Accounting Archives - Page 4 of 5

Posted on December 20, 2018 by admin-s20

Understanding Methods of Depreciation

Generally, methods for providing depreciation are based on the formula developed on a study of…

depreciation method - Best accounting classes in ahmedabad

Generally, methods for providing depreciation are based on the formula developed on a study of the behavior of the assets over a period of years for readily computing the amount of depreciation suffered by different forms of assets. However, various accounting institutes focus on a few methods and overlook the other methods. Due to space constraint, we will explain only two most commonly used depreciation methods here.

The two methods for providing depreciation are the Straight Line Method and the Reducing Balance Method. The Straight Line Method is the most suitable and accurate method to adapt in most case. The income tax rules, however, prescribe the Reducing Balance Method except in the case of assets of an undertaking engaged in generation and distribution of power.

Straight Line Method: An equal amount is written off every year during the working life of an asset so as to reduce the cost of the asset to nil or its residual value at end of its useful life. The advantages of this method are that it is simple to apply and give accurate result results especially in the case of leases, patent and copyrights, and also in case of plant and machinery. This method is even known as Fixed Instalment Method.

Methods of Depreciation - best tally classes in ahmedabad

So, it is very simple. And it is like apportioning some expenses every year. So, no need to attend any accounting institute for this purpose.

Reducing Balance Method: Under this method, a fixed percentage of diminishing value of the asset is written off each year, so as to the asset to its break – up value at the end of its life, repairs and small renewals being charged to revenue. This method is commonly used for plants, fixtures, etc. Under this system, the annual charge for depreciation decreases from year to year, so that the earlier years suffer to the benefit of the later years. Also, under this method, the value of the asset can never be completely extinguished, which happens in the early explained Straight Line Method.

Many accounting institutes and academies stop at this juncture instead of teaching students exact formulae of arriving at the proper depreciation rate. But our accounting training in Ahmedabad focuses on every nitty-gritty of this method since this method is generally the only allowed method of calculating income tax applicable to the firm.

In this method, Depreciation goes on decreasing every year. The formula is –

best accounting classes in ahmedabad 2018-12-19

Suppose that the fixed asset purchase price is 10,000, the scrap value is 1,000, and the depreciation rate is 30%.

Using the Reducing balance method, 30% of the depreciation base (net book value minus scrap value) is calculated at the end of the previous depreciation period. Calculation of depreciation for the first three years is shown in the following table.

Understanding Methods of Depreciation - accounting classes in ahmedabad

If you have any questions related to this topic, we will be happy to revert to you or you can visit our accounting institute in Ahmedabad and attend a free demo class of depreciation accounting.

Posted on December 11, 2018 by admin-s20

Depreciation: Concept

As you are aware that during various accounting courses fixed asset accounting is highly…

depreciation - Best accounting class in ahmedabad

As you are aware that during various accounting courses fixed asset accounting is highly stressed upon. Fixed assets like plant and machinery are used in the business for the purpose of production of goods or for providing useful services in the course of production. Value of such fixed assets decreases with time and its utilization i.e. wear and tear. Vale of the portion of fixed assets utilized for generating revenue must be recovered during the particular accounting year to ascertain true income. This portion of the cost of fixed assets allocated to a particular accounting year is called Depreciation. Hence, all accounting courses state it imperative to understand how to calculate depreciation.

Depreciation means a diminution in the value of assets, due to natural wear and tear, exhaustion of subject-matter or similar causes.

The loss in the value of assets employed for carrying on the business being an essential element of business expenditure, it is necessary to calculate the amount of such loss, to get a stipulation, and hence, come at the amount of profit or loss obtained by the business.

Reasons for Depreciation:

Physical wear and tear resulting from the use
Tangible fixed assets like machinery, building, furniture, etc. can get exhausted or discarded on account of resistance, pressure, weathering, the power of use, chemical reaction, handling, etc.
Physical deterioration resulting in exposure to the element
Number of assets deteriorates with the mere passage of time, being continually exposed to forces of nature, like wind, weather, etc.
Disuse
A machine kept continuously idle become potentially less useful by the passage of time.
Depletion
Wasting assets such as mines and quarries lose their value because they get exhausted on account of continuous extraction.
Obsolescence
Some equipment will be rendered out of date by more efficient equipment, which reduces the usability of the original equipment.
Accident
If an asset meets an accident, the value of an asset may go down.

But now the question arises, why do we need to provide Depreciation? The following are the objectives for providing Depreciation.

Funds for replacement
Generation of adequate funds in the hand of business for replacement of the asset at the end of its useful life.
Correct income measurement
Depreciation must be charged for proper estimation of periodic profit or loss.
True position statement
Value of fixed assets should be adjusted for depreciation charged in order to depict the actual financial position.
Ascertainment of true cost of production
For ascertaining the true cost of production, it is necessary to charge depreciation as an item of cost of production.

