Accounting Jargons

The need of businesses for recording (business) transactions in systematic manner has given rise to Book-keeping.

Book-keeping tells us how to keep a record of business transactions. Only transactions related to business expressible in money terms are recorded. Book-keeping activities include recording in the journal, posting to the ledger and balancing of accounts. But Book-keeping is unable to present clear financial picture of the state of affairs of a business. The information contained in these books needs to be analysed and interpreted to make any judgement about the financial position of the business. Such information can be given by accounting.

Accounting is a system which collects and processes financial information of a business. This information is reported to the users to enable them to make appropriate decisions.

American Accounting Association defines accounting as “the process of identifying, measuring and communicating economic information to permit informed judgements and decision by users of the information”. The process of accounting as per above definition is given below

 The process given above may be put into an accounting cycle which is an end-to-end sequence of accounting process, which begins with the recording of business transactions and ends with the preparation of final accounts.

Cost accounting is collection, classification and ascertainment of the cost of production for a job undertaken by the company.

Management accounting is use of accounting data for the purpose of policy formulation, planning, control and decision making by the management.

Transaction is an activity concerned with businesses which involve transfer of money or goods or services between two entities. For example, purchase of goods, salaries paid, etc. Cash transaction involves cash receipt or payment of cash, for example buying goods by paying cash. Credit transaction involves transaction on credit where receipt or payment happens later.

Proprietor owns a business and contributes capital to the business to earn profit.


Asset is a thing of value to the business or significant property belonging to the business. Some examples include Cash, plant and machinery. Tangible Assets have physical existence. It can be seen and touched. For example, plant & machinery, cash, etc. Intangible Assets have no physical existence but their possession gives rights and benefits, to the owner. It cannot be seen and touched. Goodwill, patents, are some of the examples.

Liabilities are financial obligations of a business towards others e.g. loans from bank, creditors for goods supplied.

Drawings are cash or value of goods withdrawn from the business/company by the proprietor for his personal use. It is deducted from the capital. Debtor is a person, individual, or firm which receives benefit but promises to pay in future. Debtors form part of firm’s assets. Creditors give benefit to the company first and claim it in future. Creditors form liability in the balance sheet.

Purchases are goods bought for resale or for use in the process of production. Purchases can be cash purchases or credit purchases. Sometimes these purchases are returned due to poor quality or not as per the terms of purchase, it is called purchases return. Net purchases are equal to Total purchases (cash+credit) minus purchase return.

Sales is the amount of goods sold from already bought goods or manufactured goods Sales can be cash sales or credit sales. Sometimes customer may return goods due to poor quality or not as per terms of sale, it is termed as sales return or return inward. Net sales is equal to Total sales (cash+credit) minus sales return.

In accounting stock includes goods unsold on a particular date. Opening stock means goods unsold in the beginning of the accounting period whereas the term closing stock includes goods unsold at the end of the accounting period.

Revenue includes amount received or receivable from sale of goods and other earnings in the form of interest, dividend, commission, etc.

Expense is all spending in order to produce and sell the goods and services. For example, spending for raw materials, wages, etc.

Income is the difference between revenue and expense.

Voucher is a written document supporting a transaction. It is evidence that a particular transaction has taken place for the value given in the voucher. The voucher may be in different forms, for example, invoice, cash memo, etc.

Invoice is a business document or statement prepared by the seller of goods containing information about seller and buyer, the date of sale and description of goods with quantity and price.

Receipt is an acknowledgement given by seller for cash received. Seller issues it to buyer who pays cash. Cash book entries are based on these receipts.

Account is a summary of business transactions (financial transactions) at one place relating to a person, asset, expense or revenue named in the heading. An account has two sides called debit side and credit side.

Read More

Cash flow Statement

contd. from Accounting Basics

1.4 Cash flow Statement

You should also have idea about cash flow statement. This shows how TOD's cash has changed during the time interval shown in the heading of the statement. This statement shows the cash generated and used by your company's operating activities, investing activities, and financing activities. Much of the information to this statement comes from balance sheet and income statement. We shall learn more about it in a chapter separately.

