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Cash short and over situation arises in case of petty cash payments and receipts and normal cash transactions. To replenish petty cash account and cash account, cash over and short account is prepared by recording the entry in both cases whether there is cash shortage or cash overage situation. Let’s Explain The Cash Short And Over Situation With The Help Of An Example: Suppose, a shoe company’s cashier received $490 from customer for shoes (sale price = $500) sold but the cashier mistakenly used the accounting software to record the entry in the books of accounts as $500 as it is the actual price stored in the accounting software. Now there is a difference between the actual amount received ($490) and the expected amount recorded in the ledger ($500). So, there is a difference of $10 which is charged to cash over and short account as an expense account. The journal entry to record is shown below: (a). In Case Of Cash Shortage                           Cash a/c  $490              

What Is Inspection Fee In Accounting Inspection fee is paid to certified inspector for inspecting or checking, assessing and evaluating the goods or services and a process in order to control the activities of the organization. Inspection Fee Is What Type Of Account For the company paying inspection fee it is an expense and the company receiving it, it is a revenue for its business. Inspection fee is a Temporary Account which is closed to Income Summary Account at the end of the accounting period. It is shown on Income Statement for the period. As it does not have a balance in its T Account i.e., it is not a Permanent Account , so it is not recorded in the Balance Sheet or Statement of Financial Position. Like other Expenses , the normal or usual / positive balance of inspection fee is debit and in case of closing entry it is credited which is unfavorable or negative balance for it. If inspection fee is an income, then its normal balance on credit side but negative balanc

Solution Of Multiple Choice Question (MCQ) The correct option is “C”, as when the company / corporation sells / issues 10,000 shares of authorized stock at par value of $10 per share, then the company gets cash in exchange of shares sold in the market. So, 10,000 shares sold to investors at the par value of $10 each share yield the price of $100,000 (10,000 Shares X $10 Par Value). The journal entry to record for this Transaction is shown below:                                  Cash a/c  $100,000                                                    Capital Stock a/c  $100,000                    (10,000 Shares Sold To Investors At Par Value Of $10 Each Share) Note: Authorized Stock Is Just Shown In The Balance Sheet As It Just Shows The Total Numbers Of Shares Within Which The Shares Sells To Shareholders / Stockholders. As the company received cash in selling the shares, so there is cash inflows, so we debit cash account as it is increasing. Capital Stock is also

 Solution: The correct answer of this MCQ is A), as post-dated checks / cheques are encashed or deposited into bank only when the date mentioned on it arrives. When the company / corporation received it, it is considered as an assets ( Account Receivables ) from which the company will get benefit on stated date. It is a promise from clients to pay to company on given date. It can be considered as a promise or evidence of Advance Payment to be received on the specified date stated on it. The clients / customers are still liable to pay to company in case of Dishonor of Checks. Post Dated Check / Cheque Journal Entry Before the arrival of specified date mentioned on post-dated check or when it is received from a customer, the company neither records it as a cash receipts nor reduce the balance of Accounts Receivables, so there is no Journal Entry to record in the Books Of Accounts . So, there is no effect on Accounting Equation and Financial Statements . However, on specif

Owner Distribution Is What Kind Of Account? Owner Distribution is an Equity Account (D option is correct), as it is paid to business owners out of the profits retained in the business as a claim or rights of the owners of the business against the assets of the business. Owners get the share of their investment in the business. For example, three (3) owners are given $500 (5% of $10000), $200 (2% of $10000) and $100 (1% of $10000) according to their share of investments in the business. When the business is in profit, then it is favorable to give the return of share to owners. However, in case of loss, it is not considered as an ideal situation to distribute the amount of cash to owners for the investment made in the business as the funds are needed to carry on the business and to sustain and maintain the business. Owner distribution is recorded on balance sheet as a deduction from owners equity. Difference Between Owner Distribution And Dividend In case of profits, Dividend

Solution Of Multiple Choice Question (MCQ) The correct answer is d). $9000, as the client paid the company the full $12000 ($1000 per month) which is $9000 for 9 months from 1 st January to 30 th September. The Revenue earned by the company for 3 months (1 st October to 31 st December) is $3000. So remaining $9000 is Unearned Revenue as the services yet to be performed for the 9 remaining months from 1 st January to 30 th September against which the company received the payment. The adjusting entry to record unearned revenue for 31 st December is shown below:                        Unearned Revenue a/c  $3000                                                                 Revenue a/c  $3000                               (Unearned Revenue Now Earned For The Period Of 3 Months) The balance of Unearned Revenue is $9000 on 31 st December i.e., $12000 - $3000 = $9000.

Answer To The Question The journal entry is to debit Legal Expenses Account of $4000 and credit Accounts Payable Account Or Sundry Creditors Account of $4000, as the legal firm earns revenue by rendering services to you (client) but the payment is not received from you for Legal Services performed. The legal services provided by the legal firm are legal expenses for you (client). So, from the point of view of client, legal expenses are debited as these are increased while accounts payable account is credited as the client is bound by law to pay for the services rendered by the legal firm. So, the Liability Account i.e., Accounts Payable Account are increased according to Rules of Debit and Credit. This journal entry is made on Accrual Basis of Accounting in which a journal entry is recorded whether the cash is paid or not, received or not. When the company incurred expenses or earned revenues, we record in the books of accounts.