2WD PHASE Notes With Fully Detailed Question & Answer By WM Mor Alpraned ae CONTACT:-87775 78978, 98312 47618 Art pylon80) what is Cash Book? »CashBook means the Book in which cash transactions of a business concern are recorded at first chronologically. 81) Cash Book is called Jounalised ledger’ - Explain it. »Features of Journal and features of ledger both are accumulated in cash Book for this cashbook is.called as ‘Journalised ledgel’. The features of Journal which are in cash Book, Are as follows- 83) what is Invoice? »Invoice means the document of goods which given by the seller to the buyer at the time of credit sale. 84) Mention any one difference between Purchase day book. and purchase account. » Purchase Day Book is the part of special Journal Purchase fot Account is a ledger account.85) what is Sales Day Book? »The Day Book in which transactions of credit sale of goods are recorded primarilly is called Sales Day Book. 86) what is Trade discount? »The discount which is offered by manufacture to wholeSeller and wholeseller to retailer on vist price goods at the time of sale is called trade discount. 87) what is Debit note? »Debit note means a document which is pra the causes of debit of any account. 88) what is credit note? »The entry which is done to transfer the money value from one account to another is called transfer Entry. 93) what is Adjustment Entry? »The Entries which are made in final Alc to adjust the Income expenses, liabilities and assets. are called Adjustment Entry. r94) What are the difference between purchase Account and Purchase Day Book ? »Purchase Account and Purchase Day Book both are used to record the purchase transactions of a business Organisation. But there are some difference between Purchase Account and Purchase Day Book T)Purchase Account is a part of ledger debit side or credit side IV)In case of purchase day book, there is 1g year closing balance of this account | no question of closing balance ined V)Closing balance of this Alc is transfered to } V)Total of money value column of purchase day Trading AIC book is transfered to purchase Alc in ledger95)What are the difference between sales Day book and Sale Account? »Sales Day Book and Sale Account both are used to Accord the Sales transaction of a business Organisation. But there are some differences between sales Day Book and Sales Account there are follow- SALE ba‘ BOOK DSale Day Book is a Sub-division of Journal T)Sales Day Book is u: only the credit transaations of sales aétion of sales of debit side and credit sides IV)At the end of particular period normally accounting yean, closing balance of this account is determined V)Total of money value column of Sales Day V)Closing balance of this account is Book is transfered to sales Account in ledger] transfered to trading AlcBank Reconciliation Statement 96)What is Bank Reconciliation statement ? »The statement which is prepared to reconcile the bank blance of cash book.and pass book balance on a particular daté is called as Bank Reconciliation Statement. 97)Mention two features of Bank\reconciliation statement? »It is a statement, not an account. It does not follow Double Entry System.98)What is Bank Statement ? » Bank statement is the copy of transactions which are recorded in depolitors bank account, this statement is given by the bank authority to depositor instead of Passbook. 99)Mention two Points which cause disagreement between cash Book bank balance and balance as per passbook? »There ane many points which cause disagreement between cashbook bank balance and balance as per Passbook, two of these/are- DCheque Issued but not presented into bank/for payment. IDCheque diposited into bank but not cleaned. 100)Is Bank Recongiliation statement an account@=Discuss in favour of it! » Bank Reconciliation statement is a statement only, [Vis Rot an account, because the features of an account drejnot shown jh Book\Reconciliation” Statement as - 1) Format: The format of Bank Recongiliation Statemefit and ledger account is totally different ID System The bank reconciliation statement does not follow the double entry |system like/ledgen accounts. IID) objective: The objective of preparing a bank reconciliation statement and ledger account are totally different. IV) compulsion: Bank Reconciliation statement is not mandatory like ledger account. V)Closing Balance: closing balance Bank Reconciliation Statement is not required to determine like bed ledger account ae of jf101)Mention any ten causes of disagreement between cash Book balance and pass book balance. »There are many causes of disagreement between the cash book bank balance and pass book balance, from these ten causes of disagreement are mentioned below- DCheque deposited into bank not cleared. TD)Cheque Issued by depositor but