Subject: Accountancy/ Financial Accounting for Managers caren 5 Business Course/Subject: BSC HRHA Note: Accounting is the Language of business and therefore it is called DR.FRANCIS THOMAS business course at Total marks; 100 IHM MUMBAIExplain the following a. Business Entity Concept b, Capital . Drawings 4. Goods ©. Creditors f. Debtors E- Assets, Fixed Assets and Current Assets h. Classification of Accounts L Rules for Debit and Credit j. Trade Discount k. Cash DiscountBu . te toon amex a. Business Entity Concept Business entity concept implies that a business unit is separate and distinct from the person who supply the capital to it. Thus all the transactions of the business are recorded in the books of the business from the point of view of business as a Separate entity.( In simple words, you assume you are the business accountant). b. Capital The amount of money or property contributed by the proprietor to manage and expand the business is called capital. c. Drawings Drawings represent money or other assets withdrawn from the business by its proprietor for his private or personal use.d. Goods Goods denotes the article which is either purchased or manufactured by the trader for resale is called goods. Goods account is classified in to 5 categories: d.1, Purchase Account To record the goods purchased whether for cash or on credit. d.2. Purchase return or Return outwards Account To record the goods returned to suppliers, purchased earlier. 4.3, Sales Account ‘To record the goods sold whether for cash or on credit. 4.4, Sales Return or Return Inwards Account ‘To record the goods returned by customers sold earlier. d.5. Other goods Account ‘To record other transactions in goods such us a. Goods taken by owner account b. Goods given as free samples account extra. Note: All these accounts are types of goods account, which is a real account.e. Creditors/Accounts payable/ Sundry creditors/Trade creditors/ List of creditors A person to whom money is owed or payable by the business is called creditor. For example: If a business firm purchases goods from Mr. shah on. credit, Mr. Shah is a creditor of the business firm. f. Debtors/ Accounts receivable/ Sundry debtors/ Trade debtors/ List of debtors A person who owes money or money’s worth to the business is called debtor. For example: If a business firm sells goods to Mr. Patil on credit, Mr. Patil is a debtor of the business firm.g. Assets, Fixed Assets and Current Assets g-1 Assets In accounting terminology, the property of every description owned and possessed by the business is called asset. 2.2. Fixed assets Those assets which have real existence and are fixed by nature and give benefits to the business for long period of time which may be more than one year are called fixed assets. Example: Land, Building, Furniture extra. £:3. Current assets Those assets which are used to manage day to day activities and are keep ‘on changing their form and amount are called current assets. Example: Cash, Stock or inventory extra.h. Classification of Accounts An account is a summary of all transactions during a particular period relating to: 1. A particular person 2. A particular asset or 3. A particular item of income, gain expense or loss. Classification of accounts/Types of accounts: 1. Personal Accounts Example: Individuals(Creditor, debtor, Lender extra)and Artificial persons or legal entities(Companies/banks). 2. Real Accounts Example: Fixed assets, Current assets and Investments 3. Nominal Accounts Example: Incomes, Gains, Expenses, and Losses. 5j. Dual Aspect Concept Every financial transaction involves a two fold aspect: 1. The yielding of a benefit and 2.The giving of that benefit. Thus every debit must have a corresponding credit and recording both the aspects simultaneously is known as double entry system. k, Rules for debit and credit( Analyse the next example) Debit - credit rules for three types of accounts are: Type of Account Debit Credit 1. Personal The receiver The giver Accounts 2. Real Accounts | What come: What goegout 3. Nominal All expenses and |All incomes and Accounts losses gainsFrom the following example prepare a table which shows: Date, Accounts affected, Personal or Real or Nominal, Rules applicable, Debited or Credited and amount. 2020 Jan. 1, Started business with a capital Rs.200000. 5. Purchased goods on credit less 10 % trade discount for Rs. 5000 from Mr. Anand. 10. Sold goods for cash Rs. 2000 to Mr. Anil less 10% cash discount. 20. Deposited with State Bank of India Rs.10000. 