December 26, 2021

Accounting is a continuous process because the business never comes to halt. It is, therefore, necessary that transactions of one period would be separate from those in the ensuing period so that the results of the working of each period can be correctly ascertained. The arrangement that is made for the purpose is technically known […]

Where the number of consignments sent out in a year is large, usually a separate consignment Sales Day Book and Ledger are kept. In that case, the entries in the Day Book in respect of price of goods sent out and expenses incurred on their transport and insurance should be verified with copies of proforma

When the empties or containers in which goods necessarily have to be supplied are costly, the manufacturers normally agree to purchase them back at a reduced price as compared to the one charged for them. In such a case, it is necessary to keep a separate account of the empties “issued and received” and the

From time to time accounts of customers are credited with the value of goods returned and the rebates and allowances sanctioned on one account or another. The entries are passed on the basis of credit notes issued to customers. The credit note contains complete particulars of the credit allowed and the basis on which it

A record of goods sent out on sale or return basis should preferably be kept in a specially ruled Day Book. In this book first memoranda entries are made; and only after the goods have been sold entries are made debiting the party and crediting the Sales Account. The auditor should refer to the memoranda

The student should refer to Spicer and Pegler’s book for the details in the matter of internal check on sales that should be exercised and the extent to which checking of individual entries in the Sales Day Book can be dispensed with when it is proper and effective. The credit sales should be verified by

If a part or whole of a consignment of goods found to be defective or of a poor quality, the goods sometime are returned to the supplier and his account is debited. The debit is raised in the Purchase Returns Books, on the basis of Debit Note. The supplier, on receiving the Debit Note, issues

1.Factors which increase the gross profit :  Undervaluation of opening stock; it may be either the effect of non-inclusion of certain items of stocks or that of valuation of the stock at a rate lower than that warranted by the basis of valuation adopted or miscalculation of the value of one or more items of

Some of the frauds which audit may fail to disclose unless stocks are checked are the following: Suppose there are two cotton mills : Alfa and Beta, and have a common managing director. The mill Alfa closes its accounts on December 31, and mill Beta, on March 31. Further, suppose that when the accounts of

When an invoice runs into several pages and the total of each page has been carried forward to the next or where the amount of an invoice has been distributed over several accounts, it should be confirmed that the amounts relating to different parts of the invoice have been adjusted together. When the total amount

The purchases on credit should be verified by reference to the suppliers invoices to which generally copies of delivery notes, disclosing the dates and particulars of goods received and acknowledged by the Receiving Department, are also attached. While vouching entries for purchases with the invoices, the following points should be specially observed :  that the

The provision of service also constitutes trading, e.g., those rendered by a contractor, estate agent, repairer of motorcars, etc. In those cases, the internal check should provide for the regulation of the charges for the services rendered, either according to an agreement entered into with the parties, to whom the services have been provided, or