•Consider the following data for the month of June of T Company
•Balance as per bank book is Rs. 70,240
•Bank statement showed a favourable balance of Rs. 73,920..
•Examination of bank book and bank statement revealed the following:
nA cheque of Rs. 4,920 paid into bank was not credited by the bank until July 3rd.
nA standing order for payment of annual payment of Rs. 1,000 had not been entered into bank book.
nOn 27thJune two customers of T Co. paid directly into bank Rs. 5,500, advice of which was received in July.
nCheques issued but not presented in the bank amounted to Rs. 4,600.
nThe bank had debited the account by Rs. 500 on account of bank charges.
•Lets assume that T Co. has not closed its books.
•You are required to adjust the bank book and then prepare a bank reconciliation statement.
Solution
•Following require adjustment in bank book:
nPayment of an annual subscription Rs. 1,000, not entered in bank book.
Debit Relevant Expense A/c 1,000
Credit Bank 1,000
nReceipts from two customers of directly into bank Rs. 5,500,
Debit Bank 5,500
Credit Customer’s Accounts 5,500
nBank charges Rs. 500
Debit Bank Charges Account 500
Credit Bank 500
Adjustments in Bank Book
Original Balance As Per bank book 70,240
Credit / Less Payment on standing orders (1,000)
Credit / Less bank charges (500)
Add Receipts from customers 5,500
Adjusted balance as per bank book 74,240
Solution
T. Co.
Bank Reconciliation Statement as on June 30, 20—
Balance as per Bank Book 74,240
Add Un presented cheques 4,600
Less Un credited cheques (4,920)
Balance s per bank statement 73,920
Example 2
•Same data as previous example.
•Balance as per bank book is Credit Rs. 56,000
•As per bank statement unfavorable balance of Rs. 52,320
Solution
Adjustments in Bank Book
Original Balance As Per bank book (56,000)
Credit / Less Payment on standing orders (1,000)
Debit / Add Receipts from customers 5,500
Credit / Less bank charges (500)
Adjusted balance as per bank book (52,000)
Solution
T. Co.
Bank Reconciliation Statement as on June 30, 20—
Balance as per Bank Book (52,000)
Add Un presented cheques 4,600
Less Un credited cheques (4,920)
Balance as per bank statement (52,320)
Example 3
•From the following data ascertain the balance as per bank statement of Nasir & Co on March 31, 20--
nBalance as per bank book Rs. 63,000
nCheques issued but not presented for payment Rs. 12,000.
nCheques deposited but not cleared Rs. 20,000
nProfit on deposit was credited by bank but not debited in bank book Rs. 2,000.
nA customer paid into bank directly Rs. 15,000 but the same was not recorded in bank book.
nOther receipts in bank that were not recorded in bank book Rs. 8,000.
Solution
Nasir and Co.
Balance as per Bank Book 63,000
Add Un presented cheques 12,000
Less Un credited cheques (20,000)
Add Profit received 2,000
Add amount deposited by customer 15,000
Add other receipts in bank 8,000
Balance as per bank statement 80,000
Solution
Nasir and Co.
Balance as per Bank Statement80,000
Less Un presented cheques (12,000)
Add Un credited cheques 20,000
Less Interest received (2,000)
Less amount deposited by customer (15,000)
Less other receipts in bank (8,000)
Balance as per bank book 63,000
•Debtors OR Trade Debtors – are the receivables by the organization against the sale of goods.
•Receivables / Other Receivables – are all receivables other than trade debtors e.g. advances to staff, suppliers.
•Creditors OR Trade Creditors – are the payables by the organization against the purchase of stock.
•Payables / Other Payables – are all payables other than trade creditors e.g. advances received from customers.
•Accruals – are the expenses of the business that are payable at the end of the accounting period.
•Payables / Other Payables – are all payables other than trade creditors e.g. advances received from customers.
•Provision – where an expense is incurred but the actual amount is not known at the time of recording at the end of accounting period.
