Commerce > Accountancy Class 12 > Accounting Treatment
Accounting Treatment Video Lecture - Accountancy Class 12 - Commerce
FAQs on Accounting Treatment Video Lecture - Accountancy Class 12 - Commerce
| 1. What is the accounting treatment for revenue recognition? |  |
Ans. Revenue recognition is the process of recording and reporting revenue earned by a company. According to generally accepted accounting principles (GAAP), revenue is recognized when it is realized or realizable and earned. This means that revenue should be recognized when it is probable that economic benefits will flow to the company and the earnings process is complete. The specific accounting treatment for revenue recognition may vary depending on the nature of the business and the industry it operates in.
| 2. How are expenses treated in accounting? | |
Ans. Expenses are a vital part of accounting as they represent the costs incurred by a company in its day-to-day operations. In accounting, expenses are recognized when they are incurred, meaning when goods or services are received or consumed, regardless of when the payment is made. Expenses are recorded in the income statement and are deducted from revenue to determine the net income or loss for a specific period. Common types of expenses include salaries and wages, rent, utilities, supplies, and advertising costs.
| 3. What is the accounting treatment for depreciation? | |
Ans. Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. In accounting, depreciation is treated as an expense and is recorded in the income statement. The purpose of depreciating an asset is to match the cost of the asset with the revenue it generates over its useful life. There are various methods of calculating depreciation, such as straight-line depreciation, declining balance depreciation, and units-of-production depreciation. The choice of method depends on factors like the asset's expected usage and industry practices.
| 4. How are inventory costs treated in accounting? | |
Ans. Inventory costs are treated as assets in accounting until the inventory is sold. When inventory is purchased, the cost is initially recorded as an asset on the balance sheet under the inventory account. As the inventory is sold, its cost is recognized as an expense called "cost of goods sold" in the income statement. The cost of goods sold is deducted from revenue to determine the gross profit. The remaining inventory cost is carried forward as an asset until it is sold or deemed obsolete, at which point it is expensed.
| 5. What is the accounting treatment for bad debts? | |
Ans. Bad debts refer to the portion of accounts receivable that a company believes is uncollectible. When a company determines that a customer is unlikely to pay its outstanding balance, it needs to account for this potential loss. The accounting treatment for bad debts involves creating an allowance for doubtful accounts, which is a contra-asset account. The allowance represents the estimated amount of uncollectible accounts, and it is deducted from the accounts receivable account on the balance sheet. This reflects a more realistic value of the accounts receivable, considering the expected losses from bad debts.
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Text Transcript from Video
[Music]
hello friends friends will continue with
dissolution of partnership firm right in
dissolution we have covered the major
topics in the very beginning I told you
we'll be covering four things in this
one is realization account right in this
we sell all our assets subject to
conditions and from the money that we
realize we settle the liabilities clip
then second thing was partners loan
clear third thing partners capital
accounts and the last was Bank or cash
account clear so we have discussed all
the major topics of this chapter we are
left with just two small topics right
these are those are very small
discussions related to this only yeah
those two discussions are related to
this only the basic is this the whole
chapter is revolving around these four
topics realization partners loan
partners capital and banker
cash account one topic that I will touch
upon in the maybe in the next lecture is
memorandum balance sheet that is a very
very small topic a very small concept
right the basic concept of this chapter
revolves around these four things clear
we have discussed all these four things
in detail right if you have understood
the detail of all these four things then
doing the practical questions will
very very easy for you people right you
must understand the concept in detail
that we have discussed in the previous
lectures so if you are seeing this
lecture I hope that you have understood
what we have done so far you have gone
through the previous videos right after
that you can attempt what we are going
to do today right so today we will do
the practical part of it I'll be doing a
practical question in will in which we
will prepare a realization account
partners capital account and bank
account we will cover all these areas
clip so let us see the problem balance
sheet of a firm as a 31st March 2016 is
given to us we have the liabilities we
have assets Heights freehold property