1.5 Double Entry System of Accounting 

For ages, accountants have been using accounting procedure termed as double entry system of accounting for recording transactions. In double entry system, each amount is recorded in at least TWO accounts.
For each transaction, there are two aspects. One is “receiving aspect” or “incoming aspect” or “expenses/loss aspect”. This is “Debit aspect”. The other is “giving aspect” or “outgoing aspect” or “income/gain aspect”. This is “Credit aspect”. These aspects “Debit aspect” and “Credit aspect” form the basis of Double Entry System. For every debit, there must be a corresponding credit of equal amount and vice versa.
Recording of transactions can be done by following given approaches:
I. Accounting Equation Approach
II. Traditional Approach

Accounting Equation Approach

This is called American approach wherein transactions are recorded based on accounting equation
Assets=Liabilities+ Stockholders' (or Owner's) Equity

Traditional Approach

This is British Approach. Transactions are recorded on the basis of existence of two aspects of each transaction i.e. debit and credit. Books of accounts are used to record transactions under double entry system.
For your company first you should find out all the relevant and useful list of accounts for recording transactions. This list is referred to as Chart of Accounts.
TOD might use following accounts

From Balance Sheet

• Asset accounts (e.g. Cash, Accounts Receivable, Supplies, and Equipment) 
• Liability accounts (e.g. Loan Payable, Accounts Payable, and Wages Payable) 
• Stockholders' Equity accounts (e.g. Common Stock, Retained Earnings)

From Income Statement: 

• Revenue accounts (e.g. Service Revenues, Investment Revenues) 
• Expense accounts (e.g. Wages Expense, Rent Expense, Depreciation Expense) 

1.6 Illustrations for Double Entry System of Accounting (American Approach) 

 Suppose on July 1, on the first day of your business, first transaction is investment of your money (Rs. 500,000) for 50,000 shares of TOD of common stock then TOD's accounting system will show addition to CASH account of Rs. 500,000 and stockholder’s equity account will show increase of Rs. 500,000. CASH and STOCKHOLDER’S EQUITY are balance sheet accounts. Nothing will appear on income statement because there is no revenue or expenses as on July 1.

When you record these transactions, TOD's balance sheet will look as shown below as per American approach:

Balance-sheet always balances as shown above. From above table an equation may be derived which is given below.

                            Assets = Liabilities+ Stockholders' (or Owner's) Equity
                         500,000 = 0                + 500,000

As we learnt about double entry system of accounting, in this case two accounts i.e. Cash and Common stock accounts are affected by the transaction.

As per double entry system, an amount for transaction should be entered on left side of one account and on the right side of another account. Entry on left is DEBIT and entry on right is CREDIT. Amount is entered is same on both sides.
But how accountants know which account he should debit and which account he should credit. For that we shall have to know about types of accounts. Account is a summary of relevant transactions at one place relating to a particular head. Account may be classified based on kind of transactions.

Transactions can be divided into three categories

• Transactions relating to individuals and firms
• Transactions relating to properties, goods or cash
• Transactions relating to expenses or losses and incomes or gains.

Therefore accounts may be classified as follows

Personal Accounts: The accounts which relate to persons. Personal accounts include the following.

i. Natural Persons: Accounts which relate to individuals. For example Ram's A/c, Daksh’s A/c, etc. ii. Artificial persons: Accounts which relate to a group of persons or firms or institutions. For example, XYZ Ltd., Indian Bank, GIC Limited Country club etc.
iii. Representative Persons: Accounts which represent a particular person or group of persons. For example, outstanding salary account, prepaid insurance account, etc.

The company may keep business relations with all the above personal accounts, because of buying goods from them or selling goods to them or borrowing from them or lending to them. Thus they become either Debtors or Creditors.
The proprietor being an individual his capital account and his drawings account are also personal accounts.

