CHAPTER:1

ACCOUNTING RECORDS:

WASTE
BOOK

JOURNAL/
FINAL
SUBSIDIARY
ACCOUNTS
BOOK

TRIAL
BALANCE LEDGER

REMEMBER:

CONSIDER MONETORY
TRANSACTIONS TEMS
MEASURABLE RECORD IN THE
WHICH ARE
TRAM ACCOUNTS
RELATED TO
BUSINESS NSACTIONS
DEFINITION OF ACCOUNTING:

 Accounting is a systematic process of identifying recording classifying

summarising and communicating financial information of business to its
stakeholders or authorities for decision making.

OBJECTIVES OF ACCOUNTING:

To maintain systematic • Book-keeping,Journal,Ledger & Trial

records of business balance
transactions • cash-credit purchase&sale

To determine the • Treading A/C and P&L A/C

results • GP & NP

Determination of • Balancesheet
Finanacial Position • Assets & Liabities

Communicating • Financial Reports

financial information • Economic condition (solvency or
to various users insolvency)

CHARACTERISTICS OF ACCONTING:
1.It is an art :Special skills are required
2. it is a science :Proper principals are followed
Proper rules and logic behind everything
3. it is a language of business :It has its own words and meanings
4.Only financial transaction recorded : Only Money terms measurable transactions
are recorded
5.Recorded in special books :Cash transactions cash book
Sale transaction sales book
6.Quantitative Information :Numeric information recorded in books of account
7. Service transactions are also recorded
8.Interpretation of transaction
9.Classification and analysis of transaction

ADVANTAGES OF ACCOUNTING:
To know the Profitability

• net profit & gross profit

Provide information about Income & Expenditures

• from P&L A/C

To know the Financial Status

• How much Profit & Loss

Useful for Management for policy making

• i.e capital employed in firm is provide enough return or not?

Useful for various users for decision making

• Stakeholders: Creditors,Debtors,Investors,Shareholders etc.

Useful As an Evidence

• Because it is in written form

LIMITATIONS OF ACCOUNTING:

Avoidance of non financial transaction

• Honesty, loyality of employee plays significant role but not

recorded in accounts

Window dressing

• Manipulated by accountants which leads to company in more

favourable position then actual position

Monetary information only

• The events which are measured in terms of money that only

recorded

Historical cost

• In balance sheet assets valued on its cost base, which fails to

take consideration factors like inflation.

Dual standards

• P&L account (income statement)-current price balance sheet-

historical price

Avoidance of market value

• Assets record on its cost price

BASES OF ACCOUNTING:

1.Accrual basis/ mercantile base:

 Income is recognised when it is earned and expenses when it is incurred

 All the transactions are recorded cash + credit
 Provides correct profit and loss
 Used by all companies and other organisations
 E.g. outstanding expenses, income earned but not received

2.Cash basis:

 Income are recognised when actually cash received and expenses are recognised
when actually cash paid
 Only cash transaction record
 Leads inaccurate profit or loss
 Used by small business at beginning ,doctors, lawyers, Chartered Accountants and
non profit organisation

3.Mixed or hybrid base:

 Revenue recordes on cash basis

 expenses recorded on mercantile base
 This method is not popular in India

BRANCHES OF ACCOUNTING:

1.FINANCIAL ACCOUNTING:
 Ascertains the profit and financial position of the business

 The broadest branch and is focused on the needs of external users.

  Information is communicated in a complete set of financial statements.

 Primarily concerned with processing historical data.

 Uses information for decision-making needs.

2.MANAGEMENT ACCOUNTING:
 Supplies relevant information at the appropriate time to the management to enable decision
making and exercise effective control

 provide timely and relevant information for those internal users of accounting information,
such as the managers and employees in their decision-making needs.

 Involves financial analysis, budgeting and forecasting, cost analysis, uation of business
decisions, and similar areas

3. COST ACCOUNTING:
 Ascertains the cost of goods produced or services rendered by a business

 Mostly used by manufacturing firms.

 Used by those industries which have lots of resources & costs to manage.

 To know the total cost as well as per unit cost.

 CHAPTER:2
ACCOUNT:
 An Account is a record of debit and credit entries of all the economic transactions
involving a particular item or particular person

TYPES OF ACCOUNTS:

TYPES OF ACCOUNTS

PERSONAL A/C
(A/C RELATED TO NATURAL IMPERSONAL A/C
PERSON OR ARTIFICIAL
PERSON & LIABILITIES))

REAL A/C
(A/C RELATED TO GOODS &
OTHER PROPERTY)

NOMINAL A/C
(A/C RELATED TO BUSINESS
TRANSACTIONS i.e INCOMES
& EXPENCES)

RULES OF ACCOUNTING:

TYPES OF DEBIT SIDE CREDIT SIDE

ACCOUNTS
PERSONAL A/C Debit the Receiver Credit the Giver
REAL A/C Debit What comes in Credit What goes out
NOMINAL A/C Debit the expences/losses Credit the income/profit
 CHAPTER:3

TYPES OF TRANSACTIONS:
"Business transaction means the exchange of products/services of business for cash and/or
on credit between two or more than two persons."

Examples of Transactions

 Sales of Goods and Services for Cash or Credit.

 Subscribing to a Netflix Premium plan (there is an interaction between you (the

buyer) and Netflix (the Seller)

 Purchase of inventory on cash or credit.

 Purchase of an asset.

 Disposal of an asset.

 Payment of salaries to employees.

Types of Transactions

Certain types of transactions are recorded in the books of account. There are two types of
transactions.

1. Those transactions which are entered in the books of account are called economic
transaction or monetary transaction.

2. Those transactions which cannot be recorded in the books of account are called non-
economic or nonmonetary transaction.
 TRANSACTIONS

ECONOMIC NON-ECONOMIC
TRANSACTIONS TRANSACTIONS

CASH
TRANSACTIONS

CREDIT
TRANSACTIONS

OTHER
TRANSATIONS

Cash transaction

In this types of transaction money is paid immediately for purchase and cell transaction of
asset goods and services

Credit transaction

In this types of transaction money is not paid immediately for purchase cell transaction of
asset goods and service it will be paid in future

This types of transaction generate the relation of debtor-creditor.