investment data store cash at Bank on
the liability side what we have is X
capital y Capital Z capital saundra
curators and profit and loss account
click now first of all we have to
prepare realization account what is the
first step of realization account
transfer all the assets right transfer
all the assets to realization account
subject to conditions right so we will
do we will transfer all the assets we
will not see what is give further given
in the question first of all we will
prepare realization account
clear friends so first of all what we
are going to do is we are going to
prepare realization account for this we
will transfer the assets first let's
start transferring we will transfer
freehold property yes we will transfer
investments yes we will transfer sundry
assets yes we will transfer stock 1 lakh
50000 years we will transfer cash at
bank no why because in the realisation
account we transfer only those assets
which we are going to sell in the market
and from which we are going to realize
some money the cash at Bank is already
in the liquid form so we are going to
transfer these 4 assets
clear so let's transfer them what will
be the journal entry realization to
assets so I can say 2 freehold property
that is 8 lakhs right to investments
investments is to luck then to debtors
debtors are 1 lakh and to stock 1 luck
50000 right so we have transferred all
the assets to realization account we
have collected the assets and put the
assets in one carton that carton is a
realization account now talking of
liabilities are we going to transfer
this capital accounts no sundry
creditors yes Outsiders liability we are
going to transfer to realization account
profit and loss account is it an
outsider liability we have to pay this
profit to outside no it is our own
profit so in the realization account we
have to take only those liabilities
which are payable to the outsiders in
this case it is only sundry creditors of
2 lakh rupees so I will say by
sundry predators of to luck clear this
much is clear we have completed step one
of realization account in which we say
transfer all the assets and liabilities
to realization account now let's see now
what is the next step
can you tell me what is the next step in
the last lecture I told you about the
four steps of realization
step one is transfer all assets and
liabilities to realization account what
is the step two step two is realize
money from the sale of assets now let's
sale assets what is given regarding that
right see it is given that X took over
the investments at a value of 1 lakh
90,000 so an asset is taken over by a
partner what is the journal entry we
will adjust that money from the partners
capital accounts and the journal entry
will be partners capital account debit
to realization account so here I will
say buy X capital account right
investments for how much 1 lakh 90,000
clear next he says cash realized was
freehold property 9 lakhs from freehold
property we realized the cash of 9 lakh
from debtors 90 thousand and stock 1
lakh 40,000 so I can say by bank right
from property
we realized 9 lakh right from debtors we
realized 90,000 and from stock we
realized one lakh 40,000 so what is the
total amount that we realized it is 11
lat
30,000 clear any other asset left no we
have treated all the assets now
regarding the liabilities they say that
creditors were paid at a discount of 5
percent right so what is the amount of
creditors if you see the creditors is 2
lakh 5% discount 10,000 so creditors
were paid 1 lakh 90,000 so I can say 2
bank in this creditors creditors are
paid 1 lakh 90,000 then we are given
that expenses of realisation came to 20
thousand if the question is silent we
have to assume that these expenses have
been paid by the firm so what is the
journal entry for that realization
account debit to cash or bank account so
I can say here expenses how much 20,000
so what is the total 2 lakh 10000 now
which side is more debit side or the
credit side in this case credit side is
more than the debit side right so that
means we have to gain transfer to X
capital
why is capital and Z its capital so the
total gain is 60,000 this will be
equally distributed profit sharing ratio
is equal so 20,000 each will be
distributed this total is 15 lakh 20,000
clear this much realization account is
clear friends just remember those four
steps clear
first is transferred all the assets and
liabilities to realization account
second is sale of assets third is from
the money realized by sale of assets
settle the liabilities fourth is closed
the realization account on closure there
will be either gain or loss credit side
is more than debit side it is again if
debit side is more than credit side it
is a loss loss will be transferred to
partners capital accounts in their
profit sharing ratio very simple logic
right that's why I told you that before
this video you must go through the
previous lectures before this lecture
this question you will be able to
understand that why we are doing like
this if you have understood the logic if
you have understood the previous
lectures clearly then this is a very
easy question for you nothing in this
chapter even if any other question is