31. Cash withdrawn for personal use from business Rs.2000. sowmon:Bao oF oa Te ex 7 z 3 Te 3 6 oo ee eo ae oor ta Peeaal | ocean [cass me an rm ml.Debited 2020 or Januvary | Accounts affected PorRorN, Rules Applicable Credited | Amount a [cash Account Real Account | Debit what comes in ebited | 200000 Capital Account sonal Account _| Credit the giver Credited | 200000 5 [Purchase Account Real Account | Debit what comesin Debited | 4500 (Me. Anand Account Personal Account_| Credit the giver credited | 4500 10 | cash Account Real Account | Debit what comes In Debited | 1800 Discount Allowed Account | Nominal Account | Debit all expenses and losses | Debited | 200 Sales Account Real Account —_| Credit what goes out credited | 2000 20 | State Bank of india Account| Personal Account | Debit the receiver Debited | 10000 Cash Account Real Account —_| Credit what goes out credited | 20000 31 | Drawings Account rsonal Account | Debit the receiver Debited | 2000 Cash Account Real Account | Credit what goes out Credited | 2000Note:1, Trade discount Trade discount is an allowance given by the wholesaler to the retailer on the listed or catalogue price. The adjustment for trade discount is always made in the invoice or credit memo or bill itself and therefore trade discount will not appear in the books of accounts. Net invoice price(Amount recorded) = Listed price — Trade discount Example: Purchased goods worth Rs. 5000 on credit from Mr. Patil less 10% trade discount. Net invoice price = Rs.5000 — Rs.500 = Rs.4500 The amount to be recorded in Purchase account and Mr. Patil’s Account is Rs. 4500 respectively.Boo og tes ro ee Note: 2. Cash discount Cash discount is an allowance given by the seller to the buyer for early or prompt payment and cash discount is always recorded in the books of account. Example: Sold goods for cash Rs. 2000 to Mr. Anil less 10% cash discount. In this case: Cash account is to debited for Rs. 1800 Discount allowed account is to be debited for Rs.200 Sales account is to be credited for Rs.2000TNCHMACT MODEL: MCQ|I0=1 = 10 Marke) 1 Drawing account isan example of esl Account Pertonal Acount Nominal Account None ofthe above SB ean example of Nominal Aecount Personal Account Real Account |. None ofthe above What are the possessions ofa business? Asset 1 Webiaty e-Mone ofthe above 4A person who owes money tothe busines called Creditor b Debtor Je Lender None of the above 5. Trade discount: "Not recorded in the books 1. Recorded inthe books ‘2 None ofthe above(6. Debit what goes out and ret what comes nis the rule of bit and credit fr Real Account 1. Nominal Recount ©. Personal Recount 1. None ofthe above 7. cath discount ‘2. Not recorded in the books i, Recorded in the books ©. None of the above 48. person to whom money s owed by the business caled: 2. Debtor 1. creditor ‘8 Nominal Recount BL Real Account Personal Recount 10, Debit the giver and credit the receiver ithe rule of debit and credit for ‘Real Account Personal Account Nominal Account 4. None ofthe above.Journal, Ledger and Trial Balance Journalise the following transactions in the journal of Mr. his ledger and prepare a trial balance as on 31/01/2020. Date 2020 Jan. 1. Virendra started business with a capital Rs.200000. 5. Purchased goods on credit less 10 % trade discount a for Rs.5000 from Mr. Anand. 10. Sold goods for cash Rs. 2000 to Mr. Anil less 10% Cash discount. 20. Deposited with State Bank of India Rs.10000. 31. Cash withdrawn for personal use Rs.2000. irendra, post them intoJOURNAL Journal isa French word meaning day. Journal means a book to record dally transactions or dally book. As s00n as any financial transaction takes place itis frst recorded in the journal, Hence journal is called the ‘book of first original or prime entry. Steps: 1. (Entry line -1/Row-1)Record the date of transaction In the ‘Date Column’ and enter the name of the account to 'be debited in the particulars column (very close to the left hand side),along with the abbreviation ‘Dr’ (very close to the right hand side) Inthe same line and amount tobe debited is written In the debit amount column in the same lin 2. (Entry line ~ 2/Row-2]Write the name of the account to be credited in the next line preceded by the word To, 2 ttle space away(from the line which separates the Date Column and the particulars columnand amount to be credited fs written in the credit amount column in the same line, 3. (Entry line ~3/Row -3)Write the narration(a bref description of the transaction)start with a word Being/For “within brackets in the next line n the particulars column. 