Pradeep and Selvam set up a photography business. In the first month: - They each invested Rs. 2,500 cash in the share capital. - They took a Rs. 1,000 bank loan. - They billed customers Rs. 2,300 and collected Rs. 1,900 in receivables. - Various expenses were paid, including insurance, supplies, equipment rent, and interest. - The trial balance was prepared and net profit for the month was Rs. 1,370.

1. Example 1: Ajit set up Green Shoots company, a farming consultancy, in October 20XX.
The transactions in the first month were as follows:
a) Ajit invested cash in the company’s share capital Rs.10,000
b) Took an interest free loan from a friend Rs.2000
c) Bought equipment for cash Rs.9000
d) Paid insurance for one year Rs.480
e) Bought supplies on credit Rs.700
f) Billed customers for services Rs.1400
g) Provided services for cash Rs.3200
h) Received advance from a customer Rs.150
i) Paid for supplies in (e) on account Rs.300
j) Paid salary for the month Rs.800. Note: Ajit is also an employee of the
company
k) Collected receivables Rs.1,100
Required: 1. Record the transactions directly in the accounts
2. Prepare the October 31 trial balance

2. A + E L + Owner’s Equity + Rev
Sr.
No.
Cash Equip. Supplies A/c Rec Insu.
Prem
Sal
Exp
F. Loan A/P
Sup.
Share
Cap
Adv
Recvd
Reven
ue
a 10000 10000
b 2000 2000
c -9000 9000
d -480 480
e 700 700
f 1400 1400
g 3200 3200
h 150 150
i -300 -300
j -800 800
k 1100 -1100
5870 9000 700 300 480 800 2000 400 10000 150 4600
ANSWERS:

3. A + E L + Owner’s Equity + Rev
Sr.
No.
Cash Equip. Supplies A/c Rec Insu.
Prem
Sal
Exp
F. Loan A/P
Sup.
Share
Cap
Adv
Recvd
Reven
ue
a 10000 10000
b 2000 2000
c -9000 9000
d -480 480
e 700 700
f 1400 1400
g 3200 3200
h 150 150
i -300 -300
j -800 800
k 1100 -1100
ANSWERS:

4. Trial Balance
Particulars Debit Credit
Equipment 9000
Trade Receivables 300
Cash 5870
Supplies 700
Prepaid Insurance 480
Trade Payables 400
Unearned Revenues 150
Loan Payable 2000
Share Capital 10000
Revenue from Services 4600
Salaries expense 800
Total 17150 17150

5. Liabilities Amount Assets Amount
Share Capital 10000 Equipment 9000
Profit +3800 13800 Trade Receivables 300
Loan Payable 2000 Cash 5870
Trade Payable 400 Supplies 700
Unearned Revenue 150 Prepaid Insurance 480
16350 16350
Balance-sheet

6. A )Ajit invested cash in the company’s share
capital Rs.10,000
cash Dr 10000
capital Cr 10000

7. b) Took an interest free loan from a friend
Rs.2000
cash dr 2000
loan cr 2000

8. c)Bought equipment for cash Rs.9000
equpt dr 9000
cash cr 9000

9. d) Paid insurance for one year Rs.480
Prepaid insurnace Dr. 480
cash CR 480

10. e) Bought supplies on credit Rs.700
PURCHASE (SUPPLY) dR 700
A/C PAYABLE CR 700

11. f) Billed customers for services Rs.1400
A/R DR 1400
Sales (revenue) CR 1400

12. g) Provided services for cash Rs.3200
Cash DR 3200
Sales (revenue) CR 3200

13. h) Received advance from a customer Rs.150
cash DR 150
unearned revenue/adv. revenue CR 150

14. I )Paid for supplies in (e) on account Rs.300
a/p DR 300
cash CR 300

15. j) Paid salary for the month Rs.800. Note: Ajit is
also an employee of the company
salary DR 800
cash CR 800

16. k) Collected receivables Rs.1,100
cash DR 1100
A/R CR 1100

17. Example 2
• a ) Mahesh started business with cash Rs. 60,000 and Goods Rs. 30,000.
• b) Purchased goods for cash Rs. 40,000 and on Credit Rs. 25,000.
• c) Purchased goods from Ram of Rs. 20,000. Paid the amount in Cash and received 2 % cash discount.
• d) Goods costing Rs. 33000 sold at a profit of 33*1/3 %. Three fourth payment received in cash.
• e) Sold goods to Gopal for Rs. 20000. Received cash from Gopal Rs. 18000 and discount allowed to him 2000.
• f) Paid telephone bill amounting to Rs. 800.
• g) Goods Sold to Harish on credit Rs. 2000
• h) Harish returned goods 500.
• i) Closing inventory Rs 50000 (Use only for estimating COGS and Balance Sheet purpose, no need to make entries).

