THEORY BASE OF ACCOUNTING.pptx

THEORY BASE OF ACCOUNTING

ACCOUNTING Accounting is the language business. Accounting is an information system that provides accounting information to the users for correct decision-making .. “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money transactions and events which are, in part at least of a financial character and interpreting the result there of”

Accounting Cycle

1. Source Documents they are the first documents that exist relating to a transaction . serve as proof for, a transaction . Bookkeepers and accountants need to keep source documents for each transaction. Ex- invoices, cash slips, receipts, check counterfoils, bank deposit slips and more.

2. Journals Journal entries are that first basic entry of debit and credit for each transaction, chronological (date-order) records of transactions entered into by a business . Journals also refer to the books of first entry ,

3. Ledger (T-Accounts ) The ledger is a grouping of the accounts of a business . we take all the journal entries (debits and credits) relating to one account (in this example, bank ) and draw up an account with all the transactions relating to it

4. The Trial Balance The trial balance is a sheet or report displaying all the accounts of a business, drawn up as a trial (test) of whether the total of all the debit balances equal the total of all the credit balances. The trial balance is prepared as a final check before drawing up the financial statements. When errors are shown up in the trial balance, we make corrections through adjusting entries .

5. Financial Statements The financial statements are the key reports of a business. they are prepared from the information in the trial balance above. The purpose of the financial statements is to show the reader the financial position , financial performance and cash flows of a business . Financial statements are usually prepared once a year consist of an income statement , statement of changes in owners equity , balance sheet , cash flow statement

Objectives of Accounting

1. To maintain a systematic record of business transactions Accounting is used to maintain a systematic record of all the financial transactions in a book of accounts. For this, all the transactions are recorded in chronological order in Journal and then posted to principle book i.e. Ledger.

2. To ascertain profit and loss Every businessman is keen to know the net results of business operations periodically. To check whether the business has earned profits or incurred losses, we prepare a “Profit & Loss Account”.

3. To determine the financial position to check the value of assets and liabilities. we prepare a “Balance Sheet”.

4.To provide information to various users 1. Investors and potential Investors safety and growth of their investments, future of the business 2. Creditors assessing the financial capability, ability of the business to pay its debts 3. Lenders Repaying capacity, credit worthiness 4. Tax Authorities assessment of due taxes, true and fair disclosure of accounting information 5. Employees Profitability to claim higher wages and bonus, whether their dues (PF, ESI etc.) deposited regularly.

5. To assist the management By analysing financial data and providing interpretations in the form of reports, accounting assists management in handling business operations effectively . to evaluate the performance, to take various decisions

Characteristics of Accounting:

(1) Identifying financial transactions and events Accounting records only those transactions and events which are of financial nature. So, first of all, such transactions and events are identified.

(2) Recording of transactions Accounting involves recording the financial transactions inappropriate book of accounts such as Journal or Subsidiary Books.

(3) Classifying the transactions Transactions recorded in the books of original entry – Journal or Subsidiary books are classified and grouped according to nature and posted in separate accounts known as ‘Ledger Accounts’.

4) Summarising the transactions It involves presenting the classified data in a manner and in the form of statements, which are understandable by the users. It includes Trial balance, Trading Account, Profit and Loss Account and Balance Sheet .

(5) Analysing and interpreting financial data Results of the business are analyzed and interpreted so that users of financial statements can make a meaningful and sound judgment.

(6) Communicating the financial data or reports to the users Communicating the financial data to the users on time is the final step of Accounting so that they can make appropriate decisions.

Different Branches of Accounting

(a) Financial accounting : Financial Accounting is that branch of accounting which involves identifying, measuring, recording, classifying, summarising the business transactions, i.e . it involves the steps from Identifying, Recording of transactions to Summarisation , and communicating the financial data.

(b) Cost accounting : Cost Accounting is that branch of accounting which is concerned with the process of ascertaining and controlling the cost of products or services.

(c) Management accounting Management accounting refers to that branch of accounting which is concerned with presenting the accounting information in such a way that helps the management in planning and controlling the operations of a business and in decision making.

ADVANTAGE 1. Helpful in management of business 2. Helpful in the payment of income tax and sales tax 3 . Helps in sale of business 4 . Aid to memory 5. Proof in the court of laws 6. Helpful in the realization of debts : - 7 . Helpful in making comparative study : 8. Helpful in planning 9 . Makes decision making easy

Limitations of Accounting Accounting is not precise : Accounting is not completely free from personal bias or judgment. Accounting is done on historic values of assets: Accounting records assets at their historical cost less depreciation. It does not reflect their current market value. Ignore the effect of price level changes: Accounting statements are prepared at historical cost. So changes in the value of money are ignored. Ignore the qualitative information: Accounting records only monetary transactions. It ignores the qualitative aspects. Affected by window dressing: Window dressing means manipulation in accounting to present a more favourable position of the business than the actual position.

Define the term Bookkeeping, Accounting and Accountancy . Bookkeeping Book Keeping is a part of Accounting and it is the process of identifying, measuring, recording and classifying the financial transactions. Accounting Accounting is a wider concept and actually, it begins where Book Keeping ends. It includes summarizing, interpreting and communicating the financial data to the users of financial statements. Accountancy Accountancy refers to systematic knowledge of the principles and the techniques which are applied in Accounting.

BOOK KEEPING Book-keeping is the art of keeping or maintaining accounts in the prescribed manner. According to A.H. Rozencomph : - Book-Keeping is the art of recording business transactions in a systematic manner. Accounting = Book-Keeping (recording, classifying, summarizing) + Analysis and interpretation

BASIS BOOK KEEPING ACCOUNTING 1.Scope BOOK Keeping involves (a) identifying the transactions, (b) measuring the identified transactions (c) recording the measured transactions (d) classifying the recorded transactions. Accounting in addition to Bookkeeping involves summarizing the classified T ransactions, analysing the summarized results, interpreting the analysed results and communicating the interpreted information to the interested parties 2 Stage Book-keeping is primary stage. Accounting is the secondary stage. It starts where bookkeeping ends. 3. Basic Objective The basic objective of book keeping is to maintain systematic records of financial transactions. The basic objective of accounting is to ascertain net results of operations and financial position and to communicate information to the interested parties.

4. Who Performs Book-keeping work is performed by junior staff. Accounting work is performed by senior staff 5. Knowledge Level The book-keeper is not required to have higher level of knowledge than that of an accountant The accountant is required to have higher level of knowledge than that of bookkeeper. 6. Analytical Skill The book-keeper may or may not possess analytical skill. An accountant is required to possess analytical skill. 7. Nature of Job The job of a book-keeper is often routine and clerical in nature. The job of an accountant is analytical is nature. 8. Designing of Accounting System It does not cover designing of accounts system. It covers designing of accounting system. 9. Supervision & Checking The book-keeper does not supervise and check the work of an accountant. An accountant supervises and checks the work of a book-keeper.

DOUBLE ENTRY SYSTEM OF BOOK-KEEPING. This system of accounting was invented by Lucas Pacioli of Italy in 1494 The system is based upon the fact that there are two aspects of every transaction. Each business transaction involves at least two persons, parties or accounts. Double entry does not mean that a transaction is recorded twice. It means that at least two accounts are affected by a transaction.

PRINCIPLES ( i ) Each business transaction affects at least two accounts. (ii) Each account is divided into two parts, i.e., Debit Side and Credit Side. (iii) Division of amount column of journal into Debit and Credit. (iv) Based upon accounting concepts and conventions. (v) Helps in preparing Trial Balance which is a test of arithmetical accuracy in accounting. In a Trial Balance total of all debit is always equal to the total of all credits. (vi) Preparation of final accounts with the help of Trial Balance.

