Accounting-Unit 1.pdf
- 2. Definition of Accounting
“Accounting is an art of recording, classifying and
summarizing in terms of money transactions and events of
financial nature and interpreting the results thereof.”
According to Robert Anthony,“Accounting has been
called the language of business.”
- 5. Role of Management Accountant
Planning
Organizing
Directing
Analyzing and
Controlling
- 9. Users of accounting information
Owners
Management
Employees
Investors
Creditors
Government
Consumer
- 11. Importance of accounting
Internal Management Outsiders
Owners’ (Shareholders)
Managing Director and
Directors
Investors
Employees
Lenders
Suppliers and other
creditors
Customers
Govt. and
Public
- 12. Limitations of accounting
Records only monetary transaction.
Effect of Price level changes
Inventory and FA
Alternative treatment
Depreciation
Biasness
Fraud
- 13. Scope of accounting
Measurement
Past and present
Forecasting
Decision-making
Evaluation
Control
Govt. rules regulations
Taxation
- 15. Accounting concepts
Separate entity.
Money measurement.
Going concern.
Accounting period.
Cost.
Dual aspects.
Matching.
Realization.
Accrual
Objectivity
- 18. Rules of Debit and Credit
1. For personal a/c-
“Debit the receiver and credit the giver”.
2. For real a/c-
“Debit what comes in and credit what goes out”.
3. For Nominal a/c-
“Debit all expenses & losses and credit all gains and profits.”
- 19. Accounting equation
The basis for double entry system of accounting.
The total assets of the business are equal to total liabilities.
The form of an accounting equation which is as follows:
Total Assets =Total Liabilities
OR
Total Assets= Liabilities + Capital
OR
Total Assets- Liabilities = Capital
- 20. Journalize the following transactions
Jan.1-A started business with cash of Rs. 1,00,000.
Jan.2- Goods purchased from X Rs. 2,000, for cash Rs. 3,000 and from D Rs.
5,000.
Jan. 5- Paid to D in full settlement Rs. 4,900.
Jan. 7 – Purchased goods from R for Rs. 10,000 ; paid 50% in cash and 50% is
due.
Jan.8 - Purchased goods from S for cash at a list price of Rs. 20,000, at 10%
trade discount.
Jan. 9 - Goods of Rs. 2000 has been given as Charity.
Jan. 10 – withdrawn goods byA for personal use of Rs. 1,000.
Jan. 12- Goods lost due to theft of Rs. 500.
Jan. 14 –A ask his supplier M to send goods to N according to his order.
Jan. 15- Goods sold for cash of Rs. 10,000 to a customer and collected 8 % sales
tax on it.
Jan. 31- Paid Rent Rs. 2000, Salary Rs. 3000 and Godown Rent Rs. 2000.
- 21. Prepare trial balance
Capital – Rs. 40,000
Cash a/c- Rs. 10,020
Purchases- Rs. 79,000
Sales- Rs. 50,000
Drawings – Rs. 500
Salaries – Rs. 500
Discount received - Rs. 20
- 22. From the incorrect trial balance
prepare correct trial balance
Name of Account Dr. Bal. Cr. Bal.
Capital 220000
Cash in hand 25,000
Drawings 75,000
Bills payable 50,000
Sundry Expenses 10,000
Profit from Investment 20,000
Wages 40,000
Sales 80,000
Sales Returns 20,000
Purchased 60,000
Rent Paid 10,000
- 23. Commission Received 5,000
Loss on Revaluation 5,000
Commission Paid 5,000
Bills Receivable 5,000
Electricity Expenses 20,000
Furniture 50,000
Debtors 30,000
Creditors 20,000
Stock 40,000
Total 4,45,000 4,45,000
- 26. Profit and Loss account
Profit
Compensation for the capital invested and risks incurred.
Summarization of all individual accounts
Accumulating information on different items (Expenses and
Revenue).
- 27. Balance sheet
Reporting of the financial position.
It is a snapshot of the financial health.
Convey value owned and claims against it.
- 29. A- Horizontal Form
Liabilities Assets
I- Share Capital I- FixedAssets
II- Reserve & Surplus II- Investments
III- Secured Loan III- CurrentAssets, Loans and advances
IV- Unsecured Loan IV- Misc. Expenditure
V- Current Liabilities and Provisions
A. Current Liabilities
B. Provisions
- 30. B-Vertical Form
Schedule
No.
Curren
tYear
Previous
Year
I- Sources of Funds:
1. Shareholders’ funds:
(a) Capital
(b) Reserves & Surplus
2. Loan Funds:
(a) Secured loans
(b) Unsecured loans
II-Application of Funds
1. FixedAssets
2. Investments
3. Current assets, loans and advances:
Less: Current liabilities
4. (a) Misc. Exp.
(b) Profit & Loss a/c (Loss)
- 31. Prepare the balance sheet
Capital 98090
Drawings 10000
Net Profit 16090
Creditors 14800
Loan 20000
Cash 20380
Bank 8000
Debtors 24000
Investment 5000
Furniture 1800
Closing Stock 79800
- 32. Analyze the following B/S
Liabilities Amount Assets Amount
Capital 1,00,000 FixedAssets 50,000
Creditors 50,000 Cash 2,000
Bills Payable 10,000 Bank 78,000
Loan From
Bank
50,000 Bills
Receivables
5,000
P& LA/c 5000 Debtors 20,000
Reserve and
Surplus
45,000 Closing Stock 1,05,000
Total 2,60,000 Total 2,60,000