Leaning Online

Post Closing Trial Balance shows the finalized closing balances of Permanent Accounts (assets, liabilities and equity) before starting the new accounting period while a Trial Balance is a simple and Unadjusted Trial Balance that shows unadjusted balances of different types of accounts before adjustments made to these accounts. Post closing trial balance only shows the permanent accounts balances after recording Closing Entries at the end of the accounting period while a trial balance shows both Temporary Accounts and permanent accounts balances before recording Adjusting Entries which affects the accounts during the accounting period.

Trial B alance is a total control ledger account of all Types of Accounts in order to show the arithmetic accuracy of finalized balances of Accounts while Subledger shows individual account’s balances at the end of the accounting period. From Subledgers, closing balances of accounts are transferred to general ledgers / control ledgers of respective accounts while from general ledger the account’s balances are transferred to trial balance.

Usually, the purchase of goods or services or assets for cash or credit from suppliers or vendors is called purchase but in accounting the word “ Purchases ” is used when goods are purchased which may be Cash Purchases or Credit Purchases while purchase of Assets and services for cash or on account is called purchase. Purchase order is made by buyer to vendor or supplier informing about quantities of goods ordered, company information, etc., Purchase will take place when the company gives purchase order to supplier or vendor for the delivery of goods, services or assets.

A Voucher is an internal document issued by the Accounts Payable Department for payment approval and other processing to check the purchase order that was sent to supplier or vendor for the delivery of goods or services. Purchase order contains quantities of goods or items, company’s information, etc. Voucher is made for internal records of the business while purchase order is made to the suppliers or vendors for the delivery of goods or services.

Invoice bill or vendor invoice is received when the company actually received the goods or services from suppliers or vendors after they received the purchase order from the company. When the company received the goods or services from suppliers or vendors, then the suppliers / vendors sent the Invoice to the company. This invoice is known as vendor invoice for buying company and this document will be sent to Accounts Payable Department for further processing in order to get final authorization / approval of payments against the goods or services received.

A n Invoice is an external document issued by the suppliers / vendors containing listing goods, quantities, price lists, etc., after they received purchase order from the buyer while a voucher is an internally generated document issued by Accounts Payable Department for business own records and to get approval for making payments against the invoice received from supplier or vendor. Types of Invoice may include Purchase Invoice , Sales Invoice , etc., while voucher may include Purchase Voucher, Sales Voucher, Journal Voucher, etc.

Utilities Paya ble is the amount due from company to utilities companies due to non payment against the services (Electricity, Gas, Telephone Facilities, etc) received by it for the month. It is a Current Liability for the company as it is payable usually on monthly basis or within one year. Utilities Payable is shown on the Balance Sheet . Utilities Payable Jour nal Entry The following Journal Entry is recorded in the Book of company:                                     Utilities Expenses a/c  XXX                                                                        Utilities Payable a/c  XXX           ...

There are ma ny causes due to which Cost of Goods Sold or Cost of Sales increases. Some Common and important causes are mentioned below: (i) Increase In Unit Cost Per Unit When the prices of products increase due to inflation, then the unit cost of various products increases due to which cost of production increases that ultimately increases the cost of sales of products. But if the eco nomy is growing well means, when there is boom period, then cost of sales decrease. (ii) Lack of Technology When there is manual working without the use of technology, then cost of working increases which ultimately increases the cost of production as less work is done with maximum amount of cost due to manual working while technology reduces workers cost and improve the working time with minimum cost. By adopti ng advanced technology, we can minimize the cost of sales as we may reduce workers costs and increase the working...

Purchases shows those goods which are purchased for cash or o n credit / accoun t  a nd it is the part of Cost of Sales or Cost of Goods Sold while cost of sales is the cost incurred in the production and selling of a product. Purchases is equal to cost of sales plus closing inventory minus opening inventory while cost of sales is equal to opening inventory plus purchases minus closing inventory. Mathematically, we may show this relationship as below: Purchases = Cost of Sales + Closing Inventory - Opening Inventory Cost of Sales = Opening Inventory + Purchases - Closing Inventory

Purchase Voucher is used to show Purchases Transactions such as goods purchases, purchase of assets while Sales Voucher is used to record Sales Transactions such as goods sold, sale of fixed assets, etc. Purchase voucher provides an evidence of purchase made with the suppliers while sales voucher provides an evidence of sale made with the customers of the company.

