October 2018

Posted on October 31, 2018 by admin-s20

What is journal?

We will learn accounting concept through this article i.e. Journal. Journal is the book…

What is Journal By Super20 | The Best Accounting Classes in Ahmedabad

We will learn accounting concept through this article i.e. Journal. Journal is the book of primary entry in which every transaction is recorded before being posted into the ledger. In this book of accounts, transactions are recorded in a chronological order.

Transactions are entered to see which account should be debited and which credited. Journal is also called a subsidiary book. Recording of the transaction in Journal is called journalizing the entries.

While you learn accounting, it is very rewarding to know how the various transactions can be recorded in the journal. If one can record all the transactions in the journal correctly, we can say that one has won more than half of the battle.

The specimen ruling the Journal is as under:

Journal | The Best Tally Classes in Ahmedabad

Date: The date which the transaction has taken place is recorded here. The year written at the top of the date column of each page of the journal. Therefore, on the next line of the date column, the month and day of the first entry are written.
Particulars: The two aspects of transactions are recorded in his column i.e., the detail regarding the accounts which have to be debited and credited, the name of the account(s) to be debited are entered at the extreme left of the particulars column next to the date column. The abbreviation ‘Dr.’ is written at the right end of the particular column on the same line of the account debited. The name of the account to be credited is entered on the next line with prefix ‘To’ and is intended to the right of the date column. A brief explanation of the transaction known as narration is written below the account title of the transaction.
L.F. (Ledger Folio): this column records the page number in the ledger in which the account in the particular column are transferred (posted).
Amount (Debit): The debit account is recorded in the amount (Dr.) column opposite to the title of the account debited.
Amount (Cr.): The credit amount is recorded in the amount (Cr.) column opposite to the time of the amount credited.

Many students approaching our training institute to learn practical accounting in Ahmedabad are explained concepts in detail differently. Normal accounting journal entries can be easily made if these rules are followed but some complex entries may confuse you. These types of entries are called compound journal entries. Transactions which are inter-connected and have taken place simultaneously are recoded by means of a combined entry provided that takes place the same day. For example, if the amount is spent on the same day for salary, wages, stationery, rent, etc. a combined entry can be passed debiting all nominal accounts with particular amounts and crediting cash account with the total amount spent. There are cases where a combined entry is passed even for transactions of like nature which have taken place on different dates. This happens when the details of a particular type of transaction are recorded separately but journal entries are passed only periodically with the total amounts of those transactions.

If you have queries pertaining to the journal or want to learn practical accounting in detail please write to us at [email protected] or call us at M – +917069646028.

Posted on October 24, 2018 by admin-s20

Rule of Debit and Credit

In the previous topic, we saw how Double Entry System works but that concept…

credit debit rules by s20

In the previous topic, we saw how Double Entry System works but that concept cannot handle the accounting work independently. So some more basic concepts are introduced for channelizing double entry system. As you are aware that Super 20 Training Institute (S20) is recognized as one of best accounting training institute in Ahmedabad and we have various accounting courses, tally courses, taxation courses, GST courses for students of various backgrounds, we will endeavour to explain the concepts of debits and credits in detail.

The two sides of any account are arbitrarily distinguished. The left of an account is called the debit side; the right side is called the credit side. Any entry on the left side of an account is called a debit entry or debit, an entry on the right side is called a credit entry or credit.

Double entry system means the recording of both the aspects i.e., receiving of values and giving of values of each transaction. When an account receives the value or benefits it is debited and when it gives a value or benefit, it is credited. As every transaction affects at least two accounts, one account receives a benefit of the certain value; another account would give the benefit of the same value. So it is simply no need to go to any tally academy or accounting academy for this.

Rules have been framed for the correct debit and credit of following
– Personal account
– Real account
– Nominal account

Personal Account: ‘Debit the receiver and credit the giver’
Debit the account of a person who receives something and credit the account of the person who gives something. For example: if you purchase goods from the Ram, on credit, the two accounts involved are Goods (Purchase) Account and Ram’s Account. Since Ram is a giver in this transaction his account will be credited. Similarly, if cash is paid to Ram, Ram’s Account will be debited since he is the receiver.

Real Account: ‘Debit what comes in, credit what goes out’
Debit the account of the thing which comes in and credit the account of the thing which goes out. For example: when furniture is purchased in cash, furniture account is debited while cash account should be credited.

