Roll No-31

Q.1. What is Book- keeping? How does it differ from Accounting?

Answer: Book-keeping is mainly concerned with record keeping or

maintenance of books of accounts. The maintenance of books of accounts
include the following four activities:
1) Identifying the transactions of financial nature from amongst the various
transactions.
2) Measuring the identifying transactions, in terms of money.
3) Recording the identifying transactions, recording is done in what is
called books of original entry or Journal
4) Classifying, classification is done in what is called ledger.

Book-keeping involves the recording of business transactions, but

accounting is a broader term used for entire accounting system.
Following
are the difference between book-keeping and Accounting.
Book-keeping Accounting

1.Book-keeping is a task-oriented 1. Accounting is more results-oriented

function that routinely and than book-keeping. Accounting is
systematically records an involved more with interpreting and
organisation’s day-to-day financial using financial information in decision
transactions making rather than just preparing it.
2. Book-keeping is the basis of 2. While, Accounting is the basis for
accounting. business language.

3. Book-keeping is the primary stage of 3. Whereas, Accounting is the secondary

recording. stage of accounting.

4. In book-keeping entries are made 4. Whereas, Accounting work is done on

on the basis of original document. the basis of records of book-keeping.
5. Book-keeping doesn’t provide any 5. Whereas, Accounting provide
information for managerial decision information for managerial decision
making. making.

Q.2. Explain the term ‘Accounting Concept.’ Name eight accounting concepts
and explain any one of them with a suitable example.

Answer: Accounting Concept are generally accepted notion applied in the field
of accounting. A concept finds its place in a belief about the desirability of a
method or procedure. Such methods or procedures are the general rules
applied by the business entities while recording the transactions are preparing
the financial statement to provide uniform character. The eight accounting
concept are as follows:
1) Business Entity concept
2) Money measurement concept.
3) Going concern concept
4) Cost concept
5) Dual aspect concept
6) Accural concept
7) Matching concept.
8) Objective concept.

Money measurement concept means only those

transactions are recordable in Accounts which are measurable in money.
Broadly business transactions are related to five elements. These are also
known as “Elements of Financial Statements”. These elements are: assets,
liabilities, capital, income and gains, expenses and losses. In journal, ledger,
trading account, profit and loss account and balance sheet we write these
elements by name e.g. purchases, sales, plant, furniture, capital of x,
salaries etc. these items are recorded in the books of accounts in money
 value because money serves as a common measures for expressing
business transactions. This is known as Money measurement concept.
Example- Suppose, there was a very hardworking employee in a
company with the help of whom the business keeps and growing
everyday . Suddenly this employee resigned now this would be huge loss
to the company but since, resignation of an employee cannot be
measured in terms of money , this will be not recorded in the Books of
Account.
Another Example: Salary is shown at ₹ 10,000 in the profit and loss
account. This means that the services received from the employees is
measured (valued) at Rs10,000 in accounts. Thus, accountants follow
money measurement concept while recording transactions and
preparing financial statements.

Q.3. What is Journal and what are the functions of it?

Answer: When a business transaction takes place, the first record of it is
done in a book called journal. The journal records all the transactions of
a business in the order in which they occur. The journal may therefore
be defined as a chronological record of accounting transactions. It shows
names of accounts that are to be debited or credited, the amounts of the
debits and credits and any other additional but useful information about
the transaction. The format of journal is sub-divided into five columns. These
five columns are i) Date, ii) Particulars, iii) Ledger Folio, iv) Amount (debit)
and (Credit).
Journal
Dr In the book of xyz….
Cr
Date Vou Particulars l/ Dr Cr
No. f Amount Amount
2020 Cash A/c 30,000
1st Aug Dr 30,000
To Bank A/c
(the amount brought into
capital)
In the format above, the debit entry is listed first and the debit amount
appears in the left-hand amount column; the account to be credited
appears below the debit entry and the credit amount appears in the right
hand amount column. The data in the journal entry are transferred to the
appropriate accounts in the ledger by a process known as posting. Any
entry in any account can be made only on the basis of a journal entry. The
column l.f. which stands for ledger folio gives the page number of accounts
in the ledger wherein posting for the journal entry has been made.
The Functions of a journal are as follows:
1) Keeping record in chronological order: The main function of
journal is to keep a chronological (i.e. date-wise) record of all
transactions.

