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The differe nce b etween Primary  B ooks of Accounts ( B ooks of Prime E ntry)  and Secondary  B ooks of Accounts ( B ooks of Secondary E ntry)  is that Primary  B ooks are  Books of Original Entries or Books of Prime Entries  to record  Business Transactions  Chronologically (Date-Wise) from Voucher while Secondary  B ooks of Accounts are  Books of Final Entries  where  Accounts  are Finally recorded separately i.e., in a classified form, to show closing b alances to be  transferred to  Trial  Balance  at end of the accounting period. Examples of Primary B ooks of Accounts are Cash B ook, Sales Day  B ook, Purchases Day B ook, etc while Secondary B ooks of Accounts include Cash B ook, Purchases Account, Sales Account, Capital Account, etc. Another name for Journal is Primary B ooks of Accounts, B ooks of Original Entry or B ooks of Prime Entry...

There is no difference between Books of Original Entry and B ooks of Prime Entry as both of these names are used to show Books or Journals used to record Business Transactions chronologically (Date-Wise) from voucher or source documents. Recording aspects of Accounting is called B ookkeeping in which main primary books of accounts such as Cash B ook, Purchases Day book, Sales Day book, etc are kept for recording transactions.

How To Calculate Credit Purchases From Financial Statements Firstly, you can calculate Purchases from Income Statement by using the Cost of Sales Formula , and then you can easily calculate Credit Purchases if Cash Purchases is given. We know that Cost of Sales Formula is:                Cost of Sales = Opening Inventory + Total Purchases - Closing Inventory Let’s us understand the computation of Credit Purchases with the below examples: Example 1. Here Cost of Goods Sold = Rs. 120000, Opening Inventory = Rs. 9000, Closing Inventory = Rs. 11000, Cash Purchases = Rs. 48800, Credit Purchases = ? Putting the values, we have:                                       120000 = 9000 + 48800 + Credit Purchases - 11000               ...

In Computerized Accounting System, the Journalizing is often done as these accounting softwared do the job automatically. B ut in case of Manual Accounting System, the process of journalizing is occurred mostly by an accountant manually on a register.

B ecause, from Journal , all the accounts’ balances are finally transferred to concerned Ledger Accounts as Books of Final Entry . So, now the balances are finalized for the preparation of Trial Balance . If this step is missed, then the accounting record may not be correct and errors, mistakes and frauds can not be detected, corrected and prevented easily. Any error in Trial balance is detected from books of accounts, especially books of final entry because these books show the finalized balance of an Account which may be incorrect due to wrong posting, errors of omission and other hidden errors which are not easy to reveal. Such errors are detected with the help of Ledger’s balances when these accounts from journal are finally posted to concerned ledgers’ accounts. For Example, if the Cash Book is undercasted by Rs. 1000, then we need to check cash book for checking transactions, then we can detect the errors easily and trial balance ...

The word "Prepaid" means paid before receiving the benefits, so Prepaid Expenses are those Expenses which are paid in advance against which the company still not received the benefits at the end of the accounting period. The word "Postpaid" mea ns paid after receiving the benefits, facilities, etc., so,    Postpaid Expenses are those expenses which are incurred and against which the payment is not made but the services or benefits are received for the current accounting period. Prepaid Expenses are Current Assets while Postpaid Expenses are Current Liabilities . For Example, Internet Service Providing Companies offers Postpaid and Prepaid Packages. In postpaid facility, the user company pays the bill at the end of the month while in prepaid package, the user firstly paid the bill and then uses the services for the month.

The word Prepaid mea n s to pay after receivi n g some b e nefits. So, Postpaid Expe nses are those Expenses for which the Sole Proprietor’s B usiness or the company enjoyed the benefits but the payment is payable at the end of the accounting period. It is a Current Liability for the business and shown on B alance Sheet as it is payable at the end of the accounting period for which the business has already received the benefits for that period. For Example, if the user compa ny after receiving internet usage data and then pay to internet service company at the end of the accounting, then it is an example of postpaid expenses. Postpaid Expenses Journal E ntry  is the same as in case of Accrued Expenses or Outstanding Expenses or Expenses Payable . When the company incurs the expenses, then the following Adjusting Entry is recorded as shown below:                     ...

Whe n Income or Revenues Accounts Increase, we credit these accounts and whe n these decrease, we deb it these types of accou nts as per Rules of Deb it A nd Credit . The normal or usual balance of Revenues Accounts is credit which is closed to Income Summary Account at the end of the accounting period. However there some cases in which we debit revenues which is unfavorable or unusual situation and in such situation, the revenue is called N egative Revenue. These cases are mentioned below: 1. Post Closing Entries At the end of the accounting period, revenues are closed to Income Summary Account because revenues are Temporary Accounts which are ultimately recorded on Income Statement or Profit And Loss Account for the period. The Closing Entry to close Revenues is shown below:                                               ...

Allowa nce for Doubtful Accounts or Provision For Doubtful Debts are neither Assets nor Liabilities but these are, in fact, Contra Assets Accounts which is just an estimated amount of Uncollectible Accounts Receivable taken from Accounts Receivable and it is calculated on the basis of either income statement-approach or balance sheet-approach. After that, it is deducted from closing balance of Accounts Receivable on the balance sheet in order to calculate the net realizable value of accounts receivable. Also, the allowance for doubtful accounts is the requirement of Matching principle to match sales with the uncollectible accounts expense on Income Statement.

When Expenses increase, we debit these and when these decrease, we credit these according to the Rules of Debit And Credit . Expenses have normal or positive or favorable debit balance which is closed to Income Summary Account at the end of the accounting period as these are Temporary Accounts . Credit balance in expense account  shows u nfavorable or negative balance which is due to certain we discussed here. In these certain circumstances we credited expenses accounts instead of debited. B elow is the list of those reasons due to which expenses are credited: 1. Post Closing Entries At the end of the accounting period, all the expenses are closed to income summary account. we pass the following negative journal entry for all negative expenses accounts which are now closing:                     Income Summary Account a/c   XXX         ...

A reasonable amount of Uncollectible Accounts Receivables indicates that the company’s management is adopting a sound credit policy as the management improve Credit Sales and encourage customers to purchase company’s products or services. However, in such situation, the company’s management makes sure that it will collect unpaid invoices from customers within the due date and it all depends upon customers’ past experiences, dealings with the company, etc.

Allowance for Doubtful Accounts is the estimation of N et Sales or closing balance of Accounts Receivable in order to find out N et Realizable Value of Accounts Receivable . It is the requirement of Matching Principle , so that Sales must be matched with Uncollectible Accounts Expense / Doubtful Debts . For this purpose, allowance for doubt accounts policy is adopted to check credit sales with customers so that there should be less chance of Bad Debts Written Off . There are Three Types of Allowa nce for Doubtful Accounts Policy (i) Sound Credit Policy Such policy is adopted when the company wants to increase credit sales with those customers who are reliable in making payment based on their past experiences and dealings with the company. Maki ng a Sound Credit Policy e ncourages customers to make credit sales as much as they like. As a result, many customers make credit sales and hence the amount of unpaid invoices increases. The mana...