4. (Entry line ~4/Row -8)Draw a line across the entire Particulars Column, Note: LF denotes ledger folio/ledger page number and Dr denotes debit. ‘The format of journal Is given below: ‘Tournal entries Inthe books Particulars LF [Debits) | creaiins) aJournal entries in the book of Virendra for Januvary 2020 Date Particulars LF | Debit(Rs) | Credit(Rs) aso [ sy [aa male om eee | |e a {oye raised bens wh ecapal of 200001 aI = eee (Being bought goods from Mr.Anand’s for Rs.5000 less 10% TD) = | peer me | ee ease areas ae = (Being sold goods for cash Rs.2000) i | aoe beaeremanacaaa [sees pean Po = (Being deposited Rs.10000 with SBI) 31 | Mr Virendra’s drawings Account Dr 2000 ones (Being withdrawn Rs.2000 from personal use) roca 218500 | 218500 br [4800 4500 2000LEDGER Ledger denotes group of accounts/folios. An account is a statement showing the summary of transactions and final balance in respect of a person or an item. Each account is kept on a separate page or folio. All Pages or folios are bound together in a book which is called ledger. Notes: 1. Each ledger account starts with the name of the account. The name of the account is. shown in the top( middle or centre) of the account and in one page open maximum 4 accounts. 2. Each ledger account is divided into two parts and the left - hand side(LHs) is called the debit side(written in the abbreviated form Dr.) and the right - hand side(RHs) is called the Credit side(written in the abbreviated form Cr.). Therefore the English alphabet Tis similar to the shape of an account. Amounts entered on the LHS of an account are called debits and amounts entered on the RHS of an account are called credits. 3. On the LHS and RHS of the account there are 4 columns each: Date, Particulars, J.F, and Amount respectively. Note: J.F denotes journal folio/Journal page number. 4, The standard format of an account is given below:Or Tame ofthe account @ Date [Particulars | 1F [Amount [Date | Partcuars _[.F | Amount Posting The process of transferring journal entries from journal to ledger is called Posting. Steps in posting: 1. Fill the amount column on the debit and credit side in the respective accounts Note: While posting compound entries please remember that the amount standing against a particular account should be transferred to that account. 2. Fill the particulars column that is, on the debit side name of the account credited preceded with the word ‘To’ and on the credit side name of the account debited preceded by the word ‘By’. 3. Fill the date column.23: ee * = => WHI cur ose actos amano soeson REN VEN mor san FY Ledger accounts in the books of Mr. Virendra ‘ash Account| Particulars “LF [Amount | Omte Mr Vrendrts Capital AccountMr. Virendrls Drawing AccountTo Virendras capital A/C '200000 | 2020 20 | By state bank of indie 10000 Tosales 1800 san | 31 | By Virendra's drawings 2000 31 By Balance cd 189800 um oim00 Yo Balance b/é 189800 ‘Mi Virendr’s Capital Account 2020 Toalance cfd 200000 |Jan [1 | Byeash arc 200000 00000 00000 Feb [1 | By Balance o/s ‘200000 Purchase Account ‘2020 ToAnand 4500 [tan |31 | By aance c/s 500 ‘500 ‘S00 ToBalance b/d 500ex oad otea aoe ME RE YO oF ‘at bank india count 1 [amount [Oate Pears iF [amo en 10000 [ian | 31 | myastnce id 12000 a a = Eel ‘eran Drawing Acount 20 2000 [ian | | by Balance 20 za 08 = see eee e weewas oF NCHMCT MODEL: MCQs on JOURNAL AND LEDGER 1. Amount invested by the proprietor in the business should be credited to: (@) Alc payable (©) Capital (©) Cash (@) Drawing (G2, Transactions are first recorded in which book? b (2) Book of Original Entry (0) Accounts (©) Accounting Equation (6) Book of Final Entry 3, Journal is also called a: (2) A day book (0) History book (©) Ledger book (4) An entry bookQ4. Journal lists transactions in which order? {a) Decreasing (b) Chronologically/Date- wise (c) Alphabetical (d) Increasing Q5. Among these statements which one is incorrect regarding journal entry? {a) The de! it ed first {(b) Journal entries show the effects of transactions {¢) Each journal entry should begin with a date {(d) Journal entries provide account balances Q.6 Cash withdrawal from business by the proprietor should be debited to: {a) Cash account (b) Purchase account {€) Capital account {d) Drawings account7. Aledger is called a book of: (a) Primary entry () Final entry (6 Original ent (@ None of the above 8. From whieh of the following is a ledger accounts prepared, (@) Transactions (©) Journal (6) Events (@) None of the above 9. The process of transferring of entries from a journal to their respective edger accounts i called a8. () Entry () Aritumetic (© Balancing (@ Posting410, The ledger column that Hinks the entry with