ACCOUNTANCY
(Based on new SCERT/ NCERT syllabus)
ISLA COMMERCE ACADEMY
Near AKG flyover,
Francis road, Calicut-1
Email: info@islacommerce.com
Mob: 7736 01 01 06, 8089 01 01 08
www.islacommerce.com
ABDUL MUMIN T
(DIRECTOR, ISLA COMMERCE ACADEMY)
PREFACE
We are glad to present before you the study material based on continuous
and comprehensive evaluation (CCE). This study material includes all the necessary
facts, concepts, equation and problems which are helpful to score full mark in public
examination. To make learning process easier and contended the book therefore, is
an up to date, dependable and learner friendly resources
I hope that this study material will help to meet the requirement of all those for
whom it is meant. I am grateful to Mr. Shafeeq V.P. (MD, Synergy Profilez) and
Mr. Bahavudheen (Director, Academis) for giving necessary supports and advice to
prepare the material
Wish you all the best and expect to meet you and greet you in next class next
year.
Good luck
CONTENTS
1
INTRODUCTION TO ACCOUNTING…………………………………………………………………….
1
2
THEORY BASE OF ACCOUNTING ………………………………..………………………………………
4
3
ORIGIN & RECORDING OF TRANSACTIONS…………………………………………………………
7
4
BANK RECONCILIATION STATEMENT ………………………………………………………………….
16
5
TRIAL BALANCE AND RECTIFICATION OF ERRORS………………………………………………..
19
6
DEPRECIATION, PROVISIONS AND RESERVES…………………………………………………….
25
7
BILL OF EXCHANGE …………………………………………………………………………………………….
29
8
FINANCIAL STATEMENTS…………………………………………………………………………………….
36
9
ACCOUNTS FROM INCOMPLETE RECORDS………………………………………………………….
46
10
APPLICATIONS OF COMPUTER IN ACCOUNTING……………………………………………....
53
11
COMPUTERISED ACCOUNTING SYSTEM………………………………………………………………
54
12
STRUCTURING DATABASE FOR ACCOUNTING……………………………………………………
55
13
ACCOUNTING SYSTEM USING DATABASE MANAGEMENT SYSTEM……………………..
56
14
PREVIOUS YEAR QUESTION PAPERS……………………………………………………………………..
57
Chapter – 1
1
INTRODUCTION TO ACCOUNTING
Definition of Accounting
Definition by the AICPA-American Institute of Certified Public Accountants (Year 1961):
“Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least, of a financial character, and interpreting the result thereof”
Objectives of Accounting:
1.
2.
3.
4.
Systematic Recording of Transactions.
Calculation of profit or loss of the business.
To Ascertain the Financial Position of Business.
Providing Information to Users.
Qualitative Characteristics of Accounting Information:
1. Reliability: Accounting information must be reliable. A reliable information should be free from errors and bias
and faithfully represent the information.
2. Relevance: The accounting information should be relevant to the decision making needs of the users.
3. Understandability: It must be easily understandable to users.
4. Comparability: The financial statement of an enterprise should be comparable. It should facilitate inter-firm
comparison and intra-firm comparison.
Limitations of Accounting:
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It is historical in nature.
Transactions of non-monetary nature will not be recorded in accounting.
Use of different accounting methods reduces the reliability of accounts.
It does not show the profit or loss of each product, job, process etc.
In accounting price changes are not considered.
Branches of Accounting:
1. Financial Accounting: It is the original form of accounting. The purpose of this form of accounting is to record
transactions in the books of accounts and to prepare financial statements and interpreting the results.
2. Cost Accounting: It deals with the process of ascertainment of cost with the help of this system, the cost of
product or service can be ascertained and controlled.
3. Management Accounting: It is concerned with the use of Financial and Cost Accounting information to
managers for making business decisions.
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INTRODUCTION TO ACCOUNTING
2
Users of Accounting Information:
Internal Users
 Owners
 Management
 Employees
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External Users
Creditors
Investors
Researchers
Government
Customers
Public
Difference Between Book Keeping and Accounting:
Book Keeping
Purpose of book-keeping is to keep systematic
record of transactions and events of financial
character in order of its occurrence.
Accounting
Purpose of accounting is to find results of
operating activity of business and to report
financial strength of business.
Book-keeping is a foundation of accounting
Accounting is considered as a language of business.
Book-keeping is carried out by junior staff.
Accounting is done by senior staff with skill of
analysis and interpretation.
Output of book-keeping is an input for
accounting.
Output of accounting permit informed judgments
and decisions by the user of accounting
information.
BASIC ACCOUNTING TERMS:
1. Transaction: It means an event or a business activity which involves exchange of money or money’s worth
between parties.
2. Assets: Asset is a resource owned by the business with the purpose of using it for generating future profits.
i. Fixed Assets: (The asset which is intended to be used for long period (above one year)
a) Tangible Assets: Tangible assets are the capital assets which have some physical existence.
(Eg. Land, Machinery, Building, Furniture etc.)
b) Intangible Assets: The capital assets which have no physical existence but are represented by rights in
certain things. (Eg. Goodwill, Patents, Copyrights, Trade-marks etc.)
c) Wasting Assets: Assets which get exhausted to the extent of extraction. (Eg. Mines, Quarries, oilfield etc.)
d) Fictitious Assets: Fictitious assets means the assets which are not actually assets of the company but
shown on the assets side of the balance sheet. Fictitious assets are the expenses or losses which are not
fully written off (not offset in the Profit and Loss A/c) during particular accounting period. These
expenses or losses are spread over more than one year. (Eg. Business loss, Preliminary expense,
Discount on issue of shares etc.)
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INTRODUCTION TO ACCOUNTING
3
ii. Current Assets: cash and other assets that are expected to be converted to cash within a year. (Eg. Cash in
hand, Cash at bank, Stock, Debtors, Bills receivable, Prepaid expense, Accrued income etc.)
3. Liabilities: It is an obligation of financial nature to be settled at a future date. It represents amount of money
that the business owes to the other parties.
i. Non-Current Liabilities (Long term Liabilities): Liabilities which are payable after a long period (above one year)
(Eg. Bank loan, Debentures, Mortgage etc.)
ii. Current Liabilities: Liabilities which are payable within a short period (less than one year).
(Eg. Creditors, Bank overdraft, Bills payable, Outstanding expense, Income received in advance etc.)
4. Capital: It is amount invested in the business by its owners.
5. Drawings: It represents an amount of cash, goods or any other assets which the owner withdraws from business
for his or her personal use.
6. Expenses: This represents expenditure incurred to earn revenue of the current period . (Eg. Purchase, Wages,
Freight, Salary, Rent, Stationary, Insurance, Discount allowed etc.)
7. Income: These are the amounts of the business earned by selling its products or providing services to customers,
called sales revenue. Other items of income common to many businesses are: commission, interest, dividends,
royalties, rent received, etc.
8. Purchases: The amount of goods purchased by a business both for cash and credit and are meant for sale.
9. Sales: It is the revenue or income earned by a business through the sale of goods and services.
10. Debtors or Trade Receivables: A debtor is a person who owes money to the business.
11. Creditors or Trade Payables: A creditor is a person to whom the business owes money.
12. Voucher: It is the documentary evidence in support of transaction.
Difference Between Capital Expenditure and Revenue Expenditure:
Capital Expenditure
The expenditure incurred in acquiring a capital
asset or improving the capacity of an existing
one, resulting in the extension in its life years.
Revenue Expenditure
The expenditure incurred in running day to day
operations.
Its benefits extend to more than one year.
Its benefits extend to only one year.
It is a real account.
It is a nominal account.
It is shown in the balance sheet.
It is shown in the profit and loss account.
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Chapter – 2
THEORY BASE OF ACCOUNTING
4
ACCOUNTING PRINCIPLES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP):
A widely accepted set of rules, conventions, standards, and procedures for reporting financial information, as
established by the Financial Accounting Standards Board are called Generally Accepted Accounting Principles.
Accounting Assumptions or
Concepts
• Business/Accounting entity
• Money measurement
• Going concern
• Accounting period
Accounting Principles
Modifying Principles
• Revenue Realisation
• Verifiability or Objectivity
• Matching
• Full disclosure
• Dual aspect (or Duality)
• Historical Cost
• Materiality
• Consistency
• Conservatism (Prudence)
• Timeliness
• Substance over legal form
• Practice in industries
1. Business/Accounting Entity Concept: (Separate existence, Owner and business are separate entities)
 This concept explains that the business is distinct from the owner. Thus, the transactions of business
only are to be recorded in the books of business.
 when a person brings in some money as capital into his business, in accounting records, it is treated
as liability of the business to the owner.
2. Money Measurement Concept: (Transactions involving money will be recorded)
 According to this concept, transaction involving money or money`s worth will be recorded in the
books of accounts. (Eg. Cash sales, Rent paid, Bought Furniture etc.)
 Transactions which cannot be expressed in money do not find place in the books of accounts.
(Eg. Poor planning, Appointment of a staff, Qualities of employee etc.)
3. Going Concern Concept: (Business will last for a long time)
 This concept assumes that the business has a perpetual succession or continued existence.
 There is no intention to liquidate the business in the immediate future.
 (Eg. Classification of fixed assets and current assets and current and non-current liabilities etc.)
4. Accounting period Concept: (The period for which profit and loss a/c is prepared)
 According to this assumption, the life of a business is divided in to different periods for preparing financial
statements.
 Generally business concern adopts twelve months period for measuring the income of the concern.
This time interval is known as accounting period. (ie, April 1- March 31 or Jan 1 – Dec 31)
5. Revenue Realisation (Revenue Recognition):
 This Concept deals with the point of time at which the revenue is earned. (eg: Revenue from sale is realized
when sale is made.)
 Rent received, Interest received, Commission received etc. is recognized on time basis. Eg. Commission for
month of December 2019 received in 2020 January will be treated as revenue of FY 2019 itself.
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THEORY BASE OF ACCOUNTING
5
6. Objectivity or Verifiability Concept:
 Under this principle, accounting data must be verifiable.
 In other words, documentary evidence of transactions must be made which are capable of verification by
an independent respect.
 Eg. Invoice, Voucher, Cash memo, Debit note, Credit note etc.
7. Matching Concept:
 Cost or expense of a business are matched with the revenue of that period in order to ascertain the profit or loss.
 It means that all incomes and expenses relating to the financial period to which the accounts relate
should be taken in to account without regard to the date of receipts or payment.
 (Eg. Outstanding expense, accrued income, Prepaid expense etc.)
8. Full Disclosure Concept:
 Accounting statement should disclose all material facts for the benefit of the users. (Eg. Method of
valuation of stock, contingent liabilities are shown as a footnote of balance sheet.)
9. Dual Aspect Concept:
 Every business transaction has a dual effect – giving aspect and receiving aspect.
 The duality principle is commonly expressed in terms of fundamental accounting equation,
Assets = Liabilities + Capital
10. Cost Concept (Historical Cost):
 All Transaction should be recorded in at their acquisition cost. The cost of acquisition is the cost of
purchase of asset.
11. Consistency Concept:
 Accounting practices should remain the same from one year to another.
 (Eg. Methods for computation of depreciation, Valuation of inventories etc.)
 This facilitates inter-firm and intra-firm comparison.
12. Conservatism Concept (Prudence):
 This is a concept of playing safe, which is followed while preparing the financial statements.
 The idea of this concept is to consider all possible losses and to ignore all probable profits.
 Eg. (valuing closing stock at cost or market value whichever is lower; creating provision for
doubtful debts, discount on debtors; writing off intangible assets like goodwill, patents, etc)
13. Materiality Concept: (Importance to material fact, ignoring insignificant details)
 Materiality means relevance or importance or significance.
 It is generally accepted in the accounting circle that the accounting statements and records must reveal all
material facts.
14. Timeliness: (Financial statement can be useful to the end users only when it is made available to them in time)
15. Substance over legal form (Transaction are recorded with their substance and not legality)
16. Practice in industries
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THEORY BASE OF ACCOUNTING
6
BASIS OF ACCOUNTING
1.
Accrual Basis of Accounting:
 Accrual Basis of Accounting is a method of recording transactions by which revenue, costs, assets and
liabilities are reflected in the accounts for the period in which they accrue.
 This basis is also referred to as mercantile basis of accounting.
2.
Cash Basis of Accounting:
 Cash Basis of Accounting is a method of recording transactions by which revenues, costs, assets and
liabilities are reflected in the accounts for the period in which actual receipts or actual payments are made.
Accounting Standards:
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Accounting standards are considered as a guide for maintaining and preparing accounts.
Accounting standards may be defined as the accounting principles and rules which are to be
followed for various accounting treatments while preparing financial statements on uniform basis
and which will reveal the same meaning to all the interested groups.
Accounting standard Board of India (ASB)
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The Institute of Charted Accountants of India (ICAI) constituted an Accounting Standards Board (ASB) in
April, 1977 for developing Accounting Standards.
The primary duty of ASB is to formulate the accounting standard for India.
During the formulation of accounting standards, the ASB considered the applicable laws, usage, customs and
the business environment existing in our country.
The ASB will give due consideration to International Accounting Standards (IASs) issued by the International
Accounting Standard Committee and tries to integrate them to the extent possible.
IFRS (International Financial Reporting Standards)
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International Financial Reporting Standards (IFRS) is a set of accounting standards developed by an
independent, not-for-profit organization called the International Accounting Standards Board (IASB).
The goal of IFRS is to provide a global framework for how public companies prepare and disclose their
financial statements.
IFRS provides general guidance for the preparation of financial statements, rather than setting rules for
industry-specific reporting.
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7
ORIGIN & RECORDING OF TRANSACTIONS
Chapter – 3
Double Entry System:
Every transaction has two fold aspects, i.e., one party giving the benefit and the other receiving the benefit.
Every transaction is divided into two aspects, Debit and Credit. One account is to be debited and the
other account is to be credited.
Every debit must have its corresponding and equal credit.
Accounting Equation:

Accounting equation signifies that the assets of a business are always equal to the total of its liabilities
and capital (owner’s equity). The equations read as follows:
ASSETS = LIABILITIES + CAPITAL

The above equation can also be presented in the following forms,
Liabilities = Asset – Capital
Capital
= Asset – Liabilities
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It is also called Balance Sheet equation.
Format of Accounting Equation:
Transactions
Cash
Started business with
cash ₹ 10,000
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

Assets
+ Bank + Stock + Furniture + Debtors
Liabilities + Capital
Creditors + Capital
10,000 +
0
+ 0
+
0
+ 0
0
0
+ 10,000
Purchased goods for
₹ 3,000 on credit
New equation
0
+ 3,000 +
0
+ 0
3,000
+
10,000 + 0
+ 3,000 +
0
+ 0
3,000
+ 10,000
Cash deposited into
bank ₹ 5,000
New equation
Total
(5000) + 5,000 + 0
+
5,000 + 5,000 + 3,000 +
13,000
0
0
+ 0
+ 0
0
3,000
+ 0
+ 10,000
13,000
+
0
The concept of Debit and Credit
As already stated, every transaction involves give and take aspect. In double entry accounting, every
transaction affects and is recorded in at least two accounts.
When recording each transaction, the total amount debited must equal to the total amount credited.
In accounting, the terms — debit and credit indicate whether the transactions are to be recorded on the
left hand side or right hand side of the account
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ORIGIN & RECORDING OF TRANSACTIONS
8
Rules of Debit and Credit

There are two approaches for deciding an account is debited or credited.
1. American Approach or Modern Approach
2. British Approach or Traditional Approach
American approach
Assets
Expenses
Incomes
Liabilities
Capital
Debit
Increases
Increases
Decreases
Decreases
Decreases
Credit
Decreases
Decreases
Increases
Increases
Increases
British Approach
1. Real Account: (Tangible and intangible assets)
Debit what comes into business
Credit what goes out of business
2. Nominal Account: (All expenses and all incomes)
Debit all expenses or losses
Credit all income or gains
3. Personal Account:
a) Natural persons like Afeef A/C, Khaliq A/C, Shafeeq A/C etc.
b) Artificial persons like companies, partnership, BOI, AOP etc. (Eg. ABC Co. A/C, Infosys A/C, Bharath A/C.)
c) Representative personal accounts (Eg. Outstanding expense, Prepaid expense, Accrued income etc.)
Debit the receiver
Credit the giver
Books of Prime Entry (Journal):
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A journal is often referred to as Book of Prime Entry or the book of original entry.
In this book transactions are recorded in their chronological order.
The process of recording transaction in a journal is called as ‘Journalisation’.
The entry made in this book is called a ‘journal entry’.
Format of Journal
Date
Particulars
LF
Debit (₹)
Credit (₹)
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9
Source Document:
Business transactions are usually evidenced by an appropriate document such as Cash memo, Invoice, Sales bill,
Pay-in-slip, Cheque, Salary slip, etc.
A document which provides evidence of the transactions is called the Source Document or a Voucher.
Ledger:
ledger is also called the Principal Book
It contains different accounts where transactions relating to that account are recorded.
It as a book of secondary entry.
As and when the transaction takes place, it is recorded in the journal in the form of journal entry. This entry is
posted again in the respective ledger accounts under double entry principle from the journal. This is called
ledger posting.
Format of Ledger:
Dr
Date
Particulars
Cr
JF Amount
Date
Particulars
JF Amount
Difference Between Journal and Ledger:
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Journal
Book of prime entry or original entry
Ledger
Book of secondary entry or final entry
Transactions are recorded in chronological order
Transaction are recorded in analytical order
Also called memorandum book
Also called principal book
Process of recording transaction in the journal is
called journalizing
Process of recording entries in the ledger is called
posting
SUBSIDIARY BOOKS
Subsidiary Books refers to books meant for specific transactions of similar nature.
Subsidiary Books are also known as Special journals or day books.
The sub-division of journal is done as follows:
Cash Book
For recording all cash and bank transactions
Purchase Day Book
For recording all credit purchase of goods
Sales Day Book
For recording all credit sale of goods
Purchase Return Book/
Return Outward Book
For recording goods returned to suppliers
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Sales Return Book/
Return Inward Book
For recording goods returned by customer
Bills Receivable Book
For recording bills received from customers
Bills Payable Book
For recording bills given to suppliers
Journal Proper
For all other transactions not covered in any of the above categories –
i.e. Credit purchase or sale of assets, Adjustment entries, Rectification entries,
Opening entries, Closing entries, Transfer entries etc.
10
Cash book:
It is a special journal which is used for recording all cash receipts and all cash payments.
Cash Book is a book of original entry since transactions are recorded for the first time from the source documents.
The Cash Book is larger in the sense that it is designed in the form of a Cash Account and records cash
receipts on the debit side and cash payments on the credit side.
Thus, the Cash Book is both a journal and a ledger.
Types of Cash Book:
1. Single Column Cash Book: Single Column Cash book has one amount column on each side. All cash
receipts are recorded on the debit side and all cash payments on the credit side.
Dr
Date
Particulars
LF
Cash Book
Cash
Date
Cr
Particulars
LF
Cash
2. Double Column Cash Book: In this type of cash book, there are two columns of amount on each side of
the cash book (Cash and Bank column)
Dr
Date
Particulars
LF
Cash
Cash Book
Bank
Date
Particulars
LF
Cash
Cr
Bank
3. Petty Cash Book:
 The petty cashier works on the Imprest system.
 Under this system, a definite sum is given to the petty cashier at the beginning of a certain period.
This amount is called imprest amount. The petty cashier goes on making all small payments out of
this imprest amount and when he has spent the substantial portion of the imprest amount, he gets
reimbursement of the amount spent from the head cashier. Thus, he again has the full imprest
amount in the beginning of the next period.
Amount
Analysis of payments
Amount
Date Particulars V.no
Received
paid
Postage Stationary Office cleaning Misc.
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Purchase Day Book:
The purchase day book records the transactions related to credit purchase of goods only.
Date
Purchase Day Book
Name of the supplier
Invoice no.
LF
Amount
Sales Day Book:
The sales day book records transaction of credit sale of goods to customers
Date
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LF
Amount
Purchase Return Book
Name of the supplier
Debit note
LF
Amount
Sales Return Book/ Return Inward Book:
The transactions relating to goods which are returned by the customers for various reasons, such as not
according to sample, or not up to the mark etc. contain in this book.
On receipt of goods from the customer, a credit note is prepared.
A Credit note is prepared, when a party is to be given a credit for reasons other than credit purchase.
Date

Invoice no.
Purchase Return Book/ Return Outward Book:
This book contains the transactions relating to goods that are returned by us to our creditors e.g. goods
broken in transit, not according to the sample etc.
For every return, a debit note (in duplicate) is prepared and the original one is sent to the supplier for
making necessary entries in his book.
A Debit note is a document evidencing a debit to be raised against a party for reasons other than sale on credit
Date