Impersonal Accounts: All those accounts which are not personal accounts. This is further divided into two types viz. Real and Nominal accounts.
i. Real Accounts: Accounts relating to properties and assets which are owned by the business concern. Real accounts include tangible and intangible accounts. For example, Land, Building, Goodwill, Purchases, etc.
ii. Nominal Accounts: These accounts do not have any existence, form or shape. They relate to incomes and expenses and gains and losses of a business concern. For example, Salary Account, Dividend Account, etc.
Business transactions are recorded based on following golden rules of accounting

Sr.No	Name of Account	Debit aspect	Credit Aspect
1	Personal	The receiver	The Giver
2	Real	What comes in	What goes out
3	Nominal	All Expenses and Losses	All income and Gains

Read More

Balance Sheet

contd. from Accounting Basics

1.3 Balance Sheet 

Mr. Das now started explaining about balance sheet. It is a one kind of financial statement that reports company's assets, liabilities, and stockholders' (or owner's) equity at a specific point in time. It is a snapshot of a company's financial position at a given moment. For example, if a balance sheet is dated March 31, 2009 the figures shown on the balance sheet are the balances in the respective accounts after all transactions of March 31, 2009 have been recorded.

1.3.1 Assets 

Assets are the resources that a company owns. So in your case all motorcycles, cash in the bank, all supplies (raw material) in hand, and equipment are assets. These assets can be reported in accounts called vehicles, cash, supplies, and equipment. Accounts Receivable is also one asset as it records earning or sale made but not paid.
A. Prepaid 
You have to learn about obvious asset,—the unexpired portion of prepaid expenses. Suppose for instance, TOD pays Rs. 15000 on July 1, for an insurance premium on its motorcycles (insurance premium is being paid bi-annually). This is Rs. 2500 for a month. From July 1 till July 31 Rs. 2500 worth of insurance is used or “expires”. This expired amount will be reported as Insurance Expense on July's income statement. The remaining Rs. 12500 “unexpired insurance” premium would be reported in asset account on balance sheet called Prepaid Insurance. Some examples of prepaid include supplies. The portion that gets used up in the current accounting period is listed as an expense on the income statement; and unexpired is listed as an asset on the balance sheet. You might have observed a strong link between income statement and balance sheet which we shall see in later chapters.

B. Cost Principle and Conservatism 
Mr., Das emphasized that company’s assets, should be recorded at original cost and be carried at original cost even when market value of item has increased. This is due to another basic accounting principle known as the cost principle. Accountants may not increase the value but they may decrease the value based on one more concept- Conservatism. For example, if you are preparing balance-sheet for September 30, 2009 and you wish to report value of boxes (used to carry Food Items) as one of the asset which were bought at $1 on July 2009. If price of box has been cut by 50% and current purchase price is 50 cents. Since replacement cost of the inventory (50 cents) is less than original price ($1), principle of conservatism dictates that this inventory asset should be reported at lower amount on balance sheet. In nutshell, by cost principle assets can not be reported at more than cost and by conservatism assets should be reported at less than their cost.

C. Depreciation
All assets such as equipment, vehicles, and buildings are routinely depreciated. This is as per matching principle. For the sake of definition, depreciation is allocation of cost of the asset to “depreciation expenses” in the income statement over its useful life. Generally depreciation is used for assets whose life is limited—for example equipment wears out, vehicles become old and costly to maintain, buildings age, and some assets like IT equipment become obsolete.
Just for the sake of understanding, suppose you have 5 motorcycles, each purchased for Rs. 50,000 with useful life of 5 years (Total=250000). The accountant allocate one-fifth of 250000 to depreciation expenses or match 250000/5 with each year’s revenue for 5 years. Every year the carrying amount or book value will be reduced by Rs. 50000. Book value (or carrying amount) is cost of motorcycles minus total depreciation since acquisition of motorcycles.
This means that after one year the balance sheet will show book value of motorcycles as Rs. 200000, after two years Rs. 150000 and so on till it becomes zero at the end of five years.
Assets are not shown on the balance sheet at their fair market value. Assets such as buildings, equipment, also called as long-term assets are reported at their cost minus the depreciation which shown in the income statement as Depreciation Expense. Thus value of asset on the balance-sheet might have gone up in the market but it is consistently reduced on balance-sheet as accountant has moved some of its cost to depreciation expenses in income statement. It is also possible that some asset (e.g. furniture) might have fair market value much smaller than book value reported on balance sheet. The Land is not depreciated hence it appears at its original cost. Current asset (short term assets) values are close to their market values, since they tend to "turn over" in short periods of time.

1.3.2 Liability 

The balance sheet also shows liabilities as on date of reporting. Liabilities are obligations of the company to others viz. loan from lenders (loan payable), the interest on the loan (Interest Payable), the amount payable to other stores for items purchased on credit (Accounts Payable), and the salaries to be paid (Wages Payable). Occasionally company also receive money in advance before actually earning it. For example some corporate customer may pay you in lump sum on July 1 for Food Items (say Rs. 10,000) to be delivered for next two months. Your company TOD has received cash Rs. 10,000 but it will turn into revenue only when TOD earn it by delivering Food Items. On July 1, cash asset has increased by Rs. 10,000 but TOD also has liability of same amount as it has to fulfill its obligation else return the money.
On July 1, liability account has “unearned revenue”. When TOD deliver Food Items worth Rs. 5000 each for next two months, each month Rs. 5000 is moved from ‘unearned account” to “service revenues”.

1.3.3 Stockholder’s Equity 

This is another section in the balance sheet provided company is a corporation. It is also called Owner’s equity if company is sole proprietorship. The Stockholders' Equity is the difference between the asset and liability. It is "book value" of the corporation. It comprise of common stock, preferred stock, retained earnings, and current year’s net income.
Whenever a company issue shares, common stock increases. With the increase in profit retained earning increases and exactly opposite happens when company incurs net loss. This implies increase in revenue increases stockholder’s equity and expenses case decrease in equity. Now you realized relationship between income statement and balance sheet.

Read More

Welcome to Accounting : Accounting Basics Day 1

General perception of the learners of accounting is very dry and tough. Through this tutorial we will try to make accounting interesting. We will go step by step in simple real world example for better understanding the concept

1.1 Lets start a business

Suppose you want to start a new restaurant business. You complete all the legalities and name the restaurant as The Taste of Delhi. You are new at business but not comfortable with the difficult subject of accounting. You hire an accountant Mr. Das. Based on your business idea/plan, Das estimates that TOD (Taste of Delhi) shall have thousands of transactions per year. As this is your first rendezvous with accounting, you are puzzled by the term “transaction”. Mr. Das explains you the meaning of term “transaction” by giving you following examples

1. You will have to put in your personal money and own shares into your own company.
2. The Taste of Delhi will have bikes for Delivery
3. TOD will begin earning by billing consumers for services
4. TOD will incur expenses in operating business such as salary, and expenses associated with vehicle and advertising.

Now you are clear about what “transaction” means.

Mr. Das proceeds to explain purpose and content of the following financial statements

1. Income Statement
2. Balance Sheet
3. Statement of Cash Flows
4. Double Entry System of Accouting


For Accounting Jargon refer http://www.oracleappstoday.com/2014/09/accounting-jargons.html

Read More

Income Statement

contd. from Accounting Basics

1.3 Income  Statement

Mr. Das tells you that an income statement will show how profitable TOD has been during the time interval shown in the statement's heading (For example FY 2008-2009).This period of time might be monthly, quarterly, or yearly or whatever you choose. While reporting profitability, two things are considered

1. Revenues- amount earned
2. Expenses- Amount spent to earn revenues.

The two terms “revenue” and “expenses” are broad terms which we shall explore below.

