Category: Accounting Treatments

Accounting For Payday Loans – Journal Entries For Payday Loan, Cash Advance & Interest Receivable With Provision For Bad Debts

Payday Loan is a type of cash advance offered to individuals or employees looking for emergency cash to finance short-term needs. It is a convenience way to raise cash as it comes with convenient terms like interest, repayment period etc.

Accounting Entries For PayDay Loan

When you advance a loan to customers, CR your bank account and DR payday loan receivable account with the amount disbursed as a loan. The interest income on the loan should also be accounted for, hence, DR payday loan receivable account and CRinterest income account with the interest portion of the loan.

On receipt of part or outright payment, DR your bank account and CR payday loan receivable account.

Continue reading “Accounting For Payday Loans & Cash Advance”

Recent search terms:

• accounting for payday lenders (1)

Accounting Entries For Foreign Exchange Transactions – Journals For Forex Purchases, Fluctuation, Gain or Loss, Hedge, Revaluation & Currency Sales 

A foreign exchange transaction occurs when you pay a supplier or receive payment from a customer in a currency different from your home currency or a currency your financials are reported in. In such transaction, you need to factor in the prevailing exchange rate your reporting currency is, to the foreign currencies for seamless conversion to be easy.

When treating foreign exchange transactions in your book, you need to account for either gain or loss arising from forex conversions – which could be exchange rate gain/loss or unrealised profit/loss – while the exchange rate gain or loss report lets you track all income earned or loss incurred on business transactions, unrealized profit or loss arises when there is a change in the value of your foreign currency portfolio, which could be cash in hand or bank.

Let’s discuss the accounting entries for foreign exchange transactions.

Foreign Purchases Transactions

When you make payment for goods supplied or services rendered by a foreign supplier, CR your bank account and DR the inventory account or DR expenses account (for services) by multiplying the foreign currency value by the current exchange rate.

Continue reading “Accounting Entries For Foreign Exchange Transactions”

Recent search terms:

• accounting entries for foreign exchange hedge (1)
• accounting for foreign exchange transactions (1)
• foreign exchange gains and losses accounting treatment (1)

A mortgage-backed security is a term that became popular during the global market crash of 2008 that dragged big financial institutions like Lever brothers, and Fannie Mae under.

How do Mortgage-backed securities work?

Let’s paint a scenario to explain what this term means to a layman – Assuming you want to buy a house and would like a certain percentage of the cost to be financed by mortgage or home equity from ABC bank. ABC bank paid the money into your savings account after accepting the terms of payment – you agree to repay the loan (with interest) within a certain period.

To ABC bank, the mortgage loan portfolio (which comprises the principal and interest payment receivable over a set schedule) is an asset which will be treatment under “Loan & Advances” in the statement of financial position.

Continue reading “Mortgage-Backed Securities Explained & Accounting Entries”

Recent search terms:

• accounting entries for mortgage backed securities (1)
• accounting for mbs (1)
• accounting for mortgage back security investments (1)
• accounting of mortgage backed securities (1)
• mortgage backed securities accounting treatment (1)
• purposeydn (1)

Accounting For Subscriptions Revenue – Learn Journal Entries For Membership, Software or Magazine or Digital Subscription Receivables & Receipts

Let’s say you run a subscription –based business where members or customers make an upfront payment into your account to enjoy a particular product or service for a specified period, you need to understand that it is different from a one-time sale of a product. In accounting, recognising the full amount paid as an income will definitely be an error as you can only recognise revenue for services rendered not from advanced payment.

Here are steps to treat subscription revenue using a scenario.

A newspaper company publishes a magazine on latest technology innovations disruption ideas. Members pay on a monthly, quarterly or yearly basis to get latest publications.  If a long time subscriber decides to pay $1000 for 10-month issues, what are the relevant accounting entries in the books of account?

Continue reading “Accounting For Subscriptions Revenue – Membership, Software or Magazine”

Recent search terms:

• accounting for software subscription revenue (2)
• accounting entry for subscription software (1)
• Accounting for business yearly membership ? (1)
• accounting for subscription revenue (1)
• subscription revenue journal entry (1)

Accounting Entries For Loan Receivables & Payables – Learn How To Treat Loan Notes, Interest Payments, Provision, Write Off & Convertible Loan QuickBooks

A loan is a debt instrument provided by an entity to another entity known as the borrower at an agreed interest rate, evidenced by a promissory note which specifies the principal sum, interest rate charged by the lender and period of repayment.

In treating Loan disbursement in your books of account, there are two sided entries to note: from an issuer’s perspective and a receiver’s angle. When it’s the latter the loan is payable but on the former, you tag it receivable.

Accounting Treatment For Loan Receivables

When you issue a loan note to a borrower, it is treated as an asset, which, if receivable under a year, is a current asset. In your book, CR your bank account, and DR asset account – Note receivable – with the amount advanced to the borrower.

