Tag: accounting equations and transactions

The Narasimham-II Committee was tasked with the progress review of the implementation of the banking reforms since 1992 with the aim of further strengthening the financial institutions of India. It focussed on issues like size of banks and capital adequacy ratio among other things.

Credit purchase during the accounting year which was not recorded in the books of account but included in the closing stock is to be added to the credit purchase A/c and Creditors A/c.

Financial capital is the money used to help pay for the acquisition of plants, equipment, and other items needed to build products or offer services. Hence, it can be referred to money capital. 

Outstanding expense are those expenses which are due but not paid. These are expenses like salary for the month of March is not paid but the services are already taken.

Closing stock represents the cost of unsold goods lying in the stores at the end of accounting period.
The closing stock is calculated as:
Opening Stock + Purchases - Sales = Closing Stock.

According to accrual concept of accounting, the profit or loss for an accounting year is not based on the revenues realised in cash and the expenses paid in cash during the year because there may be some receipts of income and payments of expenses during the current year which may partially relate to the previous year or the next year. There are certain items which are not recorded on day-to-day basis such as depreciation on fixed assets, interest on capital, etc. These are adjusted at the time of preparing financial statements. The purpose of making various adjustments is to ensure that the final accounts reveal the true profit or loss and the true financial position of the business. The items which usually need adjustments are: