Elements of Accounting

B.V. Patel Institute of Business Management, Computer & Information

Technology, Uka Tarsadia University

Question Bank 030030104: Elements of Accounting

1

Unit: 1 Introduction of Financial Accounting

Answer the following. (1 mark)

1. Which concept assumes that business enterprise and its owners are two separate

independent entities?

2. What is transaction?

3. Drawing account is which type of account?

4. Which transactions are recorded in Purchase Book?

5. What is an Accounting Equation?

6. At which price are fixed assets shown in the books of account?

7. Find the value of assets, if capital =110000 and liabilities=20000.

8. Which concept states that business will not be dissolved in near future?

9. Define term „ Capital‟

10. According to dual aspect concept Capital is =?

Briefly answer the following. (2 marks)

1. Write the any two advantages of financial accounting.

2. Define term „Creditors‟

3. What is closing stock?

4. Explain the dual equation concept.

5. Write the function of accounting?

Answer the following (limit 250 words). (5 marks)

1. Explain the Money measurement concept.

2. Write short notes: Business entity concept

3. Functions of Accounting

4. Going concern concept.

5. Rules of debit and credit.

6. Convention of consistency

7. Dual aspect concept

8. Convention of full disclosure




2

Unit: 2 Book Keeping-I


1. In which account business owner withdraws cash for personal use is debited?

2. Mention the types of owner‟s personal account.

3. Give the types of impersonal account.

4. What are the goods drawn from business for owner‟s personal account called?

5. Classify the accounts: Capital account, Purchase account.

6. What is trial balance?

7. Define term journal.

8. Are the following Journal entries correct? If not give correct entry:

By Purchased A/c…………… 1800

To Cash A/c………………………..1800

(Narration: Purchased goods of Rs.1800 from Chirag)

9. What is the rule of real account?

10. State the nature of following accounts: (liability , assets , income, expenses)

Stock of goods, Depreciation, Loan, Rent received


1. From the following transactions state the name of accounts, types of accounts. Find out

which account will be debited and which will be credited?

(i) Purchased goods of Rs.10000 at 5% cash discount from Kiran.

(ii) Paid salary Rs.1200 to Devang.

2. Classify the following accounts into Personal, Real and Nominal:

Building A/c, Salary A/c, Bank A/c, Mr.Jatin A/c

3. Explain giving reason whether the following are cash or credit transaction:

Purchased goods of Rs.1000 from Rahul at 10% cash discount.

Received order from Amar for supply goods of Rs.1000.

4. Give the format of Trading Account.

5. Explain the rule of nominal account.

6. Post the following journal:

(i) By Cash A/c…………… 28000

To Sales A/c………………………..28000

(Narration: Sold the goods for cash)

7. Give journal entries of the following posting in the ledger accounts:

Cash A/c

Date Particulars JF Rs. Date Particulars JF Rs.




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2012 2012

March:9 To Sales 12500 March:12 By Purchase 14500

March:9 To Commission 2500 March:12 By salary 500

Total 15000 Total 15000

8. Define the term “Assets”.


2.1 Journal

Ex: 1: Write journal entries from the following transaction of Shri Vipul shah.

2010

May 2:

Started business with cash Rs.12000.

3: Purchased goods of Rs.2000.

5: Sold the goods of Rs.1000 to Rakesh at cash.


10: Withdrawn goods of Rs.1000 for personal use.

Ex: 2: Write the following transactions of Mr. Krunal in his journal.

2010

Aug 1:

Mr.Krunal started business with cash Rs.10000,furniture Rs.500 and stock of

goods Rs.1000.

3: As more needed in business a loan of Rs.1500 at 10% taken from Vipul.

8: Open a bank account in SBI bank and paid Rs.5800 in it.

10: Purchased goods of Rs.10000 at 10% trade discount from Jay.

11: Sold the goods to Mr.Rakesh at 10% trade discount at cash.

12: Paid for life insurance premium Rs.1200.

14: Sold goods Rs.1700.

15: Withdrawn goods of Rs.3000 for personal use from business.

Ex: 3: Write the following transactions of Mr. Rajesh in his journal.

2010

Aug:2

Mr.Rajesh Started business with cash Rs.50000,debter Rs.20000 and stock

Rs.10000.

3: Purchase goods of Rs.10000 @ 10% Trade discount.

4: Open a bank account and paid Rs.4000 in it.

5: Sold the goods of Rs.5ooo at 5% trade discount.

7: As more needed in business a loan of Rs.10000 at 5% interest is taken from

Jay.

8: Withdrew cash from business for personal use Rs.500.

9: Receive an order from Rahul for supplying goods Rs.1000 at 10% trade

discount and 10% cash discount.

10: Sent goods to Rahul as per order.

11: Paid salary Rs.1000.

12: Given goods worth Rs.500 to flood relief fund.




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Ex:4:Write journal entries from the following transactions of Manoj for the month of

July ,2010:

2010

July 1:

Mr.Anil started a new business with stock of goods Rs.12500,debter

Rs.5400,furniture Rs.6700 and cash Rs.10500.

2: Purchased goods of Rs.10000 at 10% trade discount and 5% cash discount.

3: Sold the goods of Rs.5ooo at 5% trade discount and 10% cash discount at cash.

4: Purchased a table of Rs.200 for shop and chair of Rs.150 for home from A-1

furniture mart for cash.

7: Paid life insurance premium Rs.1000.

8: Paid insurance premium Rs.500 by cheque.

11: Goods costing of Rs.800 are stolen from godown.

