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what is accrual basis of accounting?explain in detail?
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Answer / dharmendra jha
Accrual basis means something that becomes due especially
an amount of money that is yet to be paid or received at
the end of the accounting period.
The accrual concept under accounting assumes that revenue
is realised at the time of sale of goods or services
irrespective of the fact when the cash is received. For
example, a firm sells goods for Rs 10,000 on 20th March
2010 and the payment is not received until 10th April 2010,
the amount
is due and payable to the firm on the date of sale i.e.
20th March 2010.
It must be included in the revenue for the year ending 31st
March 2010.
Similarly, expenses are recognised at the time services
provided, irrespective............
| Is This Answer Correct ? | 37 Yes | 6 No |
Answer / sameer
accrual accounting = recording income earned/ expenses made when they occur , irrespective of when cash is received or paid.
| Is This Answer Correct ? | 15 Yes | 0 No |
Answer / simran fukela
Accrual basis mean the income earned and expense incurred of this year is recorded in this year whether money paid and receipt in any financial year.
For example: rent charges of Rs. 10000 incurred in the month of march 2015. But Payment of expenditure is made on April 2016 but expenditure shall be recorded in march 2015
| Is This Answer Correct ? | 1 Yes | 0 No |
acrrual means recording the revenue or expenses for the period in which they are earned or incurred irrespective of whether cash transfer has taken place or not.
Earned= right to receive is established....
Incurred= obligation to pay is established...
| Is This Answer Correct ? | 1 Yes | 0 No |
Answer / baig
The profit arises only when there is an increase in owners capital, which is a result of excess of revenue over expenses and loss.
| Is This Answer Correct ? | 1 Yes | 15 No |
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DHPL is a small sized firm manufacturing hand tools. It manufacturing plan is situated in haryana. The company's sales in the year ending on 31st march 2007 were Rs.1000 million(Rs.100 crore) on an asset base of Rs.650 million. The net profit of the company was Rs.76 million. The management of the company wants to improve profitability further. The required rate of the company is 14 percent.The company is currently considering an investment proposal. One is to expand its manufacturing capacity. The estimated cost of the new equipment is Rs.250 million. It is expected to have an economic life of 10 years. The accountant forecasts that net cash inflows would be Rs.45 million per annum for the first three years, Rs.68 million per annum from year four to year eight and for the remaining two years Rs.30 million per annum. The plant can be sold for Rs.200 million: (a) The company can borrow funds from a nationalized bank at the interest rate of 14 percent for 10 years. It will be required to pay equal annum installment of interest and repayment of principal. (b) A financial institution has offered to lend money to DHPL at 13.5 per annum but it needs to pay equated quarterly installment of interest and repayment of principal. Questions: (1) Should the company expand its capacity? show the computation of NPV. (2) What is the annual installment of bank loan? (3) calculate the quarterly installment of the financial institution loan. (4) should the company borrow from the bank of from the financial institution?
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