Accounting Equation and Impact of various adjustement on Accounting equation

You can also visit our website, www.iedubook.com to watch many more videos on Accountancy prepared by CA. Arinjay Kumar Jain. Have a happy learning.

Accounting equation forms the basis or the foundation for the double entry bokk-keeping system. According to this equation, for each and  transaction, the total debits equal the total credits.

It is also represented as under : -

Assets = Liabilities + Capital

Impact on Accounting Equation - Introduction of Capital  in business

When capital is introduced in Business, Cash available with the business increases. An increase in asset is debited and added to the asset side. Similarly, the business owes the same amount to owners for capital and this amount is credited, and hence shown on other side of Accounting equation.

Impact on Accounting Equation for Salary payments

Payment of Salary in cash reduces the Asset side of the Accounting Equation. Similarly, given that Salary is an expenditure, on a standalone basis without any income it would increase the loss of the Business and reduce the Capital of owners.

Impact on Accounting Equation - Purchased Plant and Machinery  in Cash Credit

Purchase of Plant and Machinery  in Cash or Credit would increase the Asset available in Business, namely Plant and Machinery and hence be Increased in the asset side by that Amount. When its purchased in cash, it would reduce cash balance on Asset side. On the other hand, when purchased on credit, it would increase the liability to the Supplier of Plant and Machinery

Impact on Accounting Equation -  Capital withdrawn by owners

When the owners of business withdraw capital, Cash is reduced from the Asset side to that extent since its paid to the owners. At the same time, since amount due to owners from Business is reduced, capital account of the owners is also reduced by an equal amount

FDI – Permissible Capital Instruments for Investing in India under FEMA

Under the existing FDI policy, the following Capital  Instruments for permissible for Investing in India under FEMA

·         Equity Shares

·         Fully, Compulsorily  and Mandatorily Convertible Preference Shares

·         Fully, Compulsorily  and Mandatorily Convertible Debentures

·         FCCB’s

·         Subscription to American / Global Depository Receipts of an Indian Company

Interest on Other type of Preference Shares/Debentures, would be denominated in Rupees and hence interest thereon has to be based on swap equivalent of LIBOR + permissible spread for corresponding maturity External Commercial Borrowings.

The Law is based on Consolidated FDI Policy Circular No.1 of 2012. Prepared by Mr. Arinjay Kumar Jain

Foreign Direct Investment - Permitted and Prohibited Sectors

 The Law is based on Consolidated FDI Policy Circular No.1 of 2012 

1.    Permitted Sectors – Investment in Permitted Sectors can be made under the following two routes : -

a.    Automatic Route

No  prior approval  required from the RBI or the GOI.  Only Reserve Bank of India needs to be informed within specified period. 

b.    Government Approval Route (‘FIPB’)

Proposals falling outside the prohibited Sectors and not falling under automatic route require prior approval of Foreign Investment Promotion Board (‘FIPB’) 

2.    Prohibited Sectors

Foreign investment is not permitted in companies engaged in prohibited sectors – Refer Para 6.1 of the Policy.

 

Physics - Concepts relating to Laws of Reflection from Plane Mirros

Incident ray : -   The ray of light which strikes the Plane mirror, or any other surface is known as incident ray. 

Point of incidence : - It is the point at which the ray of Light hits the Mirror.

Reflected ray – All reflected ray correspond to a particular incident ray. A reflected ray, as it corresponds to a given incident ray, represents the light which is reflected by the surface, as an incident ray falls on it.

Normal Ray – It is a light ray which is perpendicular to a surface, i.e it hits the surface at 90 degrees.

Angle of Reflection - The angle formed between the surface, normal and the reflected ray is known as angle of reflection.

Angle of Incidence  -   The angle between Incident ray and the normal to the surface is known as the angle of incidence. 

Laws of reflection – This law states that when a ray of light hits a surface, angle of Incidence is always equal to angle of reflection. Further all of the following, namely, an incident ray, Reflected ray and Normal ray, all lie on the same Plane.

Watch this and many more Videos on Physics at http://www.iedubook.com/tutorial/su/33/CBSE,-ICSE/Class-X/Physics.html

Accountancy - Matching Concept for Revenue

According to the Matching Concept for Revenue, cost incurred to earn revenue is recognized  as an expenditure only during the period when the revenue is recognized as having been earned, i.e , we match the expenditure to the related revenue. This has three aspects : -

• As revenue is recognized as income, related expenditure is considered as an expense in the profit and loss account;
• Expenses pertaining to revenue, which are to be earned in next accounting period are carried forward as deferred expense in Balance Sheet and treated as an expense only in next year;
• Advance revenue received is to be treated as income in the year when the corresponding services are provided or property in goods is transferred.

You can also visit our website, www.iedubook.com at the following link http://www.iedubook.com/tutorial/su/8/CBSE,-ICSE/Class-XI/Accountancy.html to watch many more videos on Accountancy. Have a happy learning.

Accountancy - Revenue Recognition Concept

According to the revenue recognition concept, in order to recognize revenue from a transaction, there are two things which should have occured, namely : -

• Transaction should have been entered into;
• Right to receive the payment must be established.

The revenue recognition event need not necessarily occur with the event of collection of cash. Once the above two factors are established, even if the cash is received at a later point in time, it does not make any difference to the recognition of revenue. The undermentioned video explains the concept of revenue recognition in detail. You can also visit our website, www.iedubook.com to watch many more videos on Accountancy. Have a happy learning.