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Rules of Debit and Credit
Financial transactions under double entry system have double effect because they involve at least two accounts. One is credited and the other is debited. The debiting and crediting has to be done on basis of laid down rules.
Accounts are often classified in terms of assets, liabilities, income, and expenses (Larson & Jensen, 2005). Expenses are further classified thus: capital expenses and revenue expenses. Assets are classified in terms of their liquidity. They are properties and possessions that an organization has that can be liquidated within a year or after a year. The properties and possessions can have physical existence or no physical existence. They can be tangible or intangible. Liabilities are a business enterprise debts and obligations. A business enterprise therefore has an obligation to pay its debts on a future date. Assets are created when a venture invests its capital. Income...
It is the returns received from the resources invested in a business. Expenses are the costs an enterprise incurs in its endeavors to earn revenue. Basically, profit is the excess of income over expenses in a specific period. Loss on the other hand, is the excess of expenses over income (Larson & Jensen, 2005). Capital expenditures have a life of more than one year. They create an asset used in generating future income. A typical example of capital expenditure is a machinery or furniture purchased. Revenue expenditures are day-to-day expenses with instantaneous benefits like employee salary or rent paid on a leased building. Any account: be it an asset, a liability, income, or an expense that provides some sort of benefit to a business venture is debit (Larson & Jensen, 2005). However, any undertaking that compels a business enterprise to return benefit…
References List
Larson, K. & Jensen, T. (2005). Fundamental Accounting Principles. McGraw-Hill Ryerson
Pieters, A. & Dempsey, H.N. (2009). Introduction to financial accounting (7th ed.). Durban:
LexisNexis.
Advice for the Company on the New Internal Control Requirements Internal control requirements are the policies, mechanisms and procedures that organizations should satisfy to minimize the operational risks. The internal control is very critical to deter employees from implementing fraudulent operations; an organization is required to adhere to the internal system before going public. Section 404 of the SOX (Sarbanes-Oxley) Act states that internal control is critical for a publicly
Banking In the 1899 case of Austen v United States Bank 174, the Supreme Court defined a bank in the following words: "A bank is an institution, usually incorporated with power to issue its promissory notes intended to circulate as money (known as bank notes); or to receive the money of others on general deposit, to form a joint fund that shall be used by the institution, for its own benefit,
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