1st PUC

You can Download Chapter 9 Financial Statement Questions and Answers, Notes, 1st PUC Accountancy Question Bank with Answers Karnataka State Board Solutions help you to revise complete Syllabus and score more marks in your examinations.

Karnataka 1st PUC Accountancy Question Bank Chapter 9 Financial Statement

1st PUC Financial Statement Two Marks Questions and Answers

Question 1.
What do you mean by financial statements?
Answer:
The statements which explains the financial position of the concern for a particular period. Called financial statements.

Question 2.
Why do you prepare final accounts?
Answer:
For knowing exact financial position and financial result of the concern, final accounts to be prepared.

Question 3.
What is trading account?
Answer:
Trading a/c is a financial statement prepared for the purpose of finding out trading result or a gross profit or loss of a business concern for a particular period.

Question 4.
What is profit and loss a/c?
Answer:
It is a financial statement prepared at the period end for knowing business result, i.e., profit or loss. It is a nominal a/c contain all indirect expenses loss and indirect income and profit.

Question 5.
What is balance sheet?
Answer:
Balance sheet is prepared for the purpose of knowing financial position of a business in a given period. It contains assets and liabilities of a business.

Question 6.
Mention the statements prepared under final accounts.
Answer:
The Financial statements prepared under final accounts are :

• Trading account
• Profit and Loss a/c
• Profit and loss appropriation a/c
• Balance sheet

Question 7.
Arrange the following assets in the balance sheet of a sole trading concern in the order of permanence.

• Cash
• Building
• Closing stock
• Machinery

Answer:

• Cash
• Stock
• Machinery
• Building.

Question 8.
Where do you show the following in the balance sheet of a sole trading concern.
Answer:
(a) Bills payable
(b) Plant and machinery
(a) Bills payable = Balance sheet liability side
(b) Plant and machinery = Balance sheet assets side.

Question 9.
Name any four current assets.
Answer:

1. Cash
2. Bank
3. Stock
4. Debtors

Question 10.
Name any four fixed assets.
Answer:

1. Machinery
2. Goodwill
3. Building
4. Furniture

Question 11.
Mention any four items appeared in trading account debit side.
Answer:
The items appeared in trading a/c debit side are :

1. Purchases
2. Wages
3. Freight charges
4. Factory expenses

Question 12.
What is Net profit?
Answer:
Net profit is the surplus remaining after meeting all indirect expenses out of gross profit.

Question 13.
Differentiate profit and loss a/c and balance sheet.
Answer:

Trial balance	Balance sheet
1. It is a summary of ledger balance	1. It is a summary of assets and liabilities
2. It contain all balance	2. It contain only real and personal a/c

Question 14.
What is profit and loss appropriation a/c?
Answer:
The financial statement prepared at the period and to show now the profit of a company appropriat or the internal profit of the company allocation called ‘profit and loss appropriation’ account.

Question 15.
Write the object of balance sheet preparation.
Answer:
Balance sheet is prepared for the purpose of knowing financial position of a business concern.

Question 16.
Who is debtor?
Answer:
The person who purchase goods from business on credit it called debtor.

Question 17.
Mention four types of assets.
Answer:

1. Tangible assets
2. Intangible assets
3. Fixed assets
4. Current assets

Question 18.
What is bad debts?
Answer:
If the debtors not able or agree to pay their debts that protion treated as bad debts.

Question 19.
Write the meaning of gross profit.
Answer:
It is a positive trading result. The excess of sales and closing stock over purchases, direct expenses and opening stock called gross profit.

Question 20.
What is direct expenses?
Answer:
The expenses which directly involved in production called direct expenses. All direct expensses are recorded in trading a/c debit side.

Question 21.
What is Indirect expenses?
Answer:
The expenses which is not directly involved in production but relating to the business called indirect expenses. There expenses are recorded in profit and loss a/c debit side.

Question 22.
What is Final Accounts?
Answer:
Final accounts is the process of preparation of finanicial statements at the end of the year.

Question 23.
Differentiate trial balance and balance sheet.
Answer:

Profit and loss a/c	Balance sheet
1. It is a nominal a/c	1. It is a real and personal a/c
2. It is prepared to know the business result (profit / loss)	2. It is prepared to know the financial position.
3. It contains all expenses and income	3. It contains assets and liabilities.

1st PUC Financial Statement Six Marks Questions and Answers

Question 1.
What are the objectives of preparing financial statements?
Answer:
The following are the objectives of preparing financial statements:
1. To ascertain profit earned or loss incurred by a business during an accounting period.
This is estimated by preparing Trading and Profit and Loss Account.

2. To ascertain the true financial position of a business. This is reflected by the Balance sheet.

3. To enable comparison of current year’s performance with that of the previous year’s, i. e., intra-firm comparisons. Also, to compare own performance with that of the other firms in the same industry, i.e., inter-firm comparisons.

4. To assess the solvency and credit worthiness of the business

5. To provide various provisions and reserves to meet unforeseen future conditions and to toughen the financial position of the business

6. To provide vital information to facilitate various users of accounting information in decision making process. [Any two]

Question 2.
What is the purpose of preparing trading and profit and loss account?
Answer:
The purposes of preparing Trading Account are:
a. To calculate gross profit earned or gross loss incurred during an accounting period

b. To estimate the cost of goods sold

c. To record direct expenses (i.e., expenses incurred on the purchases and manufacturing of goods)

d. To measure the adequacy and reasonability of direct expenses incurred by comparing purchases with direct expenses incurred

e. To compare the realized efficiency and performance with the desired or proposed targets

f. To calculate net profit or net loss

g. To ascertain net profit ratio and to compare this year’s net profit ratio with that of the desired and proposed target in order to assess the efficiency and effectiveness

h. To measure the adequacy and reasonability of indirect expenses incurred by ascertaining ratio between indirect expenses and net profit

i. To compare current year’s actual performance with desired and planned performance

j. To provide various provisions and reserves to meet unforeseen future conditions and to toughen the financial position of the business. [Any two]

Question 3.
Explain the concept of cost of goods sold.
Answer:
Cost of goods sold (COGS) is the cost of merchandise that is sold to the customers. It includes cost of raw materials purchased, direct expenses incurred, value of opening stock, i.e., the value of the last years unsold stock and excludes closing stock if any, i.e., the value of current year’s unsold stock or stock in need.
The formula to calculate COGS is:
Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses – Closing Stock

Question 4.
What is a balance sheet? What are its characteristics?
Answer:
Balance sheet is a statement prepared to ascertain values of assets and liabilities of a business on a particular date. It is called Balance sheet as it contains balances of real and personal accounts, which are not closed on a particular date.
Characteristics of Balance Sheet
It is a statement of assets and liabilities.
The total of Assets side must be equal to Liabilities sides.
It is prepared at a particular date.
It helps in ascertaining the financial position of the business.

Question 5.
State whether the following statements are items of capital or revenue expenditure:
a. Expenditure incurred on repairs and w hite washing at the time of purchase of an old building in order to make it usable.
b. Expenditure incurred to provide one more exit in cinema hall is compliance with a government order.
c. Registration fees paid at the time of purchase of a building
d. Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
e. Depreciation charged on a plant.
f. The expenditure incurred in erecting a platform on which a machine will be fixed.
g. Advertising expenditure, the benefits of which will last for four years.
Answer:
a. Capital expenditure
b. Revenue expenditure
c. Capital expenditure
d. Capital expenditure
e. Revenue expenditure
f. Capital expenditure
g. Deferred Revenue expenditure

Question 6.
Distinguish between capital and revenue expenditure
Answer:
Following points of distinction between capital expenditure and revenue expenditure are worth noting:
a. Capital expenditure increases earning capacity of business where as revenue expenditure is incurred to maintain the earning capacity.

b. Capital expenditure is incurred to acquire fixed assets for operation of business where as revenue expenditure is incurred on day-to-day conduct of business.

c. Revenue expenditure is generally recurring expenditure and capital expenditure is nonrecurring by nature.

d. Capital expenditure benefits more than one accounting year where as revenue expenditure normally benefits one accounting year.

e. Capital expenditure (subject to depreciation) is recorded in balance sheet whereas revenue expenditure (subject to adjustment for outstanding and prepaid amount) is transferred to trading and profit and loss account.

Question 7.
What is an operating profit?
Answer:
Operating profit is a profit earned through normal activities of a business. It is the excess of gross profit over operating expenses. In other words, it is the excess of operating revenue over operating cost. It is also termed as earnings before interest and tax (EBTI).

It does not include incomes and expenses that are not related to main course of the business. It is calculated by following formulae:
Operating Profit = Gross Profit – Operating Expenses
or
Operating Profit = Sales – Operating cost
Operating Profit = Sales – COGS – Operating Expenses
Operating expenses include office and administrative expenses, selling and distribution
Expenses, discount, bad debts, etc.

1st PUC Financial Statement Long Answers

Question 1.
What are financial statements? What information do they provide?
Answer:
Every business firm wants to know its financial position at the end of an accounting period. In order to assess its financial position, profit earned or loss incurred during an accounting period, the book value of its assets and liabilities is to be ascertained. In order to serve this purpose, financial statements are prepared. Financial statements are the statements showing profitability and financial position of a business at the end of the year. It includes:

Income statements: Trading and profit and loss account, which represents direct and indirect expenses, incurred to generate revenues. On one hand, trading account discloses either gross profit or gross loss; on the other hand, profit and loss account discloses either net profit or net loss.

Statement of financial position: Balance Sheet, which enlists the book value of all the assets and liabilities of the firm. Balance sheet discloses the true financial position, solvency and credit worthiness of the business.

Question 2.
What are closing entries? Give four examples of closing entries.
Answer:
The balances of all nominal accounts are transferred to the Trading and Profit and Loss Account. The entries required for such transfers are termed as closing entries. The examples of closing entries are given below.
Closing entries to transfer the following items to the debit side of trading account form Trail Balance:

Closing entries to transfer the following items to the credit side of trading account from Trial Balance:

Closing entries to transfer the following items to the debit side of Profit and Loss Account from Trial Balance:

Closing entries to transfer the following items to the credit side of Profit and Loss Account from Trial Balance:

Question 3.
Discuss the need of preparing a balance sheet.
Answer:
The need to prepare a Balance Sheet are given below.
a. It helps in determining the nature and book value of various assets, such as fixed assets, investments, current assets, etc. at the end of an accounting period.

b. It helps in ascertaining the nature and amount of various liabilities like long term liabilities, current liabilities, provisions, etc., which a business owes.

c. It discloses important information about capital invested in a business. The additional capital invested during the accounting period, drawings of the owners and profit (or loss) added to (or deducted from) the capital of the business.

d. It helps I assessing the solvency of a business.

e. It discloses the true financial position of a business at a particular point of time.

f. It lays down the basis for maintaining new books for next accounting period.

Question 4.
What is meant by Grouping and Marshalling of assets and liabilities? Explain the ways in which a balance sheet may be marshalled.
Answer:
The rationale behind preparing financial statements is to present a summarized version of all financial activities in such a manner that all users can interpret and understand the information easily, appropriately and also take decisions accordingly

Grouping of assets and liabilities: Grouping means showing similar assets and liabilities under a single head. For example, all assets that can be used for more than a year are clubbed together under the heading ‘fixed assets’, to example, building, furniture, machinery, etc.
Marshalling of asset and liabilities: When assets and liabilities are shown in a particular order of liquidity or permanence, they are said to be marshalled.

In order to liquidity: Liquidity means convertibility into cash. Assets that can be converted into cash in least possible time, i.e., more liquid assets are recorded first, followed by the lesser liquid assets. In a balance sheet, cash in hand is recorded at first and goodwill at last. In the same way, liabilities that are to be paid first, i.e., high priority liabilities are recorded first, followed by the lower priority ones. In a balance sheet, current liabilities are recorded first and then the li9ng term liabilities and capital at the last.
Balance Sheet of ……………………….. as on ……………………..

In order of permanence: It is just reverse of the above method. In this assets and liabilities are arranged in their reducing level of permanence. The assets with higher degree of permanence are recorded first, followed by the assets with lower degree of permanence. For example: goodwill, land and building have the highest degree of permanence and hence are recorded at the top, whereas, cash at bank and cash in hand are recorded at the bottom. In the same way, liabilities are shown according to their life in the business. Liabilities with higher level of permanence like, capital is recorded at the top and other liabilities with lower permanence are recorded at the bottom.
Balance sheet of ………………………….. as on ……………………………
Following is the proforma of a balance sheet in the order of permanence :
Balance sheet as on or as at …………………….


Meaning, characteristic, need and structure of the balance sheet: The balance sheet is a statement of assets and liabilities of a business enterprise and shows the financial position at a given date informations contained in a balance sheet is true only on that date. The balance sheet is a part of the final account. But it is not an account, it is only a statement. In a balance sheet the totals of assets and liabilities are always equal. It portrays the accounting equation.

A balance sheet has to be prepared to know the financial position of the business, and the nature and values of its assets and liabilities. All the accounts which have not been closed till the preparation of the profit and loss account are shown in the balance sheet. Assets and liabilities shown in the balance sheet are marshalled in order of liquidity or in order of permanence.

1st PUC Financial Statement Numerical Questions

Question 1.
From the following balances taken from the books of Simmi and Vimmi Ltd. For the year ending March 31,2003, calculate the gross profit.

