where the value of the transaction is

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1 CHAPTER- INTRODUCTION TO ACCOUNTING Two marks Questions and Answers.. What is Book keeping? Book keeping is the art of recording business transactions in a systematic manner.. Give the meaning of Accounting? Accounting is the process of identifying. Measuring and communicating financial information to end users.. What is Accountancy? Accountancy is the theory and practices of accounting. 4. What are transactions? A transaction means an event, activity or dealing involving the exchange of money or money s worth between the persons. 5. What are Business Transactions? Every financial change which occurs in the business is a business transaction. 6. Explain any two types of transactions. a) Cash Transaction- A transaction where the value of the transaction is settled (i.e. Received or paid) in cash immediately. Ex.. Purchase of goods for cash.. Sale of goods for cash. b) Credit Transaction- Is a transaction where the value of the transaction is not settled immediately, but its settlement is postponed to a future date. Ex. Purchased goods from Kiran.. Sold goods to varun. 8. Explain the following terms. a) Capital: The amount of money or money s worth invested or introduced by the proprietor into9 his business at the time of commencement of business is called capital b) Drawings: Refers to cash or goods withdrawn by the proprietor from his business for his personal, private or domestic use. c) Assets: The valuable things owned by the business. d) Liabilities The obligations or debts payable by the enterprise in future in form of money or goods, e) Debtor: Is a person who owes money to the business. f) Creditor: Is a person to whom the business owes money. g) Stock: The goods available with the business for sale on a particular date. h) Profit: Excess of revenue over expenses. i) Loss: Excess of expenses over revenue. j) Voucher: the documentary evidence in support of a transaction. CHAPTER- THEORY BASE OF ACCOUNTING Two marks Questions and Answers.. Expand GAAP and ICAI. Generally Accepted Accounting Principles Institute of Charted Accounts of India. Give the meaning of accounting concepts. The assumptions and ideas which are fundamental to accounting practice.. Give the meaning of accounting conventions. The customs and practices which are followed to prepare Financial Statements of a business concern. 4. Explain any two Accounting conventions. a) Convention of consistency: It signifies that the accounting practices and methods should practices and methods should remain consistent from one accounting year to another b) Convention of conservatism: It means Those business transactions should be recorded in such a way that profit should not be over stated and future loss should be considered. c) Convention of full disclosure: Accounting must disclose all material information. d) Convention of materiality: It means record only of those business

2 transactions which are significant (material) and insignificant transaction are ignored. 5. What is Double Entry system of book keeping? Double entry system is a complete and scientific method of book keeping as both (Dr and Cr) aspects of transactions is recorded. 6. What are Accounting Standards? The policy documents issued by recognized accounting body. 7. Write any two Accounting Standards accepted under IAS. AS- Valuation of Inventory AS-- Cash flow statement AS-6- Depreciation Accounting AS-0 Accounting for fixed assets Five marks questions and answers.. Explain any five Accounting concepts? a) Business Entity Concept: Under this concept the business transaction should be separated from the personal transaction of the proprietor. b) Money Measurement Concept: It means that in accounting a record is made only of those transactions which can be measured and expressed in the terms of money. c) Going Concern Concept: It means that a business enterprise will continue to operate for a fairly long period of time. d) Accounting Period Concept: Means that to measure the financial results of business, the business working life is split into convenient short periods of months time is called accounting period. e) Dual Aspect Concept: It is related to every transaction which is split up into Dr and Cr aspect. CHAPTER- RECORDING OF BUSINESS TRANSACTIONS-I Two marks Questions and Answers. What is Accounting Equation? The equation between the total assets and total liabilities with owner s capital is stated in the form of an equation. i. ASSETS=LIABILITIES+C APITAL ii. CAPITAL=ASSETS- LIABILITIES iii. LIABILITIES=ASSETS- CAPITAL. What is Accounting cycle? The process in which accounting transactions pass through a cyclical process of journalising, ledger posting, drafting trial balance and preparing financial statement.. What is journal? In journal each transaction is classified into debit and credit aspect. 4. What is Narration? A brief explanation to the journal given in brackets start with Being. 5. Mention types of Journal entries. Give an example. Simple journal entries - The entry involves only two accounts of which one account being debited and another being credited. Ex. Sold furniture for Cash Ac Dr To Furniture Ac Compound journal entries - The entry contains more than one debit or more than one credit or a combination of two are more simple journal entries. Ex. Commenced business with cash 0 and furniture worth 0. Cash Ac Dr 0 Furniture Ac Dr 0 To Capital Ac 0

