Accounting Q & A - 14-10-2018

Accounting Q & A - 14-10-2018

• Gross Profit: Gross profit is the closing balance in the debit side of the trading account. Trading account consists of the factory expenses and inflow of cash. 
• Net Profit: Net profit is the closing balance at the debit side of the P and L account. It consists of office income and expenses. Net profit is the figure arrived at after deducting tax and depreciation. (Assets - Liabilities = Net Profit)
• Break Even Point (BEP): This is a result indicates where there is no profit or loss.
• Sensex: Sensex could be construed as sensitive index, sensex is the index of BSE, sensex consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE. 
• Nifty: Nifty construed as National fifty, nifty is the index of NSE (National Stock Exchange). Nifty represents the top 50 stock of the NSE. 
• General Ledger: Ledgers are of two types one is general ledger and the other is personal ledger. General ledger consists of accounts relating to expenses, incomes, liabilities and assets. General ledger is the base for preparation of trail balance.
• Deffered Tax: Deffered tax is either tax asset or tax liability. It is temporary difference between book (accounting) value of assets and liabilities, and their tax value.
• Penny stock: Penny stocks are stocks that traded at very low prices, but subject to extremely high risk.
• Fixed Cost: Fixed cost is that where the fixed cost will not change even though the production is more or less, it is fixed for a specific period of time.
• Operating Cost: The day-to-day expenses incurred in running a business, such as sales and administration, as opposed to production also called operating expenses.
• How to Create Profit & Loss A/c: Profit & loss A/c contains indirect incomes and expenses.  brought down Gross Profit on debit side. All Indirect incomes write on credit side and all indirect expenses are write on debit side. Finally they showed balance. If the balance on debit side it is a Net profit and credit side it is a Net loss. Theses balances taken into the Balance Sheet.
• Authorised Capital & Subscribed Capital: How much amount shown in articles of association is called authorized capital and how much issued from authorized capital in issued capital where how much subscribed from issued capital is called subscribed capital.
• Quick Asset: Quick Assets are ABSOLUTE LIQUID ASSETS which can be easily       converted into cash immediately. Cash/Bank & Short term inventories are the examples.
• Derivative: Derivative is a financial contract whose payoff structure is determined by the value of an Underlying asset. The underlying may be Stocks, Financial indices, forex, Commodities, Bonds, interest rates etc. Different variants of derivatives are Options, Forwards, futures, SWAPS.
• Bonus Shares: Bonus shares are the shares allotted to existing equity shareholders without any consideration being received from them, in cash or kind. They are issued to capitalize profits of the company. Bonus shares can be issued only if Articles of Association permit such an issue.
• Hire Purchase & Installment Purchase: While in Hire Purchase system, the title before you pay the last installment, remains with the Hirer (i.e. one who lives something on HPS). Installments paid are considered as payment towards the usage of the article hired, until the last installments. If you default in paying even the last installment, the hirer can take away the article, without having to repay any installment or part thereof to the hiree. Only after the payment of the last installment, the ownership (title) to goods pass on to the hiree. In case of Installment option, the title to goods is considered to have passed to the hiree on the payment of the first installment only. Every installment is considered to be the payment towards the value of the goods and not for the usage alone. In case of default seller can enforce the hiree to sell the product and make good the remaining installment. But the hirer cannot claim a good title to the goods.