Classification of Assets and Liabilities

What Are Assets and Liabilities? A balance sheet is a statement that outlines the financial position of an enterprise. It is necessary for the balance sheet to show the enterprise’s assets and liabilities based on their characteristic features. If assets are the property and possessions of the business, liabilities are its legal obligations (i.e., the … Read more

Accounts Payable Ledger

What Is Accounts Payable Ledger? Accounts Payable Ledger is a subsidiary ledger that lists the individual accounts of creditors; also referred to as the creditors’ ledger. What Is a Subsidiary Ledger? A subsidiary ledger is a ledger that contains only one type of account, such as the accounts payable ledger. Explanation When a business has … Read more

Company Final Accounts: Practical Problems and Solutions

This set of problems and solutions on Company Final Accounts is intended to help students understand concepts relating to Final Accounts in greater depth. Problem 1 For the year ended 31 December 2019, the profit of Kerbs Ltd. before changing depreciation on fixed assets and managerial commission amounted to $300,000. Depreciation for the year amounted … Read more

Accounts Payable

Accounts Payable: Definition The Accounts Payable is a liability account that represents debts owed to the creditors of a business. Most purchases take place on credit, and under the accrual basis of accounting, the liability must be recorded at the time title passes for the assets purchased or when the services are received, proper internal … Read more

Provision for Discount on Debtors

At the end of the trading period, there are typically outstanding debtors or accounts receivable. To motivate debtors to pay their debts, companies may sometimes offer a cash discount. For this purpose, it is necessary for the company to create a provision or allowance for the discount on debtors or accounts receivable. In other words, it … Read more

Difference Between Trial Balance and Balance Sheet

The following are the main points of difference between Trial Balance and Balance Sheet. Trial Balance Balance Sheet It is prepared to check the arithmetical accuracy of the ledger accounts. It is prepared to show the financial position of the business on a particular date. It includes the balances of all the accounts appearing in the … Read more

Marshalling of Balance Sheet

Marshaling: Definition The arrangement of assets and liabilities on the balance sheet in a particular order is called marshaling. Marshaling: Explanation The main purpose of the balance sheet is to show the financial position of the business. Therefore, assets and liabilities on the balance sheet should be shown in the proper order that facilitates a … Read more