Sales Day Book
Name of the customer
Sales Return Book
Name of the customer
Credit note
LF
Amount
Journal Proper
A book maintained to record transactions, which do not find place in special journals, is known as
Journal Proper.
Following transactions are recorded in this journal:
1. Opening entry
2. Adjustment entries
3. Rectification entries
4. Closing entries
5. Transfer entries
6. Credit sale or purchase of assets
7. Goods withdrawn by owner for his personal use
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ORIGIN & RECORDING OF TRANSACTIONS
Questions
Accounting Equation
1. Show the impact of the following transaction
on the accounting equation:
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Raheem started business with ₹ 1,00,000
Purchased machinery for ₹ 10,000
Purchased goods for cash ₹ 20,000
Credit purchase of goods ₹ 8,000
Cash paid into creditors ₹ 800
Paid wages ₹ 4,000
Goods costing ₹ 10,000 sold on credit for
₹ 14,000
Withdrawn for private use ₹ 4,000
Received interest ₹ 2,000
2. Show the accounting equation on the basis
of following transaction
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Mr. Rahul commenced business with cash
₹ 80,000 and goods ₹ 25,000
Credit purchase of goods worth ₹ 30,000
and cash purchase for ₹ 36,000
Paid to creditors ₹ 16,000
Paid salary ₹ 6,000
Goods worth ₹ 50,000 sold at a profit of
40%, out of which 32,000 received in cash.
Bought furniture for shop ₹ 16,000 and for
personal use ₹ 10,000.
3. Prove the accounting equation from the
following transaction
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Ram commenced business with cash ₹ 30,000
Ram purchased machinery worth ₹ 10,000
for cash
Purchased goods from Joel on credit ₹ 10,000
Goods costing ₹ 7,500 sold on credit for
₹ 10,500
Ram withdrawn ₹ 500 for his personal use.
Cash paid to Joel ₹ 3,000.
Cash paid into bank ₹ 5,000
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12
Journal
4. Enter the following transactions in the journal of
Mr. Khaliq.
Jan 1 Mr. Khaliq started business with cash ₹ 20,000
2 Paid into bank ₹ 10,000
3 Purchased goods for ₹ 2,000
5 Sold goods to Ramu ₹ 4,000
7 withdraw for personal use ₹ 200
10 Credit purchase from Anand ₹ 1,000
11 Cash received from Ramu ₹ 1,000
16 Paid to Mr. Anand ₹ 500
20 Commission received ₹ 300
22 Sold goods for cash ₹ 15,000
23 Cash withdrawn from bank ₹ 1,000
25 Paid rent ₹ 1,500
28 Paid salary ₹ 10,000 by cheque
31 Paid wages ₹ 5,000
5. Journalize the following transactions in the books of
Ajay.
Nov 1 Ajay started business with cash ₹ 1,00,000
3 Bought furniture ₹ 20,000
5 Purchase goods from XYZ co. ₹ 21,500
8 Cash sales ₹ 35,000
10 Paid for office stationary ₹ 250
11 Purchased from Anil ₹ 11,000
12 Open a bank account ₹ 10,000
14 Cash paid to XYZ co ₹ 11,500
16 Goods sold to ABC co. ₹ 20,000
18 Cash withdrawn from bank for personal
use ₹ 1,000
21 Cheque received from ABC co. ₹ 10,000
22 Paid rent ₹ 1,500
24 Paid salary to manager ₹ 1,000
29 Paid insurance premium ₹ 500
6. Journalize the following transactions
 Mubarak started business with cash ₹ 60,000
 He bought goods from X co. ₹ 30,000
 He purchased furniture ₹ 5,000
 He paid salary ₹ 1,000
 Sold goods to Adarsh ₹ 45,000
 He received commission ₹ 6,000
(Assuming CGST @9% and SGST @9%)
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ORIGIN & RECORDING OF TRANSACTIONS
Sub division of journal
Cash Book
7. Enter the following transactions in single
column cash book and find balance
Jan 1 Opening balance ₹ 30,000
5 Received cash from sunil ₹ 4,500
6 Purchased goods for cash ₹ 6,000
10 Cash deposited into bank ₹ 5,000
15 Sold goods on credit ₹15,000
21 Paid wages ₹ 2,000
25 Purchase stationary ₹ 500
26 Paid to Anil ₹ 2,500
28 Withdrew cash from bank for office use
₹ 1,000
30 Paid salary ₹ 4,100
31 Paid rent ₹ 1,500
8. Record the following transactions in a single
column cash book.
Dec 1 Nihal started business with cash ₹ 10,000
2 Open a bank account ₹ 5,000
3 Purchased goods for cash ₹ 500
4 Bought office furniture ₹ 1,000
7 Sold goods for cash ₹ 6,000
10 Paid insurance premium ₹ 250
14 Paid for stationary ₹ 200
19 Cash received from Anoop ₹ 600
21 Electricity charge paid ₹ 150
24 Purchased goods for ₹ 1,000
25 Cash sales ₹ 2,000
30 Rent paid ₹ 500
9. Record the following transactions in a double
column cash book
Mar 1 Opening balance of cash ₹ 15,000
bank ₹ 3,600
3 Received from Shabari ₹ 3,300
4 Cash sales ₹ 5,000
6 Paid for convenience ₹ 2,400
7 Cash purchase ₹ 3,600
9 Paid to Roshan by cheque ₹ 7,200
11 Cash sales ₹ 2,700
ISLA COMMERCE ACADEMY_ ICA
13
12 Paid salary ₹ 1,200
14 Withdrew from bank for office use ₹ 3,000
16 Paid to Ajay by cheque ₹ 7,500
18 Received from Rathan & co. by cheque and
deposited into bank ₹ 1,500
20 Paid into bank ₹ 2,100
21 Cash sales ₹ 2,700
23 Purchased furniture and paid by cheque ₹ 15,000
25 Received cheque from Joel and send for
collection ₹ 5,400
27 Joel cheque has been dishonoured ₹ 5,400
30 Paid wages ₹ 1,500
31 Paid into bank ₹ 9,000
10. Enter the following transactions in a double column
cash book of Bahavudheen and balance it.
Apr 1 Opening balance, cash in hand ₹ 19,000
cash at bank ₹ 43,000
2 Purchased goods for cash ₹ 12,000
6 Sold goods for cash ₹ 30,000
8 Paid to Shaji by cheque ₹ 22,500
10 Received a cheque from Rahul and deposited
into bank ₹ 31,000
13 Paid into bank ₹ 15,000
16 Purchased stationary ₹ 1,500
19 Received commission ₹ 3,500
22 Withdrew cash from bank ₹ 7,500
23 Paid rent by cheque ₹ 4,500
25 Drew cash from bank for domestic use ₹ 3,000
29 Issued a cheque to Dennis ₹ 10,000
29 Paid into bank ₹ 10,000
30 Bank charges ₹ 50
11. Prepare double column cash book with cash and
bank column from the following transactions.
Oct 1 Cash balance ₹ 2,500
Bank balance ₹5,000 (cr)
3 Received cash on sales ₹3,500
4 Paid cash for purchase of goods ₹ 2,700
6 Withdrew cash from bank ₹ 2,000
9 Paid Sham by cheque ₹ 1,500
12 Personal withdrew from bank ₹ 700
13 Received a cheque from Mithun ₹ 8,000
15 Cheque from Mithun was send into bank
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ORIGIN & RECORDING OF TRANSACTIONS
for collection ₹ 8,000
18 Paid cash for stationary ₹ 175
20 Jose on our customer paid directly into
bank account ₹ 3,000
23 Withdrew cash from bank for office
use ₹ 1,500
24 Paid stationary by cheque ₹ 1,000
25 Paid into bank account ₹ 1,200
26 Received a cheque from Anand and send
into bank account ₹ 5,900
27 Mithun cheque was remitted dishonoured
28 Paid rent ₹ 450
29 Bank charge ₹140
30 Paid John by cheque ₹ 1,400
19 Postage ₹ 42
21 Entertainment ₹ 20
23 Travelling ₹ 12
24 Stationary ₹ 65
26 Entertainment ₹ 24
28 Miscellaneous expenses ₹ 24
30 Postage ₹ 35
Purchase Day Book
14. Enter the following transactions in the purchase book
Jun 1 Bought from Riswan Calicut
100kg sugar at ₹ 5/kg
50kg tea at ₹ 15/kg
7 Purchased from Abin traders Cochin
10 bags of rice at ₹ 150/bag
less trade discount 5%
12. Enter the following transactions into petty cash
book (Imprest system) for the month of July 2020.
Jul 1 Cash received from chief cashier ₹ 500
2 Typing paper ₹ 20
3 Postage ₹ 10
6 Office cleaning ₹ 35
7 Postage ₹ 15
9 Office cleaning ₹ 35
11 Cartage ₹ 25
14 Postage ₹ 18
16 Ink, paper, typing paper ₹ 32
18 Type writing ribbon ₹ 35
20 Telephone charge ₹ 48
22 Office cleaning ₹ 35
24 Nails and polish ₹42
27 Telegram ₹ 52
29 Paper, pencil, pen ₹ 30
13. Record the following transactions in a petty cash
book
Jan 1 Balance in a hand ₹ 125
Received from cashier to make up the
imprest ₹ 375
3 Postage ₹ 41
5 Stationary ₹ 62
8 Entertainment ₹ 15
10 Travelling expense ₹ 26
14 Miscellaneous expenses ₹ 16
16 Entertainment ₹ 24
18 Repair ₹ 28
ISLA COMMERCE ACADEMY_ ICA
14
10 Bought of Rajan Trissur
50 bags of wheat ₹ 100/ bag
less trade discount ₹ 10%
14 Purchased from Don Kannur
15 chests of tea at ₹ 150/chest
21 Purchase from Jishnu Idduki
15 tins of biscuit at ₹ 75/tin
10 tins of sweets at ₹ 60/tin
(Assuming CGST @6% and SGST @6%)
Sales Day Book
15. Following are the transactions taken from the books
of furniture dealer, prepare his sales book.






Sold to Anil
5 wooden tables at ₹ 135/table
Sold to Raman
2 dining table at ₹ 1200/table
trade discount 10%
Sold to Rasheed
1 type writer for ₹ 1,500
Sold to Shamil
2 dressing table at ₹ 275/table.
Sold 50 chairs to Hameed at ₹ 50/chair
Sold to Faris
2 Steel cabinet at ₹ 1,500/each
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ORIGIN & RECORDING OF TRANSACTIONS
Purchase Return Book
16. Enter the following transactions in the purchase
return book and post them to ledger account.
Feb 1 Return to Delhi mills
25m of cotton at ₹ 10/m
15m of linen at ₹ 12/m
less trade discount 10%
4 Return to Nithin mills
30 towels at ₹ 4 each
10 blankets at ₹ 30 each
7 Return to Sneha mills
10 shirt piece at ₹ 30/piece
less trade discount 10%
Sales Return Book
17. From the following transactions prepare sales
return book.



Anand traders return back goods worth ₹ 275
Return goods by Akshay which were defective
₹ 215
Allowance granted to Rahul for breakage of
goods ₹ 250
Ledger:
18. Record the following transactions and post
them to ledger accounts.
Jan 1 Mr. Ahamed commenced business with
cash ₹ 1,00,000
2 Purchase goods for cash ₹ 20,000
4 Sold goods for cash 15,000
7 Bought goods from Akhil ₹ 14,000
9 Sold goods to Adarsh ₹ 30,000
11 Paid wages ₹ 2,000
13 Rasheed purchased goods from us ₹ 1000
15 Cash received from Adarsh ₹ 10,000
17 Paid to Akhil ₹ 10,000
19 Cash received in a commission ₹ 500
21 Paid salary to staff ₹ 5,000
24 Paid rent ₹ 2,500
29 Withdrew cash for personal use ₹ 1,500
ISLA COMMERCE ACADEMY_ ICA
15
19. Enter the following transactions in a double column
cash book and post them to ledger account.
Jan 1 Opening balance cash ₹ 8,350
bank ₹ 2,000
2 Paid into bank ₹ 4,000
3 Received cash from Bhiju ₹ 5,000
5 Paid cash to Vinod ₹ 1,400
7 Received interest ₹ 425
10 Cash sales ₹ 3,900
13 Received a cheque from Danish ₹ 1,500
14 Withdrew cash from bank ₹ 2,500
16 Cheque received from Bhiju was paid into
bank ₹ 1,500
18 Salary paid by cheque ₹ 800
19 Manoj a customer paid directly to bank
account ₹ 1,800
23 Withdrew cash for office use ₹ 1,500
26 Received cash on sales ₹ 3,600
29 Rent paid ₹ 1,000
30 Draw a cheque for personal use ₹ 900
20. Enter the following transactions in the relevant day
book, post them to ledger account.
Jan 1 Bought goods from Anand ₹ 4,500
3 Sold goods to Balan ₹ 1,400
4 Allowance claimed from Anil for shortage ₹ 75
6 Sold goods to Chandran ₹ 1,750
8 Sold goods to David ₹ 700
9 Bought goods from Isac ₹ 1,400
11 Allowance granted to David for shortage ₹ 50
13 Sold goods to Fransis ₹ 850
14 Allowance granted to Chandran for over
charge ₹ 30
15 Sold goods to Gopal ₹ 750
17 Sold goods to Ravi ₹ 650
20 Fransis returned us good ₹ 40
23 Gopal returns goods ₹ 40
24 Return goods to Isac ₹ 150
25 Purchase goods from Damodar ₹ 900
28 Sold goods to Govind ₹ 600
31 Received goods returned by Govind ₹ 35
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16
BANK RECONCILIATION STATEMENT
Chapter – 4
A bank reconciliation statement is a statement prepared by the depositor for the purpose of
reconciling or making agree the cash book balance with the pass book balance on a certain date by making
suitable adjustment.
A Bank Reconciliation statement is prepared with the help of Bank statement (pass book) and bank
column of cash book.
Note: items appearing on the debit side of cash book will be credited by the banker in the pass book
and vice versa.
Specimen of Bank reconciliation statement
Balance as per cash book
+
XXX
(Deposit balance)




Cheque issued but not presented for payment
Interest, dividend, etc. credited in the pass book
Direct payment into the bank by customer
Collection made by the bank behalf of the customer





Cheque deposited but not cleared
Bank charge debited in the pass book
Cheque dishonoured
Interest on overdraft
Payment made by the bank behalf of the customer
Balance as per pass book
Balance as per pass book
Cheque deposited but not cleared
Bank charge debited in the pass book
Cheque dishonoured
Interest on overdraft
Payment made by the bank behalf of the customer




Cheque issued but not presented for payment
Interest, dividend, etc. credited in the pass book
Direct payment into the bank by customer
Collection made by the bank behalf of the customer
Balance as per cash book
ISLA COMMERCE ACADEMY_ ICA
(OD balance)
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
(OD bal.)XXX
(Deposit bal)XXX
XXX
XXX
+
XXX
XXX
(Deposit balance)





XXX
(OD balance)
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
(OD bal.)XXX
(Deposit bal)XXX
XXX
XXX
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Questions
1. On 30th June 2020 the cash book of Akhil showed
debit balance of ₹ 2,905, were as his pass bank
showed a balance of ₹ 2,203 (credit). On checking
the pass book it was found that



A cheque for ₹ 1,510 issued to Vijay on 28th
June was not cashed until 3rd July 2020.
A cheque received from a customer for ₹ 2,225
on 25th Jun was not collected by the bank
before 30th June.
There was a credit in the pass book for ₹ 45 as
interest allowed by the bank and the debit of
₹ 32 for bank charges which were not entered
in the cash book.
Prepare bank reconciliation statement as on
30th June 2020.
BANK RECONCILIATION STATEMENT






Cheque deposited but not cleared ₹ 2,250.
Cheque issued but not presented till Jan 30th
₹ 1,520.
Bank charge not seen in the cash book ₹ 75.
Building rent collected and credited by bank
₹ 4,000.
Prepare bank reconciliation statement and find
out the balance as per cash book.
3. Prepare bank reconciliation statement from the
following. Joel found that his cash balance as on
31st Jan 2021 as per cash book was different from
that and pass book balance.



Bank balance as per cash book ₹ 8,920.
Out of different cheque issued in Jan 2021,
cheque for ₹ 3,900 were not presented for
payment.
Cheque for ₹ 4,750 deposited into the bank
were not collected.
ISLA COMMERCE ACADEMY_ ICA
A customer has paid directly to Anil account a
sum of ₹ 780, for which no entry is found in the
cash book.
Bank paid Anil electricity bill for ₹ 350 which
remains to be recorded in the cash book.
4. On 31st Dec 2020 a cash book of Anand showed a
bank balance of ₹ 5000. From the following
information prepare bank reconciliation statement
and find out the balance as per pass book.



2. January 31st 2020 pass book of Anil showed a
deposit balance of ₹ 19,200 on verifying the pass
book with cash book the following were observed.
17


Cheque had been issued for ₹ 2,500 out of it
cheque worth ₹ 1,500 presented for payment
A cheque from Kumar for ₹ 500 was paid in 28 th
Dec, but was dishonoured and the advice was
received on 3rd Jan.
Cheque worth ₹ 1,400 were paid on 28th Dec but
has not been credited by the bank. One cheque
for ₹ 200 was entered in the cash book on 28 th
Dec but was banked on 2nd Jan 2021.
Pass book shown a debit of ₹ 25 for bank
charges. It also shown a ₹ 380 collected by the
bank as interest
One of the debtor deposited a sum of ₹ 350 in
the account of the firm on 28th Dec. but not
recorded in the cash book.
5. From the following prepare a bank reconciliation
statement. The passbook of Mr.A disclosed a credit
balance of ₹ 8,700 on 31st March 2021.





Cheque amounting to ₹ 2,500 were paid on 27th
March out of which cheque amounting ₹ 800
were credited in the pass book on 2nd April.
Cheque totaling ₹ 4,000 were issued during the
month of march, out of which cheque of the
values ₹ 900 were debited in the pass book after
31st March.
An entry of ₹ 100 of a payment by a customer
direct into the bank appears in the pass book
There was a debit of ₹ 24 bank charges in the
pass book. and there was a credit of ₹ 54 interest
Bank column payment side of the cashbook is
overcast by ₹ 1,000
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BANK RECONCILIATION STATEMENT


Dividend amounting ₹ 200 collected by the
bank appeared in the pass book.
Rent of ₹ 300 paid by the bank on the behalf of
Mr. A appeared in the pass book.
6. From the following prepare BRS and ascertain the
balance as per pass book as on 30th June 2020.






Cash book balance (credit) ₹ 2,700
Cheque recorded in the cash book but
omitted to pay in for collection ₹ 100
Dividend collected and credited in the pass
book ₹ 1,300
Bills receivable discounted was dishonoured
₹ 1,700
Bank charge in the pass book ₹ 50
Cheque issued in June 2020 ₹ 2050 was
presented for encashment in July 2020.
7. Prepare BRS from the following






Overdraft balance as per cash book as on 31st
Dec 2020 ₹ 5,100.
Interest on overdraft debited in the pass book
₹ 170
Bank charges debited in the pass book ₹ 75
Cheque issued but not cashed prior to 31st Dec
2020 ₹ 1,400
Cheque paid in but not cleared before 31st Dec
2020 ₹ 3,100
Bills receivable discounted dishonoured ₹ 900



18
Interest on investment credited by bank amount
to ₹ 21 but not entered in the cash book.
Interest on overdraft ₹ 275 and bank charges
₹ 15 debited by the bank have not yet been
shown in the cash book.
₹ 1,500 on account of bill collected by the bank
appeared as a credit in the pass book but not in
the cash book.
9. From the following particulars, ascertain the bank
balance as per cash book of Swamy as at 31st March
2020.






Credit balance as per pass book as on
31.03.2020 ₹ 2,500.
Bank charges of ₹ 60 had not been entered in
the cash book.
Out of the cheque of ₹ 3,500 paid into the bank,
a cheque of ₹ 1,000 was not yet credited by the
banker.
Out of the cheques issued for ₹ 4,500, cheques
of ₹ 3,800 only were presented for payment.
A dividend of ₹ 400 was collected by the banker
directly but not entered in the cash book.
A cheque of ₹ 600 had been dishonoured prior
to 31.03.2020, but no entry was made in the
cash book.
8. On 31st Dec 2020 the cash book of Rasheed
showed an overdraft of ₹ 2,150. On checking the
cash book with pass book the following facts were
ascertained:


Cheque for ₹ 650, ₹ 810, ₹ 150 issued prior to
31st Dec 2020 have not yet been present for
payment.
Cheque for ₹ 800, ₹ 750, ₹ 375 paid into the
bank on 28th Dec were not collected by bank.
ISLA COMMERCE ACADEMY_ ICA
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Chapter – 5
TRIAL BALANCE AND RECTIFICATION OF ERRORS
19
Trail Balance:


A trial balance is a statement showing the balances, or total of debits and credits, of all the accounts in the
ledger with a view to verify the arithmetical accuracy of posting into the ledger accounts.
Trial balance is an important statement in the accounting process. which shows final position of all accounts
and helps in preparing the final statements.
Objectives of Preparing the Trial Balance:
1.
2.
3.
4.
To ascertain the arithmetical accuracy of the ledger accounts.
To ascertain the balance of any ledger Account.
To help in locating errors.
To help in the preparation of the financial statements.
Trial Balance as on (Date)
Account Name
Debit
Land
XXX
Building
XXX
Furniture
XXX
Plant
XXX
Machinery
XXX
Investment
XXX
Stock
XXX
Cash
XXX
Purchase
XXX
Wages
XXX
Salary
XXX
Freight
XXX
Rent
XXX
Insurance
XXX
Advertisement
XXX
Carriage inward
XXX
Sales return
XXX
Drawings
XXX
Sales
Commission received
Interest received
Discount received
Loan
Creditors
Bills payable
Bank od
Capital
XXX
Credit
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Preparation of trial balance:
 A trial balance can be prepared in the following three ways :
 1) Total Method 2) Balance Method 3) Compound method
ISLA COMMERCE ACADEMY_ ICA
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TRIAL BALANCE AND RECTIFICATION OF ERRORS
20
Total method:
 Under this method, total of each side in the ledger (debit and credit) is ascertained separately and shown in
the trial balance in the respective columns.
 The total of debit column of trial balance should agree with the total of credit column in the trial balance
because the accounts are based on double entry system.
Balance Method:
 This is the most widely used method in practice.
 Under this method, all the ledger accounts are balanced. The balances may be either “debit-balance” or
“credit balance”.
 The account having debit balance are entered in the debit column of the trial balance. Similarly, accounts
showing credit balance are written in credit column.
Compound Method:
 This method is a combination of totals method and balances method.
 Under this method four columns for amount are prepared. Two columns for writing the debit and credit
totals of various accounts and two columns for writing the debit and credit balances of these accounts.
Classification of Errors:
1) Errors of principle: Real a/c
Nominal a/c
(eg: 1. Purchase of machinery has been entered in the purchase book;
2. Sale of machinery had been credited to sales a/c)
2) Errors of omission: omission may be either complete (eg: Credit sale of goods is not recorded in the sales
book) or partial omission ( eg: Cash sales is entered on the cash book but omitted to be posted to sales a/c)
3) Errors of commission: These are the errors which are committed due to wrong totaling, wrong balancing, posting
to wrong account, wrong amount etc.
4) Compensating errors: If the effect of an error in one account is cancelled by the effect of one or more
errors in some other account.
(eg. Purchase book is overcast by 200 and the sales book is also overcast by 200.)
Errors disclosed by trial balance: (One side errors)
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
Posting of transaction in wrong side of the account.
Posting an amount on the wrong side.
Wrong totaling of subsidiary book.
Error is made in carrying forward.
Wrong balancing in the ledger account.
Posting of one aspect of Journal entry in Ledger account.
Recording of one aspect of entry twice.
Omission of posting in one account.
ISLA COMMERCE ACADEMY_ ICA
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TRIAL BALANCE AND RECTIFICATION OF ERRORS
21
Errors not disclosed by trial balance: (Two side errors)
a.
b.
c.
d.
e.





Complete omission of a transaction.
Error of principle
Compensating errors
Posting of an amount in the wrong account but correct side
Entering wrong amount in the subsidiary book.
Suspense Account:
Suspense account is a temporary account opened to make the trial balance agree, till the errors are located
and verified.
Even if the trial balance does not tally due to the existence of one sided errors, accountant has to carry
forward his accounting process to prepare financial statements.
The accountant tallies his trial balance by putting the difference on shorter side as ‘suspense account’.
When the errors are located and the specific accounts and amounts involved are identified, the amounts are
transferred from suspense account to the relevant accounts thereby closing the suspense account.
Thus, suspense account is not placed in any particular category of accounts and is just a temporary phenomenon.
Rectification of Errors
Before the preparation of final accounts
1. One side errors: Affecting only one account. Not require any journal entry for rectification.

Partial omission:
Eg. Cash sales of ₹ 100 is entered on the cash book but omitted to be posted to sales a/c
Rectification: Sales account should be credited with ₹ 100.

