Why closing inventory appears on the credit side of Trading account?
Closing stock or as it is also named as closing inventory is definitely an asset. But trading account is not the same as Inventory account. Inventory, being an asset, should have a debit balance in Inventory account. Trading account is a distinct account and both must not be mixed up together. The answer to the […]
What is Ledger?
In accounting, especially in financial accounting, the term ledger is discussed many times. However, use of ledger is not limited just to financial accounting as we do have ledger accounting in cost accounting as well. Ledger simply means collection of related accounts at one place i.e. a set of accounts mean ledger. Usually accounts with […]
How POSSESSION and CONTROL of an asset are different in financial acconuting?
Possession of an asset might mean just having a physical control of the asset. The party who holds the asset is the possessor of such asset. But the word control holds special meaning in the business world. Especially in financial accounting. And understanding the meaning of control and ability to differentiate between the possession and […]
What is the difference between Account and Ledger?
If we sum up the whole story in one line then it will be like this; Account is a place where transactions are recorded and Ledger is a place where accounts are maintained. Basically when the transaction occurs, we identify the nature of the transaction and then it is recorded in the proper account. Different […]
What is Private ledger?
Private ledger is basically such book of accounts in which such accounts are maintained which are maintained to be confidential. Therefore, any such account which might cause some privacy issues or the one that is crucial for the owners’ of the business than such account is maintained under Private ledger. It cannot be treated as […]
Why capital account is not debited to record drawings?
When owner of the business withdraw funds or goods from the business, we do not debit capital account instead we open record these withdrawals in another account which is usually named as Drawings account. So, we record such transactions without disturbing capital account in drawings account. Drawings account is also a capital account as this […]
What is nominal ledger?
First of all students must not confuse the accounts with ledgers. These are two totally different things. Even though these terms are loosely used for each other but they are certainly not the same. Ledgers can be regarded as big registers where we write up and update different accounts. So, it means accounts are specific […]
What is the difference between “Selling costs” and “Cost of Sales”?
“Cost of sales” if said in a phrase then it basically is, manufacturing cost of units sold in a particular period or simply cost. On the other hand “selling costs” include such costs that are incurred to make things available for sale. Important thing to understand here is that even after incurring cost of sales, […]