Nominal Account: ‘Debit all expenses and losses and credit all income and gains’
Debit the accounts of expenses and losses and credit all income and gain. For example: if you pay salary to the clerk, the two accounts involves are salary account and cash account. Salary account is a nominal account. Salary paid is an expense of the business and therefore this account will be debited. Similarly, if the interest is received, interest account will be credited, since interest is an income item.

If the three fundamental rules described above are kept in mind, it would be possible to record all the transactions correctly.

You must have noted that if a transaction involves two accounts of different kinds then relevant positions of relevant rules will be applied. For example payment of salary affects salary account and the cash account – the former is a nominal account whereas the letter is a real account.

Hence, the former part of the third rule and the latter part of the second rule will be applicable, i.e., the rule will be: Debit all expenses and losses and credit what goes out. Salary account will be debited and cash account is credited.

Well, if you want to know debit credit in details, you can surely approach us and join our Executive of Commerce course or visit our website www.s20.in. you can also visit our centre in Ahmedabad.

Posted on October 17, 2018 by admin-s20

Double Entry System

Double entry system of book keeping is the most popular scientific system of accounting.…

double-entry-system | Best Accounting Classes in Ahmedabad

Double entry system of book keeping is the most popular scientific system of accounting. According to it, every transaction has two-fold aspects – debit & credit and both aspects are to be recorded in the books of accounts. This system has been found of great use for recording the financial affairs for all institutions.

How Double book-keeping is helpful?
– By the use of this system the accuracy of the accounting work can be established, through the device of trial balance,
– Profit earned of loss suffered during the period can be ascertained together with details &
– The position of a firm can be ascertained.

For the conceptual clarity, one must know the basic of accounting and the reason why they are used in the way we do. Because at S20, we want things to remain simple people joining our accounting classes, tally classes or GST classes will definitely appreciate this. So, let’s understand the concept of double entry system with an example –

A person starts his business with Rs. 10,000; capital and cash are both 10,000. Transactions entered into by the firm will alter the cash balance in two ways, one will increase the cash balance and other will reduce it. Payment for goods purchased, for salaries and rent etc., will reduce it; sales of goods for cash and collection from customers will increase it.

We can change the cash balance with each transaction but this will not be easy to tally at the end of the financial year. Instead it would be better if all the transaction that lead to an increase are recorded in one column and those that reduce the cash balance in another column; then their net result can be ascertained, if we add all increases to the opening balance of cash and then deduct the total if all decreased we shall know the closing balance. In this manner, significant information will be available relating to cash.

The two columns which are referred above are put usually in the firm of an account, called the ‘T’ form.

This is illustrated below by taking imaginary figures:

Best tally classes in ahmedabad

What we have done is to put the increase of cash on the left-hand side and the increase on the right side; the closing balance has been ascertained by deducting the total of payment, Rs. 2,000 from the total of the left – hand side. Such a treatment of receipt and payment of cash is very convenient.

The proper form of an account is as follows:

The columns are self-explanatory except that the column for reference (Ref.) is meant to indicate the source where information about the entry is available.

The aforementioned outflow and inflow of cash have their specific nature in wider terms which is explained in the next article Rule of debit and credit. Your feedback on this article may be shared at [email protected]. we are known as premier accounting institute in Ahmedabad. Our flagship Executive of Commerce Course is known for its detailed coverage of accounting topics.

Posted on October 10, 2018June 19, 2023 by admin-s20

IL&FS Fiasco and Accounting Statements

Recently, the entire nation has been shocked to see that the institution of the…

Recently, the entire nation has been shocked to see that the institution of the size, scale and reputation like IL&FS has defaulted on its interest obligations.

It is noteworthy that IL&FS was considered to be one of the most reputed borrowers in India and perceived to be a Government backed institution. We have to understand that what makes such a large institution fail. There may be many reasons, but in the context of this article let us look at the accounting statements only.

Following is a summarized consolidated financial statements highlights of IL&FS in recent past.

Now we have to understand the items line by line. Because, at Super 20 Training Institute, our aim is to understand these items from a practical perspective. And you are aware that it is the best accounting institute in Ahmedabad. Many accounting institutes in Ahmedabad focus on teaching books. Rather S20 as an Accounting Training Institute has set a benchmark by focussing on such case study based practical approach in learning accounting, taxation, tally, GST etc.