INTERNAL USERS 1.Owners They need information related to profit or loss and financial position of the organisation so that they can evaluate the extent to which their investment is safe and earning profits . 2 . Management Management of an organisation needs accounting information for planning & controlling 3. Employees- These employees get bonus on the basis of financial performance

Banks Financial Institutions - Banks & financial institutions provide loans to the organisation on the basis of their projected working in financial terms. Investors - Investors, both existing and prospective, need information aboutfinancial performance of the organisation and its financial position. need information to evaluate the desirability of investment. Creditor interested in knowing creditworthiness of the organisation before allowing credit sales of significant amount . Government tax authorities need financial information to evaluate whether the taxes have been paid correctly by the organisations . Public organisations contribute to public welfare in several forms like providing employment, making goods available EXTERNAL USERS

QUALITATIVE CHARACTERISTICS OF ACCOUNTING (i). Reliability ( ii). Relevance : ( iii). Understandability ( iv). Comparability

(i). Reliability : Accounting information is meaningful only when it is reliable. Accounting information has reliability when it (a) has true representation of relevant transactions, (b) is verifiable by any one and (c) is complete in all respects. (ii). Relevance : In order to became effective tool for decision making, accounting information should be relevant to its users. Accounting information has relevance when it(a) influences decision of the users by helping them to evaluate past, present or future events and (b) is received timely. (iii). Understandability : Accounting information should have understandability from the view point of users. Accounting information has understandability when it is (a) presented in such a form which can be easily understood by the users and (b) devoid of very critical accounting terms and jargons. (iv). Comparability : To be useful, accounting information should have quality of comparability. Accounting information should have quality of comparability. Accounting information has quality of comparability when (a) information belongs to similar period of time and (b) common unit of measurement and formats of presenting information are used.

GAAP (generally accepted accounting principles ) GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting . GAAP specifications include definitions of concepts and principles, as well as industry-specific rules. The purpose of GAAP is to ensure that financial reporting is transparent and consistent from one organization to another . a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board ( FASB)

Meaning of Accounting Standards Accounting Standards are written policy documents issued by expert accounting body or by the government or other regulatory body covering the aspects of recognition, measurement, treatment, presentation, and disclosure of accounting transactions in financial statements An accounting standard is a policy that defines the treatment of an accounting transaction in financial statements.

Indian Accounting Standard abbreviated as Ind -AS Ind AS or Indian Accounting Standards govern the accounting and recording of financial transactions as well as the presentation of statements such as balance sheet and profit and loss account of a company in India. The Ind AS was prescribed as a result of calls for Indian accounting standards to be on par with the globally accepted standards, the IFRS. The Ind AS was issued under the supervision and control of the Accounting Standards Board (ASB). The Companies Act mandates the balance sheets and income statements of all companies to comply with the accounting standards. The Ind AS was formulated as a compromise formula that tries to harmonise Indian accounting rules with the IFRS.

The significance of Indian Accounting Standards Ind AS is based on They facilitate the cross-border flow of money, global listing and global comparability of the financial statements . This, in turn, facilitates global investment and benefit to capital market stakeholders. It enhances the investor’s ability to compare the investments on a global basis. This, in turn, reduces the risk of misjudgments. It also eliminates the costly requirements of reinstatement of financial statements.

International Financial Reporting Standards (IFRS ) The IFRS was instituted by the International Accounting Standards Board (IASB). The IASB is headquartered in London. The purpose of issuing the IFRS was to have a common accounting language to increase transparency in the presentation of financial information.

Modern approach: Accounting Equation Method Types of Account Meaning example Assets Account Liabilities Account Capital Account Revenue account Expenses account Related to Tangible and Real Assets. Financial obligations towards outsiders. Related to proprietor’s. Amount charged for goods sold . Related to the amount spent. Land, Purchase, Sales, Goodwill. Loan, Creditors, out standing expenses. Drawings account. Interest received, dividend received, discount, sales. Wages, salary, dep. Purchase.

Assets & Liability Types of Account Meaning example Rules for Debit Rules for Credit Assets Account Liabilities Account Related to Tangible and Real Assets Financial obligations towards outsiders Land, Purchase, Sales, Goodwill Loan, Creditors, out standing expenses Debit the increase in Assets Debit the decrease in Liability Credit the decrease in Assets Credit the increase

Capital A/c Types of Account Meaning example Rules for Debit Rules for Credit Capital Account Related to proprietor’s Drawings account Debit the Decrease in in capital Credit the increase in Capital

Revenue & Expense A/c Types of Account Meaning example Rules for Debit Rules for Credit Revenue account Expenses account Amount charged for goods sold Related to the amount spent Interest received, dividend received, discount, sales Wages, salary, dep. Purchase Debit the decrease in income and profits Debit the increase in expenses and losses Credit the increase in income and profits Credit the decrease in expenses and losses

Accounting Equation The accounting equation is a basic principle of accounting and a fundamental element of the balance sheet. The equation is as follows: Assets = Owner’s Equity + Liabilities This equation sets the foundation of double-entry accounting and highlights the structure of the balance sheet Every transaction will affect 2 items. The equation will still balance!

A ssets = O wner’s E quity + L iabilities Items of value owned by the business The funds of a business provided by its owners and the profits entitled to him Debts owed by a business to external parties such as suppliers

Assets = Owner’s Equity + Liabilities Building Motor vehicle Office Equipment Fixtures Stock (closing) Cash in hand Cash at bank Capital Profits Creditors Loan from bank Other creditors

Questions Assets = $50,000, Liabilities = $20,000, Owner’s equity = ? Assets = ?, Liabilities = $10,000, Owner’s equity = $15,000 Assets = $60,000, Liabilities = ?, Owner’s equity = $40,000

ANS -1 Owner’s equity = Assets – Liabilities = $50,000 – $20,000 = $30,000

ANS 2 Assets = Liabilities + Owner’s equity = $10,000 + $15,000 = $25,000

ANS 3 Liabilities = Assets – Owner’s equity = $60,000 – $40,000 = $20,000

Examples 1. The business owner invests $10,000 in Company XYZ

2. Company XYZ purchases $3,000 of equipment .

3. Company XYZ purchases $1,300 of supplies on credit.

4. XYZ receives $800 cash from customers for services provided

5. XYZ pays $400 expense for employee salaries.

If we add up both sides of the equation they will equal to $27,00 and balance, as shown below :

Revision Capital + Liabilities = Assets 1,00,000 + = 1,00,000 (Cash)

JOURNAL “A Journal is a chronological record of financial transactions of a business.” It is book of prime entry or original entry in which all the business transactions are recorded the first in the sequence in which the transactions had actually occurred . “The process of recording the transactions into journal is called Journalising .

Characteristics: It is a chronological record of financial transactions records all the details of transactions from various source documents. It records both the aspects of a transaction i.e., debit and credit using Double Entry System of Book Keeping. It gives complete details of a transaction in one entry. transferring the journalized transactions to the individual accounts known as Ledger Accounts. all the transactions are recorded for the first time , so its known as Book of Original Entry.

The objectives of journal are as follows: • To record the financial transactions in a systematic way. • To show necessary information in a systematic way. • To provide legal evidences of business. • To provide data wise (chronological) record of transactions. • To help in preparing ledgers.