Cash Book is both a Journal And Ledger to not only shows daily cash transactions chronologically (Date-Wise) but also shows the finalized account’s balance of Cash Account while a Journal shows the business transactions of Different Types of Accounts . A cash book is not only a Journal or a  B ook of Original Entry but also a Ledger or a  B ook of Final Entry while a journal is a book of primary or original entry. It fails to classify the specified information of all accounts separately i.e., we can not find the closing balance of an account at the end of the accounting period.

A Ledger is the Books of Final Entry to classify and to provide specific information about Different Types of Accounts separately while a Cash Book is both a Journa l and a ledger. It shows only daily cash transaction chronologically (Date-Wise) and also shows the closing balance of Cash Account for the accounting period. A ledger can not play the role of a journal to show the details of daily transactions while a cash book can do so as all the cash transaction are primarily recorded in the cash book while in ledger accounts are finally transferred to it and in order to know the details of Transactions , we need to check the general journal and Special Journal of the concerned accounts. A  Ledger  shows detailed records a nd closing b ala nce  of a  specific account transferred from  Journal  at the end of the accounting period while a  Cash  Book  is prepared to show only Cash Transactions and closing balance of cas...

Dividend is that portion of Retained Earnings which is unappropriated for the business and it is the reversal of Equity , so it is a Contra Eq uity Account and deducted from the equity on Statement of retained earnings while equity is the rights of owners of the business in the Assets of the business, so it is an internal source of finance for the business. Dividend is a kind of withdrawal from the business as it is paid out of retained earnings of the business during the accounting period while equity is the amount invested in the business to finance different projects of the business.

N o, there is no difference between Cost of Goods Sold and cost of sales. In fact, both these two accounting terms used interchangeably as goods sold are called sales. So one may replace the words “Goods Sold” and replace it with Sales . Cost of sales includes not only all the costs incurred in order to produce or manufacture a complete product but also it is incurred in order to sale a product or finished goods to sold to end customers. Examples are Purchases, Distribution Costs, Packaging Costs, Selling Costs etc. Cost of Goods Sold is calculated for trading concerns which deals with finished products that is ultimately sold to customers in the market. Cost of Sales Formula is equal to Opening Inventory + Purchases - Closing Inventory as shown below:                                                    ...

Goods Sold are called Sales while goods purchased are called Purchases . There are two types of sales, Cash Sales and Credit Sales while purchases consists of Cash Purchases and Credit Purchases . Goods sold for cash is called cash sales. Goods sold on credit or on account is called credit sale while goods purchased for cash is known as cash purchases and goods purchased on credit or on account is called credit purchases in accounting. Sales accou nt  is a Direct Revenue and it is recorded on Income Statement on Revenues Side while purchases accou nt is a type of direct expenses and reported on Income Statement On Expenses Side. Credit Sales is calculated by preparing Accounts Receivable / Debtors T Account while credit purchases is calculated from the preparation of Accounts Payable / Creditors T Account for the accounting period. However, both cash sales and cash purchased are calculated from Cash Book .

Yes, Salaries Expense is a Direct Revenue, as it  is used to make Sales for the company. According to Matching Concept Gaap , all the Revenues must be matched with the Expenses incurred in earning these revenues. Selling Expenses Direct Or Indirect Selling expenses may be direct or indirect. If salaries expenses are related to cost of production of goods, then these are called direct expenses, but if these are not related to cost of production of goods, then these are called indirect expenses.

Inventory Or Stock Is What Type of Account Inventory is a real account or property account as it is related to a current asset account but it is not related to nominal account which represents Revenues , Expenses , Gains and Losses. I nventory is also not a personal account as it does not have a ny concern wit h livi ng or natural persons. Actually, it is related wit h t hi ngs or goods remained unsold at t he e nd of t he accou nting period. B asically, inventory is the goods remained unsold in the gowdon at the end of the accounting period which provides benefits in the next accounting period when we sold it to customers at a profit.

Loa n given by a company or corporation to an employee is an advance payment to him / her. It is a Current Asset if it is used within one year, otherwise it is a N on Current Asset / Fixed Assets . The Journal Entry to record loan payme nt is shown below:              Loan To Employees a/c / Advance To Employee (Mr.A)  XXX                                                                                    Cash a/c / B ank a/c  XXX                                                             (Loan Given To Employee) At the ...