there it will you will find it very easy
because the whole concept revolves
around this clear the whole concept
revolves around this clear friends now
next next we have to prepare partners
capital accounts so let's prepare
partners capital accounts prepare the
formats
right an examination do prepare proper
formats okay here we have particulars X
Y Z particulars XY and Z so what is the
opening balance of capitals if you see
the question balance sheet the opening
balances are given at five lakh for lakh
and three lakh right so I can say by
balance brought down this is five lakh
four lakh and three lakh now first see
the realization account is there any
treatment regarding to the partners
capitals yes two treatments are there
one is the investment is taken over by
partner for the head the partners
capital account is debited so I will say
it to realization account this is 1 lakh
90,000 clear isn't it
this investments are taken over by
partner then the second thing we have is
the gain on realization which will be
transferred to the partners capital
accounts so by realization in this case
I will say again this is twenty thousand
twenty thousand and twenty thousand
clear
right now anything else in the
realization account no then we discussed
that any reserves are appearing in the
balance sheet any reserves and
accumulated profits or losses appearing
in the balance sheet they should be
transferred to the partners capital
accounts in their profit sharing ratio
in this you can see the profit and loss
account that is the accumulated profit
appearing in the liability side of the
balance sheet 1 lakh 50000 this will be
equally distributed among partners so by
profit and loss account this will be
fifty thousand 50 thousand and fifty
thousand clear friends anything else no
this is all about partners capital
accounts now what will be the balance as
we can see credit side is more than
debit side so what should I write here
to balance carry down we discussed in
the last lecture that in this case we
can't write balanced carry down because
we are closing down business we are not
carrying forward the capitals to be
shown in the balance sheet we are
closing down the balance sheet how can
we write capitals then we will write to
bank account which will reflect the
amount which is being paid to the
partners right this amounts come to
three lakh eighty thousand right four
lakh seventy thousand and three lakh 70
thousand so this total is five lakh
seventy right
470 and 370 clear friends capital
accounts is clear I hope this much is
clear to you right so we have prepared
the partners capital accounts and we
have discussed that in partners capital
account the balance is to be transferred
to bank account which reflects the
payment made to the partners or payment
brought in by partners in this case if
you see this is payment to partner clear
this is credit balance this is what we
call credit balance credit side is more
than the debit side it shows the credit
balance that is the payment made to
partner now what we are going to prepare
last is the bank account
clear
so lastly we are going to prepare bank
account can you tell me the opening
balance of cash at Bank this has 3 lakhs
where I will write I will say it to
balance brought down 3 lakhs now see the
realization account can you see
something related to bank yes we have
the assets sold right 11 lakh 30,000 so
I can say by realization how much 11
lakh 30,000 cliff sorry sorry sorry
sorry I have to this will be Bank to
assets sorry to realisation 11 lat
30,000 sorry friends because the journal
entry is been to realization oh sorry
yes bank to realization clear now this
is we have assets
now what about liabilities yes we have
this also bank 2 lakh 10000 regarding
the liabilities so I have regarding the
liabilities also that is 2 lakh 10000
what else anything else in the
realization no check for in the partners
capital accounts yes the balance that is
being paid to partners capital 3 lakh
8470 and 370 so I will say by X capital
3 lakh 18000 right by wise capital for
luck 70,000 and by
since capital threelac 70,000 and if you
cross-check this is there any balance in
the bank no there will be no balance
your account will Ellie this comes to 14
lakh 30,000 that means after settling
all the accounts of the partners
capitals your bank will tele after doing
all the transactions relating to
realization relating to partners capital
your bank account will tell you there
will be no balance carry down right in
dissolution remember this there will be
never a balance carried down neither in
the partners capital account neither in
the bank account because if we will say
a balance carried down where we are
going to take this balance we are
closing our balance sheet where we are
going to take that balance right so
either the accounts will match or in
case of partners capital it will be the
payment that is to be made to partner is
this clear friends so I have told you in
this question he has asked about the
journal entries also that you can pass
short on your own right we have
discussed all in detail so friends I am
telling you again go through the first
few lectures first if you have
understood the basics of dissolution if