Too much theory… Uh… Ok. So our institute runs various accounting courses in Ahmedabad and focuses on learning practical accounting. So, let us learn accounting entries related to depreciation.

When the depreciation is directly charged to an asset account, the entry to be made on writing off depreciation is:

s20 Depreciation concepts 3.21.30 PM

Alternatively, when the asset continues to be shown at its original cost till discarded or destroyed or sold the following entries may be passed:

s20 accounting classes in ahmedabad - Depreciation concepts

However, where the assets are sold or discarded or exchanged for the new asset. The total accumulated depreciation for the asset in the provision for depreciation account is transferred to the asset account by the following journal entry

s20 deprecation and accounting concept Screenshot 2018-12-11 at 3.21.46 PM

In the balance sheet, the asset account is shown at its original cost less accumulated balance in the provision for depreciation account.

To know more about such topics stay tuned to S20 or join our accounting courses.

Posted on November 6, 2018 by admin-s20

Principal Book of Accounts

Oh! What is this? Principal book of accounts? Had you attended our accounting course,…

Principal-Book-of--Accounts the best classes in Ahmedabad

Oh! What is this? Principal book of accounts? Had you attended our accounting course, you would not ask this question. The answer is simple, it called ‘Ledger’. Ledger is the principal book of accounts where similar transactions relating to a particular person or property or expenses are recorded. It is a set of accounts. It contains all accounts of business enterprises whether real, nominal or personal. The main function of the ledger is to classify out sort out all the items appearing in the journal or other subsidiary books under their appropriate accounts so that at the end of the accounting period each account will contain the entire information of all the transactions relating to it a summarized or condensed form.

The following is the specimen ruling of the standard form of the ledger account.

princacc - s20 the best tally classes in ahmedabad

Ledger posting :
The term ‘posting’ means transferring the debit and credit items from the journal to their respective accounts in the ledger. So without practical accounting training also, you can do this. Still, certain minute things which are covered in various accounting courses are also explained here.

Following rules should be observed while posting transactions in the ledger from the journal.

Separate accounts should be opened in the ledger for posting transactions relating to different accounts recorded in the journal.
The concerned account which has been debited in the journal should also be debited in the ledger i.e., the debit of the journal entry is posted to the debit side. However, a reference should be made of the other account which has been credited in the journal.
The concern account which has been credited in the journal, should also be credited in the ledger i.e., the credit of the journal entry is posted to the credit side, but a reference should be given of the other account which has been debited in the journal.
It is customary to use the words ‘To’ and ‘By’ while making posting in the ledger. The word ‘To’ is used with the accounts shown on the debit side of the ledger account while the word ‘By’ is used with accounts which appears on the credit side of the ledger account.
In the folio column, the page number of the journal form where the entry is transferred to the ledger account is written.

The date of the transaction is written on the date column.

Super20 - the best accounting classes in ahmedabad

super20 the accounting classes in ahmedabad

So, it is very simple and easy. Only thing, which is expected of you is accuracy in the entire process. And for accuracy, all you need is to do lot of practice. Because, at our accounting training institute in Ahmedabad, while teaching various accounting courses, we stress utmost for accuracy.

If you have any questions or are looking for the best accounting training institute in Ahmedabad, you may contact us.

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 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.

Posted on July 24, 2018 by admin-s20

Latest Technology Trends in Accounting

Accountant in earlier days meant a Mehtaji / Munimji sitting with a red bulky…

Accountant in earlier days meant a Mehtaji / Munimji sitting with a red bulky book on his desk, wearing spectacles and giving a frowning look at bills. And then we saw revolution of computer that has changed the way we do accounting. Then came accounting softwares and then ERPs like SAP, Oracle etc. Accountants tried to follow these trends by undergoing various accounting training. We saw many tally training institutes. Any new trend is followed by various courses.

Technology is ever evolving and accounting field is no exception. I still remember how demand was exploded for tally courses in Ahmedabad. And how people used to line up to do accounting courses in Ahmedabad. I still remember that first preference for courses after B.Com. would be accounting or business accounting and taxation courses.

Now what are latest technology trends in accounting in Indian cities like Mumbai / Ahmedabad?

1. Evolution of cloud based softwares
All software vendors are on this now. India’s highest selling software Tally or world’s highest selling software Quick-books all are seeing increasing adoption of their cloud versions. So no doubt we are seeing a secure, accessible and cost effective way of doing accounting. So bye bye desktop based versions. All hail for cloud based softwares.

2. Evolution of customized softwares and applications
People today also buy ready-made softwares like Tally for accounting. And then they get their staff take tally courses and training or prefer to hire staff from tally training institutes. However, many organisations have focused on providing their staff with adequate accounting training by providing them various accounting courses and training. And later on tried to have a customised accounting softwares for their organisations. This has really helped them. We think that it is very cumbersome and costly process. It is like inventing a wheel. I think there is no need for having customised accounting software when you have all kinds of softwares available.