Limitation: It follows the prescribed accounting rules and concepts and therefore journalising is not an easy process. It is suitable for lesser number of transactions as recording of large number of transactions will be inconvenient. It does not reveal balances of accounts for which individual ledgers are required to be prepared. Therefore, it cannot be used as substitute to ledger.

2018 April 1 April 2 April 3 April 4 April 13 April 20 April 24 April 28 April 28 April 30 April 30 April 30 Ramesh started business with cash Paid into bank Bought goods for cash Drew cash from bank for office use Sold goods to Krishna on credit Bought goods from Shyam on credit Received from Krishna Allowed him discount Paid cash to Shyam Discount received Krishna returned goods Cash sales for the month Paid rent Paid salary ₹1,00,000 20,000 50,000 10,000 15,000 22,500 12,500 500 21,500 1,000 2,000 80,000 5,000 10,000

Ans Date Particulars L.F Debit Credit( ₹) Apr 01 Cash A/c Dr. 1,00,000 To Capital A/c 1,00,000 (Started business with cash) Apr 02 Bank A/c Dr. 20,000 To Cash A/c 20,000 (Paid into bank) Apr 03 Purchases A/c Dr. 50,000 To Cash A/c 50,000 (Goods purchased) Apr 04 Cash A/c Dr. 10,000 To Bank A/c 10,000 (Drew from bank for office use) Apr 13 Krishna A/c Dr. 15,000 To Sales A/c 15,000 (Goods sold)

Apr 20 Purchases A/c Dr. 22,500 To Shyam A/c 22,500 (Goods purchased on credit) Apr 24 Cash A/c Dr. 12,500 Discount Allowed A/c Dr. 500 To Krishna A/c 13,000 (Received from Krishna) Apr 28 Shyam A/c Dr. 22,500 To Cash A/c 21,500 To Discount Received A/c 1,000 (Paid to Shyam) Apr 28 Sales Return A/c Dr. 2,000 To Krishna A/c 2,000 (Goods returned by Krishna) Apr 30 Cash A/c Dr. 80,000 To Sales 80,000 (Cash sales for the month of April)

Apr 30 Rent A/c Dr. 5,000 To Cash A/c 5,000 (Paid rent) Apr 30 Salary A/c Dr. 10,000 To Cash A/c 10,000 (Paid salary)

2018 ₹ Jan. 1 Rahul started business with cash 1,00,000 Jan. 2 Paid into bank 60,000 Jan. 3 Bought goods from M/s. Singh & Co. on credit 20,000 Jan. 3 Paid cartage 300 Jan. 4 Purchased furniture 2,000 Jan. 4 Place an order for HP Printers for ₹15,000, amount advanced 5,000 Jan. 4 Purchased calculator 1,000 Jan. 4 Purchased computer through cheque 13,000 Jan. 6 Paid for postage 150 Jan. 8 Sold goods for cash 4,000 Jan. 9 Sold goods on credit to M/s. Sharda & Co. 10,000 Jan. 9 Paid cartage 200 Jan. 15 Paid to M/s Singh & Co. on account 17,500 Jan. 25 Sold goods to M/s. Ray & Co. 5,600 Jan. 27 Received cheque from M/s. Sharda & Co. in full settlement of amount due from them 9,750 Jan. 31 Paid for electricity charges 1,000 Jan. 31 Paid salary 1,500 Jan. 31 Paid rent of building by cheque , half of the building is used by the proprietor for residential use 5,000 Jan. 31 Drew for private use 3,500

Date Particulars L.F. Debit ( Rs ) Credit ( Rs ) 2018 Jan.01 Cash A/c Dr. 1,00,000 To Capital A/c 1,00,000 (Business started with cash) Jan.02 Bank A/c Dr. 60,000 To Cash A/c 60,000 (Cash deposited into cash) Jan.03 Purchases A/c Dr. 20,000 To M/s Singh & Co. 20,000 (Goods purchased) Jan.03 Cartage A/c Dr. 300 To Cash A/c 300 (Cartage paid)

Jan.04 Furniture A/c Dr. 2,000 To Bank A/c 2,000 (Furniture purchased by cheque) Jan.04 HP Printers A/c Dr. 5,000 To Bank A/c 5,000 (Advance paid for placing an order for printer) Jan.04 Office Equipments A/c Dr. 1,000 To Bank A/c 1,000 (Calculator purchased by cheque) Jan.04 Computer A/c 13,000 To Bank A/c 13,000 (Computer purchased by cheque) Jan.06 Postage A/c Dr. 150 To Cash A/c 150 (Postage paid)

Jan.08 Cash A/c Dr. 4,000 To Sales A/c 4,000 (Goods Sold) Jan.09 M/s Sharda & Co. A/c Dr. 10,000 To Sales A/c 10,000 (Goods Sold) Jan.09 Cartage A/c Dr. 200 To Cash A/c 200 (Cartage paid) Jan.15 M/s Singh & Co. A/c Dr. 17,500 To Cash A/c 17,500 (Payment made)

Jan.25 M/s Ray & Co. A/c Dr. 5,600 To Sales A/c 5,600 (Goods Sold) Jan.27 Bank A/c Dr. 9,750 Discount Allowed A/c Dr. 250 To M/s Sharda & Co. A/c 10,000 (Payment Received) Jan.31 Electricity Charges A/c Dr. 1,000 To Cash A/c 1,000 (Electricity Charges paid) Jan.31 Salary A/c Dr. 1,500 To Cash A/c 1,500 (Salary paid) Jan.31 Rent A/c Dr. 2,500 Drawings A/c Dr. 2,500 To Cash A/c 5,000 (Rent paid) Jan.31 Drawings A/c Dr. 3,500 To Cash A/c 3,500 (Cash withdrawn for personal use)

Practice It Date particulars Amount Jan 1 2 3 4 7 Mahenda singh started business with cash 50,000, bank balance 40,000, machinery 3,00,000 and goods 70,000 Paid for wages Paid for postage Paid for advertisement Purchased goods from ram niwas Purchased goods from singh traders Paid cash to singh traders and discount allowed of 200 4000 200 6000 10000 8000 7800

Other Journal Entries started business with cash Cash Account Dr To Mohan's Capital Account (Being business started with cash ) Purchased goods from Ram on credit Purchases Account Dr . To Ram's Account ( Being purchase on credit)

Rent paid Rent Account Debit ToCash Account Interest Received Cash Account Debit Interest Account Purchased furniture for cash Furniture Account Debit Cash Account

Machinery sold in cash Cash Account Debit Machinery Account Outstanding Salary Salary Account Debit Outstanding Salary Account Paid to X X's Account Debit Cash Account

SUBSIDIARY BOOKS Subsidiary Books are the books that record the transactions which are similar in nature in an orderly manner. They are also known as special journals or Daybooks . In big organizations, for the easy and accurate recording of all the transactions, the journal is subdivided into many subsidiary books. For every type of transaction, there is a separate book.

Different Types of Subsidiary Books Cash book Purchases book Sales book Purchases return or return outwards book Sales return or return inwards book Bills receivable book Bills payable book Journal proper

Purchases book A firm records all its credit purchases of goods in Purchase Book or Purchase Day Book. While it records all the cash purchases of goods in the Cash Book. Date Name of the Supplier and details of purchases Invoice ref. L.F. Amount (₹) Remarks

Q Following information is obtained from the books of Mr. Joseph. 2011 July 1 Purchased goods from Robert on credit 4000 July 2 Purchased office furniture from Delite Furniture on credit 5000 July 3 Purchased on credit goods from Robinson 3000 July 4 Purchased stationery on credit from Bittoo 500 July 5 Purchased goods for cash 7,500 You are required to make out a purchases day book of Mr. Joseph.