12: Goods worth Rs.600 were distributed free among the poor.

14: Purchased goods of Rs.1000 by a cheque and paid Rs.200 carriage by cash.

15: Goods of Rs.400 were damaged by rain and were sold for Rs.100.

Ex:5:Write journal entries from the following transactions of Shri Rahul for the

month of September, 2010:

2010

Sep 2:

He started a new business with stock of goods Rs.20000,debter Rs.8000,furniture

Rs.10000,creditors 4500 and cash Rs.10500.

3: Purchased goods of Rs.5000 at 10% trade discount and 10% cash discount from

Akash and half amount paid by cash.

5: Purchased stationary for shop Rs.100 and payment by cheque.

7: Sold the goods of Rs.8000 at 10% trade and 10% cash discount to Ravi. He paid

half amount by cheque.

8: Goods costing Rs.300 were distributed as samples.

10: Goods of Rs.500 were received as samples and were sold for Rs.450.

14: Goods of the cost of Rs.3000 were completely destroyed by fire. The goods were

not insured.

15: Goods of Rs.2400 were damaged by fire. The insurance company accepted a claim

for Rs.1600.The goods damaged were sold for Rs.360.

Ex:6:Write journal entries from the following transactions of Vardhaman stores for

month of November, 2010:

2010

Nov 1:

Purchased goods of Rs.4000 @ 10% cash discount from Jignesh and ¼ amount

paid by cheque.

2: Goods of 2000 were sold to Ketan which we purchased from Jignesh.

4: Ketan return the goods of 1000 which we return to Jignesh.

5: Purchased goods worth Rs.10000 @ 5% trade discount and 10% cash discount

from Sunil. Half amount paid in the cash.




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Ex: 7: Record following transaction in the journal of Jay Ambe Mart for the month of July.

2012

July1: Started business with cash Rs.12000,debtors Rs.4000 , furniture Rs.6000 and

goods Rs.15000.

4: Purchased goods of Rs.10000 at 10% trade discount and 5% Cash discount from

Vinay and half amount paid by cheque.

6: Sold the goods of Rs.8000 at 5% trade discount and 2% cash discount Nikunj and

received 1/2 amount in cash.

8: Goods of Rs.2400 were damaged by fire. The insurance company accepted a

claim for Rs.1600.The goods damaged were sold for Rs.360.

10: Paid Salary Rs.2000 by cheque to Tejash.

2.2 Ledger and Posting

Ex:1:Recording the following transactions of Jayesh Desai march, in his journal

and post them to ledger accounts:

2010

March 1:



4: Sold the goods of Rs.1000 to Rakesh at cash.

6: Purchased goods of Rs.1500 from Rakesh.

7: Withdrawn Rs.1000 cash for personal use from business.

Ex:2:Recording the following transactions of Chirag Patel April, in his journal and

post them to ledger accounts: 2010

March 1:


2: Purchased goods from Krunal for cash Rs.2000.

5: Sold goods to Nirav Rs.1700.

12: Purchased a cupboard Rs.2800.

20: Paid Rent Rs.800 and salary to the accountant Rs.1000.

25: Paid son Anil‟s college fee Rs.500.

Ex:3:Recording the following transactions of Shri Rohit July, in his journal and

post them to ledger accounts: 2: Rohit started business with capital of Rs.20000.

3: Purchased goods from Dipak Rs.5000.

5: Purchased office furniture Rs.2500.

10: Paid insurance premium Rs.1200.

15: Received commission Rs.500.




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Ex: 4: Write the journal and prepare the account of Mr.Amaratbhai from the following

Information. (April-09) 2010

April 2:

Debit balance brought forward Rs.2000.

3: Sold Goods to Mr.Amaratbhai Rs.4000

4: Mr.Amaratbhai returned goods Rs.500.

6: Mr.Amaratbhai paid on his Account Rs.1000.

10: Received a cheque from Mr.Amaratbhai and deposited in to bank Rs.1000.

Ex: 5: Record the following transaction in the journal of Vivekanand and prepare capital and

cash Account.

2010

March 1:

Started business with cash Rs.20000, Furniture Rs.6000, Goods Rs.7000 and a

loan of Rs.2000 from Ankur.

4: Purchased goods of 100000 from Mehul at 2% trade discount and 5% cash

discount. Gave a cheque for half the amount.

5: ¾ of the goods purchased from Mehul is sold to Pooja after adding 10% profit.

2.3 Trial balance

Ex: 1.The following balance is taken from the books of Mahesh Joshi as on 31-

3-2010.Prepare a Trial balance.

Name of Accounts Balance Rs Name of Accounts Balance Rs

Capital A/c 2,00,000 Bad debts 3000

Purchase 1,80,000 Salary 10000

Bills payable 10000 Creditors 1,30,000

Sales 3,30,000 Outstanding wages 2000

Drawings 30000 Wages 20000

Debtors 4000 6% loan 28,700

Furniture 17000 Machinery 50,000

Building 50,000 Advertisement Exp. 4000

Opening stock 12000 Discount allowed 6100

Stationery -Printing 4000 Goodwill 6000




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Ex: 2.From the following balances of accounts prepare trail balance as on 31-03-

2010.Use suspense account if needed.