Accounting for Creditors
•Purchase of goods
Debit Stocks Account
Credit Creditors Account
•Goods returned
Debit Creditors Account
Credit Stocks Account
•At the time of payment
Debit Creditors Account
Credit Cash / Bank Account
•Discount received from creditors
Debit Creditors
Credit Stock OR Discount Received
Discounts Allowed to Customers
•Discount allowed to debtors
Debit Sales OR Discounts Allowed
Credit Debtors
Recording of Accrual
•At the time of recording accrual
Debit Relevant expense account
Credit Accrued expenses / Expenses Payable
•At the time of payment
Debit Accrued expenses / Expenses Payable
Credit Cash / Bank
•Recording of rebate
Debit Accrued expenses / Expenses Payable
Credit Expense Account
Recording of Accrual
•At the time of recording accrual
Debit Relevant expense account
Credit Accrued expenses / Expenses Payable
•At the time of payment
Debit Accrued expenses / Expenses Payable
Credit Cash / Bank
•Recording of rebate
Debit Accrued expenses / Expenses Payable
Credit Expense Account
Difference Between Accrual and Provision
•Accrual is made when exact amount of expense is known at the time of recording.
•Provision is made when it is known that an expense will arise but the exact amount is not known.
Recording of Provision for Doubtful Debts
•At the time of creating the provision
Debit Profit and Loss Account
Credit Provision for Doubtful Debts
•At the time of actual bad debt
Debit Provision for Doubtful Debts
Credit Trade Debtors
•In case of bad debt where no provision was made
Debit Profit and Loss Account
Credit Trade Debtors
Provision for Expenses (e.g. Electricity)
•At the time of creating the provision
Debit Relevant Expense Account
Credit Accrued Expenses
•At the time actual amount is known
nWhere actual bill is less than the provision
Debit Accrued Expenses
Credit Expense Account
•Recording of payment
Debit Accrued Expenses
Credit Cash / Bank
Presentation of Provision
•Provisions are presented as current liabilities in the balance sheet.
•Exceptions
nDepreciation
nProvision for doubtful debts
•Provision for Doubtful Debts is shown as a reduction from debtors in the balance sheet.
Recording of Debtors
•At the time of sale
Debit Debtors
Credit Sale
•At the time of receipt
Debit Cash / Bank
Credit Debtors
Recording of Debtors
•Return of goods by debtors
Debit Sale
Credit Debtors
Debit Stock
Credit Cost of Sales
Recording of Provision
Extract of Profit and Loss Account
•Extract of Profit and Loss to show the Provision for Doubtful Debts
Profit and Loss Account
For the year ended --—
Gross Profit 90,000
Less: Expenses
Provision for bad debts (5,000)
Extract of Balance Sheet
•Extract of Balance Sheet to show the Provision
Balance Sheet
As At ----------
Current Assets
Debtors 100,000
Provision for Bad Debts (5,000) 95,000
Recording of Bad Debt
•Where provision has already been made for that debt:
Debit Provision for Bad and Doubtful Debts
Credit Debtors
•No expense will be charged.
Recording Change in Provision
•Reducing the provision
Debit Provision for Bad and Doubtful Debts
Credit Profit and Loss Account
•Increasing the provision
Debit Profit and Loss Account
Credit Provision for Bad and Doubtful Debts
Example
•Following information is available for A Ltd. For the year ended June 30, 20--.
nBad Debts During the year
November 1,100
January 640
April 120
nAt the year end total debtors amounted to Rs. 68,000 out which Rs. 2,200 is considered to be doubtful / bad.
•Show the relevant accounts and extracts from Profit and Loss and Balance Sheet.
Example
Presentation
A Ltd.
•Profit and Loss Account for the year ended June 30, 20—
Gross Profit -------
Less: Expenses
Bad Debts (1,860)
Provision for bad debts (2,200)
•Extract of Balance Sheet As On June 30, 20--
Current Assets
Debtors 68,000
Provision for Bad Debts (2,200) 65,800
Example 2
•A business creates a provision for bad debts @ 5% of its debtors on balance sheet date.
•On Jan 01, 20-- the balance of Provision was 6,600.
•During the year debts written off amounted to Rs. 5,400.
•On December 31, 20--, debtors totaled Rs. 62,000.
•Show Bad debts Account and provision for bad debts account.
Solution
•Required closing balance of Provision
62000 x 5% = 3,100
Example 2
Presentation
•Extract of Balance Sheet
Current Assets
Debtors 62,000
Provision for Bad Debts (3,100) 58,900
Control Accounts
•In general ledger summarized record is maintained in the account called “Control Account”. Separate control account is used for Debtors and Creditors.
•Details of individual accounts are kept in a separate Register / Ledger called subsidiary ledger.
