are necessary for tax purposes, legal accountability, and adequate financial oversight. They are key sources of information and evidence used to prepare, verify, and/or audit financial statements. They also include documentation to prove asset ownership for the creation of liabilities and proof of monetary and non-monetary transactions.  BENEFITS OF KEEPING ACCOUNTING RECORDS It is very important that business owners make a habit of recording their business transactions every day. It will assist in making informed, efficient and precise decisions at any time. Proper bookkeeping involves maintaining up to date accounting system, which includes recording business transactions as they occur, as well as keeping important receipts or bills for substantiating all expenses incurred on behalf of the business. The benefits of keeping a...

A conceptual framework should reduce political pressures in making accounting judgments. The IASB is not the only beneficiary of the framework. The credibility of financial reporting is enhanced when purposes and concepts are used to provide direction and structure to financial accounting and reporting. The major purposes of the conceptual framework are furnished below: (a) to assist the IASB in the development of future accounting standards and in its review of existing accounting standards, ensuring consistency across standards.  (b) to assist the IASB in promoting harmonization of regulations, accounting standards, and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments permitted by accounting standards. (c) to assist national standard-setting bodies in developing national accounting standards. (d) to assist preparers of financial statements in applying international financial reporting...

A conceptual framework can be defined as a system of ideas and objectives that lead to the creation of a consistent set of rules and standards. Specifically, in accounting, the rule and standards set the nature, function, and limits of financial accounting and financial statements. In financial reporting, a conceptual framework is a theory of accounting prepared by a standard-setting body against which practical problems can be tested objectively. A conceptual framework deals with fundamental financial reporting issues such as the objectives and users of financial statements, the characteristics that make accounting information useful, the basic elements of financial statements (e.g., assets, liabilities, equity, income, and expenses), and the concepts for recognizing and measuring these elements in the financial statements.

Overhead includes activities that are not directly related to the products or services that the firm offers, but they support the firm's profit-making activities. For example, paying the rent is not a profit-making activity, but it allows the firm to maintain a building and manufacture its products. Therefore, the overhead is an important part of business operations, regardless of whether the firm generates a high volume of business or not. Overhead costs can include both fixed and variable costs such as rent, research & development, advertising, office supplies, taxes, interest, depreciation, insurance, and others. It can include pretty much anything that doesn't go directly into production.

A high-low method is a common tool employed to determine what portion of a cost is fixed and what portion of a cost is variable. Small-business owners can use this information to create budgets and to help understand how changes in volume affect the company's costs in total and on a per-unit basis. However, the high-low method comes with some disadvantages. Two value: Even though the high-low method's reliance on only two sets of values contributes to its simplicity, it also enhances its weakness as a cost estimation method. It ignores all data in between the extremes, capitalizing only on the highest and lowest. This effectively ignores all trends of costs in between the extreme values, thus making it impossible to obtain any additional information from figures derived from this method. Assumption: The high-low method operates under the assumption that no foreign factors affect the cost of products and fixed costs remain the same at all levels of production. Fixed costs, being...