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Accounting-Unit 1.pdf
- 1.
- 2. Definition of Accounting “Accountingis 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.”
- 3. Accounting System Input • BusinessTransactions Processing System •Recording • Classifying • Summarizing • Analyzing Output • Financial Statements
- 4. Functions of Accounting Recording the data Classifying Summarizing Analyzing Interpreting Communicating
- 5. Role of ManagementAccountant Planning Organizing Directing Analyzing and Controlling
- 6. Branches of Accounting Financial Accounting. CostAccounting. ManagementAccounting.
- 7. Accounting tree Transaction Journal Trading A/c Profitand Loss A/c Ledger and Subsidiary Books Balance Sheet
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- 9. Users of accountinginformation Owners Management Employees Investors Creditors Government Consumer
- 10. Bases of accounting Cash basis Accrual basis Hybrid basis
- 11. Importance of accounting InternalManagement 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
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- 15. Accounting concepts Separateentity. Money measurement. Going concern. Accounting period. Cost. Dual aspects. Matching. Realization. Accrual Objectivity
- 16. Accounting Conventions Conservatism Consistency Disclosure Materiality.
- 17. Classification of account Personal account Real account Nominal account
- 18. Rules of Debitand 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 Thebasis 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 followingtransactions 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 incorrecttrial 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 Losson 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
- 24. Ans.= Rs.3,95,000
- 25. Financial Statements 1. Tradingor Manufacturing Account 2. Profit and Loss account. 3. Balance Sheet.
- 26. Profit and Lossaccount 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 Reportingof the financial position. It is a snapshot of the financial health. Convey value owned and claims against it.
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- 29. A- Horizontal Form LiabilitiesAssets 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- Sourcesof 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 balancesheet 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 followingB/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