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Current Assets VS Total Assets Current Assets provide probable future economic benefits to the business equal to or less than one year while Total Assets is the combination of both Current Assets and Non-Current Assets / Fixed Assets , so it provides longer benefits as compared to current assets. Current assets are equal to Total Assets - Fixed Assets while Total Assets is equal to Current Assets + Fixed Assets. Relationship Between Current Assets And Total Assets If current assets increase, then the total assets will also increase. Similarly, if current assets decrease the total assets will also decrease. So, there is a direct relationship between Current Assets And Total Assets. So, we can say that current assets may provide benefits equal to or less than one year while total assets may provide more benefits as it also include fixed assets / non-current assets.

Current Assets VS Quick Assets Current Assets are the resources of the business which provides probable future economic benefits to the business within one year while Quick Assets or Liquid Assets are also current assets but among all of the current assets, these are more liquid in nature i.e., these are convertible into cash very easily and very quickly. Examples of quick assets include Cash, Cash Equivalents and Accounts Receivable. The formula used for the calculation of current assets is shown below: Current Assets = Total Assets - Fixed Assets The formula used for computation of Quick Assets is: Quick Assets = Cash + Cash Equivalents + Accounts Receivable + Short-Term Investments - Closing Stock + Prepaid Expenses Current assets are utilized in meeting daily expenses and to work smoothly and for the running of daily business operations, usually quick assets are utilized i.e., cash & cash equivalents and accounts receivable are used. For example, for purchasing

Sales Revenue Minus Sales Returns And Allowances And Sales Discounts Equals / Sales Less Sales Discounts Less Sales Returns And Allowances Equals Multiple Choice Question (MCQ) / Net Sales = Gross Sales - Sales Allowances - Sales Returns - Sales Discounts / Sales Revenue Equals To What  Sales Revenue Minus Sales Returns , Sales Allowances And Sales Discounts Equals To Net Sales . The formula to calculate Net Sales is shown below: Net Sales = Gross Sales - Sales Discounts - Sales Returns & Allowances Actually, sales allowances, returns and discounts are the Contra Revenue Accounts which are deducted from Gross or Total Sales in order to calculate net sales for the period. For example, Mr. A, as a sole proprietor, sold goods (5 chairs of Rs. 10000 each) worth Rs. 50000 to Mr. B on account. Later on Mr. B found that one chair is defective, one has some minor defects. Mr. B returned one chair of Rs. 10000 which is accepted by Mr. A. Mr. A gave sales discount of 2% on sa

Source Documents Used To Record Sales Returns And Sales Allowances Transactions The Source Document used for Journalizing Sales Returns and Sales Allowances is Credit Memorandum. Actually, when goods sold to customers but goods are returned from customers to sellers / vendors due to damaged goods or major defects found on goods or customers retain the goods at the lower price than the original price due to minor defects on it, then a seller issued a credit memorandum, containing item details, price lists, amount of goods deducted, etc., to buyers informed him that he granted him Sales Returns or Sales Allowances on goods sold, whichever is the case. The original copy of credit memorandum is sent to the customers / buyers and the copy of credit memorandum is used by the seller as a source document for recording sales returns and sales allowances in General Journal . So, in this way the seller, supplier or vendor used credit memorandum as a source document for journalizin

Why Sales Returns and Allowances Are Not Debited In Sales Ledger' s Account Sales Returns and Sales Allowances are not debited to the Sales Account in order to provide the better information about Contra Revenue Accounts to the management. So these contra revenue accounts are recorded in sales returns and sales allowances ledgers’ accounts respectively. The management of the company can easily and clearly understand what is the amount of sales and what are the amounts of sales returns and sales allowances. The information obtained from ledger accounts of sales returns and sales allowances, as separate from sales ledger’s account, helps the management to improve the quality of products and to take into account the necessary steps to sole customer problems, etc., so that these problems should be surely decreased in future. In Income Statement, Sales returns and allowances are deducted from sales to reduce it as these have balances opposite to sales account, i.e., the

Journal Entry For Household Expenses Of The Owners Of The Business Paid household expenses are related with the personal expenses or private expenses of the owners of the business. Actually, it is a Drawings and it is not concerned with business matters according to Business Entity Concept . For example, a sole proprietor, Mr. A, withdrew cash of Rs. 30000 from business for his own private expenses, then following journal entry is recorded:                                                                  Drawings a/c  30000                                                                                             Cash a/c  30000                                       (Cash Withdrawn From Business For Household Expenses) As drawings account is created, so we debit it and credit cash account as it is decreasing. Drawings account is a Contra Capital Account , so it is deducted from capital account on Balance Sheet. If the cash withdrew from business for business use a

What is The Journal Entry Of Sale Of Fixed Assets / Non Current Assets Partially Depreciated For The Year? When a Fixed Asset or Non-Current Asset purchased by the business disposed off or sold out in the market for cash or exchanged with the new one, then we credit such fixed asset with its historical cost and debit Accumulated Depreciation charged on it upto its use (from the date of purchase) in the business. The amount of cash received is debited and the difference of debit and credit amounts is recorded accordingly in the entry to make balance of debit and credit amounts. If the cash amount is more than the book value of fixed asset, the company gains and if less than the company faces loss on Disposal of Fixed Asset . In a disposal account, if the credit side exceeds the debit side, then there is a gain on sale of fixed asset and if the debit side is higher than the credit side, then it is a case of loss on sale of fixed asset. The journal entry to record for disposal of