Other transaction

The transaction that do not fall in the above mentioned to types.These are special
transactions. These are neither cash nor credit transactions.These are special transactions
which are recorded in the books of accounts.

E.g goods destroyed in accident

theft of goods

goods given for donation

goods given for advertisement

goods destroyed by fire

METHODS OF PREPARING ACCOUNTS:
1. DESHI NAMA SYSTEM:

 Very old method of preparing accounts

 Written in regional language

 There are two main books:◆Rojmel

◆Khata Vahi
 Derived and adopted in Indian subcontinent
 Books are known as "Vahi" and system is known as "Vahi Khata paddhti"

2. SINGLE ENTRY SYSTEM:

The single-entry system is a simple and cost-effective way for small businesses to maintain
their financial records.

Advantages:

1. Simple and Easy: Easy to understand and implement, even for those without extensive
accounting knowledge.
2. Less Time-Consuming: Faster and less time-consuming compared to the Double Entry
System.
3. Low Cost: Requires minimal investment in accounting software and personnel.
4. Flexibility: Allows for flexibility in recording transactions.
5. Suitable for Small Businesses: Ideal for small businesses or sole proprietorships with simple
financial transactions.

Disadvantages:

1. Lack of Accuracy: Prone to errors and inaccuracies, as transactions are recorded only once.
2. Incomplete Financial Picture: Fails to provide a complete picture of financial transactions
and position.
3. Difficulty in Preparing Financial Statements: Makes it challenging to prepare accurate
financial statements.
4. Limited Audit Trail: Lack of a clear audit trail, making it difficult to detect errors or fraud.
5. Not Compliant with Accounting Standards: Does not comply with accounting standards
and regulatory requirements.

3. DOUBLE ENTRY SYSTEM:

According to historians, The mathematicians of Italy Luca Pacioli is considered as “The Father
Of Double Entry System”.

Advantages:
1. Accuracy: Ensures accuracy in accounting records as each transaction is recorded twice.

2. Completeness: Provides a complete picture of financial transactions.

3. Error Detection: Helps detect errors and frauds.

4. Financial Reporting: Enables preparation of accurate financial statements.

5. Compliance: Complies with accounting standards and regulatory requirements.

Disadvantages:
1. Complexity: Can be complex and time-consuming to implement and maintain.

2. Cost: Requires skilled personnel and accounting software, increasing costs.

3. Rigidity: Can be inflexible, making it difficult to adapt to changing business needs.

4. Dependence on Accounting Knowledge: Requires a good understanding of accounting

principles and concepts.

5. Potential for Errors: Despite its advantages, errors can still occur if transactions are not
recorded correctly.

IMPORTANT TERMINOLOGIES

1. GOODS

In accounting, goods refer to tangible items that are bought, produced, or sold by a
business as part of its core operations. These items are considered inventory and are
intended for resale or production.
Types of Goods in Accounting

1. Raw Materials
o Basic inputs used in the production process.
o Example: Steel for car manufacturing.
2. Work-in-Progress (WIP)
o Goods that are partially completed in the production process.
o Example: A half-built vehicle on an assembly line.
3. Finished Goods
o Completed products ready for sale.
o Example: Smartphones in a retail store.
4. Traded Goods
o Goods purchased for resale without further processing.
o Example: A bookstore selling purchased books.

2. STOCK/INVENTORY

Stock or Inventory refers to the goods and materials a business holds for the
purpose of resale, production, or operational use. It is classified as a current asset in
accounting because it is expected to be consumed, sold, or converted into cash
within a business's operating cycle.

Examples of Inventory

1. Raw Materials: Steel used in car manufacturing.

2. Work-in-Progress (WIP): Partially assembled furniture.
3. Finished Goods: Packaged toys ready for sale.

3.ASSET

An asset is any resource owned or controlled by an individual or organization that

has economic value and is expected to provide future benefits. Assets are listed on
the balance sheet and are categorized as current, non-current, or intangible

ASSETS

NON-
CURRENT FICTITIOUS
CURRENT
ASSETS ASSETS
ASSETS
 1. NON-CURRENT ASSET

A Non-Current Asset (also known as Fixed Asset or Long-Term Asset) refers

to a physical or intangible resource that a company owns and uses for long-
term operations, typically for over one year. These assets are not intended for
resale and are expected to provide benefits for an extended period of time

Examples: Property, Plant, Equipment (PPE), Long-term Investments

A. TANGIBLE ASSET

A Tangible Asset is a physical asset that has a definite form and can be
seen, touched, and measured. These assets have a physical presence and
can be used in business operations to generate value or revenue.

B. INTANGIBLE ASSET

An Intangible Asset is a non-physical asset that has value due to its

unique characteristics, such as intellectual property, reputation, or other
non-tangible benefits. Unlike tangible assets, intangible assets cannot
be touched or physically measured.

2. Current Assets

A Current Asset is a short-term asset that a company expects to convert into

cash, sell, or consume within one year or within the company's operating
cycle, whichever is longer. These assets are highly liquid and are used to
support day-to-day operations.

Examples: Cash, Inventory, Accounts Receivable

3. FICTIOIUS ASSET

A Fictitious Asset refers to an asset on the balance sheet that does not
represent a physical or tangible asset but has value, such as goodwill or other
non-monetary benefits. These assets are typically created through accounting
adjustments or legal constructs rather than actual physical ownership or value.

4. LIABILITY

In accounting, a Liability is a financial obligation or debt that a company owes to

external parties, such as creditors, suppliers, or lenders. These obligations arise from
past transactions or events and must be settled through the transfer of assets,
typically in the form of cash, goods, or services.

LIABILITY

ON THE BASIS ON THE BASIS

OF RELATION OF TIME

NON-
INTERNAL EXTERNAL CURRENT
CURRENT
LIABILITY LAIBILITY LIABILITY
LIABILTY

• ON THE BASIS OF RELATION

A. INTERNAL LIABILITY

An Internal Liability refers to a financial obligation or debt that a company owes to

its own employees, shareholders, or related parties within the organization. These
liabilities are created through internal agreements or transactions and are not
directly related to external creditors or third parties.

Examples:

 Accrued Salaries or Bonuses owed to employees.

 Inter-company loans or advances between related entities.
 Unsettled dividends or profits distributed internally among shareholders or
partners.