no}presented into bank for payment. IIDExpenses made by bank according to standing:intruction of depositon but not informed to dépositon IV)Revenue collécted by bank according To"standing instruction of dépositon but not informed to depositor V)Intrest Deposited by bapk-on/depositop savings but not infonmed to depositor VDBank charge deducted by ‘bank but not informed to depositor VIDDebtors of depositor directly into depositors bank Alc but informed/to depositor VIII) Deposited cheque into bank is dishonoured by bank out not informed to depositor IX)Issued cheque is dishonoured by bank but not informed to depositon X) If bank related any other transaction are recorded either pass book or cash book. 2 an pylon{rial [Balance 102)What is Trial Balance ? » Trial Balance is a Statement which is prepared to Judge the arithmetical accuracy of accounting. 03)Mention any two features of the Trial Balance? » (I) Trial Balance is a statement. (I1) Trial Balance is prepared by taking the ledger Account. O4)What do you mean by suspense A/C? >If debit side ond credit side total Tid balance are at is compensating errors? @n one error or errors are rectified by another error or errors automatically in accounting, then it is called as compensating errors. 09) What is errors of Misposting? »To post the transactions from Journal to ledger A/C, many times posting are occured in similar Alc instead of correct account, this type of errors are called as Errors of Misposting. an vyhonshN10)Is Trial Balance an Account? Discuss in Favour of your answer » Trial Balance is not an Account, it is a statement only, because the features of an Account are not show in Trial balance, These are follows- i)Format:Format of Trial Balance and ledger account are different. ii)Compulsion:Preparation of ledger accéunts are mandatory but preparation of trial balance is not mandatory. ii)Place:Accounts are prepared in ledger bddkebut Trial Balance is prepared on separate sheet out of books of agcounts. iv)Objective: Trial Balance,is prepared to prove theyarithmetical accuragy of accounts.which is different fromhé objectives of ledgen Account. v)Statement:Each ledger account is the classified statement of transactions but Triahbalance is the statement of closing balance of ledger accounts. vi)Time:Ledger account are prepared during the accounting year/ period but Trial Balance is prepared on a particular date. vii)Base:Ledger account are prepared based on journal but Trial Balance is prepared based on ledger accounts. annghonyhRedlficalton ¢ Wh Evvors 112)What is single sided error? » If Error is Occurred in any one of the two transaction related accounts, then it is called as single sided error 113) What is Double Sided error? »If error is occured in a transaction related to both accounts, then it is called as Double Sided error 114)Give example of one-sided error? »Purchase Day Book was undencast by Rs. 500, iss error 115)Give an example of Double sided error? purchased of Rs. 40.00 in cash, but in accounting related both accounts corded by Rs. 400 Instead of Rs 4000. it is an error of commission. 119)Give an example of compensating error? »Salary paid of Rs. 5000 but Salary Ale is wrongly debited by Rs 500 and commission received of Rs. 5000 but commission Alc is wrongly credited by 500. Here first error is rectified automatically by secad Second error It is a onsh compensating. error ae111) Discuss the errors briefly, which are not detected by Trial balance? » Main objective of Trial Balance is to prove the arithmetical accuracy of accounting. though there are some errors which are not detected by Trial balance, which are as follows~ iError of Principle: The errors which occur due to ignérance, of Pritigiple of accounting is called as error of Pinciple. This typey6f Errors dre not detected by Trial Balance wages paid for Installation of machinery is débited to wages 18 Instead of machinery A/c It is an error of Pninciple. at all in Books of accounts i is called as error ofto not Detected by trial balance. in: The errors which occur due to wrong posting of amount rect side of actual account is called as error Commission. 00 and Cash Ac is credited by Rs 500 Instead of is error of commission. ompensating error: In accounting, if one error or more errors are rectified nother one or more errors then -alled as Compensating error Salary paid of Rs 5000, is debited to Salary A/C. by Rs. 500 instead of Rs 5000 Commission received of Rs 10,000 is credited to Commission Alc by Rs 5.500 Instead of Rs 10,000. Here Ist error is rectified by 2nd error It is a Compensating.RECTIFICATION OF ERROR 112)What is single sided Error? >If error is occurred in any one of the two Transaction related accounts, then it is called as single sided Error 113) what is Double Sided Error? » If Error is occured accounts, then it is called os Double Sided Error a Transaction related to both 114) Give example of one-sided error? ‘ed both accounts are recorded by Rs. 400 Instead of as 4000 it is an error of ission. 