Depreciation, Rectification of errors, opening/transfer/closing entries | Accounting Basics |

For Class details, visit: https://cmajunction.com/CLASSES/ Handwritten Notes of Fundamentals of Accounting: https://imojo.in/3y3568e Fundamentals of Accounting Accounting Basics Topics covered in this video: 1. DEPRECIATION –METHODS (STRAIGHT LINE AND DIMINISHING BALANCE METHODS) “Depreciation is the gradual and permanent decrease in the value of an asset due to constant use, wear and tear” Amortization Intangible assets such as goodwill, trademarks, and patents are written off over several accounting periods covering their estimated useful lives Depletion This method is especially suited to mines, oil wells, quarries, sandpits, and similar assets of a wasting character. In this method, the cost of the asset is divided by the total workable deposits of the mine etc., and by following the above manner rate of depletion can be ascertained. Obsolescence The term ‘Obsolescence’ refers to the loss of usefulness arising from such factors as technological changes, improvement in production methods, change in market demand for the product output of the asset or service or legal or medical or other restrictions Dilapidation In one sentence Dilapidation means a state of deterioration due to old age or long use. This the term refers to damage done to a building or other property during the tenancy. Methods of Providing Depreciation: 1. Straight Line Method = Cost of Asset – Residual Value Expected Life of Asset 2. Diminishing Balance Method = Cost or WDV of Asset x Rate of Depreciation Methods of Recording Depreciation: 1. When a provision for Depreciation Account is maintained 2. When a provision for Depreciation Account is not maintained 2. RECTIFICATION OF ERRORS Basic Concepts, Undercast, Overcast & Suspense A/c Before Preparation of Trial Balance After Trial Balance but before Final Accounts After Final Accounts: Transfer all amounts concerning Nominal Accounts to Profit & Loss Adjustment A/c 3. OPENING ENTRIES, TRANSFER ENTRIES, ADJUSTMENT ENTRIES, CLOSING ENTRIES Opening Entries: The opening entry is an item which is passed in the Journal proper or General Ledger All Asset A/c’s Dr To All Liabilities A/c To Owners’ Capital A/c Closing Entries: a) For transferring purchases and direct expenses (goods related) to Trading A/c b) For transferring sales and closing stocks c) For transferring gross profit or gross loss to P&L A/c d) For transferring expenses e) For transferring Incomes f) For transferring Net profit or net loss Transfer Entries: When an amount or balance of one account must be transferred to some other accounts, it is done using a transfer journal entry in the Journal Proper. i.e., The amount is withdrawn from Capital Capital A/c Dr. To, Drawing A/c ADJUSTMENT ENTRIES 1. Closing Stock: When a closing stock appears outside the trial balance Closing stock A/c ……Dr. To Trading A/c As it is given outside the trial balance, it is treated twice in final accounts i.e., it appears in the trading account on the credit side and also in the balance sheet asset side. 2. Outstanding expenses: For example, wages of `4,000 which have become due on 31st March but not paid in the financial year is termed as outstanding wages. The adjustment entry is: 3. Prepaid or unexpired expenses For example, the insurance premium of `6,000 for one year is paid on 1st Jan. and the accounting year closes on 31st March. This means the insurance premium for nine months i.e. for April 1st to Dec…, 31st amounting to `4,500 has been paid in advance i.e., prepaid. The adjustment entry is: 4. Accrued Income: 5. Income Received in Advance Join or telegram channel: @cmajunction Handwritten Notes: Check out the store: https://www.instamojo.com/CMAJunction... CMA INTER PAPER-5 Financial Accounting: https://imojo.in/34t9hta PAPER-7 Direct Taxation(first three chapters): https://imojo.in/300l9qd Income under the head Salaries: https://imojo.in/1zavnm4 Income from House Property: https://imojo.in/y99ogr Profits & Gains of Business or Profession: https://imojo.in/1a5xs19 Income under Head Capital Gains- For those who want to Study with our Capital Gains videos: Capital Gains Full Notes [Section 45-55]: https://imojo.in/8mgm3l The income of Other Person included in Assessees Total Income Direct Taxation Handwritten Notes: https://imojo.in/oc2tph Set-off & Carry Forward of Losses Handwritten Notes: https://imojo.in/csbdw PAPER-9 Operations Management & Strategic Management: https://imojo.in/2e0m5vw PAPER-10 Cost & Management Accounting: https://imojo.in/ugaa1 Financial Management: https://imojo.in/qbcbuw #cmafoundation #depreciation #rectification