Tag Archives | Final Accounts

General Instructions for Preparation of Balance Sheet

In this article we will discuss about the General Instructions for Preparation of Balance Sheet. A. Current Assets: 1. An asset shall be classified as current when it satisfies any of the following criteria; (a) It is expected to be realized in, or is intended for sale or consumption in, the company’s normal operating cycle; […]

Directors‘ Report and Auditors’ Report

Directors’ Report: Previously, it was the practice with most Indian companies to send to the shareholders a copy of the balance sheet and the profit and loss account accompanied by only the briefest possible report from the directors. Apart from matters dealing with the disposal of profits, i.e., recommendations regarding transfer to reserves and dividends, […]

Notes on Net Profit

In this article we will discuss about the Net Profit in Accounting Policies:- 1. Objective of Net Profit 2. Scope of Net Profit 3. Definitions 4. Period 5. Extra Ordinary Items 6. Ordinary Activities 7. Prior Period Items 8. Changes in Accounting Estimates 9. Changes in Accounting Policies 10. Contingencies and Events Occurring after the […]

Divisible Profits: Meaning, Entries and Illustrations

The below mentioned article provides an overview on Divisible Profits:- 1. Meaning of Divisible Profits 2. Transfer to Reserve 3. Declaration of Dividend out of Reserve 4. Depreciation 5. Payment of Dividend 6. Profit from Subsidiary Companies 7. Dividends 8. Appropriation of Profits 9. Separate Bank Account for Dividends 10. Interest out of Capital 11. […]

Contingencies and Balance Sheet Date | Final Accounts

In this article we will discuss about the Contingencies and Events Occurring after the Balance Sheet Date. Contingencies: The term “contingencies” used in this Statement is restricted to conditions or situations at the balance sheet date, the financial effect of which is to be determined by future events which may or may not occur Estimates […]

Profits Prior to Incorporation in Final Accounts

It may happen in case of new companies that a running business is taken over from a certain date, whereas the company may be incorporated at a later date. The company would be entitled to all profits earned after the date of purchase of business unless the agreement with the vendors provides otherwise. But profits […]

Calculation of Commission in Final Accounts (With Illustrations)

The law permits payment of commission to managerial personnel on net profit calculated before taking into account the commission. If the profits are, for example Rs 7,20,00,000, a managing director (if there is only one) can receive up to 5% of Rs 7,20,00,000 or Rs 36,00,000 as his remuneration (the exact amount depends upon the […]

Inter-Company Holdings in Final Accounts | Holding Companies

In India, a subsidiary company is not allowed to acquire shares in its holding company. But if the subsidiary company had acquired shares in the holding company before it became the subsidiary or before the commencement of the Companies Act, 1956, the company can continue to hold the shares [section 42 (3)]. However, the subsidiary […]

Final Accounts of General Insurance Business

In this article we will discuss about the Final Accounts of General Insurance Business along with solved illustrations. Insurance other than life insurance is called general insurance. Fire insurance against loss of property due to fire and marine insurance against loss of cargo, freight and ship are examples of general insurance Reserve for Unexpired Risks: […]

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