It is apparent that the company was the anyways troubled one looking at the above numbers. The company was borrowing at a fast pace and this has resulted into the highest ever interest expenses being borne by the company. The company’s operating profits are decreasing on one side and on the other side the company’s interest expenses shot up drastically by 21%. The sole reason for this difference was that the company continued to borrow funds from the markets and mostly they were short-term borrowings. As you may be aware that in recent past the short-term interest rates are much higher compared to long-term interest rates. Company’s projects were mostly long-term in nature so they had to ideally raise funds from longer term papers. But the company did the contrary.

So, net if you see revenues of the firm were up by 9% in last one year. That looks quite rosy. Now if we look at the operating profits we have a doubt. Operating profits were down by -13%. That means something is seriously wrong. On rising revenues, the company had negative operating profits.

The company’s depreciation was also not in line with the expectations. It was up about 20%. There also somebody needs to dig deeper. And ultimately that has resulted into the company making cash losses as well as accounting losses. This is very alarming and fishy and only some drastic or magical steps can save this company that we can infer.

Friends, we will examine this case from a financial and accounting ratio analysis perspective in my next article. But as of now what we have understood is that the company was troubled operationally as well as financially. If you do not understand any of this topic discussed above you can approach team S20 for more clarity and understanding. You can also write to us at [email protected]. We provide people of any background a simple, effective and practical training in Accounting, Taxation, GST, Tally. You can know more about our courses at www.s20.in/courses

Posted on October 8, 2018June 19, 2023 by admin-s20

IL&FS fiasco and accounting ratios

We have a space constraint, so let us not discuss what was discusses in…

We have a space constraint, so let us not discuss what was discusses in the previous article. But you can refer my article IL&FS fiasco and accounting statements for basic understanding.

Now let us straight away understand what are accounting ratios or financial ratios as they are famously referred to.

I have produced direct ratios as calculated by me in MS Excel. If you do not know how to calculate financial ratios or how to arrive at accounting ratios you can approach Super 20 Training Institute – Ahmedabad. We provide such case based, practical and detailed understanding of various topics in our Accounting Courses, Taxation Courses, GST Courses, Tally Courses etc. at our training institute in Ahmedabad.

Now let us look at Operating Profit Margin. In FY1617, Operating Profit Margin was 49%, whereas, in FY1718, Operating Profit Margin was 39%. Such a big erosion in margins is worrisome. That means the company has some serious operating issue which needs to be looked at. Or the figures may be misleading for the previous years.

The next important accounting ratio is EBIT margin. That is Earning Before Interest and Taxes Margin. In FY1617, EBIT Margin was 42%, whereas, in FY1718, EBIT Margin was 31%. This is the significant decline. That means the company has less amount of money to meet their interest expenses.

Finally, we are staring at Net Profit Margin. In FY1617, Net Profit Margin was 1%, whereas, in FY1718, Net Profit Margin was -10%. The company was barely profitable in the previous year. Hence, everything was not ok even in FY1617 also. It was not ignored by everyone concerned with the company. And now we are staring at a big loss in FY1718. Signals were there, but they were ignored.

How default is evident from the above analysis. It is from Interest Coverage Ratio. In FY1617, the company was barely able to meet its interest obligations. On the other side, in FY1718 the interest cover was less than 1.

That means that the company did not have sufficient funds to service their interest obligations. Still, the company kept raising funds from the markets. All these funds were short-term funds basically to see the day has gone off or passed. The management was doing time pass all these days. The regulators were sleeping. The Government thought that the investors like LIC, SBI are taking care of IL&FS. LIC, SBI and other foreign investors were thinking that the management was very much able and worthy. Credit rating agencies were giving AAA rating blindly. Lenders took money from public and loaned to IL&FS thinking it is backed by the Government and anyways AAA. But it was written on the wall that IL&FS is not functioning well. And the worst came true. The institution of this size, scale and reputation are staring at bankruptcy.

Friends, these are the easy tools to analyse the company’s accounting records. Anyone, who wants to understand such topics in detail may contact us at [email protected]. or visit our website. We are proud to be known as the best accounting training institute in Ahmedabad. All the best.

Month: October 2018

What is journal?

Rule of Debit and Credit

Double Entry System

IL&FS Fiasco and Accounting Statements

IL&FS fiasco and accounting ratios

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