On receipt of an agreed interest from the Notes, you DR your bank account and CR the interest income account ( to the income statement)

Continue reading “Accounting Entries For Loan Receivables & Payables”

Recent search terms:

• loan payable accounting entries (4)
• What are the entries for a loan in accounting program (1)
• loan receivable accounting entry (1)
• loan payable or receivable? (1)
• LOAN PAYABLE ENTRIES (1)
• accounting entries of interest receivable for several years (1)
• Loan Payable (1)
• lender entries for mortgage downpayment accounting (1)
• IN accounting can we offset the payables with loan? (1)
• how to record loan receivables accounting (1)
• entries of convertible promissory note (1)
• what is accounting transaction for foreign loans (1)

Accounting Treatment For Insurance Premium – Learn The Journal Entries For Insurance Premium Income Paid In Advance, Payment, Claim Settlement & Brokerage Fees or Commission

As a business owner who is concerned about the risk of loss, insurance is designed to secure your business against future occurrences that might lead to loss of asset or properties due to an unforeseen event. Hence, you are expected to pay an agreed premium on a monthly or annual basis.

Since the amount calculated as a premium to cover the risk involved is paid to an insurance company prior to the prior covered, you will definitely be wrong if the full figure is expensed to a profit or loss account. In other words, that amount should be treated as prepayment which is a current asset.

Here are accounting entries for insurance premium paid, insurance claim, insurance compensation, insurance premium income and brokerage fees.

Insurance Premium Paid

DR the ‘Insurance Prepaid” account and CR “the bank account with the actual amount paid to the insurance company.

DR the “Insurance Expenses” account and CR “Insurance Prepaid” account with the amount written for the month.

The idea here is that the insurance premium is amortised for the period covered and expenses on a monthly basis till the value is written off to the profit or loss account.

Continue reading “Accounting Treatment For Insurance Premium, Claim & Brokerage”

Recent search terms:

• insurance claims and accounting treatment (2)
• insurance claim accounting treatment (2)
• Accounting For Insurance (1)
• accounting treatment of insurance premiums (1)
• format of insurance claim account (1)
• how to treat insurance premium (1)
• how to treat insurance premium on manufacturing account (1)
• Insurance Claim In Accounting (1)
• insurance claims format for accounting (1)
• accounting treatment of insurance (1)
• accounting treatment for ex gratia payment on an insurance claims (1)
• accounting for insurance broker fees (1)
• accounting for insurance brokerage (1)
• accounting for insurance claim (1)
• accounting for insurance claim settlements (1)
• accounting for inventory insurance claims (1)
• accounting for prepaid insurance brokerage fees (1)
• accounting for travel insurance claims (1)
• accounting treatment for advance insurance premium (1)
• questions on insurance claim account (1)

Accounting Treatment For Debt Securities – Treasury Bills & Bond Investment – Journal Entries For Treasury Stock & Bond Purchases at Discount or Premium From Government.

A business with excess cash can, as an alternative to bank savings, decide to invest in a short or long term securities which guarantee a fixed return on quarterly, semi-annual or annual basis. One of such securities could be debt or equity. In this accounting treatment, we will share tips on how to record investment in debt securities – treasury bill and bond investment. While treasury bills is a short-term debt security issued (above or below the face value) by the government to raise finance for the capital project with maturity less than a year, bond investment is a long-term debt instrument with coupon rate and maturity up to 20-30 years.

These two debt securities are popular among corporate investors because they are regarded as risk-free investment backed by the credit of the government.

Return on T-Bill Vs Return on Bond Investment

In calculating the interest on investment in treasury bills, you compare the face value and purchase price. It is sometimes referred to as a “discount”. To recognise interest income consecutively over the life of a Treasury bills the interest method should be used. The interest method is used to amortize the discount or premium and recognize interest income. The interest rate used in calculating the return on this debt security is the prevailing rate of similar securities, other known as “effective interest rate”. This is different from the computation of interest earned on bond securities where you calculate the known coupon rate against the purchase price.

Continue reading “Accounting Treatment For Debt Securities – Treasury Bills & Bond Investment”

Recent search terms:

• journal entries for treasury bills (4)
• accounting entries for sale of tbills (2)
• accounting when to record the Treasury bill yield (2)
• accounting treatment for t-bills (2)
• accounting for treasury bonds (2)
• t bills journal entry (1)
• track treasury bill purchases in quicken (1)
• Treasury Bills Accounting entry (1)
• recording treasury bills accounting (1)
• mortgage backed securities journal entries (1)
• treasury bond in accounting (1)
• journal entries for retirement of bonds with t-bills (1)
• journal entries for purchase of government security (1)
• journal entries for investment in securities at a discount (1)
• IFRS ACCOUNTING TREATMENT OF TREASURY BILLS (1)
• how to record treasury bills (1)
• Valuation of Treasury bonds accounting (1)
• accounting for t bills (1)
• accounting for treasury bills on the financials (1)
• ACCOUNTING GL FOR TREASURY BILLS (1)
• are US treasury bonds cash or investments GAAP (1)
• auditing bills and bonds (1)
• how is income for treasury bills accounted for (1)
• how to account for discounted treasury bills as per ifrs (1)
• how to record a treasury bill asset journal entry (1)