PURCHASE BOOK

Sales Book A firm records all credit sales of goods in the Sales Book or Sales Day Book . It records cash sales of goods in the Cash Book. We do not record the sale of assets in the Sales Book . Date Particulars Invoice ref. L.F. Amount (₹) Remarks

Purchase Return or Return Outward Book We record the return of goods purchased in the Purchase Return Book. A Debit Note is prepared for every return of goods in duplicate . Date Particulars Debit Note No. L.F. Details Totals Remarks

Sales Return or Return Inwards Book We record the return of goods sold in the Sales Return Book. A Credit Note is prepared for every return of goods in duplicate . Date Particulars Outward invoice L.F. Details Totals Remarks

Bills Receivable Book We record all the acceptance of the bills in our favor in the Bills receivable book. We need to post the total of bills receivable book to the Bills receivable A/c. Also, we need to post the individual accounts of the customers. No. of bills Daye of receipt From whom Name of the receiver Name of the drawer Name of acceptor Date of bill Due date L.F. Amount of bill How disposed off

Bills Payable Book We record all the acceptance of the bills that we issue in favor of others in the Bills payable book. We need to post the total of bills payable book to the Bills payable A/c. Also, we need to post the individual accounts of the suppliers. No. of bills Daye of acceptance To whom Name of drawer Name of the payee Where payable Date of bill Term Due date L.F. Amount of bill how disposed of

Journal Proper It includes transactions relating to credit purchase and sale of assets, depreciation, outstanding and pre-paid expenses, accrued and unearned income, opening and closing entries, adjustment entries and rectification entries.

Advantages Saving Labour Hours Division of Work Specialization of Work Easy for Reference Easier for Checking

REVISION - Types of Subsidiary Books Cash Book- It is a book which records the receipts and payment of cash transaction. Purchase Book- It is a book which records all the credit purchases of goods of the company. Purchase Return Book- It is a book which records all the return of credit purchases of goods of the company . Sales Book- It is a book which records all the credit sales of goods of the company. Sales Return Book- It is a book which records all the return of credit sales of goods of the company. Bills Receivable Book- It is a book which records all the bills receivable. Bills Payable Book- It is a book which records all the bills payable. Journal Proper- All the transactions which are not recorded in the above books are recorded here

Cash Book A cash book is a special subsidiary book which primarily records all cash receipts and cash payments The cash book is a book of original entry as transactions are first recorded in it Cash book is a real account. It shows always debit balance.

Definitions According to Andrew Munro: cash book is used for recording the receipts and payments of money, whether in coins, notes, cheques, postal orders, bank drafts etc. According to Carter: cash books is a book of original entry, the object of which is to record all receipts and payments of money.

Features Acts as both a journal and a ledger. Can be used as an alternative to a cash account for recording transactions. It follows the dual entry system of accounting ( i,e . Debit and credit side in cash book). The debit side should be identical to the credit side. Cash book should always have a debit balance. Only cash transactions are recorded in chronological order.

Cont.… All receipts are recorded in the debit side and all cash payments are recorded in credit side It records only one aspect of transactions i.e. cash Cash column of the cash book always shows debit balance or equal balance but cannot show credit balance. In practice, cash book is a substitute of cash account

Similarity between cash book and journal Transactions are recorded from source documents in both books Transactions are recorded in chronological order in both books Both books contain a ledger folio column Just like a journal, transactions from cash books are also posted to the relevant accounts in ledger.

CASH BOOK Vs Cash A/c Parameter Cash Book Cash Account Purpose It serves dual purpose of journal and ledger. No need for cash transactions to be recorded in journal. It only serves the single purpose of a ledger. Types There are three types of cash books: single, double and triple column cash books. There is only one type of cash account Narration Cash books have narration which come after the entries Cash accounts are not followed by narration Dependency Cash books are not dependent on any other book because it is the book of original entry Cash accounts are dependent on journal day Order of recording The recording of transactions is done directly in a cash book The cash transactions are first recorded in a journal book and later recorded in the cash account

Kinds of cash book Simple cash book Two column cash book Three column cash book Petty cash book

Kinds of cash book Single Column Cash Book : A single column or simple cash book is that type of cash book which is used to note down only the cash transactions. Double Column Cash Book : A double column cash book records two types of transactions under two separate columns. Here, one is compulsorily cash column, and the other can be either a discount column or a bank column. Triple Column Cash Book : This type of cash book records transactions related to three different types of accounts, i.e., cash, bank and discount. Thus, it substitutes the creation of cash account, bank account, discount received and discount allowed in the ledger.

Single Column Cash Book : It has one amount column on each side of account. Only cash receipts and cash payments are recorded in this book. As an account of ledger, left side of this book is debit and right side is credit. All cash receipts are recorded in debit side and all cash payments on credit side. Excess of debit over credit is treated as cash balance in hand.

Format of single column cash book

Date Particulars Amount 2005 June 1 Opening balance cash in hand 100 1 Cash sales 1500 2 Cash purchases 750 4 Received from Shyam 1250 8 Deposited into bank 500 10 Purchased goods 250 12 Sold goods 700 15 Bought stationery 50 20 Withdrawn from bank for office 8000 22 Purchased goods 1000 24 Paid wages 2000 25 Paid rent 400 26 Paid to Mukesh 250 30 Paid to Gagan 300

Date Receipts R.No. L.F. ( Rs ) Date Payments V.No. L.F. ( Rs ) 2005 2005 01-Jun To Balance B/d 100 02-Jun By Purchase A/c 750 01-Jun To Sales A/c 1500 08-Jun By Bank A/c 500 04-Jun To shyam's A/c 1250 10-Jun By Purchase A/c 250 12-Jun To Sales A/c 700 15-Jun By Stationary A/c 50 20-Jun To Bank A/c 8000 22-Jun By Purchase A/c 1000 24-Jun By wages A/c 2000 25-Jun By rent A/c 400 26-Jun By mukesh's A/c 250 30-Jun By Gungan's A/c 300 30-Jun By Balance c/d 6050 11550 11550 01-Jul To Balance b/d 6050

D ouble column cash book A double column cash book records two types of transactions under two separate columns. Here , one is compulsorily cash column, and the other can be either a discount column or a bank column. The cash column is used to record all cash transactions and works as a cash account whereas bank column is used to record all receipts and payments made by checks and works as a bank account. Both the columns are totaled and balanced like a traditional T-account at the end of an appropriate period which is usually one month.

Cont.. Since a double column cash book provides cash as well as bank balance at the end of a period, some organizations prefer to maintain a double column cash book rather than maintaining two separate ledger accounts for recording cash and bank transactions.

Important points to remember while making entries in a double column cash book Recording cash transactions: All cash receipts are recorded in cash column on the debit side and all cash payments are recorded in cash column on credit side of the double column cash book. If cash is received from a debtor or customer and is deposited into the bank account on the same date, the entry will be made in the bank column on the debit side, not in the cash column.

Recording bank transactions: When a check is received and the same is deposited into the bank account on the same date, the amount of the check is entered in the bank column on the debit side. When a check is received and the same is not deposited into the bank on the same date, the amount of the check is entered in the cash column, not in the bank column. When a check is issued, the amount of the check is entered in the bank column on the credit side.

Contra entry Contra entry is a transaction which involves both cash and bank. Both debit aspect and credit aspect of a transaction get reflected in the cash book . For example: Cash received from debtors and deposited into bank Cash withdrawn from bank for office use .

