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The voucher system in accounting is a method of controlling payments made by a business. The system ensures only authorized payments are made and can be used for both goods and services purchased either on account or for cash.

The matching principle forms a necessary part of the accruals basis of accounting, and ensures that expenses are matched to revenues recognized in an accounting period.

This post shows how to calculate manager's commission on net profit after charging such commission.

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The 3 column ledger account adds a third column to the standard T account used in bookkeeping, in order that a running balance can be maintained on the account. The three columns are debit, credit and balance.

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A business records an accounting entry for a barter transaction. The transaction involves the business exchanging goods in return for the provision of advertising services.

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The book value of equity represents the amount of a business which is available for the distribution to the stockholders. The total book value of equity needs to be allocated to preferred stockholders before common stockholders.

A paid cash on account journal entry is needed when a business has paid cash to a supplier and the amount is not allocated to a particular supplier invoice or the supplier has not yet sent an invoice.

A physical count of inventory reveals inventory shrinkage of 1,470. The journal entry to record this reduces the inventory to the physical count using an inventory shrinkage expense account.

A business needs to have spare capacity for activities such as production and staff. The capacity cushion calculation indicates the level of spare capacity a business has relative to its total capacity.

Accounting errors can occur in double entry bookkeeping for a number of reasons. Accounting errors are not the same as fraud, errors happen unintentionally, whereas fraud is a deliberate and intentional attempt to falsify the bookkeeping entries. An accounting error can cause the trial balance not to balance, which is easier to spot, or the error can be such that the trial balance will still balance due to compensating bookkeeping entries, which is more difficult to identify.

A letter of irrevocable credit or irrevocable lc,  is one which cannot be revoked or amended by the buyer without agreement from the seller. A letter of credit is a mechanism a seller can use to reduce risk and facilitate payment for international trade. A letter of credit works by substituting the credit of a bank for that of a buyer, it is basically a guarantee to the seller that the buyers bank will make payment.

Prepaid expenses are costs paid by a business which have not been fully utilized during one accounting period; they overlap accounting periods. Prepaid accounting arises from the matching concept, one of the fundamental accounting principles.

The business updates the ledger by copying each of the entries in the books of prime entry to the appropriate account in the ledger. This updating process is referred to as posting the general ledger.

The double entry bookkeeping system categorizes accounts into personal and impersonal accounts. Impersonal accounts are then further divided into real accounts and nominal accounts. The purpose of using these types of accounts in accounting is to simplify the bookkeeping system.