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Prepaid Advertising Expense means that the advertiser company paid advertising expense in advance to the advertising company for the advertisements but still services not received during the accounting period. It is a Current Asset and example of Prepaid Expenses . The prepaid advertising or advertising paid in advance the Entry is shown below:                              Prepaid Advertising a/c   XXX                                                                   Cash a/c  XXX                                              (Paid Advertisements In Advance) ...

Accrued Advertising Expense means that payment is not made to advertising company for the advertising campaign delivered by advertising company to the advertiser company. Outsta nding / Accrued Advertising Expense Journal Entry / Advertising Expense Payable                             Advertising Expense a/c  XXX                                                                   Accrued Advertising a/c  XXX                                                 (Advertising Accrued for the Month) Also Study, “ Advertising Expense Journal Entry ” ...

1. Owners draw is known as Drawings and it is taken for personal use of the owners of the business according to Business Entity Concept Gaap while salary is the remuneration, benefits or reward received against the services delivered to the company or corporation by an employee. 2. Drawings is Contra Equity Account which is not concerned with the business as it is the internal matter of the proprietor while salary is an Expense for the corporation to pay to the employees for the current period if it is not paid but accrued for the next month, then it becomes Accrued Salaries or Salaries Payable that is a Current Liability .   Is An Owner's Draw Considered Income No, as it is a Co ntra Equity Account which is considered as drawings deducted from closing balance of Capital .

Rules of Debit And Credit are very important for knowings which Account to be debited and which is needed to be credited. There is an easy way to remember or lean debit and credit rules for an account. This is the simplest and easiest way which is given below: (a) Rules For Assets And Expenses are the same. (i) Increase in Assets / Expenses = Debit (ii) Decrease in Assets / Expenses = Credit   Also Read Out, “ What Are Debit And Credits In Accounting ” All Accounts which have debit balance normally should be debited when increase and credited when there is a decrease in the amount. (b) Rules For Liabilities , Owner’s Equity And Revenues (i) Increase in Liabilities / Owner’s Equity / Revenues = Credit (ii) Decrease in Liabilities / Owner’s Equity / Revenues = Debit   Any account which has credit balance normally is credited when it increases and debited when there is decrease in its ru...

1. Capital is the amount of money invested in the business by Sole Proprietor or Partners in case of partnership business to start it or expand it. The amou nt invested either a Cash or Goods (Stock or Purchases) while Assets are the probable future economic benefits which are received by the business within one year or for a long period of time. 2. Capital is the internal resource of the business provided by owners of the business while assets are acquired as a results of capital. Any claim against the assets of the business are only due to the internal or external sources. 3. Capital is shown on Liabilities & Equity Side of  Balance Sheet  while assets are shown on asset side of balance sheet. 4. Capital is used to acquire assets while assets are used in the daily operations of the business and helps in generating profits for the business which is added to the capital of the business. 5. Capital is calculated from  St...

Journal Entry may be either single entry or double entry depending upon the Bookkeepi ng System i.e., Single Entry System or Double Entry System while double entry works only in double entry system of Bookkeeping . Journal Entry Examples include incomplete accounting and complete Accounting Transactions and records. Examples are accounts from customers, Cash Book , Sales Day Book , Purchases Day Book , etc. These Books of Accounts show complete records under double entry system while most of the times shows incomplete records under single entry system. In case of double entry, complete accounting records are shown. For every debit, there is a credit. Examples are Income Statement , B alance Sheet, etc that shows complete information of Financial Statements to the Users of Financial Statements for the accounting period.

Capital is the amount invested in the business by a sole trader or sole proprietors, or in case of partnership, in his business to start a new business to grow the already established business while Liabilities are the obligations payable by the business to outsiders of the business. 2. Capital is related to internal sources of the business, so it is called internal liabilities and it is claims against the rights ( Assets ) of the business from the owners of the business while liabilities are the external sources of the business and hence called External Liabilities. These are the claims against the assets of the business from outsiders such as Suppliers ( Accounts Payable / Creditors ). You Ca n Also Read Out, " Difference Between Liabilities And Owner's Equity " 3. Liabilities may be Current, Long-term or Deferred but capital is not specified. It all depends upon the sole owners which amount to invest to start or grow the ...