Capital A/c 90000 Sales 96500

Drawings 5000 Goods return credit 1500

Purchase 32000 Goods return debit 1000

Railway Freight 1000 Discount Received 800

Bad Debts Reserve 900 Bad debts 200

Opening Stock 4000 Investment 8000

Interest on investment 560 Carriage outward 6200

Discount allowed 560 Building 1,00,000

Goodwill 8200 Debtors 28700

Creditors 21000 Cash balance 7240

Bank overdraft 8000 Advertisement Exp. 2400

Ex: 3.From the following balances of accounts, prepare trial balance as on 31-3-

2009.Use suspense accounts if needed.


Capital A/c 2,00,000 Bad debts 3000

Purchase 1,80,000 Discount Received 10000

Bills payable 10000 (C.L) Creditors 1,30,000

Goods return (cr) 16000 Opening stock 92,000

Goods return(dr) 20000 Salary 18000

Sales 3,30,000 Outstanding wages 2000

Drawings 30000 Wages 20000

Bad debts reserve 4000 6% loan 28,700

Furniture 17000 Machinery 50,000

Building 50,000 Advertisement Exp. 4000

Cash and Bank balance 1980 Discount allowed 6100

Bills receivable 40,000 Freight and Octroi 8000

Investments 8000 Debtors 1,51,000

Stationery -Printing 4000




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Ex: 4.From the following balances of accounts prepare trail balance as on 31-

03- 2010.Use suspense account if needed.


Capital A/c 100000 Cash in hand 7000

Drawings 15000 Rent 2750

Purchase 35000 Bad Debts 3650

Opening Stock 12000 5% Loan 12500

Sales 65000 Interest 600

Debtors 24000 Bad Debts Reserve 750

Building 35000 Bank balance 2500

Plant & Machinery 5000 Bills Receivable 4000

Bills Payable 5000 Carriage outward 100

Stationery 1000 Goodwill 6500

Ex: 5.From the following balances of accounts prepare trail balance as on 31-

03- 2010.Use suspense account if needed.


Drawings 10000 Outstanding wages 250

Capital A/c 60000 Cash balance 1400

Land And Building 25000 Bank Balance 6400

Furniture 5000 Discount 3500

Stock 15000 Salary 2550

Sundry Debtors 30200 Outstanding Salary 550

Sundry Creditors 9600 Bills Payable 1950

Carriage inward 2800 Bills Receivable 2980

Carriage outward 4200 Travelling Expense 400

Wages 4500 Advertisement Exp 600




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2.4 Final Accounts

Ex:1 From the undernoted Trial Balance of a trader as on 31-12-2000 prepare a

Trading and Profit account for the year ended 31-12-2000 and a Balance sheet as

on that date:

Trial Balance

Particulars Rs Particulars Rs.

Cash in hand

Purchase

Opening stock

Sundry Debtors

Plant

Furniture

Bills Receivable

Rent and Taxes

1,200

1,20,000

35,000

50,000

60,000

15,000

20,000

10,000

Capital

4% bank loan

Bills payable

Sundry Creditors

Sales

Bad Debts reserve

Wages

Salaries

80,000

20,000

22,000

24,000

2,00,000

1,200

16,000

20,000

Additional Information

(i) Closing stock Rs. 40,000

(ii) Provide outstanding liabilities: Rent and Taxes Rs. 2000; wage Rs. 3,000;

Salaries Rs. 4,000

(iii)Depreciation; on plant 5%; on Furniture 10%

(iv) Write off Rs. 500 as bad debts

(v) Create bad debts reserve 2.5% on Sundry Debtors

Ex: 2 From the following balances prepare the trading and profit and loss

account and balance sheet as on March 31, 2011.

Debit Balances Amount Rs. Credit Balances Amount Rs.

Drawings 6,300 Capital 1,50,000

Cash at bank 13,870 Discount received 2,980

Bills receivable 1,860 Loans 15,000

Land and Building 42,580 Purchases return 1,450




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Furniture 5,130 Sales 2,81,500

Discount allowed 3,960

Reserve for bad

debts 4,650

Bank charges 100 Creditors 18,670

Salaries 6,420

Purchases 1,99,080

Stock (opening) 60,220

Sales return 1,870

Carriage Inward 5,170

Rent and Taxes 7,680

General expenses 3,630

Plant and

Machinery 31,640

Debtors 82,740

Bad debts 1,250

Insurance 750

Total 4,74,250 4,74,250

Adjustments:

1. Closing stock Rs. 70,000.

2. Create a reserve for doubtful debts @ 10% on debtors.

3. Insurance prepaid Rs. 50.

4. Rent outstanding Rs. 150.

5. Interest on loan is due @ 6% p.a.

Ex:3 The trial balance of Mr. Ajay as on 31st Dec. 2003 was as follows

Particulars Debit Credit

Purchases

Sales

Reserve for doubtful debts

Sundry Debtors

Sundry Creditors

Bills Payable

Opening Stock

Wages

Salaries

Furniture

Postage

162505

50200

26725

23137

5575

7250

4226

252400

5200

30526

3950




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Power and fuel

Trade expenses

Bad debts

Loan to X @ 10% (1-9-03)

Cash in Hand

Trade Expenses accrued but unpaid

Drawing

Capital

Outstanding Wages

1350

5831

525

3000

10000

4452

700

10000

2000

304776 304776

Prepare trading account and profit and loss account for the year ended Dec. 31

2003 and Balance sheet as on that date after taking into consideration the

following information:

(i) Depreciation on furniture is to be charged @ 10%

(ii) Sundry debtors include an item of Rs 500 due form a customer who has

become insolvent

(iii) Reserve for bad debts is to be maintained @ 5% on sundry debtors

(iv) Goods of the value of Rs 1500 have been destroyed by fire and insurance

company admitted a claim for Rs 1000

(v) Stock on 31st Dec. 2003 was Rs. 12550.