Answer:
Financial statement-I

Question 2.
From the following balance extracted from the books ofM/s Ahuja and Nanda. Calculate the amount of:
(a) Cost of goods available for sale
(b) Cost of goods sold during the year
(c) Gross Profit

Answer:
(a) Cost of goods available for sale
= Opening stock + Net purchases + Wages
Net Purchases = Credit purchase + cash purchase – purchase return
Net purchase = 7,50,000 + 3,00,000 – 10,000
= 10,40,000
Cost of goods available for sale = 25,000 + 10,40,000 + 1,00,000
= 11,65,000

(b) Cost of goods sold during year = Net sales – Gross profit
or
= Opening stock + Net purchase + D.E – Closing stock.
= 25,000 + 10,40,000 + 1,00,000 – 30,000
= 11,35,000

(c)

Question 3.
Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv & Sons for the year ended March 31, 2005.

Answer:

Operating Profit = Net profit + Non operating expenses – Non operating incomes.
Operating profit = Sales – (opening stock + Net purchases + D.E + Indirect expenses) + closing stock.
= 11,00,000 – (50,000+6,00,000+60,000+45,000+65,000)4-70,000
= 11,00,000-8,20,000+70,000 =3,50,000

Question 4.
Operating profit earned by M/s Arora & Sachdeva in 2005-06 was ₹ 17,00,000. Its . non-operating incomes were ₹ 1,50,000 and non-operating expenses were ₹ 3,75,000.
Calculate amount of net profit earned by the firm.
Answer:
Operating profit = 17,00,000
Non-operating incomes = 1,50,000
Non-operating expenses = 3,75,000
Net profit = ?
Net profit = operating profit + Non-operating incomes – Non-operating expenses
= 17,00,000+1,50,000-3,75,000
Net profit = 14,75,000

Question 5.
The following are the extracts from the trial balance of M/s Bhola and Sons as on March 31,2005.

Closing stock as on date was valued at ₹ 3,00,000.
You are required to record the necessary journal entries and show how the above items will appear in the trading and profit and loss account and balance sheet of M/s Bhola & Sons.
Answer:

Question 6.
Prepare Trading and Profit and Loss account and Balance sheet as on March 31,2005:

Closing stock as on March 31, 2005 ₹ 22,400
Answer:

Question 7.
The following trial balance is extracted from the books of M/s Ram on March 31,2005. You are required to prepare trading and profit and loss account and the balance sheet as on date:


Answer:

Question 8.
The following is the trial balance of Manju Chawla on March 31,2006. You are required to prepare trading and profit and loss account and a balance sheet as on date:

Closing Stock ₹ 2,000
Answer:

Question 9.
The following is the trial balance of Mr. Deepak as on March 31,2005. You are required to prepare trading account. Profit and loss account and a balance sheet as on date :


Closing Stock ₹35,000
Answer:

Question 10.
Prepare trading and profit and loss account and balance sheet from the following particulars as on March 31,2005.

Answer:

Question 11.
From the following trial balance of Mr. A. Lai, prepare trading, profit and loss account and balance as on March 31,2005


Answer:

Question 12.
prepare trading and profit and loss account and balance sheet of M/s Royal Traders from the following balances branches as on March 31,2005


Answer:

Question 13.
Prepare trading and profit and loss account from the following particulars of M/s Neema Traders as on March Traders as on March 31,2005.

Answer:

Question 14.
From the following balances of M/s Nilu Sarees as on March 31,2005. Prepare trading and profit and loss account and balance sheet as on date.


Closing stock on March 31,2005 ₹ 22,000
Answer:

Question 15.
Prepare trading and profit and loss account of M/s Sports Equipments for the year ended March 31,2006 and balance sheet as on that date:

Answer:

 

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You can Download Chapter 3 Recording of Transactions I Questions and Answers, Notes, 1st PUC Accountancy Question Bank with Answers Karnataka State Board Solutions help you to revise complete Syllabus and score more marks in your examinations.

Karnataka 1st PUC Accountancy Question Bank Chapter 3 Recording of Transactions I

1st PUC Accountancy Recording of Transactions I One Mark Questions and Answers

Question 1.
Classify the English system of accounts.
Answer:
The three types of accounts under English system are :

1. Personal account
2. Real account
3. Nominal account

Question 2.
Classify the account under American system.
Answer:
The important classification of accounts under American system are :

• Assets A/c
• Liability A/c
• Equity or Capital A/c
• income A/c
• Expenses A/c

Question 3.
What is personal account?
Answer:
Transactions between two persons called personal account. Here one person give benefits and another one receives benefits.

Question 4.
Mention the different types of persons under personal account.
Answer:
The different types of person in personal account are :

1. Natural person
2. Artificial person
3. Representative persons.

Question 5.
Who is natural persons under personal account?
Answer:
All living individuals are natural persons. Example: Rama’s a/c, Bhima’s a/c etc.

Question 6.
Who is artificial person under personal account?
Answer:
Artificial or legal persons means institutions or body of individuals, which are considered as person in the eyes of law. example : companies, school, banks, etc.

Question 7.
Write the meaning of representative person.
Answer:
The person who represents the artificial person called representative person. Example : Debtors account, creditors account, capital account.

Question 8.
What is real account?
Answer:
The accounts relating to properties, assets, and pocessions with which we carry on business comes under one head of accounts called Real a/c. Example : Cash, goods, land and building, machinery, copy rights etc.

Question 9.
Write the meaning of tangible assets.
Answer:
The assets which we can see and touch called tangible assets. Example : Land and Buildings, machinery, goods, investments, etc.

Question 10.
What is nominal account?
Answer:
An account related to incomes or gains and expenses or losses of business called nominal accounts.

Question 11.
Write any four examples for artificial persons a/c
Answer:
Example for artificial persons a/c are :

1. Vijaya institute’s a/c
2. SAk college for commerce and management a/c
3. Syndicate Bank a/c
4. BHSHES a/c.

Question 12.
Give, any four examples for representative persons.
Answer:
Example for representative persons a/c are :

1. Debtors a/c
2. Prepaid expenses a/c
3. Capital a/c
4. O/s salary

Question 13.
Give examples for real account.
Answer:
Example for real a/c are

• Buildings a/c
• Plant and machinery a/c
• Stock a/c (iv) Cash a/c
• Motor car a/c

Question 14.
Give any four examples for nominal a/c.
Answer:
Example for nominal a/c are : –

1. Salary a/c
2. Rent received a/c
3. Printing and stationery a/c
4. Commission received a/c

Question 15.
Give two examples for tangible and intangible fixed assets.
Answer:
Example for Tangible Fixed assets are :

• Plant a/c
• Motor vechicle a/c Example for intangible

Fixed assets are :

• Goodwill a/c
• Trademarks a/c

Question 16.
Define double entry system.
Answer:
Eric, I, kohler says “It is a two way expression of each transactions”.

Question 17.
What is an accounting voucher?
Answer:
Accounting voucher is a document, which contains the analysis of a transaction.

Question 18.
Write the meaning of accounting equation.
Answer:
It is followed at every stage of accounting. It means every debit every transaction as equivalent credit.

Question 19.
Write the accounting equation.
Answer:
Assets = Liabilities + Capital (A = L + C).

Question 20.
What is an account?
Answer:
An account is the summarised information of transactions relating to a person, goods or service

Question 21.
Give the meaning of journal.
Answer:
Journal is chief Book, in which all the transactions are recorded in chronological order (Date- wise).

Question 22.
What is journalising?
Answer:
Recording of a transactions in a jornal called journalising.

Question 23.
What is compound journal entry? Give on Example.
Answer:
A journal entry which includes more than two or more debit or credit in single entry called compound Journal entry.
Example: Electricity a/c Dr, Rent a/c Dr, To cash a/c

Question 24.
What is meant by narration?
Answer:
The brief explanation about transaction after journal entry called narration.

Question 25.
Give the format of a journal.
Answer:
Format:
Journal entries in the book of….

Question 26.
What is simple entry? Give Examples.
Answer:
Simple journal entry involve only two accounts of which one account being debited and • another account account being credited.
Example : Cash a/c  Dr
To Ramesh a/c

Question 27.
Mention any one needs of journal.
Answer:
Two needs or importance of journals are :
Journal provides transactions in chronological order.

Question 28.
Write the meaning of source of documents in the book of a/c.
Answer:
Source of documents mean on which basis the transaction are recorded in the books of accounts.

Question 29.
Mention any two source of document in the books of account.
Answer:
The source of documents for recording transactions are :

1. Bills
2. Cash receipts
3. Invoice
4. Vouchers

Question 30.
Mention two method of recording business transactions.
Answer:

1. Conventional or theoritical method of recording.
2. English or modem method of recording.

Question 31.
What is Ledger?
Answer:
Transferring of entries from journal to the respective head of account as a group in chronological order called ledger.

Question 32.
What is .posting?
Answer:
It is the process of transferring debit and credit entries from the journal to appropriate group (head of a/c) in ledger.

Question 33.
What is debit balance?
Answer:
If the debit side total of a ledger account is greater than its credit side total, the difference is called debit balance.

Question 34.
What is credit balance?
Answer:
In the ledger account if the credit side of total is greater than debit side total, the difference is called credit balance.

Question 35.
What is journal folio?
Answer:
It is the column of journal from where the entry is posted in simple words it is the page number of journal. The abbreviation of journal folio is ‘JF

Question 36.
Write the need of balancing of ledger accounts.
Answer:
Balancing of ledger helps to findout whether a particular account has received more benefits or given on a particular period.

Question 37.
What is debit in ledger a/c?
Answer:
It is a column in ledger. It is meant for recording the amount debited to this account.

Question 38.
What is credit in ledger a/c?
Answer:
It is a column in ledger. It is meant for recording the amount credited to this account.

Question 39.
What is an account?
Answer:
An account is summarised record of all transactions relating to a person, things, income or expenses for a particular period under periodical concept.

Question 40.
What is balance brought down?
Answer:
The debit balance or credit balance which we have balanced in previous period / month recording brought down, the abbreviation of brought down is b/d.

Question 41.
What is balance carry down?
Answer:
The debit and credit balance which balanced in ledger in the current period / month may forwarded to next period such balance recorded as balance carry down, the abbreviation is c/d.

1st PUC Accountancy Recording of Transactions I Two Marks Questions and Answers

Question 1.
Write the rule of personal account.
Answer:
The rule of personal a/c is –
“DEBIT THE RECEIVER –
CREDIT the Giver”.

Question 2.
Write the rule of real account.
Answer:
The rule of real a/c is –
“DEBIT WHAT COMES IN
CREDIT WHAT GOES OUT”

Question 3.
Write the rule of Nominal a/c.
Answer:
The nominal a/c rule is –
“DEBIT ALL EXPENSES AND LOSSES
CREDIT ALL INCOMES AND GAINS”

Question 4.
What is assets?
Answer:
Asset is the property or things of the business owned by business. Examples : Land and building, machinery, stock etc.

Question 5.
Write the meaning of liability.
Answer:
Liabilities are obligations of the concern to pay outsiders due to purchase, funds received, services rendered etc. Example : creditors, O/S salary, Bills payable, etc.

Question 6.
Write the rule of capital a/c under American system.
Answer:
Capital a/c rule, under American system is :
“Debit decrease in capital Credit increase in capital”.

Question 7.
Write the rule of assets a/c under American system.
Answer:
“Debit increase in the asset
Credit Decrease in the Asset”.

Question 8.
Write the rule of liabilities a/c under American system.
Answer:
Liabilities a/c rule is ⇒ “Debit Decrease in the liability
Credit increase in the liability”

Question 9.
Write the rule of expenses a/c.
Answer:
“Debit increase in expenses
Credit decrease in expenses”.

Question 10.
Write the rule of incomes a/c.
Answer:
Income a/c rule are ⇒ “Debit decrease in income
Credit increase in income”

Question 11.
Give any four examples for personal a/c.
Answer:
Examples for personal a/c are :

1. Vijaya college a/c
2. Rama’s a/c
3. Prepaid expenses a/c
4. Vijaya Bank a/c

Question 12.
Write any two features of journal.
Answer.
The features of journal are

1. Journal is a day book or daily recording transaction book.
2. Transactions are recorded systematically in chronological order (Date-wise).

1st PUC Accountancy Recording of Transactions I Six Marks Questions and Answers

Question 1.
State the three fundamental steps in the accounting process
Answer:

Question 2.
Why is the evidence provided by source documents important to accounting?
Answer:
The evidence provided by the source document is important in the following manners:

• It provides evidence that a transaction has actually occurred.
• It provides important and relevant information about date, amount, parties involved and other details of a particular transaction.
• It acts as a proof in the court of law.
• It helps in verifying transactions during the auditing process.

Question 3.
Should a transaction be first recorded in a journal or ledger? Why?
Answer:
a. A transaction should be recorded first in a journal because journal provides complete details of a transaction in one entry. Further, a journal forms the basis for posting the transactions into their respective accounts into ledger. Transactions are recorded in journal in chronological order, i.e. (Date wise) in the order of occurrence with the help of source documents.

b. Journal is also known as ‘Book of original entry, because with the help of source document, transactions are originally recorded in books. The process of recording the transactions in journal and then in ledger is presented in the below given flow chart.

Question 4.
Are debits or credits listed first in journal entries? Are debits or credits indented?
Answer:
a. As per the rule of double entry system, there are two colums of ‘Amount’ in the journal format namely ‘Debit Amount’ and ‘Credit Amount’. The way of recording in a journal is quite different from normal recording. Journal entry is recorded in journal format in which the ‘Debit Amount’ column is listed before the ‘Credit Amount’ column.

b. Credits are indented. Indentation is leaving a space before writing any word. Journal entry has its own jargon. While journalizing, in the ‘Particulars’ column of journal format, debited account is written first and credited account is in the next line leaving some space, which is indentation.