Undercast/ overcast
Eg. Purchase return book was undercast by ₹ 50
Rectification: Purchase return account should be credited with ₹ 50

Posting the amount on the wrong side of an account ( double amount)
Eg. ₹ 100 paid to Anoop was entered on the credit side of his account
Rectification: Anoop account should be debited with ₹ 200

Posting wrong amount on the correct side of an account
Eg. Payment of ₹ 1000 to Rahul posted to his debit as ₹ 100
Rectification: Rahul account should be debited with ₹ 900

Posting wrong amount and on the wrong side
Eg. Purchase from Anil for ₹ 5000 were posted to debit of Anil account as ₹ 500
Rectification: Anil account should be credited with ₹ 5,500
ISLA COMMERCE ACADEMY_ ICA
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TRIAL BALANCE AND RECTIFICATION OF ERRORS
22
2. Two side errors: It will effect two accounts. It can only be rectified with journal entries



Complete omission
Eg. Cash sales were not recorded in the books of accounts.
Rectification
Cash
A/c
dr
To Sales A/c
Error of principle
Eg. Purchase of machinery were recorded in purchase book.
Rectification
Machinery A/c
Dr
To Purchase A/c
Posted to wrong account
Eg. Sold goods to Minhaj were posted to minu account.
Rectification
Minhaj
A/c
Dr
To Minu A/c
After the preparation of final accounts
One side errors:

Partial omission:
Eg. Cash sales of ₹ 100 is entered on the cash book but omitted to be posted to sales a/c
Rectification:
Suspense
A/c
Dr 100
To Sales A/c
100

Undercast/ overcast
Eg. Purchase return book was undercast by ₹ 50
Rectification:
Suspense
A/c
Dr 50
To Purchase Return A/c
50

Posting the amount on the wrong side of an account (double amount)
Eg. ₹ 100 paid to Anoop was entered on the credit side of his account
Rectification:
Anoop
A/c
Dr
200
To Suspense A/c
200

Posting wrong amount and on the wrong side
Eg. Purchase from Anil for ₹ 5000 were posted to debit of Anil account as ₹ 500
Rectification:
Suspense A/c
Dr 5500
To Anoop A/c
5500
Two side errors: same as before preparation of final accounts
ISLA COMMERCE ACADEMY_ ICA
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Questions
1. Rajesh commenced business on 1-5-2019 with
a capital of ₹ 1, 00,000. His transaction for the
month of May were as follows:
 Opened a current account with Punjab
National bank ₹ 90000.
 Purchased furniture from ABC Co. and gave a
cheque ₹ 2800
 Bought furniture from Isha Ltd. ₹ 19000.
 purchased goods for cash ₹ 4000.
 Bought goods from Anand Ltd. ₹ 5700
 Returned goods to Anand Ltd. ₹ 200
 Gave a cheque to Isha Ltd. ₹ 10000
 purchased goods from beema ₹ 8000
 Cash sales to Manohar ₹ 4000
 Returned goods to Beema ₹ 250
 Paid Anand Ltd by cheque ₹ 3100 discount
allowed by them ₹ 100
 Ravi bought goods ₹ 7400
 Purchased typewriter for office use from
Remington India Ltd. ₹2980
 Took for personal use goods worth ₹ 500
 Received goods returned by Ravi ₹ 300
TRIAL BALANCE AND RECTIFICATION OF ERRORS
23
Rectification of errors before preparation of Trial
Balance
2. Rectify the following errors:
Credit purchase from Raghu ₹ 20,000
a)
b)
c)
d)
e)
f)
g)
h)
i)
Were not recorded.
Were recorded at ₹ 10,000.
Were recorded as ₹ 25,000.
Were not posted to his account.
Were posted to his account as ₹ 2,000.
Were posted to Reghavs account.
Were posted to the debit of Raghus account.
Were posted to the debit of Raghav.
Were recorded through sales book.
3. Rectify the following errors:
a) The Sales Book has been totaled ₹ 100 short.
b) Goods worth ₹ 150 returned by Green & Co.
have not been recorded anywhere.
c) Furniture purchased from Gulab & Bros. ₹ 1,000
has been entered in Purchases Day Book.
d) Discount allowed to G. Mohan & Co. ₹ 18 has
not been entered in the Discount Column of the
Cash Book. The account of G. Mohan & Co. has,
however, been correctly posted.
 Paid into bank ₹ 5000
 Received from Ravi ₹ 4900 discount allowed
to them ₹ 180
 Sold goods to Davis ₹ 2750
 Paid Isha Ltd. By cheque in full settlement
₹ 8800
 Paid rent for the month ₹ 250
Record the above transaction in the proper
subsidiary book, post them to the respective
ledger accounts and prepare a trial balance as
on 31st May 2019.
4. The following errors has been discovered in the
books of a firm. You are required to rectify these
errors.
a) ₹ 5000 received on the sale of machinery had
been credited to sales account.
b) A purchase of goods from T.Rajan for ₹ 250 had
been credited to the account of B. rajan.
c) The sales day book was overcast by ₹ 250
d) The petty cash balance of ₹ 35 was omitted to
be entered in the trial balance.
e) The addition of purchase return book had been
under cast by ₹ 50.
f)
ISLA COMMERCE ACADEMY_ ICA
A sale of ₹ 2,300 to Mr. Lala was posted to the
credit of Mr. Mala.
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TRIAL BALANCE AND RECTIFICATION OF ERRORS
5. Rectify the following errors:
a) A credit sale of goods ₹ 240 to Anand has been
wrongly passed through the purchase book.
b) An amount of ₹ 2500 received on sale of
machinery is credited to sales account from
the cash book.
c) ₹ 500 spent for repairs of a building was
debited to the building account.
d) ₹ 1000 drawn by the proprietor for his
personal use has been shown as trade
expense.
e) An item of ₹ 600 representing credit sale to
Ramesh, correctly entered in the sales book
has been wrongly posted as ₹ 60.
f)
The discount column on the credit side of the
cash book was added ₹ 20 short.
g) An amount of ₹ 250 due from David which had
been written off as bad in the previous year,
was recovered and had been posted to the
personal account of David.
Rectification of errors after the preparation of
final account by opening suspense account.
6. The trial balance of Mr. Anand extracted on 31st
Mar 2020 was ₹ 561 short on debit side. He opened
a suspense account in which the difference was
entered. A detailed checking of the books disclosed
the following errors.
a) The discount column on the debit side of the
cash book posted to the rent account ₹ 25
f)
24
Purchase returns for ₹ 310 posted to the
debit of purchase account.
g) A sale of ₹ 24.50 to Ajith was correctly
entered in the sales book but was posted
to the credit of Ajith as₹ 42.50.
h) A cheque for ₹ 275 received from Manuel in
settlement of his account had been returned
dishonoured and posted to the debit of
general charges account.
You are required to pass the necessary rectifying
entries and prepare suspense account.
7. Rectify the following errors by passing journal
entries if needed and show the positioning of
suspense account.
a) Goods worth ₹ 250 returned by Simon though
correctly entered in the returns inward book,
was found debit in Sivans account.
b) A credit purchase of goods from Rajan for ₹ 195
has been debited to his account as ₹ 591.
c) A discount of ₹ 40 allowed to soman was shown
in the discount column on the credit side of the
cash book.
d) An amount of ₹ 800 paid to Hari was credited in
his account.
e) Cash received ₹ 175 on sale of an old furniture
has been credited to sales account.
b) ₹ 250 paid to Dinesh posted to debit of
Dinakars account.
c) Payment of rent ₹ 260 debited to landlords
account.
d) Payment of ₹ 1000 to Rajesh posted to his
credit as ₹ 100.
e) ₹ 14 paid for repairs to furniture was entered
in the total column of the cash book, but was
not extended to the appropriate analysis
column.
ISLA COMMERCE ACADEMY_ ICA
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Chapter – 6
DEPRECIATION, PROVISIONS AND RESERVES
25
Depreciation:


“Depreciation” means decline in the value of a fixed assets due to use, passage of time or obsolescence.
Accounting Standard (AS 10) states that “Depreciation is allocated so as to charge a fair proportion of
the depreciable amount in each accounting period during the expected useful life of the asset.”
Causes of depreciation:
1. Wear and tear due to use:
When fixed assets are put to use, the value of such assets may decrease. Such decrease in the value of
asset is called wear and tear.
2. Passage of time:
The value of asset go on decreasing with the passage of time. An asset deteriorates simply with the
passage of time, even though they are not being put to any use.
3. Obsolescence:
In ordinary language, obsolescence means the fact of being “out-of-date”. Obsolescence may cause due
to technological changes, improvement in production methods, change in market demand etc.
Amortization
 Intangible assets such as goodwill, trademarks and patents are written off over a number of accounting
periods covering their estimated useful lives, this periodic write off is known as Amortization.
Depletion:
 It is one of the internal causes of decrease in the value of wasting assets such as mines, oil wells, quarries etc.
 The decline in the value of such asset is called depletion.
Need or purpose of charging depreciation:




To present true and fair financial position.
To fulfill the legal requirements.
To retain fund for replacement.
Depreciation is deductible cost for tax purpose.
Factors affecting the amount of depreciation:
1. Cost of Asset:
Cost (also known as original cost or historical cost) of an asset includes invoice price and other costs
(Transportation, installation etc.), which are necessary to put the asset in use or working condition.
2. Estimated scrap or residual value:
It is the estimated net realisable value (or sale value) of the asset at the end of its useful life.
3. Useful life of the asset:
It is the estimated economic or commercial life of the asset.
ISLA COMMERCE ACADEMY_ ICA
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DEPRECIATION, PROVISIONS AND RESERVES
26
Methods of calculating depreciation:
1. Straight Line Method/ Fixed Installment Method/ Original Cost Method:
 A fixed and an equal amount is charged as depreciation in every accounting period during the life time of
an asset.
 The formula for calculation of depreciation is
Original cost of asset – Scrap value
=
Estimated useful life
2. Written down value method/ Reducing balance method/ Diminishing balance Method:
 Under this method, depreciation is charged on the book value of the asset.
 Since book value keeps on reducing by the annual charge of depreciation, it is also known as reducing
balance method.
 The rate of depreciation is constant (usually a fixed percentage) but the amount allocated for every year
gradually decreases.
Difference between Straight line method and written down value method:
Straight Line Method
Amount of depreciation is same every year.
Written Down Value Method
Amount of depreciation declines year after year.
Depreciation is calculated on original cost of the
asset.
Depreciation is calculated on book value of the
asset.
The value of asset become zero or residual value.
The value of asset will not become zero.
This method is most suitable for assets which get This method is more suitable for assets which
depreciated on account of expiry of working life of require more and more repairs in the later years of
the asset. (Eg. Leases, copy right etc.)
their working life (Eg. Plant, Machinery etc)
It is not recognized by income tax law
It is recognized by income tax law
Accounting Treatment:
Transactions
For the purchase of an asset (including expense
incurred for the acquisition of assets)
For the depreciation on the asset
For the transfer of depreciation to P/L account
For the sale of asset
For the profit on sale of asset
For the loss on sale of asset
ISLA COMMERCE ACADEMY_ ICA
Journal Entry
A/c
Dr.
To Cash/ Bank A/c
Depreciation
A/c
Dr.
To Asset
A/c
Profit & Loss
A/c
Dr.
To Depreciation A/c
Cash / Bank
A/c
Dr.
To Assets A/c
Asset
A/c
Dr.
To Profit & loss A/c
Profit & loss
A/c
Dr.
To Asset A/c
Asset
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DEPRECIATION, PROVISIONS AND RESERVES
Date
Particulars
01/01/20 Cash/ Bank (purchase)
01/01/21 Balance b/d
Asset A/c
Amount Date
Particulars
XXX
31/12/20 Depreciation
“
Balance c/d
XXX
XXX
XXX
01/01/22 Balance b/d
XXX
31/12/22 P&L A/c (If profit)
XXX
Amount
XXX
XXX
XXX
31/12/21 Depreciation
“
Balance c/d
XXX
XXX
XXX
31/12/22 Depreciation
“
Cash/ Bank (Sale)
“
P&L A/c (if loss)
XXX
XXX
XXX
XXX
27
XXX
Provisions and Reserves:
PROVISION: (Charge against profit)
 It means to keep some money for a known liability which is probable to arise after a certain time.
 Examples of provisions are Provision for depreciation, Provision for bad and doubtful debts, Provision for
taxation, Provision for discount on debtors, Provision for repairs and renewals etc.
 Provisions are created by debiting the profit and loss account.
 In the balance sheet, the amount of provision may be shown either:
a) By way of deduction from the concerned asset on the assets side. (eg. Provision for depreciation as a
deduction from concern asset, provision for doubtful debt is shown as deduction from debtors)
b) On the liabilities side of the balance sheet along with current liabilities, for example provision for
taxes and provision for repairs and renewals.
Reserves: (Appropriation of profit)
 A reserve is an appropriation of profits.
 A part of the profit may be set aside and retained in the business to provide for certain future needs like
growth and expansion or to meet future contingencies such as workmen compensation.
 Examples of reserves are General reserve, Capital reserve, Capital redemption reserve, Secret reserve etc.
Provisions
It is created for meeting a known liability
Reserves
It is created for meeting an unknown liability
The purpose is to meet a specific future loss
The purpose is to strengthen financial position of
business
It is a charge against profit
It is an appropriation of profit
It is compulsory
It is not compulsory
It cannot be used for dividend distribution
It can be used for dividend distribution
ISLA COMMERCE ACADEMY_ ICA
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Questions
Straight Line Method
DEPRECIATION, PROVISIONS AND RESERVES
28
Written Down Value Method
1. A company bought machinery at a cost of
₹ 7,000 on 1-1-2016. It is estimated that’s its
working life is 4 years and it will fetch ₹ 1000 at
the end of the period when it is sold. The
company decided to write off depreciation by
the fixed instalment method.
6. A company purchased machinery on April 01, 2017
for ₹ 2,00,000 on credit from Anil and spent
₹ 10,000 for its installation. Depreciation is
provided @10% p.a. on written down value basis.
Prepare Machinery Account for the first three
years. Books are closed on March 31st, every year.
2. On 1st January 2018 Anil Co. Ltd. Bought
machinery at a cost of ₹ 60,000. On 1st April 2019
additional machinery costing ₹ 10,000 was
purchased. Write up the machinery account for
the years 2018 to 2020. The company closes its
accounts on 31st Dec every year and provides
depreciation at 15% on straight line basis.
7. On 1st July 2017 ABC Co. purchased a machinery for
₹ 24000 and spent ₹ 1000 for its installation, show
machinery account for the years 2017, 2018 and
2019. The company write off depreciation at 20%
P.A. on the written down value method. The
company closes its book on 31st Dec each year.
3. Raj mills Ltd. Purchased certain machinery on 1st
Jan 2017, costing ₹ 8000. On 1st July 2019 they sold
part of it (which originally cost ₹ 2400) for ₹ 1700.
The company provides depreciation @ 10% P.A. on
fixed installment system. Assuming the company
closes its books on 31st December every year. You
are required to show the machinery account for
the year 2017 to 2020.
8. M/s Rania Enterprises acquired a printing machine
for ₹ 80,000 on July 01, 2016 and spent ₹ 10,000 on
its transport and installation. Another machine for
₹ 70,000 was purchased on January 01, 2018.
Depreciation is charged at the rate of 20% on
written down value. Prepare Printing Machine
account for the years ended on March, 31st 2017,
2018, 2019 and 2020.
4. BM Co. Ltd. Purchased on 1st Jan 2016 machinery
for ₹ 19200 and spent ₹ 800 for its erection. On 1st
July 2017 additional machinery costing ₹ 10000
was purchased. On 1st April 2018, the machinery
purchased on 1st Jan 2016 having become obsolete,
was sold for ₹ 7500 and on the same date new
machinery was purchased at a cost of ₹ 20000.
Depreciation was provided annually on 31st Dec @
10%P.A. on the original cost of the asset. Write up
the machinery account for the years 2016 to 2020.
9. A company purchased some furniture costing
₹ 20000 on 1st January 2015. They decided to write
off depreciation at 10% P.A. on the diminishing
balance annually on 31st December. On 30th
September 2016 purchased further furniture items
worth ₹ 10000. On 1st July, 2017 some furniture
items purchased in 2015, which original cost ₹ 2000
was sold for ₹ 1800. Show the furniture account for
the years 2015 to 2019.
5. On Jan 01, 2016 ABC co. purchased a Machinery
costing ₹ 2,00,000 and ₹ 15,000 was paid for
installation. It was decided to provide for
depreciation @ 20% on the original cost. The plant
was destroyed by fire on July 31, 2019 and an
insurance claim of ₹ 50,000 was admitted by the
insurance company. Prepare plant account,
accumulated depreciation account and plant
disposal account assuming that the company
closes its books on December 31st, every year.
ISLA COMMERCE ACADEMY_ ICA
10. Raja Co. purchased a plant for ₹ 20000 on 1st Jan
2016. The plant was subjected to depreciate @ 10%
according to reducing balance method. It was sold
on 31st Dec 2017 for ₹ 15000. Additional plant was
purchased on January 1st, 2018 for ₹ 10000. Prepare
plant account, provision for depreciation account
and plant disposal account for 3 years.
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Chapter – 7


BILL OF EXCHANGE
29
A Bill of Exchange is a written acknowledgement of debt, drawn by creditor up on his debtor to pay certain sum
of money on demand or a future date.
According to the Negotiable Instruments Act 1881, a bill of exchange is defined as an instrument in writing
containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of
money only to, or to the order of a certain person or to the bearer of the instrument.
Features of bill of exchange:






A bill of exchange must be in writing.
It contains an unconditional order.
It’s signed by the maker.
It’s drawn on a specific person.
There is an order to pay a specific sum of money.
It must be dated and stamp.
Parties to a Bill of Exchange:
1. Drawer
Creditor
Endorser:
Drawer is the maker of the bill of exchange. A seller/creditor who is entitled to receive money from the
debtor can draw a bill of exchange upon the buyer/debtor.
2. Drawee Payer:
Drawee is the person upon whom the bill of exchange is drawn. He is the purchaser or debtor of the
goods up on whom the bill of exchange is drawn.
3. Payee: (Bill Holder)
Payee is the person to whom the payment is to be made.
Specimen of Bill of Exchange:
Date of Bill
Consideration
on the bill
Drawer
Drawee
ISLA COMMERCE ACADEMY_ ICA
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BILL OF EXCHANGE
30
A Bill Receivable can be treated in the following four ways by its receiver/drawer:
1.
2.
3.
4.
He can retain it till the date of maturity.
He can get the bill discounted from the bank.
He can endorse the bill in favour of his Creditor.
Send the bill for collection (this is used generally when due date of maturity of bill is very near).
Due Date or Maturity Date:





The term maturity refers the date on which a bill of exchange or a promissory note becomes due for payment.
The date of maturity or due date is calculated by adding 3 extra days. These extra 3 days are known as Days of
Grace.
Eg. If a bill dated 1/1/20 payable after 1 month, falls due on 4/2/20 (ie. 1 month + 3 days of grace).
If the date of maturity is a public holiday, the instrument will become due on the preceding business day
(3/2/20).
But when an emergency holiday is declared (Strike, flood etc.), then the date of maturity will be the next
working day immediately after the holiday (5/2/20)
Discounting of Bill:



If the holder of the bill needs funds, he can approach the bank for encashment of the bill before the due date.
The bank shall make the payment of the bill after deducting some interest (called discount in this case).
This process of encashing the bill with the bank is called discounting the bill.
Endorsement of Bill:



The process of transferring the right of a bill to another party is called endorsement.
This is done by putting the drawer’s signature on the back of the instrument with or without the name of the
person to whom it is endorsed.
The person who makes the endorsement is called endorser and to whom the bill is endorsed is called endorsee.
Honour of a Bill:

A bill of exchange is said to be honored when its acceptor (drawee) pays the amount of the bill to the holder of
the bill on its date of maturity.
Dishonour of a Bill:

A bill is said to have been dishonoured when the drawee fails to make the payment on the date of maturity.
Noting Charge:

If the bill is dishonoured, the fact of dishonour should be authenticated by a Notary Public. For providing this
service, an amount of fees is charged by the Notary Public, which is called Noting Charges.
ISLA COMMERCE ACADEMY_ ICA
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BILL OF EXCHANGE
31
Renewal of the Bill:

In case of renewal, the acceptor approaches the drawer before the due date of bill and request him to cancel
the original bill for the purpose of extension of credit and a fresh bill is drawn with new terms of payment.
Retirement of Bill:


Retiring a bill means making payment before the date of maturity.
The holder in such case would be willing to allow a deduction from the bill amount, which is called rebate.
Accommodation Bill: (Kite Bill)

If a bill of exchange is drawn and accepted without any consideration (not for a financing transaction in goods)
but with aim of raising money for the benefit of one or both parties involved in the bill is called
Accommodation bill.
Promissory Note:




