Accounting Definition
Accounting Definition
Payments
Balance b/d
5,000
Supports equipment
7,000
3,000
Subscription:
2004
2,000
Office expenses
400
2005
10,000
Electric charges
600
Donation
1,000
Telephone charges
600
2,000
Balanced c/d
8,400
20,000
20,000
Required: Prepare from the above particulars the income and expenditure account
of the club.
Income and Expenditure Account
For the Year Ended 31.12.2005
Receipts
Salaries &
wages
3,000
Add
outstanding
1,000
4,000
Income
Subscription
10,000
Add received
in 2004
1,000
Add accrued
1,500
12,500
Office expenses
Electric charges
Donation
1,000
Telephone
charges
Depreciation on
sports equip.
20% of 7,000
1,400
Surplus i.e.
excess of
income over
expenditures
6,500
13,500
13,500
Note:
Rate of depreciation on sports equipment is 20% (not 20% p.a). so the amount of
depreciation will be $1,400 (20 % of 7,000). The date of purchase is immaterial
here.
Accounts payable and accounts receivable?
Accounts payable are amounts a company owes because it purchased goods or
services on credit from a supplier or vendor. Accounts payable are debts that must
be paid off within a given period of time in order to avoid default. For example, at
the corporate level, AP refers to short-term debt payments to suppliers and banks.
Payables are not limited to corporations. At the household level, people are also
subject to bill payment for goods or services provided to them by creditors. For
example, the phone company, the gas company and the cable company are types
of creditors. Each one of these creditors provide a service first and then bills the
customer after the fact. The payable is essentially a short-term IOU from a customer
to the creditor. Each demands payment for goods or services rendered and must be
paid accordingly. If people or companies don't pay their bills, they are considered to
be in default.
Accounts receivable are amounts a company has a right to collect because it sold
goods or services on credit to a customer. If a company has receivables, this means
it has made a sale but has yet to collect the money from the purchaser. Most
companies operate by allowing some portion of their sales to be on credit. These
type of sales are usually made to frequent or special customers who are invoiced
periodically, and allows them to avoid the hassle of physically making payments as
each transaction occurs. In other words, this is when a customer gives a company
an IOU for goods or services already received or rendered.Accounts receivable are
not limited to businesses - individuals have them as well. People get receivables
from their employers in the form of a monthly or bi-weekly paycheck. They are
legally owed this money for services (work) already provided.When a company owes
debts to its suppliers or other parties, these are known as accounts payable.
Accounts payable are liabilities. Accounts receivable are assets.
Let's assume that Company A sells merchandise to Company B on credit. (Perhaps
the invoice states that the amount is due in 30 days.) Company A will record a sale
and will also record an account receivable. Company B will record the purchase
(perhaps as inventory) and will also record an account payable.
Our example reminds me of an old saying, "There are two sides to every
transaction." In accounting we also expect symmetry: Company A has a sale and a
receivable, Company B has a purchase and a payable.
system could still be material accounting errors that would not be detected by the
trial balance procedure.