Accounting Principles and Practices

The matching principle requires that expenses incurred in generating revenue should be recognized in the same accounting period as the related revenue. This ensures accurate measurement of net income for the period by matching efforts (expenses) with accomplishments (revenues).

According to AS-1, disclosure of fundamental accounting assumptions (going concern, accrual, business entity) is required only when they are NOT followed. If these assumptions are followed (which is normally the case), no disclosure is necessary in the financial statements.

When an account is debited in the journal, it must be debited in the ledger as well. However, the cross-reference (posting reference) should indicate the account that was credited in the transaction, not the debit account. This maintains the dual-entry system's audit trail.

Income tax is the owner's personal obligation, not a business expense. When paid from business account, it's treated as drawings/debit to capital account. It doesn't appear in business profit/loss calculation.

A contractor can use different accounting methods (completed contract or percentage of completion) for different contracts, but must consistently apply one method to each specific contract. Using both methods on a single contract would violate consistency principles.

 Accounting entry for loss :Co-Ventures Account    Dr              To Joint Venture a/c  

 Accounting entry for expenses incurred out of Joint Bank a/c

Joint Venture A/c      Dr      To Joint Bank a/c

It is the nominal account.

Account sales is the statement rendered by consignee to consignor.

It is the correct answer. The correct entry is Abnormal loss account ___ Dr. To consignment account

This is the correct answer.

Periodicity concept divides entity life into artificial time periods (accounting year) for reporting. Financial statements prepared at these arbitrary intervals - quarterly, half-yearly, annually. Prudence, consistency, matching are separate accounting principles. Periodicity answers 'when' to report - at regular intervals rather than waiting for entity's liquidation.

Trial balance lists all ledger balances showing equality of total debits and credits. But this equality only proves mathematical accuracy - debits equal credits. It does NOT prove that individual account balances are correct. Errors like compensating errors, errors of omission, posting to wrong account but correct side can still exist while trial balance balances. Bank reconciliation and cash book don't test accuracy.

Prepaid salary is an advance payment made to employees before the salary is actually earned. Like all prepaid expenses, it represents an asset for the company since the benefit (work performed) will be received in the future. Assets always carry a debit balance, which is why prepaid salary has a debit balance. Credit balance would indicate a liability, not an asset.

Balance of Payment summarises the initial transactions for a specific period, usually a year and is prepared in a single currency, i.e. domestic currency of the country concerned.