119) Give an example of compensating Error? »Salany paid of Rs. 5000 but Salary A/c is wrongly debited by Rs 500 and commission received of Rs 5000 but Commission A/c is wrongly credited by Rs.500 Here first error is Rectified automatically by second error It is a Compensating errorDEPRECIATION, PROVISIONS AAD RESERVE 120)What is Deperiation? »»Permanent diminution in the value of fixed assets due to use passage of time, obsolescence ete. is called as Depriciation. 121)Mention any two internal causes of Depreciatior » Two Internal causes of depreciation are- iwear and tear in use. ii)Depleation. 122)Mention two external causes of Depreciation? » Two external causes of depreciation are- i) Permanent fall in market value of fixed assets. ii) Passage Of Time. What Is Straight Line Method? Method In Which Depreciation Of Fixed Assets For Every Year Is Fixed, Is Called As Straight Line Method. 126)What Is Diminishing Balance Method? »The Method In Which, Depreciation Of Fixed Assets Gradually Decrease In Every Yean Is Called As Diminishing Balance Method.127)What Is Reserve? »To Meet The Unknown Loss Or Liability OF Business A Part OF Normal Profit OF Business Is Kept Away Separately, It Is Caled Reserve. 128)What Is Revenue Reserve? »The Reserve Which Is Created From Normal Profit Of Business Is Called As Revenue Reserve. ofit OF Business Is Called As iy 129)What Is Capital Revenue? »The Reserve Which Is Created From Capital Py Reserve. 130)What Is Secret Reserve? eturnable Bond Or Market Value:Depreciation Does Not Depend On Market Value Or Function OF Market Jue Of Fixed Assets. ime:Depreciation Of Fixed Assets Is Changed During The Effective Life Time OF Fixed Assets. v) Charge Against Profit:Depreciation Is The Charge Against Profit. So It Is Debited To PIL A/c Or Income-Expenditure A/c. vi)Assumption:Depreciation On Fixed Assets Is Determine On The Basis Of Assumption.Discuss briefly the necessities or objectives of depreciation charged? »Necessities and objectives of depreciation: Necessities and objectives of depreciation charged fixed assets which are used in business are mentioned below- ictual financial situation: To determine the actual financial cern on a particular date, proper Valuation of fixed ing assets huge fund is necessary. By Charging the depreciation on fixed as§ets fund is created in the business. v)Legal Compulsion:According to Income tax act.1961 and indian company act.1956 methods and rates of depreciation are predetermined. So legally depreciation charged on fixed assets are mandatory. Art Bynes135)Is depreciation a source of fund? Discuss briefly? »There is a conflict about the question mentioned above, some experts think that depreciation is the Source of fund, their logics are - a)Depreciation on fixed assets are debited to P/L A/C as indirect expenses of business, but for this no money outflowes from business money equal to depreciation is reserved in business_and used as working capital. So depreciation is called truel’as soupce of Find. b)They think to determine the sole valuefof goods. depreciations are considered. So by selling of goods, Value of depreciations Gre recovered. It is just like Sale of fixed assets, so because“f this reason some experts are interested to Say that depreciation is a source of fund. But Some(experts oppose the above statements they think depreciation is not the sourcelof fund, their logics are as follows- a) They think if depreciation is the Source of fund, then to avoid the crisis of fund in|business depreciation is to be charged more. But it is not dnly laughable\it is also unlawful. So depreciation cannot be source of fund. b)They think fund maigly comes from outside of the of business, but depreciatiéndé the internal matter of business, So depreciation cannot be the source of fund. c)Depreciation on fixed assets are to be charged in every year even if goods are not sold in any year So depreciation Connot be the source of fund of business. Art oyun137)What are the differences between straight line Method and Diminshing balance Method? » Difference between straight line method and Diminshing balance method are as follow- Straight Line Lp jiminshing Balance ead 1)In this method depreciation is charged on purchase price of fixed asset. 2)This method is not approved by Indian income tax Act and Indian Company Act. 3)This method is ca i i ated simple. '5)In this methoW#@t the end of working life of fixed assets scrap value will never be zero. Art eons138)Mention the difference between charge against Profit and appropriation of profit? »Charge against profit and appropriation of profit both are not same there are some difference between the two, mentioned above- These are as follow- Charge Against Profit 1)charge against profit means the expenses or losses of business Concern. 