ACCOUNTS BY SONIA SETIA

 Cash flow arising from operating activities is a key indicator of the extent to which the business operations of the enterprise have generated cash. It indicates whether adequate cash is generated to maintain the Business Operations, Pay dividends, repay loans and make new investments. It is also helpful in forecasting future cash flow from operations. Operating Activities are the Principal Revenue Producing Activities of the Enterprise and other activities that are not INVESTING or FINANCING activities. Thus, cash flow from Operating Activities arises from Principal Revenue Producing Activities of the Enterprise that determine the net profit or loss. Principal Revenue Producing Activities Principal Revenue Producing Activities Business activities being carried by the enterprise to earn profit. Examples of Principal Revenue Producing Activities For a Computer Manufacturing Company, Manufacturing and selling of computers is its Principal Revenue Producing Activities . 1. 2. For a T...

  When Adjustment entries are passed instead of one adjustment Entry. In this situation, Analytical table to determine the net effect of all the adjustments is not prepared instead journal entries are passed for each error or omission by debiting or crediting the Profit and Loss Adjustment Account. After passing the entries for adjustment of errors and omissions, Profit and Loss Adjustment Account is closed by debiting or crediting (as the situation is) with the corresponding credit or debit to the partner’s Current accounts, if Fixed Capital Account Method is followed or Partner’s Capital Accounts , if Fluctuating Capital Account Method is followed. ACCOUNTING ENTRIES 1.       ADJUSTMENT ENTRIES FOR THE ITEMS TO BE CREDITED TO THE PARTNER’S CAPITAL/CURRENT ACCOUNTS. Profit & loss Adjustment a/c     Dr.        To partner’s capital/current a/c (Adjustment made for previously omitted, now recorded)...

  GUARANTEE OF PROFIT New partner (or partners) may be admitted in the firm with minimum guaranteed profit from the business. The profit may be guaranteed to an existing or incoming(new) partner by: 1.All the remaining partners in an agreed ratio or 2. One or more of the existing or old partners. When the guaranteed partner’s or new partner’s share of profit (actual) is more than the guaranteed amount then his Actual share of profit is given to him instead of the guaranteed amount of profit.     1.     GUARANTEE OF PROFIT BY ALL THE REMAINING PARTNERS.   When all the remaining partners (other than the Guaranteed) guarantee that the guaranteed partner shall be given a minimum amount of profit.   Journal entries   1.       On Distributing the profit as if there is no Guarantee Agreement.   Profit and Loss Appropriation a/c     Dr.        T...