Dear Chartered accountants,
Query No 1: what is the exact meaning of the following terms
A) Networth
B) Turnover
C)Netprofit
please tell me the differences of these three thing...
Query No 2:
" To" means credit and " By" means Debit in Accounting...
in Trading account......why all expenses are posted in " To" side for example to purchase,to wages??? why they didn't mention the by purchase by wages??
Networth can be assets- liabilities or as per IT acts
Turnover can be sales or formula as per IT acts
Net Profit is Profits before tax- Current+/-Deferred taxes.
To & By are used to denote debit and credit balances in double entry system or ledger books.
1.) Debit all the expenses and losses. 2.) Credit all the income and gains.
In the trial balance all expenses are in Debit balance. When you post them to Trading account (Nominal account), the entry is
By Trading account
To Expenses/ Wages account
This is because Trading account itself is an individual ledger type account or a book. So for the purpose of double entry/ dual aspect, the BY wages in trail balance becomes TO Wages. This system is meaningless before COS method where there is no Trading account. Just remember in the exams, all debit balances in the trial balance will be shown as TO in the Trading account's debit side.
COS sales is better than this and even I dont practise Trading account.
CAclubindia