Ex: 4 Prepare the trading profit and loss account of M/s Mohit Traders as on

31 March 2012 and Balance sheet.

Debit Balances Amount Rs. Credit Balances Amount Rs.

Opening stock 24,000 Sales 4,00,000

Purchases 1,60,000 Return outwards 2,000

Cash in hand 16,000 Capital 1,50,000

Cash at bank 32,000 Creditors 64,000

Return inwards 4,000 Bills payable 20,000

Wages 22,000 Commission received 4,000

Fuel and Power 18,000

Carriage inwards 6,000

Insurance 8,000

Buildings 1,00,000

Plant 80,000

Patents 30,000

Salaries 28,000

Furniture 12,000




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Drawings 18,000

Rent 2,000

Debtors 80,000

6,40,000

6,40,000

Adjustments:

a) Salaries outstanding 12,000

b) Wages outstanding 6,000

c) Commission is accrued 2,400

d) Depreciation on building 5% and plant 3%

e) Insurance paid in advance 700

f) Closing stock 12000

Ex: 5 From the following Trail balance of M/s Jalaram & Co. Prepare final

accounts for the year ending on 31st, March 2010.

Debit balances

Amount

Rs. Credit balances Amount Rs.

Purchases 70,000 Capital account 56,000

Sales returns 5,000 Sales 1,50,000

Opening stock 20,000 Purchase returns 4,000

Discount allowed 2,000 Discount received 1,000

Bank charges 500 Sundry creditors 30,000

Salaries 4,500

Wages 5,000

Freight inwards 4,000

Freight outwards 1,000

Rent, rates and

taxes 5,000

Advertising 6,000

Cash in hand 1,000

Plant and

machinery 50,000

Sundry debtors 60,000

Cash at bank 7,000

Total 2,41,000 Total 2,41,000

Adjustment :

1. Closing stock on 31st March 2010 was Rs.40000.

2. Depreciation on plant and machinery 20%.

3. Bad debt of 10% is required to be provided on debtors.




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Unit: 3Book Keeping-II


1. In which book transaction of credit purchase recorded?

2. When some goods are returned to supplier, which note is sent along with it?

3. Which transactions are recorded in the Sales book?

4. What is contra transaction?

5. Who prepares bank reconciliation statement?

6. Debit balance in the pass book shows which balance?

7. What are the various types of subsidiary books?

8. What is cash discount?

9. Credit balance in the pass book shows which balance?

10. Write an objective of preparing bank reconciliation statement.

11. Bank reconciliation statement is a?

12. Which transactions recorded in the purchase book?


1. Write any four transactions which reduce bank balance.

2. Find the amount recorded in Sales book:

Sold goods of Rs.8000 at 2% Trade discount and 5% cash discount to Ketul.

3. Why is the preparation of Bank Reconciliation Statement necessary?

4. List any four subsidiary books.

5. Give any two reasons for the difference between bank balance as per cash book and bank

balance as per pass book.

6. Find the amount recorded in purchase book:

Purchased goods of Rs.15000 at 5% Trade discount and 2% cash discount from jay.

7. In which book transaction of returns outwards recorded?

8. Sales return book is also called?

9. What is debit note?

10. Give specimen ruling of sales book.

11. What is credit note?

12. What is meant by cash book?

13. How is two column cash book written?

14. What is a Bank Book?

15. Cash account always shows which balance?

16. What is a Bank Reconciliation Statement?




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3.1 Subsidiary Books

Ex: 1. Enter the following transactions in the Purchases book, sales book and returns

books of Shri Manish.

2010

March.1:

Purchased goods from Kapil at a trade discount of 20% Rs.10000.

2: Of these ,half the goods are sold to Gautam at a profit of 20%

2: Purchased furniture from Abhilash on credit Rs.300.

3: Gautam returned defective goods at Rs.240, which we returned to Kapil.

4: Purchased goods of Rs.2000 from Ganesh at 20% trade discount and 5% cash

discount. Paid half the amount in cash.

5: Sold to Dipak goods for cash Rs.300.

6: Mayank placed an order to supply goods Rs.1000.

7: Sent goods to Mayank as per his order and paid Rs.10 for carriage on his behalf.

8: Returned defective furniture to Abhilash Rs.100.

Ex: 2. Enter the following transactions in the Purchases book, sales book and returns

books. 2010

April.2: Purchased goods of Rs 5000 at 10% trade discount from Jigar.

3: Furniture of Rs 500 purchased on credit from Navin.


6: Goods of Rs.6000 were sold to Chirag.

8: Goods of Rs.1000 were sold to Yatin at 10% trade and 10% cash discount.

10: Purchased goods from Dharmesh Rs.10000 at 10% trade discount and one half of

the goods purchased were sold to Sagar after charging 10% profit on cost.

11: Chirag returned the defective goods of Rs.2000 to us, which we have returned to

Jigar with debit note no: 189.

Ex: 3. Enter the following transactions in the Purchases book, sales book and purchases

return and sales return book. 2010

March.1: Purchased goods of 6000 from Kapil at 10% trade discount and 5% cash

discount. Half amount paid by cash.

2: Sold all the goods purchased from Kapil to Deval at 10% profit on sales price.

3: Deval returned goods of Rs.600 being defective which we have returned to Kapil.

10: Purchased goods of Rs 2000 from Ruchita at 10% trade discount.

18: Sold goods of Rs 4000 to Pinal at 10% trade discount.

20: Sent goods of Rs.3000 to Mitul.

25: Sold goods of Rs.1500 to Komal at 5% cash discount and received ¾ amounts in

cash.

30: An order for goods of Rs.1000 is received from Manish.

Ex.4:Prepare purchase book ,sales book ,purchase return book and sales return book

in the books of Ganesh from the following transactions:

2010

Jan.1: Sold the goods Rs.15000 to Narad at 10% trade discount.




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3: Purchased from Akash goods of Rs.20000 at 10% trade discount.

4: Out of goods purchased from Akash sold half of the goods (before deducting

discount) to Dharti adding 20% profit on cost.

8: Sold goods of Rs.8000 to Hawa for cash at 2% cash discount.

11: Purchased goods of Rs.40000 from Vinod.

14: Dharti returned half of the goods sold to him. This was returns to Akash.

18: Purchased a machine from Patel for Rs.15000.

21: Sold to Sangeeta goods of Rs.8000 at 10% trade discount.

23: Sangeeta returned entire goods sent other goods sent other goods of rs.3000 to

Sangeeta for which she made payments immediately by cheque.

25: Placed an order with Dipika for supply of goods of Rs.10000 at 5%trade discount.

26: Bhaskar placed an order for supply of goods of Rs.10000 at 5% trade discount.

30: All the goods for which order was placed with Dipika were sent by Dipika

directly to Bhaskar as per our instruction to supply goods to Bhaskar as per his

order.

Ex: 5. Prepare columnar Subsidiary book Viz. purchase book, sales book, purchase

return book and sales return book in book of Sanjay from following transaction

2009

March-1:

Purchased from Raj 150 balls at Rs.14 per ball and 75 bats at Rs.300 per bat on

credit at 10% trade discount and 5% cash discount.

March-3: Sold following goods to Rajesh at 5% cash discount:

Balls:45 Nos. at Rs.50 each

Bats:25 Nos. at Rs.350 each

March-8: Purchased following goods from Dimple at 10% trade discount:

Balls:75 Nos .at Rs.90 each


March-10: Sold following goods to Ajay at 5% trade discount:



March-14: Ajay returned half of the goods and sent credit note No.30 to him

March-15: Returned following goods to Raj:




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Balls: 25 Nos.

Bats:25 Nos.

March-17: Goods purchased from Dimpal were sold to Deep at following price:

Balls: at Rs.100 each

Bats: at Rs.650 each

March-19: Deep returned half of the goods which were returned to Dimpal

March-22: Cash purchased:



Ex: 6. From the following transaction, prepare various subsidiary books in the books of

Shri Krunal Trader with the columns of sales tax, Mahajan Lago, Packing expense and

railway freight.

2010

April 1: Purchased goods of Rs.25000 at 10% trade discount from Sanam sent the bill by

adding sales tax at 4% Mahajan Lago Rs.200 and packing expenses Rs.200

5: Sold goods of Rs.10000 to Mamata at 10% trade discount and sent the bill by

adding 2% sales tax Mahajan Lago Rs.120 Packing expense of Rs.75 and

Railway freight Rs.55.

6: We returned goods to Sanam of Rs.3000 and sent debit note with sales tax Rs.75

and Railway freight Rs.40

7: Mamata returned goods of Rs.1000 and we have given credit of Rs.20 for sales

tax and Rs.20 Railway freight to her.

8: Purchased goods of Rs.5000 from Uva with sales tax 5% and Mahajan Lago 2%

paid half of the amount by cash.

14: Sold goods of Rs.5000 to Daya. Sales tax Rs.180 and Mahajan Lago Rs.75.

18: Daya returned goods of Rs.800 for which given a credit to her Rs.50 for sales tax

and Rs.30 for Mahajan Lago.

25: Returned goods of Rs.1500 to Uva and sent a debit note with Sales tax.

Ex: 7. From the following transactions, prepare various subsidiary books in the books

of Shri Nitin showing columns for various expenses:

2010

May.1: Purchased from Priya Corporation goods of Rs.10000 at 10% trade discount.

Sales tax 5%, railway freight Rs.150, Mahajan Lago Rs.30 Invoice No.111.

3: Purchased goods of Rs.8000 from Paresh Traders ,sales tax 5%,railway freight

Rs.100 and carriage Rs.50.

5: Sold goods of Rs.6000 to Mala corporation at 10% trade discount .Sales tax at

10%, carriage Rs.30, railway freight Rs 30.Bill No.713.




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8: Sold entire goods purchased from Paresh traders to Mita traders at 25% profit on

cost ,on two months credit .charged sales tax 5% ,Mahajan Lago Rs 20,railway

freight Rs.150 and carriage Rs.50.

11: Mala corporation returned 50% of goods and they were given credit for sales tax

Rs 270, railway freight Rs 50 and carriage Rs.10 credit note No.11.

15: Sold goods of Rs 10000 to Chandra Traders at 10% trade discount, sales tax 2%,

carriage Rs 50 and railway freight Rs 100.Bill No.1001.

21: Purchase furniture of Rs 5000 from Vinod .Received bill with 10% sales tax.

25: Mita Traders returned half of the goods. Gave credit of sales tax Rs.250, railway

freight Rs 50 and carriage Rs 20. Credit note No.12.

28: Goods returned by Mita Traders were returned to Paresh Traders Debt note no.

10. Rebate for sales tax of Rs 200, railway freight of Rs.50 and carriage of Rs 20

will be received in is to be allowed by Paresh

Cash Books

Ex: 1.Enter the following transaction in the cash book of Shri Sharad Parikh and find

out the cash balance.

2010

June 1:


2: Purchased furniture Rs.1000 and stationary Rs.200.

4: Purchased goods of 1500 for cash and paid carriage 200.

5: Sold goods for cash Rs.3000.

8: Paid salaries Rs.2000.

10: Received commission Rs.2500.

Ex:2 .Enter the following transaction in the two column cash book of Vardhman

stores having cash and Bank columns:

2010

July 1:

Cash balance Rs.11000,bank balance Rs.6000.

5: Cash purchases Rs.1000,cash sales Rs.2000.

7: Rs.5000 paid into bank.

8: Received a cheque for Rs.1000 from Mihir.

10: Paid salary by cheque Rs.400.

11: Sold goods Rs.4000 and received cheque which was paid in the bank.

20: A cheque which was received from Mihir was paid into bank.

22: Withdrawn Rs.4000 for office expenses and Rs.5000 for personal use from the

bank.

24: The cheque given by Mihir and paid into the bank was dishonored.

26: A dividend of Rs.1500 collected by the bank was credited and Rs.10 bank charges

were debited.

28: Purchased goods worth Rs.2000 from Vinit on credit. Paid carriage Rs.100 in

cash.




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Ex:3 .Enter the following transaction in the three column cash book of Shri Rahul

having cash and Bank columns: 2010

Nov 1:

Cash on hand Rs.10000 and bank balance Rs.7000.

2: Paid petty cashier Rs.500.

3: Cash sales Rs.11000 and cash purchase Rs.3000.

4: Cash sales to Rohan Rs.2000 and received a cheque which was immediately

deposited in the bank.

7: Cash sales Rs.2000 at 10% cash discount.

8: Withdrew from bank for shop expense Rs.4000 and for household expense

Rs.2000.

10: Purchase furniture of Rs.2000 and payment by cheque.

15: Paid rent of Rs.1500 by a cheque.

18: Paid salary Rs.3000.

Ex: 4. From following transaction prepare three column cash book of “Ajanta Stores”

2010

March 1:

Opening cash balance Rs.6000 and bank balance Rs.5000

2: Goods of Rs.6000 sold to keyur at 10% trade and cheque received from Keyur

which was paid into bank.

4: Goods of Rs. 9000 sold for cash to Ronak at 10% cash discount.

5: Rs.5000 deposited into the bank.

6: Paid 3000 for salary and Rs.1000 for wages.

8: Rs.300 withdrawn from the bank for personal use.

10: Life insurance premium Rs.800 paid by cheque.

11: Cash purchase Rs.2000.

15: Cash sales Rs.5000.

18: Shop rent Rs.1500 paid by cheque.

20: Bank has credited of Rs.200 for dividend and 100 debits for commission.

Ex: 5.Record the following transactions in the three columns book of Mr.Jayesh for the

month of July, 2010.

2010 July

1:

Cash balance Rs.10000, Bank overdraft Rs.5000.

3: Deposited into the bank Rs.9500.

14: Cash sales Rs.6500 at 2% cash discount.

15: Cash purchases Rs.5000 at 5% cash discount.

18: Received from Mr.Ankur Rs.7500 in full settlement of Rs.7600 by cheque.

19: Deposited Mr.Ankur cheque into the bank.

24: Bank informed that Mr.Ankur cheque is returned dishonored.

27: Paid sundry expenses Rs.500 in cash and paid salaries Rs.1500 by cheque.

28: Bank debited our account by Rs.750 for payment of insurance premium and

credited in our account for receipt of dividend Rs.850.

30: Withdraw from bank cash Rs.2000 for office use and Rs.600 for personal use.




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Ex: 6.From the following transaction prepare three columnar cash books of Shri

Narmad.

2010

April 1:

Opening cash balance Rs.2500,opening bank overdraft Rs.5000.

3: Goods of Rs.2000 sold for cash at 10% cash discount.

5: Goods of Rs.4000 purchased at 10% trade discount and 5% cash discount and

the amount is paid by cheque.

7: Goods of Rs.7000 sold to Keshav are deposited in the bank.

9: Cheque issued by Keshav is deposited in the bank.

13: Tapi issued a cheque of Rs.6000 towards payment of his old desktop of Rs.6005.

15: Rs.2000 for salary and Rs.1500 for railway freight are paid by cheque.

17: Rs.3100 deposited into the bank.

20: Rs.2500 withdrawn from the bank for payment of shop rent.

21: Rs.3000 paid for shop rent.

26: As more money required in the business personal vehicle of Rs.10000 is sold for

Rs.8000 and Rs.7000 brought in the business.

28: Rs.5000 deposited in the bank.

Ex: 7.Record the following transactions in the three columns book of Mahavir for the

month of June, 2010. June 1: Cash balance Rs.4200, bank overdraft Rs.3050.

2: Issued a cheque of Rs.2200 to Vipin in full payments of his due of Rs.2250.

3: Sold goods of Rs.4000 to Rekha at 10% trade discount. Paid half the amount by

cheque.

4: Deposited Rekha‟s cheque into bank.

5: Sold goods of Rs.3000 to Ajit at 5% cash discount. He issued a cheque of 2/3

amount which is immediately deposited in the bank.

6: Purchased goods of Rs.5000 from Bhathawala at 10% trade discount and 5%

cash discount if the payment is made within 10 days.

7: The cheque received from Rekha is dishonoured.

10: Issued a cheque in full settlement to Bhathawala.

12: Purchased stationary of Rs.200 by cheque.

14: Purchased goods of Rs.2000 from Mehata at 10% trade discount and 5% cash

discount. Paid Rs.410 in cash and remaining amount by cheque.

20: Against the dues of Mr Jammandas he gave a cheque of Rs.1350 after deducting

10% cash discount.

21: Cheque received from Jamnadas was endorsed to Kevat.

25: Withdrew from bank for office exp.Rs.1000 and for household to Rs.250.

30: Keeping Rs.1000 on hand, excess cash was deposited in the bank.

3.2Bank Reconciliation Statement

Ex: 1.From following information given bellow, find out the bank balance as per pass

book on 31 March. Bank balance as per cash book Rs.10000.Prepare Bank

reconciliation statements.




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2010

March 1: A cheque of Rs.5000 is deposited in to bank, but not credited by bank.

2: A cheque of Rs.4000 is issued but not debited by bank.

3: A cheque of Rs.2000 is directly deposited in bank by Manoj.

4: Dividend of Rs.1000 is collected and credited by bank.

5: Bank interest of Rs.100 is credited by bank, which is not recorded in cash book.

6: The cheque of Rs.1000 gives the Prashant which is not recorded in cash book.

Ex: 2.From following information ,prepare Bank reconciliation statements as on 31-4-

2009 of Vivek .Balance as per cash Rs.7500. 2009

1: The bank had collected interest Rs 1500 on the investment and had credited it

In the pass book, but not recorded in cash book.

2: Interest on bank old Rs.250 and bank changes Rs.50, were debited in the pass

book, but not entered in the cash book.

3: Cheques amounting to Rs.5000 were paid into bank of which cheques

amounting only Rs 4500 could be credited.

4: Cheque of amounting 6400 were given to suppliers but only 5400 were

presented.

5: A customer had paid Rs.500 directly to bank account which was not recorded in

cash book.

Ex: 3.Shri Ashok cash book shows the bank balance of Rs.9000 on 31-3-2004.It did not

tally with balance in the Pass book. , prepare the Bank Reconciliation Statement on 31-

3-2004. A cheque of Shri Rajesh zaveri for Rs.600 which was paid into the bank on 23-

3-2004 was not yet credited.

2: A cheque for Rs.800 given to Shri Nalin Bhatt has not been entered in the

passbook.

3: The bank had credited interest of Rs.100, for which no entry appears in the

cashbook.

4: Bank charges of Rs.40 debited in the Pass Book were not entered in the

cashbook.

5: A customer, Shri Bharat Barot had paid a cheque of Rs.600 on 25-3-2004

directly into the bank; this was entered in the cashbook on 31-3-2004.

Ex: 4. On 30th

, June, 2004 the passbook of Shri Shailesh showed a balance of Rs.7500 to

his credit. On comparing the Passbook with the cashbook, the following discrepancies

are found: Prepare a bank Reconciliation statement and find out the bank balance as

per Cashbook.

1: Cheques of Rs.500 were deposited in the bank but were not collected.

2: Cheques amounting to Rs.4000 were issued during the month of June. Out of

which cheques of Rs 2500 were paid by the bank up to 30-6-2004.

3: The bank had debited Rs.10 as commission and credited Rs.45 as interest on

current Account but no corresponding effect was given in cash Book.




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Ex:5.On 31-12-2003 the cash Book of Shri Deepak Desai showed bank balance of

Rs.10000 which did not tally with the balance as shown by his pass book on comprise

the following discrepancies were found:

1: A cheque of 2500 was deposited into bank on 28-12-03.but the amount was

collected by the bank on 2-1-04.

2: Out of the cheques amounting to Rs.2000 drawn and issued, cheque ofRs.1200

was not presented to the bank.

3: The bank debited Rs.20 for commission and credited Rs.160 for interest on his

Current Account, but they have not been entered in the cash book.

4: According to the standing instructions, the bank has paid insurance premium of

Rs.250.

5: The debit side of the bank column of the Cash Book was overcast by Rs.500.

6. A debtor had directly deposited Rs.400 in to Dipak‟s Bank Account on 30-12-

03.This has not been entered in the cash Book.

From above information prepare the bank reconciliation statements.

Ex: 6.On 31st January 2004, the bank balance of a trader of Rs.500 as per his cash

Book, but the following differences were found on comparing his cash Book with Pass

Book.

1: Out of the cheques paid into the bank during January cheques of rs.2500 have not

been credited by the bank.

2: The bank has debited Rs.25 for interest and Rs .5 for bank charge in the pass book

but they have not been recorded in Cash book.

3: A bill receivable of Rs.600 discounted with the bank was debited by the bank

along with noting charges of Rs.15.but it was not entered in the Cash Book.

4: A cheque of Rs.500 drawn on 28-1-2004 was debited by the bank on 3-2-2004.

5: The receipts side of the Cash Book was overcast by Rs.40.

6: A cheque of Rs.215 issued to a creditor was duly paid by the bank, but was

entered in the cash book as Rs.215.

7: An outstation cheque of Rs.150 was paid by the bank on 8-1-2004 and was

credited by the bank but it was written in the cash column of the Cash Book.

From above information prepare the bank reconciliation statements and find out

balance as per Passbook.

Ex: 7.The Pass book of Shri Ramakant shows bank overdraft of Rs.2650 on 30-6-2004.

On comparing the entries in the bank column of Cash book with those of pass Book ,the

following discrepancies were found:

1: Cheque of Rs.8000 was paid into the bank, of which cheques of Rs.5700 are only

credited in pass book.

