Credit Note: A credit note, additionally referred to as a credit memo, is a business document provided by a vendor to a buyer. Credit notes serve as a starting point for the sales return diary entries. In simple terms, the credit note provides proof of a decrease in sales. A credit memo, short for "credit memorandum," is proof of a decrease in the amount owed by a buyer to a seller under a previous invoice.

It can also be a document sent by a bank to a depositor indicating that the depositor's balance has been reduced in an event other than the deposit being made, such as the bank's collection of the depositor's note receivable.

A credit note details the items, quantities, and agreed-upon pricing for goods or services given by the seller but returned or did not receive by the customer. It may be provided for damaged items, faults, or allowances. A Credit Memo will lessen or remove the buyer's obligation to pay the previously issued invoice. A Credit Memo should not be used in place of a formal document. The PO #, Date, Billing Address, Shipping Address, Terms of Payment, and a list of items with quantities and prices are rarely included in the Credit Memo. It usually refers to the original invoice and, on occasion, explains the cause for the problem.

A gift card or shop card credit that allows the customer to purchase an item or service from that merchant at a later date. In cases where the original sales agreement did not include an express refund policy for returned products, a seller may give credit notes as a goodwill gesture to a customer who desires to return previously acquired merchandise (instead of monetary reimbursement). In such cases, a credit note for the amount of the returned item is frequently offered, allowing the customer to swap their purchase for other things available with the sale.




Debit note: A debit note, additionally referred to as a debit memorandum, is a business document sent by a buyer to a seller as a formal request for a credit note. The source document for the Purchase returns log is the debit note.

In simple terms, it is proof of the existence of a cost-cutting measure. The seller may also provide a debit note as opposed to a billing statement to alter the amount of a previously issued invoice (for example, if the bill of sale is recorded in the incorrect value).

In most cases, debit notes are utilized in business-to-business transactions. Such transactions sometimes entail an extension of credit, which means that a seller would ship items to a corporation before the products have been paid for. Although real things are being exchanged, real money is not until a genuine invoice is given. Rather, debits and credits are recorded in an accounting system to maintain track of dispatched inventory and payment. When a price is stated on a debit note, it represents the amount charged to the consumer for the products.


Going concern principle: The going concern concept implies that an entity will continue to operate for the time being. This, on the other hand, ensures that the company will not be compelled to suspend operations and liquidate its assets in the near future at what may be very low fire-sale prices. By making this assumption, the accountant is justified in delaying the recognition of some costs to a later period, when the entity is presumably still in operation and making the best use of its assets. In the absence of sufficient information to the contrary, an entity is believed to be a going concern. An example of such contradictory information is an entity's inability to satisfy its commitments when they come due in the absence of significant asset sales or debt restructurings. If this were not the case, an entity would be purchasing assets with the goal of terminating its activities and reselling the assets to a third party.

If the accountant considers that a business is no longer a going concern, the question of whether its assets are impaired arises, which may necessitate a write-down of their carrying amount to their liquidation value. As a result, the value of a continuing business is greater than its breakup value, because a going concern might theoretically continue to produce profits.

Because the idea of going concern is not explicitly defined anywhere in widely accepted accounting rules, it is open to substantial discretion as to when an organization should declare it. However, generally accepted auditing standards (GAAS) require auditors to examine an entity's capacity to continue as a going concern.




Dual aspect Principle: The duality principle is another name for the dual aspect notion. This principle states that if something is provided, it will be received by someone. This may be stated as follows: anytime a transaction happens, there is a two-sided effect, one credit and one debit for a corresponding amount.

According to double entry accounting, all company transaction is recorded in two different accounts. The dual aspect notion states that any transaction completed by a firm has two distinct effects that are equal and opposing in nature. This principle underpins double-entry accounting and is utilized by all accounting systems to provide accurate and dependable financial accounts.

 

Assets = Liabilities + Equity is the accounting equation employed in this topic.





Separate Entity Principle: According to the separate entity principle, we should always record the financial activities of a firm and its owners separately. The notion is especially important in the case of a sole proprietorship, because the owner's and the company's activities are probably going to be intertwined.

Here are some examples of regulations to follow while using a distinct entity:

An owner cannot withdraw cash from a firm unless it is recorded as a loan, remuneration, or equity distribution. Otherwise, the owner may purchase something (such as real estate) and record it on the company's records while treating it as a personal asset.

An owner cannot provide cash to a firm unless it is recorded as a loan or a stock acquisition. Otherwise, undocumented cash enters the company.

An owner is the only investor in a building and arranges for his firm to operate from it in exchange for a monthly rent payment.

The separate entity idea should also be extended to a company's functioning divisions, so that we may ascertain the same information individually for each division. The approach is more difficult to implement at the division level since there is a propensity to apportion corporate costs to each subsidiary; this makes determining profitability and financial status at the operational unit level more challenging.

Once the policies and procedures for accounting for a separate business have been established, they must be followed consistently; otherwise, there will be ambiguity regarding transactions involving the owners or the separate entity.


Depletion: Depletion is a common accounting and tax term in the mining, wood, and petroleum sectors. It is a cost recovery technique for accounting and tax reporting, comparable to depreciation: "The depletion deduction" allows an owner or operator to account for the decline of a product's reserves.

There are two forms of depletion for tax purposes: percentage depletion and cost depletion.

In most cases, the technique that results in the biggest deduction is applied for mineral property. The cost depletion approach must be used for standing wood.

Depletion is a way of recognizing the progressive expenditure or consumption of natural resources over time, for both accounting and tax reasons in the United States. Depletion occurs when natural resources are depleted via mining, quarrying, drilling, or falling.

According to the IRS Newswire, more than half of oil and gas production companies calculate their depletion deduction using cost depletion. Oil and gas wells, mines, and other natural resource deposits (including geothermal deposits) are examples of mineral property. To that end, property refers to each individual stake that a firm has in each mineral deposit in each separate tract or parcel of land. Two or more different interests can be treated as one property or as separate properties by businesses.



Accounting Information System/Users: Accounting Information System (AIS) is a system that gathers, saves, and processes financial and accounting data. This financial data is helpful for accounting information system users who need to provide financial details for owners/shareholders, supervisors, potential investors, debtors, bankers, along with other lending institutions, the government, and so on. Let us learn more about the accounting information system's characteristics and users.

A company's accounting and commercial activity is tracked via an accounting information system. People, procedures and instructions, data, software, information technology infrastructure, and internal controls are the six key components. Each component is described in detail below.

1. Individuals

2. Procedures and Guidelines

3. Data;

4. Software;

5. Information Technology Network

6. Internal surveillance