Contra entry March 04: Received from John & Co. a check amounting to 4000. March 05: Deposited into bank the check received from John & Co. on March 04 . (1). When cash is deposited into the bank account: The entry for depositing cash into the bank account is: Bank [Dr] Cash [Cr] the deposited amount is written in the bank column on debit side and cash column on credit side.

(2). When cash is withdrawn from bank account for business use : The entry for withdrawal of cash from bank account for business purpose is: Cash [Dr] Bank [Cr] The withdrawn amount is written in the cash column on debit side and bank column on credit side.

Cash Book with Discount, Cash and Bank Column As the name indicates, there are 3 columns, discount, cash and Bank. The usual method of entering discount and cash is adopted and bank column is also added. A. Here, one transaction, which is very important is = 'Receipt of a cheque " and "Its deposit in Bank Account". In such a case a. If cheque is received but not deposited in the same day : When the cheque is received, it is first entered in the cash-column, and on the next day, when the cheque is deposited in the bank, it is entered in the bank column. b. If the cheque is received and banked on the same day : Then, it is directly shown as a receipt in the Bank Column.

B. Contra Entry : a. An entry which involves, cash a/c and Bank a/c only, then it is called a contra entry. There are three types of contra entry. b. cash deposited into Bank c. Cash withdrawn from Bank d. Cheque deposited in Bank as in case (A) above. "C" – Symbol used for contra entry.

Prepare a cash book with Discount and cash columns 2005. 2005 Amount (Rs.) Mar-01 Balance of Cash-in-hand 12000 Mar-02 Received from Mahesh Rs 600 and allowed him a discount 40 Mar-03 Purchased a printer for Rs. 450 Mar-10 Purchased goods by cash 1000 Mar-12 paid Gagandeep Rs. 900 who allowed a discount of Rs. 80 Mar-16 Received from cash Sales 6000 Mar-18 paid for postage 120 Mar-19 Shyam who owed Rs 900 settled his account by paying Rs 875 Mar-25 Received from Jayesh Rs160 and allowed him discount Rs 8 Mar-31 paid wages Rs 800

Dr. Cr. Date Receipts R. No. L.F. Discount (Rs) Amount (Rs) Date Payments VN L.F. Discount (Rs) Amount (Rs) 2005 2005 01-Jun To Balance B/d 12000 03-Jun By Printer A/c 450 02-Jun To Mahesh's A/c 40 600 10-Jun By Purchase A/c 1000 16-Jun To Sales A/c 6000 12-Jun By Gagandeep's A/c 80 900 19-Jun To Shyam's A/c 25 875 18-Jun By Postage A/c 120 25-Jun To Jayesh's A/c 8 160 Jun-31 By Wages A/c 800 Jun-31 By Balance C/d 16365 19635 19635 1 st july To balance b/d 16365 19635 Cash Book with column of Discount and Cash

triple column cash book This type of cash book records transactions related to three different types of accounts, i.e., cash, bank and discount . Thus, it substitutes the creation of cash account, bank account, discount received and discount allowed in the ledger .

Cont.. The cash and bank columns of triple column cash book are used as accounts and are periodically totalled and balanced just like in case of a double column cash book. The discount column is only totalled. It is not balanced because it does not work as an account.

Cont.. In general ledger, two separate accounts are maintained for discount allowed and discount received. The total of discount column on debit side of cash book represents the total cash discount allowed to customers during the period and is posted to the discount allowed account maintained in the ledger. The total of discount column on credit side represents the total cash discount received from suppliers during the period and is posted to the discount received account maintained in the ledger. Discount allowed is an expense and discount received is an income of the business.

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2008 June Amount (Rs.) 1 Cash – in – hand 500 1 Cash – at- bank 20000 4 Received from suresh 29100 Discount allowed to him 100 6 Purchase of goods by bank 7500 8 Deposited into bank 1400 11 Credit sales to vikas 210 12 Received cheque from Vikas and deposited in bank at same day 210 14 Cash sales 3000 15 paid to Gagan by cheque for full settlement of his account of 3000 16 Cash purchases 1500 17 Withdrawn from bank for office expanses 4000 18 Paid cash to Jayesh 555 discount allowed from him 45 20 Received a cheque from sukumar 10000 21 Deposited the cheque received from sukumar into bank 22 Received a cheque from subhash and sent to bank 2000 30 paid rent by cheque 200 30 paid salaries 600

Dr. Cr. Date Receipts R LF Discount (Rs) Cash Bank Date Payments V L.F. Discount (Rs) Cash Bank .No. Rs Rs .No. Rs Rs 2008 2008 Jun-01 To Balance b/d 500 20000 6 By purchase a/c 7500 4 To suresh's a/c 100 2900 8 By Bank a/c C 1400 8 To cash a/c C 1400 15 By Gagan's a/c 60 2940 12 To Vikas' a/c 210 16 By purchase a/c 1500 14 To sales a/c 3000 17 By cash a/c C 4000

17 To Bank a/c C 4000 18 BY Jayesh's a/c 45 555 20 To sukumar's a/c 10000 21 By Bank a/c C 10000 21 To cash a/c C 10000 30 By Rent a/c 200 22 To Subhash's a/c 2000 30 BY salary a/c 600 30 By Balance c/d 445 24870 100 14500 39510 105 14055 14640 Jul-01 By balance b/d 445 24870

Jun 01: Cash in hand 800 (debit balance), Cash at bank 3,365 (debit balance). Jun 03: Paid James & Co. by check 1,175 , discount received from him 25 . Jun 05: Received from David & Co. a check amounting to 990 , discount allowed to him 10 . Jun 07: Deposited into bank the check received from David & Co. Jun 10: Purchased stationary for cash, 170 . Jun 15: Purchased merchandise for cash, 1,280 . Jun 15: Cash sales for the first half of the month, 2,450 . Jun 16: Deposited into bank 1,250 . Jun 18: Withdrawn from bank for personal expenses 100 . Jun 19: Issued a check amounting to 1,630 to James & Co. and discount received from him 20 . Jun 21: Drew from bank for office use, 420 . Jun 24: Received a check amounting to 1,435 from Henry & Co. and allowed him a discount of 15 . The Henry’s check was deposited into bank immediately.

July 1 started business with cash of 9000 July 2 deposited into bank 7000 July 4 acquired a building by cheque 5000 July 10 paid bill of furniture by cheque 1000 July 15 purchased merchandise of 800 by cheque July 18 withdraw 100 from bank July 20 sold merchandise of 1200 July 22 deposited 2000 into bank July 25 bought 1000 merchandise July 26 sold 1500 merchandise by cheque July 27 Paid freight 50

On April 1, 2017, Hassan Sajjad Store Cash Book showed debit balances of Cash Rs. 1,550 and Bank Rs. 13,575. During the month of April following business was transacted. You are required to prepare Cash Book? April 2017 02 Purchased Office Type-Writer for Cash Rs. 750; Cash Sales Rs. 1,315. 07 Deposited Cash Rs. 500 to bank. 10 Received from A. Hussain a check for Rs. 2,550 in part payment of his account (not deposited). 16 Paid by check for merchandise purchased worth Rs. 1,005. 20 Deposited into Bank the check received from A. Hussain. 22 Received from customer a check for Rs. 775 in full settlement of his accounts (not deposited). 24 Sold merchandise to sweet Bros. for Rs 1,500 who paid by check which was deposited into bank. 26 Paid creditor a Salman Rs. 915 by check. 28 Deposited into Bank the check of customer of worth Rs. 775 was dated 22 nd April. 29 Paid wages by cash Rs. 500 and salary Rs. 1,000 by bank. 30 Drew from Bank for Office use Rs. 250 and Personal use Rs. 150.