Control Accounts
•Control accounts are part of Double Entry recording.
•Entries in Subsidiary Accounts are not part of double entry.
•Total of transactions in subsidiary ledger should match with the transactions in control accounts.
Information for Control Accounts - Debtors
Control Accounts
•Cash sales are usually not recorded in control accounts.
Example
•Prepare a Debtors control Account from the following data and work out the closing balance on May 31, of debtors.
nMay 1 Opening Balance 55,000
Totals for May
Total Credit Sales 45,000
Returns Inward 8,000
Cheques and Cash received 40,000
Discounts allowed 4,500
Example 2
•Prepare a Creditors Control Account from the following data and work out the closing balance on April 30, of creditors.
nApr. 1 Opening Balance 44,500
Totals for May
Total Credit Purchases 32,000
Purchase Return 6,200
Cheques and Cash paid 28,800
Discounts received 2,500
Recap
•With the increase in business, it becomes difficult to maintain separate accounts for every Debtor and every Creditor.
•Control Accounts are opened in the ledger for both Debtors and Creditors.
•Control Accounts are part of double Entry system.
•Subsidiary ledgers are not part of double entry system.
•Control Account system is used only for credit sale and credit purchase.
Subsidiary Books
•To reduce the volume of general ledger, number of books are opened that are called Subsidiary books.
Subsidiary Books- Debtors
•Three subsidiary books are maintained in case of sales / debtors.
nSales Journal / Sales Day Book – individual invoice wise sales are recorded in this Journal.
nSales Return / Return Inward Journal – in case the volume of returns is also high then these are also recorded in a separate register.
nDebtors Ledger – this ledger maintains record of individual debtor.
•Cash sale is not included in the debtors control accounts.
Information for Control Accounts
Opening balance of debtors List of debtors balances drawn up to the end of previous period confirms with the aggregate balance of the Control Account.
Credit Sales Periodically total of sales journal is posted into the debtors control account.
Sales Return In case the transaction volume of sales return is high then these are recorded in the sales return journal. Periodically the total is posted in the debtors control a/c.
Cheques / Cash Received List of receipts is extracted from cash and bank book. Or a separate column is maintained in cash and bank books for this purpose
Closing Balance This is the balancing figure. It can also be checked with the total of balances in
debtors Control Account.
•Again if we total the balance of three accounts of the debtors ledger on Jan 30,:
nA 8,500
nB 10,000
nC 15,000
nTotal 33,500
•It will be the same as the balance in the debtors control account of the general ledger.
Receipts From Debtors
•When control accounts are used we maintain cash and bank books with separate pages for receipts and payments i.e. two column cash/bank books are not used.
•On the receipts side of the cash and bank book a column is added in which receipts from debtors are separately noted.
•This type of cash / bank book is also called multi column cash / bank book.
Recording of Receipts – Multi Column Cash Book
Subsidiary Books- Creditors
•The recording of creditors is similar to debtors. The subsidiary books maintained in case of purchases / creditors are:
nPurchase Journal / Purchase Day Book – individual purchases are recorded in this Journal.
nPurchase Return / Return outward Journal – in case the volume of returns is also high then these are also recorded in a separate register.
nCreditors Ledger – this ledger maintains record of individual creditors.
•Cash purchase is not included in the creditors control accounts.
Subsidiary Books - Creditors
Opening balance of Creditors List of creditors balances drawn up to the end of previous period confirms with the aggregate balance of the Control Account.
Credit Purchases Periodically total of purchase journal is posted into the creditors control account.
Purchase Return In case the transaction volume of purchase return is high then these are recorded in the purchase return journal. Periodically the total is posted in the creditors control a/c.
Cheques / Cash Paid List of payments is extracted from cash and bank book. Or a separate column is maintained in cash and bank books for this purpose
Closing Balance This is the balancing figure. It can also be checked with the total of balances in creditors Control Account.
Recording of Payments – Multi Column cash book
Recap
nThe need for maintaining control accounts
nSubsidiary record maintained, and
nControl Accounts when a person is both Debtor & Creditor.
nNumerical Examples of Control Accounts.
When a person is both debtor and creditor
•When a person is both debtor & creditor, that means you are purchasing one thing from him and at the same time selling another thing to him.
•In the absence of written agreement, the way of settling the payable and receivable is that you pay him full and ask him to pay you full amount.
