JOURNAL ENTRIES FOR THE MONTH OF JANUARY 2021

DATE PARTICULARS L.F DEBIT CREDIT

1.1.2021 Cash A/C 80,000

To Capital A/C 80,000
(Commenced business with cash)

2.1.2021 Bank A/C 40,000

To Cash A/C 40,000
(Deposited cash with bank)

3.1.2021 Purchase A/C 5,000

To Cash A/C 5,000
(Purchased goods by paying cash)

4.1.2021 Purchase A/C 10,000

To Lipton & Co., A/C 10,000
(Purchased goods from Lime & Co. on credit)

5.1.2021 Cash A/C 11,000

To Sales A/C 11,000
(Sold goods to Joy and received cash)

6.1.2021 Salaries A/C 5,000

To Cash A/C 5,000
(Paid salaries by cash)

7.1.2021 Lipton & Co. A/C 10,000

To Bank A/C 10,000
(Paid Lipton & Co. by cheque for the purchases
made on 4th Jan)

8.1.2021 Furniture A/C 4,000

To Cash A/C 4,000
(Bought furniture by cash)

9.1.2021 Electricity Charges A/C 1,000

To Cash A/C 1,000
(Paid electricity charges by cash)

10.1.2021 Insurance Premium A/C 300

To Bank A/C 300
(Bank paid insurance premium on furniture as per
standing instructions)
 TRIAL BALANCE AS ON 31st MARCH 2021
PARTICULARS L.F DEBIT CREDIT

Cost of Goods Sold 5,20,000

Opening Stock 50,000

Salary and Wages 50,000

Sales 8,00,000

Plant & Machinery 2,00,000

Drawings 50,000

Investment 4,30,000

Creditors 1,00,000

Capital 4,00,000

TOTAL : 13,00,000 13,00,000

3.
Particulars Amount (Rs)
Share Capital 20,000
Retained Earnings 10,000
Short Term Debt 5,000
Long Term Debt 6,000
Total Assets 40,000
Compute Net Worth From the above data

Net worth, also known as shareholders' equity, is calculated as the

difference between a company's total assets and its total liabilities.
In this case, the liabilities include both short-term and long-term
debts. The formula for net worth is:

Net Worth = Total Assets - Total Liabilities

Given the data provided:

Total Liabilities = Short Term Debt + Long Term Debt

Let's calculate it:

Total Liabilities = 5,000 + 6,000 = 11,000

Now, plug the values into the net worth formula:

Net Worth = Total Assets - Total Liabilities

Net Worth = 40,000 - 11,000
Net Worth = 29,000

Therefore, the net worth is Rs 29,000 based on the given data.

 4. What is the main objective of accounting? What are the 3 main functions of
accounting?

The Main Objective of Accounting:

The main objective of accounting is to provide accurate and reliable nancial

information about a business or organization. This information is used by
various stakeholders, including investors, creditors, management, and
government agencies, to make informed decisions.

3 Main Functions of Accounting:

1. Recording nancial transactions: This involves tracking all income and

expenses of a business, as well as any changes in assets and liabilities.
This is typically done through a double-entry bookkeeping system, where
each transaction is recorded in two accounts with equal debits and credits.

2. Summarizing nancial information: This involves preparing nancial

statements, such as the balance sheet, income statement, and cash ow
statement. These statements provide an overview of the nancial health of
a business at a speci c point in time or over some time.

3. Analyzing nancial information: This involves using nancial

statements and other data to assess the performance of a business, identify
trends, and make forecasts. Accountants can use this information to help
businesses make strategic decisions, improve ef ciency, and manage risk.
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 5. Answer the following questions:
a) Mention two characteristics of assets.

b) What are intangible assets?

c) Give two examples of tangible and intangible assets.

A). Two key characteristics of assets are:

1. Economic Value: Assets must have the potential to generate future economic
bene ts for the owner. This could be through direct means, like generating
income (e.g., rental property), or through indirect means, like increasing
ef ciency or productivity (e.g., equipment).