3 Five marks questions and answers.. Explain Debit and credit rule under English system and American system of accounting English system of accounting Ac Debit the Receiver Credit the Giver Real Ac Debit what comes in Credit what goes out Nominal Ac Debit all expenses and losses Credit all incomes and Gain American system of accounting ASSET Debit increase in an Asset Credit decrease in an Asset LIABILITIES Debit decrease in a liability Credit increase in a liability INCOMEGAINS Debit decrease in an income Credit increase in an income CAPITAL Debit decrease in capital Credit increase in capital EXPENSES Debit Increase in an expenses Credit decrease in an expenses.write the accounting Equations and find out the missing figures: Assets Liabilites Capital. 00 0?.? ? Capital= Assets-Liabilities 00-0 = 0. Assets= Capital+Liabilites 0+0 = 40. Liabilities=Assets- Capital = 4000 Ms Kumar ac Interest received ac Purchases ac Capital ac Drawings ac Furniture ac Sales ac Prepaid rent ac Nominal Real Real Real 4. Draw a diagram showing accounting cycle under Traditional and Modern method. Classify the following Accounts under English system Name of the ac Type of ac Vehicle ac Real Kiran s ac State bank of India ac Salary ac Nominal OS rent ac

4 4 Fourteen Marks Question 4.Journalise the following transations. Jan Commenced business with cash 0 Jan Goods purchased for cash 4 Jan Sold Goods for cash 6 Jan Purchased goods from Kiran 8 Jan Sold goods to Manu 0Jan Bought furniture and paid by cheque Jan Returned goods to Kiran 4Jan Withdrew for office use 6Jan Manu returned goods worth 50 8 Jan Received loan from Bank 0 0Jan Deposited into Bank Jan Cash received from Manu 4 Jan Bought stationery 50 5 Jan Purchased Machinery from Shreya 6 Jan Goods withdrawn for personal use Jan Cash withdrawn for personal use 00 8 Jan Received commission 50 9 Jan paid to Kiran 0 Jan Paid Rent Jan Received cheque from Manu Journal Entries Date Particulars L F Debit Cash Ac Dr 0 Jan To Capital Ac (Being commenced Business with cash) Jan Purchase Ac Dr To Cash Ac (Being Purchased goods) 4Jan Cash Ac Dr To Sales Ac (Being sold goods) 6Jan Purchase Ac Dr To Kiran s Ac (Being purchased goods from Kiran) 8Jan Manu sac Dr To Sales Ac (Being sold goods to manu) 0Jan Furniture Ac Dr To Bank Ac (Being bought furniture Credit 0 by cheque) Jan Kiran s Ac Dr To Purchase Returns (Being goods returned to Kiran) 4Jan Cash Ac Dr To Bank Ac (Being withdrew from bank for office use) 6Jan Sales Returns Ac Dr To Manu s Ac (Being Manu returned goods 8Jan BankCash Ac Dr To Bank Loan Ac (Being took loan from Bank) 0Jan Bank Ac Dr To Cash Ac (Being deposited into bank) Jan Cash Ac Dr To Manu s Ac (Being cash received from Manu) 4Jan Stationery Ac Dr To Cash Ac (Being stationery purchased) 5Jan Machinery Ac Dr To Shreya s Ac (Being purchased machinery from Shreya) 6Jan Drawings Ac Dr To Purchase Ac (Being goods withdrawn for personal use) 7Jan Drawings Ac Dr To cash Ac (Being cash withdrawn for personal use) 8Jan Cash Ac Dr To commission Ac (Being commission received) 9Jan Kiran s Ac Dr To cash Ac (Being paid to Kiran) 0Jan Rent Ac Dr To cash Ac (Being paid rent) Jan Cash Ac Dr To Manu s Ac (Being received cheque from Manu) Compound entry Five Marks question TOTAL

5 5 5.Journalise the transaction April Govind started his business with the following; Cash Goods 0 0 Furniture 0 Creditors

