Accountancy for Class 11, Part 2, Chapter 2- Financial Statements II

Learn CBSE Accountancy Index Terms for Class 11, Part 2, Chapter 2 Financial Statements II

1. Accrued Expenses – Accrued expenses are referred to as those expenses that are incurred but are not paid. In other words, these are expenses that are recorded as expenses in company records, even before paying for the same has been done. Accrued expenses are short-term liabilities or current liabilities that are recorded in the balance sheet of the company. These are also known as accrued liabilities.

Accused expenses will be recorded in the accounting records only when the company follows the accrual basis of accounting. Accrual accounting is better than cash basis accounting as it helps in revealing a company’s financial position more accurately.

2. Accrued Income – Accrued income is referred to as the income that is earned but not yet received. In other words, it can be said that accrued income is any income that is earned but obtained by the business.

It forms the basis of accrual accounting; under this system, revenue earned in an accounting period should be realised in the same accounting period and not when the revenue is actually received. Accrual accounting is used as an alternative to the cash accounting system. It is mostly used by businesses that are involved in selling goods and services to customers on credit.

3. Manager’s Commission – Managers of a business organisation are sometimes given a commission on the net profit earned from the natural course of business in a particular financial year. The commission received in percentages is given either before or after applying tax deductions (EBIT/EAT). If there is no information on the charges on commission, then it is assumed that the commission is provided in the form of a percentage of the net profit before charging such commissions.

4. Income Received in Advance – This refers to the income received whose actual realisation of benefits will occur in the next accounting period. These are also called unearned incomes.

5. Outstanding Expenses – Outstanding expenses refer to those expenses which belong to and are incurred in the current accounting period but are left unpaid. In other words, we can say that the services in exchange for these payments have been realised but the payments are not made. For example, if Rs 2,000 wages are outstanding, then this means that labour worth Rs 2,000 has been used but has not been paid for till the end of the year.

6. Prepaid Expenses – Prepaid expenses are those expenses that have been paid in advance for the next financial year, these are the expenses that are treated as assets (current assets) and deducted from the concerned expenses in the current financial year.

7. Provision for Discount on Debtors – Provision for discount on debtors is a discount that is being allowed by an enterprise to its debtors to encourage prompt payments. Discounts likely to be allowed to customers in an accounting year can be estimated and provided for by creating a provision for discounts on debtors. Here, it is to be remembered that provision for discount is made on good debtors which are arrived at by deducting further bad debts and the provision for doubtful debts.

We hope that the offered Accountancy Index Terms for Class 11 with respect to Part 2, Chapter 2: Financial Statements II, will help you.

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