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ADMISSION ALERT B.COM PART 1

ADMISSION ALERT B.COM PART 1


Only such students will be eligible for admission to the B.Com. Part-1 class who have
passed:-
i) Intermediate in Commerce OR
ii) Higher Secondary with Commerce OR
iii) Intermediate Arts/Higher Secondary Arts Group with Economics OR
iv) Higher Secondary or Intermediate Arts/Science/Home Economics in at least Second
Division OR
v) Diploma in Commerce, Diploma of Business Administration, Diploma of Associate
Engineer of the Technical Education Board OR
vi) Intermediate Agriculture with Economics OR
vii) Intermediate Science with Mathematics.

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Sunday, December 13, 2015

What is a reversing entry?

What is a reversing entry?

A reversing entry is a journal entry made in an accounting period, which reverses selected entries made in the immediately preceding accounting period. The reversing entry typically occurs at the beginning of a reporting period. A reversing entry is commonly used in situations when either revenue or expenses were accrued in the preceding period, and you do not want the accruals to remain in the accounting system for another period.
It is extremely easy to forget to manually reverse an entry in the following period, so it is customary to designate the original journal entry as a reversing entry in the accounting software when you create it. This is done by clicking on a "reversing entry" flag.  The software then automatically creates the reversing entry for you in the following accounting period.
Example of a Reversing Journal Entry
To explain the concept, the following entry shows an expense accrual in January for an $18,000 expense item for which the supplier's invoice has not yet arrived:
 DebitCredit
 Expense 18,000 
      Accrued expenses 18,000 

You now create the following reversing entry at the beginning of the February accounting period. This leaves the original $18,000 expense in the income statement in January, but now creates a negative $18,000 expense in the income statement in February.
 DebitCredit
 Accrued expenses 18,000 
      Expense 18,000 

But we are not done yet. The supplier's invoice arrives later in February, and we record it with the following entry, which offsets the negative $18,000 that would otherwise have appeared in the company's income statement in February:
 DebitCredit
 Expense 18,000 
      Accounts payable 18,000 

The result is that the $18,000 expense appears in the company's income statement in January, which is presumably when it was supposed to appear under the accrual basis of accounting, while there is no net recognition of any expense at all in February. Thus, a reversing entry has allowed us to properly record an expense during the period when the expense was incurred, rather than in a later period, when the company obtains the supplier's invoice.
Two further examples of how to use a reversing entry are:
  • Accrued revenue. You accrue $10,000 of revenue in January, because the company has earned the revenue but has not yet billed it to the customer. You expect to invoice the customer in February, so you create a reversing entry in the beginning of February to reverse the original $10,000 revenue accrual. The final billing, for a total of $12,000, is completed later in the month. The net result is the recognition of $10,000 in revenue in January, followed by the recognition of an additional $2,000 of revenue in February.
  • Accrued expenses. You accrue a $20,000 expense in January for a supplier invoice that did not arrive in time for the month-end close. You expect the invoice to arrive a few days after you close the month, so you create a reversing entry in early February for $20,000. The invoice arrives, and you record it in February. The net result is the recognition of a $20,000 expense in January, with no net additional expense recognition in February.
What if you were to forget to make a reversing entry? In the first example, this means that the accounting records would already show $10,000 of revenue that was recorded in January, and will then show an additional $12,000 of revenue in February, so that revenue is overstated by $10,000 through the two-month period. The key indicator of this problem will be an accrued account receivable of $10,000 that the accounting staff should eventually spot if it is regularly examining the contents of its asset accounts.
If you were to forget to reverse the expense in the second example, the accounting records would show a $20,000 expense in January and another $20,000 expense in February, where the February amount is erroneous. The key indicator of this problem will be an accrued liability of $20,000 that the accounting staff should locate if it is periodically examining the contents of the company's liability accounts.
If you expect to keep an accrual for a long period of time before reversing it, then make note of the accrual in the journal entry records, and review it as part of every month-end closing process until you can reverse it. This is also a good reason to conduct account reconciliations for all balance sheet accounts at regular intervals, which will detect unreversed entries.

