Salable or usable products having a relatively low value incidentally realized in the course of manufacturing the main product is called by-product. In many instances, there may be several joint products and several by-products depending upon the nature of the input raw materials being processed. A by-product is an outcome that does not make tangible contribution to the sales revenue. The economic value of by-product, comparing it with the main product, is comparatively low. By-product in the course of sugar production are Bagasse of solid waste and molasses of sweet semi-liquid product. Poultry farm in delivering chicken meat to the market gets poultry leftover parts such as poultry fathers, bones, beaks, feet and poultry fat as by-product. The fibers and outer shell Continue reading
Accounting Basics
Accounting Treatment for Material Losses: Waste, Scrap and Spoilage
Meaning and Types of Waste The loss of raw materials in processing is waste. Waste has no receivable value. It is a quantity loss of material in the process of producing goods. Waste is brought into record by comparing the input quantity with the output quantity. Waste may occur due to shrinkage, smoke, weight loss and evaporation causing the material to become waste. They are material losses causing a quantity loss. Waste may occur in terms of a by-product which does not produce any realizable value. For example, 20kg of potato does not give 20kg of potato chips. Thus, the fact that 15 kg of chips is produced out of 20kg potato means that 5 kg of potato is wasted Continue reading
Reserves – Meaning, Objectives and Types
A reserve is a part of the profit set aside to meet future contingencies and losses. Usually, the whole amount of profit earned by the business is not distributed to the owners or shareholders. A part of the profit is retained in the business either for meeting its unexpected future liabilities and losses or for strengthening financial position. It can be created for redeeming liabilities or replacing depreciable assets or declaring uniform rate of dividend over years. It is created out of the profit only. If there is no profit in a particular year, no reserve can be created in that year. It is created by debiting the profit and loss appropriation account. It does not reduce the figure of Continue reading
Government Accounting – Meaning, Objectives and Features
Accounting is concerned with the processing of financial transactions of an entity. It generates and communicates necessary financial information to its users. It is, therefore, a process of recording, classifying and summarizing the financial transactions and communicating the results of its operations. There are different branches of accounting. One of its branches is government accounting. Government accounting is that branch of accounting, which is used in government institution. The government accounting is different from other branches of accounting such as commercial accounting. The accounting system used in government offices to record and report their financial transactions is known as government accounting. Government accounting is concerned with systematic and scientific recording of government revenues and expenditures. It is the systematic process of Continue reading
Accounting Errors – Meaning, Causes and Types
The errors or mistakes which are committed in the journal, ledger and any other financial statements are known as accounting errors. Accounting errors may be defined as those mistakes which are generally committed while recording the financial transactions in the book of accounts. These errors may be committed while recording the transactions in the journal and posting them in the ledger accounts. Such errors may be technically committed or committed due to lack of the knowledge of accounting principles and rules. Generally, accounting errors are unintentional. However, it may intentionally be committed so as to take some undue advantage. Accounting errors distort the true business results. Therefore, these errors must be properly located and rectified for ascertaining the true profit Continue reading
Double Entry Bookkeeping System
Bookkeeping is an act of keeping permanent records of the financial transactions of a business in a systematic and orderly manner. The financial transactions of the business are identified, recorded and classified in different books. In modern entities, records of financial transactions are maintained under a double entry system. The double entry system has been recognized as a systematic and complete system for recording financial transactions. Double entry system recognizes that every financial transactions has two aspects. It then records two aspects of a transaction simultaneously in two separate accounts with equal amounts. It provides the aspects of a transaction with their names of debit and credit. Thereafter, with the help of ledger accounts, profit and loss account and the Continue reading