Accounting Q & A - 1

    

    Finance: It is the branch of economics that studies the management of money and other assets.  In simpler terms it can be defined as the commercial activity of providing funds and capital.

     It addresses questions like -- what funds are required by the organization. How they can be raised? How they have to be allocated etc., 

    Accounts: It is the occupation of maintaining and auditing records and preparing financial reports for a business. Accounts provide quantitative information about finances. It addresses issues like what amount of funds have been allocated to various activities, how the book-keeping is being done etc.,

      Both functions are distinct but complementary to each other. 

   Finance and accounts are highly specialized and distinct areas and hence most organizations have separate sections of finance and accounts. OR There is a very thin line between accounts & finance. Finance relates to procurement & effective utilization of funds whereas accounts relates to recording of the transaction & the preparation of the books.

     Expand GAAP?      Generally Accepted Accounting Principles.

    Stock Turnover Ratio? - This ratio establishes the relationship between the cost of goods sold during a given period and the average amount of inventory carried during that period. It indicates whether the stock has been efficiently used or not, the purpose is to check up whether only the required minimum has been locked up in stocks.

   What do you mean by Accounts Receivables? It is one of the series of accounting mainly deals with billing which owes money to the customer or the company, organization for goods and services that have been provided to the customer it is also treated as current assets for the company and recorded in the asset side of the B\S under the head of Current assets.

  While Scrutinizing the Trial Balance which error will catch you eye immediately... Expenses and asset will show in Debit balances and Liabilities and income will show in credit balances. In TB if it is shown vice versa then we can catch error easily or Difference between the total of debit amounts and credit amounts. First, we have to check total of the debit amount and credit amount. 

    What is the difference between Direct expenses and Indirect expenses? 

    Direct Expenses are levied during the production of Goods. Eg: Carriage Inwards, Power & Fuel, Wages, Oil, Etc., 

  Indirect Expenses are levied after production of goods. Eg: Depreciation, Salary, Interest on capital, etc.,

    What is meant by marginal cost? 

In Brief Marginal cost is the variable cost of the product which increase/decrease according to production but per unit remain the same.

 What are Treasury bills? 

      A Short-term debt obligation backed by the U.S. Government with a maturity of less than one year. Treasury bills are sold in the denomination of $1000 up to a maximum of $5 Million. 

     What is a Suspense Account? 

If the through checking of the subsidiary books, posting to ledger accounts and balancing of accounts have not helped to locate the errors and in the preparation of the final accounts cannot be delayed the difference in the trial balance may be transferred temporarily to a separate account called Suspense account or the difference in books of accounts.  

If the debit side of the transactions exceeds the credit side the difference is to be credited to suspense account on the other hand if the credit side exceeds the debit side it has to be debited to a suspense account. The Suspense account appears in Trail Balance & in the Balance sheet. 

    What is the operating profit? How is it different from Gross profit? 

         Sales - Cost of goods sold = Gross profit,

         Gross profit - Operating expenses = Operating profit

         Operating expenses such as (Salary, rent, depreciation).

     What is Capital Management? 

     Capital Management is a process of utilizing organizations Capital in a highly cost-effective manner for the business requirement of the Company. For Eg: In big organizations there is a TREASURY department and if they have really great exposure for handling the money then they can get returns out of the normal funds available with their bankers.

    What is meant by Salaries Outstanding Accounts? 

     Salaries Outstanding Account refers to salaries which are already due but not paid. 

     What is Dual Accounting?

    Dual Accounting is a double-entry system, wherein both the debit and credit aspect of a transaction is recorded. Each transaction has equivalent debit and credit ledger accounts in the    account books.