6 6 Journal entry Date Particulars L F Cash Ac Dr April Stock Ac Dr Furniture Ac To Creditors Ac To Capital Ac (Being assets and liabilities introduced into business) Dr Debit Credit LEDGER Two marks Questions and Answers. 6. What is Ledger? Ledger is a book which contains a summarised, classified and permanent form of recording all transactions. 7. What is posting? Posting is the process of transferring the entries from Journal to the ledger. 8. What is Debit and Credit Balance? Debit Balance: If the debit side total of an account is greater than the credit side total, the balance is Debit Balance. Credit Balance: If the credit side total of an account is greater than the debit side total, the balance is Credit Balance. Format of Ledger: Dr Name of Account Cr Date Particulars J f Amt Date particulars J F account Five Marks question. 9. Prepare Varun s account in the books of Tarun May Credit balance in Varun account 5 May Bought goods from varun 650 0May Returned goods to varun 60 5May Purchased goods from Varun on credit 750 0May Varun returned goods 45 5May Paid to Varun 60 in full settlement of his Account. In the books of Tarun Dr Varun s account Cr Date particulars Amt Date particulars Amt 0May ToP.R Ac 60 May ByBal bd 4May ToSalesAc May Bypur.A c 650 0May TocashAc ToDis.Rec A m t Note. P.R - Purchase Returns CHAPTER-8 FINANCIAL STATEMENTS Two marks Questions and Answers.. What do you mean by final accounts and why do we prepare final accounts? Final accounts are summaries of ledger accounts prepared to show the profit or loss of the business and financial position of the business at the end of the accounting year. It consist of Trading Ac, Profit and loss Ac and Balance sheet. It is prepared to ascertain the true financial position of the business.. What is Balance sheet? It is a statement of assets and liabilities of a business prepared at the end of the accounting period with the object of ascertaining the financial position of the business.. What is trading account? An account which shows only the result of trading with all direct expenses and direct incomes called Gross Profit (G. P = Credit side>debit side) or Gross Loss( G.L = Debit side >Credit side). 4. What is profit and loss account? It is an account prepared with all the indirect expenses and indirect incomes to ascertain Net profit or Net loss of the firm in a particular period. Fourteen marks question.. Prepare final accounts for the year ended.. from the following trial balance. Sl.No. Particulars L.F Debit Credit. Capital Drawings(.4.4) -. Purchases and Sales Returns 5. Carriage - 6. Rent Debtors & Creditors Opening stock Building Wages 0 -. Commission Discount -. Printing Salary - 5. Loan Machinery 0-7. Bad debts - 8. Furniture 0-9. BR & BP 0 0. Prov. For B.debts -. Cash 8 -

7 7. Bank Interest TOTAL 7 7 Adjustments:. Stock valued at.. Depreciation on machinery at 0% and furniture 5%p.a. Outstanding salaries. 4. Prepaid rent Provision for doubtful debts at 5 % on debtors. Solution: DrTrading and PL Ac for the Year ended..5 Cr Particulars Amt Amt Particulars Amt Amt To o. stock To purchases To wages ToCarriage To G.P To Salaries Add: 0s To Rent Less: Pre paid To commission To Discount To Printing To Bad debts Add: new prov Less: old Prov. To Depr. Machinery Furniture By sales Less Returns By C.Stock By G.P By commission By Interest From the following trial balance for the year ended... prepare trading and profit and loss account and balance sheet as on this date. Sl.No. Name of the account Debit Credit. Purchases & Sales Bank balance -. Wages Debtors & Creditors Cash in hand - 6. Legal expenses Buildings Machinery 0-9. Bill receivable & bills payable 0. Office expenses -. Opening stock Gas and Fuel Freight and Carriage - 4. Factory lighting 0-5. Office furniture 0-6. Patent right Drawings on Return outwards Capital - 0 Total To Net Ptofit Liabilities Capital Add: N.P Less:Drawings Creditors Loan Bills payable os salaries Balance sheet as on i.. Amt Amt Assets Amt Buildings Machinery Less: Depr. Furniture Less: Depr. Bills receivable Debtors Less: New prov. Cash Bank Closing Stock Pre paid rent Amt Adjustments:. Machinery is depreciated at 0% and Building depreciated at 5% P.a.. Interest on capital at 4% P.a.. Os wages 4. Closing stock Provide interest on drawings at 6%.P.a. 6. Write off bad debts and maintain provision for doubtful debts 400.

