Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure...

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Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Capital Revenue Receipt Payment Classification of Capital and Revenue Non profit Organizations Difference Between capital and revenue

Transcript of Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure...

Page 1: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Capital Receipt

Revenue Receipt

Capital Payment

Revenue Payments

Deferred Revenue Expenditure

Capital

Revenue

Receipt Payment

Classification of Capital and Revenue

Non profit Organizations

Difference Between capital and revenue

Page 2: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Capital receipt are those receipt which are not revenue in nature.

Capital Receipt

Sale of Land and Building other than a

dealerRaising of loans

Accounting

Treatment

These are credited to the respective account of Capital nature.

Non profit Organizations

Difference Between capital and revenue

Page 3: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Revenue receipt are those receipt which arise in the normal course of business.

Revenue Receipt

Accounting

Treatment

These are credited to the Trading and Profit & Loss Account.

Sale of Land and Building by a dealer

Raising of loans by a person engaged in the

same business

Non profit Organizations

Difference Between capital and revenue

Page 4: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Expenditure incurred to increase the productivity and earning capacity.

Capital Payment

Cost of Land and Building

Cost of Plant and Machinery

Accounting

Treatment

It is debited to the respective asset account.

Non profit Organizations

Difference Between capital and revenue

Page 5: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Expenditure incurred to maintain the productivity and earning capacity.

Revenue Payment

Repair to Building Wages

Accounting

Treatment

It is debited to the Trading and Profit & Loss Account.

Non profit Organizations

Difference Between capital and revenue

Page 6: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Expenditure for which expenditure has been made or the liability has been incurred which will benefit over a subsequent period.

Deferred Revenue Expenditure

Expenditure on Advertisement

Accounting

Treatment

Normally such expenditure will be written off over a period of 3 to 5 years.

Non profit Organizations

Difference Between capital and revenue

Page 7: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Balance Sheet for the year ended 31st December 2012Liabilities Amount Assets Amount

Rs. Rs.

Owners funds Non-Current Assets

Capital 12,000 Furniture 15,000

Add Net profit 19,500 31,500 Current AssetsNon-Current Liabilities Debtors 15,500

Long-term loan 5,000 Bank 5,000

Current Liabilities Cash 1,000

Creditors 15,000 Closing Stock 15,000

51,500 51,500

Accounting Treatment for Special Items Closing Stock

In Balance sheet

Page 8: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

When expenses of an accounting period remain unpaid at the end of an accounting period, they are termed as outstanding expenses.Accounting Treatment:Trading Profit & Loss A/c Balance Sheet

Added to the Concerned Expense

Shown on the Liability side of the balance sheet

Outstanding ExpenseAccounting Treatment

for Special Items

Page 9: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Trading a/c for the year ended 31st December 2012Dr. Cr.Expenses/Losses Amount Revenues/Gains Amount

Rs. Rs.

Purchases 75,000 Sales 1,25,000

Wages8,000

Add Outstanding wages 500 8,500 Closing stock 15,000Gross profit c/d 56,500

1,40,000 1,40,000

Concerned Expense

Outstanding Amount+

Outstanding Expense

In Trading P&L A/c

Accounting Treatment for Special Items

Page 10: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Balance Sheet for the year ended 31st December 2012

LiabilitiesAmoun

t AssetsAmoun

t

Rs. Rs.

Owners Funds Non-Current Assets

Capital 12,000 Furniture 15,000

Add Profit 19,000 31,000 Current Assets

Non-Current Liabilities Debtors 15,500

Long-term loan 5,000 Bank 5,000

Current Liabilities Cash 1,000

Creditors 15,000 Closing stock 15,000Outstanding wages 500

51,500 51,500

Outstanding Expense

In Balance sheet

Accounting Treatment for Special Items

Page 11: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

These are expenses which are paid in advance in the normal course of business operations and may be carried forwarded to the next year.Accounting Treatment:Trading Profit & Loss A/c Balance Sheet