According to Negotiable Instrument Act 1881, a promissory note is defined as “An instrument in writing
containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to or to the
order of certain person or to the bearer of the instrument”.
When a person gives a promise in writing to pay a certain sum of money unconditionally to a certain person or
according to his order, the document is called Promissory Note.
Drawer or promisor – Debtor
Payee or promisee – Creditor
Difference Between Bill of Exchange and Promissory Note:
Bill of Exchange
It is drawn by the creditor
Promissory Note
It is drawn by the debtor
It contains an order to make payment.
It contains a promise to make payment.
There are three parties – Drawer, Drawee and
Payee
There are two parties – Drawer, and payee
It requires acceptance by the drawee
It does not require any Acceptance
Drawer and payee can be the same party
Drawer cannot be the payee
ISLA COMMERCE ACADEMY_ ICA
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BILL OF EXCHANGE
32
Accounting Treatment:
In the Books of Drawer
Bill kept till maturity
Bill discounted from
bank
Bill endorsed to his
creditor
Sale of goods
Debtor`s
A/c
To Sales A/c
Dr
Debtor`s
A/c
Dr
To Sales A/c
Debtor`s
A/c
Dr
To Sales A/c
Debtor`s
A/c Dr
To Sales A/c
Receiving the bill
Bills Receivable A/c Dr
To Debtor`s A/c
Bills Receivable A/c Dr
To Debtor`s A/c
Bills Receivable A/c Dr
To Debtor`s A/c
Bills Receivable A/c Dr
To Debtor`s A/c
Bill discounted/ bill
endorsed/ send for
collection
No Entry
On maturity of the
bill (Bill honoured)
Cash
A/c
Dr
To Bills Receivable A/c
Bill dishonoured
Debtor`s
A/c
Dr Debtor`s
A/c
Dr Debtor`s
A/c
Dr Debtor`s
A/c
Dr
To Bills Receivable A/c
To Bank A/c
To Creditors A/c
To Bill sent for collection A/c
Bill dishonoured
and paid noting
charge
Debtor`s
A/c
Dr
Debtor`s
A/c
Dr
Debtor`s
A/c
Dr Debtor`s
A/c
Dr
To Bills Receivable A/c
To Bill sent for collection A/c
To Bank A/c
To Creditors A/c
To Cash A/c
To Bank A/c
Transactions
Bank
A/c
Dr
Creditors
A/c Dr
Discount A/c
Dr
To Bills Receivable A/c
To Bills Receivable A/c
No Entry
Bill sent for collection A/c Dr
To Bills Receivable A/c
Bank
A/c
Dr
To Bill sent for collection A/c
No Entry
Transactions
Bill sent for collection
Transactions
In the Books of Drawee
Purchase of goods
Purchase
A/c
Dr
To Creditor`s A/c
Accepting the bill
Creditor`s
A/c
Dr
To Bills Payable A/c
Bill received from drawer/
Creditor
Bills Receivable A/c
To Drawer`s A/c
On maturity of the
bill (Bill honoured)
Bills Payable A/c
Dr
To Cash/ Bank A/c
On maturity of the bill (Bill
honoured)
Cash
Bill dishonoured
Bills Payable A/c
Dr
To Creditor`s A/c
Bill dishonoured
Drawer`s
A/c
Dr
To Bills Receivable A/c
Bill dishonoured and paid
noting charge
Drawer`s
A/c
Dr
To Bills Receivable A/c
To Cash A/c
Bills Payable A/c
Dr
Bill dishonoured and
Noting Charge A/c
Dr
paid noting charge
To Creidtor`s A/c
ISLA COMMERCE ACADEMY_ ICA
In the Books of Endorsee
Dr
A/c
Dr
To Bills Receivable A/c
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BILL OF EXCHANGE
33
Renewal of the Bill
Transactions
In the Books of Drawer
In the Books of Drawee
When part payment of bill is
made
Cash
A/c
Dr
To Drawee`s/ Debtor`s
Drawer`s/ Creditor`s A/c Dr
To Cash A/c
When interest received/paid in
cash
Cash
A/c
Dr
To Interest A/c
Interest
A/c
To Cash A/c
For interest receivable/
payable
Drawee`s/ Debtor`s A/c Dr
To Interest A/c
Interest
A/c
Dr
To Drawer`s/ Creditor`s A/c
When a new bill is drawn
Bills Receivable A/c Dr
To Drawee`s/ Debtor`s A/c
Drawer`s/Creditors`s A/c Dr
To Bills Payable A/c
In the Books of Drawer
In the Books of Drawee
Dr
Retirement of Bill
Transactions
On sale/purchase of goods
Debtor`s
To
Receiving/ Accepting the bill
Bills Receivable A/c Dr
To Debtor`s A/c
Creditor`s
A/c
Dr
To Bills Payable A/c
On retiring the acceptance and
rebate allowed
Bank
A/c
Dr
Rebate
A/c
Dr
To Bills Receivable A/c
Bills Payable
A/c
To Bank A/c
To Rebate A/c
ISLA COMMERCE ACADEMY_ ICA
A/c
Sales A/c
Dr
Purchase
A/c
Dr
To Creditor`s A/c
Dr
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Questions
1. Calculate Maturity Dates of Following Bills of
Exchange:
Date of Bill
Bill Period
Bill Amount
st
60 days
1,00,000
th
3 Months
50,000
rd
23 Nov 2020
2 Months
35,000
28th Jan 2020
1 month
40,000
4 Months
55,000
1 Dec 2019
30 Apr 2020
th
29 May 2020
Bill honoured at maturity
2. Khaliq sold goods ₹ 5,000 on credit to Sham on
15th March 2020. And drew a bill for the amount
of 2 month after date. Sham duly accepted the
bill and returned to Khaliq. Bill was honoured at
maturity. Show entries in the books of the both
the parties.
3. Khaliq sold goods ₹ 5,000 on credit to Sham on
15th March 2020. And drew a bill for the amount
of 2 month after date. Sham duly accepted the
bill and returned to Khaliq. On 18th April Khaliq
discounted the bill with his bank at 12% P.A. On
the due date the bill is met. Show entries in the
books of the both the parties.
4. Khaliq sold goods ₹ 5,000 on credit to Sham on
15th March 2020. And drew a bill for the amount
of 2 month after date. Sham duly accepted the
bill and returned to Khaliq. Khaliq endorsed the
bill to Bahavudheen to his creditor on 19th March
2020. Sham met his acceptance on maturity.
Give entries in the books of Khaliq, Sham,
Bahavudheen.
5. Khaliq sold goods for ₹ 5,000 on credit to Sham
on 15th March 2020. And drew a bill for the
amount of 2 month after date. Sham Duly
accepted the bill and returned to Khaliq. The bill
was send to bank for collection. On the due date
the bill is met. Give journal entries.
ISLA COMMERCE ACADEMY_ ICA
BILL OF EXCHANGE
34
6. Raju sold goods to David for ₹ 1,000. He drew a bill
for the amount payable 2 month after date. He
discounted bill with his bankers for ₹ 950. On the
due date the bill is duly met. Pass journal entries in
the books of both the parties.
7. On 15th July Faris drew a 3 month bill of ₹ 3,500 on
his debtor Shibli. Shibli accepted the bill and
returned to Faris. Faris endorse the bill in favour of
his creditor Thameem. Thameem immediately
discounted the bill with his bank for ₹ 3,420. Write
journal entries in the books of Faris, Shibli and
Thameem.
Bill dishonoured
8. Mathew sold goods for ₹ 25,000 to Pavithran. And
drew a bill upon him for the amount on 1st March
2020 payable after 3 month. On maturity the bill
was dishonoured. Give journal entries in the books
of Mathew and Pavithran.
9. Mathew sold goods for ₹ 25,000 to Pavithran. And
drew a bill upon him for the amount on 1st March
2020 payable after 3 month. On 4th April 2020
Mathew discounted the bill with his bank at 5% P.A.
On due date the bill was dishonoured. Give journal
entries in the books of both the party.
10. Mathew sold goods for ₹ 25,000 to Pavithran.
And drew a bill upon him for the amount on
1st March 2020 payable after 3 month. The bill
was endorsed in favour of his creditor Jithin. The
bill was dishonoured. Show entries in the books
of Mathew, Pavithran and Jithil.
11. Mathew sold goods for ₹ 25,000 to Pavithran. And
drew a bill upon him for the amount on 1st March
2020 payable after 3 month. The bill was send to
bank for collection. The bill was dishonoured. Give
journal entries.
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BILL OF EXCHANGE
Noting Charge
12. Anand sold goods for ₹ 3,000 to Balan. And drew
a bill upon him for the amount on 1st Jan 2020
Payable after 4 months. On maturity the bill was
dishonoured and ₹ 200 were paid by the holder of
the bill as noting charges. Give journal entries in
the books of Anand and Balan when
a) The bill was kept by Anand till his maturity.
b) The bill was discounted by Anand with his
bank @ 10% P.A.
c) The bill was endorsed in favour of his creditor
Chandran.
d) The bill was send to bank for collection.
Renewal of bill
13. Kamil sold goods worth ₹ 10,000 on credit to
Binoy on 17th May 2020. And drew a bill for the
2 months. Binoy accepted the bill and returned
to Kamil. On the due date Binoy approached
Kamil and made a request to accept ₹ 5000 in
part payment and cancel the old bill and drew a
new bill at 3 months for the balance with
interest at 10% P.A. Kamil agreed to this. A new
bill was drawn and duly accepted by Binoy and
the new bill was met at maturity. Show the
necessary journal entries in the books of both
the parties.
35
15. Kamil sold goods worth ₹ 10,000 on credit to Binoy
on 17th May 2020. And drew a bill for the amount
for a period of 2 months. Binoy accepted the bill
and returned to Kamil. Kamil endorse the bill to
Mukesh on the due date the bill was return
dishonoured and noting charges paid by Mahesh
was ₹ 20. Binoy made a request to Kamil to draw a
new bill for the amount at 2 months for which
amount of ₹ 80 charge as interest. This bill was
discounted by Binoy with his banker at 12% P.A.
This bill was honoured at maturity. Pass journal
entries in the books of Kamil, Binoy and Mukesh.
Retirement of Bill
16. Kumar accepts a bill for ₹ 4,000 drawn by Samad at
3 months dated 1st Jan 2020. Kumar retires the bill
on 4th March and is allowed a rebate at 12%. Give
journal entry in the books of both the party.
Insolvency of Acceptor/ Drawee:
17. Nithin accepted a bill drawn by Anand for ₹ 6,000
payable after 3 months on March 1st 2020. On the
due date Nithin become insolvent and dividend at
the rate of 40 paise in the rupee was received as
final settlement. Pass necessary journal entries and
prepare important ledger account in the books of
Nithin and Anand.
14. Kamil sold goods worth ₹ 10,000 on credit to
Binoy on 17th May 2020. And drew a bill for the
amount for a period of 2 months. Binoy accepted
the bill and returned to Kamil. Kamil discounted
the bill at 12% P.A. with his bank. On maturity
the bill was dishonoured worth ₹ 20 has noting
charges. Binoy made a request to Kamil to draw
a new bill for further period of 2 months for
which the interest of ₹ 80 is charge. This bill is
endorsed to Manoj and it was met on the due
date. Give journal entries in the books of Kamil,
Binoy and Manoj.
ISLA COMMERCE ACADEMY_ ICA
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Chapter – 8
FINANCIAL STATEMENTS
36
Meaning of Financial Statements:







Financial statements are the statements showing the financial position and results of business operation at the
end of the accounting period.
The 2 basic financial statements are:
1. Trading and Profit and Loss Account
2. Balance Sheet
Profit and loss account show the result of operations for a particular period of time.
Balance Sheet shows the financial position of the business for a particular point of time.
The basic purpose of financial statement is to convey information about financial position of enterprise to its
owners, management, creditors and the investors.
Trading Account:
It is an account which is prepared by a merchandising concern which purchases goods and sells the same
during a particular period.
The purpose of it is to find out the gross profit or gross loss which is an important indicator of business
efficiency.
Gross profit = Net sales – Cost of goods sold
Cost of goods sold = Opening stock + Net purchases + Direct expenses – Closing Stock
OR
Cost of goods sold = Net sales – Gross profit


Operating Profit (EBIT):
It is the profit earned through the normal operations and activities of the business.
Operating profit is the excess of operating revenue over operating expense.
Operating Profit = Gross profit – Operating expense








Profit and Loss Account:
It is a nominal account prepared to find out the Net profit/Net loss of a business for a particular period.
In this account all expenses and losses are debited and all incomes and gains are credited.
The excess of income over expense is called Net profit and the excess of expense over income is called Net loss.
Balance Sheet:
Balance sheet is a statement of assets and liabilities which reflect the financial position of the business on a
particular date.
Marshalling of Assets and Liabilities:
In a balance sheet, the assets and liabilities are arranged either in the order of liquidity or permanence.
Arrangement of assets and liabilities in a particular order is known as Marshalling.
In case of permanence, the most permanent asset or liability is put on the top of the balance sheet.
In case of liquidity, the most liquid asset or liability is put on the top of the balance sheet.
ISLA COMMERCE ACADEMY_ ICA
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FINANCIAL STATEMENTS
37
Adjustments and its treatment:
Adjustment
Adjusting Entry
Closing Stock
Closing stock
A/c
To Trading
A/c
Outstanding Expense
Treatment
1) Trading A/c – Credit side
2) B/S – Assets side
Only shown in assets
side of the B/S
Expense
A/c
Dr
To Outstanding exp. A/c
1) P&L A/c – Add to concerned expense
2) B/S – Liability side
Only shown in liability
side of the B/S
Prepaid Expense
Prepaid expense A/c
To Expense A/c
Dr
1) P&L A/c – Deduct from concerned expense
2) B/S – Assets side
Only shown in assets
side of the B/S
Accrued Income
Accrued Income A/c
To Income A/c
Dr
1) P&L A/c – Add to concerned income
2) B/S – Assets side
Only shown in assets
side of the B/S
Income Received in
Advance
Income
A/c
Dr
To Income received in adv
1) P&L A/c – Deduct from concerned income
2) B/S – Liability side
Only shown in liability
side of the B/S
Depreciation
Depreciation
To Assets
A/c
A/c
Dr
1) P&L A/c – Debit side
2) B/S – Deduct from the concerned assets
Only debited to
P&L A/c
Bad Debt
Bad debt
A/c
To Debtors A/c
Dr
1) P&L A/c – Debit side
2) B/S – Deduct from Debtors
Only debited to
P&L A/c
Provision for bad &
doubtful debt
Profit & Loss
A/c
Dr
To Prov. for doubtful debt
1) P&L A/c – Debit side
2) B/S – Deduct from Debtors
Debit side of P&L A/c
(Old Provision)
Provision for discount
on debtors
Profit & Loss
A/c
Dr 1) P&L A/c – Debit side
To Prov. for discount on dr/s 2) B/S – Deduct from Debtors
Provision for discount
on creditors
Prov. for discnt on cr/s A/c Dr
Tp Profit & Loss A/c
1) P&L A/c – Credit side
2) B/S – Deduct from Creditors
Interest on Capital
Interest on Capital A/c Dr
To Capital A/c
1) P&L A/c – Debit side
2) B/S – Add to Capital
Interest on Drawings
Capital
A/c
Dr
To Interest on Drawings
1) P&L A/c – Credit side
2) B/S – Deduct from Capital
Deferred Revenue
Expenditure
1) P&L A/c – Debit side
Profit & Loss
A/c
Dr
2) B/S – Asset side -Deduct from Deferred
To Deferred revenue exp A/c
rev. exp A/c
ISLA COMMERCE ACADEMY_ ICA
Dr
If given in TB
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FINANCIAL STATEMENTS
Commission on profit
to manager
Managers Commission A/c Dr
To Outstanding Commission A/c
1) P&L A/c – Debit side
2) B/S – Liability side
Reserve Fund
Profit & Loss
A/c
To Reserve Fund A/c
Dr
1) P&L A/c – Debit side
2) B/S – Liability side
Goods distributed as
free sample
Advertisement
To Purchase
Dr
1) Trading A/c – Deduct from Purchase A/c
2) P&L A/c – Add to advertisement expense
Dr
1) Trading A/c – Deduct from Sales A/c
2) B/S – Deduct from debtors
Closing stock
A/c
To Trading
A/C
(@ cost price of goods)
Dr
1) Trading A/c – Credit side
2) B/S – Assets side
Goods loss by fire A/c
To Trading
A/c
Dr
A/c
A/c
38
If Approved:
No accounting treatment is
required
Goods sent on
approval basis
Goods loss by fire
If not Approved:
Sales
A/c
To Debtors
A/c
( @ sale price of goods)
Fully insured:
Insurance Company A/c Dr
To Goods loss by fire
1) Trading A/c – Credit side (Total value)
2) B/S – Assets side (Total value)
Partly Insured:
Insurance Company A/c Dr
Profit & Loss
A/c Dr
To Goods loss by fire A/c
1) Trading A/c – Credit side (Total value)
2) P&L A/c – Debit side (Loss amount)
3) B/S – Assets side (Claim amount)
Not Insured:
Profit & Loss
A/c Dr
To Goods loss by fire A/c
1) Trading A/c – Credit side (Total value)
2) P&L A/c – Debit side (Total value)
ISLA COMMERCE ACADEMY_ ICA
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FINANCIAL STATEMENTS
39
Trading & Profit & Loss Account for the year ending (date)
Particulars
Opening stock
Purchases
Less Returns
Direct Expenses:
Carriage inwards
Wages
Freight
Fuel & power
Amount
XXX
(XXX)
Gross profit c/d
Gross loss b/d
Salaries
Rent
Add Outstanding expense
Insurance
Less Prepaid expense
Stationary
Repairs
General expense
Trade expense
Bank charges
Discount allowed
Carriage outward
Interest paid
Advertisement
Depreciation on assets
XXX
XXX
XXX
(XXX)
XXX
XXX
Sales
Less Returns
Amount
XXX
(XXX)
XXX
XXX
XXX
XXX
XXX
Closing stock
XXX
Goods loss by fire
XXX
XXX
XXX
XXX
XXX
Gross loss c/d
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Bad debts
XXX
Add further bad debts
XXX
Add new prov. for bad debt XXX
Add provi. For discnt on dr/s XXX
XXX
Less old prov. for bad debt (XXX)
XXX
Interest on capital
XXX
Goods loss by fire
XXX
Managers Commission
XXX
Reserve Fund
XXX
Net profit (Transferred to Capital
Account)
XXX
XXX
ISLA COMMERCE ACADEMY_ ICA
Particulars
Gross profit b/d
Commission
Add Accrued Income
XXX
XXX
XXX
Interest
XXX
Less income received in
advance
(XXX)
XXX
Discount received
Dividend
Income from investment
XXX
XXX
XXX
Provi. for discount on Cr/s
XXX
Interest on Drawings
XXX
Net loss (Transferred to Capital
Account)
XXX
XXX
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FINANCIAL STATEMENTS
40
Balance Sheet as on (date)
Liabilities
Capital
Add Interest on capital
Add Net profit
Less Net Loss
Less Drawings
Less Interest on drawings
Amount
XXX
XXX
XXX
(XXX)
(XXX)
(XXX)
Assets
Amount
XXX
Goodwill
Patent
Land
Building
Furniture
Less Depreciation
Reserve Fund
XXX
Investment
XXX
Bank Loan
XXX
Closing stock
XXX
Accrued income
XXX
Prepaid expense
XXX
XXX
XXX
(XXX)
XXX
XXX
XXX
XXX
XXX
Creditors
XXX
Less Prov. for discount cr/s (XXX)
XXX
Bills Payable
XXX
Outstanding expense
XXX
Income received in advance
XXX
Sundry debtors
XXX
Less Further bad debt
(XXX)
Less Provi. for bad debt (XXX)
Less Prov. for dsct on dr/s (XXX)
Outstanding commission
XXX
Bills receivable
XXX
Bank Overdraft
XXX
Insurance Company
XXX
Cash in Hand
Cash at Bank
XXX
XXX
XXX
ISLA COMMERCE ACADEMY_ ICA
XXX
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Questions
1. The following information relates to a business
for the year 2020. Ascertain the gross profit.
Opening stock
Purchase
Purchase return
Sales
Sales return
Closing stock
16000
40000
1500
78000
2400
13000
3. Following is the trial balance of Shafeeq as on
31-12-2020.
ISLA COMMERCE ACADEMY_ ICA
Debit
45000
55000
36500
7600
65000
6000
1675
1315
2400
430
16100
41000
2400
450
2500
3000
41
26000
1430
287800
287800
The stock on 31-12-2020 was revalued at ₹ 30,000.
Prepare trading and profit and loss account and balance
sheet.
2. From the following information prepare a profit
and loss account of Abhil & brothers for the year
ending 31st Dec 2020.
 Gross profit
₹ 12,000
 Salaries
₹ 4,500
 Stationary
₹ 250
 Insurance
₹ 200
 Carriage on sale
₹ 450
 Commission paid
₹ 800
 Advertising
₹ 850
 Discount allowed
₹ 500
 Interest received
₹ 1,000
Particulars
Plant and machinery
Freehold premises
Stock 1-1-2020
Salaries
Purchases
Sales
Furniture & fittings
Carriage inward
Carriage outward
Sales return
Purchases return
Discount received
Discount allowed
Wages
Sundry debtors
Sundry creditors
Kumar capital
Advertisement
Cash in hand
Cash at bank
Drawings
Loan from Rajesh
Rent, rates and taxes
FINANCIAL STATEMENTS
Credit
121000
1365
635
28800
110000
4. From the following figures extracted from the books of
K.M. Shafath. You are required to prepare trading and
profit and loss account for the year ended 31-12-2020.
And a balance sheet as on the date after making
necessary adjustment entry.
Particulars
Purchases
Stock on 1-1-2020
Salaries
Rent and rates
Insurance
General expenses
Wages
Machinery
Sundry debtors
Cash at bank
Drawings
Capital
Sales
Sundry creditors
Debit
120500
21500
14000
3000
800
3100
25000
31000
20000
3000
7000
248900
Credit
52000
186000
10900
248900
Further adjustments:
a) Closing stock was valued at ₹ 10,900
b) Wages outstanding ₹ 350.
c) Insurance prepaid ₹ 50
d) Depreciation machinery by 10%
e) commission accrued ₹ 50
5. The following are the trial balance of Mr. Vaseem
as on 31-12-2020.
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FINANCIAL STATEMENTS
Particulars
Cash in hand
Cash at bank
Purchases
Sales
Returns
Insurance
Wages
Power and fuel
Carriage inward
Carriage outward
Stock of 1-1-2020
Interest
Building
Machinery
Patents
Salaries
Trade expense
Capital
Drawings
Book debt( s. dr/s)
Sundry creditors
Bills payable
Debit
1600
7100
69500
600
300
10000
6800
3900
3100
11000
40000
36000
10000
12000
3500
9000
46000
270400
Credit
118400
700
500
85000
59000
6800
270400
Further adjustments:
a) Closing stock on 31-12-2020 is ₹ 17000
b) Provides for outstanding salary- ₹ 1500
wage- ₹ 1000
c) Insurance was prepaid to the extent of ₹ 75
d) Interest accrued ₹ 250
e) Machinery and patent are to be depreciated
at 10% P.A. and 20% P.A. respectively
you are required to prepare the trading and
profit and loss account and balance sheet.
6. From the following trial balance of anal as on
31-12-2020; prepare trading and profit and loss
account and balance sheet.
Particulars
Capital
Cash in hand
Cash at bank
Purchases
sales
ISLA COMMERCE ACADEMY_ ICA
Debit
1140
11200
86400
Credit
160000
156000
Wages
Power charges
Carriage inward
Carriage outward
Land and building
Salary
Machinery
Insurance
Stock on 1-1-2020
Sundry creditors
Sundry debtors
20800
9460
4080
6400
80000
8000
40000
1200
11320
56000
42
20000
336000 336000
Further information:
a) Stock on 31-12-2020 ₹ 20,000
b) Machinery to be depreciated at 10%P.A. and
building at 2%P.A.
c) Salaries outstanding ₹ 2400
d) Insurance premium was paid for year ending
30 June.
7. The trial balance prepared on 31-3-2020 showed that
the sundry debtors on that date stood as ₹ 15800. It is
known that ₹ 800 will be irrecoverable and a provision
for doubtful debt at 5% is required to be maintained.
Pass necessary journal entries.
8. The account of Ram & co. ltd. showed the following
balances on 31-12-2013.
Sundry debtors- 45800;
Bad debts written off 1520;
Provision for doubtful debts 3800.
At the time of preparation of final accounts on 31 st
December it was found that out of sundry debtors
₹ 800 will be irrecoverable. They decide to create a
provision of 5% on debtors to meet any future
possible bad debts.
Pass necessary journal entries to give effect for these
arrangement.
9. The following is the trial balance of Anand as on
31-12-2020.
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FINANCIAL STATEMENTS
Particulars
Capital
Drawings
Plant and machinery
Stock
Purchases
Return inwards
Return outwards
Furniture and fixture
Freight
Carriage outward
Rent, rates, taxes
Printing and stationary
Office expenses
Bad debts
Provision for doubtful
debts
Sundry debtors
Sundry creditors
Bills payable
Bills receivable
Discount
Wages and salaries
Cash in hand
Cash at bank
Sales
Debit
12000
50000
30000
94000
2400
10000
2800
1700
4200
1200
1000
1500
40000
6900
6000
4900
16500
Credit
105000
1400
2400
38000
7300
1000
130000
285100 285100
Additional information:
a) Closing stock on December 31, 2020 is ₹ 30000.
b) write off ₹ 1200 as bad debts
c) Provision for doubtful debts is to be maintain
at 5% on sundry debtors
d) wages and salaries outstanding ₹ 1,400
e) Depreciate plant and machinery by 15%.
10. From the following trial balance prepare trading
and P&L account for the year ended 31-3-2020
and a balance sheet as on that date.
Particulars
Capital account
Drawings
Stock 1/4/19
Trade expense
Salaries
ISLA COMMERCE ACADEMY_ ICA
Debit
12000
30000
775
5700
Credit
36000
Advertising
Discount
Bad debts
Furniture and fixture
Cash in hand
Purchase return
Purchases
Sales return
Sales
Wages
Conveyance charge
Rent and rates
Plant and machinery
Sundry debtors
Bank overdraft
Sundry creditors
420
550
6000
5600
1130
74000
1700
3500
600
1860
9000
47000
201400
43
2400
123000
12000
28000
201400
Adjustments:
a) Stock on 31-3-2020 is valued at ₹ 46,000
b) Rent and wages outstanding ₹ 300 & ₹ 200 respectively
c) Insurance prepaid to the extent of ₹ 250
d) Write off ₹ 500 as further bad debts
e) Provide for doubtful debts at 5% on sundry debtors.
f) Make a provision for discount on debtors and
discount on creditors at 2%
g) Depreciate premises at 3%, Plant and machinery at
10% and furniture and fixture at 5%
11. From the following trial balance of Don as on 31st Dec
2020. Prepare trading and P&L account for the year
ending 31 Dec 2020 and a balance sheet as on that
date.
Particulars
Capital
Stock
Sales and sales return
Purchase and returns
Carriage inwards
Rent
Salaries and wages
Sundry debtors
Sundry creditors
Bank loan at 6%
Bank interest
Advertisement
Debit
40500
7900
239750
17340
5340
10100
26000
1000
14100
Credit
100000
271680
4960
15100
35000
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Financial Statements
FINANCIAL STATEMENTS
Cash in hand
Cash at bank
Discount received
Investment
Discount allowed
General expenses
Bad debts
Insurance
Furniture
Drawings
Machinery
Travelling expense
Commission received
3100
8450
6000
7360
3500
600
1700
3000
8000
25000
2530
431270
3760
770
431270
Additional information:
a) The stock on Dec 31 2020 was ₹ 70,000
b) One third of printing and advertising is to be
carried forward to next year
c) Depreciate machinery by 10%
d) Create 5% provision on debtors, 2% provision
for discount on debtors
d) Allow 5% interest on capital
e) ₹ 1200 is to be charged as interest on
drawings.
12. From the following trial balance of Mr. Mohan
and other particulars given, prepare trading and
profit and loss account for the year ended 31 st
Dec 2020 and a balance sheet as on that date.
Particulars
Plant and machinery
Cash in hand
Cash at bank
Sundry creditors
Commission
Trade expenses
Sales
Sales return
Salaries
Carriage outwards
Rent
Insurance premium
Advertisement
Bills payable
ISLA COMMERCE ACADEMY_ ICA
Debit
23000
150
1250
1100
5000
2500
500
2000
2000
2000
Purchase adjusted
Purchase returns
Discount allowed
Discount received
Stock on 31-12-2019
Sundry debtors
Business premises
Capital
Drawings
Direct wages
Indirect wages
Bills receivable
Rent outstanding
Commission accrued
Depreciation on
business premises
Income tax
129500
1000
10000
32000
34000
5000
7000
1500
2500
500
1000
2000
265500
44
1200
800
86000
500
265500
Adjustments:
a) Goods of the cost of ₹ 500 were given as free sample.
b) Provide 5% for doubtful debt and 2% for discount on
debtors
c) commission is to be provided for works manager at
5% of gross profit.
d) A fire occurred on 28 Dec 2020 in the godown and
stock of the value of ₹ 2,500 was destroyed. It was
fully insured and the insurance company admitted
the claim in full.
e) Transfer 4% of net profit to reserve.
Credit
10500
5500
155000
13. Mohan furnishes the following details in respect of his
cloth business for the year ending 31st March 2019.
Prepare trading account for the year.
Opening stock of cloth
Purchase of cloth
Sales of cloth
Carriage on purchase
Carriage on sales
Office rent
Printing
Stock of cloth at the end
₹ 12,000
₹ 83,000
₹ 1,25,000
₹ 4,500
₹ 2,500
₹ 5,000
₹ 1,250
₹ 8,500
6000
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FINANCIAL STATEMENTS
14. Below is given the trial balance of Tom as on
31st Dec 2020. You are required to prepare a
trading and profit and loss account and balance
sheet as that date.
Particulars
Capital
Opening stock
Purchases
Plant and machinery
(including computer)
Trade charge
Sales
Carriage inward
Carriage outward
Discount
Debtors
Creditors
Office rent
Bad debt reserve
Advertising
Drawing
B/p
Salaries
Wages
Furniture
Cash in hand
Cash at bank
Debit
45,000
2,25,000
78,000
12,800
4,000
1,500
350
60,000
3,700
15,600
6,000
18,000
21,000
7,500
10,000
4,500
5,12,950
Credit
45,000
4,50,000
45
15. Anil`s account show the following as balance
relating to debtors and provision:
Debit
1,00,000
Credit
Debtors
Provision for bad debts
5,000
Bad debts
4,000
Additional information:
Write off further bad debts of ₹ 2,000 and
maintain provision for bad debts of ₹ 7,000
for the next year.
Show how much was transferred to profit
and loss account as provision for bad debts.
750
15,000
200
2,000
5,12,950
Adjustments:
a) Depreciated of furniture at 10%
b) Closing stock was valued at ₹ 60,000
c) Provide provision for doubtful debts at 10%
d) Ramesh, an employee took away a computer
worth ₹ 6,000. Later it’s been agreed to debit
the amount to his salary during the year.
ISLA COMMERCE ACADEMY_ ICA
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ACCOUNTS FROM INCOMPLETE RECORDS
Chapter – 9