Accounting For Structured Settlements & Annuity Company  – Learn The Journal Entries For Structured Settlement Annuities Purchaser From A Life Insurance Company

According to Wikipedia, “A structured settlement is a negotiated financial or insurance arrangement whereby a claimant agrees to resolve a personal injury tort claim by receiving some part of the settlement in the form of periodic payments on an agreed schedule, rather than as a lump sum.”

Let’s paint a scenario here: Mike was injured in an Auto accident which he filed a suit in court asking for compensation. After hearing, he was awarded $390,000 as compensation receivable from the other driver, the cash of $390k, when paid into his account, is tax-free; not subject to tax deductions. But if he decides to invest the money in a fixed deposit account, earnings on that principal is subject to tax.

Continue reading “Accounting For Structured Settlements & Annuity Company”

Recent search terms:

• structured settlement journal entry insurance (1)

Accounting Treatment For Disposal Of Fixed Assets – Find Tips to Record Sale of Fixed Assets With Entries On Gain or Loss in Income Statement Using QuickBooks UK, US or Canada.

When an asset is disposed of, there are standard accounting entries you should follow, especially when you are using an accounting software. To explain this, I will be sharing a typical scenario of an asset disposal for a hypothetical company, let’s call it ABC Health Ltd.

An asset was bought on 1st, January 2017 for N100,000 with an estimated useful life of 10 years expected to be depreciated using straight-line method. At the end of 5th year, the asset was sold for N75,000 to another firm. What is the accounting treatment for disposal of fixed assets in QuickBooks?

Here are steps to treat this transaction in QuickBooks:

Continue reading “Accounting Treatment For Disposal Of Fixed Assets”

Recent search terms:

• accounting treatment of disposing off an asset (4)
• accounting for disposal of an asset (1)
• disposal of asset accounting treatment (1)
• disposal of fixed assets accounting (1)
• ita accounting asset disposal calculation (1)
• practical accountingtreatment of disposed asset (1)
• software disposal value (1)

According to an article published on TheNation Newspaper online, ‘Withholding Tax (WHT) is an advance payment of income tax. In principle, it is a payment for the ultimate income tax liability of the taxpayer or company. It is not a separate tax and does not confer an exemption from the filing of yearly tax returns by the company which suffered WHT. The tax is deducted at source when a payment is to be made to the beneficiary‘.

It is a tax deducted at source for service rendered or sales.

This article illustrates how you should treat Withholding Tax in an accounting software (QuickBooks)

WHT Receivable

When you render a service or make a sale to your customers, by law they are expected to withhold a certain percentage of the transaction value as a tax which is remitted to tax agency and at the end pay the remaining balance as settlement. In such scenario, you are expected to treat the balance as WHT or else the system will hold it an account receivable balance.

Here are the steps to follow:

Note: I assume you have entered an invoice and received payment on your accounting software.

• Open the General Journal window of your accounting software.
• Under the ‘Account’ column, select ‘Accounting Receivable’ and ‘WHT Receivable’
  • Credit the Former and Debit the Latter with amount withheld by the customer
• Select the customer’s name and fill other fields – Date, General Journal No and Memo.
• Save.

Continue reading “Accounting Treatment For Withholding Tax On Revenue”

Recent search terms:

• withholding tax accounting treatment (15)
• treatment of withholding tax (12)
• withholding tax accounting (7)
• accounting treatment for withholding tax (5)
• witholding tax on interest double entry (5)
• double entry for withholding tax (4)
• double entry of withholding tax (4)
• withholding tax treatment (3)
• accounting for withholding taxes (3)
• ifrs withholding taxes (3)
• withholding tax double entries (3)
• accounting for withholding tax (3)
• accounting for withholding taxes on invoices (2)
• wht collection debit (2)
• withholding tax treatment in accounting (2)
• how to record withholding tax in accounting (1)
• how to classify withholding tax in your accounting books (1)
• how to account for withholding tax reductions on revenue received (1)
• how to capture withholding tax double entry (1)
• GAAP handling of withholding tax on a payment from your customer on your revenue and AR? (1)
• wittholding tax at source gaap treatment (1)
• accounting treament for Witholding tax (1)
• accounting offset to tax witholding health claim (1)
• accounting for vat ghana (1)
• accounting entry for interest with tax (1)