Question 5.
Why some accounting systems are called double accounting systems?
Answer:
Some accounting systems are called double accounting systems because under this system there are two aspects of every transaction, i.e., every transaction has dual effect. Every transaction affects two accounts simultaneously, that is represented by debiting one account and crediting the other account. It is based on the fact that if there is receiver, there should be a giver.

Question 6.
Give a specimen of an account.
Answer:

Question 7.
Why are the rules of debit and credit same for both liability and capital?
Answer:
a. Every business acquires funds from internal as well as from external sources. According to the business entity concept, the amount borrowed from the external sources together with the internal sources like, capital invested by the proprietor, it termed as liability to the business. Business entity entity concept treats business and business owner separately.

b. Capital of the owner is treated as liability to the business because the business has to repay the amount of capital to the owner, in case of closure of the business. As liability incurred is credited, in the same way, fresh capital introduced and net profit increases the owner’s capital, and so, captial is credited.

c. On the other hand, if liability is paid, it reduces liability, and so, it is debited. Similarly, drawings from capital and net loss reduce the capital, and so, capital is debited. Thus the rules of debit and credit are same for both liability and capital.

Question 8.
What is the purpose of posting J.F numbers that are entered in the Journal at the time entries are posted to the accounts?
Answer:
J.F. number is the number that is entered in the ledger at the time of posting entries into their respective accounts. It helps in determining whether all transactions are properly posted in their accounts. It is recorded at the time of posting and not at the time of recording the transactions.

The purpose of entering J.F. number in the ledger is because of the below given benefits.

• J.F. number helps in locating the entries of accounts in the journal book. In other words, J.F number helps to locate the position of the related journal entiy and subsidiary book in the journal book.
• J.F. number in accounts ensures that recording in the books of original entry has been posted or not.

Question 9.
What entry (debit or credit) would you make to: (a) increase revenue (b) decrease in expense, (c) record drawings (d) record the fresh capital introduced by the owner.
Answer:

• Increase in revenue Increase in revenue is credited as it increases the capital. Capital has credit balance and if capital increases, then it is credited.
• Decrease in expense Decrease in expense is credited as all expenses have debit balance. If expense decreases, then it is credited.
• Record drawings Capital has credit balance; if the capital increases, then it is credited. If capital decreases, then it is debited. Drawings are debited as they decrease the capital.
• Record of fresh capital introduced by the owner – credit Capital has credit balance, if capital increases, then it is credited. The introduction of fresh capital increases the balance of capital, and so, it is credited.

Question 10.
If a transaction has the effect of decreasing an asset, is the decrease recorded as a debit or as a credit? If the transaction has the effect of decreasing a liability, is the decrease recorded as a debit or as a credit?
Answer:
1. If a transaction has a decreasing effect on an asset, then this decrease is recorded as credit. This is because, as all assets have debit balance and if assets decrease, then it is credited. For example, sale of furniture results in decrease in furniture (asset); so, the sale of furniture will be credited.

2. If a transaction has a decreasing effect on a liability, then this decrease is recorded as debit. This is because all liabilities have credit balance. If the liability increases, then it is credited and if the liability decreases, then it is debited. For example, payment to the . creditors results in a decrease in the creditors (liability); so, the creditors account will be debited.

Question 11.
Describe the events recorded in accounting systems and the importance of source documents in those systems?
Answer:
It is beyond human capabilities to memorise each financial transaction and that is why, source documents have their own importance in accounting system. They are considered as an evidence of transactions and can be presented in the court of law. Transactions supported by evidence can be verified. Source documents also ensure that transactions recorded in the books are free from personal biases.
A few events that are supported by source document are given below.

a. Sale of goods worth ₹ 20,000 on credit, supported by sales invoice/bill
b. Purchase of goods worth Rs 5,000 on credit, supported by purchase invoice/bill
c. Cash sales worth Rs 10,000, supported by cash memo
d. Cash purchase of goods worth Rs 400, supported by cash memo
e. Goods worth Rs 1000 returned by customer, supported by credit note
f. Return of goods purchased on credit worth Rs 2000, supported by debit note
g. Payment worth Rs 1,200 through bank, supported by cheques.
h. Deposits into bank worth Rs 500, supported by pay-in slips

Out of the above events, only those events that can be expressed in monetary tenns, are recorded in the books of accounts. However, the non-monetary events are not recorded in accounts; for example, promotion of manager cannot be recorded but increment in salary can be recorded at the time when salary is paid or due.

Source document in accounting is important because of the below given reasons.

a. It provides evidence that transaction has actually occurred.
b. It provides information about the date, amount and parties involved and other details of a particular transactions.
c. It acts as evidence in the count of law.
d. It helps in verifying the transaction during the auditing process.

Question 12.
Describe how debits and credits are used to analyses transactions.
Answer:
Debit originated from the Italian word debito, which in turn is derived from the Latin word debeo, which means ‘owed to proprietor’ and credit comes from the Italian word credito, which is derived from the Latin word credo, which means belief, i.e., ‘owed by proprietor’. According to the dual aspect concept, all the business transactions that are recorded in the books of accounts have two aspects- debit and credit.

The dual aspect can be better understood by the help of an example; bought goods worth ₹ 500 on cash. This transaction affects two accounts with the same amount simultaneously. As goods are brought in exchange of cash, so the cash balances in the business reduce by Rs 500, i.e. why the cash account is credited. Simultaneously, the amount of goods increases . by Rs 500, so purchases account will be debited. Debit and credit depend on the nature of accounts involved; such as assets, expenses, income, liabilities and capital. There are five types of Accounts.

Two fundamental rules are followed to record the changes in these accounts:

For recording changes in Assets/Expenses (Losses)
a. “Increase in asset is debited, and decrease in asset is credited.”
b. “Increase in expenses/losses is debited, and decrease in expenses/ losses is credited.”

For recording changes in Liabilities and Capital/ Revenues (Gains):
a. “Increase in liabilities is credited and decrease in liabilities is debited ”
b. “Increase in capital is credited and decrease in capital is debited.”
c. “Increase in revenue / gain is credited and decrease in revenue/gain is debited.”

Question 13.
Describe how accounts are used to record information about the effects of transactions?
Answer.
Every transaction is recorded in the original book of entry (journal) in order of their occurrence; however, if we want to know that how much we receive from our debtors or how much to pay to the creditors, it is not possible to determine at a single movement. Hence, we prepare accounts to know the position of business activities in the meantime. There are some steps to record transactions in accounts:

Step 1: Locate the account in ledger,
Step 2: Enter the date of transaction in the date column of the debit side of Account.
Step 3: In the ‘Particulars’ column of the debit side of Account, the name of corresponding account is to be written
Step 4: Enter the page number of the ledger in the Journal Folio (J.F.) column of Account.
Step 5: Enter the amount in the ‘Amount’ column.
Step 6: Same steps are to be followed to post entries in the credit side of Account.
Step 7: After entering all the transactions for a particular period, balance the account by totaling both sides and write the difference in shorter side, as ‘Balance c/d’.
Step 8: Total of account is to be written on either side.

Question 14.
What is a journal? Give a specimen of journal showing at least five entries.
Answer:
Journal is derived from the French word Jour, means daily records. In this book, transactions are recorded in order of their occurrence, i.e., in chronological order from the source document. It is also termed as the book of original entry and each transaction is termed as journal entry.

Date : Date of transaction is recorded in the order of their occurrence.
Particulars: Details, of business transactions like, name of the parties involved and the name of related accounts are recorded.
L.F.: Page number of ledger account when entry is posted.
Debit Amount: Amount of debit account is written.
Credit Amount: Amount of credit account is written.

Question 15.
Record the following in Journal Entry book
April 01 Started business with cash ₹ 4,00,000
April 03 Open a bank account ₹ 80,000
April 04 Purchase goods for cash ₹ 1,00,000
April 05 Goods sold for cash ₹ 1,20,000
April 06 Goods sold to Mr. X ₹ 8,000

Question 16.
Differentiate between source documents and vouchers.

Question 17.
Accounting equation remains intact under all circumstances. Justify the statement with the help of an example.
Answer:
According to the dual-aspect concept, every transaction simultaneously, has two effects of equal amount, i.e. debit and credit. However, in any case, the equality of total assets with the total claims of business (sum of capital and liabilities) is not disturbed. This equality is algebraically represented as:

In any circumstance the above equation cannot be changed. For example,
Business started with cash ₹ 3,00,000

Cash A/c Dr.
To Capital A/c
Assets = Liabilities + Capital
Cash = Liabilities + Capital
(3,00,000) = NIL + 3,00,000

Assets decrease, as cash is invested into the business and capital increases. Thus the equality between LHS and RHS remains intact.

Goods purchased on credit ₹ 60,000

Purchases a/c Dr
To creditors a/c
Assets = Liabilities + Capital
Cash + Stock = Liabilities + Capital
3,00,000 + 60,000 = 60,000 + 3,00,000
3,60,000 = 3,60,000
Assets increase as well as liability increases, without disturbing the equality.

Goods purchased with cash 50,000

Assets = Liabilities + Capital
Cash + Stock = Liabilities + Capital
(3,00,000 – 50,000) + (60,000 + 50,000) = 60,000 + 3,00,000
3,60,000 = 3,60,000

As goods are purchased for cash, so cash balance reduces by Rs 50,000, but on the other hand, stock balance increases by ₹ 50,000. Thus the total balance of LHS remains equal to the total claims.

Question 18.
What is double entry system? Explain the classification of accounts under American system.
Answer:
Double entry system is based on the dual aspect concept. It means every transaction has twosided effects, i.e., every debit has its credit. This system is explained by Luca Pacioli in his book Summa de Arithmetica Geometria Proportioniet Proportionalita, 1494. He said if one is receiver, then the other should be the giver.
In double entry system, accounts are classified as shown below.

1. Personal Accounts: It includes individual persons, firms, companies, and other institutions, such as Mr. A.M/s ABC & Co. etc.
Rule of double entry system for personal accounts:

• Debit the receiver
• Credit the giver

For example:

1. Cash paid to Mr. A.
   A’sA/cDr.
   To Cash
2. Cash received from Mr. X Cash A/c Dr.
   To Mr. X

2. Impersonal Accounts: It relates to non living things. Impersonal accounts are further classified as real accounts and nominal accounts.

1. Real Account – It includes all types of assets.

Tangible assets that can be seen and touched; for example, machinery, building, etc. –

2. Intangible assets that cannot be seen and touched; for example, goodwill, patent, etc. Rule of double entry system for real accounts:

• Debit what comes in.
• Credit what goes out.

For example:
Furniture purchased for cash
Furniture A/c Dr.
To Cash A/c

2. Nominal Account: It includes all expenses, losses, incomes and gains.
Rule of double entry system for nominal accounts:

• Debit all losses and expenses.
• Credit all gains and incomes.

For example;

1. Rent paid Rent A/c Dr.
   To Cash A/c
2. Commission received. Cash A/c Dr.
   To Commission A/c

1st PUC Accountancy Recording of Transactions I Twelve Marks Questions and Answers

Question 1.
Use accounting equation and find out missing figures with the following:

Answer:

Question 2.
Explain the classification of accounting under English system of accounting.
Answer:
All financial business transaction have effect on two sides, namely receiving benefit and giving benefit. When this two hold effect is recorded systematically it become double entry- system. This system developed by England.

All the financial transactions can be classified in two groups.
I. personal accounts.
II. Impersonal accounts.

I. Personal a/c: Transactions between two persons is called personal a/c. Persons means it may be natural persons or firm, govt. Expand Institutions etc. Accounts relates to persons called personal a/c. There are three types of persons. They are-

(a) Natural persons: The living individuals like me and you comes under natural persons.
(b) Artificial persons: The persons who created by law established as per legal procedure called Artificial person. Ex : Companies, Firms, Banks, Co-operative Societies etc.
(c) Representative person: The person’who are represent some person or groups called Representative person. Accrued expenses a/c, o/s expenses a/c. prepaid expenses. o/s Income, Income received in advance etc. are examples for representative person.

II. Real a/c : These accounts relates to assets or properties are owned by a business. Real accounts may be classified as :
(a) Tangible assets: The assets which can be see and touch called Tangible assets.
Ex : Land and Building, plant and machinery, furniture, stock, Vehicles, etc.

(b) Intangible assets: Assets which can’t be seen or touch called intangible assets. Assets which do not have physical existence but can be bought and sold and benefited by business.
Example : Goodwill, Trade mark, copy rights etc.

III. Nominal a/c : The accounts of various expenses or losses and income or gain recorded called nominal a/c. They cannot be seen or touched. It is intangible in nature. They are fictitious or not real or nominal. The expense which a business incurs and income earns in the activities of business. Nominal a/c can classified as :

(a) Income or gain a/c: Accounts of gain, revenue, income or profit recorded.
Example : Discount received, rent received, commission received etc.
(b) Expenses a/c: Losses and expenses are recorded.
Example : Salary, bad debts, Travelling expense, Depreciation etc.

Question 3.
Explain the classifications of accounting under American system.
Answer:
Every business organisation have properties, liabilities capital. For running business it will earn certain income or revenue or has to incur expenses or losses.
As per American approach accounts of a business can classified into five heads. They are :-

1. Assets accounts.
2. Liabilities accounts.
3. Capital accounts.
4. Income accounts.
5. Expenses accounts.

(1) Assets accounts: Assets are properties of Business. The rights and resources owned by business for running its activities as per objectives come under Assets accounts. Example : Land and Building, Machinery, Furniture etc.