2)Provision is a charge against profit. 3)It Is mandatory. 5)For Appropriation of profit working capital of Business increase. Art eons139)Mention the difference between reserve and provision both are same, but there are some difference between reserve and provision, these are mentioned below- Reserve is created to meet the unknown losses or liabilities of business in future. Object Reserve is the appropriation of profit. ii)Nature Reserve is debited to the profit&loss appropriation ili) Place Provision is created to meet the known but non-spcecific losses or liabilities of business in future. Provision is the charge against profit. Provision is debited to the profit & loss A/c. Alc. Creation of reserve is not mandatory. Reserve may be created only in the year of profit. Reserve is the part of undistributed profit, So profit may be distributed to the proprietors from reserve. iv)Compulsion Creation of provision is mandatory. Provision is created in the year of profit and in the year of loss of business. v)Situation vi)Share of profit Provision is not the part of undstributed profit, So Profit may not be distributed From previeen. vii) Place Reserve is shown | Provision is shown in in Balance | in the liabilities of — | the assets side of B/S Sheet B/S as deduction from the related assets.ACCOUNTING OF BILLS OF EXCHANGE 40)What is Bill of exchange? » Bill of exchange is a written, unconditional instrument that directs a certain person to pay certain money. 41)Who is Drawer? »The person or organisation who accepts the bill is called as drawer » Bill of exchange promissory Note and che instruments. 43)What is a promissory note? goods or debtor certain period. tunity days? » The date which is determined by adding three extra days(days of grace)with e date of bill or promissory note is called as maturity days. 47)Mention any two features of bill? »Two features of bill are as follows- (Bill is written and signed by the drawer (i) Billis unconditional Neo OrACCOUNTING OF BILLS OF EXCHANGE 48)What is discounting of bill? »Encashment of bill at bank before the date of maturity is called as discount of bill. 49)What is Endorsement of bill? » Transfer the title of the bill by signing on th called as endorsement of the bill. everse of the bill is ale Wh 50)What is dishonour of a bill? »If drawer ignores to pay the bill on maturity, it is callé of abill. 51)What is noting? te of the bill is to be counted from the date of drawing, bill is called as ‘After Date’ bill. 54)What is ‘After Sight’ bill? »In the due date of the bill is to be counted from the date of acceptance, then the bill is called as ‘After Sight’ bill. anohoadtyuuwtil Fi Z Su Stalemei 155)What is trading A/c? > Trading A/cis the part of final account of trading concern whichis prepared at the end of particular accounting year to determine the gross profit of gross loss. 156)Mention any two features of trading A/c? > Two features of trading Alc ane- (Trading A/cis a part of final A/c of trading concern, (i) Trading A/c is prepared to determine gross profit or gross loss. 157) What is gross profit? > Excess of credit se total of tradng account over the debit side total is called as gross profit. 158)What is profit & loss A/c? >The account which is prepared to determine the net profit or net loss at the end ofa particular accounting year as a part of final account is called as profit and loss Alc, 159)Mention any two features of profit & loss A/c? » Two features of profit & loss A/c are- (i) It's a Nominal Ale (It's a part of Final account. 160)What is net profit? » Excess of credit side total of P/L A/eover the debit side total is called as net profit. 161)What is net loss? » Excess of debit side total of P/L A/c Over credit side total is called as net loss. 162)What is balance sheet? » Balance sheet is a statement which is prepared to as certian the financial position of a concern on a particular date. 163)Mention any two features of balance sheet? » Two features of balance sheet are as- (I's a statement (It shows the financial position of a concern. 164)Define the fictitious assets? » The assets which have no market value are called as fictitious assets. 165)Give two example of fictitious assets? » preliminary expenses, profit and loss A/c (Dr) are two example of fictitious assets.Financial Stalement 166)What is liquid assets? »The assets which are already in cash from or easily convertible in cash are called as liquid assets. 167)What is a contingent liability? » Contingent liability mean the liability which does not appear at present but may appear in future are called as contingent liability. 