the Journal Is called as. (@)3F column ©) LF column (© Credit column (@ Debit column 11, Which English alphabet is similar to the shape of an account? @t or oH (@ None of the above 112, Among these, which item is used as the base for preparing trial balance? (2) Cash account (b) Capital account (6)Journat (4) Ledger accountsBalancing of ledger accounts and preparation of trial Balance (T/B) By Step:1 - Compute the totals of both the sides of an account asa rough work, then find out the difference and record the difference as ‘Balance ¢/d or Balance c/f” ( Balance carried down or Balance carried forward respectively) on the shorter side of ° an account. Step:2— Close the account by writing the same totals on both the sides of an account, = in the same line and below the totals draw the double lines in the amount column. Step: 3 - Transfer the Balance c/d or c/f to the opposite side of an account as a4 “Balance b/d or b/f(Balance brought down or Balance brought forward respectively) Notes: 1, The last date as per the example should be the date for Balance c/d or Balance c/f. —_ 2. The next date should be the date for Balance b/d or Balance b/f. = Conclusion The real balance of an account is the balance b/d and not the Balance e/d.‘Trial Balance (T/B) ‘Trial balance isa statement of debit and credit balances ofall edger accounts and ifthe brought down balance i on the debit ide, vansfer the amount to the debit amount column and ifthe brought down balance i on the credit sie, transfer the amount to the eredit amount column of trial balance. Objectiver! Purpos The main objective isto test arithmetical accuracy ofthe books. 2.1f the TB does not tally it indicate some errors. B.A trial balance is concise summary of ledger accounts, 4. Teal Dalance isa Unk between ledger and the final accounts. ‘The following Is the format of trial balance. N_ | Name of the account ‘Assets External Liabilities/ Creditors equity Capital/Owner's equity/Internal liability Incomes/Revenue Expensesmao ‘Trial balance of Mr. Virendra as on 31/01/2020 EN [Nemeof the wccount LF [pebfamount) | credn(amount) 2 |cahale 1189800 2. | Me Virendra'e capital A/C 200000 3. [Purchase a/c 4500 4 [Me Anand a/c 4500 5, | Discount Allowed a/c 200 6 |Salesare 2000 7. | State Bank of indla A/c 10000 8 [Me Vieendra's drawings A/C 2000 Total 206500 206500Rules for debit and credit American system/Accounting equation approach) ‘Types of accounts Debit the: | Credit the: 1. Asset Increase Decrease 2. Liabilities/ External liablities/ Creditors equity Decrease Increase 3. Capital/Internal liability/ owners equity Decrease Increase 4, Incomes and gains/Revenues Decrease Increase 5. Expenses and losses Increase Decrease‘MCQs on TRIAL BALANCE 4 Accounts having credit balance is closed by writing: ( By batanee v/a © By bal (© Tobalance bd (© Todatance cs ee cd @ () atance () Balance cana Balance Wt (@ None of tne above 3. Which of the following balance will be appear as credit balance n tral balance? (@) Discount received (&) Rent Expenses (©) Porehases assets‘Trial balance i prepared to find out: 1) Prom ar toss Fim ©) Aritumetc cal position oF accounts 8) None ofthe above s transaction i completely deleted, wil the trial batanee tly = No byves ©) A transaction cennot be omitted No comments lance can be prepared on? 1) At the end of an secouating period ba )At the end ofthe year 8) Atte end ofa month :. Which of the following has normal credit balance? (a) An asset (b) An expense ©) Drawing cd) Revenue/Incomes . Which of the following account would usually have a debit balance? a) Account Payable b) Cash/ Asset (¢) Owner's Equity (@) Bank Loan |. Which of the following account has usually debit balance? a) Owner Equity/Capital (b) Purchase (c) Purchase returns (d) Discount received> Sa : 10. Which system of rules for debit and eredit we fallow in India? 4. British system », American system/Accounting equation approach, 4 ¢. British and American system 4, Nene of the above, 14, Increase in asset is alwayst a. Debited b. Credited . Debited and eredited k 4. None of the above 12, Increase in external linbility a Debited . Credited ©. Debited and credited Te 4. None of the above 13. Inerease in expense is always: E a Debited b. Credited ©. Debited and credited 4. None of the above Ciekt0 sd14 Real account always show: a. Debit balance b. Credit balance }e. Nil balance ‘8. Cannot be balanced 45,Nomial account having eredit balance represents: ‘a. Income and gain st gene . Expense or loss fe Assets 3. Liabil 16.Nomial account having debit balance represents: ‘a. Income and gain, ». Expense or loss fe. Assets 8. Liabilities 17.When the total of debits and total credits of a. Nil balance b. Debit balance 0 ‘c. Credit balance 1d. None of the above account are are equal:Journal, Ledger and Trial Balance(Assignment:2) ° Journalise the following transactions in the journal of Mr. Narendra, post them into his, ledger and prepare a trial balance as on 31/01/2020. Date 2020 Jan, 1. Narendra started business with a capital Rs.100000. 