Leaning Online

Is Wages Outstanding / Accrued Wages A Permanent Account Or A Temporary Account? Wages Payable is a Permanent Account as it is a Current Liability which is a Balance Sheet Account and shown on the balance sheet. Wages payable is not a temporary account as it is not closed to Income Summary Account at the end of the accounting period. Wages Payable has life less than one year. Usually, wages are paid to workers on daily basis. However, a company may pay wages to workers upon the completion of the project, so it is payable by the business to workers untill the work is finished. So, we can say that wages payable / outstanding wages / wages owing is a permanent account and not a temporary account as it is not closed at the end of the accounting period being a current liability of the business.

Drawing Account Is A Temporary Account Or A Permanent Account In Accounting Drawing Account is a Temporary Account as well as a Personal Account as it is closed to Owner’s Equity Account as it is relaed with the owner of the business. Eventhough, the drawing account is considered as a personal account ( Contra Capital Account ) and a temporary account yet it is not considered as a nominal account as it is not an expense and not a permanent account as it is closed to owner’s equity account. Drawing account is created by owners in case of Sole Proprietorship or Partnership Business. The normal balance / positive or favorable balance of drawing account is debit which is against the normal credit balance of owner’s equity account. That is why, it is deducted from owner’s equity account. Also, it is a contra capital account.

Office Supplies Is A Permanent Account Office Supplies on Hand or Office Supplies Unconsumed is a Permanent Account as it is considered as a Current Asset and it shows that part of office supplies which is expected to be consumed or used by the business during the accounting period. Office Supplies Expense Is A Temporary Account Or A Permanent Account The part of office supplies which is consumed by the business during the period is charged to expense account and treated as a temporary account. Office supplies on hand is a current asset and shown on the Balance Sheet as it is a Balance Sheet Account , so it  is a permanent account. Office Supplies Expense A Temporary Account Office supplies consumed or used is an expense and recorded in Income Statement as it is a Temporary Account as well as an Income Statement Account.

The effects of Contra Assets Account on balance sheet are that these are deducted from the ending balances of assets accounts in order to calculate Net Realizable Value of Assets. Actually, these are the reversal of relevant assets accounts on balance sheet. Major examples of contra asset accounts include Allowance For Doubtful Accounts and Accumulated Depreciation . Allowance for doubtful accounts is deducted from ending balance of Accounts Receivable to calculate Net Realizable Value or Book Value of Accounts Receivable . Accumulated Depreciation is deducted from the depreciable cost of the Fixed Assets in order to calculate the book value of the fixed assets / non current assets.

If The Total Debits Exceed Total Credits In The Balance Sheet Columns Of The Worksheet Then Owner’s Equity Will Increase Beacuse The Net Income Has Occurred. If the total debits exceed total credits in the balance sheet columns of the worksheet, then Owner’s Equity will surely increase as when the business earns Net Profits or Net Income which is added to owner’s equity, so owner’s equity increases. So, the business earns net profit or net income for the period. Actually, when debits of balance sheet column of worksheet are greater than credits, then the difference of debits and credits of balance sheet column of worksheet is the Net Income which equalizes both debits and credits of balance sheet column of worksheet. For example, if the net profit is Rs. 500000 for the period, then it means it is added to owner’s equity account, so it increase the owner’s equity. If Total Credits Exceed Total Debits In The Balance Sheet Columns Of A Worksheet Then There Is?     ...

How The Three Financial Statements Are Linked Together? The three Financial Statements such as Income Statement , Statement of Owner’s Equity , in case of Sole Proprietorship and Partnership or Statement of Retained Earnings in case of Company or Corporation, and Statement of Financial Position (Balance Sheet) are linked together because the Net Income / Net Profit or Net Loss calculated from income statement is transferred to statement of owner’s equity or statement of retained earnings and then owner’s equity or equity is trasferred to balance sheet. So, any mistake or error or fraud in these financial statement is automatically transferred to all of these financial statements as these financial statements are linked with each other. For example, the net income of Rs. 10000 of a sole proprietor’s business for the period is transferred to statement of owner’s equity account where it is added to the opening capital in order to calculate the closing capital which is transfer...

Why We Update The Subsidiary / Sub-Ledger Accounts Balances? / The Importance Of Updating Subsidiary Ledger Accounts Balances / Sub Ledger Accounts Balances It is important to update the balance of Subsidiary Ledgers as it reflects in the Main or Master or Control Ledger Account as the information entered into subsidiary ledgers are added up in one master ledger account. This one master ledger account is linked with all of the subsidiary ledger accounts. For example, the accounts receivable subsidiary ledger accounts balances, which are used for one single master or control ledger account is Accounts Receivable Control Ledger Account , are given below:                                                                       Mr. A     =    Rs. 3000         ...

In a Sole Proprietorship or Partnership, the Drawing Account increased on the debit side as it is the withdrawal of assets by the owners from the business for their own personal uses / private uses. Actually, the drawing account is the reversal of Owners’ Equity Account i.e., it is a Contra Capital Account . So, the normal or usual balance of drawing account is debit. When the owner withdraws from the business, then it increases on the debit side. Example: Mr. A is a sole proprietor in his own business. He withdrew Cash of Rs. 6000 from his business for private expenses. What is the journal entry and the effect of this transaction on the accounting equation?                                                                          Drawings a/c  6000           ...