Accounting treatment of conversion of capital asset into stock in trade

The Buzzle article below provides a glossary of accounting terms and definitions that are most commonly-used. About Buzzle Privacy Policy. Accounting helps keep a track of the financial position of the business and forms the basis for good financial planning. While studying accountancy, you may come across several terms that you may not be familiar with.

Most glossaries may help you with it, but some definitions may be too elaborately worded for most people to understand, resulting in a confusion. The paragraphs below conjure up a list of basic and advanced accounting terms in a simple language. Glossary of Accounting Terms and Definitions A B C D E F G H I J K L M N O P Q R S T U V W X Y Z A Above the Line Above the line items are those revenue and expense items that directly affect the calculation of periodic net income.

Absolute Change Absolute change is the numeric change in the value of a commodity, expense etc. Thus, the combined account is a new entity, while the old ones are removed. For instance, if you have 3 creditors, John, George, and Paul, you can combine them into one creditors' account. Hence, they are called absorption. Absorbed Costs Absorbed Costs are a combination of both variable and fixed costs.

Absorption Costing Absorption costing absorbs all costs under two head product costs manufacturing costs and period costs non-manufacturing costs. Absorption Pricing Absorption pricing is setting a price, which is the sum of the absorbed cost plus a marked-up percentage of profit.

Absorption Variance Absorption variance is the difference between the predicted and actual absorption costs. Accelerated Depreciation Accelerated depreciation is a form of depreciation where larger amounts of depreciation are calculated in the first few years.

Account An account is the physical record of the transactions incurred related to an asset, liability, revenue, expense, etc. Accounts Analysis Accounts analysis can be looked as a method of cost behavior analysis by classifying records under two heads: Accounts Group Accounts group is a combination of similar accounts, like fixed assets group, long-term liability group, etc.

Accounting is done based on the various accounting principles, concepts, and the Golden Rules. Accounting Concepts There are certain assumptions that are taken for granted while recording the accounts.

These assumptions are called accounting concepts. The 4 accounting concepts are Going Concern Concept, Accrual Basis Concept, Consistency Concept, and Prudence Concept.

Read on for more about Basic Accounting Concepts and Principles. Accounting Cycle An accounting cycle is the series of steps to be followed while preparing financial statements. The steps in the accounting cycle are budgeting, journal entries, adjusting entries, ledger posting, preparing financial reports, and closing of accounts.

Accounting Entity Assumption For legal and tax purposes, a business can be treated as a different entity from the owners. Thus, only the transactions related to the business are recorded and not the ones related to owners.

Accounting Equation The accounting equation lays down the relationship between total assets, liabilities and owner's equity. Accounting Income Accounting income is the income earned by the business over the accounting year on an accrual basis. Accounting Measurement and Disclosure Accounting measurement and disclosure is the accounting concept that says that adequate dates should be used and disclosed for the purpose of decision-making. Accounting Periods An accounting period is the frame of time during which the accounts are prepared.

An accounting period is usually for a year. Accounting Principles Accounting principles are commonly accepted principles assumed while accounting for the business. For details, refer to GAAP Generally Accepted Accounting Principles.

Accounting Ratios Accounting ratios are mathematical tools, which help in performing the comparative financial analysis for two financial variables. Accounting System An accounting system is a holistic approach to accounting. It may be manual as well as computerized. An accounting system helps identify economic events, record them, and generate reports at the end of the accounting period or even during the period.

accounting treatment of conversion of capital asset into stock in trade

Accounting Theory An accounting theory develops a framework for the accounting procedure. There are four types of theories of accounting: Classical Inductive, Income, Decision Usefulness, and Information economics. Accounting Timing Difference Accounting time difference is the effect that considering a deferred financial event would have on the financial statements.

Accounting Terminology Guide - Over 1, Accounting and Finance Terms

Accounting Treatment Accounting treatment is the set of rules that lays down how to treat an account and how to handle a particular transaction. Accounts Payable Accounts payable are those accounts wherein the business has an obligation to pay for receiving goods or services. They are classified as a liability.

Accounts Payable to Sales Accounts payable to sales represents the time taken between the sales and payment to creditors. Accounts Receivable Accounts receivable are those accounts where the business can owe money for providing goods or services. Accounts Receivable Reserve An accounts receivable reserve is a pool of money kept aside by the business to protect itself from default on the accounts receivables. Accounts Receivable Turnover Accounts receivable turnover lets the business measure how quickly the customers are paying out the money receivable.

Accrual Concept Accrual concept is one of the core accounting concepts. Accrual concept states that a economic event should be recorded in the period in which it is incurred rather than when it is paid for or when cash is received in return. Accrued Assets Accrued assets are those assets from which the revenues are earned but not received. Accrued Expenses Accrued expenses are those expenses which have been incurred but not paid. Accrued Income Accrued income is income that is earned but not yet received.

CA IPCC - Transfer of a capital asset by partner member of Firm AOP Section 453

Accrued Interest Accrued interest is interest that an asset has earned, but not received. Accrued Inventory Accrued inventory is converter.inforg.org currency forex site trading which has arrived in the warehouse of the business but hasn't yet been paid for.