168)What is contingent assets? »contingent assets mean the assets which are not created at present but may be created in future. 169)Give two example of contingent assets? »Uncalled share capital of a limited company and claim for breach of contract are the example.of contingent assets. 170)Give two example of contingent liability? »Liability for dishonour of the bill previously discounted, liability for damages payable in the event of a pending law action proving unsuccessful, are the example of contingent liability. 171)What is tangible assets? The assets which have physical existence, are called as tangible assets, such as building, land, plant & machinery ect. 172)What Is Intangible assets? »The assets which have no physical existence are called as intangible asset, such as goodwill, trade mark, copy right, patent etc. asSineucial Stalemeal CS lol Sor Fo ld C Neqeuisalton 173)What do you mean by receipts and payments A/c? »Receipts and payments A/C is a summary of classified cash receipts and cash payments. 174)What do you mean by income and expenditure A/c? »The account which is prepared by every no-profit seeking concern at the end of particular accounting period to know the financial result is known as income and expenditure AIC. 175)What is surplus? »Excess of total income over total expenditure in income and expenditure A/c is called as surplus. 176)What is deficit? »Excess of total expenditures over total incomes in income & expenditure A/c is called as deficit 177)Mention any two features of receipts and payments A/c? »Main two features of receipts & payments A/c are Follow~ (i)Itis prepared as per cash basis (ii)Revenue and capital both types of receipts & payments are entertained here. 178)Mention any two features of Income & expenditure A/c. »Two features of income & expenditure A/c are- (itis prepared as per accrual basis (ii)Only revenue type income & expenditures are considered here. 179)Mention any two differences between income & expenditure A/c and profit & loss A/c? » Difference between income & expenditure and profit & loss A/c ane as follow- Income & Expenditure |Profit & loss A/C It is prepared by profit seeking concern only. i)It is prepared by no-profit seeking concern only. ii)Closing balance of this account is known as surplus. Closing balance of this P/L account is known as net profit or net loss.180)Mention any two differences between receipt & payment A/c and cash book. RECEIPT + PAY/AEWMT A/C i)Only non-profit seeking concern prepare this. It is prepared at the end of particular accounting period All concern prepare this. It is prepared during the particular accounting period. 181)Mention the differences between profit seeking concern and non-profit seeking concern? »The main differences between profit séeking.concern and non-profit seeking concern are as follows- SUBJECTS KOK-PROFTT SEENIAG CONCERA i)Ob ji ie ct Profit earning is thé.main object of } Rendering Senvice is the main object this concern of this concer. ii)Formation | Profit seeking concern are founded in | Non-profit seeking concern ane form of sole proprietorship business, founded in form of club, charity, trusty partnership firm, joint stock company | board etc. ii) Ownership | 1 Ke concern, specific owner party In this concern no owner party exists. exists iv)Finoncial Result] Ip tis concern, to know the financial | In This to know the Financial result result tradig A/c ond P/L Alcs Income and expenditure Alc is prepared. prepared v) Transfer Net profit or net loss is transferred to} Surplus or direct is transferred to capital capital A/c. fund. vi)Capital Generally necessary Generally necessary capitals capitals of this concern of this concern are collected from members and publics in are supplied by the owner from of subscription.182)Mention the differences between receipts & payments A/c & Income & expenditure A/c? » Difference between receipts & payment and income & expenditure A/c: Receipts & Payment A/c Income & Expenditure A/c both are part of final A/c of non-profit seeking concern. But there are some differences between the two, these are as follow- SUBJECTS | REczIPTS+PAYMEWTA/c | Wco/ME + EXPEADITURE A/c i)Nature Receipts & Payment A/c is areal’ | Income & expenditure A/c is a Alc in nature. Nominal A/c in nature. ii) Basis This A/c is prepared on cash basis | This A/c is prepared on accrual basis ii) Two sides Cash receipts are recorded on debit side] Expenditure ane recorded on debit side and cash payments are recorded on credit | and Incomes ‘are recorded on credt side side of this Ale. of this Ale iv) Nature Revenue and copital both type of Only Reveriue type of transactions are OF Transaction transactions are recorded in this A/c. recorded in this