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What is Trading Account? Trading account is a part of final accounts prepared by a business firm which shows gross profitability of business activities during a particular period. In other words, trading account shows total sales, total purchases and all direct expenses relating to purchase and sales. Who prepares Trading Account? Trading account is prepared by manufacturing companies and trading …

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Basically, the trial balance indicates the arithmetical accuracy of the accounting entries. The trial balance is made with the closing balances of the ledger and if the totals of both sides of trial balance are equal then it indicates that the totaling and balancing of the accounts are perfectly correct. Though the totals of both sides of the trial balance …

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When the error in one account is automatically being corrected with the error in other account by chance then it is called compensating error. The compensating errors may occur due to following reasons:- Posting of less amount in any account  may be compensated with the under-casting of other account.  For example the purchase  was posted less by Rs.10000/= in debit …

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These errors are most common. These errors can be avoided with little care. These mistakes are committed because of ignorance, lack of proper accounting knowledge and carelessness of accounting staff.  Few Example of errors of commissions are as under:- If the wrong amount is entered in day book at the time of entry. For example a purchase of Rs.12450/= entered …

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When a transaction is omitted from recording in the books of accounts wholly or partially, it is called errors of omissions. These errors shows the weakness and carelessness of  the accounts staff. These errors can be avoided with a little care very easily. The errors of omissions  can be divided in to two parts:- Complete Omissions:– When a transaction is …

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This types of  errors occur when the principle of accounting are not followed at the time of making journal entry.  Error of the principles involves whenever the amount received or paid is not properly allocated to correct heads or the basic rules of debit or credit are not followed. The distinction between revenue and capital is most important because any …

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No one may be the perfect in the world. The same formula applies in accounting also. When there are lot of transactions in a business firm and different accountants are handling the accounting responsibilities, there may be the possibility of errors in recording the transactions. The errors in accounting may be classified as under:- Errors of Principles:- When the principles …

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Brief Description:- No one knows what will happen in next moment? It is not a philosophy but very true. In general life, we make the estimate for all the genuine expenditure to be done. But we make a provision for certain wanted or unwanted expenditures also. For example we keep the reserves for medicines, social obligations and some other legal …

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Brief Description:- As we know that a business firm need proper funds to run its business smoothly. Mainly, the money is being invested by the owners of the firm or shareholders of the company. If the company needs more funds then it takes loans from outsiders. Some time what happens is that the company is new in the market and …


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