Accounting Principles and Practices

• When a partner enter into partnership he/she is required to bring his share of capital in the firm. 

• Capital account of each partner represents his equity in the partnership.

  Capital account of a partner is increased in the following situations:

  • The owner made additional investments during the year.
  • The owner made guaranteed payments to the firm.
  • Partnership earned profits, and a share of profits was allocated to the partner.

  The increase in the capital will record in credit side of the capital account.

  Salary and interest allowances are guaranteed payments, discussed later.

  Capital account of a partner is decreased when the owner makes withdrawals of cash or property

• Journal entry for excess capital withdrawn by the partner is

•      Partner's Capital A/c                Dr. 

Receipts and payments account is prepared by taking the information from cash book. It records all the cash receipts and payments including revenue and capital.

Receipts and payments account mostly begin with an opening balance as it is nothing but cash account. A receipts and payment account is just like a cash account hence it begins with opening balance and ends with closing balance of cash.

The third step in preparation of Receipt and Payment account is showing the total amounts of all payments on credit side whether of capital or revenue nature and whether pertaining to past, current and future periods.

b'Option D is correct. Capital receipts refer to those receipts which either create a liability or cause a reduction in the assets of the firm. They are non-recurring or non-routine in nature. Sale of investments leads to reduction in assets. Bank loan and money raised through issue of shares create liability for firm. All are capital receipts. '

An abridged or estimated invoice sent by a seller to a buyer in advance of a shipment or delivery of goods. It notes the kind and quantity of goods, their value, and other important information such as weight and transportation charges. Proforma invoices are commonly used as preliminary invoices with a quotation, or for customs purposes in import. They differ from a normal invoice in not being a demand or request for payment.

A statement of account is a detailed report of the contents of an account. An example is a statement sent to a customer, showing billings to and payments from the customer during a specific time period, resulting in an ending balance. 

Written notification of the pending amounts, meant to prod past-due customers to make a payment. Collection letters are sent usually one after another, with the tone and language getting more direct with each successive letter, until at least some payment is received. Also called dunning letter.

A credit note or credit memorandum is a commercial document issued by a seller to a buyer. Credit notes act as a Source document for the Sales return journal. In other words the credit note is evidence of the reduction in sales.

A Delivery Challan is created in situations where goods are being transported from one place to another which may or may not result in sales. Example: Transfer of goods from the Head Office to its branches. Delivery Challans are sent along with the shipment of goods.

Accounting Framework consist a set of principles, coding and grouping structure of accounting.

The recording of financial transactions, in manual accounting system is through books of original entries while the data content of such transactions is stored in a well-designed accounting database in computerised accounting system.

In accounting software, the terms income and revenue are often used interchangeably, although some accountants distinguish them based on specific reporting standards.

The chart of accounts is divided into balance sheet accounts (assets, liabilities, equity) and income statement accounts (revenues, expenses).

A credit balance in bank account means that the person in whose account this belongs to is under an obligation to pay the bank back the entitlement of such balances. This money has been owned to the account holder by the bank and must be repaid i.e. it is a liability.