Balance Sheet – A balance sheet is known as a statement of financial position as it shows the position of assets, liabilities, and equity at the end of an accounting period. The net worth of a business can be determined by deducting the liabilities from the assets. A Ledger Book or more precisely Ledger Account is the primary and chief journal in the accounting of an organisation or a business entity. It includes complete information on all the aspects related to the financial transactions made by the business entity within the stipulated period.
A creditor, in other terms, makes a loan to another person or institution. Debtors are often grouped in financial reporting based on the period of their debt repayments. Short-term borrowers, for example, are those whose outstanding debt is due within a year. Short-term debtors’ payments are accounted for as short-term receivables in the company’s current assets. Sales Return – A sales return refers to items or goods that are returned by a customer to the business. A sales return book is a book in accounting that records all those transactions related to the returns of goods and items by the customer which were earlier sold to them on credit.
Cash – Cash and Cash equivalents are related to the detail on the balance sheet that summarises the value of a business’s assets that are cash or can be transformed into cash instantly. The cash equivalents consist of marketable securities, bank accounts, short-term government bonds, commercial paper, and Treasury bills with a maturity date of 3 months or less. Marketable bonds and money market holdings are estimated cash equivalents as they are liquid and not directed to substantial variations in the state.
- The debtor is referred to as an issuer if the debt is issued in the form of financial securities (e.g., bonds).
- In most cases, a debtor can start the bankruptcy procedure by filing a petition with the court.
- The only entity that is not a debtor is one that pays up-front in cash for all transactions.
- The company’s debtors are listed as assets on the balance sheet, whereas the company’s creditors are listed as liabilities.
NCERT Solutions for Class 11 Accountancy Chapter 1 Introduction To Accounting
If a partner introduces any further capital to the business, then the additional capital is also taken into account for providing interest. Wages – The hourly compensation paid to the employees for their work during a period of time in an organisation is called wages. The blue-collar workers are paid for the total number of hours that they work. These types of employees usually have a time card or time sheet to track their work on a weekly basis. If Alpha Company lends money to Charlie Company, Alpha takes on the role of the creditor, and Charlie is the debtor.
It increases the proprietor’s capital as it’s far introduced to the capital at the cease of every accounting period. For example, goods costing Rs 1,00,000 are bought at Rs 1,20,000, then the sale proceeds of Rs 1,20,000 is the sales and 1,00,000 is the price to generate this sale. For this reason, an accounting profit of Rs 20,000 (i.e. Rs 1, 20,000- Rs 1, 00,000) is the distinction between the sales and price that is earned via the commercial enterprise. Expenses – Charges talk to the one’s charges which might be incurred to earn revenue for the commercial enterprise. It’s miles incurred for preserving the profitability of the commercial enterprise.
Order of Performance and Liquidity – Order of performance and liquidity in accounting refers to the arrangement of assets and liabilities in a balance sheet based on their liquidity. The assets are placed according to the ease with which they can be converted into cash while liabilities are placed according to the degree of urgency in making the payment. Direct Expenses – Direct expenses are the expenses incurred directly by the organisation with the changes in the volume of the cost object.
FAQs on NCERT Solutions for Class 11 Accountancy Chapter 1 Introduction To Accounting
It’s worth noting that any corporate organization can be both a creditor and a debtor at the same time. A company, for example, may borrow capital to grow its operations (i.e., become a debtor), while also selling its goods to customers on credit (i.e., be a creditor). In other words, interest on capital is the interest paid to owners for providing a firm with the required capital to start a business.
Can a person be both a debtor and a creditor?
Liquid property – belongings that can be kept distinguish between debtors and creditors class 11 either in cash or coins equivalents are regarded as liquid belongings. These can be transformed into coins in a very brief period of time; for example, coins, financial institutions, bills receivable, etc. Fixed Assets – those are that property that is held for the long term and boom the income-earning ability and efficient capability of the business.
It gives information regarding how much goods have been purchased and sold, expenses incurred and amount earned during a year. Class 11 Accountancy NCERT Solutions Chapter 1, Introduction to Accounting provides students with the fundamentals of business financial management. Debtors are an integral part of current liabilities and represent the aggregate amount which a customer owe to the business. On the contrary, a creditor represents trade payables and is a part of the current liability. A creditor is a person or entity to whom the company owes money on account of goods or services received.
Learn CBSE Accountancy Index Terms for Class 11, Part 2, Chapter 1 Financial Statements I
Sundry Debtors and Sundry Creditors are the stakeholders of the company. For an efficient Working Capital cycle, every company maintains a time lag between the receipt from debtors and payment to creditors. So that, the flow of working capital will go smoothly. Creditors are the parties, to whom the company owes a debt. Here, the party can be an individual or a company which includes suppliers, lenders, government, service providers, etc. Whenever the company purchases goods from another company or services are provided by a person and the amount is not yet paid.
Ans.There are various types of accounting. They can be classified into – Financial Accounting, Managerial Accounting, Cost accounting, Internal accounting and Tax accounting. Get answers to the most common queries related to the K-12 Examination Preparation. Debt can be referred to in a variety of ways depending on the sort of endeavour. A debtor is commonly referred to as a borrower if the debt is taken from a financial institution (e.g., a bank).