Petty Cash Book Petty cash book is maintained by the business to recorded petty cash expenses of the business such as postage, stationery, cleaning expenses. These are many payments like the above which are of small amount. In case all these transaction are recorded in cash book their recording will not only be inconvenient but also consume a lot of valuable time of the cashier and posting clerk.

Points To Be Considered While Maintaining A Petty Cash Book In order to exercises control and for proper analysis of petty cash payments, following point should be considered. Amount paid for petty expanses in the form of petty cash should be sufficient only for a short period- eg . one week or a fortnight 1. The reimbursement to the petty cashier should be made a. Only when the petty cashier prepares a statement showing all petty payment, supported by the “voucher”(i.e. documentary and evidence) b. Petty cashier should be given the money only for the actual petty payment made by him. 2. All the vouchers should be filed in order 3. No disbursement should be made to the petty cashier without proper authorization. 4. Petty-cashier can receive money for petty-expenses only from the main cashier. Petty cashier is not allowed to receive cash from any other source.

ABC machines a multi column petty cash book on the interest systems. The interest amount is Rs . 1000 ended on 26 th June 2005. June Particulars Amt Rs. 21. Balance in hand Rs. 80 21. Received cash to make up the interest 22. Stationery Rs . 75 23. Postage RS. 120 23. Entertainment Rs. 35 24. Travelling expenses Rs. 40 24. Miscellaneous expenses Rs. 25 24. Repairs Rs. 30 24. Entertainment Rs. 19 25. Postage stamps Rs. 20 25. Entertainment Rs. 10 25. Stationary Rs. 50 26. Postage stamps Rs . 10

Amount Recd. Date V.No Particulars Total Payments( Rs ) Postage (Rs.) Printing and Travelling Entertainment (Rs.) Repairs (Rs.) Miscellaneous (RS.) (Rs.) Stationery (Rs.) and Conveyance(Rs.) 80 Jun-21 To Balance b/d 920 21 To cash a/c 22 By stationery a/c 75 75 23 By postage a/c 120 120 23 By entertainment a/c 35 35 24 By travelling expenses a/c 40 40 24 By Miscellaneous expenses a/c 25 25 24 By Repairs a/c 30 30 24 By entertainment a/c 19 19 25 By postage a/c 20 20 25 By entertainment a/c 10 10 25 By stationery a/c 50 50 26 By postage a/c 10 434 140 125 40 64 30 25 By Balance c/d 566 1000 1000 566 26 To Balance b/d

Example: enter the following transaction in petty cash book of the January Month Jan 1 cash received from chief cashier 200 Jan 3 typing paper 8 Jan 3 postage charges 4 Jan 6 office cleaning charges 4 Jan 8 postage 2 Jan 8 office cleaning charges 2 Jan 10 cartage 2 Jan 15 postage 6 Jan 18 ink 3 and typing paper 10 Jan 20 typing ribbon 10 Jan 22 telephone charges 7 Jan 24 office cleaning 2 Jan 27 telegram 25 Jan 29 typing paper 30

Format Date Particulars Cash Book Folio. Amount date Particulars Voucher No. Stationary Postal charges Cartage cleaning

Questions June 1 cash in hand 3151 and cash at bank 91401 June 2 received cheque for 990 from A and discount allowed of 10 and cheque deposited into bank June 5 bought goods from Rama & Co. for Rs. 2000 paid cheque for them discount is 1% Paid trade expenses 120 Paid taxes 400 Paid insurance charges 100 Sold goods to Rama for Rs. 12500 Received cheque discount allowed 1% Purchased 100 national plan certificates for 100 each

Questions Feb 1 head cashier has given 75 and wages paid to chowkidar 15 Feb 2 wages paid to servant 6 Feb 5 office expenses 2.30 Feb 7 freight 1.5 Feb 10 postage 5 Feb 12 ink 1.25 Feb 15 postage 1 Feb 20 coolie .50 Feb 22 paper and postage 3.5 Feb 25 sundry expenses 11.50 Feb 27 price list 9

Subdivision of Journal: Subsidiary Books In a big organisation there are innumerable transactions. It is difficult for one book-keeper to record all the transactions on time. If all the transactions are recorded in one book only, the journal would become bulky. Further, if the same records all transactions there is a chance of misappropriation and fraud also. This necessitates the sub divisions of journal.

Need for sub division of journal Journal does not provide the information promptly. Journal becomes voluminous and bulky. It does not facilitate the system of internal check. It is difficult to handle the entire work of journalization by one person as work will be heavy and large. It fails to provide details regarding sales tax, VAT and other taxation. If all types of transactions are recorded in one journal then it will hamper the normal accounting work.

Advantages of subsidiary books Availability of information Minimum errors and frauds Division of work. Saving of time Specialisation and efficiency Serves as a ready reference Fixation of responsibility Flexible system Proper control on business activities.

Difference in Journal and Ledger BASIS FOR COMPARISON JOURNAL LEDGER Meaning The book in which all the transactions are recorded, as and when they arise is known as Journal. The book which enables to transfer all the transactions into separate accounts is known as Ledger. What is it? It is a subsidiary book. It is a principal book. Also known as Book of original entry. Book of second entry. Record Chronological record Analytical record Process The process of recording transactions into Journal is known as Journalizing. The process of transferring entries from the journal to ledger is known as Posting. How transactions are recorded? Sequentially Account-wise Debit and Credit Columns Sides Narration Must Not necessary. Balancing Need not to be balanced. Must be balanced.

Rules of subdivision of Journal All the business transactions are classified as cash and non cash transactions. All the transactions of a particular type are recorded at one place It is not necessary to maintain all subsidiary books in a business Number of subsidiary books depends upon the size, nature and quantum of transactions in business. In case of necessity other types of subsidiary books, consignment outward book, advertisement book, credit collection book , daily cash-sales book are maintained in the business.

Preparation sales book, purchases book, purchase returns book and sales return book Feb 1 Goods sold to sachin 5000 Feb 4 Feb 6 Feb 7 Feb 8 Feb10 Feb 14 Feb 15 Feb 17 Feb 20 Feb 22 Feb 24 Feb 25 Purchase from kushal traders 2480 Sold goods to manish traders 2100 Sachin returned goods 600 Returned to kushal traders 280 Sold to mukesh 3300 Purchased from kunal traders 5200 Furniture purchased from tarun 3200 Bought from naresh 4060 Return to kunal traders 200 Return inward from mukesh 250 Good purchased from kirti and 10% trade discount 5700 Sold to shri chand and 5% trade discount 6600

MCQ 1 Accounting furnishes data on A) Income and cost for the managers B) Financial conditions of the institutions C) Company’s tax liability for a particular year D) All the above

ANS Accounting furnishes data on A) Income and cost for the managers B) Financial conditions of the institutions C) Company’s tax liability for a particular year D) All the above

MCQ -2 The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the Balance Sheet Income Statement Statement Of Cash Flows

Ans -2 The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the Balance Sheet Income Statement Statement Of Cash Flows

MCQ 3 The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a specific date is the Balance Sheet Income Statement Statement Of Cash Flows

Ans 3 The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a specific date is the Balance Sheet Income Statement Statement Of Cash Flows

MCQ -4 Long term assets having no physical existence but, possessing a value are called A) Intangible assets B) Fixed assets C) Current assets D) Investments

ANS MCQ -4 Long term assets having no physical existence but, possessing a value are called A) Intangible assets B) Fixed assets C) Current assets D) Investments

MCQ 5 The assets that can be easily converted into cash within a short period, i.e., 1 year or less are known as A) Current assets B) Fixed assets C) Intangible assets D) Investments

ANS -MCQ 5 The assets that can be easily converted into cash within a short period, i.e., 1 year or less are known as A) Current assets B) Fixed assets C) Intangible assets D) Investments

MCQ 6 The art of recording all business transactions in a systematic manner in a set of books is called- (a) Accounting (b) Book – keeping (c) Ledger (d) None of these.