B. EXTERNAL LIABILITY

An External Liability is a financial obligation or debt that a company owes to

external parties, such as creditors, lenders, suppliers, or other entities outside the
organization. These liabilities arise from transactions or agreements between the
company and parties not within the company.

Examples:

 Loans and Borrowings from banks or financial institutions

 Supplier payables
 Lease obligations
 Bonds payable
 Taxes payable to government authorities
 ON THE BASIS OF TIME

A. CURRENT LIABILTY

A Current Liability is a financial obligation that a company is required to settle

within one year or within its operating cycle, whichever is longer. These are short-
term debts or obligations that are due in the near future and are typically paid
using current assets such as cash or accounts receivable.

Examples:

 Accounts Payable
 Short-term loans or borrowings
 Accrued expenses (e.g., salaries, taxes, utilities)

B.NON-CURRENT LIABILTY

A Non-Current Liability (also known as Long-Term Liability) is a financial

obligation that a company does not expect to settle within one year or within its
operating cycle, whichever is longer. These liabilities are typically related to long-
term financing, such as loans, bonds, or lease obligations, and are expected to be
paid over a period longer than one year.

Examples:

 Long-term loans and borrowings

 Bonds payable
 Lease liabilities (non-current portion)

5. CAPITAL

In accounting, Capital refers to the financial resources invested in a business

by its owners or shareholders. It represents the net worth of a business, which
is the difference between its assets and liabilities.

Key Characteristics:

1. Source of Financing: Capital is used to finance business operations,

investments, and growth.
2. Types:
o Equity Capital: Investment made by the owners (e.g., shares, retained
earnings).
o Debt Capital: Funds raised through borrowing (e.g., loans, bonds).
3. Importance:
 o Owner’s Equity: The portion of the business financed by the owners'
contributions.
o Net Worth: Assets minus liabilities, which reflect the business’s
financial health.
4. Uses:
o Expanding operations
o Purchasing assets
o Paying off debts
o Funding research and development

6. DEBIT

In accounting, a Debit refers to an entry on the left side of an account that

represents an increase in assets or a decrease in liabilities and equity. Debits
are used to record transactions that either add to the value of an account or
reduce a related liability or equity account.

In double-entry bookkeeping, debits are recorded on the left side of an

account.

7. CREDIT

In accounting, a Credit refers to an entry that either increases a liability or

equity account or decreases an asset or expense account. Credits are used to
balance financial statements and are one of the two basic types of accounting
entries, alongside debits.

Credits are essential for maintaining the accounting equation (Assets =

Liabilities + Equity) and for ensuring the double-entry bookkeeping system
works correctly.

8. DEBTOR

In accounting, a Debtor (or Accounts Receivable) is an individual or entity that

owes money to a business for goods or services provided on credit. Debtors
are essentially customers or clients who have not yet paid for products or
services they have received.

Debtors are recorded as current assets on the balance sheet since they
represent amounts expected to be collected within a short period. Managing
debtors efficiently ensures healthy cash flow and reduces the risk of bad debts
or non-payment.
9. CREDITOR

In accounting, a Creditor is an individual or an entity to whom a company or

an individual owes money due to a transaction or agreement. Creditors
provide goods, services, or lend money with the expectation of repayment
along with any agreed-upon interest or fees.

Creditors are critical for business operations as they provide necessary

resources (e.g., goods, capital) that support a company’s growth. The amounts
owed to creditors are recorded as liabilities on a company’s balance sheet.

10.REVENUE / INCOME

In accounting, Revenue (also known as Income or Sales) is the total amount

of money generated from the sale of goods, services, or other business
activities. It represents the primary source of income for a business and is a
key indicator of its financial performance.

Revenue is a critical financial metric used to evaluate a company's growth,

profitability, and efficiency in generating income. It is reported on the income
statement and is a foundation for calculating profitability ratios and
performance evaluation.

11.EXPENSES

In accounting, Expenses are the costs incurred by a business in the process of

earning revenue. They represent the outflow of resources, typically cash or
assets, used to generate sales or income.

Expenses are crucial for financial reporting as they impact a company's net
income and help in assessing profitability. Tracking and managing expenses is
essential for controlling costs and ensuring the efficient use of resources.

12. PROFIT
In accounting, Profit refers to the financial gain that a company makes after
subtracting its total expenses, costs, and taxes from its total revenue. It
represents the positive difference between income and outflows.

Profit is a key indicator of a business's financial health and performance. It

shows the company's ability to generate earnings relative to its expenses and
investments. High profits indicate efficient operations and a strong financial
position.

13.LOSS
 In accounting, a Loss refers to a decrease in the value of a business or its net
worth resulting from expenses or the sale of assets at a price lower than their
carrying value. It represents a reduction in income or an excess of expenses
over revenues during a specific period.

Losses are an important part of financial analysis as they impact a company's

profitability and financial performance. Consistent losses can signal potential
financial difficulties and may require corrective actions such as cost-cutting,
restructuring, or re-evaluating business strategies.

14.VOUCHER

In accounting, a Voucher is a document that provides evidence of a financial

transaction. It serves as a record of the transaction, including details such as
amounts, parties involved, and the purpose of the transaction. Vouchers are
used to ensure the accuracy and authorization of financial activities.

Vouchers help maintain a systematic approach to accounting and ensure

accurate financial reporting, auditing, and compliance with financial standards.
They are essential for tracking and managing financial data efficiently.

15.ACCOUNTS

In accounting, an Account is a record used to track financial transactions

related to specific types of assets, liabilities, equity, revenues, or expenses.
Each account provides a systematic way to measure and report financial data,
allowing businesses to monitor financial performance and position.

Accounts provide the foundation for financial statements such as the Income
Statement, Balance Sheet, and Cash Flow Statement. They help businesses
track financial performance, plan for future operations, and ensure compliance
with regulatory standards.

16.DRAWINGS

In accounting, Drawings refer to the amount of money or value of assets that

an owner of a sole proprietorship or partnership withdraws from the business
for personal use. Drawings are recorded as a decrease in the owner’s equity or
capital in the business.