When the owner of the business withdrew Cash Rs. 5000 for his own personal use, then this Transaction has two fold effects on Accounting Equation , but first, we need to learn what is the Journal Entry :                                         Drawings Account  5000                                                                        Cash Account  5000 (Cash Withdrawn For Personal Use From business)   Assets  =   Liabilities + Owner’s Equity                             (5000)   =    ...

No, it is not true as the correct Accounting Equation shows that Assets is equal to the sum of Liabilities Plus Equity . Mathematically, we can write as shown below: Assets = Liabilities + Owner’s Equity Here, Assets are the rights or resources or benefits available for the business in the future while Liabilities (External Sources of Finance) and Equity or Owner’s Equity (Internal Sources of Finance) are the two claims or rights against the assets of the business.

Yes, because all the ledger accounts’ closing balances for the accounting period are finally transferred to Trial balance. so, it should match otherwise, either ledger accounts or Trial Balance is not prepared correctly with accuracy. It is to be noted eventhough the total of debit side is equal to the total of credit side in a trial balance, but still there are certain types of hidden mistakes, errors or frauds that does not show trial balance and these errors are detected only by considering B ooks of Accounts such as Journal and Ledger . B y preparing revised T Accounts or Ledger Accounts of Different Types of Accounts , we can find out these types of secret errors such as compensatory errors, Errors of Principle, etc. and then treat accordingly to solve the problem.

Which Financial Statement Is Based On The Accounting Equation? Yes, the Balance Sheet represents Basic or Fundamental Accounting Equation which shows the relationship between Assets , Liabilities and Equity . Whole Accounting Under Double Entry System revolves around this equation. This Accounting Equation is written as follows: Assets = Liabilities + Owner’s Equity (Equity) Here, Assets are the resources acquired a business as a result of Liabilities (External Sources of Finance) and Owner’s Equity or Equity that are Internal Sources of Finance for a business. Assets during the accounting period are always equal to the sum of liabilities and owners' equity or simply equity. The left side of balance sheet or Statement of Financial Position represent Total Assets while right side shows total liabilities and owners' equity. All the transactions occurred during the accounting period affect either left side or right side or both left and right at the same...

The difference between a company's Assets and its Liabilities is Equity or Owner’s Equity according to Accounting Equation : Assets = Liabilities + Equity Assets - Liabilities = Equity This accounting equation is the basis of Double Entry System that all of the resources (Assets) must be equal to the Rights of Outsiders (External Liabilities) and Rights of Owners of the business (Internal Liabilities or Equity).

The Trial Balance will include the ending or closing balances of Different Types of Accounts for the accounting period. The total of Debit side will be equal to the total of Credit Side, otherwise the Trial B alance is not agreed. However, there are specific hidden types of errors that cause the trial balance agree but it lacks to show the true information, so these there is need to check these kinds of mistakes and errors and frauds. Temporary Accounts have no balances and finally closed to Income Statement . Only Permanent Accounts will be transferred to B alance Sheet.

Post Closing Trial Balance includes only Permanent Accounts B alances (Assets, Liabilities & Equity) a nd  these go to the  Balance Sheet as these have closing balances and never close until the business will shut down. All the Temporary Accounts (Revenues & Expenses) will be closed  by passing closing entries at the end of the accounting period, so these are not included in the Post Closing Trial B alance.

The main or primary purpose of Extended Trial Balance is to show the lists of Ledger’s Accounts Balances after Adjustments that will go to the Financial Statements whether it is an Income Statement or Balance Sheet at the end of the accounting period. We get the information of unadjusted accounts’s balances and adjusted account’s balances at a glance. We also know the list of accounts go to the Income Statement or Balance Sheet and the types of adjustments made on these Types of Accounts . Examples of Such Adjustments include Errors, Accrual & Deferrals, Depreciation, Allowance For Doubtful Debts, Closing Inventory / Closing Stock Adjustments, etc.