5, Purchased goods for cash for Rs.5000 from Mr. Anand less 10% CD 10, Sold goods for cash Rs. 1000 to Mr. Anil less 10% Cash discount, | 20. Salary paid Rs.20000. = 31 Cash withdrawn for personal use Rs.2000,The journal has been divided or broken into different parts, in each of which a different set of transactions are entered. These parts of a journal are known as subsidiary books. The following table shows the subsidiary books with its purpose S.to [Subsidiary books Purpeses/objectives 1 | Purchase Book/Bought Book “To record onl credit purchase of goods transactions 2 [Purchase Returns Book or Return outwards |To record only purchase return of goods transactions bok '3__| Sales Book/ Sold Book "fo record only credit sale of goods transactions 4 "To record onl sales return of goods transoctions 3s ‘To record only cash bank wansactions | 6 "To record the transactions related to bilsreceivable 7 [Bll Payable book "eo record transaction related to ils payable '@ Journal Proper ‘To record the transactions which cannot be entered in other subsatry bookson ame ofthe pple Purchase Book Sales Book bee [ae hora Saisie ho [uF [Amount L L Invotce/Bil/Credit Memo Invoice is a document made by the seller at the time of credit sale. The seller should make three copies of the invoice and the original copy of the invoice is always send along with the goods send to the buyer. Purchase Invoice/Inward Invoice In buyer’s point of view the original copy of the invoice rei Purchase invoice, Sales Invoice/Outward Invoice In seller's point the remaining two copies of the invoice are known as sales invoice/outward invoice, ved from the seller is known asPurchase Return Book are ofthe spar Debitnote Ne [LF Amount Sales Return Book : Dae Tara fhe eaorar (Geatiote ie [LF [Amounts Fe Debit Note [Debit note ra statement made bythe customer a the time of returning the defective goods tothe supple, stating that the suppliers or credtor’s account le being debited forthe valve of goods returned to them, In ther ‘words the common journal entry for purchase return wl be: Creditors or suppliers A/C Dr “Te Purchase return or Return Outwerds Ne Credit Note Credit notes a statement made bythe supplier as an acknowledgement of debit note received from the cstomer stating tht the customers or debtor’ account i being credited forthe value of defective goods ‘ceive from them. nother words the common journal entry wil be ‘Sales return or Return inwards A/C or F ToDebtor's or Customer's A/CDate [Name f the tomer [aie [UF [Amour a) Bills Payable Book ate Name ofthe supp aie [uF [amount a Journal proper Note: The format journal proper and journal Is same.Example: Subsidiary books Record the following transactions in the proper subsidiary books/sub-dlvisions of |Journal/books of prime entry of Mir. Pawa 2020 “March: 1. Purchased goods for Rs.14000 from Mr. Sanjay as per purchase invoice no.123, 5. Sold goods to Anil and company for Rs.17000 as per sales invoice no.101 10. Purchased goods worth Rs. 10000 from Sanjeev as per thelr Invoice no 15. 15. Returned goods worth Rs. 500 to Mr Sanjay and issued debit Note:10 20. Anil and company returned goods worth Rs.1000 as per credit note no.3 25. Received a bill for Rs. 5000 from Anil and Company according to bill no.7 30. lgsued a bill of Rs.3000 to Mr. Sanjay as per bill no. 15 31, Purchased office furniture worth Rs.10000 from India Furniture Mart for Rs.10000‘Subsidiary books af Mr. Pawar for March 2020 rh Reta Book Nae fheSales return book a Gearnaete [UF [amma] Bills Receivable Book Die [Rane li er fine [oF [amo Bila Payable Book aa [Nane ihr ine [Fo Journal Proper oo [aay [ear“ Subsidiary books of Mr. Pawar for march 2020 i - Purchase book Dave Naw ofthe spe Purchase vole No [LF [Amount mares [10 [sence his ‘030 te Sales book == Date Name ofthe etme [Shierinvoieste (LF [Ameunt 2020 | 5) Antanécorpany 11 ‘one Purchase return book a ate Name fhe spr Date Note LF [Amount = 2020 [15 | Ma Sear 10 00 March |Sales Return Book Date [Nar ofthe ter Greate a LF [Amount = Pa 5 1000 Bills Receivable book Dee [ave ofthe ctor BlINe [LF [Amount - in | | Bills payable book ate [Nam ofthe spi Bits [UF [Amour] we amo P Seniy 15 ecoJournal proper Date Paria | Debims) [rans « ‘2n20 31 | Fentre NE De) 30000 arch To nda urture Mart NC 1000 (ting furitre prose on cred fra nl funtre mart fr R.1000)NCHMCT: McQ MODEL Purchase book is used to record: 9. All purchases All credit purchases All credit purchase of goods I. All credit purchase of assets Sales day book is used to record: All sales - All credit sales All credit sale of assets All credit sale of goods Returns inward book is used to record: Return of goods previously sold »- Return of goods previously Purchased Return of assets previously purchased . Return of assets previously soldCredit purchase of fh Purchase book - Cash book Journal proper Sales return book When goods are returned to suppliers, the suppliers will also receive: . Credit note . Debit note Either credit note or debit note |. Both credit note and debit note A debit note issued to a creditor for goods returned Is recorded in: Bills receivable book >. Purchase book Purchase return book Journal proper zTea ena 7--Credit note number is recorded in: | Cash book b. Return inward book © Journal proper _d. Return outward ward book | 8. The total of purchase book will be posted to: _ a. Debit side of purchase a/c b. Credit side of purchase a/c © Credit side of cash a/c 4d. None of the above “o-the toate mnt tao 2. Debit side ofThree column cash book ra three amount columne(Cath, bank and dicount columns) on both the sides ofthe cash book, i Isknown as three colurnn cath book, 2.Onthe opening date ifthe cash balance and bank deposit balances are given its recorded on the LHS cash ‘column and bank column a To balance b/d. On the ether hand, on the opening date the bank overdraft balance le gven its recorded on the RHS bank column as BY balance b/@” 3. Contra Entries: ae those entries which are recorded on both the ses of three column cashbook or which tffect the bank account and cash account atthe same time, Example - Depositing of cash in the bank. The journal entry will be: Benk alc or To Cash A/C ——= Example: 2- Withdrawal of cath from the bank. The journal entry will be: cen AIC OF To Bank A/C Example: 3- A cheque received on an earlier date is deposited, 5 8. On date of receipt ofthe cheque. The journal entry wil be: coh NC °r To.Givers A/C 3. onthe dae of depos ofa cheque. The journal entry ail 3 ‘nk AIC or : To Cash A/C :c ‘Example! 1 Ener the following tanscton in oa trp clumn cath book for December: 2020. @ 2: eld goods for cash 8.5000, less 10% Cash discount Ss laud a chaque to Gopal for R75 nfl stlment of R500 5: Withrow fom bank for ofice une R500 “Received e cheque rom Laxman for Re.AS in ull ettement of 500 11: Pa for purchases by cheque R350 26: Received chaque rom Maninder Singh Re. 800 531: Deposited the above cheue int the banke Te Three column cash book Date Receipts LF] Om [ash | Bank | Oat Payments Ter ow [eas [Banksample: 1: Enter the following transaction in tow triple clumn ash book for December: 2020. December 1 Opening cash balance 2000, bak balance Rs. S000 2: Sod gods for cash R500, les 30% Cath ducout. Ss lnaed a chaque to Gopal for R75 in fl settlement of R500 F 5: Vitharown fom bank for oie use R500 7 Racaved cheque trom Laman for R450 In ful settlement of R500 1: Pad for purchases by cheque 350 ss 531: Deposited te above cheque int the bane oe Three column cash book Dae [Recipe ‘] be Jeach [tank |oate UF [oe [ean eon ‘= 2020 |1 | YBalance b/d ‘2000 | 5000 | 2020 cs as Dee (2 [Fossler seo ¢ 31 [Tecan ¢ 8 2 | to Baance b/d 250 | 4925Notes: 4. If we receive and deposit a cheque on the same date, it should be entered directly in the bank column on the debit side. 5. I the date of deposit of a particular cheque is not mentioned in the given example , the date of receipt and date of deposit of the cheque is to be taken as the same date. 6. While balancing the three column cash book, only the cash column and bank column are to be balanced, and discount column is never balanced and therefore the discount column totals ate to be written on both the sides. 7. Cash book serves the dual purpose that is serves as a subsidiary book and also as a ledger. In other words the cash balance and bank balance as per cash book is transferred directly to the trial balance.( In simple words there is no need to make cash account and bank account in the ledger).NCHMCT MODEL(MCQ) 1. Which of the following isa transaction of contra(C) entry? a. Sale of goods to Mr. Anand Rs.1000 * bb. Warehouse rent Rs.7000 paid by cheque 4, Received Rs.12000 in full settlement of Rs.12500 |. Cash deposited to bank Rs,9000. 