Thursday, December 10, 2015

Accruals Concept

Accruals Concept


Accrual Definition
An accrual is a journal entry that is used to recognize revenues and expenses that have been earned or consumed, respectively, and for which the related cash amounts have not yet been received or paid out. Accruals are needed to ensure that all revenues and expenses are recognized within the correct reporting period, irrespective of the timing of the related cash flows. Without accruals, the amount of revenue, expense, and profit or loss in a period will not necessarily reflect the actual level of economic activity within a business.
Accruals are a key part of the closing process used to create financial statements under the accrual basis of accounting; without accruals, financial statements are considerably less accurate.
Under the double-entry bookkeeping system, an accrued expense is offset by a liability, which appears in a line item in the balance sheet. If accrued revenue is recorded, it is offset by an asset, such as unbilled service fees, which also appears as a line item in the balance sheet.
It is most efficient to initially record most accruals as reversing entries. By doing so, the accounting software in which they are entered will automatically cancel them in the following reporting period. This is a useful feature when you are expecting to issue an invoice to a customer or receive an invoice from a supplier in the following period. For example, a business may know that a supplier invoice for $20,000 will arrive a few days after the end of a month, but the controller wants to close the books as soon as possible. Accordingly, he records a $20,000 reversing entry to recognize the expense in the current month. In the next month, the entry reverses, creating a negative $20,000 expense that is offset by the arrival and recordation of the supplier invoice.
Accrual Examples
Examples of accruals that a business might record are:
  • Expense accrual for interest. A local lender issues a loan to a business, and sends the borrower an invoice each month, detailing the amount of interest owed. The borrower can record the interest expense in advance of invoice receipt by recording accrued interest.
  • Expense accrual for wages. An employer pays its employees once a month for the hours they have worked through the 26th day of the month. The employer can accrue all additional wages earned from the 27th through the last day of the month, to ensure that the full amount of the wage expense is recognized.
  • Expense accrual for supplier goods and services. A supplier delivers goods at the end of the month, but is remiss in sending the related invoice. The company accrues the estimated amount of the expense in the current month, in advance of invoice receipt.
  • Sales accrual. A services business has a number of employees working on a major project for the federal government, which it will bill when the project has been completed. In the meantime, the company can accrue revenue for the amount of work completed to date, even though it has not yet been billed.
Other Accrual Issues
If a business records its transactions under the cash basis of accounting, then it does not use accruals. Instead, it records transactions only when it either pays out or receives cash. The cash basis yields financial statements that are noticeably different from those created under the accrual basis, since timing delays in the flow of cash can alter reported results. For example, a company could avoid recognizing expenses simply by delaying its payments to suppliers. Alternatively, a business could pay bills early in order to recognize expenses sooner, thereby reducing its short-term income tax liability.

Debits and Credits

Debits and Credits


Debit and Credit Definitions
Business transactions are events that have a monetary impact on the financial statements of an organization. When accounting for these transactions, we record numbers in two accounts, where the debit column is on the left and the credit column is on the right.
  • debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account. It is positioned to the left in an accounting entry.
  • credit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account. It is positioned to the right in an accounting entry.

