Section A

1.

The distinct stages in accounting are as follows:

1. Identifying and analysing business transactions

2. Recording of transactions in journals

3. Posting to respective ledger accounts

4. Preparation of unadjusted trial balance

5. Passing of adjustment entries

6. Preparation of adjusted trial balance

7. Preparation of financial statements (balance sheet, profit and loss statement)

8. Providing closing entries

9. Post closing trial balance

10. Reversing entries

The following steps are involved in the accounting process:

1. The first and the most important part of the accounting process is the

analysis of the transactions to decide which account is to be debited

and which account is to be credited.

2. Next comes journalising the transactions i.e. recording the

transactions in the journal.

3. The journal entries are posted into respective accounts in the ledger

and the ledger accounts are balanced.

4. At the end of the accounting period, a trial balance is prepared to

ensure quality of debits and credits.

5. Adjustment and closing entries are made to enable the preparation of

financial statements.

6. As a last step financial statements are prepared.

These six steps taken sequentially complete the accounting

process during an accounting period and are repeated in each subsequent

period.
2.
Comparison Chart

BASIS FOR PROFIT & LOSS

TRADING ACCOUNT
COMPARISON ACCOUNT

Meaning Trading account is an Profit & loss account is an

account which indicates account, representing the
the result of trading actual profit earned or loss
activities, such as sustained by the business
purchase and sale of during the accounting
products. period.

Preparation It is prepared to It is prepared to ascertain

ascertain gross profit for net profit for the period.
the period.

Transfer of Balance of trading Balance of profit & loss

balance account is transferred to account is transferred to
Profit & Loss Account. Capital Account.

Accounts for Direct revenue and direct Operating and non-operating

expenses incomes and expenses.

3.
Cost of Plant = Rs 50,000
Useful life = 10 years
Residual value = Rs 5000
Depreciation = Cost-Residual value/Estimated useful life
=50,000-5,000/10
=45000/10
=4500
Also,
rate of depreciation = Annual depreciation/cost of plant x 100
= 4500/50,000 x 100
= 9%

4.

Particulars   Amount(Rs.)

Net Profit of the year (given)   ₹ 6,50,000

Add: Non – fund items
debited to P&L Account    

Good Will written off ₹ 10,000  

Loss on sale of machinery ₹ 1,500  

Depriciation (20% of
500000) ₹ 1,00,000 ₹ 1,11,500
Less: Non – fund items
credited to P&L Account    

Profit on sale of building ₹ 40,000 ₹ 40,000

Funds from operations   ₹ 7,21,500

     

Amount Amount(Rs.
Particulars Rs. Particulars )
Good Will written off ₹ 10,000 Profit on sale of building 40000

Loss on sale of machinery ₹ 1,500 Funds from operations 721500

Depriciation (20% of
500000) ₹ 1,00,000    
       
To Net Profit ₹ 6,50,000    

  ₹ 7,61,500   761500
       

6.