(2) Liabilities accounts: These are the amounts of credit or debt owed by business to external persons.
Example : Creditors Bank loan, Bills payable, outstanding expenses etc.

(3) Capital accounts: It represent owner’s fund or internal funds, owners claim on assets of the business. Capital is an excess of Assets over liabilities. It includes fund invested by owners, reserves and surplus. Capital is personal accounts of owner.

(4) Income accounts: Amount received or receivable by business from sale or service of its product. Example: Commission Discounts, Rent Interests, dividend received etc. These accounts are same as the “Nominal A/c” in English system.

(5) Expenses accounts: Amount paid or payable for service obtained by business from outsiders are recorded in these a/c. These Expenses need for carrying out business operations. Example : Salary, Rent, Carriage, Advertising etc.

Question 4.
Write the rule of Debit and Credit under English system.
Answer:

Question 5.
Write the rule of Debit and Credit under English system.
Answer:

Question 6.
Classify the following into (i) Personal a/c (ii) Real and (iii) Nominal a/c
Answer:
(1) Land and Building – Real a/c
(2) Rama’s a/c. – Personal a/c
(3) Salaiya/c – Nominal a/c
(4) State Bank of India – personal a/c
(5) Machinery’s a/c – Real a/c
(6) Renta/c (8) Drawings a/c
(7) Furhiture’s a/c – Real a/c
(9) Wages a/c – Nominal a/c
(10) Capital a/c – personal a/c
(11) Stationery a/ – Nominal a/c
(12) Cash a/c – Real a/c
(13) o/s commission a/c – personal a/c
(14) Mysore mines a/c – Real a/c
(15) Stock a/c – Real a/c
(16) Goodwill a/c – Real a/c
(17) Repairs a/c – Nominal a/c
(18) Discount paid – Nominal a/c
(19) Loan a/c – personal a/c
(20) Investment a/c – Real a/c
(21) Motor vehicle a/c -Real a/c
(22) Bad debts – Nominal a/c
(23) Bank a/c – Real a/c
(24) Purchases a/c – Real a/c
(25) Interest a/c – Nominal a/c
(26) Loose tools a/c – Real a/c
(27) Bank overdraft a/c – personal a/c
(28) Postage a/c – personal a/c
(29) Bills Receivable a/c – Real a/c
(30) Provision for bad debts – personal a/c
(31) Bank loan a/c – personal a/c
(32) Sales a/c – Reala/c
(33) Rent received in advance- personal a/c
(34) Depreciation -Nominal a/c
(35) Goods loss on fire – Nominal a/c
(36) National college a/c – personal a/c
(37) Fixed Deposit a/c – Real a/c
(38) Purchase return – Real a/c
(39) Bad debts recovered – Real a/c
(40) Provision for Discount on creditors a/c – personal a/c
(41) Bills payable a/c – Real a/c
(42) Provision for Depreciation a/c – personal a/c
(43) Rent Receivable – personal a/c
(44) Mangalore’s Trading co – personal a/c
(45) Donation – Nominal a/c
(46) Depreciation Fund – Real a/c
(47) Sports club – personal a/c
(48) Sales Returns a/c – Real a/c
(49) Discount Received a/c – Nominal a/c
(50) Debtors a/c – personal a/c

Question 7.
Give any six examples for personal a/c.
Answer:
(i) Ramesh a/c
(ii) Vijaya college a/c
(iii) SBI a/c
(iv) Rent Receivable a/c
(v) Commission payable
(vi) Prepaid insurance

Question 8.
Write any six example for real a/c.
Ans.
(i) Land and building a/c
(ii) Plant and machinery a/c
(iii) Furniture a/c
(iv) Motor vechicle a/c
(v) Bills receivable a/c
(vi) Cash a/c

Question 9.
Write any six items appear under nominal a/c.
Answer:
(i) Rent received
(ii) Commission paid
(iii) Salary a/c
(iv) Wages paid
(v) Discount paid a/c
(vi) Discount received a/c

Question 10.
Give examples for assets.
Answer:
(i) Land and Building a/c
(ii) Plant and machineiy a/c
(iii) Goodwill a/c
(iv) Stock in trade a/c
(v) Debtors a/c
(vi) Bills receivable a/c

Question 11.
Write any six itmes of liabilities.
Answer:
(i) Bank loan a/c
(ii) Bills payable a/c
(iii) Creditors a/c
(iv) Provision for tax a/c
(v) Outstanding salary a/c
(vi) Bank overdraft a/c

Question 12.
Write any six expenses appear under profit and loss a/c debit side.
Answer:
(i) Salaiy paid
(ii) Commission paid
(iii) Discount paid
(iv) Wages paid
(v) Carriage a/c
(vi) Frieght a/c

Question 13.
Write any six items appear under income side.
Answer:
(i) Commission received
(ii) Discount received
(iii) Interest received a/c
(iv) Royalty received
(v) Interest on drawings
(vi) Divided received

Question 14.
Explain the accounting cycles.
Answer:

The accounting cycle is based on accounting principles. The process of accounting are,

• Business transaction / Book keeping : The business transactions are recorded in chronological order. The transactions which are in term of money or moneys worth.
• Journal: The business transactions are classified as per the principles of accounts and write in a systematic manner in the chief books of accounts called journal. The process of writing entries called journal entries.
• Ledger: The transactions which are recorded in journal will be posted to Ledger where accounts are written up. The effect of debit and credit of transactions pertaining to each account is arrived at, in the form of balances.
• Trial balance : Trial balances extratted from ledger accounts are transterred to trial balance to findout the accuracy of the workdone from ledger accounts.
• Final accounts or financial statements : Preparation of financial statements like Trading accounts and profit and loss and appropriation accounts. Balance sheet is the final step or last step of accounting process.

Question 15.
Write the important features of journal.
Answer:
The features of journal are :-

• Journal is a day book or daily recording transaction book.
• Transactions are recorded systematically in chronological order (Date-wise).
• It is a prime book or original entry or first entry Book.
• It analyse the transactions into debit and credit as per double entry system.
• Journal gives complete details about financial transactions.
• From journal Debit and credit item transfer to specific hedger, means ledger prepared with the help of journal only.
• For each and every transaction recording after it will end with narration.
• It contains proper columns or writing in specified format.

Question 16.
Write the recording process of journal.
Answer:
Journal entries should be recorded with the help of transaction book or book-keeping. The important steps for recording journal entries are :

• Decide the nature of transactions from business point of view. Example : Cash or credit transaction.
• Find out the two aspect or sides of transactions which a/c should be debited and which a/c (one) should be credited.
• Identity the type or class of A/c classify them into real, personal is nominal a/c.
• Determine how there a/c are affected what come is and what goes out. or who recived benefit or give benefit or Expenses and income. .
• Apply the concerned rule or write the journal entries.

Question 17.
Write the elements of journal entry format.
Answer:
Recording process : Journal being a principal book, transactions are entered into it in a systematic manner. For this purpose it is presented in a columnar form providing columns for ease, of the following elemental of the transaction.

Question 18.
Write the need / Advantages/ merits / uses of journal.

• It provides date-wise record of all the transaction so that the reference of transaction will be quick and easy.
• It gives whole record of all the transaction at one place.
• By writing journal narration, it help to understand the purpose and nature of entry.
• It avoids the making of immediate entries in the ledger book.-
• It helps to avoid the mistakes or errors in the books of accounts.
• It is necessary for recording the opening entries, closing entries and adjusting entries.
• It helps to identity the errors which were in the books of accounts.
• It is a book of prime entry or original entry.

Question 19.
Write the important steps of journalising.
Steps in Journalising.

1. First step : Firstly we have to find out two accounts involved in the transaction. While ascertaining the two accounts, the account of a person in whose books entries are recorded should not be taken into account.
2. Second step : We have to find out whether the accounts are personal, real or nominal accounts.
3. Third step : After the second step we have to apply the relevant rules of the each account which means the account should be credited or debited.
4. Fourth step : Lastly we should pass the journal as stated earlier.

Question 20.
Write the important points to be noted before journalising.

• Though the proprietor or owner is the legal owner of the business, owner and business should treated two separate entities (Separate entity concept).
• Business transaction are recorded in the view point of business not in the view point of proprietor.
• The various terms used in a transaction such as commenced business, started business, capital introduced, capital brought in, etc. mean one and the same thing (capital) similarly withdraw, personal drawing, private purpose etc., are drawings a/c.
• Money borrowed from any outsiders including wife, relative, friends, should be treated as ‘loan’ account, similarly given also (loan given).
• Goods a/c – opening stock, purchases, sales, returns outwards or inwards and closing stock must be recorded as purchase, sales, purchase return and sales return respectively.
• Purchase of Fixed assets should be recorded in fixed assets name only and it should not be recorded in purchase book example : plant and machinery a/c
• Cash paid or received from parties against the services is not recorded in their personal a/c (names) but in the name of services Example : salary paid to ‘x’ a/c
• Trade Discount should not be recorded only cash discount should be recorded.
• Some times the transactions are not clear. In that case the correct meaning should be understood.
  Examples, (a) Purchase goods, not clear about cash, or credit. It should be treated as cash transaction.
  (b) Purchase goods from ‘Y’. It is treated as credit transcation.
•  Expenditure on fixed assets should not be recorded in the name of assets but in the name of service ‘Repairs and maintenance’ unless otherwise stated clearly.

Question 21.
Fill up the blanks:
(a) Cash A/c Dr.
To ________.
(Being Capital Introduced)
Answer:
Capital a/c

(b) ________Dr.
To Cash A/c
(Being Cash paid into Bank)
Answer:
Bank a/c

(c) ________Dr.
To Purchases A/c
(Being goods withdrawn for personal use)
Answer:
Drawings a/c

(d) Cash A/c ………………… Dr.
To________.
(Being goods sold for cash)
Answer:
Sales a/c

(e) ________Dr.
To Commission A/c
(Being commission received)
Answer:
Cash a/c

Question 22.
Prepare the personal account of Mr. Sagar in the books of Mr. Gopal.

Answer:
Ledger a/c in the books of Mr. Gopalimag

Question 23.
The following transaction are in the books of Mohit, prepare accounting equation:

Answer:

Question 24.
Rohit has the following transactions:

Prepare the Accounting Equation to show the effect of the above transactions on the assets, liabilities and capital.
Answer:

Question 25.
Using accounting equation to show the effect of the following transaction of M/s Royal Traders.

Answer:

Question 26.
Show the following accounting Equation on the basis of the following transactions.


Answer:

Question 27.
Show the effect of following transaction on the accounting equation:

Answer:

Question 28.
Journalise the following transactions in the books of Himanshu:

Answer:

Question 29.
Journalise the following transactions:

Answer:

Question 30.
Jouranlise the following transaction in the books Harpreet Brose.:
(a) ₹ 1,000 due from Rohit are now bad debts.
(b) Goods worth ₹ 2,000 were by the proprietor.
(c) Charge depreciation @ 10% p.a fro two month on machine costing Rs. 30,000.
(d) Provide interest on capital of ₹ 1,50,000 at 6% p.a fro 9 months.
(e) Rahul become insolvent, who owed is ₹ 2,000 a final dividend of 60 paisa in a rupee is received form his estate.
Books of Harpreet brose.
Answer:

Question 31.
Prepare journal from the transaction given below :
(a) Cash paid for installation of machine Rs. 500
(b) Goods given as charity ₹ 2,000.
(c) Interest change on capital @ 7% p.a when total capital were ₹ 70,000.
(d) Received ₹ 1,200 of a bad debts written off last year.
(e) Goods destroyed by fire ₹ 2000
(I Rent outstanding ₹ 1000
(g) Interest on drawings ₹ 900
(h) Sudhir kumwr who owed me ₹ 3,000 has failed to pay the amount. He pays me a compensation of 45 paisa in a rupee
Commission received in advance ₹ 7000

Question 32.
Journalese the following transaction, post to the ledger:

Answer:

Question 33.
Journalise the following transactions is the journal of M/s Goel Brothers and post them to the ledger.
Answer:










Question 34.
Give journal entries of M/s Mohit traders, Post them to the ledger from the following transactions.

Question 35.
Journalise the following transaction in the Books of the M/s Bhanu Traders and Post them into the ledger.

Question 36.
Journalise the following transaction in the books of Sanjana and post them into the ledger:


Answer:

Question 37.
Journalise the following transaction in the books of Transaction during the month of April 2005 were:
The following balances of ledges of M/s marble traders on April 1, 2014.
Answer:

Journal entires in the book of

Question Paper Problems

Question 1.
Record the following transactions in the personal account of Deepa.

Answer:

Question 2.
Journalise the following transactions in the book of Manohar.

Answer:

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Karnataka 1st PUC Kannada Textbook Answers Sahitya Sanchalana Chapter 21 Mahatmara Guru

Mahatmara Guru Questions and Answers, Notes, Summary

You can Download Chapter 10 Financial Statements With Adjustments Questions and Answers, Notes, 1st PUC Accountancy Question Bank with Answers Karnataka State Board Solutions help you to revise complete Syllabus and score more marks in your examinations.

Karnataka 1st PUC Accountancy Question Bank Chapter 10 Financial Statements With Adjustments

1st PUC Financial Statements With Adjustments One Mark Questions and Answers

Question 1.
Why is it necessary to record the adjusting entries in the preparation of final accounts?
Answer:
It is extremely important to record the adjusting entries in the preparation of final accounts.
1. This is done in order to assess the true net profit or net loss of the business organization.