you have understood about realization
what is realization what is partners
loan what is partners capital what is
bank cash what are the items to be
included why they are included how to
treat workmen compensation how to treat
expenses if you know all about this then
doing practical questions will be very
very easy for you you just need to
understand the logic you need to
understand the basics clear clear
friends
so if you have any queries I have done
one question with you practice more
questions on your own if you find query
in any question just send me the image
of the question right email me at ksj
teaching at the rate of gmail.com just
send me the image of the question I will
I will give you the solution it will be
better if you give me that specific
point where you are finding the question
difficult right so that I can focus on
that specific point clear friends so in
the next class what we are going to do
is we'll be just covering whole of this
topic in the next two lectures right
will complete dissolution in the next
lecture what we are going to do is a
small topic related to partners loan and
capital partners loan and partners
capital how we are going to set off
these against each other this is a very
small topic we'll cover in the next
lecture clear so that's all for this
lecture friends thank you so much
hello friends friends will continue with
dissolution of partnership firm right in
dissolution we have covered the major
topics in the very beginning I told you
we'll be covering four things in this
one is realization account right in this
we sell all our assets subject to
conditions and from the money that we
realize we settle the liabilities clip
then second thing was partners loan
clear third thing partners capital
accounts and the last was Bank or cash
account clear so we have discussed all
the major topics of this chapter we are
left with just two small topics right
these are those are very small
discussions related to this only yeah
those two discussions are related to
this only the basic is this the whole
chapter is revolving around these four
topics realization partners loan
partners capital and banker
cash account one topic that I will touch
upon in the maybe in the next lecture is
memorandum balance sheet that is a very
very small topic a very small concept
right the basic concept of this chapter
revolves around these four things clear
we have discussed all these four things
in detail right if you have understood
the detail of all these four things then
doing the practical questions will
very very easy for you people right you
must understand the concept in detail
that we have discussed in the previous
lectures so if you are seeing this
lecture I hope that you have understood
what we have done so far you have gone
through the previous videos right after
that you can attempt what we are going
to do today right so today we will do
the practical part of it I'll be doing a
practical question in will in which we
will prepare a realization account
partners capital account and bank
account we will cover all these areas
clip so let us see the problem balance
sheet of a firm as a 31st March 2016 is
given to us we have the liabilities we
have assets Heights freehold property
investment data store cash at Bank on
the liability side what we have is X
capital y Capital Z capital saundra
curators and profit and loss account
click now first of all we have to
prepare realization account what is the
first step of realization account
transfer all the assets right transfer
all the assets to realization account
subject to conditions right so we will
do we will transfer all the assets we
will not see what is give further given
in the question first of all we will
prepare realization account
clear friends so first of all what we
are going to do is we are going to
prepare realization account for this we
will transfer the assets first let's
start transferring we will transfer
freehold property yes we will transfer
investments yes we will transfer sundry
assets yes we will transfer stock 1 lakh
50000 years we will transfer cash at
bank no why because in the realisation
account we transfer only those assets
which we are going to sell in the market
and from which we are going to realize
some money the cash at Bank is already
in the liquid form so we are going to
transfer these 4 assets
clear so let's transfer them what will
be the journal entry realization to
assets so I can say 2 freehold property
that is 8 lakhs right to investments
investments is to luck then to debtors
debtors are 1 lakh and to stock 1 luck
50000 right so we have transferred all
the assets to realization account we
have collected the assets and put the
assets in one carton that carton is a
realization account now talking of
liabilities are we going to transfer
this capital accounts no sundry
creditors yes Outsiders liability we are
going to transfer to realization account
profit and loss account is it an
outsider liability we have to pay this
profit to outside no it is our own
profit so in the realization account we
have to take only those liabilities
which are payable to the outsiders in
this case it is only sundry creditors of
2 lakh rupees so I will say by