Drawings are important in determining the profitability and financial health of

a business. They directly reduce the owner's claim on the business’s assets and
are reflected in the financial statements, impacting the overall net worth of the
business.
17.SOLVENT

In accounting, a Solvent Person refers to an individual or entity that has

enough assets to cover its liabilities, meaning it can meet its financial
obligations as they come due. A solvent person is able to pay off debts
without facing significant financial distress.

Being solvent is crucial for individuals or businesses, as it indicates financial

stability and the ability to maintain operations and growth over time.
Insolvency occurs when liabilities exceed assets, leading to an inability to meet
financial commitments.

18.INSOLVENT

In accounting, an Insolvent Person refers to an individual or entity (such as a

company) that is unable to meet its financial obligations as they come due,
due to having more liabilities than assets. This means that the person's total
debts exceed their total assets, making it impossible for them to pay off their
creditors.

Insolvency can lead to bankruptcy proceedings, restructuring, or liquidation as

the entity attempts to repay creditors or reorganize its financial affairs.
Insolvency is a critical indicator of a company's or individual's financial health,
requiring intervention to address the financial shortfall.

19.BAD DEBTS

In accounting, Bad Debt refers to an amount of money owed to a company

by customers who are unable or unwilling to pay. This is an expense that
businesses recognize when a customer fails to make payment for goods or
services already provided.

Recognizing bad debt is crucial for maintaining accurate financial statements

and ensuring that the business reflects realistic revenues. It helps to adjust
accounts receivable and maintain proper financial health assessments.

20.DISCOUNT

In accounting, discount refers to a reduction in the price of goods or services

offered to customers or clients. This reduction can be applied at the time of
sale or as an incentive for early payment, bulk purchases, or specific customer
loyalty programs.
 Revenue Recognition: Discounts affect the net revenue by reducing the total
sales amount.
 Expense Management: For businesses offering discounts, these reductions may
lead to adjustments in expenses related to cost of goods sold (COGS) or
marketing promotions.

DISCOUNT

TRADE CASH
DISCOUNT DISCOUNT

 TRADE DISCOUNT

In accounting, a Trade Discount is a reduction in the listed price of goods or

services provided by a seller to a buyer. It is typically offered based on the
quantity of goods purchased, the frequency of purchases, or specific business
relationships, rather than as an incentive for early payment.

 CASH DISCOUNT

In accounting, a Cash Discount is a reduction in the amount owed by a buyer

to a seller if payment is made within a specified period. It is an incentive for
early payment and is typically recorded in the financial statements as a
reduction in the accounts payable or sales amount.

21.ALLOWANCE

In accounting, Allowance refers to an estimate or provision set aside to cover

potential future losses or expenses. It represents a reduction in the value of an
asset or an adjustment to liabilities, ensuring that financial statements reflect
potential risks or uncertainties.
 CHAPTER:4

Meaning of journal:
In accounting, a journal is a book that records a business's financial transactions in
chronological order. It's also known as the "book of original entry" because it's the first place
where transactions are recorded.

Characteristics of a Journal in Accounting:

1. Chronological Record: Journal entries are recorded in chronological order, as and when
transactions occur.

2. Original Entry: Journal is the original book of entry, where transactions are first recorded.

3. Debit-Credit System: Journal entries follow the debit-credit system, where each transaction
is recorded with a debit and a corresponding credit.

4. Narration: Each journal entry is accompanied by a brief narration or description of the

transaction.

5. Date: Journal entries include the date of the transaction.

6. Reference Number: Journal entries may include a reference number or voucher number for
easy identification.

7. Sequential Entry: Journal entries are recorded sequentially, with each entry having a
unique entry number.

Importance of a Journal in Accounting:

1. Permanent Record: Journal provides a permanent record of all financial transactions.

2. Chronological Record: Transactions are recorded in chronological order, helping to track

the sequence of events.

3. Error Detection: Journal helps detect errors and omissions in financial recording.

4. Preparation of Ledger: Journal entries are used to prepare the Ledger accounts.

5. Financial Statement Preparation: Journal entries are used to prepare financial statements
like Balance Sheets and Profit & Loss Accounts.

6. Audit Trail: Journal provides an audit trail, enabling auditors to verify financial transactions.
7. Compliance: Journal helps ensure compliance with accounting standards and regulatory
requirements.

Meaning of cashbook:

A cash book is a financial journal that contains all cash receipts and disbursements, including
bank deposits and withdrawals. This is the main area where businesses record any and all
cash-related information. Entries are normally divided into cash payments and receipts.

Characteristics of a Cash Book:

1. Chronological Record: Cash transactions are recorded in chronological order.

2. Original Entry: Cash Book is the original book of entry for cash transactions.

3. Dual Column: Typically has two columns, one for receipts (deposits) and one for payments
(withdrawals).

4. Running Balance: Shows a running balance of cash, updated after each transaction.

5. Cash Transactions Only: Only cash transactions are recorded in the Cash Book.

6. Daily Entries: Entries are made daily, or as transactions occur.

7. Verified by Cash Count: The Cash Book balance is periodically verified by counting the
actual cash on hand.

Importance of a Cash Book in Accounting:

1. Record of Cash Transactions: Cash Book provides a complete record of all cash
transactions.

2. Cash Position: Helps to determine the cash position of the business at any given time.

3. Control Over Cash: Enables management to exercise control over cash receipts and
payments.

4. Preparation of Financial Statements: Cash Book is used to prepare financial statements like
Balance Sheets and Profit & Loss Accounts.

5. Audit Trail: Provides an audit trail, enabling auditors to verify cash transactions.

6. Detection of Errors: Helps to detect errors and discrepancies in cash transactions.

7. Management Decision-Making: Provides valuable information for management to make

informed decisions.
 CHAPTER:5

Meaning and importance of a Ledger:

Meaning: A Ledger is a book or digital file that contains a collection of accounts, each
representing a specific asset, liability, equity, revenue, or expense. It's a permanent record of
all financial transactions.

Importance:

1. Provides a Complete Picture: Ledger accounts provide a complete and detailed picture of a
company's financial position.

2. Helps in Preparation of Financial Statements: Ledger accounts are used to prepare

financial statements like Balance Sheets and Profit & Loss Accounts.

3. Facilitates Audit and Analysis: Ledger accounts help auditors and analysts to examine and
interpret financial data.

4. Ensures Accuracy and Consistency: Ledger accounts ensure accuracy and consistency in
financial recording and reporting.

5. Helps in Decision-Making: Ledger accounts provide valuable information for management

to make informed decisions.
 JOURNAL ENTRIES.

1.Transactions for capital and drawings when new business is commenced.

Ajay has commenced his business with the name Avadh enterprise. Write Journal
entries from transaction of June‘2024.

2024

1 Introduced capital of ₹ 50,000 and commenced business.

2. Brought goods of ₹ 10,000,furniture of ₹ 2000 and debtors of ₹ 30,000 in business.

3. Sold bike of ₹ 20,000 for ₹ 15,000 out of which ₹ 10,000 introduced in business.

5.Brought in business personal receivable of ₹ 6000 and payables

of ₹ 4000. 7.Withdrawn ₹ 1000 from business for personal use.
16. Paid income tax of ₹ 500.

22. Paid ₹ 200 for life insurance premium from business.

25. Withdrawn goods of ₹ 400 for personal use from business.

31. College tution fees of son ₹ 500 paid from business.

2.Transactions for goods and assets:

Pass journal entries for the following transactions of

gokul Traders. 2024,
1 july. Brought cash of ₹ 10,000, stock of ₹ 10,000 and Furniture of ₹ 5000 and
commenced business.

1. Goods purchased of ₹ 5000 from Mathura traders.

2. Goods sold for cash ₹ 4000.
3. Goods purchased from Rushikesh of ₹ 8000 and paid an half amount in cash.
4. Goods of ₹ 1600 returned to Mathura Traders.
5. Goods of ₹ 600 given for Prime Minister relief fund.
6. Electronic weight machine purchased for ₹ 450.
7. 100 shares of Shri Barsa Ltd. Purchased at ₹ 30 and 2% brokerage is paid.
Both the Payment paid by cheque.
8. Goods of Goods ₹ 4000 sold to Kedarnath.
9. Goods of ₹ 1500 destroyed by fire.
10. Half the goods returned back from Kedarnath.
11. Furniture of ₹ 3000 purchased from Bansidhar Furniture Mart.
 17. After adding 20%, goods of ₹ 1000 sold to Chandni. Carriages of ₹ 50 paid
on her behalf.

3.Other Forms of Goods Outward.

5. Write Journal entries for the following transactions in the
books of Murlidher. 2024.
May 1. ₹ 1000 is withdrawn from business for personal use.
2. Goods of ₹ 700 destroyed by fire. It was not insured.
3. Goods of ₹ 500 is stolen from business.
8. Goods stolen received back of ₹ 100 on police investigation.
12. Goods of ₹ 2500 is destroyed by fire. Insurance company has admitted
claim for it.
15. Goods of ₹ 4000 is destroyed due to sinking of steamer. For which
insurance company has admitted claim of 50 % amount.
16.Goods of ₹ 500 given as donation.
20.Goods of ₹ 200 distributed as free sample for advertisement purpose.
22. Goods of ₹ 400 received as a free sample from manufacturer.
25. Goods received on 22, sold and realize ₹ 300.
28. Goods of ₹ 1500 is destroyed by fire. Insurance company has admitted
claim of ₹ 900.₹ 200 realize from scrap of this goods.
30. Goods of ₹ 600 destroyed in rain, which is sold for ₹ 200.

4.Transactions through Bank.

Write Journal in the books of shree Vasant Traders for the following
transaction: 2024
June 1.A current account is opened with SBI bank by
depositing ₹ 20,000. 2 Goods sold for ₹ 5000, the amount
of which directly deposited in bank.
4. Furniture of ₹ 10,000 is purchased, payment is made through cheque.
9. Withdrawn from bank ₹ 400 for personal expense and ₹ 700 for office
expenses.
10. A cheque of ₹ 1500 received from Virat.
15. Goods of ₹ 3000 sold on cash to Parthiv, Out of which 50% amount
received by cheque.
18. Fire insurance premium ₹ 450 and life insurance premium of ₹ 300 are
paid by cheque.
22.A cheque of dividend warrant of ₹ 200 deposited in bank.
25. Bank has credited ₹100 for bank interest and debited ₹50 as bank charges
to our account.
28. A cheque of ₹ 800 issued to Param as final settlement.
 30. A cheque of ₹ 600 is received from Shivaji.
5.Transaction for Loan and Interest on loan.
Write journal entries for the following in the books of Pranam:
1. A loan of ₹15,000 at 14% is borrowed from Pawan for business.
2. A loan of loan ₹18,000 at 18% is given (lent) to Pushkar.
3. Paid interest of six month on loan borrowed from Pawan.
4. From Pushkar, interest on loan is received for six months.

6.Transactions for Trade Discount, Cash discount and Allowance.

Record the following transaction in the journal of

Mahendra Sanghvi. 2024.
July 1. Goods of ₹ 10,000 purchased at 10% trade discount from Taruna Traders.

2. Goods of ₹7000 sold to Gandhi Brothers on cash at 5% trade discount.

3. Goods of₹ 12,000 purchased from Mangaldas at 10% trade discount and 5% cash
discount. Payment is made in cash.

04. Goods of ₹ 11000 sold to Viral at 10% trade discount and 5% cash discount.
Payment is. Received in cash.
05. Goods of ₹ 8000 purchased from Bihar Brothers at 10% trade discount and at
10% cash discount. Paid half the amount immediately by cash.
06. Goods of ₹ 15,000 sold to Bimal at 10% trade discount and if due is paid up
to 9th July,10% cash discount will be allowed.
07. For sale of 6 July, Bimal has issued cheque for an half amount, which is deposited
in bank.

08. Bimal has settled the remaining balance in cash.

09. ₹ 1020 was due from Sunita, she paid ₹ 1000 as final settlement.

10. A cheque of ₹ 800 was issued to Vaishali as a final settlement for due of ₹ 810.

7. Transactions of Revenue and Expense.

Record the following transactions in the journal of

Arun Parekh. 2024.
August 1.For business books of accounts purchased ₹ 650.

2. Commission received ₹ 800.

9. Wages of ₹200 and carriage of ₹ 100 paid in cash.

10. Paid ₹ 2500 for painting work of shop.

20. Light Bill of ₹ 1800 paid by cheque.

25.₹ 1200 paid for refreshment at inaugural function of shop.