3. Quickbooks is fast evolving in India
Quickbooks – a global leader with their low price strategy is registering healthy growth and traction in India. Small organizations are fast adopting Quick-books. I have now some students asking for Quick-books course in Ahmedabad instead of Tally Course in Ahmedabad.

4. Tally seems to have a tough time in India
Yes. It is right. The leader in Indian Accounting market seems to have tough time. It is apparent. They are being challenged by local players like Busy, Marg etc. On the other side they have regional players to compete with like Miracle, Kuber etc. Newer players like Zoho have also become very aggressive. SAP and Oracle have also small business suites. And global leaders like Quickbooks are becoming increasingly aggressive.

5. Accounting Training Institutes are growing
Yes. There are lots of accounting jobs, accountant vacancies and it seems our B.Com. syllabi are outdated. They are totally out of sync with industry. And we see lot of demand for accounting training institutes in Ahmedabad and other cities of India. People line up and ask for various tally courses, accounting courses, GST courses etc.

6. Usage of ERP is increasing and expanding
Due to SAP and Oracle lowering their price tag and increasing their customizability many small and medium enterprises are now willing to adopt these packages. Also there are many small and home grown ERP players offering ERP packages at a fraction of the cost of SAP and Oracle. They are also reasonably good. So your inventory, finances, CRM and operations all are integrated.

7. Artificial Intelligence and Machine Learning
Though right now in my limited knowledge, I have not known artificial intelligence or machine learning being used by any organisation in accounting field. Recent activities of the likes of Netsuite are worth following. It is clear that in future AI would be part of any decision making process. So I am sure decision making activities in Accounting, various reporting systems and analytical processes in Accounting to increasingly use artificial intelligence and machine learning.

So, you may have questions, what kind of courses people need to after B.Com.? Welcome to Super 20 Training Institute. Our Executive of Commerce (Accounting, GST & Tally) Course is one of its kind in India. No match for it. I take a challenge. All the best.

Posted on June 11, 2018 by admin-s20

Accounting with GST – Purchase

Despite people taking accounting courses in Ahmedabad, Tally courses in Ahmedabad, GST courses in…

accounting-GST

Despite people taking accounting courses in Ahmedabad, Tally courses in Ahmedabad, GST courses in Ahmedabad, at times, we find due to clerical errors and lack of due diligence Accountants in Ahmedabad cause loss to their clients.

Hence, in our series of articles explaining accounting with GST today we will discuss purchase accounting with GST.

When we make purchase, we actually pay GST to the vendor/creditor. Under GST mechanism, we will then get credit of GST paid to the vendor. So it is very important for us to do this section very carefully.

Let us take a practical case to get accounting training / GST training in this matter.

Rittal Enterprise in Ahmedabad is a textile trading firm based at Ahmedabad. They purchase readymade shirts from Vittal Enterprise in Ahmedabad, a shirts manufacturer based at Ahmedabad.

Suppose Rittal Ahmedabad have purchased 1,000 nos. of shirts @ Rs. 500/- from Vittal Ahmedabad. Hence, total purchase value is Rs. 5,00,000/-

Now from the lookup of our GST training, we got to know that GST @ 5% is applicable on these kinds of products. Since the purchase is within state CGST @ 2.5% and SGST @ 2.5% will be applicable on this transaction. Since this is a purchase transaction these will be input GST. Input CGST Rs. 12,500/- and Input SGST Rs. 12,500/- will be paid to the vendor.

Now let us understand accounting effect in the books of Rittal Enterprise Ahmedabad:

Purchase of trading goods will always debited in the books of accounts. So, Purchase A/c Dr. Rs. 5,00,000/-. Input CGST and SGST are credits receivable hence they are debited in the books of accounts by Rs. 12,500/- each. The goods are purchased on credit hence Rittal Enterprise Ahmedabad is yet to pay to Vittal Enterprise Ahmedabad. So, Vittal Enterprise Ahmedabad is a creditor and their account need to be credited. So, final entry will look like as below:

Purchase A/c Dr. Rs. 5,25,000/-
Input CGST Dr. Rs. 12,500/-
Input SGST Dr. Rs. 12,500/-
To Vittal Ent. Cr. Rs. 5,25,000/-

Though this article has its own limitations, you can contact us for various accounting courses, GST courses, tally courses, wherein we try to cover such topics from a very practical perspective based on actual case studies. Super 20 Training Institute is proud to serve students in capacity of the best accounting training institute in Ahmedabad.

Posted on May 31, 2018 by admin-s20

New Batch Starting for Accounting Courses – Register now !

– Register now. New Morning EC Batch starting from June 5, 2018 timing 8…

– Register now. New Morning EC Batch starting from June 5, 2018 timing 8 am to 10 am (Ideal for Tally Course, Accounting Course, Job-oriented Course). For more details visit / call S20.

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Category: Accounting