46
Incomplete accounting records are those accounting records which at present are not complete according
to double entry principles.
Reasons for incompleteness in accounting records:
Accounting records may be incomplete due to any one or more of the following reasons:
1.
2.
3.
4.
The businessman may be ignorant of the separate legal entity assumption.
The businessman may be ignorant of the double entry accounting principles.
Business may not intentionally maintain proper accounts to evade taxation.
Destruction of the books of accounts due to fire, flood etc.
Limitation of incomplete records




Arithmetical accuracy of the accounts cannot be checked because no agreed trial balance can be prepared.
True profit or losses cannot be ascertained because correct trading and profit and loss account cannot be
prepared.
True financial position cannot be ascertained because real balance sheet cannot be prepared.
This system is not accepted by tax authorities and companies Act.
Difference between single entry and double entry:
Single Entry

Double Entry
Incomplete records (cash transactions only)
Complete records (cash & credit transaction)
Statement of profit and loss is prepared to
calculate profit
Trading and profit & loss A/c is prepared to
ascertained the profit/ loss of business
Statement of affairs is maintained
Balance sheet is prepared
Two aspects of a transaction is not recorded
Two-fold aspects of each and every transaction
is prepared
Adopted by small scale business
Adopted by large scale business
Ascertaining profit under incomplete records:
There are two main methods of ascertaining profit under the incomplete records system:
1. Net worth method or statement of affairs method or capital comparison method; and
2. Conversion method. (single entry system is converted into double entry system)
1. Net worth method or statement of affairs method:
 Under this method two statements are to be prepared.
a) Statement of affairs
b) Statement of Profit/Loss
ISLA COMMERCE ACADEMY_ ICA
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ACCOUNTS FROM INCOMPLETE RECORDS
47
Statement of Affairs:
 This statement is prepared to find out the opening capital or the closing capital of the business.
 It shows assets on one side and the liabilities on the other just as in case of a balance sheet. The
difference between the totals of the two sides (balancing figure) is the capital.
Liabilities
Outstanding expense
Bills Payable
Bank OD
Creditors
Capital
(Balancing Figure)
Statement of affairs as on (date)
Amount
Assets
XXX
Cash in Hand
XXX
Cash at Bank
XXX
Stock
XXX
Debtors
Furniture
XXX
Machinery
Land
XXX
Amount
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Statement of Profit or Loss:
 It is prepared to ascertain the profit or loss by comparing the opening with closing capital.
Statement of profit / loss for the year ended
Capital at the end of year (Closing Capital)
Add: Drawings
XXX
XXX
Less: Additional Capital
Less: Capital at the beginning of year (Op.Capital)
XXX
(XXX)
(XXX)
Profit or loss made during the year
XXX
Difference between Statement of affairs and Balance sheet
Statement of Affairs
Balance Sheet
It is prepared to determine the amount of
capital at a particular date.
It is prepared to ascertain the true financial position.
It is based on estimates; hence, it is less reliable.
It is based on principles; hence, it is more reliable.
It is prepared from incomplete records of
business transaction under single entry system.
It is prepared when accounts are maintained under
double entry system.
Omission of assets and liabilities cannot be
easily identified.
Omission of assets and liabilities can be easily
identified, as omission will lead to mismatch of
either sides of the balance sheet
ISLA COMMERCE ACADEMY_ ICA
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ACCOUNTS FROM INCOMPLETE RECORDS
48
2. Conversion method:
 Under this method, the single entry system is converted into double entry system by preparing
Profit & Loss account and Balance sheet.
 For this, the important missing items have to be worked out by preparing the following statements/ accounts.
Missing items
Opening Capital
Source of information
Opening statement of affairs
Credit purchases
Total creditors account
Credit sales
Total debtors account
Bills receivable received
Bills receivable account
Bills payable paid
Bills payable account
Cash/bank balance
Summary of cash
Ascertainment of Credit Sales:
Dr
Total Debtors Account
Particulars
Amount
Particulars
Balance b/d
XXX
Cash
Bank (cheque received)
B/R dishonoured
XXX
Bills Receivable (B/R)*
Bank (cheque dishonoured)
XXX
Sales returns
Discount allowed
Credit Sales
XXX
Bad debts
(Balancing Figure)
Balance c/d
XXX
Cr
Amount
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Ascertainment of Bills Receivable:
Dr
Particulars
Balance b/d
Sundry Debtors*
(Balancing Figure)
ISLA COMMERCE ACADEMY_ ICA
Total Bills Receivable Account
Amount
Particulars
XXX
Cash/Bank
Debtors (B/R dishonoured)
XXX
Balance c/d
XXX
Cr
Amount
XXX
XXX
XXX
XXX
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ACCOUNTS FROM INCOMPLETE RECORDS
49
Ascertainment of Credit Purchases:
Dr
Total Creditors Account
Amount
Particulars
Cash
XXX
Balance b/d
Bank (Cheque issued)
XXX
Bills payable (bills accepted)*
XXX
B/P dishonoured
Returns
XXX
Bank (cheque dishonoured)
Discount received
XXX
Credit Purchases
Balance c/d
XXX
(Balancing Figure)
XXX
Particulars
Cr
Amount
XXX
XXX
XXX
XXX
XXX
Ascertainment of Bills Payable:
Dr
Total Bills Payable Account
Particulars
Amount
Particulars
Cash/Bank
XXX
Balance b/d
Creditors (B/P dishonoured)
XXX
Sundry Creditors*
Balance c/d)
XXX
(Balancing Figure)
XXX
ISLA COMMERCE ACADEMY_ ICA
Cr
Amount
XXX
XXX
XXX
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Questions
Net worth method/statement of affairs method:
1. Mr. Danish keeps his book under Single entry
system. Ascertain Profit or loss for the Year
ending 31-12-2020 after considering the following
Capital on 1-1-2020
₹ 40000
Capital on 31-12-2020 ₹ 60000
Drawings for the year ₹ 3000
Additional Introduced ₹ 10000
2. Sanoob started a firm on 1st Jan 2020, with capital
of ₹ 10,000. On 1st April 2020 he borrowed from
his wife a sum of ₹ 4,000. On 31st Dec 2020 his
position was:
Cash ₹ 600; Stock ₹ 9,400;
Creditors ₹ 6,000
Debtors ₹ 7,000
Ascertain profit or loss taking into account ₹ 2,000
for his drawings. Prepare
a) Statement of affairs
b) Statement of profit or loss account
3. Mr. M started his readymade garments business on
April 1, 2019 with a capital of ₹ 40,000. He did not
maintain his books according to double entry
system. During the year he introduced fresh capital
of ₹ 25,000. He withdrew ₹ 10,000 for personal use.
On March 31, 2020, his assets and liabilities were as
follows:
Total creditors ₹ 90,000; Total debtors ₹ 1,25,600;
Stock ₹ 24,750; Cash at bank ₹ 24,980.
Calculate profit or loss made by Mr. M during the
first year of his business using the statement of
affairs method.
4. Ascertain the profit from the following:
Capital on 1st January 2020
Capital as on 31st December 2020
Drawings made during the year
Capital introduced on 1st July 2020
ISLA COMMERCE ACADEMY_ ICA
₹ 16,000
₹ 17,900
₹ 4,800
₹ 2,000
ACCOUNTS FROM INCOMPLETE RECORDS
50
5. A trader keeps his book by the single entry method.
He gives you the following information from which
you are required to find out his profit or loss for the
year ending 31st Mar 2020.
Particulars
1-4-2019 31-3-2020
Bank balance
200
350
Cash in hand
50
75
s. debtors
4400
3400
s. creditors
2600
3000
stock
2650
2850
plant and machinery
5000
5000
furniture
2000
2000
 He had withdrawn ₹ 2,500 during the year and had
introduced fresh capital ₹ 5,400 on 1st July 2019.
 A provision of 5% of s. debtors is to be provided.
 Write off depreciation on plant and machinery at
10% p.a. and furniture at 12% p.a.
 Interest on capital is to be allowed 6% P.A
Conversion Method:
6. Anil provide the following information. Help him to
find out the gross profit made during the year 2020.
Opening stock
Purchase during the year
Direct trade discount
Closing stock
Sales
₹ 1,20,000
₹ 2,00,000
₹ 20,000
₹ 50,000
₹ 3,50,000
7. Calculate the closing stock from the given items as on
31.12.2020.
Opening Stock ₹ 5,000; Purchases ₹ 35,000; Sales₹ 48,000; Direct Expenses ₹ 2,000; Gross Profit ₹ 4,000.
8. From the following information calculate credit sales.
Balance of debtors 1-1-2020
Cash received from debtor’s
B/R received during the year
Sales return
debtors as on 31-12-2020
₹ 25,000
₹ 50,000
₹ 5,000
₹ 500
₹ 7,500
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ACCOUNTS FROM INCOMPLETE RECORDS
9. From the following information calculate total
purchases.
 Cash purchase ₹ 37,000
 Cash paid to creditors during the year ₹ 82,000
 Bills payable discharged during the year ₹ 42,000
 Bills payable dishonoured ₹ 1,600
 Purchase return ₹ 1,000
Creditors
Bills payable
1.1.2020
13,000
10,000
31.12.2020
8,000
15,000
10. Compute the amount of total purchases and total
sales of Mr. Amit from the following information
for the year ending on March 31,2020.


















Total debtors as on April 01, 2019 ₹ 40,000
Total creditors as on April 01, 2019 ₹ 50,000
Bills receivable as on April 01, 2019 ₹ 30,000
Bills payable as on April 01, 2019 ₹ 45,000
Discount received ₹ 5,000
Bad debts ₹ 2,000
Return inwards ₹ 4,000
Discount allowed ₹ 3,000
Cash sales ₹ 10,000
Cash purchases ₹ 8,000
Total debtors as on March 31, 2020 ₹ 80,000
Cash received from debtors ₹ 1,00,000
Cash paid to creditors ₹ 80,000
Cash received against bills receivable ₹ 25,000
Payment made against bills payable ₹ 40,000
Total creditors as on March 31, 20120 ₹ 40,000
Bills payable as on March 31, 2020 ₹ 50,000
Bills receivable as on March 31, 20120 ₹ 35,000
11. Calculate credit sales:






Opening Balance of debtors ₹ 40,000
Bad debts written off ₹ 10,500
Bill receivable received ₹ 30,000
Cash received from debtors ₹ 73,000
Allowance granted ₹ 2,450
Returns inwards ₹ 7,100
ISLA COMMERCE ACADEMY_ ICA


51
Bills receivable dishonoured ₹ 1,800
Closing balance of Debtors ₹ 29,000
12. T. Rajan who keeps his books by single entry, instruct
to you to prepare trading and profit and loss account
for the year ended 31st March 2020 and a balance
sheet as on that date.
On 1st April 2019:





Stock
₹ 25,000
Creditors
₹ 24,000
Debtors
₹ 65,000
Premises
₹ 40,000
Office furniture ₹ 3,500
Upon analyzing his cash book for the year, you find
the following information:










Bank overdraft 1-4-2019
Received from debtors
Received for cash sales
Paid to creditors
Paid for cash purchase
Interest on overdraft
Paid salaries and wages
Paid general charges
Rent and taxes
Drew for personal use
₹ 10,000
₹ 74,000
₹ 22,000
₹ 45,000
₹ 13,000
₹ 600
₹ 9,500
₹ 800
₹ 1,100
₹ 1,000
Scrutiny of the personal account showed that he had
allowed ₹ 5,000 has discount to his debtors and had
earned ₹ 2,500 has discount from his creditors.
On 31st March 2020






Stock
Debtors
Bills receivable
Bills payable
Premises
Furniture
₹ 42,000
₹ 68,000
₹ 3,000
₹ 4,000
₹ 40,000
₹ 3,500
He also owed ₹ 600 for expenses. You are to
charge 5% depreciation on furniture and premises.
Provide ₹ 4,400 for doubtful debts and allowed 5%
interest on opening capital.
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ACCOUNTS FROM INCOMPLETE RECORDS
13. Arjun keep his book by single entry during the
year of 2020. He kept a cash book which shows
the following information.








Cash from debtors ₹ 8,000
Additional capital introduced ₹ 600
Loan from Don @ 6% p.a. on 1/7/20 ₹ 3,000
Overdraft on 1st Jan 2019 ₹ 600
Paid into creditors ₹ 6,000
General expense ₹ 1,800
Salaries ₹ 600
Drawings ₹ 800



52
Rent ₹ 1,400 and Advertising ₹ 460
Electricity charge ₹ 275
Printing and stationary ₹ 340
His other assets and liabilities were
Particulars
Debtors
Creditors
Outstanding:
Rent
Electricity charge
Advertising
1-1-2020
3,475
1,500
31-12-2020
5,165
3,600
200
40
300
25
300
The following were the balance as on 1-1-2020




S. debtors ₹ 10,600
S. creditors ₹ 3,000
Furniture ₹ 5,000
Stock ₹ 3,600
Stock on 31st Dec 2020 was valued at ₹ 5,200 but he
has no record of the stock on 31st Dec 2019 he informs
you, however that he sells his goods at cost + 331/3 %.
The following were the balance as on 31-12-2020




S. debtors ₹ 12,000
S. creditors ₹ 3,800
Furniture ₹ 5,000
Stock ₹ 5,200
Furniture is to be depreciated by 10% p.a.
Provide half year interest on Ganesh loan and
interest on capital ₹ 200.
Prepare trading and profit and loss account for
the year ended 31st Dec 2020 and balance sheet.
14. Suhail was carrying on business as a sole trader
but had not kept his book properly. You are
asked to prepare his final account for the year
ended 31st Dec 2020. However, he able to
obtain following information.
Summary of his cash book





Balance of cash on 1st Jan 2020 ₹ 3,150
Receipt from debtors ₹ 41,450
Personal drawings ₹ 3,500
Payment to creditors ₹ 32,600
Salaries ₹ 2,500
ISLA COMMERCE ACADEMY_ ICA
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APPLICATION OF COMPUTERS IN ACCOUNTING
Chapter – 10
Elements of a Computer System
1. Hardware :- Physical Parts of a computer.
Eg: Monitor, CPU, Keyboard, Mouse etc.
2. Software :- Set of instructions that tells the hardware
what to do.
a. System Software :- Engaged in background
processes.
i. Operating System :- Provides platform to run
application software.
ii. Language Translator :- Translate the source
codes into machine codes.
b. Application Software :- User oriented programmes
designed for performing certain specific tasks.
Eg : MS Word, MS Excel, Adobe Photoshop
3. People
:- System User.
4. Data
:- Raw facts that need to be processed.
Capabilities & Limitations of a Computer
Capabilities
Limitations
High Speed
No IQ / Intelligence
High Accuracy
No Feelings
Versatility (Multi-Tasking)
Lack of decision making skill
Reliability
Lack of Common sense
53
3. Memory Unit
4. CPU (Central Processing Unit)
 Brain of a computer
 It controls the flow of data
 It has 3 main units :
1. ALU (Arithmetic Logical Unit) – For calculations
2. CU (Control Unit) –For controlling all operations
3. Memory Unit
Large Storage
Components of a computer
1. Input Units
Keyboard & Mouse
Scanner
MICR
(Magnetic
Ink
Character Reader)
OMR
(Optical
Mark
Recognition)
BCR (Barcode Reader)
2. Output Units
Printer
Monitor
Plotter
Fax
VDU (Visual Display Unit)
OCR (Optical Character Speakers & Soundcards
Reader)
Joystick , Track Ball
Memory Unit
TPS (Transaction Processing System)
Steps in TPS :1. Data Entry
2. Data Validation
3. Processing
4. Storage
5. Information
6. Reporting
MIS – Management Information System
AIS – Accounting Information System
ISLA COMMERCE ACADEMY_ ICA
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COMPUTERISED ACCOUNTING SYSTEM (CAS)
Chapter – 11
54
Accounting Packages/ Softwares
 Accounting with the help of computers is called
Ready to Use
Customised
Tailored
Modification in
Designed to
the readymade
meet the special
software
requirement
For small
For medium
For large
business
business
business
Low cost
Medium cost
High Cost
computerised accounting.
Readily available
Advantages & Disadvantages of Computerised Accounting
Advantages
Disadvantages
Increased Accuracy
Costly
Time Saving
System Failure
Large Storage Capacity
Staff Opposition
Diligence
Training Time
in the market
Difference between Manual Accounting & Computerised
Accounting
Manual
Computerised
Whole work are done
Most of works are done
manually
with the help of computer
Alteration is very difficult
Alteration is very easy
Time consuming
Speedy
Accuracy comparatively low Ensure maximum accuracy
Automatic production of
Automatic production of
reports is not possible
reports is possible
Requirement of Database Oriented Application
1. Front end interface
2. Back end database
3. Data Processing
4. Reporting System
Link between user &
software
Data Storage system
Convert data into
information
Final Output
ISLA COMMERCE ACADEMY_ ICA
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STRUCTURING DATABASE FOR ACCOUNTING
Chapter – 12
Database
 It is a collection of information that is organised.
DBMS (Database Management System)
 Software that manages database.
 Eg : LibreOffice Base, MS Access, SQL (Structured
Query Language), Oracle.
55
Symbols in ER Model
ENTITY
ATTRIBUTE
ER Model (Entity Relationship)
 Graphical representation of data.
Elements of ER Model
1. Entity
:- Category that has a physical or
conceptual existence.
2. Attribute :- Descriptive properties of entity.
3. Relationship :- Event occurring between two entities.
Entity
1. Students
2. Employees
3. Account
4. Vouchers
RELATIONSHIP
Attribute
Admission Number
Name
Gender
Date of Birth
Age
Employee ID
Name
Date of Birth
Designation
Department
Account Code
Account Name
Account Type
Voucher Number
Voucher Date
Amount
Narration
Primary Key / Key Attribute
 Attribute which contain unique value for identifying the
entity.
 Eg : Admission Number, Employee ID, Account Code,
Voucher Number.
ISLA COMMERCE ACADEMY_ ICA
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ACCOUTING SYSTEM USING DBMS
Chapter – 13
56
Components of DBMS:
1. Tables: Used to store the data in the database.
2. Forms: Screen that allow viewing, adding, and updating
the data.
3. Queries: To retrieve data on the basis of certain criteria.
4. Reports: To present and summarise data.
Steps to Create a Database in LibreOffice Base:
1. Open LibreOffice Base
Application  Office  LibreOffice Base
2. Select “Create a new database” option
3. click on “Finish” button
4. Give a file name & Click on “Save”
5. Click on “Tables” icon
6. Click on “Create Table in Design View”
7. Create required fields & select data type
8. Set a primary key
9. Save the table & Give a table name
Methods for creating Queries
1. Design View (Best Method)
2. Query Wizard
3. SQL View
DATA TYPES
Data Type
Used to Store
Text
(VARCHAR)
Words or numbers (Not to be used in
calculations)
(Employee ID, Name, Designation, Mobile
Number, Gender)
Numbers
(Salary, Dearness Allowance [DA])
Date only
(Date of Birth)
Time only
(Registration Time)
Date & Time
(Date of Birth)
data that can be only one of two possible
values
(Are you Disabled?)
Number
Date
Time
Date/Time
Yes/No
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ACCOUNTACY WITH COMPUTERISED ACCOUNTING
SAMPLE QUESTION PAPER -1
57
1. Ajay sold goods to Vijay. Here Vijay becomes
a) Seller
b) Creditor
c) Debtor
d) Proprietor
10. Identify the transaction from the given journal entry
2. Credit purchases of goods are recorded in _____
a) Cash book
b) Purchase book
c) Purchase return book d) Sales book
11. State two limitations of single entry system.
3. Recording transactions into journal is called ____
a) Posting
b) Journalising
c) Balancing
d) Transforming
Purchases
A/C Dr 20000
To Mohan A/C
20000
12. Write the name of computer Hardware component
in the missing space of given figure
ALU
INPUT UNIT
CONTROL UNIT
_______
____________
4. Purchase of building will _________
a) Increase the asset
b) Increase the liability
c) Decrease the asset
d) Decrease the liability
13. List out two advantages of Computerised Accounting.
5. Identify the entries which cannot be recorded in
the Journal Proper.
a) Adjustment entries
b) Opening entries
c) Contra entries
d) Transfer entries
14. Connect the following Entity Relationship elements
with appropriate symbol.
a) Entity
b) Attribute
c) Relationship
6. Bank reconciliation statement is prepared by
a) Business
b) Bank
c) Creditor
d) Debtors
7. Furniture purchased is wrongly debited in
purchase A/c, is an example of ________
a) Error of principles
b) Error of commission
c) Error of omission
d) Compensating error
8. Which method of accounting usually followed
by small traders
a) Single entry system b) Double entry system
c) Mercantile system
d) Hybrid system
9. A list of assets are given below
a) Cash b) Furniture c) Stock d) Building
Classify the above under the appropriate heads
ISLA COMMERCE ACADEMY_ ICA
15. A table structure in MS Access is given. Write the
data types of given field name.
Field Name
Name
Date of birth
Sex
Roll Number
Data Type
Text
16. Calculate the closing stock from the given
items as on 31.12.2020.
Opening Stock 5,000; Purchases 35,000; Sales 48,000;
Direct Expenses 2,000; Gross Profit 4,000
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58
17. Match the following:
Going concern
concept
Accounting
period
Duality aspect
Business entity
concept
The period for which profit and loss
account is prepared
Owner and Business are separate
entities
A business has indefinite period
The double aspect of a transaction
are recorded
18. Prepare a single column cash book from the
following transactions.
1/1/20 Started business with capital ₹ 20,000
2/1/20 Purchased goods for cash ₹ 7000
5/1/20 Sold goods for cash ₹ 5,000
7/1/20 Paid salary ₹ 3,000
19. Prepare Bank Reconciliation statement as on
31.03.2020.




