Accounts Fundamentals

Jerryland Lyngdoh
1 What are financial statements and how these are prepared from
trial balance?
A written report which quantitatively describes the financial health of a
company. This includes an income statement and a balance sheet, and often
also includes a cash flow statement. Financial statements are usually
compiled on a quarterly and annual basis.
The financial statement can be prepared by rearranging the items on the
worksheet. The income statement is typically prepared first and then the
balance sheet. The worksheet does not eliminate the need to journalize and
post the adjusting journal entries. This must still be done in order for the
information to enter the accounting system .Journalizing and posting the
adjusting journal entries will bring the ledger into agreement with the
adjusted trial balance amounts shown on the worksheet.
Trial balance is a statement which is prepared to check the
Arthematical accuracy of the accounts. It will be prepared with the help of
balances of different accounts in ledger. Or it can be prepared based on
following principle.

Debit: All expenses, losses and assets

Credit: All Incomes, gains and liabilities
3. Explain
a. Current assets and non current assets
An asset which is not easily convertible to cash or not expected to
become cash within the next year. Examples include fixed assets,
leasehold improvements, and intangible assets. This is known as non current
assets.
An asset which is near cash (for ex- pen of market steers) an asset which
is convertible into cash within one year without disrupting the business. This
is known as current assets.

b. Long term liabilities and current liabilities?

Long Term Liabilities-
These are obligations that are reasonably expected to be liquidated at some
date beyond one year or one operating cycle. Long-term obligations are
reported as the present value of all future cash payments.
Current Liabilities-
A company's debts or obligations that are due within one year. Current
liabilities appear on the company's balance sheet and include short term
debt, accounts payable, accrued liabilities and other debts.
These are debts that are due to be paid within one year or the operating
cycle, whichever is longer; further, such obligations will typically involve the
use of current assets, the creation of another current liability or the provision
of some service.

4. What is BRS? Why should be prepared?

A form that allows individuals to compare their personal bank account
records to the bank's records of the individual's account balance in order to
uncover any possible discrepancies
Since there are timing differences between when data is entered in the banks
systems and when data is entered in the individual's system, there is
sometimes a normal discrepancy between account balances. The goal of
reconciliation is to determine if the discrepancy is due to error rather than
timing.
'Bank reconciliation statement' means verifying / realizing every transaction
done with bank. It may be related with payment made or credit received or
particular interest charged or received

5.Explain meaning of non –trading organization? List out the non trading
concern?

Unlike a normal trading concern, non trading concerns like clubs, societies
and association are incorporated without the motive of making profits.

Their main objective is to promote amongst its members recreational

interest.

However, some clubs and societies which run bars or restaurant for the
convenient of the member on a permanent basis with the intention of profit
 The following statement has been prepared for the XYZ Social Club:

Receipts and Payments Account for the year ended 30 April 2007

$ $
Balance at bank at 1 Payment for food
1,950 6,320
May 2006 and drink
Subscriptions 4,975 Wages 8,790
Cafeteria takings 11,860 New furniture 600
Receipt from members
10,900 Insurance 430
for trip to Bangkok
Annual social
Letting of club premises 3,100 760
expenses
Sale of tickets-annual Lighting and
720 510
social heating
Purchase of new
420
video machine
Publicity expenses 335
Expenditure for trip
10,650
to Bangkok
General Expenses 215
Repairs &
870
maintenance
Balance at bank at
3,605
30 April 2007
33,505 33,505

Following additional information at 1 May 2006

$
Club premises, valued at cost 32,000
Furniture 1,800
Equipment(including old video machine valued
860
at $40)
Stock of food and drink 1,800
Insurance prepaid 40
Creditors for food and drink 165
Lighting and heating accrued 130
Subscriptions: in arrears(paid in May 2006) 170
Subscription : in advance 120

Following additional information at 30 April 2007

 $
Stock of food and drink 1,650
Creditors for food and drink 470
Insurance prepaid 55
Lighting and heating accrued 110
Subscriptions in arrears 290
Subscription in advance 90

During the year, the club wrote off the old video machine. Depreciation is calculated at 25% of the
book value of furniture and equipment at 30 April 2007. Charge 60% of wages to the cafeteria.