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An accountant of a firm,maintaining its books under accrual basis,does not want to account salaries amounting to Rs.20,000 for the month of March 2016,on the grounds,that it was not paid.The firm closes its books on 31st March every year.Is the accountant correct in doing so?

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Solution

No,because as per the accrual concept,expenses should be accounted for at the time when it is incurred and not when it is paid.

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Similar questions

On 1st April, 2013 a firm purchased a machinery for Rs. 1,00,000. ON 1st July, 2016 the machinery became obsolete and was sold fro Rs. 40,000. The firm charges depreciation on its machinery @ 10% per annum on written down value method. The books are closed on 31st March of every year. Prepare necessary ledger accounts assuming that provision for depreciation account is maintained.

A, B

C

are partners sharing profits and losses equally.

A

C

have granted loan to the firm on 1st October, 2016 of

R s . 1, 00, 000

R s .1, 50, 000

respectively. It is agreed that interest @

9 %

p.a. will be paid on loan. Books of account of the firm are closed on 31st March every year. Interest on loan is yet to be paid as on 31st March, 2017. You are required to pass Journal entries in the books of account of the firm and prepare ledger accounts of the two partners.

Q. X, Y and Z were in partnership sharing profits and losses equally. 'Y' retires from the firm. After adjustments, his Capital Account shows a credit balance of ₹ 3,00,000 as on 1st April, 2016. Balance due to 'Y' is to be paid in three equal annual instalments along with interest @ 10% p.a. Prepare Y's Loan Account until he is paid the amount due to him. The firm closes its books on 31st March every year.

Q. Geeta, Sita and Meeta were partners in a firm sharing profits in the ratio of

5 : 3 : 2

. The firm closes its books on

31^{s t}

March every year. On

30 - 6 - 2015

Geeta died. On that date her capital account showed a debit balance of Rs.

5, 000

and Goodwill of the firm was valued at Rs.

3, 70, 000

.
There was a debit balance of Rs.

12, 000

in the profit and loss account. Geeta's share of profit in the year of her death was to be calculated on the basis of the average profit of last

5

years which was Rs.

80, 000

.
Pass necessary journal entries in the books of the firm on Geeta's death.

Q. On 31st March, 2018, after the closing of the accounts, the Capital Accounts of P, Q and R stood in the books of the firm at ₹ 40,000; ₹ 30,000 and ₹ 20,000 respectively. Subsequently, it was discovered that interest on capital @ 5% had been omitted. Profit for the year ended 31st March, 2018 amounted to ₹ 60,000 and the partners' drawings had been P–₹ 10,000, Q–₹ 7,500 and R–₹ 4,500. The profit-sharing ratio of P, Q and R is 3 : 2 : 1. Give necessary adjustment entry.

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