A Statement of Owner’s Equity Partnership is prepared for partnership’s business and it provides information about capital of each partner, the share of income / profits and losses of each partner, their additional investments and withdrawals from the business. It is the same as in case of Sole Proprietorship where the Statement of Owner’s Equity is prepared, but only the difference is that we, firstly, calculate owner’s equity of each of partners separately and then add the owner’s equity of each of the partners in order to calculate the total of owners’ equity of the business. Format of Statement of Owner’s Equity Partnership: Example:                                                                         ABC Company                                                               Statement of Owners’ Equity                                                         For the Year Ended 31 st December, 2020     Mr. A                                             Rs. 

Dividend Is Which Type Of Account In Accounting As we know that Dividends are shares of distributions paid to shareholders calculated from Net Income / Net Profit for the year. Dividend account is a Personal Account as it is a Contra Equity Account which is deducted from Retained Earnings Account by transferring it to Retained Earnings Account in order to calculate ending equity. It is very important to note that Dividend is a Balance Sheet Account but still it is considered as a temporary account and not permanent account as it is closed to retained earnings account during closing entry process. Is Dividend A Permanent Account Or Temporary Account It is a Temporary Account as it is closed to retained earnings so, it is not a Permanent Account . Dividend account is not a nominal account as it is neither an expense account nor a revenue account. Actually, it is a contra equity account which is deducted from equity. Dividend is also not considered as a real account as

Well Said "Accounting Is The Language Of Business"  (Warren Buffet) Because, Accounting is the way through which the useful information of a business is communicated to concerned parties, e.g., owners, directors, managers, employers, employees, government, customers, creditors, investors, etc. This information may be related to financial, cost, managerial, etc. For example financial information is useful for Users of Financial Information / Statements , cost information is useful for producers, managerial information is useful for management of the business. Without accounting, we are unable to collect financial, cost and managerial information. Accounting has Generally Accepted Accounting Principles (GAAP) which are universally applicable and acceptable in every country of the world. These standards describe the basis for measuring, recognition, recordings, etc., of different kinds of accounts in the Books of Accounts . It maintains proper records of books of accoun

Plant Assets VS Current Assets Plant Assets are Fixed Assets or Non Current Assets which are used in the business’ operations to produce revenue for the period while Current Assets are the resources which provide probable benefits within or less than one year. Some Current Assets such as Cash and Cash Equivalent and Accounts Receivable are converted into cash very quickly while plant assets are used in the business for more than year, so usually these are converted into cash when these are no longer useful for the business i.e., after fully depreciation charged on these assets, then these are sold out in the market for cash. Examples of plant assets include Land & Building, Machinery, Vehicle, Office Equipment, etc. Examples of current assets consist of Cash & Cash Equivalent, Accounts Receivable, Inventory, Prepaid Expenses, Investments, etc. Similarities Between Plant Assets And Current Assets (a) Both are assets for the business. (b) Both are used in the busin

Contingent Assets VS Contingent Liabilities Contingent Assets are probable benefits that will arise on the happening of uncertain future events while Contingent Liabilities are the probable debts or due payable by the business to outsiders on the occurrence or non-occurrence of uncertain future events. Contingent Assets Example For example, if a company filed a case in court for claiming the rights of content, then the copyright will be a contingent asset for the company that will arise on the happe ning of future event i.e, either the company prove that it has legal owner of the content or it may fail to prove it. When the court makes a judgement that the company has legal owner of the content then such copyright (intangible asset) is recorded in company financial statements and it is now no longer be existed as a contingent asset. Contingent Liabilities Example If a company has a dispute with supplier company for goods purchased on account and the supplier company filed

Plant Assets Definition And Meaning / Are Plant Assets Current Assets? Plant Assets are those Assets which are used by the business during its daily business operations to produce revenue for the accounting period. These are also known as Fixed Assets or Non Current Assets and categorized under the section of Fixed Assets with the Title of Property, Plant & Equipment on assets side of balance sheet. These assets having useful life of more than one year. Are Plant Assets Tangible Or Intangible As these have physical existence, so these are considered as Tangible Assets . Also, these are not considered as Current Assets which provide probable benefits within or less than one year. Examples / Types of Plant Assets Types of plant assets include Land & Building, Machinery, Vehicle, Office Equipment, Furniture & Fixtures, etc. Like fixed assets, Depreciation is also recorded on plant assets. These are recorded at book value (Cost - Accumulated Depreciation) as accu

Goods Withdrawn For Office Use Journal Entry / Goods Used For office Use Journal Entry When the goods or merchandise withdrawn by sole owners from business for office use or business use, then this Transaction is related with business matters as the goods withdrew for business use or office use of the business. For example, Mr. A, a sole proprietor, withdrew goods worth Rs. 5000 for office use. Then the entry to record is given below:                                                                          Purchases a/c  5000                                                                                                    Cash a/c  5000                                                                             (Goods Taken For Office Use)   Goods Withdrawn For Private Use Journal When the goods are withdrawn by sole proprietors or sole owners or partners (in partnership form business) from business for private use or household expenses, then this t ransaction is re