2 doe: fulfil the function of both a journal and ledger a. Purchase book ». Cash book — «. Sales book ls payable book 3. In which of the following book cash purchase is recorded? ‘a. Cash book b. Purchase book 4. . Both (a) and (b) e |. None of the above :4. In case of three column cash book, Contra entry is related with: 2. Cash, Discount ». Cash, Bank Bank, Discount d. None of these 5. Balance of cash book is posted to the ledger: a. In the cash account b. In bank account Nowhere d. Either (a) or (b) 6. A cheque received and deposited in the same day is recorded in the: 2. Cash column of the cash book . Bank column of the cash book &. Credited in the cash book 4. |. None of the above7. In which book does the cash sales will be recorded? 2. Cash book ». Purchase book . Journal proper d. Sales book 8, The bank column of a three column cash book may show: a. Only debit balance b, Only credit balance . Either a debit balance or credit balance d. Debit and credit balance 9.The cash column of a three column cash book may show: a. Only debit balance b. Only credit balance . Either a debit balance or credit balance110. Ina three column cash book: 2. Only cash and bank columns are balanced b. Only cash and discount columns are balanced . Only bank and discount columns are balanced d. Cash, bank, and discount columns are balanced 11, The examples of contra entries are: ‘2. Depositing of cash in the bank b. Withdrawal of cash from the bank ‘cA cheque received on an earlier date is deposited 4d. All of the above 12, Three column cash book records: 2. All receipts transactions only b. All payments transactions only . All cash and credit transactions 4d. All receipts and payments of cash and bank transactions113.Who originated the double entry system of accounting? Alfred Marshall . Edwin T Freediy . Luco Pacoli d. Warren Buffet 14, Cash book is a: ‘a. Subsidiary book b, Subsidiary book and a ledger account . Ledger account d. None of the above 15. Following one is not a book of original entry fa. Purchase book . Cash book & Ledger 4. Bills payable book16, Classified summary of all transactions is called: ‘2. Cash book b. Journal Ledger d. Trial balance 17, Assets minus owner's equity = a. Capital , Expenses . Liabilities d. Income 18. A second hand motor car was purchased on credit fro Mohan will be recorder ‘a. Journal proper b. Sales book Cash book d. Purchase book Note: All topics done tll today(incuding today’s topic) are the topics for mid-term. All the best the:Columnar petty cash book/Tabular petty cash book/Analytical petty cash book Petty cash book is prepared by an organisation in order to record small or petty payments of cash on day to day basis. ay Notes: = 1.0n the opening date if the petty cahier starts with opening cash balance the entry should be “To Balance b/d’. 2. Ifthe petty cashier receives the cheque from main cashier the entry should be “To Bank” land receives cash from the main cashier the entry should be: “To Cash’. 3, Voucher number/V. No: Whenever the petty cashier makes a payment a voucher should be prepared and if the payment is more than Rs.5000 a revenue stamp should be affixed. = 4, Ifthe petty cashier gives advances to any of the employee it should be recorded in the ledger account column because itis an asset and not an expense. 5. Imprest system: Under imprest system of petty cash book, the petty cashier should start with the same cash balance at the beginning of each month/fortnight/week. In other words the petty cashier should receive cheque or cash which is exactly equal to the amount which he : ‘or she has spent during the previous month/fortnight/week.Boo og ese Pi 2 OMe | MOET OfeY TRANS AMHATENS —SUEEIOW EW BR sn F 5 Ea Pa(elere mm BN SGOO it Bd SE eeu BU tte mies Atos Oates Fram the flowing prc write an raycal/clannr pty cash book under imprest saan or march 2020 ey ‘mount Mare Blance nad with pty esior 0 Cheque ected rom mai cesar for pty coh 0 13 nen sto 70 gz b {35 Advane eno ettnder Ms Ras 0 Ms ae ‘Ansia Pty esibook et Ne [Total [Al of pve 7 Postage [Cartage | Miscelaneous | Aunt [2020 |i Tobaenceb/a = iar — [Tene 2 By Reverse tape 100 120 5 Brponage same 70 [70 i 7 leverage 300 10 E 8 Byrn re 100 10 | 5 By Avance te Rema “0 we a5 | By Balas eft |qe SS ee if = Analytical Petty cashbook = ae [oe as a hat ces é ee = ats om wm = ee es Se fer ee, = 5 feeSas oe 7 E a, Bena ‘omic ca mooeL questions: b 1 Under the imprest system of petty cash the ptt ash balances 2 neresad every week/month 1 Reduced every week/monts ©. hwo rvtred 0 the egal erent 44 Used up completely before being retored 2.Th