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Commission Pay means that the payment made to employees based on some specific tasks, projects, targets that should be met in order to qualify for commission pay or incentive. So, it is a form of remuneration or reward given to employees when they meet specific sales targets or achieve specific performance required for the tasks, etc. It may also be given in addition to basic salary to employees. You Can Also Study, “ What is Commission Account ” Usually, the commission pay is based on the percentage of sales made by a sales manager in a given sales campaign for a specified time period usually weekly, monthly or quarterly. It is given to improve the working performance of the employees so that they try to make sales or meet the targets on time in order to get more incentives or packages if particular target is achieved. For example, the company may give commission to a sales manager equal to 10% of every sale made. ...

It is a fees paid to chartered firms by the company for auditing the B ooks of Accounts , Financial Statements of the company for the accounting period in order to verify financial statements that should give reliable, true & fair view of financial statements to the Users of Financial Statements / Information . Audit Fees Journal Entry When it is paid to Qualified Chartered Firms or Auditors for checking books of accounts alongwith financial statements for the accounting periods, then following Journal Entry is recorded in the Journal of the company as shown below:                                                     Audit Fees a/c  XXX                                               ...

Impaired Assets are those Assets which have less fair market value than carrying value / book value shown on the B alance Sheet when we test these Types / Kinds of Assets for Impairment . Examples are Fixed Assets / N on Current Assets , Intangible Asset such as Goodwill and Current Asset like Accounts Receivable . Due to Physical Usage, Obsolescence, etc. the recoverable amount or fair market value of assets decreases as compare to carrying value so Impairment Loss is recognized in Income Statement in such accounting in which it is incurred. Impairment Assets Journal Entry In case of Impairment of fixed assets, the Journal Entry would be as shown below:                                         Impairment Loss a/c  XXX                                 ...

Impairme nt is a gradual and permanent decrease in the recoverable amount or fair market value of Fixed Assets / N on Current Assets when it is compared with carrying value / book value of fixed assets. It is created when we test whether the carrying value exceeds the recoverable amount, which is a benefit for the company’s business by using it or by selling to the market that is a fair market value, or not. Impairment Calculation As mentioned above, if carrying value exceeds the recoverable amount, then there is impairment of fixed assets which is recognized as Impairment Loss which is calculated as shown below: Impairment Testing Formula or Impairment Loss Formula: Impairment Loss = Carrying Value - Recoverable Amount Impairment Is What Type Of Account ? Impairment Account is a Contra Asset Account as it is deducted from relevant assets‘closing balances on Balance Sheet .

Impairment is the gradual decrease in the recoverable value or fair market value of Fixed Assets / N on Current Assets due to physical usage, damage, obsolescence, etc as the carrying value / book value exceeds the recoverable amount while Depreciation is the systematic allocation of the cost of the Depreciating Assets until the Useful Life of these Assets is expired. Impairment account is a loss to the business while depreciation is an expense which is just an estimated amount charged to Expense every year till the end of useful life of the assets so it is also recorded on Income Statement like  impairment loss.

Bad Debt is the actual expense or loss to the business which was due from customers who failed to pay the company because of insolvency or who are declared as bankrupt by the court while Impairment means a constant or permanent decrease in the fair market value of Fixed Assets / No n Current Assets due to its usage or physical damages, etc. and it results a impairment loss recognized in the Income Statement as the carrying value or book value of a fixed asset exceeds its recoverable amount which is a benefit obtained from the use or sale of that particular Asset . Depreciation is calculated by using / applying different Depreciation Methods such as Straight-Line-Method, Written Down Value Method (Diminishing Balance Method), etc., while Impairment is calculated by either Loss Incurred Model or Forward-Looking ECL Model and its formula to calculate is given below: Impairment Loss = Recoverable Amount - Carrying Value ( B ook Value)

Accrual refers to the recordi ng of Expenses and Revenues either paid or not received at the end of the accounting period while Provision is an estimated amount which is created to avoid loss to the business in nearer future. Accrued Expenses are Current Liabilities and Accrued Revenues are Current Assets for the company so these are shown on the Balance Sheet while Provision is a Contra Account such as Allowance for Doubtful Accounts / Provision for Doubtful Debts , etc. These are deducted from the relevant accounts’s closing balances on balance sheet date.

Travel Adva nces  are those  Expenses which are  paid in advance to employees, who traveled or visited for business purposes, to meet travel related expenses such as Travel Expenses, Meals Expenses, etc. Travel Advance is paid to employees for meeting their travel expenses such as travelling expenses, meal expenses, etc., Employees visits to different events for promoting company marketing and other business matters. Travel Advances are examples of Prepaid Expenses and treated as Current Assets to be shown on Balance Sheet as the company paid advances to employees against which the company will received the benefits i.e., a sales manager visit to university event in order to make marketing campaign to promote the company’s products and brand name in the mind of students. According to the Rules of Debit And Credit , the normal or usual bala nce of Travel Advance is de bit, however, when it is incurred we debit it and when it is tr...

The Main or Primary Purpose of Equity is to show the rights of owners of the business against the Assets of the business. The equity is also called Capital in sole proprietorship or partnership. It is shown on the Balance Sheet on Liabilities & Equity Side. From the Accounting Equation , equity is the difference between assets and Liabilities as shown below: Equity = Assets - Liabilities   As Equity is provided by the owners of the business so it is an internal source of financing for the business.

The Mai n  purpose or aim of  Depreciation is to allocate the cost of Depreciable Assets over its Useful Life and is done by matching cost of the productive asset with the revenues earned by using it during the accounting period according to Matching Principle Gaap . For Example, furniture are depreciated over a period of five years as it has useful life of five years during which it is useful for the business before it will become obsolete. So we record the following Entry where Depreciation Expense on Furniture is recorded to match the cost of furniture with revenues reported on Income Statement and then Contra Account (Accumulated Deprecation - Furniture) on balance sheet to be deducted from the cost of Furniture in order to allocate the cost of the furniture over its useful life of five years.                Depreciation Expense - Furniture a/c  XXX            ...

The Main or Primary Purpose of Assets is to show the resources owned and controlled by the entity during the life time of a business. These provide probable future economic benefits that will flow to the business over time. Types of Assets include Current Assets , Non Current Assets / Fixed Assets and Contingent Assets . Assets are used in the business to operate the business operations such as Furniture, Plant & Machinery, Office Equipment, etc Assets are equal to Liabilities plus Equity as shown by the Accounting Equation shown below: Assets = Liabilities + Equity

The Main or Primary Purpose of Liabilities is to show the amounts of debts due by a business to outsiders / external parties ( Accounts Payable / Creditors , Suppliers, B anks and other Financial Institutions) to the business and these are taken in order to run the business operations and to fund the projects when the business has not sufficient resources to meet Expenses and create Assets . Liabilities include Current Liabilities , Long-Term Liabilities and Contingent Liabilities and these are shown on the B alance Sheet . Liabilities are equal to the Assets minus Equity as shown by below Accounting Equation : Liabilities = Assets - Equity The above basic accounting equation shows the relationship exits between liabilities, assets and equity.

Management Fees Received In Advance or Unearned Management Fees or Prepaid Management Fees is a Current Liability for a Management Company which received it in advance but still not rendered the services at the end of the accounting period. It is shown on Liabilities & Equity side of Management Company’s Balance Sheet . Management Fees Received In Advance Journal Entry Following Journal Entry is passed in the Book of Management Company as shown below:                                           Cash a/c  XXX                                                       Management Fees Received In Advance a/c  XXX                      ...