22. A model of bill of exchange is given below.
Balance as per cash book ₹ 8000
Cheque issued to Kumar but not presented
for payment ₹ 5,000
Interest credited to pass book only ₹ 700
Bank charges debited in pass book only ₹ 400
20. Correct the following journal entries according to
narration given in brackets.
a) Kumar A/c Dr 1,000
To Cash
1,000
(Salary paid)
b) Mahesh A/c Dr 2,000
To Cash
2,000
(Cash paid to Sumesh)
21. M/s. Alpha Ltd. purchased a Machinery for ₹ 40,000
on 1.1.2018. The accounting year ends on 31st Dec
every year. Prepare the Machinery account,
charging depreciation @ 10% annually on
diminishing balance method till 2020.
ISLA COMMERCE ACADEMY_ ICA
a) Who is the Drawer of bill?
b) Who is the Drawee.
c) Find the due date of bill.
23. The Trial Balance of Mr. Rajesh as on 31st March 2020
is given below. Prepare Trading and Profit and Loss
a/c and Balance sheet as on 31.03.2020.
Type of account
Capital
Purchases
Sales
Opening stock
Sundry debtors
Sundry creditors
Wages
Salary
Insurance
Commission
Buildings
Machinery
Furniture
Cash in hand
Debit
25,000
2,000
7,000
500
3,000
1,500
30,000
10,000
5,000
3,000
87,000
Credit
50,000
30,000
5,000
2,000
87,000
Adjustments:
a) Closing stock is valued to ₹ 3,000.
b) Wages outstanding ₹ 500.
c) Depreciate Machinery by 10% per annum
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ACCOUNTACY WITH COMPUTERISED ACCOUNTING
MARCH - 2016
1. Which one of the following is incorrect?
a) Assets = Liabilities + Capital
b) Liabilities = Assets – Capital
c) Capital = Assets – Liabilities
d) Liabilities = Assets + Capital
2. When the drawee of the bill of exchange makes
the payment before the maturity date of bill, it
is called _________
a) Dishonour of bill
b) Discounting of bill
c) Retiring of bill
d) Renewal of bill
3. Find the pair which is NOT matched
a) Operating system – system software
b) Keyboard – mouse
c) Scanner – output device
d) Microwave transmission – satellite link
4. Fill in the blanks with suitable data type on the
basis of hint given:
a) Name
: Text
b) Birth date: _______
5. Which one of the following is NOT a business
transaction?
a) Bought motorcar for business ₹ 1,00,000
b) Paid employees salary ₹ 1,000
c) Paid sons fees from business ₹ 2,000
d) Paid sons fees from his personal account ₹ 200
6. List any two ways in which quarries may be created in
access.
7. The fact that a business is separate and
distinguished from its owner is best exemplified
by ___________ concept
a) Money measurement
b) going concern
c) business entity
d) cost
ISLA COMMERCE ACADEMY_ ICA
59
8. Arun sold goods on credit for ₹ 1,000 to Amal.
a) Who is the debtor in this transaction
b) Write journal entry of this transaction
9. Rajanesh is a manager with great expertise in
management and leading his firm very well. But his
expertise does not find a place in the accounting
records of the firm.
a) Is it genuine according to the rules of accounting?
b) State your answer with the reason
10. Journal and ledger are two important books
maintained in accounting.
a) State any two differences between these books
b) Purchase office furniture for ₹ 500 by cheque.
The account to be debited is _________
11. In every organization, a large number of small
payments of respective nature are there. To record
these as a separate cash book is maintained, is called
petty cash book.
a) Name the person who prepare this book.
b) What is imprest?
c) Prepare a petty cashbook from the following
transaction of Nisha associates for the month of
January 2000, under analytical firm given that
imprest amount is ₹ 500.
Date
Details of transactions
Jan 5
“ 10
“ 12
“ 15
“ 17
“ 19
“ 25
“ 30
Postage
Refreshments
Bus fare
Courier charges
Taxi fare
Speed post charge
Refreshments
postage
Amount
15
10
20
10
20
10
25
20
12. For quite efficient and accurate recording of
business transaction, journal is subdivided
into special journals.
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60
a) List any two examples for special journals
b) Prepare a cashbook from the following
transactions of grace enterprise for the
month of December, 2010
Date
Details of transactions
Amount
Dec 1
Cash in hand
Cash at bank
Purchased goods for cash
Sold goods for cash
Cash deposited into bank
Paid rent
Withdraw cash for personal
use
Purchased goods and
payment made by cheque
Received commission
15,000
10,000
5,000
7,500
4,000
500
“8
“ 15
“ 18
“ 20
“ 25
“ 28
“ 29
250
1,000
200
13. Bank reconciliation statements prepared to
reconcile the cash book and pass book balances
on a certain date.
a) This statement is prepared by __________
b) Write any one cause for difference in
passbook and cashbook
c) Cash book of Tinu shows a bank balance of
₹ 15,000. On comparing the cash book and
passbook the following discrepancies were
found.




Cheque issued to Deepa but not yet
presented for payment ₹ 1,000
Bank interest credited by the bank ₹ 400
Divya, a customer directly deposited
₹ 4,000 to firm’s bank account
Bank charges ₹ 100 not entered in cash
book
Prepare bank reconciliation statement
b) Rectify the following errors.



Office furniture purchased for ₹ 5,000 was
posted to purchase account.
Cash sales ₹ 2,000 was posted as ₹ 200
Goods withdrawn by the proprietor for personal
use ₹ 1,000 was not recorded in the books.
15. Kannan and Sons acquired a machinery for ₹
1,80,000 on 10th October, 2012 and spend ₹ 20,000
for its installation. The firm write off depreciation at
the rate of 10% p.a. on original cost every year.
Draw up machinery account for the first 3 years
given that the books of accounts close on March 31 st
every year.
16. On 1st January, 2015 Arya sold goods to Adwaith for
₹ 10,000 and drew a bill of exchange for 3 months.
Adwaith accepted the bill. In 7th February, 2015 Arya
discounted the bill with her bank for ₹ 9,800. But on
the date of maturity of the bill. Adwaith was unable
to make the payment. Pass the journal entries in the
books of Arya.
17. Find the `sale’ of Mr. Binesh from the following
information provided by him for the year ending
31st March 2013.
Particulars
Closing stock
Purchases
Wages
Carriage outwards
Return outwards
Opening stock
Gross profit
Amount
5,000
12,500
1,000
500
100
2,500
10,000
14. Trial balance is a statement prepared to check
for arithmetical accuracy of business
a) Name any two types of errors which cannot
be disclosed through this statement.
ISLA COMMERCE ACADEMY_ ICA
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61
18. Computerised accounting has many advantages
over manual accounting.
a) List any two advantages of computerized
accounting
b) Write any one condition that must fulfill by an
accounting report.
c) The user oriented programme designed and
developed for performing certain specific
tasks are called as _________
19. Observe the following table.
Entity
?
Attribute
…………
?
?
?
Record
201
HAL
MALE
7-2-73
a) Give a suitable entity name
b) Write the relevant attributes relating to the
entity.
Type of account
Debit
Cash in hand
Purchases
Sales
Return outwards
Bad debts
Carriage outwards
Wages
Furniture
Capital
Provision for bad debts
Discount
Salaries
Commission
Advertising
Debtors
Creditors
10,000
75,000
500
600
6,500
50,000
500
5,000
1,300
50,000
1,99,400
Credit
1,00,000
1,000
73,000
100
5,500
19800
1,99,400
Additional information:
a. Closing stock is valued at ₹ 25,000
b. Salary of an employee is not paid ₹ 500
c. Further bad debts incurred ₹ 200
d. Provision for bad debts is created at 5% on debtors
20. Consider the following information from the
books of Mr. sidique.
a) Profit for the year ₹ 60,000
b) Additional capital introduced by him ₹ 50,000
c) Drawings by him this year ₹ 30,000
d) Capital at the end of the year ₹ 2,00,000
Find the capital introduced by him at the
beginning of the year.
21. The following is the trial balance of Ammu
associates for the year ending 31st December,
2014 and other information relating are given
to you. Find the working result of business and
also show the financial position of them for the
year.
ISLA COMMERCE ACADEMY_ ICA
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ACCOUNTACY WITH COMPUTERISED ACCOUNTING
JULY - 2016
1. Things or properties of value are called_______
a) Assets
b) Liabilities
c) Capital
d) Revenue
2. Goods withdrawn by the proprietor for personal
use are debited to ________
a) Capital account
b) Drawings account
c) Stock account
d) Purchase account
3. Goods returned by customers are also known
as________
a) Purchase returns
b) Returns outwards
c) Return inwards
d) Goods in transit
4. Overdraft as per the cash book on 01/12/2015
₹ 750. Dividend credited by bank on 31/12/2015
was ₹ 1,250. New balance as per the cash book
will be ____________
a) overdraft as per the cashbook ₹ 750
b) overdraft as per the cashbook ₹ 1,250
c) balance as per the cash book ₹ 2,000
d) balance as per the cash book ₹ 500
1)
2)
3)
4)
8. Give suitable names to the following:
1
2
6. Find the odd one out from the following. State
the reason.
a) Rent
b) Salary
c) Wages
d) General Expenses
7. Arrange the following items given in the brackets
into their order of occurrence in transaction
processing cycle.
(Storage, Data Entry, Processing, Validation)
ISLA COMMERCE ACADEMY_ ICA
Software readily available in the market
Software made as per the requirements
of business
?
?
9. State the relevant principles/concepts.
Statements
1
2
3
4
5
5. Statement prepared to ascertain arithmetical
accuracy of accounts.
a) Bank Reconciliation Statement
b) Statement of Affairs
c) Trial Balance
d) Financial Statements
62
6
Related
accounting
principles
Owner and Business have separate
existence
Recording monetary events only
Business has got indefinite life
Follow same accounting practices
year after year
Stock is valued at cost price or
market price whichever is less
Compare expenses with revenue of
an accounting period
?
?
?
?
?
?
10. Find the capital at the beginning, from the
following information.