sundry predators of to luck clear this
much is clear we have completed step one
of realization account in which we say
transfer all the assets and liabilities
to realization account now let's see now
what is the next step
can you tell me what is the next step in
the last lecture I told you about the
four steps of realization
step one is transfer all assets and
liabilities to realization account what
is the step two step two is realize
money from the sale of assets now let's
sale assets what is given regarding that
right see it is given that X took over
the investments at a value of 1 lakh
90,000 so an asset is taken over by a
partner what is the journal entry we
will adjust that money from the partners
capital accounts and the journal entry
will be partners capital account debit
to realization account so here I will
say buy X capital account right
investments for how much 1 lakh 90,000
clear next he says cash realized was
freehold property 9 lakhs from freehold
property we realized the cash of 9 lakh
from debtors 90 thousand and stock 1
lakh 40,000 so I can say by bank right
from property
we realized 9 lakh right from debtors we
realized 90,000 and from stock we
realized one lakh 40,000 so what is the
total amount that we realized it is 11
lat
30,000 clear any other asset left no we
have treated all the assets now
regarding the liabilities they say that
creditors were paid at a discount of 5
percent right so what is the amount of
creditors if you see the creditors is 2
lakh 5% discount 10,000 so creditors
were paid 1 lakh 90,000 so I can say 2
bank in this creditors creditors are
paid 1 lakh 90,000 then we are given
that expenses of realisation came to 20
thousand if the question is silent we
have to assume that these expenses have
been paid by the firm so what is the
journal entry for that realization
account debit to cash or bank account so
I can say here expenses how much 20,000
so what is the total 2 lakh 10000 now
which side is more debit side or the
credit side in this case credit side is
more than the debit side right so that
means we have to gain transfer to X
capital
why is capital and Z its capital so the
total gain is 60,000 this will be
equally distributed profit sharing ratio
is equal so 20,000 each will be
distributed this total is 15 lakh 20,000
clear this much realization account is
clear friends just remember those four
steps clear
first is transferred all the assets and
liabilities to realization account
second is sale of assets third is from
the money realized by sale of assets
settle the liabilities fourth is closed
the realization account on closure there
will be either gain or loss credit side
is more than debit side it is again if
debit side is more than credit side it
is a loss loss will be transferred to
partners capital accounts in their
profit sharing ratio very simple logic
right that's why I told you that before
this video you must go through the
previous lectures before this lecture
this question you will be able to
understand that why we are doing like
this if you have understood the logic if
you have understood the previous
lectures clearly then this is a very
easy question for you nothing in this
chapter even if any other question is
there it will you will find it very easy
because the whole concept revolves
around this clear the whole concept
revolves around this clear friends now
next next we have to prepare partners
capital accounts so let's prepare
partners capital accounts prepare the
formats
right an examination do prepare proper
formats okay here we have particulars X
Y Z particulars XY and Z so what is the
opening balance of capitals if you see
the question balance sheet the opening
balances are given at five lakh for lakh
and three lakh right so I can say by
balance brought down this is five lakh
four lakh and three lakh now first see
the realization account is there any
treatment regarding to the partners
capitals yes two treatments are there
one is the investment is taken over by
partner for the head the partners
capital account is debited so I will say
it to realization account this is 1 lakh
90,000 clear isn't it
this investments are taken over by
partner then the second thing we have is
the gain on realization which will be
transferred to the partners capital
accounts so by realization in this case
I will say again this is twenty thousand
twenty thousand and twenty thousand
clear
right now anything else in the
realization account no then we discussed
that any reserves are appearing in the
balance sheet any reserves and
accumulated profits or losses appearing
in the balance sheet they should be
transferred to the partners capital
accounts in their profit sharing ratio
in this you can see the profit and loss
account that is the accumulated profit
appearing in the liability side of the
balance sheet 1 lakh 50000 this will be
equally distributed among partners so by
profit and loss account this will be
fifty thousand 50 thousand and fifty
thousand clear friends anything else no
this is all about partners capital
accounts now what will be the balance as
we can see credit side is more than
debit side so what should I write here
to balance carry down we discussed in
