Accounts Of Professional Persons
Accounts Of Professional Persons Learn All About Professional Persons Accounts : The persons who provides different types of services, using their knowledge and brain are called professionals. For example the doctors, chartered accountants, lawyers, engineers etc. Such persons are also required to maintain proper books of accounts. At the end of every financial year , these professional persons, have to prepare their final accounts.
Final accounts of such professional persons includes the following –
- To know to amount of profit earned / loss suffered, the professional persons prepare
- Receipts and expenditure A/C OR Income and expenditure A/C.
- Income and expenditure A/C OR Receipts and expenditure A/C.
1 Which system of accounting the professional persons use ?
: The professionals like doctors, lawyers etc, use combination of cash system and mercantile system of accounting, which we may call as hybrid system of accounting, in this system income are recorded on cash basis,but the payment of expenses are recorded under mercantile system.
2 What is the difference between receipts and payments account and receipts and expenditure accounts ?
: The receipts and payments account is a summary of cash transanctions ( it is like a cash book ). Hence it not shows profi / Loss, well receipts and expenditure account is a nominal account, like a profit and loss account, which shows a profit / loss for the year.
3 What is the difference between receipts and expenditure account and income and expenditure ( P & L A /C ) ?
: The income and expenditure account is prepared under per accrual / mercantile system in which incomes as well as expenses are recorded on accrual basis, but while preparing receipts and expenditure A/c, we use cash system of accounting for recording incomes, but accrual system for recording expenses. Therefore profit shown by both these accounts differs. The receipts and expenditure ac is prepared by professional persons like Doctors, CAs, lawyers. etc .
4 Define profession
: A Profession in an activity of rendering cosultation services bases on expert knowledge and experience to the clients charging the fees e.g. Doctors, C.A.’s, Lawyers etc.
5 What is the difference between Business and Profession ?
: A business is an activity where the goods are purchased &sold (i.e. treding activities are undertake), while the profession in an activity of rendering consultation services bases on specialised expert knowledge, skill and experience to tne clients charging the fees e.eg doctots’ C.A.’s , Lawyers etc. ln case of profession the brain/knowledge/experience/skill is a main capital. But in case of buseness the cash’ machinery etc. is the main capital.
6 Write a short note on-Receipts and Expenditure A/c ?
Receipts&expenditure A/c is a prepared by professional persons like Doctors, C.A.’s Lawyers, Architects’ etc. to ascertain profit earned from their professional activities.