18. A + E L + Owner’s Equity + Rev
Sr.
No.
Cash Open.
invent
Purchase
s
A/R Dist
Allow
Tel.
bill
Sales
Ret.
Capital A/P Dist.
Rece.
Sales
a 60000 30000 60000+
30000
b -40000 40000+
25000
25000
c -19600 20000 400
d 33000 11000 44000
e 18000 2000 20000
f -800 800
g 2000 2000
h -500 500
50600 30000 85000 12500 2000 800 500 90000 25000 400 66000
ANSWERS:

19. a) Mahesh started business with cash Rs. 60,000 and Goods Rs.
30,000.
CASH DR 60000
opening inventory DR 30000
CAPITAL CR 90000

20. b) Purchased goods for cash Rs. 40,000 and on Credit Rs. 25,000
purchase a/c DR 40000
purchase a/c DR 25000
CASH CR 40000
A/P OR CREDITORS CR 25000

21. c) Purchased goods from Ram of Rs. 20,000. Paid the amount in Cash
and received 2 % cash discount.
purchase a/c DR 20000
CASH CR 19600
DISCOUNT RECEIVED CR 400

22. d) Goods costing Rs. 33000 sold at a profit of 33*1/3 %. Three fourth payment
received in cash
CASH DR 33000
A/R DR 11000
Sales A/C CR 44000

23. e) Sold goods to Gopal for Rs. 20000. Received cash from
Gopal Rs. 18000 and discount allowed to him 2000.
CASH DR 18000
DISCOUNT ALLOWED DR 2000
Sales A/C CR 20000

24. f) Paid telephone bill amounting to Rs. 800.
Telephone bill dr 800
cash cr 800

25. g) Goods Sold to Harish on credit Rs. 2000
Aa/r dr 2000
Sales a/c cr 2000

26. h) Harish returned goods 500.
Sales Return DR 500
A/R CR 500

27. • Trial Balance
Dr. Cr.
Cash 50600
Opening Inventory 30000
Purchases 85000
A/R 12500
Discount Allowed 2000
sALES RETURN 500
Telephone bill 800
Capital 90000
A/P 25000
DISCOUNT Received 400
Sales 66000
Total 181400 181400

28. • Income Statement
Sales – Sales Return 66000 -500
= 65500
Less COGS(OPEN. STOCK + Purchases- discount received –
Closing)
(30000 + 85000 -400 – 50000)
(64600)
900
Less Expenses
Discount Allowed 2000
TELEPHONE bILL 800
Profit (loss) (1900)

29. Balance sheet
Liabilities ASSET
Capital 90000 cASH 50600
Retained Earning (Loss) -1900 A/R 12500
A/P 25000 INVENTORY 50000
113100 113100

30. Example: 3 Pradeep and Selvam set up Venus Photoshop Company in December 20XX. The
transactions in the first month were as follows:
a) Pradeep and Selvam invested cash in the company’s share capital Rs.2500 each
b) Took a bank loan Rs.1000
c) Paid insurance for the month Rs.60
d) Bought supplies on credit Rs.350
e) Billed customers for services Rs.2300
f) Used supplies Rs.270
g) Paid equipment rent for the month Rs.500
h) Collected receivables Rs.1900
i) Repaid bank loan Rs.700
j) Paid interest on bank loan Rs.100
k) Paid a dividend Rs.200
Required: 1. Record the transactions directly in the accounts
2. Prepare the December 31 trial balance

31. A + E L + O equity + Rev
Sr.
No.
Cash Supplies A/c
Rec
Div. Bank
Int
Insu.
Exp
Sup.
Exp.
Euip
Rent
B.
Loan
A/P
Supp
.
Partner’s
Capital
Reven
ue
P S
a
b
c
d
e
f
g
h
i
j
k

32. A + E L + O equity + Rev
Sr.
No.
Cash Supplies A/c
Rec
Div. Bank
Int
Insu.
Exp
Sup.
Exp.
Euip
Rent
B.
Loan
A/P
Supp
.
Partner’s
Capital
Reven
ue
P S
a 5000 2500 2500
b 1000 1000
c -60 60
d 350 350
e 2300 2300
f -270 270
g -500 500
h 1900 -1900
i -700 -700
j -100 100
k -200 200

33. Trial Balance
Particulars Debit Credit
Trade Receivables 400
Cash 6340
Supplies 80
Trade Payables 350
Bank Loan 300
Share Capital 5000
Dividends 200
Revenue From services 2300
Insurance Expense 60
Supplies Expense 270
Equipment rent Expense 500
Interest Expense 100
Total 7950 7950

34. Income & Expenditure Statement
Particulars Amount
Sales 2300
Less:
Bank Interest
Supply Expense
Insurance Expense
Equipment Rent
100
270
60
500
Profit/(Loss) 1370
Dividend Expense 200
Reserve and Surplus 1170
Balance Sheet
Equity & Liabilities:
Owner’s fund
Reserves & Surplus
Non – Current Liabilities:
Bank Loan
Current Liabilities :
Account payable (Supplies)
5000
1170
300
350
Total 6820
Assets:
Current Assets:
Supplies
Cash
Account Rec.
Receivable
80
6340
400
Total 6820

35. Example : 3.3 Rhetorica Company conducts public speaking classes. The following are the account
balances om March 31, 20XX
Building Rs. 10,000
Supplies Rs. 900
Trade Receivables Rs. 2100
Prepaid Insurance Rs.600
Trade Payables Rs.1700
Share Capital Rs.10,000
Revenue from Services ?
Salaries Expense Rs. 5800
Electricity Expense Rs. 350
Insurance Expense Rs. 50

36. Particulars Debit Credit
Building 10000
Supplies 900
Trade Receivables 2100
Prepaid Insurance 600
Trade Payables 1700
Share Capital 10000
Revenue From Services 8100
Salaries Expense 5800
Electricity Expense 350
Insurance Expense 50
Total 19800 19800
ANSWER

37. Income Statement:
Revenue from Services: 8100
Less: Salaries Expenses: 5800
Electricity Expenses: 350
Insurance Expenses 50 6200
Net Profit 1900
Liabilities Amount Assets Amount
Share Capital 10000 Building 10000
+Profit 1900 11900 Supplies 900
Trade Payables 1700 Trade Receivables 2100
Prepaid Insurance 600
13600 13600
Balance-sheet