Alc. 183)Mention the difference between receipts & payments A/c and Cash Book? » Receipts and payments A/c is called the summary of Cash Book, but there are some differences between them, these are as follows- SUBJECT CASH BOOK i)Concern Dnly non-profit seeking Profit-seeking concern and oncern prepares this A/c | non-profit seeking concern prepare this A/c. In this A/c narration is not] In thi book narration for each necessary. transaction is necessary. ii)Part Of Final 4 This A/cis part of final A/c of | This is not a part of final A/c but Alc any non-profit seeking concen. | very important part of A/c for ony concem. Receipts & Payment Alc is Cash book is prepared during prepared at the end of particular | the particular accounting accounting period. period. i)Narration iv) TimeA Evdr- 184)What do you mean by Single Entry System? »Under the accounting system in stich both sides of every transactions are not recorded is called as single entry system. 185)What account are kept under this method? » generally cash Book and personal A/c are kept under this method. 186)Where is single entry system folowed? »Generally in small business, single entry System is followed for are accounting. 187) Mention any two advantages of single entry system? >Single Entry System is very easy ond simple and under this method of accounting secrecy of ‘accounting is easily kept. 188) Mention any two limitations of single entry system? » Ih this System transaction are not recorded properly and this system of accounting is not approved by law. 189)Mention the types of single entry system? » Single Entry System is divided into three types, such as- (i)Pure Single Entry system. (i) Smple single Entry System. (Quasi single Entry System. 190)What do youmean by single Entry System? Mention the main features of this system. » Single Entry System is an unscientific accounting system. This system does not follow the double entry system. So single entry system means the system that does record the both side of each transaction. Actually single Entry system of accounting does not follow any particulas rule of accounting. »Main features of single Entry System: Incomplete recording: under this system of accounting, transactions are not recorded completely. 2)Personal Accounts:Under this system only personal A/c (Debtors A/c and creditors A/c) are kept.noble Ende 191)Mention the various advantages of single Entry system. » Single Entry system is an unscientific system of accounting, it is not approved by law. But it has some advantages, because of these reasons some concerns follow this system to keep their accounts. Advantages of this system are as follow: i)Easy&Simple:This system of accounting is very easy and simple, to follow this system special knowledge is not necessary. i)Short Time: Within very short term accounting is possible under this system, because this system is very easy and simple. ili)Economy:This system of accounting is very economical; because limited accounts are kept in this system. iv)Secrecy:In this system secrecy of accounting is easily kept because very few number of accountants are involved in this system. 192)Mention the various disadvantages or limitations of single Entry system? » Single entry system has some advantages and at the same time it has some disadvantages or limitations also disadvantages or limitations of single entry system. i)Incomplete records:In this system transactions of a concern are not recorded properly, so as a result necessary informations from accounting are not received. ii) Problem to prepare the trial balance:In this system, it is not possible to prepare the trial balance for proving the arithmetical accuracy of accounting. ili) Undependable:Under this system of accounting very few accounting books are kept. So this system is considered as very Undependable. iv)Possibility of fraud:Actually single Entry system is an incomplete accounting system. So possibilities of fraud in this system increases.193)Mention the various differences single Entry system and double Entry system. »The differences between single Entry system and double entry system are as follow- Subject | Single Entry System | Double Entry System (i)Science |Single Entry system is | Double Entry system is an unscientific system | a scientific system of accounting. ii) Two Sides | In this system of Inthis system of accounting both sides of } accounting both sides of each transactions are | each transactions are not recorded. recorded. ii)Books of | In this system of In this system of accounts accounting personal accounting personal Alc and cash books | A/c,Real A/c and are only kept. Nominal A/c are kept. iv)Secrecy Secrecy of accounting} Secrecy of accounting is not to be maintained Accounting highly in this system. highly in this system.