2. It helps us record those adjustments which were left or omitted and were not recorded in the accounts.

3. It assists us to separate all the financial transactions into a year-wise category. The financial statements include only those entries which belong to the current year. It rules out the previous and forth coming years’ entries which are the basis for accrual basis of accounting.

4. Further, it provides us the room for making various provisions which are made at the end of the year, after assessing the entries year’s performance.

Question 2.
What is meant by closing stock? Show its treatment in final accounts.
Answer:
Closing stock implies the value of unsold goods at the end of an accounting period. The valuation of closing stock is done on the basis of its cost price or the realizable value, whichever of the two is lesser.
Treatment of closing stock:
If closing stock is given in the adjustment, then there will be two postings.
Trading Account credit side
Balance Sheet assets side under current assets
If closing sotck is given in the trial balance, then it needs to be shown only in the assets side of the balance sheet.

Question 3.
Write short note on
(a) Outstanding expenses
(b) Prepaid expenses
(c) Income received in advance
(d) Accrued income
Answer:
a. Outstanding expenses: These refer to those expenses which belong to and are incurred in the current accounting period but are left unpaid. In other words, we can say that the services in exchange of these payments have been realized but the payments are not made.

b. Prepaid expenses: These refer to those expenses for which the benefits have not been realized by the payments have already been made in advance. These are basically the advance payments for the next year, which are made in the current accounting period.

c. Income Received in Advance: This refers to the income received whose actual realisation of benefits will occur in the next accounting period. These are also called unearned incomes.

d. Accrued Income: This refers to those incomes which have been earned during an accounting period but have not been actually realised in the current period. These are also called earned incomes.

Question 4.
Give the proforma of income statement and balance in vertical form.
Answer:

Question 5.
Why is it necessary to create a provision for doubtful-debts at the time of preparation of final accounts?
Answer:
The provision for doubtful-debts is created with the motive of minimizing the effect of actual loss caused by the bad-debts. The actual figure of the current year’s bad debts will be known in the next year with the realization of debtors. At that point of time, it will be known as to how many of the debtors have become bad. Thus, instead of waiting for the realization of debtors, we create a provision for doubtful-debts in order to cover the expected future loss associated with the debtors becoming bad.

Question 6.
What adjusting entries would you record for the following?
(a) Depreciation
(b) Discount on debtors
(c) Interest on capital
(d) Manager’s commission
Answer:
a. It is treated as a business expense and is debited to profit and loss account. In the balance sheet, the asset will be shown at cost minus the amount of depreciation.

b. It is treated as a business expense and is debited to profit and loss account. It will be shown as a deduction from the debtors account to portray correctly the expected reliable value of debtors.

c. It is shown as an expense on the debit side of the profit and loss account and added toe capital in the balance sheet.

d. It is shown as an expense on the debit side of the profit and loss account and on liability side in the balance sheet.

Question 7.
What do you mean by provision for discount on debtors?
Answer:
The discount is allowed to those debtors who are ready to pay a huge amount in one shot. It is given in order to encourage them to repay the debt. The provision for discount on debtors is created n good debtors.

The amount of good debtors is calculated by deducting the amount of bad debts, further bad debts and new provision for doubtful debts. The required percentage of the good debtors is calculated and the provision for discount on debtors is deducted from the Debtors’ amount in the Assets side of a Balance Sheet. As it is a loss for the business, it is shown in the debit side of the profit and loss account.

Question 8.
Give the journal entries for the following adjustments:
(a) Outstanding salary at Rs 3,500.
(b) Rent unpaid for one month at Rs 6,000 per annum.
(c) Insurance prepaid for a quarter at Rs 16,000 per annum.
(d) Purchase of furniture costing Rs 7,000 entered in the purchases book.
Answer:

Question 9.
What are adjusting entries? Why are they necessary for preparing the final accounts?
Answer:
According to the double-entry system, all the adjustments given outside the Trial Balance are psoted at two places. The adjusting entries are necessaiy they enable us to post and take into account those items which are omitted or entered with the wrong amount and/or recorded under wrong heads.
The treatment of adjusting entries is necessary:
(a) It helps us assess the true financial position of an organization based on accrual basis of accounting.
(b) It helps us know the actual figure of profit or loss.
(c) It records the omitted entries and rectifies the errors made.
(d) It helps in providing depreciation and making different provisions, such as bad debts and depreciation.

Question 10.
What is meant by provision for doubtful-debts? How are the relevant accounts prepared and what journal entries are recorded in the final accounts? How is the amount for provision for doubtful-debts calculated?
Answer:
The provision for doubtful-debts is provided after deducting the amount of bad-debts from the debtors. The provision for doubtful-debts is provided because of the rationale that the actual amount of bad-debts will only be known in the next year, when the amount of debtors will get realised. Thus, it will only then be known as to how many of the debtors have become bad. Thus, in order to bridge-up the expected future loss, we create a provision for doubtful-debts.

For the provision for doubtful-debts, we prepare debtors account and provision for doubtful debts account.
For recording bad-debts, the following journal entry is passed
Profit and Loss Dr
To Provision for Bad and Doubtful Debts A/c
Let us take an example to understand how bad debts and provision for doubtful debts are recorded. An extract from a trial balance on March 31, 2005 is given below:

Additional information:
Write-off further bad debts ₹ 2,000 and create a provision for doubtful debts @ 5% on debtors.
In this case, the following journal entries will be recorded :


Only relevant items.
Note: The amount of new provision for doubtful debts has been calculated as follows:
₹ 62,000 × 1,550.

Question 11.
Show the treatment of prepaid expenses, depreciation and closing stock at the time of preparation of final accounts when they are gives
a. Inside the Trial Balance
b. Outside the Trial Balance
Answer:
1. Prepaid expenses: There are several items of expense which are paid in advance in the normal course of business operations. At the end of the accounting year, it is found that the benefits of such expenses have not yet been fully received; a portion of its benefit would be received in the next accounting year. This portion of expense in carried forward to the next year and is termed as prepaid expenses.
a. When given inside the Trial Balance: It will be posted only in the assets side of the Balance sheet.
b. When given outside the Trial Balance: It is shown on the assets side of the balance sheet. The amount of prepaid expenses is deducted from the total of expenses under a particular head for the purpose of preparing trading and profit and loss account.

2. Depreciation: It is the decline in the value of assets on account of wear and tear and passage of time etc.
a. When given inside the Trial Balance: It can be shown in the Debit side of the profit and loss A/c. it means that this depreciation amount has already been deducted from the concerned assets in the balance sheet.
b. When given outside the Trial Balance: It can be shown in the debit side of the profit and loss a/c and it deducted from the concerned assets in the balance sheet.

3. Closing stock: The closing stock represents the cost of unsold goods lying in the stores at the end of the accounting period.
a. When given inside the trial balance: It is shown on the asset side of the balance sheet under the head current assets.
b. When given outside the trial balance: It is credited to the trading and profit and loss account, and shown on the asset side of the balance sheet under the head current assets.

1st PUC Financial Statements With Adjustments Numerical Questions

Question 1.
Prepare a trading and profit and loss account for the year ending December 31, 2005. From the balances extracted of M/s Ramesh sons. Also prepare a balance sheet at the end of the year.


Adjustments

1. Commission received in advance ₹ 500
2. Rent receivable ₹ 1,000.
3. Salary outstanding ₹ 500 and insurance prepaid? 400.
4. Further bad debts ₹ 500 and provision for bad debts @ 5% on debtors and discount on debtors @ 2%
5. Closing stock ₹ 16,000.
6. Depreciation on building @ 6% p.a.

Answer:

 

Question 2.
Prepare a trading and profit and loss account of M/s Green club Ltd. For the year ending December 31,2005. From the following figures taken form his trial balance :

Adjustments

1. Depreciation charged on machinery @ 5% p.a.
2. Further bad debts ₹ 3,000. Discount on debtors @5% and make a provision on debtors @ 6%.
3. Wages prepaid ₹ 2,000.
4. Interest on investment @ 5%
5. Closing stock 20,000.

Answer:

Question 3.
The following balances has been extracted from the trial of M/s Runway shine Ltd. Prepare a trading and profit and loss account and a balance sheet as on December 31, 2005.

Adjustments

1. Further bad debts t 1,000. Discount on debtors ₹ 500 and make a provision on debtors @ 5%.
2. Interest received on investment @5%.
3. Wages and interest outstanding ₹ 100 and ₹ 200 respectively.
4. Depreciation charged on motor car @ 5% p.a.
5. Closing stock ₹ 32,500.

Answer:

Question 4.
The following balances have been extracted from the trial of M/s Haryana Chemica Ltd. You are required to prepare a trading and profit and loss account and balance sheet as on December 31, 2005 from the given information.


Adjustments

1. Closing stock was valued at the end of the year ₹ 80,000.
2. Salary amounting ₹ 1,000 and trade expense ₹ 600 are due.
3. Depreciation charged on building and machinery are @ 4% and @ 5% respectively.
4. Make a provision of @ 5% on sundry debtors.

Answer:

Question 5.
From the following information prepare trading and profit and loss account of M/s Indian sports house for the year ending December 31, 2005.


Adjustments

1. Closing stock was ₹ 22,500
2. Provision for bad debts is to be maintained @ 2% on debtors.
3. Depreciation charged on : Furniture and fixture @ 5% plant and machinery’ @ 6% and motor car @ 10%.
4. A machine of ₹ 15,000 was purchased on July 01,2005.
5. The manager is entitle to a commission of @ 10% of the net profit after charging such commission.

Answer:

Question 6.
Prepare the trading and profit and loss account and a balance sheet of M/s Shine Ltd. From the following particulars.

Adjustments

1. Closing stock was valued ₹ 35,000.
2. Depreciation charged on furniture and fixture @ 5 %.
3. Further bad debts ₹ 1,000. Make a provision for bad debts @ 5% on sundry debtors.
4. Depreciation charges on motor car @ 10%.
5. Interest on drawing @ 6%.
6. Rent, rates and taxes was outstanding? 200.
7. Discount on debtors 2%.

Answer:

Question 7.
Following balances have been extracted from the trial balance of M/s Keshav Electronics Ltd. You are required to prepare the trading and profit and loss account and a balance sheet as on December 31, 2005.

The following additional information is available :

1. Stock on December 31,2005 was ₹ 15,000.
2. Depreciation is to be charges on buildings at 5% and motor van at 10%.
3. Provision for doubtful debts is to be maintained at 5% on Sundry Debtors.
4. Unexpired insurance was ₹ 300.
5. The manager is entitled to a commission @ 5% on net profit before changing such commission.

Answer:

Question 8.
From the following balances extracted from the books of Raga Ltd. Prepare a trading and profit and loss account for the year ended December 31, 2005 and a balance sheet as on that date.

The additional information is as under:

1. Closing stock was valued at the end of the year ₹ 20,000.
2. Depreciation on plant and machinery charged at 5% and land and building at 10%.
3. Discount on debtors at 3%.
4. Make a provision at 5% on debtors for bad debts.
5. Salary outstanding was ₹ 100 and wages prepaid was ₹ 40.
6. The manager is entitled a commission of 5% on net profit after charging such commission.

Answer:

Question 9.
From the following balances of M/s Jyoti Exports, prepare trading and profit and loss account fo the year ended March 31, 2006 and balance sheet as on this date.


Closing stock ₹ 20,000

1. To provision for bad debts is to be maintained at 5 per cent on sundry debtors.
2. Wages amounting to ₹ 1000 and salary amounting to ₹ 700 are outstanding.
3. Factory rent prepaid ₹ 200.
4. Depreciation charges on Plant and Machinery @ 5% and Building @ 10%.
5. Outstanding insurance ₹ 200.

Answer:

Question 10.
The following balances have been extracted from the books of M/s Green House for . the year ended December 31, 2005, prepare trading and profit and loss account and balance sheet as on this date.

Adjustments:
(a) Machinery is depreciated at 10% and buildings depreciated at 6%.
(b) Interest on capital @ 4%.
(c) Outstanding wages ₹ 50.
(d) Closing stock ₹ 50,000.
Answer:

Question 11.
From the following balances extracted from the book of M/s Manju Chawla on March 31, 2005, you are requested to prepare the trading and profit and loss account and a balance sheet as on this date.

Closing stock was ₹ 4,000.
(a) Interest on drawings @ 7% and interest on capital @ 5%.
(b) Land and Machinery is depreciated at 5%.
(c) Interest on investment @ 6%.
(d) Unexpired rent ₹ 200.
(e) Charge 5% depreciation on furniture.
Answer:

Question 12.
The following balances were extracted from the books of M/s Panchsheel Garments on December 31,2005.
Account Title Amount

Prepare the trading and profit and loss account for the year ended December, 31 and a balance sheet as on that date.
(a) Unexpired insurance ₹ 500.
(b) Salary due but not paid ₹ 900.
(c) Wages outstanding ₹ 100.
(d) Interest on capital 5%.
(e) Scooter is depreciated @ 5%.
(f) Furniture is depreciated ₹ @ 10%.
(g) Closing stock ₹ 7,500.
Answer:

Question 13.
Prepare the trading and profit and loss account and balance sheet of M/s Control device India on December 31, 2006 from the following balance as on that date.