Capital at the end ₹ 1,56,000
Drawings during the year ₹ 14,000
Additional capital introduced during the
year ₹ 40,000
Loss during the year ₹ 20,000
11. Consider the following table and answer the
question given below:
Student
Adm. No.
Stud_Name
Stud_Sex Stud_Class
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63
a) Name of entity
b) Primary key
c) Generate a meaningful record by writing an
example in the above boxes with question mark
12. Mention the steps for creating a simple table in
MS Access.
13. Ascertain the amount to be debited to profit and
loss account under the head ‘Salaries’ based on
the following information.
Given in Trial balance:
Salary (Dr) ₹ 12,000
Salary outstanding (Cr) ₹ 2,000
Given in adjustments:
Salary includes ₹ 1,500 paid in advance
16. A company purchased a machinery costing ₹ 90,000
on 01/01/2015. On 01/07/2015 another machinery
was ₹ 95,000. Installation cost was ₹ 5,000. Provide
depreciation at the rate of 10% per annum. Show the
machinery account for the year 2015. Assume that
book is closed on 31/12/2015.
17. Prepare a Bank Reconciliation Statement as on
31/01/2015, from the following information.
a)
b)
c)
d)
e)
Balance as per the cash book
₹ 45,000
Cheque issued but not presented
₹ 8,000
Bank charges debited in the passbook ₹ 6,000
Direct deposit by customer into bank ₹ 4,000
Interest credited in the passbook
₹ 2,500
18. Prepare a simple cash book from the following:
14. Show the accounting equation the respect of the
following transactions.
a)
b)
c)
d)
Started business with cash ₹ 1,00,000
Purchase goods from Menon ₹ 30,000
Sold goods for cash ₹ 20,000
Paid Salary ₹ 5,000
15. You are required to:
a) Pass rectification entries for the following
based on the narration.
b) Which among the following will affect the
agreement of Trial Balance?
No. Particulars
Sales
A/c Dr
To Rajan A/c
1
(Purchased goods
from Rajan on credit)
Salary
A/c Dr
2
To Cash A/c
(Salary paid ₹ 3,300)
Sanjay
A/c Dr
3
To Cash A/c
(Paid to Sanjeev)
ISLA COMMERCE ACADEMY_ ICA
Debit
Credit
50,000
50,000
4,300
5,000
4,300
5,000
a)
b)
c)
d)
e)
f)
g)
Opening balance
Cash purchases
Salary paid
Withdrew from bank for office use
Paid to Shekar
Deposited into bank
Cash sales
₹ 40,000
₹ 15,000
₹ 5,000
₹ 12,000
₹ 6,500
₹ 9,000
₹ 10,000
OR
Prepare an analytical petty cash book from the
following details.
2015
Jan
1 Received from the main cashier
2 Purchased stationary
5 Paid for postage stamp
7 Paid for carriage
12 Railway freight paid
19 Telegrams
22 Telephone charges
31 Sundry expense paid
₹ 1,000
₹ 55
₹ 154
₹ 112
₹ 98
₹ 75
₹ 32
₹ 125
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64
19. On 01/01/2015 Sachin sold goods worth ₹ 17,000
to Mr. Anand. Anand paid ₹ 7,000 immediately
and for the balance Sachin drew a bill on Anand
payable after three months, which was duly
accepted. Sachin discounted the bill was
dishonoured. Pass the entries in the books of
Sachin.
20. The following balances are extracted from the
books of a sole trader as on 31/12/2015.
Name of the Ledger
Capital
Cash in hand
Opening stock
Purchases and sales
Debtors and creditor
Salary
General expense
Plant and machinery
Furniture and fixtures
Wages
Debit
22,000
20,000
1,60,000
31,000
15,000
13,000
80,000
32,000
12,000
Credit
1,00,000
2,60,000
25,000
Additional Informational:
a) Closing stock on 31/12/2015 ₹ 33,000
b) Salary prepaid ₹ 2,000
c) Writeoff ₹ 1,000 as bad debts and provide
3% for provision for bad and doubtful debts.
d) Wages outstanding ₹ 1,000
ISLA COMMERCE ACADEMY_ ICA
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ACCOUNTACY WITH COMPUTERISED ACCOUNTING
MARCH - 2017
1. Vinod took a loan of ₹ 1,00,000 from Canara Bank.
Identify the debtor in the above transaction.
1. Write off the cost of intangible assets is termed as
__________
a) Depreciation
b) Depletion
c) Amortization
d) Obsolescence
2. Which one of the following is NOT a feature of
ready-to-use accounting software?
a) It is suited to small organization
b) Volume of accounting transaction is very low
c) Cost of installation is high
d) Number of users is limited
3. Classify the following assets under appropriate
heads.
Cash, Machinery, Land, Stock
4. “A Balance Sheet is more reliable than statement
of affairs”. Explain.
5. Classify the following into input and output devices.
Key board, Printer, Mouse, Monitor
6. Give any two limitations of computerized
accounting systems.
7. a) Write a suitable entity for the attributes given
below.
Account Code
Account Name
b) Also identify the key attribute to that entity.
8. Give any two limitations of computerized
accounting systems.
9. a) Mention the name of the reserve that is created
out of revenue profits.
b) b) How does it differ from capital reserve?
ISLA COMMERCE ACADEMY_ ICA
65
10. a) Ascertain cost of goods sold
Opening stock ₹ 18,000
Purchases ₹ 22,000
Wages ₹ 5,000
Closing stock ₹ 15,000
b) How much is gross profit, if sales is ₹ 37,500.
11. Write any two data types in MS – Access with
suitable examples.
12. Match the following:
A
Closing stock valued at cost or
market price whichever is less
Every transaction will have two
aspects
All business events not recorded
in accounting
Accounting information should
be free from bias
B
Objectivity principle
Money measurement
concept
Dual aspect concept
Principle of
conservatism
13. Started business with cash ₹ 85,000 and stock
₹ 15,000. Sold goods for cash ₹ 10,000
a) Prove that the accounting equation is satisfied in
the above transactions
b) Also pass the journal entries to record the above
transactions.
14. i. Purchase day book was undercast by ₹ 3,000.
ii. Wages paid ₹ 500 in connection with purchase of
machinery has been debited to wages account.
a) Identify the type of errors committed in the
above transactions.
b) Pass the entries to rectify it.
15. On 1st January, 2016 Arun drew a 3 months bill upon
Varun for ₹ 6,000. On 3rd January, 2016 Arun
discounted the bill with his banker @ 6% per annum.
The bill was honoured on the due date.
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66
a) Identify the drawer in the above bill.
b) Record the necessary journal entries in the
books of Arun and Varun.
16. The cashbook of Manu showed a debit balance
of ₹ 18,000. On comparing cashbook with
passbook, the following differences were noted.
a) Cheque issued but not yet presented for
payment ₹ 4,000
b) Bank charges debited in the passbook ₹ 500
c) Cheque sent to bank for collection but not
yet collected ₹ 3,000
d) Rent collected and credited by bank ₹ 3,500
i.
Name the statement Manu will prepare in
order to reconcile balance as per cashbook
with passbook
ii. Prepare that statement to reconcile it.
17. Sethu a dealer in books had the following
transactions for the month of June 2016.
a) Purchased books on credit from Himalaya
publishers:
100 copies of accountancy text for class XI
@ ₹ 150 per text
80 copies of Business studies text for class
XI @ 120 per text
(OR)
Prepare a double column cashbook from the details
given below.
2016 November
1 Opening balance Cash (dr.) ₹ 30,000
Bank (cr.) ₹ 12,000
2 Purchased goods for cash
₹ 8,000
10 Cash deposited into bank
₹ 17,000
15 Salary paid by cheque
₹ 5,000
18 Sold goods for cash
₹ 15,000
30 Cash withdrawn from bank ₹ 3,000
18. The following is the Trial Balance of Kiran, a trader
on 31st December, 2016. Prepare final account for
the year.
Particulars
Capital
Opening stock
Salaries
Carriage
Commission
Purchase
Bad debts
Return outwards
Sales
Sundry debtors
General expenses
Cash in hand
Sundry creditors
Depreciation
Machinery
b) Purchased books on credit from saradhi
books:
90 copies of accountancy text for class XII @
₹ 180 per text
75 copies of business studies text for class
XII @ ₹ 140 per text
Trade discount allowed 5%
Additional information:
c) Returned to saradhi books:
8 copies of accountancy text for class XII @
₹ 180 per text
15 copies of business studies text for class
XII @ ₹ 140 per text
a)
b)
c)
d)
Record the above transactions in the
appropriate day books
ii. Identify the source document for recording the
transaction no. (c) above
Debit
12,500
3,000
2,500
30,000
1,000
24,000
2,000
6,500
1,500
52,000
1,35,000
Credit
80,000
4,000
2,000
41,000
8,000
1,35,000
Closing stock was valued at ₹ 10,000.
Carriage outstanding ₹ 500.
Commission received in advance ₹ 700.
Provide 5% of debtors for bad debts.
i.
ISLA COMMERCE ACADEMY_ ICA
19. “Book-keeping is a narrow concept and accounting is
a broader concept” Comment.
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67
20. The following are the transactions taken place in
the business of a furniture dealer:
Mar 1 Sold to Akbar 5 tables @ ₹ 2500 per table
5 Sold to Binthu 3 dressing tables @ ₹ 3000
per table
8 Sold to Faiswal 2 dining tables @ ₹ 1500
per table
17 Sold to Sharanya 10 wooden chairs @ ₹ 400
per chair
22 Sold to Swalih an old computer @ ₹ 9500
Prepare sales book for the month of March
21. Prepare final account for the year ended 31st
March 2010.
Trial Balance
Debit
5000
Cash in hand
Capital
Opening stock
Purchases
Advertisement
Factory lighting
Carriage inwards
Drawings
Sales
Returns
Creditors
Debtors
Land and buildings
Furniture
Insurance
Bank loan
Interest on loan
Commission
Water and power
20000
85000
2000
500
500
4000
4000
9500
100000
17000
1500
500
2000
2,51,500
Credit
50000
150000
2500
30000
15000
4000
2,51,500
Adjustments:
1. Closing stock is valued at Rs.25000
2. Land and building depreciated by 5%
3. Commission received in advance Rs.2000
4. Insurance prepaid Rs.1000
5. Provide interest on capital at 5%
ISLA COMMERCE ACADEMY_ ICA
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ACCOUNTACY WITH COMPUTERISED ACCOUNTING
JULY - 2017
1. Which one of the following is NOT a fixed asset?
a) Goodwill
b) Stock of goods
c) Furniture
d) Land
2. Which one of the following transactions results a
decrease in asset and capital?
a) Purchased goods for cash
b) Capital brought into the business
c) Withdrew cash for personal use
d) Loan taken from bank
3. Find the suitable data type for the following fields
in the table 'Employee'.
Data types: (Text / Number / Date)
a)
b)
c)
d)
Details
Employee number
Employee name
Employee
designation
Employee date of
birth
Fields name
emp_ID
emp_name
Data Type
?
?
emp_desg
?
emp_dtfb
?
68
5. Mr. Muneer, a fruit merchant maintains incomplete
records of accounting.
a) Name the statement prepared by him to find
out the opening capital balance.
b) Find out his capital as on 1st April, 2015 from the
information given below.
Fuririture – ₹ 14,000; Machinery – ₹ 26,000;
Cash in hand – ₹ 6,300; Bills payable – ₹ 3,450;
Sundry debtors – ₹ 15,700; Sundry creditors –
₹ 4,800; Closing stock – ₹ 7,300
Find out the amount of profit made by him during
the year ended 31st March, 2016, if his closing capital
balance as on that date amounts to ₹ 67,500.
6. Briefly explain any two objectives of accounting.
7. From the given pairs find the correct one:
a) Debit - Increase in Assets
b) Debit - Increase in Revenue
c) Credit – Increase in Expenses
d) Credit - Decrease in Liabilities
4. A) Study the details given below:
i.
Discounting of bill Collecting cash from bank
before due date
ii. Endorsing of bill Transferring of bills
received to a creditor
iii. Dishonoring of bill - Does not make
payment on the due date
Choose the CORRECT answer from the following
a) Only i) and ii) are correct
b) Only ii) and iii) are correct
c) OnIy i) and iii) are correct
d) i), ii) and iii) are correct
B) What term will be used for cancelling a bill of
exchange before due date and drawing a
new bill at the request of the acceptor?
ISLA COMMERCE ACADEMY_ ICA
8. a) Name the statement prepared for locating errors
and checking the arithmetical accuracy of the ledger
accounts.
b) The following errors were found in the books of
Mr. Immanuel. Identify the type of error and write
the rectifying journal entry.
i.
Wages paid for installation of machinery ₹ 1,000
was posted to wages account.
ii. Furniture purchased for ₹ 8,400 wrongly recorded
in the purchase day book.
9. In every table, there will be a field containing a unique
value used for identification. Find its name.
a) Primary key
b) Domain
c) Belation
d) Entity
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69
10. In a Balance Sheet, the assets and liabilities are
grouped and arranged in a particular order.
a) What is the name used for arranging the
Balance Sheet items?
b) What is the name used for arranging the
Balance Sheet items?
Liabilities
Bank OD
Creditors
Bank Loan
Capital
Amount
4,000
8,000
10,000
56,000
78,000
Assets
Amount
Cash
3,000
Debtors
13,000
Land
60,000
Goodwill
2,000
78,000
c) Find out the amount of “Current Assets" and
“Current Liabilities" from Balance Sheet.
11. What is CPU? Explain.
12. On 1st April,2016 Thomas purchased goods from
Arun for ₹ 6,000 on credit. Identify the debtor
and creditor in this transaction.
13. Write any four attributes of the entity "Student"
in an ER design.
14. Which one of the following is NOT an input
device?
a) Digital camera
b) Laser printer
c) Bar code reader
d) Track ball
15. a) Name the statement prepared to ascertain
the causes of difference in the cash book and
bank passbook balance.
b) On 31"t March, 2016 the cashbook of M/s
Media Associates showed a debit balance of
₹ 15,200. On the same date his bank passbook
showed a credit balance of ₹ 19,850. On
comparing the following differences were
observed.
ISLA COMMERCE ACADEMY_ ICA
Cheque for ₹ 3,200 issued to Vivek & Sons on 25 th
March, 2016 was not presented at the bank.
ii. Cheque received from Hameed ₹ 1,800 deposited
into bank for collection on 28/03/2016, is not yet
collected and credited.
iii. Interest on deposit credited by bank in the
passbook ₹ 850.
iv. Sajith, a customer directly remitted ₹ 2,400 in
the bank account.
i.
Show, how these balances were reconciled.
16. Write any two advantages of computerized
accounting system.
17. Imprest system used for the preparation and
maintenance of petty cash book. Explain, how this
system is operate.
18. Aashni Traders and Bhavya Stores purchased
machinery on 01/01/2013 at ₹ 50,000 each. The
amount depreciation calculated by them @10% for
the first three years are shown below:
Date
31-12-2013
31-12-2014
31-12-2015
Ashni Traders
5000
5000
5000
Bhavya Stores
5000
4500
4050
a) Identify the method of depreciation adopted by
the firms.
b) Draw up the Machinery account of Bhavya Stores
for the first three years assuming that the
company closings its accounts on 31st every year.
19. Prepare a cash book with cash and bank columns
from the following transactions.
01/4/2015
01/4/2015
04/4/2015
06/4/2015
07/4/2015
08/4/2015
Cash in hand
Bank Overdraft (cr)
Purchased goods for cash
Cash sales
Cash deposited into bank
Received a cheque from
Mr. Murali
5,300
3,600
2,750
13,500
15,000
7,000
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70
12/4/2015 Cheque received from
7,000
Murali paid into bank
15/4/2015 Withdrew cash from bank
5,000
18/4/2015 Paid to Chitra by cheque
3,000
20/4/2015 Paid salary
2,500
24/4/2015 Rahul a customer directly
1,800
paid into bank
OR
Enter the following transactions of M/s Megha
Traders in appropriate subsidiary books and
find out total credit purchases and total returns
outwards.
2016 JuIy 1 purchased the following goods on credit from M/s
Harisree Books as per the invoice No. 637.
120 Accounting record book @ ₹ 50 per book.
100 Physics record book @ ₹ 60 per book.
Trade discount at 10%.
July 8 purchased the following goods on credit from
premier Stores as per the Voucher No. 612.
30 boxes of ball point pen @ ₹ 70 per box.
20 boxes of gel pen @ ₹ 120 per box.
JuIy 12 Returned goods to Harisree Books as per the
Debit Note No. 12.
4 Accounting record books @₹ 50 per book.
3 Physics record books @ ₹ 60 per book.
Trade discount at 10%.
July 18 Purchased goods from Vinayaka Stores as per
the Voucher No.217.
20 packets A4 photocopy @ ₹ 130 per packet.
15 packets A3 photocopy @ ₹ 180 per packet.
July 24 Returned goods to Vinayaka Stores as per the
Debit Note No.13.
2 packets A4 photocopy paper @ ₹ 130 per packet.
July 31 Purchased 100 ruled note books @ ₹ 20 per book
from Karim Stores on credit.
ISLA COMMERCE ACADEMY_ ICA
20. Kripal sold goods to Jayesh for ₹ 15,000 on 12th March,
2016 and drew a bill payable after three months.
Jayesh accepted the bill and returned to Kripal. On 15 th
March, Kripal discounted the bill with his bank for
₹ 14750. The bill was dishonored on the due date. Pass
the necessary journal entries in the books of Kripa.
21. Identify the accounting principles applied in the
following cases and briefly explain the concerned
accounting principles.
a) Asset = Liabilities + Capital.
b) Capital is regarded as a liability.
c) Stock is valued at cost price or market price
whichever is less.
22. From the following Trial Balance and additional
information given in respect of M/s Travancore
Traders, prepare Trading and Profit and Loss account
for the year ended 31st March, 2016 and Balance
Sheet as on that date.
Trial Balance as on 31st March 2016
Particulars
Debit
Credit
Stock as on 1-4-2015
9,200
Purchases and sales
40,000
82,000
Purchase return
1,350
Wages
8,000
Salaries
8,900
Sundry debtors
10,000
Insurance premium
3,000
Bank Overdraft
11,500
Capital
50,000
Drawings
2,100
Land and Buildings
47,000
Furniture
12,000
Commission
1,550
Bad debts
8,00
Cash in hand
5,400
1,46,400 1,46,400
Adjustments:
a) Stock on 31st March 2016 is valued at ₹ 10,400.
b) Wages outstanding amounts to ₹ 1,200.
c) Insurance premium paid in advance ₹ 300.
d) Depreciate furniture by 10%
e) Create a provision for doubtful debts at 5% on
debtors.
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ACCOUNTACY WITH COMPUTERISED ACCOUNTING
MARCH - 2018
Answer all questions from question number 1 to
9. Each carry one score
1. Notebooks purchased by a stationary shop comes
under __________
a) Assets b) Income c) Purchases d) Liabilities
2. Fill in the blank:
______________
A/c
Dr.
To Thomas & Co. A/c
(Purchased Machinery from Thomas & Co.)
a) Purchase b) Cash c) Machinery
d) Goods
3. Ramesh, a dealer of Television, sold an old
furniture to Rafeeque for ₹ 3,000 on credit.
Identify the day book to record this transaction.
a) Purchase day book
b) Journal proper
c) Sales day book
d) Cash book
4. Bank Reconciliation Statement is prepared by –
a) Bank b) Depositor c) Creditor d) Debtor
5. Rent paid ₹ 4,500 was entered in cash book as
₹ 5,400. This is an error of
a) Principle
c) Compensating error
b) Omission
d) Commission
6. _____ reserve is not shown in the Balance Sheet.
a) Secret b) General c) Revenue
d) Capital
7. James sold goods for ₹ 10,000 to Rajeev and a
promissory note was prepared for a period of 2
months and endorsed to Raheem. Who is the
drawer of the promissory note?
a) James
c) Raheem
b) Rajeev
d) None of these
ISLA COMMERCE ACADEMY_ ICA
71
8. ________ account is prepared by a trader, who does
not maintain the double entry system of accounting,
to find out the value of credit purchase.
a) Total creditors
c) Bills receivable
b) Total debtors
d) Bills payable
9. Find the odd one out:
Keyboard, Mouse, MICR, Printer
Answer any five questions from question number 10
to 15. Each carries two scores.
10. Identify the accounting principles related to the
following:
a) Purchased 10 kg of raw materials for ₹ 5,000 was
entered in the books of account as ₹ 5,000.
b) Assets of business are always equal to the claims
of owners and outsiders.
11. Rectify the following errors:
a) Sold goods for ₹ 7,000 to Sangi & Cet, entered in
Purchase day book.
b) Rent paid ₹ 4,000 debited to Landlord account.
12. Insurance premium of ₹ 6,000 was paid for a period of
one year on 1st April, 2015. How the transaction will
be treated while preparing financial statements for
the year ending 31stDecember,2015?
13. Write any two features of using computers in
accounting.
14. Match the column A, with column B.
A
Data Processing
Front end interface
Reporting system
Back end database
B
Data Storage System
Convert data into information
Link between user and software
Final output
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72
15. Write the name of any two attributes of the entity
employee in an organization.
Answer any three questions from question
number 16 to 19. Each carries three scores.
16. In a business organization, goods are known in
different names Write the names used for the
goods in the following cases.
a) Goods remaining unused at the end of the year.
b) Goods returned by the buyer due to breakage
in transit.
c) Goods sold for cash and credit.
17. Royal Furniture received an order for making a
dining table on 10th May, 2017 and they
complete the work on 15th July, 2017. The
dining table was delivered to the customer on
20th July. 2017 and received the payment on
25th July, 2017. In which date this transaction
will be recorded in the books of the Royal
Furniture? Why?
18. Write a short note on key attribute with an
example.
19. A Trial Balance is given below. Rewrite it, if
there is any mistake.
Trial Balance
Debit
2,00,000
50,000
Capital
Purchases
Sales return
Sales
Purchase return
Machinery
Building
Cash
3,000
2,53,000
Credit
4,000
1,28,000
1,50,000
1,00,000
27,000
4,09,000
20. Prepare Minerva traders A/c from the
following information:
2017
Dec 1 purchased goods from Minerva Traders ₹ 50,000
Dec 5 paid ₹ 40,000 to Minerva traders.
Dec 10 Sold goods to Minerva Traders ₹ 20,000
Dec 15 purchased Furniture from Minerva Traders
₹ 26,000
Dec 20 purchased Machinery from Minerva Traders
₹ 75,000.
Dec 25 paid ₹ 1,00,000 to Minerva Traders.
21. Compute the cost of goods sold and gross profit with
the help of the following information.
Purchases
₹ 3,00,000
Sales
₹ 4,00,000
Purchase return
₹ 2,000
Sales return
₹ 3,000
Wages
₹ 50,000
Carriage inward
₹ 10,000
Salaries
₹ 25,000
Stock on 1-1-2017
₹ 60,000
Stock on 31-12-2017 ₹ 80,000
22. From the following particulars, find out total
purchases.
Creditors on 1st April 2016
Creditors on 31st March 2017
Cash paid to creditors
Return outwards
Bills payable accepted
Discount received
Bills payable dishonoured
Cash purchase
₹ 60,000
₹ 40,000
₹ 50,000
₹ 5,000
₹ 16,000
₹ 4,000
₹ 2,000
₹ 4,000
Answer question numbers 23 and 24. Each
carries five scores.
23. Prepare a Bank Reconciliation Statement as on 31st
December, 2017.
Answer any two questions from question
number 20 to 22. Each carries four scores.
ISLA COMMERCE ACADEMY_ ICA
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73
a) Balance as per cash book ₹ 20,000.
b) Cheques deposited and cleared but omitted
to record in cash book ₹ 4,000.
c) Cheque issued but not presented for
payment ₹ 6,000.
d) Bank charges debited in the passbook ₹ 800.
e) Cheque deposited but not collected ₹ 7,000.
26. On 1st July, 2014 M/s. Golden store purchased a
second hand plant for ₹ 85,000, spent ₹ 10,000 for its
overhauling and ₹ 5,000 for installation, Another plant
was purchased on 1st January, 2016 for ₹ 50,000. It
was decided to charge depreciation at 10% on original
cost. On July 1st 2016, the plant purchased on 1st JuIy,
2014 were sold for ₹ 75,000. Prepare a plant account
upto 31st December, 2017.
f) Interested credited in the passbook ₹ 500
Answer question number 27, which carries eight
scores.
24. On 4th May, 2014 Rajan sold goods to Kabheer for
₹ 25,000. Kabheer paid ₹ 5,000 immediately in cash
and accepted a bill drawn by Rajan for the balance
amount for a peiod of 2 months. On maturity date
Kabheer requested Rajan to cancel the old bill and
to draw a new bill upon him for a period of 3
months. He also agreed to pay interest at 6% p.a. in
cash. Rajan agreed and cancelled the old bill and
drew a new bill. The new bill was accepted and met
by Kabheer on due date. Pass the journal entries in
the books of Rajan.
27. The following is the Trial Balance extracted from the
books of Arya Traders for the year ended 31st Mar 2017
Answer any one from question numbers 25 and
26. Question carries six scores.
25. Prepare a double column cash book from the
following transactions for the month of January
2018.
Jan 1
“4
“5
“7
“8
“ 12
“ 15
“ 18
“ 20
“ 25
“ 30
Cash in hand
Bank Overdraft
Salaries paid
Sold goods
Purchased goods by cheque
Purchased machinery
Deposited into bank
Interest charge by bank
Overdraft
Commission received
Withdrew cash for personal
use
Sumesh, a customer directly
paid into bank
Withdrew cash from bank
ISLA COMMERCE ACADEMY_ ICA
₹ 16,000
₹ 6,000
₹ 2,000
₹ 8,000
₹ 4,000
₹ 5,000
₹ 8,000
₹ 500
₹ 3,000
₹ 2,000
₹ 6,000
₹ 2,000
Trial Balance as on 31st March, 2017
Particulars
Debit
Credit
Purchases
80,000
Drawings
6,000
Sales
1,20,000
Opening stock
20,000
Sundry creditors
35,000
Sundry debtors
46,000
Purchase return
2,000
Sales return
1,500
Commission
6,900
Wages
7,000
Carriage inwards
2,000
Carriage outwards
1,000
Salaries
10,000
Rent
3,400
Bills payable
16,000
Bank overdraft
9,500
Cash in hand
4,300
Building
80,000
Furniture
23,000
Bad debts
2,000
General expenses
4,000
Insurance
6,000
Capital
1,00,000
2,92,200 2,92,200
Adjustments:
a) Closing stock was valued at ₹ 45,000
b) Salaries paid only up to 31st January, 2017
c) Insurance prepaid ₹ 800
d) Create a provision for doubtful debts at 10% p.a.
on debtors
e) Depreciate building at 5% p.a & furniture at 10 p.a
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ACCOUNTACY WITH COMPUTERISED ACCOUNTING
JULY - 2018
Answer all questions from question numbers 1
to 8. Each carry 1 score.
1. State the accounting concept, if a business charges
depreciation under written down value method
and it follows the same method in the subsequent
years.
2. Which one of the following events is NOT a
business transaction?
a)
b)
c)
d)
Furniture purchased for cash
Goods are ordered for next month
10% of debtors are treated as bad
Salary outstanding to the employee
3. Computer purchased from Mr. X on credit is
recorded in the __________
a) Purchase book
b) Journal proper
c) Cash book
d) Sales book
Answer any 5 questions from question number 9 to
14. Each carries 2 scores.
9. Classify the following item as Revenue, Expense, Gain
and Profit.
a) Profit on sale of investment b) Interest received
c) Goods sold at above cost
d) Depreciation
10. Arun constructed a building for ₹ 5,00,000 for his
new business concern. After 2 years the market
value of the building is enhanced to ₹ 8,00,000.
a) If you are the accountant, which amount appear
in the books?
b) What is the accounting principle support your
recording?
11. Cash book is both Journal and Ledger. Justify your