2) Basis and source for posting: Journal provides the basis and sources
for posting into ledger

3) Maintain the identify of transactions: Journal helps to maintain the

identify of each transaction by keeping a complete record of each
transaction at one place on permanent basis.

Q.4. What is ledger and Posting? Discuss the features of a ledger?

Answer: Ledger is a book of account which contains a condensed and
classified record of all transaction of the business posted from the journal.
Since all transactions are ultimately recorded in the ledger. In the book,
separate accounts are opened for each ‘account head’ and all transactions
relating to a particular ‘account head’ will be posted in that concerned
account. An account for each person, each type of revenue, expenses, assets
and liability is opened in the ledger. For example: all transactions relating to a
particular supplier; Shayam will be posted to the account of Shayam. This helps
in ascertaining the amount due to Shayam.
Posting Is the process of transferring debit and credit
aspects of the entries appearing in the journal and other books of original
entry to the debit and credit sides of the relevant accounts in the ledger.
Postings are made using the word ‘To’ and ‘By’ as a word on the debit side and
credit side respectively.
 The features of a ledger are as follows:
Ledger accounts are the T-shape accounts which provide information
regarding all the transactions which takes place for that particular account.
Such Ledger Account has the following features:
1) Two sides: A Ledger Account has two sides, namely Left hand side and
Right hand side. Left hand side is called the Debit side while the Right
hand side is called the credit side.
2) Recording of two aspects: Posting is made on the debit side of the
ledger account which has been debited in the journal and the account
which has been credited in the journal is credited in the ledger account.
3) Balancing: Each account in the ledger is balanced independently. This is
done by ascertaining the difference between the total of the debit side
and total of the credit side.

Q.5. What is a Trail Balance?

Answer: The trial balance is simply a list of the account names and their
balance as of a given moment of time with debit balances in one column
and credit balances in another column. It is prepared to ensure that the
mechanics of the recording and posting of the transaction have been
carried out accurately. If the recording and posting have been accurate
then the debit total and credit total in the trial balance must equally.
It is prepared at the end of the month before adjustments are made in the books.
It is used to see if all journal entries are posted correctly and uncover any
posting errors. Once the trial balance has been prepared, then we will move into
adjusting and closing process at the end of the month. All income statement
accounts will be closed, earnings will be assessed, and the process will restart in
the next month.

Q.5. What is cashbook? Is a cashbook a Ledger or a Journal?

Answer: Cash Book is a special purpose book which is used to record all
transactions relating to cash receipts and cash payments in chronological
order. A cashbook is a subsidiary of the general ledger in which all cash
transactions during a period are recorded.
It is a journal since the transactions are recorded in it for the first time
from the source documents. Later on these are posted to the respective
accounts in the ledger. The Cashbook is also a ledger in the sense that it serves
the purpose of a cash account also. When a Cashbook is prepared, no separate
cash account is opened in the ledger. As such the Cashbook is a journal as well
as a ledger.

Q.6. What is a “Contra entry”? Name the types of transaction for which contra
entries passed?

Answer: Contra entry are those which appear at the same time on both the
sides (Dr. and Cr.) of the Cashbook. These entries (Contra) are distinguished
from the other entries by writing the letter “C” against them in L.F. column.
They are not required to be posted to ledger as their double entry is complete
in the Cashbook itself.
Contra entries are passed for the following types of
transactions:
1) Deposited cash into bank.
2) Withdrawn money for office use.
3) Deposited cheque into bank.
4) Opening a current A/c with bank.

For Example: Deposited cash into bank – when cash is deposited into
bank, cash goes out of business and hence cash balance is reduced. At
the same time, bank becomes the debtor as it is received the amount.
This transactions is to be entered on both the sides of the Cashbook, i.e.
on the credit side in cash column (as by Bank) is to be recorded as cash
goes out, and on the debit side in Bank column (as To Cash) is recorded.
This double entry of this transaction is complete in the Cashbook itself.
Such entries, the double entry of which is completed in the Cashbook
itself are called “Contra entries”.
Date Vo Particular L/ Bank Date Vo Particular L/ Cash Ban
u s f Cas u s f k
No. h No.
202 To cash c 20,00 Jan1s By bank c 20,00
0 A/c 0 t A/c 0
Jan 2020
1st

In the books of …………..

Cashbook with Cash and Bank columns
Dr Cr