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A Bank Reconciliation Statement (BRS) is a financial document that compares the bank's records of an individual or a company's account with the corresponding entries in their own accounting records. It helps identify any discrepancies between the two sets of records, such as unrecorded transactions or errors, ensuring the accuracy of the financial information. The reconciliation process typically involves adjusting the accounting records to match the bank statement and vice versa.

Bookkeeping involves the systematic recording, storing, and retrieving of financial transactions. It's more about data entry and maintaining accurate financial records.

Accountancy encompasses a broader scope, involving the interpretation, analysis, and summarization of financial data. Accountants use the information recorded by bookkeepers to generate reports, provide insights, and make financial decisions. Essentially, accounting involves understanding and communicating the financial health of a business or individual.

The goods and services tax (GST) is a tax on goods and services sold domestically for consumption. The tax is included in the final price and paid by consumers at point of sale and passed to the government by the seller. The GST is usually taxed as a single rate across a nation.

Types.

Capital is the amount of money invested by the owner in the business. Say Reena is interested in doing a chocolate business , after sometime she has taken ₹ 40000 from her piggy bank which she collected since her childhood .

This 40,000 Reena wants to invest in her chocolate business , so it will be termed as Capital.

Now Business and Owner are treated as two different entities. If they both would be considered one entity then profit calculation can be misleading and false too.

Say Reena takes out some chocaltes everyday from her business and distribute free of cost to her cousins. In this case we can never calculate correct profit of Reena because she is using business products and giving free of cost to her relatives , thats why business and owner should be treated separate.

If Reena gives any chocolate to her cousin it should be treated as a transaction of personal use and should be termed as Drawings.

So when any amount is invested by owner in the business and as owner and business are two separate entities, therefore money invested by owner in the business will be treated as burden on the business

And technical word used for burden is called as Liability .

So Capital which owner invests in the business is considered as a burden on business .

So we call Capital as Internal Liability 

1. Interest on Loan taken by Firm should be 6 percent per annum.

2. Interest on Loan given by the Firm should be nil

3. No partner could be admitted in the firm without the consent of the exisiting partners.

4. Interest on Capital, Interest on Drawings and Partner's Salary/comission should be nil.

5. The Profit sharing ratio between the partners, for both profit and loss should be equal.

There are three types of accounts:

1. Personal account

2. Real account

3. Nominal accountR

1. Rule for personal account -  "debit the receiver and credit the giver."

2. Rule for real account is- "debit what comes in and credit what goes out"

3. Rule for nominal account is-"debit all expenses and losses and credit all incomes and gains"

This is one of the introductory chapters at the graduation level as well as in professional exams.

The brief notes on methods and calculation of goodwill in easy steps are presented below:

Methods of Valuation of Goodwill

1. Average Profits Method
2. Super Profits Method
3. Annuity Method
4. Capitalisation Method
1. By Average Profits Method
2. By Super Profits Method

Let us discuss each method in detail.

1. AVERAGE PROFITS METHOD

STEPS for calculation

1. Adjusted average annual profits (See note 1)
2. Number of years of purchase (given in question)
3. Value of Goodwill= Adjusted average annual profits multiplied by the number of years of purchase

Note :

• If several years of purchase for goodwill valuation are not given in the question, then the number of years for which data of profit or loss are provided should be taken.

Calculation of Adjusted average annual profits:

Steps for calculating it are as follows:

• Calculation of Adjusted profits OR Adjusted Future profits OR Future Maintainable Profits

• Calculation of Adjusted average profits

There are two methods:

Simple average method

(If there is fluctuation in the profits for given periods with no specific trend, then use this method). The formula is

 Total adjusted profits of all the given years divided by the number of years.

Weighted average method

(An increasing or decreasing trend in the profits for periods given in the question then use this method). The format for calculating it is as follows.

 SUPER PROFITS METHOD

STEPS for calculation

1. Adjusted average annual profits (See Note below)
2. Average Capital Employed (See Note below)
3. Expected Rate of Return (given in question)
4. Regular Profits = Average Capital Employed multiplied by Normal Rate of Return
5. Super Profits = Adjusted average annual profits less Normal Profits
6. Value of Goodwill = Super Profits multiplied by the number of years of purchase

Note

• Calculation of Adjusted average annual profits (as discussed earlier)
• Calculation of Average Capital Employed

           There are two ways to ascertain Average Capital Employed. 

Liabilities Based Approach

 ANNUITY METHOD 

STEPS for calculation

1. Super Profits (Refer Super Profits method )
2. Annuity Value (given in question)
3. Value of Goodwill = Super profits multiplied by Annuity Value

1. CAPITALISATION METHOD

By Average Profits Method

STEPS for calculation

1. Adjusted average annual profits (See Note below)
2. Expected Rate of Return (given in question)
3. Total Value of Business = (Adjusted average annual profits divided by Normal Rate of Return) multiplied by 100
4. Value of Goodwill = Total Value of Business Less Capital Employed

 Note: Capital Employed = Assets minus Liabilities

By Super Profits Method

 STEPS for calculation

1. Super Profits (Refer Super Profits method )
2. Average Rate of Return (given in question)
3. Value of goodwill = (Super Profits divided by NRR) multiplied by 100

Preparation of Final Accounts From Incomplete Records or Single Entry System:

There are two methods for the preparation of final accounts from single entry books/ incomplete records.

Method 1: Under this system, two statements are prepared:

1. Statement of profit and loss and
2. Statement of affairs.

Step1 - Prepare a statement of affairs at the beginning and at the year-end to find out the opening and closing capital, respectively.

Proforma of the statement of affairs:

Statement of affairs as on....(date).

Sources to find out details like assets and liabilities of a business enterprise:

1. Cash Book for cash balance
2. Bank Passbook for the bank balance
3. Personal Ledger for Debtors, Creditors, Bills receivable and other current assets/ liabilities etc.
4. Inventory by actual counting and Valuation
5. Written down value of Fixed assets from the list prepared by the proprietor disclosing the original cost, the date of purchase and written down value after deducting a reasonable amount of deprecation.

Step2 - Prepare a statement of profit and loss to ascertain the trading profit. It can be prepared either in the statement form or in the form of a ledger. Both the formats are explained below.

Format: Statement of Profit and Loss for the year ended.

1. In the statement form

 2. In the form of Ledger

Step3 - Prepare a statement of affairs as at the YEAR-END to show the business’s financial position.

Method 2: Conversion of single entry to double entry

Step1 - various ledger accounts are prepared, e.g. sales, purchases, debtors, creditors, Trading A/c, cash book to locate missing details.

Step2 - Find all the required details from the available information. For example, if we know opening & closing balances in Debtors’ A/c and the cash received from debtors, the balancing figure will indicate sales figures. Similarly, with the opening and closing balances of creditors & credit purchases figures, we can find cash paid to creditors from the creditor’s ledger.

Step3 - Once all these figures required to prepare financial statements are calculated through their respective ledgers, it is easy to prepare the financial statements in regular formats.