•If the agreement exists, the way and may be the wiser way is that you pay or receive from him, the net amount of payables and receivables.
When a person is both debtor and creditor
•For example, you purchase item A from Mr. ABC for Rs. 100,000 and sell him item B for Rs. 65,000.
oOne way of settling the payable and receivable is that you can pay Mr. A 100,000 and ask him to pay Rs. 65,000.
oThe other and may be the wiser method is that you pay him Rs. 35,000 and both the transactions are settled. And this is how such transactions are handled in real life.
When a person is both debtor and creditor
Normally where no control accounts are maintained, following entries will be passed:
Debit A (payable/creditor) account 65,000
Credit A (receivable/debtor) account 65,000
The other entry will be:
Debit A (payable/creditor) account 35,000
Credit Cash / Bank 35,000
This will settle the payable account fully.
When a person is both debtor and creditor
•Where control accounts are being maintained the above two entries are still passed but with slight modification:
Debit Creditors Control account 65,000
Credit Debtors Control account 65,000
The other entry will be:
Debit A (payable/creditor) account 35,000
Credit Cash / Bank 35,000
This entry comes from the creditors column of cash / bank book payment side as usual.
Bad Debts
•Provision does not effect debtors account in simple books. It will therefore, have no effect either on debtor control account or debtors ledger.
•At the time of actual bad debt, the journal entry
Debit Provision / Bad Debts
Credit Debtors Control Account
•In subsidiary ledger, the debit entry will be same but the credit effect will go to Individual Debtors Account in Debtors Ledger.
•Similar treatment is given to discounts received and allowed.
Example 1
•You are required to prepare the Creditors Control account for the month of March and calculate the closing balance from the following data.
nMarch 1 Opening balance Dr. 50,390
nTotals for the month
Sales from Sales Register 60,500
Sales Return (Sales Return Register) 1,550
Cheques and cash received 75,500
Discounts Allowed 2,000
Bad debts written off 1,800
nNo provision for bad debts was made previously.
Example
•Prepare the Creditors Control account for the month of June and calculate the closing balance from the following data.
nJune 1 Opening balance Cr. 35,500
nTotals for the month
Purchases from Purchase Register 50,000
Purchase Return (Purch. Return Register) 1,550
Payments made 45,500
Discounts received 1,500
Example
•The financial year of ABC Co. ended on June 30, 2002. You have been asked to prepare the Debtors and Creditors Control Account from the information extracted form subsidiary books. NOTE
nSales Cash 140,500 1
Credit 255,000
nPurchases Cash 95,000 1
Credit 199,500
nTotal Receipts 405,000 2
nTotal Payments 275,000 2
nDiscounts allowed(all credit cust.) 12,000
nDiscounts received(all credit supp.) 9,500
Example 3
NOTE
nBad debts written off 800
nIncrease in prov. Doubtful debts 2,000 3
nLast year closing balances were
Debtors 285,000
Creditors 194,000
NOTES
1 Cash Sales and Purchases don’t effect debtors/creditors control accounts.
2 Total receipts and payments include cash sale and purchases.
3 Change in provision does not effect debtors actual write off .
Subsidiary Ledgers
•Subsidiary ledgers contain the record of all individuals Debtors and Creditors.
•Subsidiary ledgers give information about the main clients and slow moving clients which is helpful for the management in decision making.
•If the business has distributors in different areas, subsidiary ledger give information about sale of different distributors in different areas which is helpful for the management in decision making.
Recording of Bad Debts in Control Accounts
•In case no provision was created for doubtful debts:
Debit Bad Debts
Credit Debtors Control Account
•In case provision was created for doubtful debts:
Debit Provision for Doubtful Debts
Credit Debtors Control Account
•Recording is also made in the respective account of the debtor in subsidiary ledger.
Recording of Discounts Received in Control Accounts
Debit Creditors Control Account
Credit Discount Received Account
Recording is also made in the respective account of the creditor in subsidiary ledger.
Recording of Discounts Allowed in Control Accounts
Debit Discount Allowed Account
Credit Debtors Control Account
Recording is also made in the respective account of the debtor in subsidiary ledger.
Rectification of errors
•In recording transactions, there is always a chance of error.
•There can be clerical errors in the books of Accounts.
•Whatever the reason may be, there may be an error or two in the accounting process.