views.
12. Write the name of the correct computer components
in the given box.
4. As Per business entity concept owner of the
business is ________
a) Supplier
b) Creditor
c) Debtor
d) Borrower
Secondary Storage
(b)
(a)
5. Find the odd one and state the reason:
a) Mouse b) Monitor c) Keyboard d) Pen drive
6. Find the “Entity” from the following.
a) Employee
b) Employee ID
c) Employee name
d) Age
7. Income receivable is _________
a) An asset
b) Liability
c) A profit
d) A loss
8. Different entities are related to simplify the data
storage is termed as __________
ISLA COMMERCE ACADEMY_ ICA
74
Output
Input
(c)
ALU
(d)
13. Identify the limitations of CAS from the following.
a) Disruptions
b) Scalability
c) Staff opposition d) Legibility
14. Point out any two differences between ‘Provision’
and ‘Reserve’.
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75
Answer any 4 questions from question number
15 to 19. Each carries 3 scores.
a)
15. Show the effect of following transactions on
Asset, Liabilities and Capital based on accounting
equation.
Drawings
A/c
Dr.
5,000
To Purchases A/C
5,000
(…………………………………………………..)
b)
Stock in Trade A/c
Dr. 10,000
To Capital
A/c
10,000
(………………………………………………..)
c)
Rejitha’s
A/c
Dr. 20,000
To Bank
A/c
20,000
(……………………………………………….)
a)
b)
c)
d)
e)
f)
Started a business with cash ₹ 1,50,000
Rent received ₹ 5,000
Purchased goods on credit from Rema ₹ 2,000
Paid cash to household expenses ₹ 4,000.
Sold goods for cash (cost- 10,000) ₹ 13,000
Deposited into bank ₹ 25,000
16. Calculate gross profit from the balances taken
from the books of Usha for the year ending 31st
March 2017.
Opening stock
Net sales during the year
Net purchases during the year
Closing stock
Direct expense
₹ 1,00,000
₹ 15,00,000
₹ 9,00,000
₹ 1,50,000
₹ 80,000
17. From the following information, calculate the
capital at the beginning.
Capital at the end of the year ₹ 6,00,000
Drawings made during the year ₹ 50,000
Fresh capital introduced
₹ 1,00,000
Profit of the current year
₹ 1,20,000
d)
Sales
A/c
Dr. 60,000
To Trading
A/c
60,000
(………………………………………………)
21. Record the following transactions in a double
column cash book.
Oct 1 Cash in hand
Oct 1 Cash at bank
Oct 2 Purchased goods
Oct 4 Rent paid by cheque
Oct 5 Cash deposited into bank
Oct 10 Purchased machinery by cheque
Oct 12 Sold goods and the customer
Deposited the amount into bank
Oct 22 Cash withdrawn for office use
Oct 31 Paid salary
₹ 40,000
₹ 25,000
₹ 20,000
₹ 4,000
₹ 10,000
₹ 15,000
₹ 12,000
₹ 7,000
₹ 6,000
22. Chandra Traders Purchased a Motor Van on 1-1-2013
for ₹ 6,00,000. The firm writes-off depreciation at the
rate of 10% p.a. on written down value method. Draw
up Motor Van account for the first three Years.
18. Explain briefly about ‘Accounting Reports’.
19. What are the following terms stand for?
a) GAAP
b) IFRS
c) ICAI
Answer any 3 questions from question number
20 to 23. Each carries 4 scores.
20. Give narrations for the following journal entry.
ISLA COMMERCE ACADEMY_ ICA
23. Identify the debit and credit aspects from the
following transaction.
a)
b)
c)
d)
Insurance premium paid in advance.
Discount allowed to Mr. Anandu.
Goods taken for peronal use.
Depreciation written off on machinery.
Answer any 2 questions from question
number 24 to 27. Each carries 5 scores.
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76
24. The cash book shows a debit balance of
₹ 10,800. On comparing the cash book with
passbook, the following discrepancies were
found. Help them to reconcile the same.
a) Cheque deposited in bank but not credited
₹ 2,000
b) Cheque issued but not yet presented for
payment ₹ 15,000
c) Insurance premium paid by the bank ₹ 800
d) Bank interest credited by the bank ₹ 450
e) Bank charges ₹ 150
f) Directly deposited by a customer ₹ 8,500
25. Help Ramu a friend of you to prepare Trial
Balance with the following items:
Loan given to Mohan
Sales
Preliminary expenses
Buildings
Capital
Bills Receivable
Investment
Advance from Rajas
Bank overdraft
Drawings
₹ 75,000
₹ 2,00,000
₹ 20,000
₹ 1,40,000
₹ 1,00,000
₹ 25,000
₹ 50,000
₹ 40,000
₹ 10,000
₹ 40,000
26. Rectify the following errors.
a) Credit sales to Mohan ₹ 1,200 was not
recorded
b) Rent paid ₹ 6,000 was posted to Ramu
(Landlord) personal account
c) Cash sales ₹ 2,000 were posted as ₹ 200.
d) Sales book overcast by ₹ 3,000.
e) Purchases book under cast by ₹ 4,000
Answer question number 28, which carries 8
scores.
28. From the following Trial Balance of M/s. Goutham and
Son's as on 31st December 2016 Prepare a Trading and
Profit & Loss Account and Balance Sheet.
Particulars
Opening stock
Purchases
Sales return
Cash in hand
Cash at bank
Salary
Wages
Insurance
Carriage inward
Debtors
Machinery
Buildings
Sales
Capital
Loan
Creditors
Purchase returns
Commission
Bills payable
Bank OD
Trial Balance
Debit
12,500
40,000
300
1,000
5,700
800
1,250
1,000
1,050
10,000
7,000
10,000
90,600
Credit
53,800
20,000
5,000
8,000
580
500
1,500
1,220
90,600
Adjustments:
a) Closing stock ₹ 12,300
b) Outstanding wages ₹ 200 and salary ₹ 100.
c) Accrued commission ₹ 300.
d) Create 5% provision for bad and doubtful debts.
e) Charge 10% depreciation on Machinery.
27. Aroop sold goods to Salini on January, 1st 2017 for
₹ 40,000 and drew upon her a bill of exchange for
3 months. Salini accepted the bill and returned to
Aroop. Aroop discounted the bill by an interest of
8% p.a. on 02-01-2017. On the due date, the bill
was dishonoured. Record the necessary entries in
the books of Aroop.
ISLA COMMERCE ACADEMY_ ICA
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ACCOUNTACY WITH COMPUTERISED ACCOUNTING
MARCH - 2019
Answer all questions from 1 to 9. Each carry one
score.
9. Calculate capital at the beginning.
Closing capital ₹ 6,00,000/- ; Profit for the year
₹ 40,000/-; Drawings during the year ₹ 58,000/-
1. The statement prepared to test the arithmetical
accuracy of the books of accounts.
a) Balance Sheet
b) Trial Balance
c) Profit and Loss Account
d) Journal
2. Pick out the WRONG pair:
a) Land, Building
c) Debtors, Machinery
b) Cash, Stock
d) Copyright, Patent
3. Which one of the following is NOT an element of
computer system?
a) IQ
b) Hardware
c) Software
d) People
Answer any five questions from 10 to 15. Each
carries two scores.
10. “Even though computer possess many capabilities it
suffers from number of limitations”. Mention any
two limitations.
11. ‘Accounting is a post mortem survey’. Do you agree?
Justify your answer.
12. Identify the following symbols used for constructing
ER diagrams.
4. A bill is ‘noted’ when it is _________
a) Discounted
b) Honoured
c) Dishonoured
d) Endorsed
5. Which one of the following is NOT a contra
transaction is two column cash book?
a) Cash deposited into bank
b) Opened a new account with bank
c) Cash withdrawn from bank for domestic purpose
d) Cash withdrawn from bank for office use
6. Which term refers to writing off the cost of
intangible assets like patents, copyright,
trademarks etc.?
a) Amortization
b) Depletion
c) Obsolescence
d) None of these
77
a)
=
Entity
b)
=
?
c)
=
?
13. Write the treatment of return inwards and return
outwards in the financial statements.
14. List out any four advantages of computerized
accounting system.
15. Complete the following as per hint given.
7. Fill in the blank with suitable ‘data type’ on the
basis of hint given.
a) Emp Name : Text / Text (Varchar)
b) Emp Salary : ………………………..
8. ‘While preparing final accounts, outstanding wages
is added to the wages account’. Identify the
accounting principle related with this statement.
ISLA COMMERCE ACADEMY_ ICA
Transaction
a)
Purchased good for cash
Effect on business
 Increase in asset
 Decrease in asset
b) Bought furniture on credit
?
c)
?
Bank loan repaid
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78
Answer any two questions from 16 to 18. Each
carries three scores.
16. From the following particulars ascertain credit sales
Particulars
Debtors as on 1st April 2017
Debtors as on 31st March 2018
Cash received from debtors
Discount allowed
Bad debts
Amount
25,000
40,000
50,000
7,000
3,000
17. Briefly explain any three components of DBMS.
18. Calculate cost of goods sold for the year 2017
with the help of the following information
Particulars
Opening stock
Closing stock
Purchases
Sales
Carriage inward
Carriage outward
Wages
Amount
80,000
1,30,000
3,75,000
6,00,000
7,000
4,000
12,000
Answer any three questions from 19 to 22. Each
carries four scores.
19. Akhil has the following transactions.
a)
b)
c)
d)
Started business with cash ₹ 5,00,000
Purchased goods on credit ₹ 40,000
Sold goods costing ₹ 27,000 on credit for ₹ 30,000
Bank loan received ₹ 80,000
Prove the accounting equation (A = L + C).
20. Rectify the following errors.
a) Purchase day book overcast by ₹ 500
b) Salary paid to Mr. Kumar is debited to his
personal account ₹ 26,000
c) Purchase of goods from Geetha ₹ 2,500 is
omitted to record in day book.
d) Sale of office furniture for ₹ 4,000 posted to
sales account.
ISLA COMMERCE ACADEMY_ ICA
21. On 1st May 2017, Krishna sold goods to Kripa for
₹ 20,000 and drew a bill of exchange for 3 months.
Kripa accepted the bill. On 1st June 2017 Krishna
discounted the bill, Kripa was unable to make the
payment. Pass the journal entries in the books of
Krishna.
22. A company purchased a machinery for ₹ 50,000 on
30th June 2015. Depreciation is charged @ 10%
under straight line method and accounts closed on
31st December every year.
Answer question number 23, 24 and 25. Each
carries five scores.
23. A portion of Trial Balance on 31st December 2016 is
as follows:
Sundry debtors ₹ 62,000; Bad debt ₹ 4,000
Adjustments:
 Further bad debts to be written off ₹ 2,000
 Create provision for bad debts @ 5% on debtors.
Give journal entries and show how these items will
appear in the statement of the business.
24. From the following particulars, prepare an
analytical petty cash book for the month of
November 2018, under the imprest system.
2018 November
1
Balance in hand
1
Cheque received from main cashier
3
Stamp purchase
6
Stationary
8
Printing charges
10 Cartage
14 Travelling expenses
15 Repairs
26 Paper and pencil
30 Telephone charges
₹
87
413
60
44
62
50
64
74
38
28
25. On March 31, 2017 the cashbook of Mr. Sreejith, a
trader showed a deposit balance of ₹ 48,400. His
passbook as on that date was ₹ 51,880. On
comparing the cashbook with the passbook, the
following differences were observed.
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79
a) Direct payment by three customers to the
bank amounted ₹ 7,800.
b) Insurance premium paid by bank ₹ 1,200.
c) Bank charges debited in passbook ₹ 120.
d) Cheque issued to a customer but not
presented for payment ₹ 6,000.
e) Four cheque paid into bank for collection but
not collected amounted to ₹ 9,000.
Answer any one question from 26 to 27, which
carries eight scores.
26. Consider the following transaction and record
them into appropriate special journals for the
month of January 2018.
1
Sold goods for cash ₹ 48,000
7
Purchased goods from M/s Sivaram
electricals (Invoice No. 2345)
20 fans @ ₹ 1,200 per piece
Less trade discount 10%
27. Following is the Trial Balance of Mr. Ajayan as on
31st March 2018.
Trial Balance
Particulars
Debit
Opening stock
24,000
Purchases
1,38,000
Sales
Freight
24,300
Salaries
65,000
Sundry debtors
26,000
Sundry creditors
Land and building
1,80,000
Interest
Rent
8,000
Furniture
15,000
Insurance charges
800
Capital
Cash in hand
7,200
Cash at bank
11,700
5,00,000
Credit
2,68,000
24,000
600
2,07,400
5,00,000
10
Purchased goods for cash ₹ 13,800
Additional Information:
11
Sold goods to M/s Parvathy Traders (Invoice
No. 327)
4 Colour TV @ ₹ 14,000 per piece
5 Computers @ ₹ 28,000 per piece
8 Table fans @ ₹ 1,550 per piece
a)
b)
c)
d)
e)
15
Purchased goods from M/s Ragam Agencies
(Invoice No. 046)
15 Colour TV @ ₹ 12,800 per piece
8 Computer @ ₹ 26,000 per piece
Prepare Trading, Profit and Loss account for
the year ending 31-03-2018 and Balance
Sheet as on that date.
20
Cash sales ₹ 3,400
28
Sold goods to M/s Alpha Electronics (Invoice
No. 328)
2 Computers @ ₹ 30,000 per piece
Less trade discount 5%
31
Purchased goods from M/s Aruna Ltd.
(Invoice No. 864)
12 Washing machines @₹ 20,000 per piece
Less trade discount 10%
ISLA COMMERCE ACADEMY_ ICA
Closing stock was valued at ₹ 40,000.
Freight outstanding ₹ 2,000.
Salaries prepaid ₹ 5,000.
Depreciate furniture by 10%.
Interest accrued ₹ 200
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ACCOUNTACY WITH COMPUTERISED ACCOUNTING
JULY - 2019
Answer the following questions from 1 to 10,
each carries 1 score.
1. Creatives Traders provides accounting information
to its users whenever it is required for. Specify the
qualitative characteristics of accounting.
a) Understandability
b) Relevance
c) Comparability
d) Reliability
2. Suresh advanced 3 months salary to an employee
of his firm. This advance salary is
a) Revenue expense
b) Capital expense
c) Current asset
d) Current Liability
3. Which accounting concept specifies trading
account?
a) Cost concept
b) Revenue realisation
c) Going concern concept d) Matching concept
4. Machinery purchased from Sheeba Industries Ltd
on credit is recorded in
a) Purchase day book
b) Purchase ledger
c) Journal proper
d) Cash book
5. A furniture merchant used 2 chairs for his office
use, which was credited in ________
a) Purchase account
b) Furniture account
c) Ofiice furniture account d) Drawings account
6. Find the odd one:
a) Direct payment by bank on behalf of
account hold
b) Bank charges debited by bank
c) Interest allowed by bank
d) Dishonour of a bill discounted with the bank
7. Find out the wrong pair:
a) Salary
- Revenue expenditure
b) Furniture
- Capital expenditure
c) Bank Loan
- Revenue receipt
d) Sale of machinery - Capital receipt
ISLA COMMERCE ACADEMY_ ICA
80
8. While marshalling the balance sheet in the order of
liquidity which of the following asset comes last?
a) Debtors
b) cash
c) Furniture
d) Bank
9. A bill of exchange is prepared by __________
a) Debtor
b) Creditor
c) Both of them
d) None of them
10. Opening statement of affairs is prepared to find
out ___________
Answer any five questions from 11 to 16, each
carries 2 scores.
11. Give examples for each of the following terms:
a)
b)
c)
d)
Revenue
Gain
Short term liability
Fixed assets
12. i. State the concept of the policy of anticipate no
profit and provide for all possible losses.
ii. Recommend any one practice of applying this
concept in accounting.
13. From the following balances taken from Kanth
Traders for the year ending March 31st 2018,
calculate the gross Profit.
Closing stock
Net sales during the Year
Net purchase during the Year
Opening stock
Direct expenses
- ₹ 1,50,000
- ₹ 4,00,000
- ₹ 1,50,000
- ₹ 80,000
- ₹ 70,000
14. Find out the missing account:
i. ____________ A/c
Dr
To Salary A/c
(Salary outstanding)
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81
ii.
____________ A/c Dr
To Rent A/c
(Rent received in advance)
19. List out the distinctive advantages of computer
accounting system over a manual system.
15. How statement of affair is differ from balance
sheet?
16. Give two examples of the organisations where
'ready-to-use’, 'customised' packages
suitable to perform the accounting activity.
Answer any 3 questions from 17 to 20, each
carries 3 Scores.
17. Write the accounting equation and find out the
missing figure:
1
2
3
Assets
80,000
?
60,000
Liabilities
50,000
45,000
?
Capital
?
15,000
35,000
18. Prepare suitable day book from the following
information:
20. Write the procedure of creating 'Table' in DBMS.
Answer any 2 questions from 21 to 21, each carries
4 scores.
21. Journalise the following transactions:
a)
b)
c)
d)
Insurance Paid by cheque ₹ 2,000
Goods costing ₹ 2,500 gave to charity
Withdrew cash from bank for office use ₹ 1,500
Goods returned to Nirmal ₹ 6,000
22. From the following particulars of Sree Agencies
prepare a Bank Reconciliation Statement as on March
31st 2018.
a) Balance as Per cash book ₹ 80,000
b) Cheques for ₹ 10,000 is deposited in the bank
but not yet collected by the bank.
c) ₹ 500 bank charges debited to Sree Agencies
account which is not recorded in cash book.
d) A cheque for ₹ 15,000 is issued by Sree Agencies
not presented for payment.
Date
Details
2018
Jan 1
Sold goods on credit to Krishna Store as
per invoice no. 401
40 Tshirts@ ₹ 500each
25 Jeans @ ₹ 750 each
Less 10% trade discount
23. M/s Radhika Textile Mills purchased a machinery on
1st April, 2015 for ₹ 2,00,000 and spent ₹ 30,000 for
its installation. Another machine was purchased on
January 1st 2017 for ₹ 30,000. Depreciation is charged
at the rate of 20% on written down value method.
Show the machinery account up to 31st March,2018.
Jan 8
Sold goods on credit to M/s Danya Tex
as per invoice no. 403
20 Churidars @ ₹ 400 each
50 Kurtas @ ₹ 300 each
Less trade discount 5%
Answer all questions from 24 to 26, each carries 5
Scores.
Sold goods on credit to Salu Textile
Mart as per invoice no. 404
Jan 20 75 Sarees @ ( 700 each
30 Pardas @ ( 900 each
Less trade discount 8%'
ISLA COMMERCE ACADEMY_ ICA
24. Prepare a petty cash book under imprest System.
Jan 1st Cash received from main cashier ₹ 2,000
2nd Photocopy
₹ 35
3rd
Auto charges
₹ 60
th
5
Ink, Pen, Pencil
₹ 70
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82
6th
8th
10th
11th
15th
20th
25th
Bus fare
Postage stamp
Cartage
Courier charges
Refreshment
Telegram charges
Taxi fare
₹ 85
₹ 150
₹ 40
₹ 90
₹ 180
₹ 40
₹ 120
25. Rectify the following errors:
a) Salary paid to Mr. Suresh is debited to his
personal a/c ₹ 8,000.
b) Purchase book is overcast by ₹ 5,000
c) Goods sold to Mr. Sojan on credit ₹ 500 have
been wrongly passed through purchase book.
d) Amount received ₹ 10,000 from Shalini was
wrongly recorded as ₹ 1,000.
e) Repairs on machinery ₹ 4,000 debited to
machinery a/c.
26. Complete the entries in the journal.
Particulars
LF Debit Credit
___________ A/c
Dr
60,000
To Sales A/c
60,000
(Goods sold on credit to
Sreejith)
2 ___________ A/c
60,000
Dr
60,000
To Sreejith A/c
(Acceptance received from
Sreejith)
3 Bank
55,200
A/c
Dr
4,800
__________ A/c
Dr
60,000
To ________ A/c
(Discounted bill with bank)
4 Sreejith
60,000
A/c
Dr
60,000
To ________ A/c
(Bill dishonoured at the
due date)
1
Answer any one question from 27 to 28, 8 Scores.
27. Prepare Trading and Profit and Loss account and
Balance Sheet from the given Trial Balance on
31-3-2018.
ISLA COMMERCE ACADEMY_ ICA
Particulars
Capital
Drawings
Purchases and sales
Returns
Carriage
Rent
Debtors and creditors
Opening stock
Buildings
Wages
Commission
Discount
Printing
Salary
Loan
Machinery
Bad debts
Furniture
B/R and B/P
Cash
Bank
Interest
Debit
2,000
35,000
2,000
500
2,000
20,000
9,000
17,000
5,000
200
500
300
2,300
30,000
1,000
10,000
15,000
28,500
12,700
Credit
80,000
72,000
1,500
15,000
800
10,000
13,000
700
1,93,000
1,93,000
Adjustments:
1. Closing stock valued ₹ 12,000
2. Depreciation on machinery @ 10% and furniture
@ 5% p.a.
3. Outstanding salaries ₹ 1.000
4. Prepaid rent ₹ 300
5. Provision for bad debts @ 5%o on debtors
28. i. Cash book is both journal and ledger accounts. Do
you agree? State your view in three points.
ii. Prepare double column cash book from the given
information:
2018
Jan 1 Cash in hand ₹ 60,000
Cash at bank ₹ 40,000
Jan 2 Cash received from Mohan ₹ 30,000
Jan 5 Purchased goods for cash ₹ 15,000
Jan 6 Electricity charges paid through cheque ₹ 2,000
Jan 8 Cash deposited into bank ₹ 25,000
Jan 10 Cash sales ₹ 40,000
Jan 15 Issued cheque to Babu ₹ 8,000
Jan 20 Bank charges debited by bank ₹ 250
Jan 31 Interest credited by bank ₹ 500
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ACCOUNTACY WITH COMPUTERISED ACCOUNTING
MARCH - 2020
Answer all questions from 1 to 11. Each carries
1 score.
1. Writing off the cost of intangible assets like
patent, copy right etc. is known as ________
a) Depreciation
b) Depletion
c) Amortization
d) Obsolescence
2. The maker of a bill of exchange is known as_____
a) Drawee
b) Payee
c) Drawer
d) None of these
3. ________ is an example of direct expense
a) Salary
b) Wages
c) Rent
d) Office expense
4. The person who owes money to the business is
known as ________
a) Debtor
b) Creditor
c) Partner
d) None of these
5. A series of operation in a certain order to
achieve a desired result is known as _______
a) Procedure
b) Data
c) Connectivity
d) Decisions
6. Multiple types of taxes in goods and services were
abolished through the introduction of ____
a) VAT
b) GST
c) Octroi
d) Income tax
7. In case of Bill of Exchange, _____ additional
days are added with its period to arrive at the
maturity date.
a) 5 days
b) 3 days
c) 2 days
d) 1 day
8. Which among the following is not an advantage of
computerized accounting system?
a) Speed
b) Cost of training
c) Reliability
d) Accuracy
ISLA COMMERCE ACADEMY_ ICA
83
9. The database element which enables to retrieve data
and information:
a) Tables
b) Queries
c) Forms
d) Report
10. If the salary paid during a year is ₹ 5,000 and
outstanding salary at the end of the year is ₹ 2,000,
then the amount of salary to be debited to profit and
loss account is:
a) 3,000
b) 5,000
c) 2,000
d) 7,000
11.
This symbol represents a _____ in entity
relationship model.
a) Entity
b) Weak entity
c) Relationship
d) Attribute
Answer any 4 questions from 12 to 16, each carries
2 scores:
12. Give the adjusting journal entries for the following
items:
a) Bad debt
b) Salary outstanding
13. List out any 4 limitations of computerized accounting
systems.
14. Give any two situations which increases the pass
book balance while preparing a bank reconciliation
statement.
15. Name any four special journals used in large business
firm.
16. From the given items list out ‘Entities’ and ‘Attributes’.
Employee
Date of Birth
ABC Company Ltd
Employee id
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84
Answer any 5 Questions from 17 to 22, Each
carries 3 scores.
17. What are the objectives of accounting? (any three)
18. Give journal entries for the following transactions:
a) Sold goods to Mithun ₹ 18,000
b) Paid rent ₹ 10,000
c) Withdrew cash from business for personal use
₹ 4,000.
19. Mr. Anand an accountant of a business
identified the following errors in their book of
accounts. Name the type of error occurred.
a) Payment to supplier of goods for ₹ 30,000 is
wrongly posted to the debit of their account
as ₹ 3,000.
b) Credit sales to Majeed ₹ 25,000, not entered
in the sales book.
c) Purchase of machinery for ₹ 50,000 is
debited to purchases account.
20. Compute the cost of goods sold from the
following information using suitable formula:
Opening stock
Purchases
Closing stock
Wages
Carriage inwards
–
–
–
–
–
₹ 50,000
₹ 1,50,000
₹ 40,000
₹ 80,000
₹ 4,000
21. Briefly explain the components of a Computer.
(any three)
22. Give the expansion of DBMS and list out any four
its components.
Answer any 2 questions from 23 to 25, each
carries 4 scores:
ISLA COMMERCE ACADEMY_ ICA
23. From the following information find out the amount
of credit sales.
₹
Cash received from Debtors
60,000
Debtors as on 1-1-2016
40,000
Debtors as on 31-12-2016
50,000
Bad debts
5,000
Discount allowed
4,000
24. State which principles / concepts are applicable in the
following cases.
a) Creation of provision for doubtful debts.
b) Capital brought by the owner is treated as a
liability.
c) Method of calculation of depreciation is not
changing year after year.
d) Accounting should focus on material facts.
25. Give rectification entries for the following transactions:
a) Salary paid to Ramu ₹ 5,000 was debited to his
personal account.
b) Credit sales to Sajan ₹ 10,000 was recorded as
₹ 1,000 in sales book.
c) Credit purchase from Zakariya ₹ 20,000 were not
recorded.
d) Cash received from Sakeer ₹ 4,000 was wrongly
posted to Shaheer’s account
Answer any 2 questions from 26 to 28, each carries
5 scores
26. Mr. Prakash the Chief Accountant of a business
identified some differences in their cash book balance
and bank passbook balance as on June 30, 2017. You
are required to prepare a bank reconciliation
statement to reconcile the balances.
a) Balance as per cash book ₹ 64,000.
b) Cheque issued but not presented for payment
₹ 5,000.
c) Bank charges debited by bank ₹ 500.
d) A cheque of ₹ 10,000 was deposited but not
collected by bank.
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85
e) A customer directly deposited ₹ 3,000 in the
bank.
f) Bank directly collected the dividend and
credited to bank account ₹ 4,000.
27. On July 1, 2014 Elite Printers purchased a
machinery for ₹ 3,00,000 and spent ₹ 10,000 for its
installation. It was decided to provide depreciation
@ 10% p.a. on straight line method. Prepare
machinery account for first 4 years. Assuming that
books are closed on 31st December every year.
28. Deepak sold goods to Ramesh for ₹ 20,000 on
January 13, 2016 and drew a bill payable after
two months. Ramesh accepted the bill and
returned to Deepak. On January 20, Deepak
discounted the bill with his bank for ₹ 19,500.
The bill was dishonoured on the due date. Pass
journal entries in the books of Deepak.
Answer any 1 question from 29 to 30. Each
carries 8 scores:
29. From the following Trial Balance and additional
information given in respect of M/s. Kochin
Traders, prepare Trading and Profit and Loss
account for the year ended 31st March, 2018.
₹
Particulars
Stock(1/4/17)
12,800
Cash
18,000
Wages
35,000
Drawings
3,000
Debtors
20,000
Purchases
1,45,800
Land and
Buildings
45,000
Sales return
8,400
Salary
10,000
Bad debt
1,000
Insurance
8,300
Bills receivable 14,000
3,21,300
Particulars
Capital
Creditors
Loan
Sales
Purchase
return
Discount
Bills Payable
ISLA COMMERCE ACADEMY_ ICA
₹
50,000
18,400
18,000
2,23,500
Additional Information:
a) Salary outstanding ₹ 1,000
b) Provide 5% on debtors for provision for doubtful
debts
c) Insurance prepaid ₹ 2,500.
d) Depreciation on Land and Building @ 5%.
e) Closing stock was ₹ 14,200.
30. Mr. Sharma, the petty cashier of Megha Traders
received ₹ 1,500 on June 01, 2018 from the head
cashier. For the month, details of petty expenses
are listed as under:
Date
Particulars
Amount (₹)
June 2
“ 3
“ 5
“ 6
“ 7
“ 8
“ 8
“ 11
“ 12
“ 13
“ 18
“ 21
“ 27
“ 30
Postal stamps
Auto charge
Refreshments
Auto fare
Telegram
Bus fare
Cartage
Stationary
Paper, Pen, Pencil
Refreshments
Photostat charges
Courier services
Postage stamps
Taxi fare to manager
35
50
85
60
42
35
48
25
85
40
38
85
45
100
Prepare a Petty Cash Book.
4,100
800
6,500
3,21,300
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