Accounting Miscellaneous

Introduction of capital by owner of business is recorded on Receipts side of a cash book.

The purchase price of a software that will be used for more than 12 months should be regarded as a capital expenditure. It is considered a capital expenditure when the asset is newly purchased or when money is used towards extending the useful life of an existing asset.

“Treating a revenue expenditure as a capital expenditure” is an example of Error of principle. An error of principle is an accounting mistake in which an entry is recorded in the incorrect account, violating the fundamental principles of accounting. An error of principle is a procedural error, meaning that the value recorded was the correct value but placed incorrectly.

Stock take is not the methods of inventory costing. Stock-taking or “inventory checking” or “wall-to-wall” is the physical verification of the quantities and condition of items held in an inventory or warehouse. This may be done to provide an audit of existing stock. It is also the source of stock discrepancy information.

In case of debit balance, the words To Balance b/d are written on the debit side.

The normal balance of asset account is Debit balance. Normal balance is the side where the balance of the account is normally found.

Under Straight line method of depreciation, the amount of depreciation expenses remains constant throughout the life of the asset.

The real accounts are accounts of Assets, Liabilities and Capital. The accounting formula essentially shows that what the firm owns (its assets) is purchased by either what it owes (its liabilities) or by what its owners invest (its shareholders equity or capital).

Total credit sales is a commonly used base to create the provision for doubtful debts. The provision for doubtful debts is the estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet collected. It is identical to the allowance for doubtful accounts.

Trial balance shows the accumulated depreciation as a credit item. Accumulated depreciation has a credit balance, because it aggregates the amount of depreciation expense charged against a fixed asset.