Debit and Credit Usage
Whenever you create an accounting transaction, at least two accounts are always impacted, with a debit entry being recorded against one account and a credit entry being recorded against the other account. There is no upper limit to the number of accounts involved in a transaction - but the minimum is no less than two accounts. The totals of the debits and credits for any transaction must always equal each other, so that an accounting transaction is always said to be "in balance." If a transaction were not in balance, then it would not be possible to create financial statements. Thus, the use of debits and credits in a two-column transaction recording format is the most essential of all controls over accounting accuracy.
There can be considerable confusion about the inherent meaning of a debit or a credit. For example, if you debit a cash account, then this means that the amount of cash on hand increases. However, if you debit an accounts payable account, this means that the amount of accounts payable liability decreases. These differences arise because debits and credits have different impacts across several broad types of accounts, which are:
  • Asset accounts. A debit increases the balance and a credit decreases the balance.
  • Liability accounts. A debit decreases the balance and a credit increases the balance.
  • Equity accounts. A debit decreases the balance and a credit increases the balance.
The reason for this seeming reversal of the use of debits and credits is caused by the underlying accounting formula upon which the entire structure of accounting transactions are built, which is:
Assets = Liabilities + Equity
Thus, in a sense, you can only have assets if you have paid for them with liabilities or equity, so you must have one in order to have the other. Consequently, if you create a transaction with a debit and a credit, you are usually increasing an asset while also increasing a liability or equity account (or vice versa). There are some exceptions, such as increasing one asset account while decreasing another asset account.
If you are more concerned with accounts that appear on the income statement, then these additional rules apply:
  • Revenue accounts. A debit decreases the balance and a credit increases the balance.
  • Expense accounts. A debit increases the balance and a credit decreases the balance.
  • Gain accounts. A debit decreases the balance and a credit increases the balance.
  • Loss accounts. A debit increases the balance and a credit decreases the balance.
If you are really confused by these issues, then just remember that debits always go in the left column, and credits always go in the right column. There are no exceptions.
Debit and Credit Rules
The rules governing the use of debits and credits are as follows:
  • All accounts that normally contain a debit balance will increase in amount when a debit (left column) is added to them, and reduced when a credit (right column) is added to them. The types of accounts to which this rule applies are expenses, assets, and dividends.
  • All accounts that normally contain a credit balance will increase in amount when a credit (right column) is added to them, and reduced when a debit (left column) is added to them. The types of accounts to which this rule applies are liabilities, revenues, and equity.
  • The total amount of debits must equal the total amount of credits in a transaction. Otherwise, an accounting transaction is said to be unbalanced, and will not be accepted by the accounting software.
Debits and Credits in Common Accounting Transactions
The following bullet points note the use of debits and credits in the more common business transactions:
  • Sale for cash: Debit the cash account | Credit the revenue account
  • Sale on credit: Debit the accounts receivable account | Credit the revenue account
  • Receive cash in payment of an account receivable: Debit the cash account | Credit the accounts receivable account
  • Purchase supplies from supplier for cash: Debit the supplies expense account | Credit the cash account
  • Purchase supplies from supplier on credit: Debit the supplies expense account | Credit the accounts payable account
  • Purchase inventory from supplier for cash: Debit the inventory account | Credit the cash account
  • Purchase inventory from supplier on credit: Debit the inventory account | Credit the accounts payable account
  • Pay employees: Debit the wages expense and payroll tax accounts | Credit the cash account
  • Take out a loan: Debit cash account | Credit loans payable account
  • Repay a loan: Debit loans payable account | Credit cash account
Debit and Credit Examples
Arnold Corporation sells a product to a customer for $1,000 in cash. This results in revenue of $1,000 and cash of $1,000. Arnold must record an increase of the cash (asset) account with a debit, and an increase of the revenue account with a credit. The entry is:
 DebitCredit
Cash1,000 
     Revenue 1,000

Arnold Corporation also buys a machine for $15,000 on credit. This results in an addition to the Machinery fixed assets account with a debit, and an increase in the accounts payable (liability) account with a credit. The entry is:
 DebitCredit
Machinery - Fixed Assets15,000 
     Accounts Payable 15,000

Other Debit and Credit Issues
A debit is commonly abbreviated as dr. in an accounting transaction, while a credit is abbreviated as cr. in an accounting transaction.
Debits and credits are not used in a single entry system. In this system, only a single notation is made of a transaction; it is usually an entry in a check book or cash journal, indicating the receipt or expenditure of cash. A single entry system is only designed to produce an income statement.

Thursday, November 26, 2015

RESULTS: B-COM REGULAR PART 2/COMBINED SUPPLEMENTARY EXAMS 2014

BREAKING NEWS

KARACHI UNIVERSITY HAS ANNOUNCED RESULTS OF B-COM REGULAR PART 2/COMBINED SUPPLEMENTARY EXAMS 2014
RESULT K LIAY HAMARA BLOG VISIT KAREN.



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