Closing stock was valued ₹ 20,000.
(a) Interest on capital 10%.
(b) Interest on drawings @ 5%.
(c) Wages outstanding ₹ 50.
(d) Outstanding salary ₹ 20.
(e) Provide a depreciation @ 5% on plant and machinery.
(f) Make a 5% provision on debtors.
Answer:

Question 14.
The following balances appeared in the tria balance of M/s Kapil Traders as on March

The partners of the firm agreed to records the following adjustments in the books of the Firm: Further bad debts ₹ 300. Maintain provision for bad debts 10%. Show the following adjustments in the bad debts account, provision account, debtors account, profit and loss account and balance sheet.
Answer:

Question 15.
Prepare the bad debts account, provision for account, profit and loss account and balance sheet from the following information as on December 31,2005

Adjustments :
Bad debts ₹ 500 provision on debtors @3%.

You can Download Chapter 5 Bank Reconciliation Statement Questions and Answers, Notes, 1st PUC Accountancy Question Bank with Answers Karnataka State Board Solutions help you to revise complete Syllabus and score more marks in your examinations.

Karnataka 1st PUC Accountancy Question Bank Chapter 5 Bank Reconciliation Statement

1st PUC Accountancy Recording of Transactions II One Mark Questions and Answers

Question 1.
What is bank reconciliation statement?
Answer:
The statement which explains causes of differences between the cash bank balance and the pass book balance called bank reconcilitation statement.

Question 2.
Why is bank reconciliation statement is prepared?
Answer:

• Statement helps the customer to reconcile the difference between pass book and cash book.
• To know the real balance of pass book and cash book means real cash balance.
• To keep track on cheque issues and cheque deposited into account.

Question 3.
State any one reasons for the difference between cash book balance and pass book balance.
Answer:
The differences between cash and pass book casuse are :

• Cheque deposited into bank but not realised.
• Cheque issued to parties but not presented.
• Any expenses directly debited by bank book and not in the cash book.
• Any income directly received by bank and not recorded by business.

Question 4.
Write one features of Bank Reconciliation statement (BRS).
Answer:
Features of Bank reconciliation statement are:

1. It is prepare by customer of the bank but not the banker.
2.  BRS explains the differences between the bank pass book and cash book
3. It helps to keep track on cheque issue and deposits.

Question 5.
What do you understand by the following?
(a) Debit balance as per cash book.
(b) Credit balance as per cash book.
Answer:
(a) Debit balance as per cash book: Cash balance as per companies books of a/c’s called debit balance.
(b) Credit balance as per cash book: The overdrawn balance of cash in companies books a/c called credit balance.

Question 9.
What is bank overdraft?
Answer:
It is a current a/c. Where bank provide opportunity to withdraw more than deposit called (B.O.D.) Bank Over Draft.

Question 10.
Mention one methods of preparing BRS.
Answer:
The Two methods of preparing BRS

1. Statement method or one column method.
2. Debit column and credit column method or two column method

Question 12.
Who prepare bank reconcilation?
Answer:
The bank reconciliation statement prepared by customer and not by banker.

1st PUC Accountancy Recording of Transactions II Additional Questions and Answers

Question 1.
What do you understand by the following?
(a) Debit balance as per cash book.
(b) Credit balance as per cash book.
Answer:
(a) Debit balance as per cash book: Balance of cash as per pass book called debit balance, (b) Credit balance as per cash book: Overdrawn cash balance o,f bank balance as per pass book called credit balance.

Question 2.
What do you understand by the following.
(a) Favourable balance as per cash book.
(b) Unfavourable balance as per cash book.
Answer:
Favourable Balance as per cash book: The Debit Balance of cash is favourable balance of cash book.
Unfavourable cash book: The Negative Balance of cash is unfavourable cash book

Question 3.
What is Pass book?
Answer:
The printing statement or book which explain the transactions of deposit holder called pass book.

Question 4.
Mention Two methods of preparing BRS.
Answer:
The Two methods of preparing BRS

1. Statement method or one column method.
2. Debit .column and credit column method or two column method

Question 5.
Write any two advantages of BRS.
Answer:

1. BRS helps to know the real value of cash balance of business in particular period end.
2. It helps to detect/errors irregularities and frauds committed by employees, in the business.

Question 6.
State the need for the preparation of bank reconciliation statement?
Answer:
The need to prepare Bank Reconciliation Statement is given below:

• It helps in finding out the errors and omissions committed in the Cash Book and the Pass Book.
• It shows uncleared cheques, which have already been debited in the Cash Book but have not been yet recorded in the Pass Book.
• It helps in checking embezzlement of money from the bank account.
• It helps in measuring the accuracy of the transactions recorded in the Cash Book.
• It facilities in preparing revised Cash Book that reflects true bank balance.

Question 7.
What is Bank Overdraft?
Answer:
Bank overdraft is a liability to an account holder. When the account holder withdraws excess amount over available bank balance, he/she runs a negative bank balance. The negative bank balance is an obligation to the account holder and is called bank overdraft. In other words, bank overdraft is the excess of withdrawal over deposits,

Question 8.
Briefly explain the statement ‘Wrongly debited by the bank’ with example.
Answer:
Amount wrongly debited by the bank implies a situation when the bank wrongly debits a Pass Book. The following are the common mistakes that occur in the Pass Book when bank wrongly debits in the Pass Book. Mistakes occurs in case a person has more than one account in a bank. For example, a cheque of ₹ 2,000 issued from his Current Account was wrongly paid through his Savings Account.

Question 9.
State the causes of difference occured due to time lag.
Answer:
The causes of difference that occur due to time lag are,

• When issued cheques are not presented for payment in the period for which Bank Reconciliation Statement is being prepared, i.e., date of issue and the date of presenting the cheques are not same.
• When deposited cheques are not cleared in the period for which the Bank Reconciliation Statement is being prepared.

Question 10.
Briefly explain the term favourable balance as per cash book.
Answer:
Favourable balance (Debit Balance), as per the Cash Book, is an asset to an account holder. It is also known as debit balance as per the Cash Book. Favourable balance is the excess of total of debit side over total of credit side of a bank column of a Cash Book.
In other words, favourable balance means excess of deposits over withdrawals.

Question 11.
Enumerate the steps to ascertain the correct cash book balance.
Answer:
Genrally, differences between the Cash Book and the Pass Book arise due to the reason that items have not been recorded in the Cash Book. In order to ascertain the correct Cash Book balance, we need to prepare corrected (Adjusted) Cash Book.
The below given steps are involved in the preparation of corrected (Adjusted) Cash Book.

Step 1: Note down the bank balance as per the Cash Book.
Step 2: Rectify all the errors committed in the Cash Book.
Step 3: Enter those transactions in the debit of the Cash Book, in the that are only in the debit of the Pass Book.
Step 4: Enter those transactions in the credit of the Cash Book that are only in the debit of the Pass Book.
Step 5: The Cash Book is totalled and balancing figure is calculated. This balancing figure is use for preparing BRS.

1st PUC Accountancy Recording of Transactions II Essay type / Long Questions and Answers

Question 1.
What is a bank reconciliation statement? Why is it prepared?
Answer:
Bank reconciliation statement is a statement prepared for determining causes of differences and. reconciling bank balance (as per the Cash Book) with the balance as per the Pass Book or vice versa.
Bank Reconciliation Statement (BRS) is prepared when the bank balance of the Cash Book is not equal to the balance shown by the Pass Book on the same date (when BRS is being prepared). In order to match the two respective balances, errors and omissions are to be located and rectified, which is the main rationale behind preparing the Bank Reconciliation Statement.

The need for preparation of Bank Reconciliation Statement is:

• It helps in finding out the errors and omissions committed in the Cash Book and in the Pass Book.
• It shows uncleared cheques that have already been debited in the Cash Book but have not yet been recorded in the Pass Book.
• It helps in checking embezzlement of money from the bank account.
• It helps in measuring the accurancy of transactions recorded in the Cash Book.
• It facilitates in preparing revised cash book that reflects a true bank balance.

Question 2.
Explain the reasons where the balance shown by the bank Passbook does not agree with the balance as shown by the bak column of the cash book.
Answer:
Below given are the reasons on account of which the balance shown by the bank Pass Book does not agree with the balance shown by the bak column of the Cash Book.

1. Differences due to time lag: Differences may arise, if the date of recording transactions in the bank column of the Cash Book is not same to that of the Pass Book.

2. Cheques issued by the firm but not presented in the bank: Usually, issue of a cheque is recorded in the bank column of the Cash Book on the date that is mentioned
(mentioned date) on the cheque. Sometimes, the holder of the cheque does not present the cheque on the date which is mentioned on it. This may lead to differences in the balance between the Pass Book and the bank balance of the Cash Book.

3. Deposit of cheque recorded in the Cash Book at the time of deposit but collected later or not collected by the bank: Deposit of a cheque is recorded in the bank column of the Cash Book on the date of clearance. Usually, date of deposit and date of clearance are not the same. This difference in the two respective dates leads to a mismatch between the Pass Book and the bank balance of the Cash Book.

4. Transactions recorded only in the Pass Book: Transactions, like interest allowed by bank on the deposits, bank charges etc., are recorded first in the Pass Book. After getting intimation from the bank, these are recorded in the bank column of the Cash Book. However, sometimes due to delay in intimation of these transactions to the customers, the Cash Book remains not updated, which leads to the difference between the Pass Book and the bank balance of the Cash Book.

Question 3.
Explain the process of preparing bank reconciliation statement with amended cash
balance.
Answer:
Bank Reconciliation statement can be prepared with the adjusted /amended bank column of the cash book by the below given steps.

Step 1 : Note down the bank balance as per the Cash Book.
Step 2 : Rectify all the errors committed in the Cash Book.
Step 3 : Enter those transactions in the debit column of the Cash Book that are only in the credit column of the pass book.
Step 4 : Enter those transactions in the credit column of the Cash Book that are only in the debit column of the Pass Book.
Step 5 : After completing the above steps, the balance or the overdraft, as per amended Cash Book, arrives, with which Bank Reconciliation Statement can be prepared.

1st PUC Accountancy Recording of Transactions II Twelve Marks Questions and Answers

Question 1.
(i) Balance as per cash book ₹ 3,200
(ii) Cheque issued but not presented for payment ₹ 1,800
(iii) Cheque deposited but not collected upto March 31, 2005 ₹ 2000
(iv) Bank charges debited by bank ₹ 150
(v) Bank charges debited by bank ₹ 150
Answer:

Question 2.
On March 31, 2005 the cash book showed a balance ₹ 3,700 as cash at bank, but the bank passbook made up to same date showed that cheques for ₹ 700. ₹ 300 and ₹ 180 respectively had not presented for payment. Also cheque amounting to ₹ 1,200 deposited into the account had not been credited. Prepare a bank reconciliation statement.
Answer:

Question 3.
The cash book shows a bank balance of ₹ 7,800. On comparing the cash book with passbook the following discrepancies were noted:
(a) Cheque deposited in bank but not credited ₹ 3,000
(b) Cheque issued but not yet present for payment ₹ 1,500
(c) Insurance premium paid by the bank ₹ 2000
(d) Bank interest credit by the bank ₹ 400
(e) Bank charges ₹ 100
(d) Directly deposited by a customer ₹4,000.
Answer:

Question 4.
Bank balance of ₹ 40,000 showed by the cash book of Atul on December 31, 2005. It was found that three cheques of ₹ 2,000. ₹ 5,000 and ₹ 8,000 deposited during the month of December were not credited in the passbook till January 0.2, 2005. Two cheque of ₹ 7,000 and ₹ 8,000 issued on December 28, were not presented for payment till January 03, 2005. In addition to it bank had credited Atual for ₹ 325 as interest and had debited him with ₹ 50 as bank charges for which there were no corresponding entries in the cash book.
Prepare a bank reconciliation statement as on December 31, 2004.
Answer:

Question 5.
On comparing the cash book with passbook of Naman it is found that on March 31, 2005, bank balance of ₹ 40,960 showed by the cash book differs from the bank balance with regard to the following:
(a) Bank charges ₹ 100 on March 31,2005, are not entered in the cash book.
(b) On March 21, 2005, a debtor paid ₹ 2,000 into the company’s bank in settlement of his account, but no entry was made in the cash book of the company in respect of this.
(c) Cheques totaling ₹ 12,980 were issued by the company and duly recorded in the cash book before March 31, 2005, but had not been presented at the bank for payment until after that date.
(d) All bill for ₹ 6,900 discounted with the bank is entered in the cash book with recording the discount charge of ₹ 800.
(e) ₹ 3,520 is entered in the cash book as paid into bank on March 31st 2005. but not credited by the bank until the following day.
(f) No entry has been made in the cash book to record the dishon or on March 15, 2005 of a cheque for ₹ 650 received from Bhanu.
Answer:

Prepare a reconciliation statement as on March 31,2005.