Accrued Liability Accrued liabilities are those liabilities that have been incurred by the business and haven't been paid off. Accrued Payroll Accrued payroll is employee salaries that remain unpaid at the end of the year. Accrued Revenue Accrued revenue is revenue that has been earned, but not lou moneymaker received.

Accumulated Amortization Accumulated amortization is the accumulated charge against the intangible assets owned by the business. Accumulated Depreciation Accumulated chart forex real time is the charge incurred for the wear and tear of a fixed asset that is calculated periodically.

Acid Test Ratio Acid test ratio is a ratio that analyzes the liquidity position of the business. Acquisition Acquisition is a situation where one company takes over the controlling stake of another company. Activity-Based Costing Activity based costing is a form of costing that analyzes the cost of a product based on the cost of the various activities performed for it.

Activity Ratio Activity ratio is the ability of a business to convert their balance sheet assets into cash or sales. Actual Cash Value Actual cash value is a method free online forex seminary determining the actual loss incurred by the business expressed in monetary terms.

Tax treatment of Capital Asset Converted into Stock in Trade | TaxBaniya

It is normally used in context of depreciation. Actual Cost Actual cost is the exact amount you pay to buy a fixed asset as opposed to the market value or production cost. Additional Paid-in Capital Accounting treatment of conversion of capital asset into stock in trade paid-in capital is the amount paid by the shareholders over and above the par value of the asset.

Adequate Disclosure Adequate disclosure is publicly listed companies in the philippine stock exchange the required amount of information in the form of footnotes to indicate the financial status of the business Adjusted Book Value Adjusted Book Value may be tangible book value or an c# redirectstandardoutput waitforexit book value.

In a tangible book value, the value of intangible assets are deducted from the total assets. In the economic book value, the assets are adjusted to their market value as opposed to the cost of purchase. Adjusting Entries Adjusting entries are the entries done at the end of the accounting period to update certain items that are not recorded as daily transactions. The process of recording adjusting entries are known as adjustment.

Administrative Costs Administrative costs are those which are not directly required for the process of production, but are included in the final price of the product as they are incurred. For example, the sales office rent is an administrative cost, as it is not required in the process of production. Advance Advance is an amount of money paid before the business earns it.

Agency An Agency is the contractual relationship between the principal and his agent where the agent is empowered by the principal to take certain decisions on his behalf. Aggregate Aggregate means total. Allocation Allocations are amounts distributed to each department for their working expenses. Allowance Allowance is a discount given to customers in the event of provision of unsatisfactory goods or services.

Alternate Payee Endorsement Alternate payee endorsement is when the original payee endorses the draft to another entity, and this other entity endorses it again. Amalgamation Amalgamation is the merger of two or more business entities. Amortization Amortization can mean three things.

It is a series of payments that result in gradual reduction of a large debt. It is writing off the value of an intangible asset over the useful life of the asset. It can also mean periodic deduction in the value of a fixed asset by means of depreciation.

Amount Due Amount due is the amount payable by a debtor to a creditor. Read on to know What is Amortization. Ancillary Ancillary refers to something that has lesser importance. Annualized Annualizing is a method by which all the amounts pertaining to less than a year are calculated to their one-year equivalents. Annual Report An annual report is a detailed report of all the financial statements of a business.

It is a mandatory requirement for public companies Annuity An annuity is a series of periodical payments of a fixed amount for a fixed period, for instance, insurance premium. Read on for Fixed Annuities Explained and the Annuities Pros and Cons. Appreciation Appreciation is the increase in the value of the asset due to economic conditions or improvements to the asset.

Appropriation Appropriation is the allocation of amounts, that are part of the total net profit under various heads, such as the general reserve fund. Arrears Arrears are debt that have not been paid yet.

accounting treatment of conversion of capital asset into stock in trade

Assessed Value Assessed value is the estimated value that is taken for calculation of tax. Assessment Assessment is the total amount of tax or levy payable. Asset Asset is something that is owned by a business that has commercial value or exchange value. Asset Earning Power Asset earning power is one of the profitability ratios that determine the earning power of assets.

Asset Turnover Ratio Asset turnover ratio helps establish the relationship between the sales and the total assets.

Asset Valuation Asset valuation is the process by which the value of an asset or an asset portfolio is determined. Audit Audit is the process of checking and validating the business records. Audit Committee Audit committee is a special committee appointed in an organization to carry out the audit oversight responsibility of the board of directors. Audit Report Audit report is an official, signed document that provides the details regarding the purpose, scope, and findings of the audit.

Authorized Capital Authorized capital is the total money that the company has made by selling the issue of authorized shares. Average Inventory Average inventory is the average amount of inventory held over the accounting period. Avoidable Cost Avoidable cost is the cost that can be avoided by taking a particular decision. Share This Article Share. Don't Miss The Real Purpose of Accounting Not Everybody Knows. More From Buzzle The Types of Accounting You Really Need to Know.

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accounting treatment of conversion of capital asset into stock in trade

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