Learning

📜 Practical Accounting Insights for Senior Accountants

Real-World Q&A with Explanations

This document presents 10 practical questions commonly encountered by Senior Accountants, with detailed journal entries, accounting standards, and real-world implications.

This document helps accountants apply advanced journal logic, understand statutory limits, and build a stronger reporting framework using real-world accounting principles.

---

1. 💼 Prepaid Rent – Matching Concept & Apportioning

Scenario:

You paid ₹60,000 on 1st Jan for 6 months’ rent. Your financial year ends on 31st March.

Journal Entries:

• On 1st Jan:

Prepaid Rent A/c Dr      60,000

    To Bank A/c               60,000

• At year-end (to record 3 months rent as expense):

Rent Expense A/c Dr      30,000

    To Prepaid Rent A/c      30,000

Balance Sheet Impact:

• Prepaid Rent (Asset): ₹30,000
• Rent Expense (P&L): ₹30,000

Principle:

Matching Concept – Recognize expenses in the same period as the related income.

---

2. 📜 Provision for Doubtful Debts – Limits & Ledger Impact

Scenario:

Sundry Debtors = ₹5,00,000
Provision Required = ₹25,000

Journal Entry:

Bad Debts Expense A/c Dr      25,000

    To Provision for Doubtful Debts A/c      25,000

Balance Sheet Presentation:

Particulars	Amount (INR)
Sundry Debtors	5,00,000
Less: Provision for Doubtful Debts	(25,000)
Net Debtors	4,75,000

Standards & Concepts:

• No fixed limit for provision; depends on risk and justification.
• AS-4 / Ind AS 109 – Expected Credit Loss.
• Prudence Principle – Recognize probable losses early.

---

3. 🏦 BRS – Cheque Not Presented

Scenario:

Cheque issued but not presented

Entry in Books:

Creditors A/c Dr       25,000

    To Bank A/c              25,000

BRS Impact:

• Bank Statement will not show this debit.
• Adjust in BRS:

Add: Cheque issued but not presented      25,000

Resolution:

Once cheque is presented and cleared, it reflects in bank statement and reconciles automatically in next BRS.

---

4. 🏢 Sale of Fixed Asset – Journal & Book Value Impact

Scenario:

• Asset Cost: ₹5,00,000
• Accumulated Depreciation: ₹3,00,000
• Book Value: ₹2,00,000
• Sale Price: ₹2,50,000 (Profit: ₹50,000)

Journal Entry:

Bank A/c Dr                        2,50,000

Accumulated Depreciation A/c Dr   3,00,000

    To Fixed Asset A/c                     5,00,000

    To Profit on Sale of Asset             50,000

P&L Impact:

• Profit on Sale = ₹50,000 (Indirect Income)

---

5. 📆 GST without Invoice or Payment

Scenario:

Service rendered, but no invoice or payment yet.

Action:

• No GST payable until invoice or payment.
• But per GST Law, invoice must be raised within 30 days of service.

Compliance Risk:

Delayed invoicing = non-compliance. File GST only after raising invoice.

---

6. 📊 COGS & Gross Profit – Simplified

Formula:

COGS = Opening Stock + Purchases – Closing Stock

Gross Profit = Sales – COGS

Example:

• Opening Stock: ₹20,000
• Purchases: ₹70,000
• Closing Stock: ₹25,000
• Sales: ₹1,00,000

COGS:

COGS = 20,000 + 70,000 – 25,000 = 65,000

Gross Profit:

= 1,00,000 – 65,000 = 35,000

P&L View:

• Sales = Income
• COGS = Expense
• Difference = Gross Profit

---

7. 📎 Provision vs Bad Debts – Journal Flow

Creating Provision (with amounts):

Bad Debts Expense A/c Dr       25,000

    To Provision for Doubtful Debts A/c     25,000

Balance Sheet Presentation:

Debtors (Gross)	₹5,00,000
Less: Provision	₹25,000
Net Debtors	₹4,75,000

Writing off Specific Bad Debt (₹10,000):

Provision for Doubtful Debts A/c Dr     10,000

    To Sundry Debtors A/c                    10,000

Updated:

| Debtors = 4,90,000 | Provision = 15,000 | Net = 4,75,000

---

8. 💼 GST on Service Without Bill

Scenario:

Service provided but invoice not issued

GST Rule:

• Invoice must be issued within 30 days
• GST liability arises even if bill not yet raised

Adjustment Journal (once raised):

Customer A/c Dr     11,800

    To Revenue A/c            10,000

    To GST Payable A/c         1,800

---

9. 💵 Internal Controls for Cash in Small Companies

Recommended Practices:

• Daily cash count & verification
• Maintain manual/digital Cash Register
• Owner/supervisor to verify deposits
• Use WhatsApp for bill collection if no formal system

---

10. 🌐 Budgeting & Overhead Analysis

Budgeting Basis:

• Prior year actuals
• Expected growth / inflation
• Department targets

Types:

• Sales Budget
• Expense Budget
• Cash Budget

Overhead Analysis:

Overhead Type	Examples
Admin	Rent, Salaries, Utilities
Selling	Travel, Commissions
Financial	Interest, Bank Charges

Use ratios like Overhead to Sales % to monitor.

---