21. Following transactions are of M/s.

Vinod Kumar & Sons for the month of

April, 2014. Prepare their Purchases Book:
April 5 Purchase on credit from M/s. Birla Mills:
100 pieces long cloth @ Rs.80
50 pieces shirting @ Rs.100
April 8 Purchased for cash from M/s. Ambika Mills:
50 pieces muslin @ Rs.120
April 15 Purchased on credit from M/s. Arvind Mills:
20 pieces coating @ Rs.1,000
10 pieces shirting @ Rs.90
April 20 Purchase on credit from M/s. Bharat Typewriters Ltd:
5 typewriters @ Rs.1,400 each

Discuss the various characteristics/attributes of accountancy.

Solution
(i) Identification: It involves the identification of those transactions, which are of a financial
nature and relate to the organisation.
(ii) Measurement: Only those business transactions and events, which can be quantified or
measured in monetary terms, are considered.
(iii) Recording: Recording is the process of entering business transactions of financial character
in the books of original entry. Once the economic events are identified and measured in
financial terms, these are recorded in books of accounts in monetary terms and in a
chronological order.
(iv) Classifying: It can be defined as the process of grouping transactions or entries of one
nature at one place.
(v) Summarising: It involves presenting the classified data in a manner which is understandable
and useful to various users of accounting statements.
(vi) Analysis and Interpretation: Analysing and interpreting the financial data helps users to
make a meaningful judgment of the profitability and financial position of the business. It also
helps in planning for the future in a better manner.
(vii) Communication: It involves communicating the financial statements to the various users
i.e., management and other internal and external users.

22. Discuss the various branches of accounting.

Solution
These are briefly explained below:
(i) Financial Accounting: The process of identifying, measuring, recording, classifying,
summarising, analyzing, interpreting and communicating the financial transactions and events
is known as financial accounting.
The purpose of this branch of accounting is to keep a record of all financial transactions, so that
-
(a) The profit earned or loss sustained by the business during an accounting period can be
worked out.
(b) The financial position of the business as at the end of the accounting period can be
ascertained.
(c) The financial information required by the management and other interested parties can be
provided.
(ii) Cost Accounting: It is the process of ascertaining and controlling the cost of a product,
operation or function. The purpose of cost accounting is to analyse the expenditure, so as to
ascertain the cost of various products manufactured by the firm and fix the prices. It also helps
in controlling the costs and providing necessary costing information to management for
decision-making.
(iii) Management Accounting: It is the use of accounting techniques for providing information to
help all levels of management in planning and controlling the activities of business to enable
decision-making. The purpose of management accounting is to assist the management in taking
rational policy decisions and to evaluate the impact of its decisions and actions.

Fill In the Blanks

a)The process of accounting starts with _______ and ends with _______.
identifying, communicating
b) Accounting measures the business transactions in terms of ________units.
Monetary
c) Identified and measured economic events should be recorded in _________order.\
Chronological order

23. Explain the following Concept

a)Accounting period concept.
The accounting period refers to the span of time at the end of which the financial statements of
an enterprise are prepared. Every organization, according to its needs, chooses a specific period
of time to complete an accounting cycle. Generally, the time chosen is a year we call the
accounting year. The time period is mentioned in the financial statements.
So the indefinite life of an organization is divided into shorter, generally equal time periods.
This facilitates a comparison of performances and allows stakeholders to get timely
information. Also in most cases, it is also a statutory requirement.

b) Going concern concept.

According to this concept, it is assumed that the business firm would continue its operations for
a fairly long period of time and would not be liquidated in the near future. All the transactions
are recorded in the books on the assumption that it is a continuing enterprise.

c) Principle of full disclosure.

This principle implies that the accounting report should be full and accurate. If there is any
material fact which can affect the profitability of the concern in the future,
we must disclose it to the users whether it is legally required or not. There are standard forms
for Balance Sheet, Notes to Balance Sheet and Statement of Profit and Loss. It is a legal
requirement for joint stock companies to present information in the standardised form.
Disclosure of accounting information means that the management should reveal its business
situation correctly to the users including the facts, matters, and policies which are even not
legally required but are material.

What are the objectives of Accounting Standards?

(i) Accounting standards provide the norms on the basis of which financial statements should
be prepared.
(ii) Accounting standards ensure uniformity in the preparation and presentation of financial
statements: by removing the effect of diverse accounting practices, Accounting standards make
financial statements meaningful and comparable.
(iii) Accounting standards provide a useful system to resolve potential financial conflicts of
interest between various groups.
(iv) Accounting standards help auditors in the audit of accounts. Accounting standards raise the
standard of an audit of accounts.

From the following business transactions of a business firm for the month of
July 2020, prepare Accounting Equation:
July 01: Balance of Cash ₹ 1,20,000; Goods ₹ 45,000; Debtors ₹
24,000;Capital ₹ 1,79,000 and creditors ₹ 10,000.
July 05: Goods sold (costing ₹ 15,000) on credit to Dinesh at 20% profits on
cost.
July 12: Outstanding salary ₹ 9,000
July 17: Commission received in advance ₹ 12,000.
July 26: Goods purchased for cash ₹ 25,000.
July 31: Goods given as charity ₹ 1,000.