Accounting Miscellaneous

The definition of inventory includes following items: – Items held for resale – Items currently in production for future sale – Materials used currently in the production of goods to be sold

Current ratio = Current assets/Current liabilities. Current ratio is a comparison of current assets to current liabilities, calculated by dividing your current assets by your current liabilities.

Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. Bookkeeping refers mainly to the record-keeping aspects of financial accounting, and involves preparing source documents for all transactions, operations, and other events of a business.

Under Standard cost method of inventory costing, a pre-determined cost is assigned to all items of inventory. A standard cost is described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the “should be” cost. Standard costs are often an integral part of a manufacturer’s annual profit plan and operating budgets.

Depreciation is charged on fixed assets to comply with Matching concept which requires that revenues must be matched with associated expenses to get a complete and accurate picture of profit and loss.

Difference of total of debit and credit side of the trial balance is transferred to Suspense A/c. Suspense accounts are used when your trial balance is out of balance or when you have an unidentified transaction. The suspense account is a general ledger account that acts as a holding account until the error is discovered or the unknown transaction is identified.

Mr. Ali account will be credited when the goods are purchased on credit from Mr. Ali.

Depreciation expenses Debit and accumulated depreciation Credit is a double entry for deprecation expenses.

The standard format of Journal does not include Assets column. An asset purchased on account is not recorded in the purchase journal. But many are of opinion to record all credit transactions in multi-column purchase journal.

Closing stock does not reduce the resources of business. Closing stock is the amount of inventory that a business still has on hand at the end of a reporting period.