A debenture is an instrument of acknowledgement of debt under the common seal of a company. It contains contract for the repayment of the principal sum at a specified date and for the payment of interest at a fixed rate per cent until the principal sum is repaid. Repayment of interest is usually half-yearly.The Comapnies […]
The word ‘company’ has not been clearly defined in the Company Act, 1956. According to the Act, all those companies which have been established under old or new company act, are included in it.According to Lord Justice Lindley, ‘‘It is an association of persons who contribute money or money’s worth to common stock and employ
Dissolution of firm means closure of business. As a result all the liabilities of the firm are paid off by disposing off all the assets of the firm and if there is cash balance, it is used to pay off the capital of the partners. It is mentioned in the ‘Indian Partnership Act, 1932, section
According to the Partnership Act 1932 Section 32 (i), a partner can retire under the following circumstances :(i) When a partner wants to retire as per the agreement.(ii) When other partner or partners have no objection on his/herretirement.(iii) When the partnership is at the sweet will and a partner gives a written notice to retire.A
When two or more persons enter into an agreement for setting up a business, running it, and sharing its profits and losses, it is called partnership. The persons who have entered into a partnership with one another are called individually ‘partners’, and collectively a ‘firm’.Definition of partnershipThe Indian Partnership Act, 1932, defines partnership as follows
According to Carter—“Single entry system is a method or a variety of methods, employed for the recording of transactions, which ignore the two-fold aspects and consequently fails to provide the businessman with the information necessary for him to be able to ascertain the position. Kohler defines it as system of book-keeping in which, as a
The statements which report the profitability and the financial position of the business at the end of the year are known as financial statements.In the words of John N. Myer, ‘The financial statements provide a summary of the account of the assets, liabilities and capital as on a certain date and the income statement showing
In business, a large number of transactions are made on credit basis. In case of credit sale of goods, buyer promises to make payment after a certain period. Under the circumstances, the seller likes to get a written undertaking from the purchaser to get the payment after a certain period. For this, the seller prepares
The term ‘provision’ means an amount, which is written off, or retained, by way of providing for depreciation, renewals, diminution in the value of assets; or retained by way of providing for any unknown future liability of which the amount cannot be determined with reasonable accuracy.Provision is a charge against the profit of the year
Depreciation may be described as a permanent, continuing and gradual shrinkage in the book value of fixed assets. It is the cost of assets consumed in business.DefinitionAccording to accounting standard VI, “Depreciation is a measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, effusion of time
Errors should not be corrected by erasing or overwriting. It reduces the authenticity of accounting records. Method of rectification depends on the stage at which it is detected. In case an error is detected in the book of original entry before its posting to the ledger, it may be neatly corrected by crossing out the
A trial balance is a summary of balances of all accounts recorded in the ledger. The format of trail balance is as fallows :Trial Balance of M/s…………as on 31st Jan., 2005According to J. R. Batliboi trial balance is a statement, prepared with debit and credit balances of ledger accounts to test the arithmetical accuracy of
Sometimes the bank balance shown in the Cash book does not tally with pass book or balance shown by the statement of account provided by the bank. To reconcile the balances, bank reconciliation statement is prepared.The causes of difference between the two balances are as follows :Cheques Paid in to Bank but not yet Collected
The ledger is the main book of accounting system. It contains different accounts where transactions relating to that account are recorded.A ledger is a collection of all the accounts, debited or credited in the given journal and various special journals. A ledger may be in the form of a bound register, or cards, or separate
Besides cash book there are few other subsidiary books to keep accounts in order.Purchases bookAll credit purchases of goods are recorded in the purchases book. ‘Goods’ have mean only those things in which the firms is dealing. These are the articles which are purchased for resale. Purchases book is also known as ‘Invoice Book’ or