1.2.1 Revenues 

Main revenue for TOD is in terms of sales of the Food Items. TOD should record revenues when they are earned under “accrual basis of accounting” and not when company receives the money which is generally done under “cash method of accounting”. Recording revenues when they are earned is the result of one of the basic accounting principle known as the revenue recognition principle.

 Let us try to understand this concept. Suppose you sell 1,000 Food Items in July for Rs. 100 per Thali, you have earned Rs. 100,000 for that month. You ask consumers to pay by August 10 as per payment terms. Even if customers did not pay by August 5, “accrual basis of accounting” require that Rs. 100,000 be recorded as July revenue because Food Items were sold in that month. When you match revenue with expenses, TOD’s income statement shows how profitable it was in July. When you receive Rs. 100,000 on August 5, you will have to make an accounting entry to show the money was received. This receipt will not be considered to be August revenues, since the sales were already reported as revenues in July when they were earned. Rs. 100,000 will be recorded in July as a reduction in Accounts Receivable because in July you had made an entry to Accounts Receivable and to Sales.

1.2.2 Expenses 

After understanding about “revenue”, let’s turn our attention to another part of income statement i.e. “expenses”. The income statement for July should show expenses incurred in July regardless of when actual payment happened. For example, if you pay salaries for July to delivery boys worth Rs. 20000 on August 2 , this expense needs to be shown in July income statement. In this case actual date of payment does not matter. This recording of expenses with the related revenues is based on basic accounting principle known as the matching principle.

Showing expense matching with revenue result in measuring profitability of the company during a given time period.

Another item of expenditure is interest expense on money borrowed by you. For example if you borrow Rs. 10,000,00 on July 1 from Bank and your company TOD agrees to pay 10 % per annum or Rs. 100000 per year and if this interest should be paid on July 1 of every year. Even though interest payment is yearly, you can see that in reality, a small percentage of interest expense is incurred each and every day. If you prepare quarterly income statements then interest for a quarter should be reported i.e Rs 100000/4. This means you will have to match Rs. 25000 of interest expense with quarterly revenue. Interest expense is a cost necessary to earn revenue. We have made things easy here. Actually income statement is complex matter than what we discussed. The difference between revenue and expenses is often referred as bottom line and labeled as Net income or Net Loss

Read More

Steps to Create Supplier, Supplier Site and Supplier Banks : Oracle EBS R12

Below are the steps to create Supplier and related sites and banks in Oracle EBS R12

1) Choose the responsibility “Purchasing Super User”. Navigate to “Suppliers” window using the path “Supply Base -> Suppliers”.

2) Enter the supplier name in the “Create Supplier” window. Press on the “Apply” button.

3) To create a supplier site, an “Address” should be created first.

 Click on the “Address Book” in the “Suppliers” window to navigate to the address creation window.

 Click on the “Create” button to create the “Address”.

 Enter the address details and click on “Continue” button.

 Associate the “Address Sites” with the necessary operating units. Click on the “Apply” button. Supplier site is now created for the supplier as shown in the below screen shot.

 4) Create contacts for the supplier site.

 Click on the “Contact Directory” in the Suppliers window.

 Click on the “Create” button.

 Enter the contact details as shown in the above screen shot. Associate the supplier site with the contact in the “Addresses For the Contact” section. Click on the “Apply” button.

 Contact is created as shown in the above screen shot.


5) Create or associate bank accounts to the supplier site.

 Click on “Banking Details” in the Suppliers window.

 Select the level at which you want to create or associate the bank for the supplier. We are choosing to create the bank account at the supplier site level. Click on the “Create” button.

 Select the Country, Bank and Bank Branch as shown in the above screen shot.

 Enter the bank account details and press on “Apply” button.

 Bank account is created for the supplier site.

Read More

Steps to Pay Invoices using Payment Batch : Oracle EBS R12

With R12 the payment process is streamlined to provide a robust and easy payment experience. Using a single window you can select, build , format and view the invoices paid.

