Accounting

The Books of Prime Entry, also known as the Books of Original Entry, are the first point of recording financial transactions in the accounting cycle. These books capture business transactions in chronological order before they are posted to the ledger accounts. They play a vital role in maintaining accurate and organized financial records, ensuring that each transaction is correctly classified and easily traceable. 1. What Are Books of Prime Entry? The Books of Prime Entry are specialized journals where transactions are initially recorded based on source documents such as invoices, receipts, and credit notes.… Read more

Goods returned, also known as returns, refer to items that are sent back either by customers or to suppliers. In ledger accounting, properly recording goods returned is crucial for maintaining accurate financial records, as returns affect both revenue and expenses. Returns can be classified into two main types: returns inwards (sales returns) and returns outwards (purchase returns). This article explains how to account for goods returned with detailed journal entries and ledger examples.… Read more

Carriage outwards refers to the transportation costs incurred by a business when delivering goods to customers. Unlike carriage inwards, which is part of the cost of goods sold (COGS), carriage outwards is treated as a selling and distribution expense and recorded in the income statement. Properly accounting for carriage outwards in ledger accounting ensures accurate reporting of operational expenses and helps evaluate the profitability of sales activities. 1. What Is Carriage Outwards?… Read more

Carriage inwards refers to the transportation costs incurred by a business when purchasing goods from suppliers. These costs are directly related to bringing inventory or raw materials to the business premises and are considered part of the cost of goods purchased. Properly accounting for carriage inwards in ledger accounting ensures that the total cost of inventory is accurately reflected, which in turn affects the cost of goods sold and overall profitability.… Read more

In ledger accounting, both carriage costs and goods returned are essential components that affect the cost of sales and overall profitability. Carriage costs refer to the expenses incurred in transporting goods, while goods returned represent items sent back either by customers or to suppliers. Proper recording of these transactions ensures accurate financial reporting and helps in evaluating business efficiency. This article explores how to account for carriage costs and goods returned with detailed ledger entries and examples.… Read more

The disposal of fixed assets in ledger accounting involves removing an asset from the books when it is sold, scrapped, or otherwise retired from use. The process includes eliminating the asset’s original cost, accumulated depreciation, and recording any gain or loss from the disposal. This example demonstrates detailed ledger entries for the disposal of fixed assets. 1. Scenario Overview XYZ Company purchased office equipment for $12,000 on January 1, 2019. The equipment is depreciated using the straight-line method over a useful life of 4 years, with no residual value.… Read more

The disposal of fixed assets in ledger accounting refers to the process of removing a fixed asset from a company’s books when it is sold, scrapped, or otherwise no longer in use. Proper accounting for asset disposal ensures accurate financial reporting and helps determine whether a gain or loss has occurred. This article explains how to record the disposal of fixed assets with detailed journal entries and ledger examples. 1. What Is the Disposal of Fixed Assets?… Read more

Depreciation is the systematic allocation of the cost of a fixed asset over its useful life. In ledger accounting, depreciation ensures that the declining value of assets like machinery, vehicles, and equipment is accurately reflected in both the income statement and the balance sheet. This example demonstrates how to record depreciation using detailed journal entries and ledger accounts. 1. Scenario Overview XYZ Company purchases a delivery van for $24,000 on January 1, with an estimated useful life of 4 years and no residual value.… Read more

Provision for depreciation is an essential concept in ledger accounting, ensuring that the gradual reduction in the value of fixed assets is accurately recorded over time. Depreciation reflects the wear and tear, obsolescence, or usage of assets such as machinery, vehicles, and equipment. The provision for depreciation is a contra asset account that accumulates the total depreciation charged on an asset, allowing businesses to maintain the original cost of the asset in the books while reflecting its reduced value.… Read more

Depreciation and the disposal of fixed assets are fundamental aspects of ledger accounting. Fixed assets, such as machinery, vehicles, and equipment, gradually lose value over time due to wear and tear, obsolescence, or usage. This reduction in value is accounted for through depreciation. When a fixed asset is sold, scrapped, or otherwise disposed of, specific ledger entries must be made to reflect the transaction accurately. This article explores how to record depreciation and the disposal of fixed assets with detailed ledger entries and examples.… Read more