Define accounting.
Accounting is a process of identifying the events of financial nature, recording them in Journal, classifying in their respective ledgers, summarising them in Profit and Loss Account and Balance Sheet and communicating the results to the users of such information, viz. owner's, government, creditors, investors,customers, shareholders etc.
According to the American Institute of Certified Accountants, 1941, “Accounting is an art of recording, classifying and summarising in a significant manner and in terms of money transactions and events that are, in part at least, of a financial character and interpreting the results thereof.”
Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.
From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner.
Complete the following sentences with appropriate words:
(a) Information in financial reports is based on .....................
(b) Internal users are the ..................... of the business entity.
(c) A ..................... would most likely use an entities financial report to determine whether or not the business entity is eligible for a loan.
(d) The Internet has assisted in decreasing the ..................... in issuing financial reports to users.
(e) ..................... users are groups outside the business entity, who uses the information to make decisions about the business entity.
(f) Information is said to be relevent if it is ......................
(g) The process of accounting starts with ............ and ends with ............
(h) Accounting measures the business transactions in terms of ............ units.
(i) Identified and measured economic events should be recording in ............ order.
Define accounting and state its objectives.
Enumerate informational needs of management.
'Accounting information should be comparable'. Do you agree with this statement? Give two reasons.
Giving examples, explain each of the following accounting terms:
* Fixed assets * Revenue * Expenses
* Gain * Profit * Capital
* Short-term liabilities
Distinguish between debtors and creditors.
Name any two types of commonly used negotiable instruments.
Why is it necessary to record the adjusting entries in the preparation of final accounts?
State the meaning of incomplete records?
What is ‘Depreciation’?
Briefly state how the cash book is both journal and a ledger.
State the meaning of a trial balance?
State the four basic requirements of a database applications.
State the different elements of a computer system.
Why is it necessary for accountants to assume that business entity will remain a going concern?
State the need for the preparation of bank reconciliation statement?
Indicate against each amount wheather it is a debit or a credit balance, and prepare a trial balance as at March 31, 2014 based on the following balances:
Accounts Title Amount ₹
Capital 1,00,000
Drawings 16,000
Machinery 20,000
Sales 2,00,000
Purchases 2,10,000
Sales return 20,000
Purchases return 30,000
Wages 40,000
Goodwill 60,000
Interest received 15,000
Discount allowed 6,000
Bank overdraft 22,000
Bank loan 90,000
Debtors :
Nathu 55,000
Roopa 20,000
Creditors :
Reena 35,000
Ganesh 25,000
Cash 54,000
Stock on April 01, 2013 16,000
Journal entry to record salaries will include:
(a) Debit salaries Credit cash.
(b) Debit capital Credit cash.
(c) Debit cash Credit salary.
(d) Debit salary Credit creditors.
Distinguish between straight line method and written down value method of calculating depreciation.
Distinguish between bill of exchange and promissory note.
Which of the following is not an error of principle:
(a) Purchase of furniture debited to purchases account.
(b) Repairs on the overhauling of second hand machinery purchased debited to repairs account.
(c) Cash received from Manoj posted to Saroj.
(d) Sale of old car credited to sales account.
Discuss the need of preparing a balance sheet.
Depreciation written off on furniture 1,500 was not posted to depreciation account.
This is an error of ..................................
The wrong effect has been:
The correct effect should have been:
The rectification entry will be.
Fill in the Correct Words :
(a) Cash book is a ......... journal.
(b) In Journal proper, only......... discount is recorded.
(c) Return of goods purchased on credit to the suppliers will be entered in ...... Journal.
(d) Assets sold on credit are entered in .........
(e) Double column cash book records transaction relating to ......... and .........
(f) Total of the debit side of cash book is ......... than the credit side.
(g) Cash book does not record the ......... transactions.
(h) In double column cash book ......... transactions are also recorded.
(i) Credit balance shown by a bank column in cash book is .........
(j) The amount paid to the petty cashier at the beginning of a period is known as ......... amount.
(k) In purchase book goods purchased on ......... are recorded.
Select Right Answer:
Voucher is prepared for:
(i) Cash received and paid
(ii) Cash/Credit sales
(iii) Cash/Credit purchase
(iv) All of the above
Discuss the advantages of computerised accounting system over the manual accounting system.
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