2. Control: The owner (or entity) must have control over the asset and the ability
to limit access to it from others. This control allows the owner to utilize the
asset to generate economic bene ts as intended.

For example, a company's inventory of nished goods has both economic value (can
be sold for pro t) and control (A company manages and decides how to use it).
Similarly, a patent provides economic value (intellectual property rights) and control
(exclusive use by the patent holder).
B). Intangible assets are assets that lack physical substance but still hold significant
value for a business. Unlike tangible assets like equipment or inventory, you can't
touch or interact with them directly. However, they play a crucial role in many
businesses, often contributing significantly to their overall success.
Here are some key characteristics of intangible assets:

• No physical form: As mentioned, they're not tangible and cannot be held or

manipulated. Examples include brands, patents, copyrights, trademarks,
customer relationships, goodwill, and software.
• Value from intellectual property: Many intangible assets are directly tied to
intellectual property, which grants exclusive rights to use or bene t from
certain creations or knowledge.
• Future bene ts: Their value derives from the potential to generate future
economic bene ts for the business. This could be through increased revenue,
reduced costs, or enhanced competitive advantage.
• Dif cult to value: Compared to tangible assets, their monetary value can be
more challenging to determine due to their intangible nature. Valuation
methods often rely on market analysis, historical data, or estimates of future
cash ows.
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Here are some common examples of intangible assets:

• Intellectual property: Patents, copyrights, trademarks, trade secrets, and

licenses.
• Customer relationships: Loyal customer base, brand reputation, and customer
goodwill.
• Creative assets: Literary works, music, lm, architectural designs, and
software.
• Contractual rights: Leases, franchises, and non-compete agreements.
• Organizational capabilities: Employee skills, knowledge, and processes.
Understanding and managing intangible assets is crucial for many businesses in
today's knowledge-based economy. They contribute signi cantly to competitive
advantage, and their proper valuation is essential for accurate nancial reporting and
decision-making.

C). Certainly! Here are two examples of tangible and intangible assets:

Tangible Assets:

1. Delivery truck: This is a physical asset that you can touch and see. It has
economic value because it is used to deliver goods and generate revenue for the
business. The delivery truck would be listed on the company's balance sheet
under "equipment."

2. Inventory: This refers to raw materials, nished goods, or merchandise held

by a business for sale or production. Like the delivery truck, inventory is
physically tangible and directly contributes to the company's economic activity.
It would be listed under "current assets" on the balance sheet.

Intangible Assets:

1. Brand name: This is an intangible asset that represents the reputation and
image of a company or product. It has value because it can attract customers,
increase loyalty, and command premium pricing. While you can't physically
touch a brand name, it's valuable and would be listed on the balance sheet
under "intangible assets."

2. Patent: This is an exclusive right granted for an invention for a limited period.
It gives the owner control over the use and commercialization of the invention,
generating economic value through licensing fees or competitive advantage.
Patents are intangible assets but are crucial for many businesses based on
innovation.
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PART (C) – Long Answer Questions (2X10 = 20)
1. Ms. Anisha has the following transactions in the month of July. Record them
in the journal, show postings in the ledger, and balance the accounts.

July Month

1st : Anisha started the business with a capital of 75,000

2nd : Purchased goods from Roy on credit 25,000
2nd: Sold goods to Ram 20,000
3rd : Purchased goods from Ann 15,000

4th : Sold goods to Tanvi for cash 16,000

5th : Goods returned to Roy 2,000
6th : Bought furniture for 15,000
7th : Bought goods from Zain 12,000
8th : Cash paid to Roy 10,000

9th : Sold goods to John 13,500

10th : Goods returned from Ram 3,000
11th : Cash received from John 5,500
12th : Goods taken by Anisha for domestic use 3,000
13th : Returned Goods to Zain 1,000
14th : Cash received from Ram 12,000
15th : Bought machinery for 18,000
16th : Sold part of the furniture for 1,000