Below are the step to pay an invoice through the Payment Process Manager .
For Backend table view please refer to : Backend View : AP Invoices to Payment

1) Choose the responsibility “Payables Super User”. Navigate to the “Payments Manager” window using the path “Payments => Entry => Payments Manager”. Click on the “Submit Single Payment Process Request” link to create a “Payment Process Request”.

2) Create the “Payment Process Request” and enter a value for the field “Payment Process Request Name”.

 3) Enter mandatory values which are marked as (*) and optionally entire the remaining criteria.
   This is a selection criterion for the invoices to get picked for the payment process.

Scheduled Payment Selection Criteria 

Payment Attributes

User Rates Processing

Processing

Validation Failure Results

Additional Information 

Click on the “Submit” button to submit the “Payment Process Request”.

 4) The “Payment Process Request Program” will run and keep the invoices for review if everything         looks fine.

Click on the “Start Action” button to view the selected invoices for review

Click on the “Submit” button. “Build Payments” program is submitted to build the payments based on the selected invoices/scheduled payments.

5) Refresh the “Payment Process Request”.

Click on the “Start Action” button to view the “Payments” that have been created in the “Payment Batch”.

6) Select “Run Payments Process” as the action and click on “Go” button.
The “Payments” will be formatted (i.e. the Check is created) and “Payment Instruction” is created. Go to the “Payments Manager” page and click on the “Payment Instructions” tab. Query for the “Payment Instruction”.

 Next step is to print the check. Click on the “Take Action” button.

Read More

Status Codes and Phase Codes of a Concurrent Request : Oracle EBS R12

Concurrent Request Status Codes : 

SELECT LOOKUP_CODE, MEANING
  FROM FND_LOOKUP_VALUES
WHERE LOOKUP_TYPE = 'CP_STATUS_CODE'
     AND LANGUAGE = 'US'
     AND ENABLED_FLAG = 'Y';

LOOKUP_CODE	MEANING
R	Normal
I	Normal
Z	Waiting
D	Cancelled
U	Disabled
E	Error
M	No Manager
C	Normal
H	On Hold
W	Paused
B	Resuming
P	Scheduled
Q	Standby
S	Suspended
X	Terminated
T	Terminating
A	Waiting
G	Warning

Concurrent Request Phase Codes: 

SELECT LOOKUP_CODE, MEANING
  FROM FND_LOOKUP_VALUES
WHERE LOOKUP_TYPE = 'CP_PHASE_CODE'
    AND LANGUAGE = 'US'
    AND ENABLED_FLAG = 'Y';

LOOKUP_CODE	MEANING	DESCRIPTION
C	Completed	Request has finished
I	Inactive	Request is unable to run
P	Pending	Request is waiting to be run
R	Running	Request is running

Read More

WiFi not working/detected in Ubuntu

This is a common issue with most of the Ubuntu Versions.

The WiFi does not work out of the box unlike most of the other functionality and softwares Ubuntu provides.
This usually is true for several third party drivers.

Follow the steps below to get WiFi working on your laptop

1) Connect temporarily to your wired connection

2) Open terminal/console

3) Hit the commands below
            a) sudo apt-get remove --purge bcmwl-kernel-source 
            b) sude apt-get install linux-firmware-nonfree

4) Restart the system. WiFi should be working fine.





Ubuntu is a Debian-based Linux operating system, with Unity as its default desktop environment (GNOME was the previous desktop environment). It is based on free software and named after the Southern African philosophy of ubuntu (literally, "human-ness"), which often is translated as "humanity towards others" or "the belief in a universal bond of sharing that connects all humanity". Please refer http://www.ubuntu.com/

Read More

SQL*Loader-522: lfiopn failed for file

Cause: SQL*Loader-522: lfiopn failed for file occurs when there are permission issues

Solution: Check for rwx permission on your code artifacts, data files. Also make sure you have rwx permissions on your folders as well.

Read More