ANS MCQ 6 The art of recording all business transactions in a systematic manner in a set of books is called- (a) Accounting (b) Book – keeping (c) Ledger (d) None of these.

MCQ 7 The process of recording, classifying and summarizing all business transactions in order to know the financial result is called – (a) Book – keeping (b)Accounting (c) Journalizing (d) None of these.

ANS -MCQ 7 The process of recording, classifying and summarizing all business transactions in order to know the financial result is called – (a) Book – keeping (b)Accounting (c) Journalizing (d) None of these.

MCQ 8 Cash, goods or assets invested by the proprietor in the business for earning profit is called- (a) Profit (b) Capital (c) Fixed assets (d) None of these.

ANS -MCQ 8 Cash, goods or assets invested by the proprietor in the business for earning profit is called- (a) Profit (b) Capital (c) Fixed assets (d) None of these.

MCQ 9 The person, firm or institution who does not pay the price in cash for the goods purchased or the services received is called- (a) Creditor (b) Proprietor (c) Debtor (d)None of these.

ANS MCQ 9 The person, firm or institution who does not pay the price in cash for the goods purchased or the services received is called- (a) Creditor (b) Proprietor (c) Debtor (d)None of these.

MCQ -10 Book – keeping is- (a) An art (b) A science (c) An art and science both (d) None of these.

ANS -MCQ -10 Book – keeping is- (a) An art (b) A science (c) An art and science both (d) None of these.

MCQ -12 Assets = 1,00,000 , Liabilities = 40,000 , Owner’s equity = ? 60000 140000 40000 None of the above

ANS -MCQ -12 Assets = 1,00,000 , Liabilities = 40,000 , Owner’s equity = ? 60000 (100000-40000) 140000 40000 None of the above

MCQ -13 Assets = ? If , Liabilities = 2,40,000 , Owner’s equity = 420000 600000 1,60,000 6,60,000 None of the above

ANS -MCQ -13 Assets = ? If , Liabilities = 2,40,000 , Owner’s equity = 420000 600000 1,60,000 6,60,000 (420000+240000) None of the above

Assets , Voucher, Capital , Goods, Closing stock, 1. The document certifying the purchase or sale of goods or any monetary transaction is called ……………. 2. The thing which is purchased and sold in the business is called ……………. 3. The things or properties which helps in smooth functioning of the business and which are owned by the business are called ……………. of the business . 4. The unsold goods left at the end of the year is called ……………. 5. …………… represents the excess of assets over liabilities.

Voucher Goods Assets Closing stock Capital

MATCH 1. Building (a) Debit 2. Salary (b) Credit 3. Left side (c) Asset 4. Right side (d) Expense 5. Vouchers (e) Written document.

ANS Column A Column B 1. Building (c) Asset 2. Salary (d) Expense 3. Left side (a) Debit 4. Right side (b) Credit 5. Vouchers (e) Written document.

Match Financial Accounting Cost Accounting Management Accounting ascertaining and controlling the cost of products or services identifying, measuring, recording, classifying, summarising the business transactions helps the management in planning and controlling and in decision making

Match- Ans Financial Accounting Cost Accounting Management Accounting identifying, measuring, recording, classifying, summarising the business transactions ascertaining and controlling the cost of products or services helps the management in planning and controlling and in decision making

State the appropriate subsidiary book to record the following transactions Purchase of goods from Ram Purchase of furniture in cash Depreciation on plant and machinery Sale of goods for cash Bad debts from Dolly

Purchases Book Cash Book Journal proper Cash book Journal proper

Q Q: We completely eliminate journalizing when we record transactions in a subsidiary book. True or False?

Ans : This statement is false. We record only transactions of similar types in a subsidiary book. Sales, Purchase, Cash transactions, etc will find a place in subsidiary books. But say you purchase an asset. We will record this transaction in the journal.

Match Assets Liability Equity Revenue Expense Fund Invested By Owner Items of value owned by the business Debts owed by a business to external parties Amount spends from business Activites Profit from business activities

ANS -Match Assets Liability Equity Revenue Expense Items of value owned by the business Debts owed by a business to external parties Fund Invested By Owner Profit from business activities Amount spends from business Activites

Match the Following Assets Liability Equity Income Expense Sales,Interest Received Land,stock,debtors Drawings,Capital Rent,Purchase,Wages Loan , Creditors,Bills Payables

ANS -Match Assets Liability Equity Income Expense Land,stock,debtors Loan, Creditors,Bills Payables Drawings,Capital Sales,Interest Received Rent,Purchase,Wages

MCQ Amount invested by the proprietor in the business should be credit to: (a) A/c payable (b) Capital (c) Cash (d) Drawing

ANS MCQ - Amount invested by the proprietor in the business should be credit to: (a) A/c payable (b) Capital (c) Cash (d) Drawing

MCQ Transactions are first recorded in which book/account? (a) Book of Original Entry (b) T Accounts (c) Accounting Equation (d) Book of Final Entry

ANS MCQ Transactions are first recorded in which book/account? (a) Book of Original Entry (b) T Accounts (c) Accounting Equation (d) Book of Final Entry

MCQ Customer goods returned will be credited to which account? (a) Purchases A/C (b) Return outward (c) Customer’s A/C (d) Return inward

ANS MCQ Customer goods returned will be credited to which account? (a) Purchases A/C (b) Return outward (c) Customer’s A/C (d) Return inward or PURCHASE RETURN

MCQ Journal lists transactions in which order? (a) Decreasing (b) Chronological (c) Alphabetical (d) Increasing

ANS -MCQ Journal lists transactions in which order? (a) Decreasing (b) Chronological (c) Alphabetical (d) Increasing

MCQ Cash withdrawal from business by the proprietor for Business should be credited to (a) Cash account (b) Purchase account (c) Capital account (d) Drawings account

ANS -MCQ Cash withdrawal from business by the proprietor for Business should be credited to (a) Cash account (b) Purchase account (c) Capital account (d) Drawings account

MCQ The process of recording transactions in different journals is called A.Posting B.Entry making C.Adjusting D.Journalising

ANS MCQ The process of recording transactions in different journals is called A.Posting B.Entry making C.Adjusting D.Journalising The process of recording transactions in different journals is called Journalising . Journalizing is the process of recording a business transaction in the accounting records. This activity only applies to the double-entry bookkeeping system.