30. A cheque of ₹ 900 received for brokerage.

31.A currency note of ₹ 50 eaten by goat.

8. Transactions of Bad Debts and Bad Debts Recovered

Record the following transactions in journal of Prerna:

2014

March 1.Vishal is declared insolvent, thus amount due to him ₹2000 cannot be
recovered.

5. ₹ 3000 was due from Param, he become insolvent and only ₹ 1800 are recovered.A
balance amount is written off.
10.₹ 1500 previously written off, as Bad debts of Rohan, are received.

ACCOUNTING EQUATION

Sr. Transaction Assets Capital Liability

No
1(A) When Increase Increase -
capital
introduced
by owner in
business
1(B) When Decrease Decrease -
withdrawn
made by
owner from
business.
2 Purchase of One - -
goods in would
cash. increase
.
Another
would
decrease
3 Purchase of Increase - Increase
goods on
credit.
4 Sale of One Would -
goods in would increase
cash. increase . (in
. profit)
Another
would
decrease.
5 Sale of One Would -
goods on would increase
credit increase . (in
. profit)
Another
would
decrease.
6 Payment of Decrease Decrease -
revenue
expense in
cash.
7 Revenue - Decrease Increase
expenditure
outstanding.
8 Receipt of Increase Increase -
revenue
income in
cash
9 Revenue Increase Increase -
income
outstanding

10 Purchase of One - -
asset in would
cash. increase
.
Another
would
decrease
11 Purchase of Increase - Increase
asset on
credit.
12 Sale of asset One - -
in cash. would
increase
.
Another
would
decrease.
13 Sale of asset One - -
on credit would
increase
.
Another
would
decrease
14 When funds Increase - Increase
borrowed.
15 Out going Decrease Decrease -
material,
e.g. goods
destroyed
by fire.

1: Write journal entries for the following transactions and explain accounting treatments
based on equation.

(1) Ramesh has brought cash of 20,000 and furniture of 10,000 to commence business.
(2) 5000 deposited in bank and opened account.
(3) Goods of 8000 purchased from Rajesh
(4) Goods of 6000 purchased for cash.
(5) Goods of ₹ 5000 sold for 9000 to Raman on credit.
(6) Goods of ₹ 3000 sold for 6000 in cash.
(7) Goods of 1000 returned to Rajesh. (Purchase return)
(8) Goods of 2000 returned by Raman. (Sales return)
(9) Goods of 1000 destroyed by fire.
(10) Salary paid 2000..
(11)Salary outstanding is 1000.
(12)Commission received 4000.
(13)Receivable dividend 2000.
(14)Insurance premium of shop paid
500
(15)A computer of 8000 is purchased from Shree Krishna Computer Co.
(16)Owner withdraw 1000 from
business.
 (17)Account settled of Rajesh.
(18)Account settled by Raman.

CASH BOOK

1. Prepare simple cash book from the following transactions of Raju for February, 2024

2024 Feb.

1. Cash on hand 5000.

3. Goods of 3000 sold to Gita for cash.
5.Goods of 2000 purchased from Amit for cash.
7. Cash of 5000 brought in the business, as more funds are requied in the business.
9. Insurance premium 800 paid.
10. Furniture of 4000 purchased from Ganesh Furniture Mart for cash.
12. 1500 received towards commission and 1200 paid towards brokerage.
14.3000 received from Mahesh towards receivable.
16. Salary 1000 and freight 200 paid.
18.3000 paid to Prakruti towards an old account
20. Machinery purchased for the business 2000.
23. As more funds are required in the business, ₹10,000 borrowed as loan bearing 10% rate
of interest from Rameshbhai.
26.Cash purchase ₹7000.
28. 3000 deposited in Prime Co-operative Bank.

2. Prepare two columnar cash book (cash and discount columns) of Shri Sagar from
the following transactions:

March 2024

1.Opening cash balance 8000.

4.Goods of 6000 purchased at 10% trade discount.
7 GOods of 3000 sold to Pravin for cash at 5% cash discount.
10.Goods of 4000 sold for cash at 10% trade discount and 5% cash discount.
12. Furniture of 5000 is purchased from Gopal Furniture Mart.
15. 1000 paid to Vishnu towards full settlement of 1020.
16. 900 paid for commission.
18.1500 received from Kamlesh towards full settlement of 1560.
20. Paid 2000 for salary and 400 for wages.
23. Goods of 2000 purchased from Vishwa for cash at 10% trade discount and 10% Cash
discount.
26. Cash of 4000 brought in the business.
28. Machine of 8000 is purchased from Maheshwari Engineering, for which 5000 is paid And
the balan amount is agreed to be paid after one month.

3. From the following transactions, prepare cash and bank columnar cash book in the
book of Geeta

April 2024

1. Opening cash balance 6000,Opening bank balance 5000.

3. Goods of 10,000 sold to Pankaj for cash at 10% trade discount.
5.Goods of 3000 purchased for cash from Janki.
7.Cash of 1500 is deposited in the bank.
9. Stationery expenses of 1000 and salary of 3000 paid by cheque.
11.1100 paid towards shop rent.
14. Cheque of 3000 received from Yesha, which is immediately deposited in the bank.
17. 1000 withdrawn from the bank to pay fire insurance premium. Sank-
21. Furniture of 800 purchased for household and cheque for the necessary amount is Issued
from the bank account of the business.
23. Fire insurance premium paid.
27. Placed an order with Akbarbhai for supply of goods of ₹5000.

4. From the following transactions, prepare three columnar cash book of Shri Jethalal.

July 2024.

1. Opening cash balance 10,000, bank overdraft 4000.

3.Goods of 3000 purchased from lyer at 10% cash discount and issued cheque of the
necessary amount.
5. Salary of 800 and stationery of 700 paid by cheque.
7. Goods of ₹ 6000 purchased from Babita at 10% trade discount. Half of the amount paid by
cash and the balance amount is paid by cheque.
9. 4000 deposited in the bank.
10. Cheque of 6000 issued to Popatlal towards the full settlement of the account of 6050.
12. Atmaram has given 6000 cash and cheque of 4000 which is deposited in the bank
towards the amount payable 10,070
14. Cheque of 5000 received from Sundar towards payment of an old debt, which is
deposited in the bank
19.3000 cash paid towards Income Tax of Jethalal.
20. Cheque of Sundar is dishonoured.
22. 50 paisa dividend received from receiver of Sundar.
28.Goods of 10,000 sold to Tipendra at 10% cash discount. For 60% of the amount cheque
received which is deposited and the remaining amount is received in cash.
31. After keeping cash on hand of 2000, remaining amount is deposited in the bank.
5. From the following transactions, prepare three columnar cash book of Shri
Jamnadas for first fortnight of April 2024.

