In order to get the contract, Mr Mehta must fulfil the above two conditions so for that hehas to do the following things.(
)Learn the basic things of recording of day-to-day transactions.(
)Collect necessary data for the preparation of last year’s financial statements.(
)Maintain a daily book to record all the day-to-day transactions of the business.(
)Appoint an accountant, who will prepare all the accounts and financialstatements from this daily book.
QUESTIONS AND ITS ANSWERS1.
Mr Mehta mentioned that(
)He could not have systematic accounting records because he did not possessspecialized accounting skill; and(
)Keeping such records would increase in costs, which he could not afford. Howwould you respond to these comments?
)Here, as Mr Mehta’s business is not very vast, recording of day-to-daytransactions does not require any specialised knowledge so he could just learnthe basic fundamentals of accounting and start recording the day-to-daytransactions in a daily book. This daily book can be recorded systematically byappointing an accountant (Mr Lal).(
)In short term, recording of proper accounts will cost a bit to Mr Mehta but it will be equalized by the long-term benefits by maintaining proper books of accounts.In addition, appointing an accountant (Mr Lal) for such limited size firm wouldnot cost very much as he will not have to be paid a very high amount for hisservices rendered.
What information would Mr Lal require for preparing the financial statements?
Mr Mehta would require three types of information for preparing the financialstatements, which are as under.(
)Information related to Trading Account(
)Purchases and sales of goods(
)Closing stock of goods(
)Information related to Profit & Loss A/c.(
)Daily revenue expenses of the firm(
)Daily revenue incomes of the firm(
)Information related to Balance Sheet(
)Information related to liabilities of firm1.Share capital2.Other liabilities which include:
Reserves & Surplus
Secured loan and unsecured loans
)Information related to Assets of the business: