Leaning Online

Commissio n Expense is an Expense for the company to pay to the sales manager for the services rendered in order to made Sales for the company during the accounting period. It is recorded on Income Statement as an Operating Expense. Commission Expense Paid Journal Entry Whe n the compan y paid commission expense for Cash or Cheque or Check, then following entry is recorded as shown below:                                             Commi ssion Expense a/c   XXX                                                                                     Cash a/c /  Bank a/c...

It is an Indirect Revenue for the agent, broker or for the company (Publishing or Affiliated Company in case of Affiliate Marketing Campaign) which, on the behalf of a company i.e. Advertising company, wants to sell products or provide services as an agent or selling company in order to earn a percentage of sales or for services rendered as a Commission for transactions executed or sales made by it. It is recorded on Income Statement or Profit And Loss Account as a revenue under operating income. You Can Also Study, “ What is Commission Received In Advance ” Commission Received Journal Entry Whe n commission received for Cash or Cheque / Check, then following journal entry is recorded as shown below:                                                     Cash a/c /  Bank a/c...

As, there are two system of Inventory recording, so Journal Entry to record a credit sale is also depended under both system. 1. Under Perpetual Inventory System The Journal Entry to record credit sale of inventory sold is shown below:                                    Accounts Receivable a/c  XXX                                                                             Sales a/c  XXX                                             (Goods Sold Or Services Rendered On Account)   Accordi ng  to the Matching Principl...

Acquisition Accounting or Purchase Accounting shows the process of acquiring of one acquiree business’s Assets , Liabilities , Non-Controlling Interest (NCI) and Goodwill by acquirer or purchasing company under Purchase Price Allocation. The Acquirer will purchase the business of Acquiree company if the purchase value is more than the sum of fair market value of Identifiable Assets ( Tangible Assets  And  Intangible Assets  Except Goodwill), and fair market value of Liabilities assumed . After the acquisition that takes place between acquirer and acquiree either for merger, acquisition or some other business combinations, the assets and liabilities of acquiree’s business now are shown on the Financial Statements of Purchasing Company.

For better understanding, we can divide this question into four parts: 1. Which Accounts Are Increased B y Debits According To The Rules of Debit And Credit , Assets and Expenses Accounts are increased by debits as these have favourable or positive balances on debit side. 2. Which Accounts Are Decreased B y Debits Liabilities , Equity And Income are decreased by debits as these have unfavourable or negative balance on debit side. 3. Which Accounts Are Increased B y Credits Liabilities, Equity and Income are increased by credits. 4. Which Accounts Are Decreased B y Credits Assets and Expenses are decreased by credits.

As Purchase Allowance is a deduction from the Gross or Total Purchases , so understating purchases allowance means that we less deducted it from total purchases. So, we need it to add more purchases allowances to deduct it from total purchases. In case of overstating purchase allowance, it decreases the amount of total purchases, so we need to add back overstated value in total purchases. Due to Overstating or Overcasting of Purchases Allowance, the N et Income will decrease and hence as a result the company earns less reve nues w hile i n  case of Understating or Undercasting of Purchases Allowance, the net income will increase, so the company ear ns more reve nue t ha n t he actual o ne.

There are many Ledgers but these can be expressed in terms of three Types of Ledgers named as Sales Ledger , Purchases Ledger and General Ledger. 1. Sales Ledger or Accounts Receivable / Debtor Ledger Sales Ledger records credit sales transactions that are related to sales made on account to our customers. It helps us in understanding how much cash amount is receivable from our customers for the Credit Sales. 2. Purchase Ledger or Accounts Payable / Creditor Ledger It shows the accounting records related credit purchases from suppliers of the business. It provides information on how much money is payable by the business to its suppliers or creditors. 3. General Ledger It is a Control Ledger or Master Ledger in which Different Types of Accounts such as Assets, Liabilities, Equity, Income & Expenses are recorded.

The purpose of General Journal is to show all the Business Transactions chronologically (date-wise) to show recording aspects ( Bookkeeping ) of Accounting . It is used to show daily accounting records of Different Types Or Kinds of Accounts . As, all the Accounts are primarily recorded in Journal, so it is called Books of Original or Primary or Prime Entry .

The Purpose of the General Ledger is to show Classification / Kinds of Accounts separately in a summarized form. At the end of accounting period, all the Permanent Accounts are finally balanced and the closing or ending balances are transferred to Balance Sheet while all the Temporary Accounts are closed to Income Summary Account and then this account is closed to Income Statement Account. As, all the Accounts are finally summarized and classified separately in a ledger, so the ledger is called Books of Final Entry or King of Accounts.

Cost of Goods Sold before Adjustments is called normal or usual or unadjusted Cost of Goods Sold or Cost of Sales while adjusted cost of goods sold is created after making adjustments to this normal cost of goods sold because of variances occurred during the production process or inventory adjustment that affected the value of Cost of Goods Sold during the accounting cycle. These variances occurred in the form of changes in production and variable costs that ultimately cause changes in total actual overhead costs or manufactured costs. If the actual manufactured cost is more than allocated manufactured cost than the variance is added to unadjusted cost of goods sold and if it is less than allocated manufactured cost, then it is deducted from normal cost of goods sold as we added more allocated cost to the normal cost of goods sold than the actual one. Adjusted Cost of Goods Sold Formula Following Formula is used to calculate Adjusted Cost of Goods...

Identifiable Assets are the Assets owned and controlled by the acquired or purchasing company which purchased the business of Acquiree’s business after setting Purchase Price Allocation . These assets provide probable future economic benefits to the business of the acquirer’s company. We assign a fair market value to these Types / Kinds of Assets and recorded in the Financial Statements of the purchaser’s company. Identifiable Assets include both Tangible Assets and Intangible Assets except Goodwill . The net Identifiable Assets are calculated to compare it with the purchase price. If the purchase is more than the fair market value of net Identifiable Assets (Fair Market Value of Indentifiable Assets - Total Values of Liabilities assumed), then the acquirer / purchasing company will surely buy the business of acquiree as it has more worth than the values of net identifiable assets of acquiree company’s business. Examples of identifia...

Net I dentifiable Assets ( NIA)  in Accounting is the difference between total values of Identifiable Assets (both Tangible Assets and Intangible Assets ) and total values of Liabilities of Acquiree’s business. It is calculated at the time of acquisition or merger of the business. It is one of the components of Purchase Price Acquisition and it is found by the acquirer or purchaser to estimate Goodwill of the acquiree company’s business. Mathematically, we calculate Net I dentifiable Assets by following equation:   Net I dentifiable Assets = Total Values of Identifiable Assets - Total Values of Liabilities