FINANCIAL ACCOUNTING

ASSIGNMENT

NAME :- VINAYAK KONDAL

SECTION :- DELTA
ROLL No. :- 22251
Q1) What is the Accrual basis of Accounting?
A1) Accrual basis of accounting is a concept in which we record
revenues when earned and expenses as incurred. By using this
approach balance sheet also gets impacted as receivables and
payable also may be recorded even in the absence of an
associated cash receipt or cash payment, respectively.
This concept is also generally accepted by Generally Accepted
Accounting Principle (GAAP) and International Financial
Reporting Standards (IFRS). As they provide us the guidance, as
how to account for revenue and expense transactions in journal.

Q2) What is the distinction between Debtor and Creditor?

A2) A DEBTOR is a person or an enterprise that owes money to
another party. They can own money from various places such as
suppliers, banks, or the other lenders etc.
A CREDITOR is a person, bank, or the other enterprise that has
lent money or extended credit to another party.
For Example : - Assume that company borrows money from the
Bank. Then the company is the Debtor as they have lent the
money and the Bank is the Creditor as the provided the money to
the company.

Q3) What is accounting?

A3) Accounting is the process of recording the financial
transactions pertaining to business. The accounting process
includes summarising, analysing, and reporting these
transactions to oversight agencies, regulators, and tax collection
entities. the financial statement used in accounting are summary
of financial transactions over an accounting period, summarising
a company’s operations, financial position, and cash flows.

Q4) Where do Dividends appears on the financial statements?

A4) Dividends are a portion of a company’s earnings which it
returns to investors, usually as a cash payment. The dividends
declared and nod paid by a corporation in the most recent years
will be reported on these financial statement for the recent years.
Dividends on common stock are not reported on the income
statement since they are not expenses. However, dividends
on preferred stock will appear on the income statement as a
subtraction from net income in order to report the earnings
available for common stock.

Q5) What is Contingent Liability?

A5) Contingent liabilities are those potential liabilities that may
occur in a future date as a result of an uncertain event that is
beyond the control of the business. A contingent liability will only
be recorded in the balance sheet when the probability of its
occurrence is certain, and the extent of such liability can be
determined. The most common contingent liabilities examples are
outstanding lawsuits, debts, product warranties, pending
investigations etc.

Q6) What is principles of Accounting?

A6) Accounting principles are the rules and guidelines that
companies and other bodies must follow when reporting financial
data. These rules make it easier to examine financial data by
standardizing the terms and methods that accountants must use.
Some of the Accounting principles are :-
1. Principle of Consistency
2. Principle of Regularity
3. Principle of Continuity’
4. Principle of Materiality
5. Principle of Good Faith
6. Principle of Non-compensation
7. Principle of Sincerity

Q7) What are Accrued Expense and when are they recorded?
A7) Accrued expenses are expenses that have occurred but are
not yet recorded in the company's general ledger. This means
these expenses will not appear on the financial
statements unless an adjusting entry is entered prior to issuing
the financial statements. As a result, liability for these
expenditures is created and recorded as accrued liabilities on the
balance sheet liability side. When a business pays cash to settle
such a responsibility, the expense account will be debited, and
the accrued expense account will be credited.

Q8) What is the difference between Financial Accounting and

Management Accounting?
A8) Financial Accounting is the original form of accounting that
deals with recording business transactions and summarizing the
data into reports, which are presented to the users so that
financial decisions can be made rationally.
Management accounting is a new field of accounting that studies
managerial aspects. It deals with the provision of financial data to
the company’s management so that they can make rational
economic decisions.
Q9) What is Retained Earnings?
A9) Retained earnings are the cumulative net earnings or profits
of a company after accounting for dividend payments. As an
important concept in accounting, it captures the fact that because
those earnings were not paid out to shareholders as dividends,
they were instead retained by the company. retained earnings
decrease when a company either loses money or pays dividends
and increase when new profits are created.