•Which means that we need a procedure to rectify those errors.
Rectification of errors
•One way is that we can simply erase or overwrite the incorrect entry and replace it with the correct one but this practice is not allowed in accounting.
• We have to Rectify / Correct the mistake by passing another entry.
Types of errors
ERRORS OF OMISSION.
nThis means that an event occurred but we did not record it.
ERRORS OF COMMISSION.
nEvent is classified and recorded correctly but classification of account is wrong.
ERRORS OF PRINCIPLE
nEntry is recorded in the wrong class of account.
ERRORS OF ORIGINAL ENTRY
nRecording of transaction is in correct account but incorrect figure is recorded.
Types of errors
REVERSAL OF ENTRY
n Entry is reversed by mistake. This means that the account that should have been Debited is Credited and vice versa.
Rectifying the errors
ERRORS OF OMISSION.
nYou have to record the entry that was omitted by mistake.
Example
A sale of Rs. 15,000 made to XYZ on Apr 15, was omitted by mistake
Rectification Entry on the date of discovery
Debit XYZ Account 15,000
Credit Sales 15,000
Narration: Rectification of omission of recording sale to XYZ on Apr 15.
Rectifying the errors
ERRORS OF COMMISSION / ERROR OF PRINCIPLE
nIn both these cases the effect given to incorrect account is reversed and effect is given to the correct account.
Example
Purchase of an asset for Rs. 50,000 is recorded in the expense account.
Rectification
Debit Asset Account 50,000
Credit Relevant Expense Account 50,000
Narration: Rectification of purchase of asset incorrectly recorded as expense.
Rectifying the errors
ERROR OF ORIGINAL ENTRY
nIf the entry recorded is of lesser amount than the required amount, then an entry of the balance amount is passed. On the other hand if the entry recorded is of a greater amount than the required amount, a reverse entry is passed that cancels the effect of the error.
Example
1) A receipt of cash Rs. 5,000 from B is recorded as Rs 500
2) A receipt of cash Rs. 5,000 from B is recorded as Rs 50,000
Rectifying the errors
Rectification
nIn the first instance the recorded figure is less by Rs. 4,500. The rectification entry will therefore be:
Debit Cash Account 4,500
Credit B Account 4,500
nIn the second instance the recorded figure exceeds by Rs. 45,000 from the desired figure. The rectification will, therefore be a reverse entry by Rs. 45,000
Debit B Account 45,000
Credit Cash Account 45,000
Rectifying the errors
•REVERSAL OF ENTRY
nIf a reverse entry is passed by mistake then two entries are required to rectify it, one to reverse the effect of mistake and the other to record correct entry. we can also pass one entry with double amount that serves the purpose of both the entries.
Example
nA payment of Rs. 10,000 made to Mr. D is recorded on the receipt side of the cash book and credit is given to D’s account.
Rectifying the errors
Rectification
nWe can correct this mistake by two entries
Debit Mr. D Account 10,000
Credit Cash Account 10,000
This will reverse the effect of mistake.
Debit Mr. D Account 10,000
Credit Cash Account 10,000
And this will record the transaction correctly.
Or we can record it through one entry.
Debit Mr. D Account 20,000
Credit Cash Account 20,000
Rectification of Errors – Example 2
• Assume that we received cash Rs. 50,000 from a debtor and instead of Debiting the Cash Book / Cash Account we Debited the Bank Book whereas the credit was given to the correct account.
Rectification of Errors
Step 1 Note down the correct entry
Debit Cash 50,000
Credit Debtors 50,000
Step 2 Note down the incorrect entry
Debit Bank 50,000
Credit Debtors 50,000
Step 3 See that Credit affect is correct. In case of Debit, affect has been given to Bank instead of cash. Therefore we will give the due affect to Cash by debiting it and Remove the incorrect affect from bank by crediting it.
Debit Cash Account 50,000
Credit Bank Account 50,000
Examples
Rectify the following errors
•Additional Capital paid in bank Rs. 100,000 credited to sales account.
•Purchase of goods of Rs. 5500 from Mr Amir recorded in books at Rs 5050
•Cash deposited in bank Rs. 20,000 credited to bank and debited to cash
•A purchase of Computer Rs. 25,000 recorded as maintenance expense.
•Completely omitted a payment of bank charges of Rs. 500
Solution
Rectify the following errors
•Additional Capital paid in bank Rs. 100,000 credited to sales account.