2: Bank has credited Rs.150 for interest and debited Rs.100 for bank charges.

3: A customer Hariprasad has directly credited a cheque of Rs.2000 into the bank

account of Ramakant.

4: A cheque of Rs.800 deposited into the bank was omitted to be recorded on Cash

Book.

5: A bill receivable of Rs.1200 earlier discounted with the bank was dishonoured

and bank has debited Ramakants account with Rs.1230 including bank charges.




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6: A cheque of Rs.1450 issued to a creditor Ramanlal and cleared by bank, which

was not recorded in cash book.

7: Bank has paid Rs.1100 for insurance premium and Rs.600 for call on shares on

behalf of Ramakant but the transitions are not found in cash book.

8: Bank has collected Rs.1800 for dividend on his behalf and credited in to his

account, but it is not recorded in cash book.

9: A cheque of Rs.1550 issued to a creditor Rajnikant is entered in cash book as

Rs.550.

(1) Prepare bank reconciliation statement as on 30-6-2004.

(2) Find out correct bank balance as per cash book on 30-6-2004

Ex:8.Prepare Shree Bakul’s Reconciliation statement as on 30-4-2004 from the

following particulars:

(1) Cheque deposited Cheque realised on Rs.

8-4-2004 14-4-2004 6,250

13-4-2004 22-4-2004 2,500

25-4-2004 05-5-2004 750

29-4-2004 08-5-2004 1,225

(2) Cheques drawn in April, 2004 but presented in May, 2004: Kavasji Rs.1, 225:

Sorabji Rs.1, 525.

(3) Bank had debited rs.125 for commission and credited rs.625 for interest in the

pass book, but recorded in the Cash book.

(4) A cheque for Rs.250 received from a customer on 30-4-2004 was recorded in

cash book bank column but it was deposited in bank on 1-5-2004.

(5) On 30-4-2004 cash book showed a bank balance (debit) of Rs.45, 000.




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Unit: 4 Stock Inventory Valuation


1. In which method stock is valued at a price which is almost near to current market price?

2. Which inventory control method does the stock consists first?

3. Which Method stock consists of first purchase?

4. Give the full name of LIFO.

5. In which method, goods remain in the stock of last purchase?

6. In LIFO system, the goods which are purchased ……… will remain in stock


1. What is FIFO Method?

2. Write the two advantages of LIFO method.

3. State the difference between „FIFO‟ and „LIFO‟ Methods of stock valuation

4. What is LIFO Method?

5. Weighted average price of 100 units is Rs 28, if the purchase price of 40 units is Rs 25,

then the purchase price of the remaining units would be Rs………..


Ex:1 The following information relates to material “M” used in a factory:

Date Particulars Units Per unit Amount

15-1-08

22-1-08

24-1-08

5-2-08

19-2-08

26-2-08

28-2-08

3-3-08

Receipts

Receipts

Receipts

Issues

Receipts

Issues

Receipts

Issues

250

100

50

55

50

350

100

40

1.25

1.30

1.35

-

1.40

-

1.35

-

312.50

130

67.50

-

70

-

135

-

The issues dated 5-2-08 and 26-2-08 are priced on LIFO and FIFO methods respectively.

From 1-3-08 it was decided to use Weighted Average Method for pricing issues. Prepare

stock Register for Material “M”




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Ex:2 The following are the transactions receipt and issues of an item of raw material:

Date Units Price per unit Rs.

2008,

March 1

March 4

March 6

March 10

March 15

March 20

March 23

Purchase

Purchase

Issued

Purchase

Issued

Purchase

Issued

600

1,200

1,000

1,400

1,600

600

200

1.5

2.00

2.00

2.5

Ascertain the quality of closing as on March 31 and state what will be its value in each

case, if the issues are made under the following methods:

(i)First in First Out (ii) Last in, First out

Ex: 3 The following is a summary of one basic raw-material item used in a chemical

product. The Following data relate to the month of March 2008

1-3-08 Opening balance 100 kgs @ Rs 4.9 per kg

4-3-08 Received 50 Kgs. @ Rs 5 per kg

10-3-08 Issued 50 Kgs

15-3-08 Material from the above issue returned from the process 10Kgs

20-3-08 Received 100 Kgs @ Rs 5.20 per kg

25-3-08 Issued 150 Kgs

28-3-08 Received 80 Kgs @ Rs 5.25 per kg

On 31st March, 2008 the stock verifier detected a shortage of 5 kgs.

Prepare a stock register under FIFO Method and find the value of closing stock on

31-3-08




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Ex: 4 In the beginning of Octber, 2008, a brush company had a stock of 10,000 brushes

valued at Rs 10 per unit. Other purchases during the month were as follows:

Purchases:

October 7 4,000 Brushes at Rs. 12.50 per brush



Issues:

October 16 16,000 Brushes

October 28 10,000 Brushes

If the issues prices are calculated by (i) FIFO method and by (ii) Weighted average

price method, what would be value of closing stock at the end of the month?

Ex:5 The following is a summary of receipt and issues of material Z in a factory during

January, 2008

Date

Receipt Issues

Unit Rate per unit

Rs.

Date Units

01-1-08

05-1-08

14-1-08

25-1-08

90

180

210

90

4

6

6

8

12-1-08

20-1-08

29-1-08

150

240

30

The issue on 12-1-08 and 20-1-08 are priced on LIFO and FIFO basis respectively. It was

decided to price the issues of 25-1-08 on Weighted Average Method.

Prepare Stock register for material

Elements of Accounting

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