Question 6.
Prepare bank reconciliation statement as on December 31, 2004. On this day the passbook of Mr. Himanshu showed a balance of ₹ 7,000.
(a) Cheques of ₹ 1,000 directly deposited by a customer.
(b) The bank has credited Mr. Himanshu for ₹ 700 as interest. ”
(c) Cheques for ₹ 3000 were issued during the month of December but of these cheques for ₹ 1,000 were not presented during the month of December.
Answer:

Question 7.
The passbook of Mr. Mohit current account showed a credit Balance of ₹ 20,000 on dated December 31, 2005. Prepare a bank reconciliation statement with the following information.
(i) A cheque of ₹ 400 drawn on his saving account has been shown on current account.
(ii) He issued two cheques of ₹ 300 and ₹ 500 on of December 25, but only the 1st cheque was presented for payment
(iii) One cheque issued by Mr. Mohit of ₹ 500 on December 25, but it was not presented for payment whereas it was recorded twice in the cash book.
Answer:

Question 8.
Prepare bank reconciliation statement.
(i) Overdraft shown as per cash book on December 31 2005 ₹10,000.
(ii) Bank charges for the above period also debited in the passbook ₹ 100.
(iii) Interest on overdraft for six months ending December 31, 2005 ₹ 380 debited in the passbook.
(iv) Cheques issued but not incashed prior to December 31,2005 amounted to ₹ 2,150.
(v) Interest on investment collected by the bank and credited in the passbook ₹ 600.
(vi) Cheques paid into bank but not cleared before December, 31,2005 were ₹ 1,100.
Answer:

Question 9.
Kumar find that the bank balance shown by his cash book on December 31, 2005 is ₹ 90,600 (Credit) but the passbook shows a difference due to the following reason:
A cheque (post dated) for ₹ 1,000 has been debited in the bank column of the cash book but not presented for payment. Also, a cheque for ₹ 8000 drawn in favour of Manohar has not yet been presented for payment. Cheques totaling ₹ 1,500 deposited in bank have not yet been collected and cheque for ₹ 5,000 has been dishonoured.
Answer:

Question 10.
On December 31,2005, the cash book of Mittal Bros. Showed an overdraft of ₹ 6,920. From the following particulars prepare a bank reconciliation statement and ascertain the balance as per passbook.
(1) Debited by bank for ₹ 200 on account of interest on overdraft and ₹ 50 on account of charges for collecting bills.
(2) Cheques drawn but not encashed before December, 31 2005 for ₹ 4,000.
(3) The bank has collected interest and has credited ₹ 600 in passbook.
(4) A bill receivable for ₹ 700 previously discounted with the bank had been dishiioured and debited in the passbook.
(5) Cheques paid into bank but not collected and credited before December 31, 2005 amounted ₹ 6,000.
Answer:

Question 11.
Overdraft shown by the passbook of Mr. Murli is ₹ 20,000. Prepare bank reconciliation statement on dated December 31,2005.
(i) Bank charges debited as per passbook ₹ 500.
(ii) Cheques recorded in the cash book but not sent to the bank for collection ₹ 2,500.
(iii) Received a payment directly from customer ₹ 4,600.
(iv) Cheque issued but not presented for payment ₹ 6,980.
(v) Interest credited by the bank ₹ 100.
(vi) LIC paid by bank ₹ 2,500.
(vii) Cheques deposted with the bank but not collected ₹ 3,500.
Answer:

Question 12.
Raghav and Co. have two bank accounts. Account No. I and account No. II. From the following particulars relating to account No. I, find out the balance on that account of December 31,2005 according to the cash book of the firm.
(i) Cheques paid into bank prior to December 31,2005, but not credited for ₹ 10,000.
(ii) Transfer of funds from account No. II to account no. I recorded by the bank on December 31, 2005 but not presented until after that date for ₹ 7,429.
(iii) Cheques issued prior to December 31,2005 but not presented until after that date for ₹ 7,429.
(iv) Bank charges debited by bank not entered in the cash book for ₹ 200.
(v) Interest Debited by the bank not entered in the cash book ₹ 580.
(vi) Overdraft as per passbook ₹ 18,990.
Answer:

Question 13.
Prepare a bank reconciliation statement from the following particulars and show the balance as per cash book.
(i) Balance as per passbook on December 31,2005 overdrawn ₹ 20,000.
(ii) Interest on bank overdraft not entered in the cash book ₹ 2,000.
(iii) ₹ 200 insurance premium paid by bank has not been entered in the cash book.
(iv) Cheques drawn in the last week of December, 2005, but not cleared till date for ₹ 3,000 and ₹ 3,500.
(v) Cheques deposited into bank on November, 2005, but yet to be credited on dated December 31,2005 ₹ 6,000.
(vii) Wrongly debited by bank ₹ 500.
Answer:

Question 14.
The passbook of Mr. Randhir showed an overdraft of ₹ 40,950 on March 31,2005.
Prepare bank reconciliation statement on March 31,2005.
(i) Out of cheques amounting to ₹ 8,000 drawn by Mr. Randhir on March 27 a cheque for ₹ 3,000 was encashed on April 03.
(ii) Credited by bank with ₹ 3,800 for interest collected by them, but the amount is not entered in the cash book.
(iii) ₹ 10,900 paid in by Mr. Randhir in cash and by cheques on March, 31 cheques amounting to ₹ 3,800 were collected on April, 07.
(iv) A cheque of ₹ 780 credited in the passbook on March 28 being dishonoured is debited again in the passbook on April 01, 2005. There was no entry in the cash book about the dishonour of the cheque until April 15.

Question 15.
From the following particulars, prepare a Bank reconciliation statement showing the balance as per pass book on 31st March 2007. The following cheques were paid into the  firm’s current account in March, 2003, but were credited by the bank in April 2007. Mr. A ₹ 5,000; Mr. B ₹ 6,000 ; Mr. C. ₹ 4,800.
The following cheques were issued by the firm in March, 2007, but were cashed in April, 2007 Mr. D. ₹ 6,000 ; Mr. E. ₹ 10,000 Mr. F. ₹ 6000. The pass book shows a credit of ₹ 500 for interest and a debit of ₹ 10 for Bank charges.
The Bank balance as per cash Book was ₹ 18,000.
Answer:

Question 16.
On 30th April, 2005. My pass book showed a credit balance of ₹ 18,000. On 28th April, I have paid in cheques amounting to ₹  4000. But of these only cheques worth ₹ 2,400 were credited in the pass book. I had issued cheques amounting to ₹ 5,000 of which cheques worth ₹ 4000 only were presented for payment. These was a credit in my pass book of ₹ 400 for interest on my investments collected by my bank. I also found that a cheque for ₹ 500 debited to Bank. Account has been omitted to be banked. An entry of ₹ 1,000 being the amount paid by a customer directly into the book appeared in the pass book.
Answer:

Question 17.
Prepare a Bank Reconciliation statement from the following statement

Answer:

Question 18.
An extract of bank column of cash book of Keerti and his Bank pass book one given below. Prepare Bank reconciliation statement as on 30th Jan. 2010.

Answer:

Question 19.
From the following particulars prepare a Bank Reconciliation Statement as at 31-12-2011. Bank Balance as per cash book ₹ 10,000
(a) Cheque issued but not cashed
Mr. Suresh – ₹ 1,000
Mr. Girish – ₹ 2,000
Mr. Ramesh – ₹ 1,500
(b) Bank had charged – ₹ 75 as charges.
(c) Cheques paid into bank, but not collected and credited:
Mr. Govind  – ₹ 250
Mr. Bharath – ₹ 2,000
Mr. Krishna – ₹ 1,000
(d) Banker had given of ₹ 30 as interest on bank balance.
(e) A customer of the firm directly deposited ₹ 500 into firm’s bank A/c.
(f) A cheque of ₹ 550 received from Arun was deposited into bank for collection returned dishonored.
(g) A cheque received from Sandeep for ₹ 400 was entered twice in the cashbook.
Answer:

You can Download Chapter 25 Boleshankara Questions and Answers Pdf, Notes, Summary, 1st PUC Kannada Textbook Answers, Karnataka State Board Solutions help you to revise complete Syllabus and score more marks in your examinations.

Karnataka 1st PUC Kannada Textbook Answers Sahitya Sanchalana Chapter 25 Boleshankara

Boleshankara Questions and Answers, Notes, Summary

You can Download Chapter 11 Accounts From Incomplete Records Questions and Answers, Notes, 1st PUC Accountancy Question Bank with Answers Karnataka State Board Solutions help you to revise complete Syllabus and score more marks in your examinations.

Karnataka 1st PUC Accountancy Question Bank Chapter 11 Accounts From Incomplete Records

1st PUC Accounts From Incomplete Records One Mark Questions and Answers

Question 1.
Write the meaning of Statement of affairs.
Answer:
It is just like a balance sheet. A statement which shows the values of Assets and Liabilities of a business on a given date. This statement helpful to find out capitals of a business.

Question 2.
What is Adjusted closing capital under Single Entry system?
Answer:
Under single entry system adjusted capital means, closing capital adjusted with drawings and additional capital called adjusted capital [Closing capital + Drawings – Additional Capital = Adjusted Capital).

Question 3.
What is the object of preparing statement of affairs?
Answer:
Single Entry System is incomplete, unscientific method of book keeping. For the purpose of finding out capital, Balance sheet equation is applied. The difference between Asset and Liability treated as capital [Assets – Liability = Capital].

Question 4.
If opening capital is ‘60,000, drawings ‘5,000, additional capital’ 10,000, closing capital ‘90,000, what will be the profit earned?
Answer:
Profit = Closing capital + Drawings – (Additional capital + Opening capital)
Profit = 90,000 + 5,000 – (10,000 + 60,000) Profit = 25,000.

Question 5.
Define Single Entry System.
Answer:
Prof: Eric Kholar defines Single Entry System as “a system of book keeping in which as a rule, only records of cash and persons are maintained; it is always in complete double entry, varying with circumstances”.

Question 6.
Write two features of Single Entry System.
Answer:
The two features of single entry system are.
(a) Both the aspect each and every transactions are not recorded under single entry system.
(b) Under this system all kinds of accounts are not maintained.

Question 7.
Mention any two merits of Single Entry System.
Answer:
The two advantages or merits of single entry systems are:
(a) It is a simple and easy method of book-keeping.
(b) It is less costly, because only few books of accounts are maintained.

Question 8.
State any Two de-merits of Single Entry System.
Answer:
Two disadvantages or demerits of single entry system is

1. Both the aspects of each and every transactions are not recorded under this system. So it is incomplete system of records.
2. Not possible to find out correct profit or loss of a concern.

Question 9.
Differentiate Single Entry System and Double Entry System.
Answer:

Single Entry System	Double Entry System
1. In this system each and every transactions are not recorded	1. In this system both the aspects are recorded for every transactions.
2. It is an incomplete, unscientific method of book-keeping	2. It is a complete, scientific and satisfactory method of book-keep

Question 10.
Mention the different types of Single Entry System.
Answer:
Three types of single entry systems are:
(a) Pure Single Entry System
(b) Simple Single entry system
(c) Quasi Single Entry system.

Question 11.
How do you ascertain profit or loss under Single Entry System?
Answer:
Under single entry system profit or loss of a concern can be found in two ways. They are Statement of Affairs method. Conversion of single entry to double entry system method.

Question 12.
Write the Balance Sheet Equation.
Answer:
Balance Sheet Equation.
Assets = Capital + Liability.

Question 13.
Differentiate Statements of Affairs and Balance sheet.
Answer:

Statement of affairs	Balance sheet
1. It is prepared under single entry system	1. It is prepared under double entry system
2. It states estimated value of assets and liabilities.	2. It states real value of assets and liabilities of a business concern

Question 14.
What is statement of Profit or Loss?
Answer:
Statement of Profit or Loss is a statement prepared under single entry system. It is prepared for the purpose of ascertaining Profit or Loss of a business in a given period.

Question 15.
How do you calculate gross profit under single entry system?
Answer:
The differences between closing capital and opening capital adjusted with additional capital and drawings called Gross profit or gross loss [closing capital + drawings – Additional capital – opening capital = gross profit]

Question 16.
Mention the books maintained under Single Entry System.
Answer:
The books maintained under single entry system are
(a) Cash Book
(b) Debtors and Creditors personal a/c
(c) Few Subsidiary books.

Question 17.
Write any Four examples of Assets mentioned in statement of Affairs.
Answer:
The assets recorded in statement of affairs are: Land and Building, Machinery, Debtors and Cash are Four Examples of Assets.

Question 18.
Write any Four examples of income consider while preparing statement of Profit or Loss.
Answer:
Income recorded in statement of profit or loss are:
(a) Rent Receivable
(b) Commission receivable
(c) Appreciation of Building
(d) Insurance prepaid.

Question 19.
State the meaning of incomplete records?
Answer:
Accounts that are not recorded as per the double entry system are known as incomplete records. According to Kohler (Dictionary for Accountants), single entry system is defined as, “A system of book-keeping in which as a rule, only records of cash and of personal accounts are maintained; it is always incomplete double entry, varying with circumstances.”

1st PUC Accounts From Incomplete Records Additional Questions

Question 1.
What are dis-advantages of single entry system?
Answer:
The important de-merits of incomplete records are
a. Under incomplete records arithmetical accuracy cannot be checked
b. Due to incomplete records, there will be scope and mis appropriation of funds.
c. Not possible to finitude true profit or loss of a business concern.
d. It never disclose correct financial position of a business concern.
e. This system not reliable by legal authority.

Question 2.
What are the differences between double entry system and single entry system?
Answer:
The important de-merits of incomplete records are:

Single Entry System	Double Entry System
1. Treated as unscientific or incomplete methods of book keeping	1. Treated as complete and scientific method of book keeping
2. The purpose of preparing is to ascertain capital as on particular date.	2. The purpose of preparing is to find out financial position of the concern.
3. It shows only the estimated financial position of the concern.	3. It shows realistic financial position for a given period
4. Om mission of Assets and liabilities cannot be easily traced	4. Any missing items can be easily traced.
5. It is prepare with the help of some ledger a/c and statements.	5. It is prepared on the basis of ledger a/c balances.