Deducted from the Concerned Expense

Shown on the Asset side of the balance sheet

Prepaid ExpenseAccounting Treatment

for Special Items

Page 12: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Trading a/c for the year ended 31st December 2012Expenses/Losses Amount Revenues/Gains Amount

Rs Rs.Purchases 75,000 Sales 1,25,000Wages 8,000 Closing stock 15,000Add Outstanding wages 500 8,500Gross profit c/d 56,500

1,40,000 1,40,000

Salaries 25,000 Gross profit b/d 56,500Less Prepaid salary (5,000) 20,000Rent of building 13,000 Commission received 5,000Bad debts 4,500Net profit (transferred to Ankit 24,000capital account)

61,500 61,500

Outstanding Expense

Concerned Expense

Prepaid Amount

Accounting Treatment for Special Items

Page 13: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Balance Sheet for the year ended 31st December 2012Liabilities Amount Assets Amount

Rs. Rs.

Owners Funds Non-Current AssetsCapital 12,000 Furniture 15,000Add Profit 24,000 36,000 Current AssetsNon-Current Liabilities Debtors 15,500Long-term loan 5,000 Prepaid Salary 5,000Current Liabilities Bank 5,000

Cash 1,000Creditors 15,000 Closing stock 15,000Outstanding wages 500

56,500 56,500

Outstanding ExpenseAccounting Treatment

for Special Items

Page 14: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Some times certain items of income such as interest on loan, commission, rent, etc. are earned during the current accounting year but have not been actually received by the end of the same year. Such incomes are known as accrued income. Accounting Treatment:Trading Profit & Loss A/c Balance SheetAdded to the Concerned Income

Shown on the Liability side of the balance sheet

Accrued IncomeAccounting Treatment

for Special Items

Page 15: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Trading a/c for the year ended 31st December 2012Expenses/Losses Amount

Revenues/Gains Amount

Rs. Rs.

Purchases 75,000 Sales 1,25,000

Wages 8,000 Closing stock 15,000

Add Outstanding 500 8,500

Gross profit c/d 56,500

1,40,000 1,40,000

Salaries 25,000Gross profit b/d 56,500

Less Prepaid salary (5,000) 20,000

Rent of building 13,000

Commission received 5,000

Add Accrued1,50

0 6,500

Bad debts 4,500 commission

Net profit (transferred to Ankit’s Capital A/c 25,500

63,000 63,000

Accrued IncomeAccounting Treatment

for Special Items

Page 16: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Balance Sheet for the year ended 31st December 2012

Liabilities Amount Assets Amount

Owners Funds Non-Current Assets

Capital 12,000 Furniture 15,000

Add Profit 25,500 37,500 Current AssetsNon-Current Liabilities Debtors 15,500

Long-term loan 5,000 Prepaid salary 5,000

Current Liabilities Accrued commission 1,500

Creditors 15,000 Bank 5,000

Outstanding wages 500 Cash 1,000

Closing stock 15,000

58,000 58,000

Accrued IncomeAccounting Treatment

for Special Items

Page 17: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Sometimes, a certain income is received but the whole amount of it does not belong to the current period. The portion of the income which belongs to the next accounting period is termed as income received in advance or an Unearned Income.Accounting Treatment:Trading Profit & Loss A/c Balance Sheet

The total amount will be deducted from the concerned income in the credit side of the P&L a/c.

Shown on the Liability side of the balance sheet

Income Received in Advance

Accounting Treatment for Special Items

Page 18: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Balance Sheet for the year ended 31st December 2012

LiabilitiesAmoun

t AssetsAmoun

tRs. Rs.

Owners Funds Non Current AssetsCapital 12,000 Furniture 15,000Add Net profit 25,500 37,500 Current AssetsNon Current Liabilities Debtors 15,500Long-term loan 5,000 Prepaid salary 5,000Current Liabilities Accrued commission 1,500Creditors 15,000 Bank 5,000Outstanding wages 500 Cash 4,000Rent received in advance 3,000 Closing stock 15,000

61,000 61,000

Income Received in Advance

Accounting Treatment for Special Items

Page 19: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Depreciation is the decline in the value of assets on account of wear and tear and passage of time. It is treated as a business expense and is debited to profit and loss account.

Accounting Treatment:Trading Profit & Loss A/c Balance Sheet

It is treated as a business expense and is debited to profit and loss account.

Deducted from the concerned Asset.

DepreciationAccounting Treatment

for Special Items

Page 20: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Trading a/c for the year ended 31st December 2012

Expenses/Losses Dr. Amount Revenues/Gains Cr. AmountPurchases 75,000 Sales 1,25,000Wages 8,000 Closing stock 15,000Add Outstanding wages (500) 8,500Gross Profit c/d 56,500

1,40,000 1,40,000

Salaries25,00

0 Gross profit b/d 56,500

Less Prepaid salary(5,000

) 20,000

Rent of building 13,000Commission received 5,000 6,500Add Accrued 1,500

Depreciation-Furniture 1,500 CommissionBad debts 4,500Net profit (transferred to 24,000Ankit’s capital account)

63,000 63,000

Income Received in Advance

Accounting Treatment for Special Items

Page 21: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Balance Sheet for the year ended 31st December 2012

Liabilities

Amount Rs. Assets

Amount Rs.

Owners FundsNon-Current Assets

Capital 12,000 Furniture 15,000

Add Profit 24,000 36,000 Less Depreciation(1,500

) 13,500Non-Current Liabilities Current Assets

Long-term loan 5,000 Debtors 15,500

Current Liabilities Prepaid salary 5,000

Creditors 15,000Accrued commission 1,500

Outstanding wages 500 Bank 5,000Rent received in advance 3,000 Cash 4,000

Closing stock 15,000

59,500 59,500

DepreciationAccounting Treatment

for Special Items

Page 22: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Bad debts refer to the amount that the firm has not been able to realize from its debtors. It is regarded as a loss and is termed as bad debt.Accounting Treatment:

Trading Profit & Loss A/c Balance SheetAmount of further bad debts is added to the existing bad debts in the debit side of the P&L a/c.

Deducted from the existing debtors amount

When the bad debts is given in P&L a/c and Trial Balance (Further Bad Debts)

Bad DebtsAccounting Treatment

for Special Items

Page 23: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Trading a/c for the year ended 31st December 2012

Expenses/Losses Amount Revenues/Gains AmountPurchases 75,000 Sales 1,25,000Wages 8,000 Closing stock 15,000Add Outstanding wages 500 8,500Gross profit c/d 56,500

1,40,000 1,40,000

Salaries25,00

0 Gross profit b/d 56,500Less Prepaid salary

(5,000) 20,000

Rent of building 13,000Commission received 5,000Add Accrued 1,500 6,500

commissionDepreciation – Furniture 1,500Bad Debts 4,500Add Further bad debts 2,500 7,000Net profit (transferred to 21,500Ankit’s capital account)

63,000 63,000

Bad DebtsAccounting Treatment

for Special Items

Page 24: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Balance Sheet for the year ended 31st December 2012

LiabilitiesAmoun

t AssetsAmoun

tRs. Rs.

Owners FundsNon-Current Assets

Capital12,00

0 Furniture 15,000

Add Profit21,50

0 33,500 Less Depreciation (1,500) 13,500Non-Current Liabilities Current Assets

Long-term loan 5,000 Debtors 15,500Less Further bad debts (2,500) 13,000

Current Liabilities and Provisions Prepaid salary 5,000Creditors 15,000

Accrued commission 1,500

Bank 5,000

Outstanding Wages 500 Cash 4,000

Closing stock 15,000Rent received in advance 3,000

57,000 57,000

Bad DebtsAccounting Treatment

for Special Items

Page 25: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Provision for bad and doubtful debt is the estimated loss provided upon the debtors for the future.

Accounting Treatment:Trading Profit & Loss A/c Balance Sheet

Debited to the P & L a/c Deducted from the existing debtors amount after further bad debts

Provision for Bad DebtsAccounting Treatment

for Special Items

Page 26: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Trading a/c for the year ended 31st December 2012

Expenses/LossesAmoun

tRevenues/Gains

Amount

Purchases 75,000 Sales 1,25,000Wages 8,000 Closing stock 15,000Add Outstanding 500 8,500Gross profit c/d 56,500

1,40,000 1,40,000

Salaries 25,000 Gross profit b/d 56,500

Less Prepaid salary(5,000

) 20,000

Rent of building 13,000Commission received 5,000

Depreciation – Furniture 1,500 Add Accrued 1,500 6,500Bad debts 4,500 commissionAdd Further bad debts 2,500 7,000Provision for doubtful debts 650Net profit (transferred to Ankit’s 20,850capital account)

63,000 63,000

Provision for Bad DebtsAccounting Treatment

for Special Items

Page 27: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Balance Sheet for the year ended 31st December 2012

Liabilities AmountAssets Amount

Owners FundsNon-Current Assets

Capital 12,000 Furniture 15,000Add Net profit 20,850 32,850 Less Depreciation (1,500) 13,500Non-Current Liabilities Current AssetsLong-term loan 5,000 Debtors 15,500

Less Further bad debts 2,500

13,000Less Provision for 650 12,350

doubtful debtsCurrent Liabilities & Provisions Prepaid salary 5,000

Creditors 15,000Accrued commission 1,500

Outstanding wages 500 Bank 5,000Rent received in advance 3,000 Cash 4,000

Closing stock 15,000

56,350 56,350

Provision for Bad DebtsAccounting Treatment

for Special Items

Page 28: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

This is the amount of commission allowed to the managers on the net profit of the company.

Managers Commission

Net Profit beforeCommission

Net Profit after commission

Suppose the net profit of a business is Rs. 110 before charging commission. If the manager is entitled to 10% of the profit before charging such commission, the commission will be calculated as :

= Rs. 110 × 10/100= Rs. 11

In case the commission is 10% of the profit after charging such commission, it will be calculated as := Profit before commission ×

Rate of commission/ (100 + commission)

= Rs. 110 × 10 = Rs. 10 110

Managers CommissionAccounting Treatment

for Special Items

Page 29: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Trading a/c for the year ended 31st December 2012Expenses/Losses Amount Revenues/Gains Amount

Purchases 75,000 Sales 1,25,000

Wages 8,000 Closing stock 15,000Add Outstanding wages 500 8,500

Gross profit c/d 56,500

1,40,000 1,40,000

Salaries 25,000 Gross profit 56,500

Less Prepaid salary (5,000) 20,000

Rent of building 13,000Commission received 5,000

Add Accrued 1,500 6,500Depreciation – Furniture 1,500 commission

Bad debts 4,500

Add Further bad debts 2,500 7,000

Provision for doubtful debts 650

Provision for discount on debtors 227

Manager’s commission 2,062Net profit (transferred to 18,561

Ankit’s capital account)

63,000 63,000

Provision for Bad DebtsAccounting Treatment

for Special Items

Page 30: Capital Receipt Revenue Receipt Capital Payment Revenue Payments Deferred Revenue Expenditure Deferred Revenue Expenditure Capital Revenue Receipt Payment.

Liabilities Amount Rs. Assets Amount Rs.  

Owners Funds Non-Current Assets  

Capital 12,000 Furniture 15,000  

Add Net profit 18,561 30,561 Less Depreciation (1,500) 13,500  

Non-Current Liabilities Current Assets  

Long-term loan 5,000 Debtors 15,500  

Less Further bad debts(2,500)  

13,000  

Less Provision for bad  

Current Liabilities and Provisions and doubtful (650)  

Creditors 15,000 debts 12,350  

Less Provision for  

discount on debtors (227) 12,123  

Outstanding wages 500 Prepaid salary 5,000  

Rent received in advance 3,000 Accrued commission 1,500  

Bank 5,000  

Cash 4,000  

Manager’s commission 2,062 Closing stock 15,000  

56,123 56,123

 

 

Provision for Bad DebtsAccounting Treatment

for Special Items