April 2024

1. Opening cash balance 30,000, bank balance 8,00,000

3. Goods of 3,00,000 purchased from Nilesh at 2% cash discount and amount paid by RTGS.
RTGS charges 30. Bank has debited the amount.
5. Goods of 1,00,000 sold to Rajesh. He has sent amount through NEFT. Bank haso credited
the amount.
6.Goods of 4,00,000 sold to Mahesh at 2% cash discount. He has sent the amount through
RTGS, Bar has credited the amount.
7. Insurance premium of 10,000 paid through NEFT and NEFT charges incurred 3. Bank has
debited the amount in our account.
9. Salary of 15,000 paid in cash.
10. Cash sales 30,000.
11. 10,000 withdrawn from bank for personal expenses.
12. 12,000 paid to Ramesh towards payable amount.
13. Raman has paid 22,000 through NEFT towards our receivable amount. Bank has credited
the amount.
14. Rent paid 5000,
15. Bank has credited 3000 of dividend.

6. From the following transactions, prepare State Bank of India (SBI) and Bank of India
(BOI) columnar Bank book in the books of Mahipatsingh.

August 2024.

1. Opening bank overdraft (SBI) 6000, Bank balance (B0I) ₹4000.

4. Goods of of t 4000 sold, against that a cheque received, which is deposited in SBI Account.
5. Goods of 6000 purchased, against that a cheque of 2000 of BOI is issued and SBI cheque
of 4000 is issued.
7.Cheque of SBI of 1400 issued led for for salary salary
11.Bank interest 500 and 2500 collected by SBI and credited in the account.
13.A cheque of 7000 received from Anuj towards the payment of an old debt which was
deposited in BOI.

18. Cheque of 3000 issued from BOI account and deposited in the SBI account.
23. Goods of 2500 purchased for which a cheque of full amount is issued from BOI Account.
26. Machinery of 6000 purchased, for which a cheque of 50% amount from SBI account and
for the remaining amount cheque is issued from BOI account.

7. From the following transactions, prepare petty cash book of Shri Darshanbhai on
imprest system

March, 2024

1. Cash received from chief cashier 4000.

3. 120 paid for carriage.
5. 130 paid for misc. expenses.
7. 500 paid to Arpit as advance salary.
10. 100 paid for postage expenses.
12.250 paid for printing of Bill-book.
15. 100 paid for Tea-refreshment and 100 paid for stationery expenses.
18.100 paid for misc, expenses.
23. 100 paid for carriage and 150 paid for stationery.
28. 50 paid for postal stamps.
29. 120 paid for carriage and 80 for Tea-refreshments.
The petty cashier is given cash at the beginning and end of the month.
 Subsidiary book
1. From following transactions, prepare a purchase book in the book of Harishkumar.
2024
March 1. Goods of ₹ 10,000 purchased from Mahesh on one month credit.

2. Goods of ₹ 15,000 purchased from Hasmukhbhai at 10% trade discount. Invoice no. 15.

6. Goods of ₹ 8000 purchaed from Manish for cash.

14.Place an order with Navin for supply goods of ₹ 10,000 at 20% trade discount.

18. Furniture of ₹ 6000 purchased from Shreeji Furniture Mart on one month credit.

20. Navin supplied goods as per order and sent his invoice no. 314 after adding railway Freight of ₹
1200.
23. Goods of ₹ 4000 purchased at 5% cash discount

25. Goods of ₹ 16,000 purchased from Babulal at 10% trade discount and paid half of the amount
immediately by cheque.

28. Goods of ₹ 6000 purchased from Lalit at 10 % trade discount and 5% cash discount. Amount of bill
paid immediately.

30.Goods of ₹ 3000 purchased from Rajesh. Bill No. 101.

2 : From the Furniture Mart. Shreeji Furniture Mart deals in purchase and sales of tables,
chairs and cupboard.

2024
April 1. Purchased from Shri Ram Furniture Mart, 10 pieces table at ₹ 1000 per piece,15 pieces chairs at
₹ 600 per piece and 5 pieces cupboard at ₹ 3000 per piece.Credit period 1 month and invoice No. 99.

5. Purchased from Shree Krishna Furniture Mart 10 pieces table at ₹ 1200 per piece and 12 pieces
cupboard at ₹ 2500 per piece at 10 % trade discount. Invoice no. 126 received. Half of the amount is
paid immediately by cash.

10. A cycle purchased from Shivam Cycle Stores at ₹ 3500.

20. Purchased chairs of ₹ 10,000 at 10% trade discount and 5% cash discount from Rahim Furniture and
amount is paid immediately.

25. An order placed with Shree Ambey Furniture Trading Co., 20 pieces tahle at ₹ 900 per piece and 5
pieces chairs at ₹ 700 per piece.

30. Purchased from Maheshbhai 5 pieces table at ₹ 1200 per piece, 20 pieces chairs at ₹ 600 per piece
and 8 cupboards at ₹ 2500 per piece at 10% trade discount. Bill no. 500
3. Shri Jagdish Hardware stores dealing with iron. From the following transactions,
prepare its sales book.

2024.

June 1. Sold goods of ₹ 13,000 to Manan on 3 months credit and sent hill number 1967.

6. Sold goods of ₹ 8000 at 5% trade discount to Anand stores. Labour of 300.Bill no. 1970.
10. Sold goods of ₹ 5000.

20. Sold a machinery of ₹ 20,000 to Bharat for 16,000.

25. Sold goods of ₹ 9000 at 10% trade discount to Ashwin. Ashwin paid 50% of the amount immediately.
27. Sold goods of 11,000 to Roshan at 10% cash discount by cash.

