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A cost center is a subunit of a company that is responsible only for its costs. Example of
cost centers are the production departments and the service departments within a factory
and administrative departments such as IT and accounting.
A profit center is a subunit of a company that is responsible for revenues and costs. Often
a division of a company is a profit center because it has control over its revenues, costs,
and the resulting profits. Examples of typical profit centers are a store, a sales
organization and a consulting organization whose profitability can be measured.
Cost centers and profit centers are usually associated with planning and control in a
decentralized company.
Question3: G.L
A general ledger account is an account or record used to sort and store balance sheet and
income statement transactions. Examples of general ledger accounts include the asset
accounts such as Cash, Accounts Receivable, Inventory, Investments, Land, and
Equipment. Examples of the general ledger liability accounts include Notes Payable,
Accounts Payable, Accrued Expenses Payable, and Customer Deposits. Examples of
income statement accounts found in the general ledger include Sales, Service Fee
Revenues, Salaries Expense, Rent Expense, Advertising Expense, Interest Expense, and
Loss on Disposal of Assets.
Some general ledger accounts are summary records which are referred to as control
accounts. The detail that supports each of the control accounts will be found outside of
the general ledger in what is known as a subsidiary ledger. For example, Accounts
Receivable could be a control account in the general ledger, and there will be a subsidiary
ledger which contains each customer’s credit activity. The general ledger accounts
Inventory, Equipment, and Accounts Payable could also be control accounts and for each
there will be a subsidiary ledger containing the supporting detail.
A listing of a company’s general ledger accounts is found in its Chart of Accounts.
It is imperative that the time interval (or period of time) be shown in the
heading of each income statement, statement of stockholders' equity,
and statement of cash flows. Labeling one of these financial
statements with "December 31" is not good enough—the reader needs
to know if the statement covers the one week ending December 31,
2010 the month ending December 31, 2010 the three months ending
December 31, 2010 or the year ended December 31, 2010.
4. Cost Principle From an accountant's point of view, the term "cost" refers to the amount
spent (cash or the cash equivalent) when an item was originally
obtained, whether that purchase happened last year or thirty years ago.
For this reason, the amounts shown on financial statements are referred
to as historical cost amounts.
The going concern principle allows the company to defer some of its
prepaid expenses until future accounting periods.
7. Matching This accounting principle requires companies to use the accrual basis
Principle of accounting. The matching principle requires that expenses be
matched with revenues. For example, sales commissions expense
should be reported in the period when the sales were made (and not
reported in the period when the commissions were paid). Wages to
employees are reported as an expense in the week when the employees
worked and not in the week when the employees are paid. If a company
agrees to give its employees 1% of its 2010 revenues as a bonus on
January 15, 2011, the company should report the bonus as an expense
in 2010 and the amount unpaid at December 31, 2010 as a liability.
(The expense is occurring as the sales are occurring.)
Example: A sales account is opened for recording the sales of goods or services and at the
end of the financial period the total sales are transferred to the revenue statement account
(Profit and Loss Account or Income and Expenditure Account).
Similarly expenses during the financial period are recorded using the respective Expense
accounts, which are also transferred to the revenue statement account. The net positive or
negative balance (profit or loss) of the revenue statement account is transferred to
reserves or capital account as the case may be
Credit Sale:-
To Sales A/c
2. Credit Purchase:-