8 8 Solution: DrTrading and PL Ac for the Year ended..5 Cr Particulars Amt Amt Particulars Amt Amt To O. Stock To purchases Less: returns To wages Add: Os To Gas & Fuel To Freight To Factory Light To G.P To Legal exp To office exp. To Depr. Machinery Building To int on capital(ioc) To Bad Debts To New prov. To Net Profit By Sales By C.Stock By G.P By Int on Drawing(IOD) Balance sheet as on i.. Liabilities Amt Amt Assets Amt Amt Capital Add: N.P IOC Less: drawing IOD Creditors Bill payable Os wages Machinery Less: Depr. Building Less: Depr Officefurniture Patent Bill receivable Debtors Less: Bad debt New prov Cash C.Stock Bank CHAPTER-4 RECORDING OF BUSINESS TRANSACTIONS-I Two marks Questions and Answers.. Give the meaning of subsidiary book. Subsidiary books are the special journals maintained for recording all the business transactions under modern system of accounting.. What is an invoice? It is the written statement giving the particulars of the quantity quality and the price of goods purchased on credit. This same invoice is known as inward invoice for the purchaser and outward invoice for the seller.. What is purchase book? Purchase book is a subsidiary book in which only credit purchases of goods are recorded. 4. What is Sales book? It is a subsidiary book in which only credit sale of goods are recorded. 5. What is Debit note? At the time of return of goods a document is prepared showing goods returned to suppliers. The document is called Debit note. 6. What is credit note? Credit note is the document prepared to record the quantity and value of goods returned by customers. 7. What is trade discount? Trade discount is allowed by the seller to the buyer. It is allowed when a customer purchases goods above a certain quantity or amount. Five marks questions:. Prepare Purchase book and post them into ledger accounts in the books of Sri Ganesh traders for the month of Jan. Jan Purchased from M.C traders 0 bags of rice at per bag, trade discount allowed at 0%. 0 Jan Bought from K.K Stores. 0 bags of wheat flour at 550 per bag. 5 Jan Cash purchases from A.R Trading Ltd Jan Purchased from B.R Traders. 0 Tins of coffee at 400 per Tin. Solution: In the books of Sri Ganesh Purchase Book Date Particulars Inwar d Invoice No. Jan 0 Jan 0Jan M.C Traders 0 Bags of rice x Less: 0% trade discount K.K Stores 0 Bags of wheat flour x550 B.R Traders. 0 Tins of coffee x 400. L. F Details Amt

9 9 TOTAL Dr M.C Traders Ac Cr Date Particulars JF Amt Date Particular JF Amt Jan By purchases 8000 f May By s.customers 7 f Dr K.K Stores Ac Cr Date Particulars JF Amt Date Particulars JF Amt!0 Jan By Purchases Dr B.R Traders Ac Cr Date Particulars JF Amt Date Particulars JF Amt 0 0Jan ByB.RTraders 4000 Dr Purchase Ac Cr Date particulars JF Amt Date Particulars JF Amt Jan To sundry suppliers 6. Prepare sales book in the books of N.T.C Traders for the month of may0 and post them to ledger accounts. May Sold goods to Arun at 0% discount 0 for his personal use. 6 May Sold goods to mohan for cash. 9 May Sold to mohan 4 on account, 5 May Ashok bought goods from us on credit for his use. 8 May Credit sales to Manoj 0 Sales Book Date Particulars Outward invoice no. 0 May!9 May 5 May 8 May Arun Less: 0% T.D Mohan Ashok Manoj 4 LF Detail Amt Fourteen marks question..enter the following transaction in proper subsidiary books March Bought goods from Madhu 0 March Sold goods to Narayan 5 March Narayan returned goods to us 00 6 March Purchased goods from kumar 0March Returned goods to Madhu 50 March Raj bought goods from us 4March Allowances granted to Raj for breakage 5 6March Purchased goods from john 0March Purchased goods from john 00 and paid Cash March Sold goods to Sri 5March Sent a Debit note to John for overcharges 00 7March Returned damaged goods to Kumar 50 9March Goods sold to Ganesh 800 0March Sent a credit note to Sri for overcharge 5 Total 7 Dr Arun Ac Cr Date Particulars Jf Amt Date Particulars Jf Amt 0 May To sales 4 Dr Mohan Ac Cr Date Particulars Jf Amt Date Particulars Jf Amt 0 9 May To sales 4 Dr Ashok Ac Cr Date Particulars J Amt Date Particulars Jf Amt 0 5 May To sales Dr Manoj Ac Cr Date Particulars Jf Amt Date Particulars Jf Amt 0 8 May To sales 0 Dr sales Ac Cr Date Particulars J Amt Date Particulars J Amt Date March 6 March 6March Purchase book Particulars Inward Invoice No. Madhu Kumar John Total Sales book Date Particulars outward Invoice No. L.F Amt 0 0 L.F Amt

10 0 march March March 9 March Narayan Raj Sri Ganesh Date 0 March 5March 7March Total Purchase returns Particulars Debit L.F Amt note No. Madhu John Kumar Total Date 5March 4March 0March Sales Returns Particulars Credit Note No. Narayan Raj Sri L.F Amt Total 50 Five marks practical orientedquestions.. Prepare an imaginary invoice.. Draft a specimen of debit Note

11 . Draft a specimen of credit note.

Final Accounts. A) Trading A/c Dr. Trading A/c Cr. Particulars Amt. Particulars Amt.

Final Accounts. A) Trading A/c Dr. Trading A/c Cr. Particulars Amt. Particulars Amt. Chapter 13 Final Accounts * Cost of Goods sold = Op. stock + Purchases Cl. Stock * Gross Profit = Sales Cost of Goods sold * Gross Profit = Sales G.P.% * Gross profit can be a percentage on Cost or it