MCQ Discount allowed is a kind of deduction from A.Account Payable B.Account Receivable C.Cash account D.Discount account

ANS -MCQ Discount allowed is a kind of deduction from A.Account Payable B.Account Receivable / DEBTORS C.Cash account D.Discount account

MCQ The other name of Journal is A.Ledger B.T account C.Day Book D.Cash Book

ANS -MCQ The other name of Journal is A.Ledger B.T account C.Day Book D.Cash Book

he accounting cycle begins by recording _____________ in the form of journal entries . BUSINESS TRANSACTIONS FINANCIAL INFORMATION CORPORATE MINUTES BUSINESS CONTRACTS

6. Of the following account types, which would be increased by a debit? (a) Liabilities and expenses (b) Assets and equity (c) Assets and expenses (d) Equity and revenues

_____________is an example of fixed asset a. Receivable b . Stock c . Land & buildings

The term _________denotes the cost of services and things used for earning revenue a . Income b . Expense c . Loss

___________denote goods brought for sale. a . Sales b . Purchase c . Expenses

Credit in the liability means a . Increase b . Decrease c . No charge

Match –Subsidiary Books Cash Book Purchase Book Purchase Return Book Sales Book credit sales of goods all credit purchases of goods return of credit purchases of goods receipts and payment of cash transaction

ANS Cash Book Purchase Book Purchase Return Book Sales Book receipts and payment of cash transaction all credit purchases of goods return of credit purchases of goods credit sales of goods

MATCH – Subsidiary Books Sales Return Book Bills Receivable Book Bills Payable Book Journal Proper Records all the bills receivable return of credit sales the transactions which are not recorded in other books records all the bills payable

ANS Sales Return Book Bills Receivable Book Bills Payable Book Journal Proper return of credit sales Records all the bills receivable records all the bills payable the transactions which are not recorded in other books

1. The most common imprest system is the ________ system ? Petty cash Cash book Cash receipt Discount

ans The most common imprest system is the ________ system ? Petty cash Cash book Cash receipt Discount

2. A cash book with cash, bank and discount column is commonly referred as ________? Cash book Two columns cash book Three columns cash book Petty cash book

2.ANS A cash book with cash, bank and discount column is commonly referred as ________? Cash book Two columns cash book Three columns cash book Petty cash book

3. Introduction capital by owner of business is recorded on which side of a cash book ? Receipts Payments Incomes Expenditure

3. ANS Introduction capital by owner of business is recorded on which side of a cash book ? Receipts Payments Incomes Expenditure

4 Cash discount is allowed on _______ repayment of debt . Lump sum Prompt Actual None of them

4 ANS Cash discount is allowed on _______ repayment of debt . Lump sum Prompt Actual None of them

5. Payment of rent expenses is recorded on which side of cash book ? Receipts Payments Income Expense

5.ANS Payment of rent expenses is recorded on which side of cash book ? Receipts Payments Income Expense

6. Drawings by owner of business are generally recorded on which of the following side of a cash book ? Receipts Payments Incomes Expenditures

6 . ANS Drawings by owner of business are generally recorded on which of the following side of a cash book ? Receipts Payments Incomes Expenditures

7. A cash book that is used to record the small payments of cash is generally referred as _________? Simple cash book Two column cash book Three column cash book Petty cash book

7. ANS A cash book that is used to record the small payments of cash is generally referred as _________? Simple cash book Two column cash book Three column cash book Petty cash book

8. Purchase of office equipment for cash will be recorded on which of the following sides of a cash book Receipts Payments Incomes Expenditures

8. ANS Purchase of office equipment for cash will be recorded on which of the following sides of a cash book Receipts Payments Incomes Expenditures

9. A simple or one column cash book usually has which of the following main columns ? Bank Payments Discount Cash

9. ANS A simple or one column cash book usually has which of the following main columns ? Bank Payments Discount Cash

MCQ-1 1) The closing balance of petty cash book is considered as A) Liability B ) Asset C ) Expenses D ) Income

ANS MCQ-1 1) The closing balance of petty cash book is considered as A) Liability B ) Asset C ) Expenses D ) Income

MCQ 2 2) Payment of rent expenses is recorded on which side of cash book ? A) Receipts B ) Payments C) Income D) Expense

ANS -MCQ 2 2) Payment of rent expenses is recorded on which side of cash book ? A) Receipts B ) Payments C) Income D) Expense

MCQ -3 3) An entry which is made on both sides of a cash book is called A ) Cash entry B ) Contra entry C ) Payment entry D ) Compound entry

ANS MCQ -3 3) An entry which is made on both sides of a cash book is called A ) Cash entry B ) Contra entry C ) Payment entry D ) Compound entry

MCQ 4 4) A cash book with cash, bank and discount column is commonly referred as A ) Cash book B ) Two columns cash book C ) Three columns cash book D ) Petty cash book

ANS - MCQ 4 4) A cash book with cash, bank and discount column is commonly referred as A ) Cash book B ) Two columns cash book C) Three columns cash book D ) Petty cash book

MCQ -5 5) Cash book records A) Cash payments B ) Cash receipts C ) Cash payments and cash receipts D ) Neither cash payments nor cash receipts

ANS -MCQ -5 5) Cash book records A) Cash payments B ) Cash receipts C ) Cash payments and cash receipts D ) Neither cash payments nor cash receipts

MCQ 7 7) Cash book is prepared by A) Bank B ) Accountant of business C ) Manager of a company D ) Bank's cashier

ANS MCQ 7 7) Cash book is prepared by A) Bank B ) Accountant of business C ) Manager of a company D ) Bank's cashier

MCQ 8 8) The most common imprest system is the ________ system A ) petty cash B ) Cash book C ) Cash receipt D ) Discount

ANS -MCQ 8 8) The most common imprest system is the ________ system A ) petty cash B ) Cash book C ) Cash receipt D ) Discount

MCQ - 9 9) Discount received is recorded on which of the following side of a cash book? . A ) Receipts B ) Payments C ) Incomes D ) Expenditures

MCQ 10 10) Drawings by owner of business are generally recorded on which of the following side of a cash book? A ) Receipts B ) Payments C ) Incomes D ) Expenditures

ANS MCQ 10 10) Drawings by owner of business are generally recorded on which of the following side of a cash book? A ) Receipts B ) Payments C ) Incomes D ) Expenditures

MCQ 11 11) Introduction capital by owner of business is recorded on which side of a cash book? A ) Receipts B ) Payments C ) Incomes D ) Expenditures

MCQ 12 12) Cash book with cash and discount column is mostly referred as A ) Simple cash book B ) Two column cash book C ) Three column cash book D ) Petty cash book

ANS MCQ 12 12) Cash book with cash and discount column is mostly referred as A ) Simple cash book B ) Two column cash book C ) Three column cash book D ) Petty cash book

MCQ 13 13) A cash book that is used to record the small payments of cash is generally referred as A ) Simple cash book B ) Two column cash book C ) Three column cash book D ) Petty cash book

ANS -MCQ 13 13) A cash book that is used to record the small payments of cash is generally referred as A ) Simple cash book B ) Two column cash book C ) Three column cash book D ) Petty cash book

MCQ 14 14) A simple or one column cash book usually has which of the following main columns? A ) Bank B ) Payments C ) Discount D ) Cash

ANS -MCQ 14 14) A simple or one column cash book usually has which of the following main columns? A ) Bank B ) Payments C ) Discount D ) Cash

MCQ 15 15) Purchase of office equipment for cash will be recorded on which of the following sides of a cash book? A ) Receipts B ) Payments C ) Incomes D ) Expenditures

ANS MCQ 15 15) Purchase of office equipment for cash will be recorded on which of the following sides of a cash book? A ) Receipts B ) Payments C ) Incomes D ) Expenditures

MCQ 16 Which of the following is generally not the party to a check? A ) Payee B ) Payer C) Bank D ) Seller

ANS -MCQ 16 Which of the following is generally not the party to a check? A ) Payee B ) Payer C) Bank D ) Seller

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