29. Mohit placed an order for supply of goods of ₹ 10,000.

30. Sold goods of ₹ 30,000 at 10 % trade discount to Khusboo and with a condition that she will be given
5% cash discount, if she pays the amount of Bill within 30 days.Bill no. 1995 sent to Khusboo.

4. From the following transactions of Shri Bhavna Telecom prepare a columnar sales
book. Bhavna Telecom sells mobile, cordless phones and simple telephones .

2024.

July 1.Sold to Bharat 5 mobiles at ₹ 9000 per piece, 5 cordless phones at ₹ 4000 per piece and 10 simple
telephones at ₹ 2000 per piece. Invoice no. 101 and credit period is 2 months.

7. Sold 3 mobiles at ₹ 8000 per piece and 2 simple phones at ₹ 1800 per piece.
15. Sold to Dipak 4 mobiles at ₹ 7500 per piece and 10 simple phones at ₹ 1700 per piece, all at 10 %
trade discount. Credit period 3 months. Invoice no. 105.

20. A machine sold to Mahendra at ₹ 12,000 and credit period is 1 month.

23. Sold to Arvind 8 mobiles at ₹ 9000 each and 10 cordless phones at ₹ 1900 each.Trade discount is
10%.Arvind Paid 50% of the amount immediately. Invoice no. 115.

26.Shri Ghansyam placed an order for supply of 5 mobiles at ₹ 8500 and 10 simple Phones at ₹ 2100
each.

28. Goods sent to Shri Ghansyam as per his order. Invoice no. 120.

31. Sold to Milan 2 mobiles at ₹ 7000 each and 3 cordless phones at ₹ 3500 each by cash.

5. From the following transactions prepare purchase book, sales book, purchase
returns book and sales return book in the book of Shri Hasmukhbhai.

2024.
January 1. Purchased goods of ₹ 10,000 from Dhruvil at 10% trade discount. Bill no. 110.

3. Purchased goods of ₹ 4000 from Komal at 10% cash discount. Credit 2 months.

7. Sold goods of ₹ 8000 to Sajan at 5% trade discount and 2% cash discount. Invoice no. 90.

10. Purchased goods of ₹ 4000. Cash memo no. 30.

11. Goods of ₹ 2000 returned by Sajan for which credit note no. 15 was sent to him.
15. 10% goods returned to Dhruvil and debit note no. 16 sent to him.

16.Purchased furniture of ₹ 5000 from Shree Bahuchar Furniture Mart.

18 Purchased goods of ₹ 30,000 from Nirmi and half of the amount paid immediately.

19. The entire goods purchased from Nirmi sold to Haily for ₹ 36,000 at 10% trade discount. Invoice no.
100. Credit period of 3 months.

20. Haily returned half of the goods sold to her and same were returned to Nirmi.

21. Kanu placed an order for supplying goods of ₹ 12,000 at 10% trade discount.

24. Supplied goods to Kanu for his order. ₹ 300 added for labour. Invoice 102.

25. Cash purchase ₹ 20,000 and cash sales ₹ 25,000.

31. Kanu returned half of the goods sold to him and it was agreed to give rebate of carriage in
proportion.

LEDGER

Q.1 Prepare a furniture account from the following particulars:

(VNSGU Mar/April 2012)

2012, Jan.

1. Bought table for cash 1,000.

3. Bought chairs from Jinal 3,000.
5. Returned Chairs to Jinal 500.
6. Sold one table for cash 1,500.
7. Bought one table for cash 500

Q.2 From the following transaction prepare Vivekanand account and balance.

(VNSGU Mar/April 2016)

2016 Jan.

1. Opening Balance (credit) 8,000

2. Purchase goods from Vivekanand of ₹ 5,000 at 10% trade discount.
3. Paid him cash 2,000
4. Returned goods to Vivekanand 1,000
7. Purchased goods of 2,500 from Vivekanand.
8. Paid him by cheque 1,500
9. Discount allowed by Vivekanand 500.

Q.3. Dinesh started business in 1st April, 2010 with cash 15,000, furniture 2,000, stock of
goods 7,500 debtors ₹ 5,000 and creditors 6,000 Journalise the above transactions and post it to
the ledger of Capital A/C.
(VNSGU Mar/April 2011)

TRIAL BALANCE

Q.1 Trial balance of Shri Rajesh as on 31-03-2024 is provide as follows. Determine whether
the trial balance is correct or not from the view point of rules of accounts. If mistakes are
reported , prepare a modified Trial Balance.

Debit Balance Credit balance

Creditors 10,000 Capital 25,000

Bills Payables 9,000 Salary 5,000

Intrest Received 6,000 Banl Overdraft 10,000

Disscount Received 750 Debtors 20,000

Machines 10,500 Disscount Allowed 250

Stock 15,000 Sales 30,000

Purchase 35,000 Sales Return 4250

Wages 4500 Rent Paid 9,000

Purchase Return 3750

Commission Received 7,000

Dividend Received 2,000

Total 1,03,500 1,03,500

Q.2 The following list of balances , Prepare a aTrial Balance as on 31 st March 2024.
 Name of Accounts Rs.

Opening Stock 5000

Machinary 1000

Creditors 5000

BOD 3000

Purchase 5000

Disscount Allowed 50

Sales 10,000

Loan from Mr.A 1000

Carriage Inward 500

Investment 2,000

Return Inward 50

Return Outward 100

Insurance Premium 150

Interest on Loan 100

Capital 11,550

Furniture 10,000

Debtord 5000

Salary 1000

Interest on investment 200

Advertisement 500

Drawings 500

Q.3 The trial balance of Shri Pareshkumar as on 31-3-2016 shows a difference in the total
of debit and credit balances. Prepare a modified trial balance:

Name of Account L.F Debit Balance ₹ Credit Balance ₹

Capital 66,000 -

Stock of goods 9,000 -

Purchase - 90,000

Sales 96,000 -
Goods return debit 1200 -

Goods return credit - 6000

Wages – Salary 11,400 -

Advertisement expens 2580 -

Rend paid - 1800

bad debts 1200 -

Building 42,600 -

Creditors 9000 -

Debtors - 8400

General reserve 5400 -

Income tax - 1800

Bank balance 2820 -

Dividend - 5000

Commission received - 10,000

Bills receivable 15,000 -

Total 2,62,200 1,23,000