Question: DISTINGUISH BETWEEN FIXED ASSET AND CURRENT ASSET?
Answer: FIXED ASSET
Assets which have long life (more than one year) and which are bought for use for a long period of time. These are not bought for selling purposes. e.g. land, building, plant and machinery, furniture etc.
Assets which have short life (less than one year) and which can be converted into cash quickly. e.g. stock, debtors, cash in hand, cash in bank, prepaid expenses.
Question: WHAT IS ACCOUNTING CYCLE?
Answer: The accounting cycle comprises of the following steps which make up the cycle complete.
First step is to record the transactions in the form of entries passed in a book named journal.
Specific ledger accounts are prepared by posting these entries from journal to ledger. This procedure is called classification and posting entries in various accounts.
Making of trial balance i.e., taking all the balances of ledger accounts in the trial. The balances of expenses, revenues, liabilities and assets would make the trial balance complete.
Preparing profit and loss account/income statement where expenses are compared with revenue to arrive at the profit and loss and preparation of balance sheet where
Assets = liabilities + owners equity