the last lecture that in this case we
can't write balanced carry down because
we are closing down business we are not
carrying forward the capitals to be
shown in the balance sheet we are
closing down the balance sheet how can
we write capitals then we will write to
bank account which will reflect the
amount which is being paid to the
partners right this amounts come to
three lakh eighty thousand right four
lakh seventy thousand and three lakh 70
thousand so this total is five lakh
seventy right
470 and 370 clear friends capital
accounts is clear I hope this much is
clear to you right so we have prepared
the partners capital accounts and we
have discussed that in partners capital
account the balance is to be transferred
to bank account which reflects the
payment made to the partners or payment
brought in by partners in this case if
you see this is payment to partner clear
this is credit balance this is what we
call credit balance credit side is more
than the debit side it shows the credit
balance that is the payment made to
partner now what we are going to prepare
last is the bank account
clear
so lastly we are going to prepare bank
account can you tell me the opening
balance of cash at Bank this has 3 lakhs
where I will write I will say it to
balance brought down 3 lakhs now see the
realization account can you see
something related to bank yes we have
the assets sold right 11 lakh 30,000 so
I can say by realization how much 11
lakh 30,000 cliff sorry sorry sorry
sorry I have to this will be Bank to
assets sorry to realisation 11 lat
30,000 sorry friends because the journal
entry is been to realization oh sorry
yes bank to realization clear now this
is we have assets
now what about liabilities yes we have
this also bank 2 lakh 10000 regarding
the liabilities so I have regarding the
liabilities also that is 2 lakh 10000
what else anything else in the
realization no check for in the partners
capital accounts yes the balance that is
being paid to partners capital 3 lakh
8470 and 370 so I will say by X capital
3 lakh 18000 right by wise capital for
luck 70,000 and by
since capital threelac 70,000 and if you
cross-check this is there any balance in
the bank no there will be no balance
your account will Ellie this comes to 14
lakh 30,000 that means after settling
all the accounts of the partners
capitals your bank will tele after doing
all the transactions relating to
realization relating to partners capital
your bank account will tell you there
will be no balance carry down right in
dissolution remember this there will be
never a balance carried down neither in
the partners capital account neither in
the bank account because if we will say
a balance carried down where we are
going to take this balance we are
closing our balance sheet where we are
going to take that balance right so
either the accounts will match or in
case of partners capital it will be the
payment that is to be made to partner is
this clear friends so I have told you in
this question he has asked about the
journal entries also that you can pass
short on your own right we have
discussed all in detail so friends I am
telling you again go through the first
few lectures first if you have
understood the basics of dissolution if
you have understood about realization
what is realization what is partners
loan what is partners capital what is
bank cash what are the items to be
included why they are included how to
treat workmen compensation how to treat
expenses if you know all about this then
doing practical questions will be very
very easy for you you just need to
understand the logic you need to
understand the basics clear clear
friends
so if you have any queries I have done
one question with you practice more
questions on your own if you find query
in any question just send me the image
of the question right email me at ksj
teaching at the rate of gmail.com just
send me the image of the question I will
I will give you the solution it will be
better if you give me that specific
point where you are finding the question
difficult right so that I can focus on
that specific point clear friends so in
the next class what we are going to do
is we'll be just covering whole of this
topic in the next two lectures right
will complete dissolution in the next
lecture what we are going to do is a
small topic related to partners loan and
capital partners loan and partners
capital how we are going to set off
these against each other this is a very
small topic we'll cover in the next
lecture clear so that's all for this
lecture friends thank you so much
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Study Accounting Treatment on the App
Students of Commerce can study Accounting Treatment alongwith tests & analysis from the EduRev app,
which will help them while preparing for their exam. Apart from the Accounting Treatment,
students can also utilize the EduRev App for other study materials such as previous year question papers, syllabus, important questions, etc.
The EduRev App will make your learning easier as you can access it from anywhere you want.
The content of Accounting Treatment is prepared as per the latest Commerce syllabus.
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