Accounting Questions and Answers

Unpresented cheques are cheques which have not yet cleared through the banking system. It is a term used in the preparation of a bank reconciliation statement. For example, if a business writes a cheque, it will post it to its cash book that day and then send it on to its supplier.

The net working capital formula is calculated by subtracting the current liabilities from the current assets. Here is what the basic equation looks like. Typical current assets that are included in the net working capital calculation are cash, accounts receivable, inventory, and short-term investments.

Remember an overcast is a situation where a customer pays an amount higher and above the real value for goods, due to an error in the total amount calculated in the invoice. The suplier is expected to send a credit note to the customer, noting an error in the invoice and  accepting to refund the excess amount to the customer. In the sales day book, the sales account will be debited (because a sale had occur) and a suspense account credited.

A suspense account is an account in the books of an organization in which items are entered temporarily before allocation to the correct or final account.

Normal balance is the side where the balance of the account is normally found. Asset accounts normally have debit balances, while liabilities and capital normally have credit balances. Income has a normal credit balance since it increases Capital . 

In accounting, nominal accounts are the general ledger accounts that are closed at the end of each accounting year. As a result, the nominal accounts are also referred to as temporary accounts. The closing process also means that each nominal account will start the next accounting year with a zero balance. Nominal Accounts are accounts related and associated to losses, expenses, income or gains.Examples include purchase account, sales account, salary A/C, commission A/C etc.