17th : Cash paid for the purchase of a bicycle for Anisha's son 1,500

19th : Cash sales 15,000

20th : Cash purchases 13,500
July 1 Cash A/C 75,000
To Anisha A/C 75,000
(Anisha started the business with a capital)

2 Purchase A/C 25,000

To Roy A/C 25,000
(Purchased goods from Roy on credit)

2 Ram A/C 20,000

To Sales A/C 20,000
(Sold goods to Ram)

3 Purchase A/C 15,000

To Ann A/C 15,000
(Purchased goods from Ann)

4 Cashi A/C 16,000

To Sales A/C 16,000
(Sold goods to Tanvi for cash)

5 Roy A/C 2,000

To Purchase Return A/C 2,000
(Goods returned to Roy)

6 Furniture A/C 15,000

To Cash A/C 15,000
(Bought furniture)

7 Purchase A/C 12,000

To Zain A/C 12,000
(Bought goods from Zain)

8 Roy A/C 10,000

To Cash A/C 10,000
(Cash paid to Roy)

9 John A/C 13,500

To Sales A/C 13,500
(Sold goods to John)

10 Sales Return A/C 3,000

To Ram A/C 3,000
(Goods returned from Ram)

11 Cash A/C 5,500

To John A/C 5,500
(Cash received from John)

12 Drawings A/C 3,000

To Anisha A/C 3,000
(Goods taken by Anisha for domestic use)

13 Zain A/C 1,000

To Purchase Return A/C 1,000
(Returned Goods to Zain)

14 Cash A/C 12,000

To Ram A/C 12,000
(Cash received from Ram)

15 Machinery A/C 18,000

To Cash A/C 18,000
(Bought machinery)
16 Cash A/C 1,000
To Furniture A/C 1,000
(Sold part of the furniture)

17 Drawings A/C 1,500

To Cash A/C 1,500
(Cash paid for the purchase of a bicycle for
Anisha's son 1,500)

19 Cash A/C 15,000

To Sales A/C 15,000
(Cash sales)

20 Purchase A/C 13,500

To Cash A/C 13,500
(Cash Purchases)
 2. BCC Advertising, owned by Ms Ramya, provides advertising consulting services.
During January 2021, the following events occurred:

Jan.2 - Owner contributed Rs. 50,000 and a new computer costing Rs. 30,500 to start
his business.

Jan. 4 - Of ce supplies were purchased on account for Rs. 5,000.

Jan. 10 - BCC Advertising obtained 12% 5-year loan of Rs. 30,000 from the bank.

Jan. 12 - BBC Advertising paid the utility bills for Rs. 3,750.

Jan. 15 - Paid the Rs. 4,000 in Accounts Payable from the purchase of of ce supplies
on Jan. 4.

Jan. 24 - Advertising services completed in January were billed to client Aruns’ Cafe
at Rs. 19,300.

Jan. 27 - BBC Advertising received Rs. 6,500 from Aruns’ Cafe, a client, as payment
on account.

Jan. 30 - Ms Ramya withdrew Rs. 7,000 of cash for personal use.You are required to
create Journal Entry, General ledger account and make a trial balance.

Journal Entries for BCC Advertising - January 2021

DATE PARTICULARS L.F DEBIT CREDIT

Jan 2 Cash A/C 50,000

Computer A/C 30,500
To Capital A/C 80,500

Jan 4 O ce Supplies A/C 5,000

To Account Payable A/C 5,000

Jan 10 Cash A/C 30,000

To Loans Payable A/C 30,000

Jan 12 Utilities Expenses A/C 3,750

To Cash A/C 3,750

Jan 15 Accounts Payable A/C 4,000

To Cash A/C 4,000

Jan 24 Accounts Receivable A/C 19,300

To Service Revenue A/C 19,300

Jan 27 Cash A/C 6,500

To Accounts Receivable A/C 6,500

Jan 30 Drwaings A/C 7,000

To Cash A/C 7,000
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