Question 3.
Write the Advantage / Merits of incomplete’records system.
Answer:
The important uses/merits of incomplete records are:

• It is a simple and easy method of book – keeping.
• It is less costly, because only few books of accounts are maintained.
• Only personal and cash accounts are main trained.
• It is suitable for small business concern.
• Accounting knowledge is not much required

Question 4.
Explain the procedure of ascertaining profit under incomplete records.
Answer:
The steps or procedure for finding out profit under incomplete system of book keeping. Closing Capital Add: Drawings

Question 5.
Explain the special features of accounts from incomplete records.
Answer:
Special features of accounts from incomplete records are:

• Both the aspect of each and every transactions are not recorded.
• Under this system all kinds of accounts are maintained.
• It is simple and easy method of book keeping.
• It is less costly.
• It is not very supportive to find out exact profit of the business concern.
• Not possible to find out correct profit or loss of a concern.

Question 6.
Aniketh gives you the following information. Find out his profit or loss.

Answer:

Question 7.
Manmohan started his business on 01.01.2008 with a capital of ₹ 4,50,000. On 31.12.2008, his position was as under:

He owed ₹ 30, 000 to his friend Ashok on th at date. He withdrew ₹ 6,000 p.m. for his household purposes. Ascertain his profit or loss for the year ending 31.12.2008.
Answer:
Opening Capital 4,50,000
Closing Capital = Assets – Liability
4,77,000 – 30,000 = 4,47,000
Drawings = 6,000 × 12 = 72,000
Additional Capital = W.L
Profit =. 4,47,000 + 72,000 – 4,50,000 = 69,000

Question 8.
From the following, calculate the capital at the beginning:

Answer:

1st PUC Accounts From Incomplete Records Six Marks Questions and Answers

Question 1.
What are the possible reasons for keeping incomplete records?
Answer:
The possible reasons for keeping incomplete records are:
a. Simple method: Proprietors, who do not have the proper knowledge of accounting principles, find it much convenient and easier to maintain their business records under this system.

b. Less time consuming: Maintaining books according to the single entry system is less time consuming, as only few books are to be maintained. Further, the books are not as comprehensive as they are under double entry system.

c. Less expensive: It is an economical mode of maintaining records, as there is no need to appoint specialized accountant.

d. Flexible: Owner may record transactions as per his/her own needs. It can be easily adjusted or changed whenever needed.

Question 2.
Distinguish between statement of affairs and balance sheet.
Answer:

Basis of Difference	Statement of Affairs	Balance Sheet
Objective	It is prepared to determine the amount of capital at a particular date.	It is prepared to ascertain the true financial position.
Reliability	It is bases on estimates; hence, it is less reliable.	It is based on sophisticated and well developed principles; hence, it is more
Accounting Method	It is prepared from incomplete records of business transactions under single entry	It is prepared when accounts are maintained under double entry system.
Omission	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.

Question 3.
What practical difficulties are encountered by a trader due to incompleteness of accounting records?
Answer:
The following are the difficulties that are encountered by a trader due to incompleteness of accounting records:
a. Accuracy of accounts: Arithmetical accuracy of accounts cannot be ascertained, since proper records of accounts are not maintained. Consequently, Trial Balance cannot be prepared.

b. Encourages fraud: As the arithmetical accuracy cannot be determined; so, this encourages fraud and provides sufficient scope for bluffing and carelessness.

c. Difficult to ascertain correct profit or loss: Since all expenses and income are not recorded, true profit or loss cannot be correctly ascertained.

d. Difficult to analyse the true financial position: As profit or loss cannot be ascertained. easily, so the balance sheet cannot be easily prepared. Hence, the absence of balance sheet will not reflect the true financial position of the business.

e. Difficulty in comparison: Due to the incomplete records and non-availability of previous years’ data, comparison is not possible. By the same token, comparisons with other firms are also not possible.

f. Unacceptable to tax authorities: It does not reflect the true and acceptable presentation of expenses and revenues. Hence, these are not acceptable by the tax authorities.

g. Raising funds: Since analysis of solvency, profitability and liquidity of business cannot be done, it is difficult to raise fund from outside.

1st PUC Accounts From Incomplete Records Twelve Marks Questions and Answers

Question 1.
What is meant by a ‘statement of affairs’? How can the profit or loss of a trader be ascertained with the help of statement of affairs?
Answer:
Statement of Affairs is like a balance sheet, which shows the estimated values of assets and liabilities.

Question 2.
When liabilities are more than assets, then the balancing figure is denoted by Capital Deficiency in the assets side of the statement of affairs.
Answer:
When the assets’ balance exceeds liabilities’ balance, the balancing figure is denoted by capital in liabilities side of the statement of affairs.
For ascertaining profit or loss, if capital in the beginning is not given, then opening statement of affairs is prepared in order to calculate the capital in the beginning. Once the opening capital and closing capital is calculated, as Statement of profit or loss is prepared to determine the amount of profit earned or loss incurred during the accounting period.

Question 3.
Is it possible to prepare the profit and loss account and the balance sheet from the incomplete book of accounts kept by a trader? Do you agree? Explain.
Answer:
The profit and loss account and the balance sheet can be prepared from the incomplete book ‘ of accounts through Conversion method. According to this method, incomplete records are converted into double entry records. In case of incomplete records, details of some transactions are easily available like cash sales, cash purchases, creditors, debtors; however, there are number of transactions, the details of which may not be available directly. Yet, these details can be found out indirectly or logically. Some of the important items that are vital for preparing balance sheet are given below,
a. Opening capital
b. Closing capital
c. Credit purchases
d. Cash purchases
e. Credit sales
f. Cash sales
g. Payment from debtors
h. Payment to creditors
i. Opening stock
j. Closing stock
Below are given are the steps included in the conversion method in a chronological order:
a. If opening capital is not given, then the first step is to prepare opening statement of affairs that gives the opening capital.

b. The second step is to prepare cash book that gives the opening or the closing cash and bank balancer.

c. The next step is to prepare total debtors account. It is prepared in order to find one of the missing figures, such as credit sales, opening debtors, closing debtors and cash received from debtors.

d. The subsequent step is to prepare total creditors account to ascertain one of the missing figures, such as credit sales, opening creditors, closing creditors and cash paid to the creditors.

e. The last step is to prepare final accounts. On the basis of the missing figures ascertained in each of the above steps, along with other mentioned information, Trading and profit and loss account and balance sheet can be prepared.

Question 4.
Explain how the following may be ascertained from incomplete records:
a. Opening capital and closing capital
b. Credit sales and credit purchases
c. Payments to creditors and collection from debtors
d. Closing balance of cash.
Answer:
a. Opening capital and closing capital: Opening capital can be ascertained by preparing opening statement of affairs at the beginning of the accounting period and closing capital can be ascertained by preparing closing statement of affairs at the end of the accounting period.

b. Credit sales and credit purchases: Credit sales are ascertained as the balancing figure of the total debtors account and credit purchases are ascertained as the balancing figure of the total creditors account.

c. Payments to creditors and collection from debtors can be ascertained by preparing total creditors account and total debtors account respectively.

d. Closing balance of cash may be ascertained by preparing cash account.

Question 5.
M/s Saniya sports equipment does not keep proper records. From the following information find out profit or loss and also prepare balance sheet for the year ended December 31, 2005

Drawings ₹ 10,000 p.m. for personal use, fresh capital introduce during the year ₹ 2,00,000. A bad debts of ₹ 2,000 and a provision of 5% is to be made on debtors. Outstanding salary ₹ 2,400, prepaid insurance ₹ 700, depreciation charged on furniture and machine @ 10% p.a.

Question 6.
From the following information calculate the amount to be paid creditors: ?

Answer:

Cash paid to creditors = 4,40,0175

Question 7.
Find out the credit purchases from the following: ?


Answer:

Question 8.
From the following information calculate total purchases. ?

Answer:


Total purchase = Cash purchase + credit purchases = 1,29,000+2,01,500 = 3,30,500

Question 9.
The following information is given ?

Answer:

Question 10.
From the following, calculate the amount of bills accepted during the year.

Answer:

Calculated purchases during the year

Question 11.
Find out the amount of bills matured during the year on the basis of information given below :

Answer:

Question 12.
Prepare the bills payable account form the following and find out missing figure if any:

Answer:

Question 13.
Calculate the amount of bills receivable during the year. ?

Answer:

Question 14.
Calculate the amount of bills receivable dishonoured from the following information. ?

Answer:

Question 15.
From the details given below. Find out the credit sales and total sales.

Answer:

Total sales = cash sales + credit sales
= 80,000 + 2,82,300
= 3,62,300

Question 16.
From the following information. Prepare the bills receivable account and total debtors account for the year ended December 31, 2005.

Answer:

Question 17.
prepare the suitable accounts and find out the missing figures if any ?


Answer:

Question 18.
From the following information ascertain the opening balance of sundry debtors and closing balance of sundry creditors.


The rate of gross profit is 25% on selling price and out of the total sales ₹ 85,000 was for cash sales.
(Hint: Total sales = 4,00,000 = 3,00,000*100/75)
Answer:

Total sales = Cash sales + Credit sales
Total sales = cost of goods sold + Gross profit
Cost of goods sold = opening stock + purchases – closing stock
= 30,000 + 2,95,000 – 25,000
= 3,00,000
Gross profit is 25% on sales i.e. 1/4 on sales so 1/3 on cost i.e. 1/4-1 = 1/3
Gross profit = 3,00,000 * 1/3 = 1,00,000
Total sales = 3,00,000 + 1,00,000
= 4,00,000
Total sales = cash sales + credit sales
4,00,000 = 85,000 + credit sales
Credit sales = 4,00,000 – 85,000
= 3,15,000

Question 19.
Mrs. Bhavana keeps his books by single entry system. You’re required to prepare final accounts of her business for the year ended December 31,2005. Her records relating to cash receipts and cash payments for the above period showed the following particulars:

The followng information is also avaliable:

All her sales and purchases were on credit. Provide depreciation on plant and building by 10% and machinery by 5%, make a provision for bad debts by 5%.
(Ans : Gross profit: ₹ 95,000 ; Net profit: ₹ 41,250 : Total of balance sheet: ₹ 5,75,250).

1st PUC Accounts From Incomplete Records Numerical Questions

Ascertainment of profit or loss by statement of affairs method
Question 1.
Following information is given below prepare the statement of profit or loss: Capital at the end of the year ?

Answer

Question 2.
Ramesh started his business on January 01, 2005 with a capital of ₹ 2,25,000. On December 31,2005 his position was as under: ?

He owned ₹ 22,500 from his friend Susheel on that date. He withdrew ₹ 4,000 per month for his household purposes: Ascertain his profit or loss for this year ended December 31, 2010.
Answer:

Question 3.
From the information given below ascertain the profit for the year : ?

Answer:

Question 4.
From the following information, calculate capital at the beginning :

Answer:

Question 5.
Following information is given below : calculate the closing capital

Answer:

Closing Capital = 40,000

Question 6.
Mrs. Manu started firm with a capital of ₹ 4,00,000 on 1st July 2005. She borrowed from her friends a sum of ₹ 1,00,000 @ 10% per annum (interest paid) for business and brought a further amount to capital ₹ 75,000 on Dec. 31, 2008, her position was:c?

He withdrew ₹8,000 per month for the year. Calculate profit or loss for the year and show your working clearly.
Answer:

Question 7.
Mr. Rakesh does not keep proper records of his business he provided following information, you are required to prepare a statement showing the profit or loss for the year. ?


Ascertainment of statement of affairs at the beginning and at the end of the year and calculation of profit or loss.
Answer:

Question 8.
Mr. Akash keeps his books on incomplete records following information is given below :


During the year he withdrew ₹ 22,500 and introduced ₹ 12,500 as further capital in the business compute profit or loss of the business.
Answer:

Question 9.
Krishna does not keep proper books of account. Following information is given below:

During the year he introduced ₹ 20,000 and withdrew ₹ 12,000 from the business. Prepare the statement of profit or loss on the basis of given information Answer:

Question 10.
Mr. Mahesh maintains his books of accounts from incomplete records. His books provide the information :

He withdrew ₹ 600 per month for personal expenses. He sold his investment of ₹ 32,000 at 2% premium and introduced that amount into business.
Answer:

Question 11.
Mr. Rajesh does not keep full double entry records. His balance as on January 01,2013 is as.

Answer:

Question 12.
Mr. Santhosh does not keep his books properly. Following information is available from his books.

During the year Mr. Santhosh sold his private car for ₹ 25,000 and invested this amount into the business. He withdrew from the business ₹ 750 per month upto July 31,2012 and thereafter ₹ 2,250 per month as drawings. You are required to prepare the statement of profit or loss and statement of affair as on December 31,2005.
Answer:
His position at the of the year is:

Question 13.
Ms. Sahand has not kept proper books of accounts prepare the statement of profit or loss for the year ending December 31,2008 from the following information:

The following adjustments were made:
(a) Ms Sahana withdrew cash ₹ 5,000 per month for private use.
(b) Depreciation @ 5% on car and furniture @ 10%.
(c) Outstanding Rent ₹ 6,000
(d) Fresh capital introduced during the year ₹ 30,000.
Answer:

Question 14.
M/s Soniya Sports Equipment does not keep proper records. From the following information find out profit or loss and also prepare balance sheet for the year ended December 31,2004.

Drawing ₹ 5,000 p.m. for personal use. Fresh capital introduce during the year ₹ 1,00,000. A bad debts of ₹ 1,000 and a provision of 5% is to be made on debtors. Outstanding salary ₹ 1,200, prepaid insurance ₹ 350. Depreciation charged on furniture and machine @ 10% p.a.
Answer: