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Day: February 11, 2019

Preparation of Profit and Loss Account

Explanation of Certain items of Profit and Loss Account

1. Salaries

Salaries are paid for the services of employees and are debited to profit and loss ac- count being indirect expense. If any salary has been paid to proprietor or partners, it should be shown separately because it requires special treatment at the time of income tax assessment.

2. Salaries and Wages

When wages account is included with salaries it treated is as indirect expense and is taken into profit and loss account.

3. Rent

Rent of the office shop showroom or godown is an indirect expense and so is debited to profit & loss account. However, rent of factory is debited to trading account. When a part of the building has been sublet the rent received should be shown on the credit side of profit and loss account as a separate item.

4. Rates and Taxes

These are levied by the local authorities to meet public expenditure. It being an indirect expenditure is shown on the debit side of profit and loss account.

5. Interest

Interest on loan, overdraft or overdue debts is payable by the firm. It is an indirect expense; so debited to profit and loss account. Interest on loan advanced by the firm on depositor investments is an income of the firm and so is credited to the profit and loss account.

If business has paid any interest on capital to its proprietor or partners it should also be debited in the profit and loss account but separately because this item needs special treatment at the time of income-tax assessment.

6. Commission

In business sometimes agents are appointed to effect sales, who are paid commission as their remuneration. So this being a selling expenses is shown on the debit side of profit and loss account. Sometimes commission is also paid on purchases of goods, such ‘as expense should be debited in the trading account. Sometimes the firm can also act as an agent to the other business houses and in such cases it receives commission from them. Commission so received is shown on the credit side of profit and loss account.

7. Trade Expenses

They are also termed as ‘sundry expenses’. Trade expenses represent expenses of such a nature for which it is not worthwhile to open separate accounts. Trade expenses are not taken to trading account.

8. Repairs

Repairs to the plant, machinery, building are indirect expenses are treated expense and are debited to profit and loss account..

9. Traveling Expenses

Unless mentioned otherwise, traveling expenses are treated as indirect expenses and are debited to profit and loss account.

10. Horse & stable Expenses

Expenses incurred for the fodder of horses and wages paid for looking after stable are treated as indirect expenses and debited to profit and loss account.

11. Apprentice Premium

This is the amount charged from persons to whom training is imparted by the business. It is an income and is credited to profit and loss account. In case apprentice premium is …

Facts to Know About Business Cards

A business card announces one’s name and provides details about the business. It is used as a means of introduction and a memory aid to the recipient. From simple cards that gave the bare details of name and address, today’s business cards have evolved with striking graphic design.

The practice of using business cards is of recent origin. The colonists and gentry of the earlier centuries used visiting cards. These cards were ornamented and carried the unique stamp of the aristocrat. As the entrepreneurial era dawned, more and more traders used trade cards to give addresses and maps to guide the customers to their stores because formal street numbering did not exist. The business card became a practical tool for small entrepreneurs to provide contact information.

Business cards serve several useful purposes. It is a tangible reminder about the interaction with the person. It creates a professional setting in which business can be discussed. By giving accurate details about the name, address, telephone numbers and email, it serves as the one-spot reference for contact. It is a great tool for prospecting for leads, generating discussions and closing in on opportunities. It provides an indication about the professionalism and credibility of the businessman.

Because the business card is such a vital ingredient for an entrepreneur, great care should be taken in designing one. A flashy design that distracts from important details is just as bad as a dull and unimpressive look. Both sides of the card should be used judiciously. The logo should be placed at a striking point in the grid and colors should be soothing.

Although today’s society does not subscribe to the social formalities of the bygone era, there still are some rules of etiquette while using business cards. The most obvious one is of course that they should be used discreetly. At business meets, they could be used as a tool for persuasion but aggressiveness should be avoided. In case one visits a person in his absence, it is always a courteous practice to leave one’s card with the message to call later.…

New Business – Survival Strategies For Your New Venture

An alarming number of new businesses collapse in the first year of operation, and many of the survivors do not live to see their fifth birthday. Try to follow the suggestions in this article if you do not want your venture to join the long list of failed businesses.

1. If you can, start your business when you are still employed.

This idea will not help someone made redundant without notice, but it will probably be a long time before your new business actually a makes profit, let alone enough to support you and your family. Being employed while you’re starting a business means very long hours but also a guaranteed income to live on.

2. Get clients or customers first.

Many startup businesses find a former employer is a good first client. In any case, do not wait until your venture is launched to find customers for whatever you decide to offer. Your business will never survive without income. You must start marketing early. Join some networking groups and make contacts.

3. Do not try to do everything yourself.

You will need help while you are starting your own business. If you are still employed, a work colleague could give support or be someone to listen sympathetically to problems. Your family may be your best supporters, but you will need to manage their concerns, which might be based on unjustified worries. If you can find someone who has succeeded himself or herself, it would be great if they could be your mentor.

4. Write a business plan.

The main reason for doing a business plan first when you are thinking of starting a business is that it can help you avoid sinking your time and money into an idea that will not succeed. The plan will change and evolve over time but will be an essential framework.

5. Be an expert on your business.

Your business plan will be a start but when you are starting a new venture you will have to become an expert. Many businessmen will tell you they mistakes in their first year, but they will have done most things right or they would not have survived. You will become an expert on your industry, products and services, sooner or later – so make it sooner and give yourself a chance.

6. Get professional advice.

Starting a business, does not mean you have to be an expert on everything. Get the legal and tax issues right the first time. It is much more difficult and expensive to cure a problem later. Be sure to get business and tax registrations right from the very beginning.

7. Sort out your finances.

Especially in times of financial turbulence investment capital is not easy to find for new businesses. Lenders are suspicions of unproven ideas, especially from new ventures that do not have good track record. Save up if you have to, and only approach potential investors and lenders when you have a convincing story to tell.

8. Start