petty hap the meres nd balance th aro he month R300 anh ety th ans {ertmmonnwareRe2P te snout to bere em hacer tht of ten So be fname amb 2h pe ahs ammo of 250, Carn he acount hae abi ace of R38 Cth end eee enDiners ahd Final Accounts(Financial statements) of one man business(Sole proprietor ship) consists of: 1. Trading Account 2. Profit and Loss Account(income statement) and 3. Balance Sheet/Psitin statement) Equation/Step: 1. Material cost = Opening stock + Net Purchases ~ Closing Stock Rs. 202500 = Rs. 5000 + Rs.200000 - Rs.2500 Note: Net purchases = Purchases ~ Purchase returns = 201000 ~ 1000 = 200000. Equation/Step: 2. Cost of goods sold|COGS) = Material cost + Direct expenses or Factory expenses 300000 202500 + Rs. 97500 > Equation/Step: 3. Gross profit = Net sales ~ Cost of goods sold Rs.200000 = Rs.500000 ~ Rs. 300000 Note: Net salee = Saler~ Sales returns =Re, 505000 ~ Re5000 Example: 1 From the above information prepare a trading account forthe year ended: 31/03/2020 Or “Trading account fo the yeor ended 31/05/2020 & Particulars [ns [ns Particulars [rs [re To opening sock 5000 | Byseles 505000 to Purchase 201000 Le Sales returns ‘000 2009 Net aales 00000 200000. By dosing stock 2500 To Direct expenes(ote: Record the 37500 Items one by one) 10 Gross profit fo be transferred te Profit and los account] Saaso0- Hew b Equation/Step: 4 Net profit= Gross profit + Non- operating incomes and gains -(Indivect expenses + Non - ‘operating expenses and losses) 3s. 200000 + 50000 - (100000 + 30000) + Re120000, also known as operating expenses or offi Note: Indirect expences expenses. Example: 2- From the above mentioned example prepare a profit and loss account forthe year ended 31/03/2020 ministration, selling and distribution f Profit ad lote account forthe year ended 31/03/2020 Partclars fe [e | Pertclae me [me Te ndrectexpenses[Nots: Record the Rams one 1300000 | y Grose prof ba ‘20000 one) yon operating incomes | onomoperating expenses (Note: Record the 30000 | and gainalRecord the tems 0000 tems ane by one) fone by ane To Net proft fa Tobe wandered to balance tet]Be 3 185 -Pombi te-sx E\SOOG] gp, Bios Example:3~ From the following information prepare a balance sheet as on 31/03/2020. Opening capital Rs. 500000, Net proftRs.120000, Drawings Rs-100000,Long term loan fom SBI Rs. 300000, Creditors Rs.50000 Bil payable Rs.20000, Outstanding expenses(Unpaid expenses) Rs.10000. Land and bullding Rs.500000, Plant and machinery Re100000 , Long term investment Re.200000, Stock Re.2500, Debtor R. 47500, Bills receivable Rs 40000, Prepaid expense(Expenses paid in advance) Rs. 10000, Balance son 33/05/2020 Copal and bie me [ae [assets = % capil ‘fined asses Opeing capal 00000 Land and Bulding 00000 A Net prof 120000 Plant and Machinery 100000 ess Drawings (100000) 2alnvesiment Clg apa 520000 | Long term investment 200000 2 Lone tern aber Curent sxate, 7 Leng term loan from 81 300000 | Stack 2500 a Current biter Debtors 47300 Creditors Bite recavable ‘0000 ile payable Prepaid expences $0000 Outstanding expenses boa = NtiMcT. eq MODEL QUESTIONS 1 Fina Accourts{Fnanclal statements) of one man busiessol proprietorship) conto Trading account 1 Prof and lor account Balance sheet 4. allotthe above 2. Trading ecount and profit and los accounts aletivly now a: None ofthe above |. Poston satan prepare Fora year Fore month 4. None ofthe above5 Income statement ie prepared fora month {4 None ofthe above 6. The performance of busines can best be evaluated by: 1 Balance sheet 1. Income statement © Cashflow tatement 4 None ofthe above 17. The nancial postion of «business can best be evaluated by 1 Balance sheet = © Cashflow ttament = None ofthe above b 1 ching stock ppese in {Trading secount and balance sheet 1B Trading secount and profit and oes acsount € Proftandlons acount and balance sheet {4 None ofthe above1a & 4 11. Non operating incomes and ain Indirect incemes includes ‘Cariags iar carsag on purchasat of raw rater) Freight nwrda right on import of raw rater) Fuel and power ‘lof the shove Indirect expense inchoe! export duty Prblicty and advertisement Al ofthe above Proton sale of asset Commision received ‘Alo the above 12, The ordarin which atts and Bait ar acrdad in the balance shea arated to Grospine Matching None ofthe aboveaa a. Grouping 1B arshaing Matching 1A. Curent eset are thove anes which canbe converted int ca 4 Within one yor 1. hin one dey © Wethin one monty 4. None ofthe shove 25. Which of the ollowing i not 2 proper balance sheet equation: 1 Ase = Uae = Capel Unies» Capt 36. Capitals seinen xeral abity ase ona rine above