•Correct Entry
•Debit Bank 100,000
•Credit Capital 100,000
•Entry recorded
•Debit Bank 100,000
•Credit Sales 100,000
•Rectification
•Debit Sales 100,000
•Credit Capital 100,000
Solution
Rectify the following errors
•Purchase of goods of Rs. 5500 from Mr Amir recorded in books at Rs 5050
•Correct Entry
•Debit Stock 5,500
•Credit Amir 5,500
•Entry recorded
•Debit Stock 5,050
•Credit Amir 5,050
•Rectification
•Debit Stock 450
•Credit Amir 450
Solution
Rectify the following errors
•Cash deposited in bank Rs. 20,000 credited to bank and debited to cash
•Correct Entry
•Debit Bank 20,000
•Credit Cash 20,000
•Entry recorded
•Debit Cash 20,000
•Credit Bank 20,000
•Rectification
•Debit Bank 40,000
•Credit Cash 40,000
Solution
Rectify the following errors
•A purchase of Computer Rs. 25,000 recorded as maintenance expense.
•Correct Entry
•Debit Computers 25,000
•Credit Bank / Cash 25,000
•Entry recorded
•Debit Maintenance 25,000
•Credit Bank / Cash 25,000
•Rectification
•Debit Computers 25,000
•Credit Maintenance 25,000
Solution
Rectify the following errors
•Completely omitted a payment of bank charges of Rs. 500
•Correct Entry
•Debit Bank Charges 500
•Credit Bank 500
•Entry recorded
•-------
•Rectification
•Debit Bank Charges 500
•Credit Bank 500
Profit and Loss Account
Profit and Loss Account
•Sales
nSales are the revenue against the sale of the product in which the organization deals.
nIn case of a service organization, there will be Income Against Services Rendered instead of Sales and there will be no Cost of Sales or Gross Profit.
•Cost of Goods Sold / Gross Profit
nIt is the direct cost incurred to manufacture the goods that are sold during the period.
nGross Profit = Sales – Cost of Goods Sold
Profit and Loss Account
•Other Income
nOther income includes revenue from indirect source of income, such as return on investment, profit on PLS account, Sale of scrap etc.
•Administrative and Selling Expenses
nAll costs that are incurred for the purpose of business but are not directly related to production are classified in Admin and Selling Expenses.
•All expenses should be distributed properly among the three classifications i.e. Cost of Goods Sold, Administrative Expenses and Selling Expenses to present the financial statements fairly.
Profit and Loss Account
•Financial Expenses
nFinancial expense are the cost / interest paid on loans taken by the organization. These are shown separately in the Profit and Loss Account
Profit and Loss Account
•Income Tax
nIncome Tax is paid on Net Profit.
nAt the time of preparing annual financial statements, an estimate of expected tax liability is made.
nA provision is then created equal to that estimate.
nThe treatment of Provision for tax is same as that of provision for Doubtful debts. i.e. provision is made at the time of preparing accounts which then adjusted accordingly at the time actual tax expense is known.
Balance Sheet (Assets)
•Fixed Assets
nAssets purchased not for resale are called fixed assets and these are presented at cost less accumulated depreciation OR revalued amount.
•Capital Work in Progress
nA fixed asset under completion is shown under this head. At the time of completion it is transferred to fixed assets.
• Deferred Costs
nThese are revenue expenditures that benefit the organization for a period longer than one year.
nThese are, therefore, initially shown in balance sheet and then charged to profit and loss (amortized) over the period they are expected to provide benefit to the organization.
Balance Sheet (Assets)
•Long Term and Short Term Investments
nInvestments made with the intention that they will be held for a period longer than twelve months are classified as long term and those made for a period shorter than 12 months are classified as short term.
Balance Sheet (Assets)
nFollowing things are important to note here:
oClassification is to be made every time a balance sheet is prepared and the period is to be calculated from the date of balance sheet.
oAn investment may initially be made as a current investment. Subsequently, if it is decided to hold it for a longer period. Then, its classification will have to be changed accordingly and vice versa.
nTherefore, investments are checked for classification every time a balance sheet is prepared and presented accordingly.
Classification of Investments
•Long term investments are those investments that are meant to be held for a long term period.
•If it is decided to dispose off a long term investment, then its classification is changed to current investment from long term.
