Unit at a Glance: Introduction Book keeping Meaning of accounting Difference between book keeping and accountancy Economic events Changing role of accountaney Process of accounting Users of financial statements Branches of accounting Objectives of accounting Basic accounting terms vvvvvyvvvyy “There's no business like show business, but there are several businesses like accounting,” Introduction: ‘Accounting has greater discipline than book keeping. It includes conceptual knowledge of the subject and applications also. BOOK KEEPING:-It involves journal, ledger, disclose the results of Business. Meaning of Accounting;-It is process of identifying, measuring, recording and communicating the financial information, Difference between Bookkeeping and accountancy Book keeping does not show the net result and accountaney shows net result of the business, sh book and other subsidiary books, it cannot Economic Events:- Allevents which can be measured in monetary Terms are known as Economic events. (Salary paid to employees, Goods purchased from creditors, cash withdrew from bank) CHANGING ROLE OF ACCOUNTANCY, 1. As a language to communicate information an enterprises. 2. To provide valuable information for judging management ability. 3. To provide quantitative information this is useful in economic decision. Process of accounting |, Identification of the economic events. (Selection of important event)2. Classification of the business transaction (Assets, lability, expenses, income). 3. Measurement in terms (Monetary value transaction.), 4, Recording of business transactions (As per accounting principal) 5, Summarizing the business transaction (Journal, ledger, trial balance and Balance sheet.) 6. Analysis and interpreting the business transactions. (Various reports, ratio te.) 7. Communication (provide information to internal and external users.) Users of financial statements; 1. Internal users (Owners, shareholders, investors, creditors, employees, customers, management.) 2 External users: - (Regulatory agencies, labor union, stock exchange, public and others) BRANCHES OF ACC | accounting (Book Keeping + preparation of financial tatement), 1 2. Cost accounting (Determines the unit cost at different level of production). 3. Management accounting (It blends financial and cost accounting to get maximum profit at maximum cost). 4. Tax accounting (Sales tax and income tax). 5. Social responsibility (Focus on social benefits) Objectives of Accounting 1. Provides information in systematic way. 2. Enables to get profit or loss of business during certain profit. 3. Shows the actual position of the business. BASIC ACCOUNTING TERMS 1. Entity:- Te means existence of an individual which includes two things 1 Business entity 2. Non business entity. 2. Transactions: - Exchange of goods and services for consideration. 3.Assets:- These are properties or economic resources of an enterprises which can be expressed in monetary terms it can be divided in two parts 1.Fixed assets( more than | year period) 2. Current assets(less than 1 year period) 4, Liabilities:-These are certain obligations or dues which firm has to pay. 5. Capital: It is an essential investment for commencement of every business. 6, Sales: It can be credit or cash, in which goods are delivered to customers 7. Revenues:-It is the amount which is earned by selling of products. 8, Expenses:-It is known as cost of assets consumed or services which used 9. Expenditure:-It means spending money for some benefit. 10, Profit: - Excess of revenues over expenses is called profit. 11. Gain: - It generates from incidental transaction such as sales of fixed asset, winning of court case. 12, Loss: - Excess of expenses over income is termed as loss,13, Discount:-It is defined as concession or deduction in price of goods sold. 14, Voucher:-It is known as evidence in support of a transaction, 15. Goods: - It refers all the tangible goods (Raw material, work in progress, finished goods.) 16, Drawings: - Amount of goods or cash which is withdrawn from business for personal use. 17. Purchases: - It means of procurement of goods on credit or cash 18, Stock: - It is a part of unsold goods. It can be divided into two categories. 1.Opening stock 2, Closing stock. 19 Debtors: - There are persons who owe to an enterprise an amount for buying goods and services on credit 20. Creditors: - These are persons who have to be paid by an enterprise an amount for providing the enterprise goods and services on credit Questions Write any two users of financial statements. ANS: - | Public 2.Regulatory agencies 2. Write any one advantage of accounting, ANS: - Provide information in systematic order 3 Write any one example of voucher. ANS: cash memo 4, Write any two examples of current assets. ‘Ans. L Stock 2.DebtorUNIT- 02 THEORY BASE OF ACCOU! ING Unit ata glance: introduction Meaning of accounting principles Features of accounting principles Necessity of accounting principles Basic accounting concepts Basis of accounting Nature of accounting standards Utility of accounting standards Intemational Financial Reporting Standards (IFRS) Meaning and benefits of IFRS vv VV VVVVY “A mode of conduct imposed on an accountant by custom, law and professional body." — Kohler Introduction: To maintain uniformity in reco: 1g transactions and preparing financial statements, accountants should follow Generally Accepted Accounting Principles. ‘Meaning of Accounting Principles: ‘Accounting principles are the rules of action or conduct adopted by accountants universally while recording accounting transactions. GAAP refers to the rules or guidelines adopted for recording and reporting of business transactions, {n order to bring uniformity in the preparation and presentation of financial statements. Features of accounting principles: (1) Accounting principles are manmade. (2) Accounting principles are flexible in nature (3) Accounting principles are generally accepted. Necessity of accounting principles: ‘Accounting information is meaningful and useful for users if the accounting records and financial statements are prepared following generally accepted accounting information in standard forms which are understood.Basic accounting concepts (1) Business entity concepts This concept assumes that business has a distinct and separate entity from its owners. Therefore business transactions are recorded in the books of accounts from the business point of view and not owners. For example, If owner bring Rs. 1,00,000 as capital in business. It is treated as bility of business to owner. Similarly if owner withdrew Rs. 5,000 from business for personal use, it is treated as reduction of owner's capital and consequently reduction in liability of business towards owner. (2)Money measurement concept This concept states that transactions and events that can be expressed in money terms are recorded in the books of accounts. Non monetary transactions cannot be recorded in the books of human resources ete. like appointment of manager, capabilit Another aspect is the records of transactions are to be kept not in physical unit but in ‘monetary unit. For example, an organisation has 2 buildings, 15 computers, 20 office tables are not recorded because they are physical unit and not in monetary unit Limitation of this concept is the valuc of rupee does not remain same over a period of time. As changes in the value of money is not reflected in books docs not reflect fair view of business affairs (3) Going concern concept This concept assumes that business shall continue to carry out its operations indefinitely for a long period of time and would not be liquidated in the foreseeable future, It provides the very basis for showing the value of assets in the balance sheet, ‘An asset may be defined as a bundle of services. For example, a machine purchased for Rs. 2,00,000 and its estimated useful life say 10 years. The cost of machinery is spread on suitable basis over next 10 years for ascertaining the profit or loss for each year. The total cost of the machine is not treated as an expense in the year of purchase itself. (4) Accounting period concept Accounting period refers to span of time at the end of which financial statements are prepared to know the profits or loss and financial position of business. Information is required to by different users at regular intervals for decision making. For example, bankers require information periodically because they want to ensure safety and returns of their investments. Similarly management requires information at regular interval to assess the performance and funds requirement, Therefore they are prepared at regular interval, normally a period of one year. This interval of time is called accounting period.(8) Cost concept According to this concept all assets are recorded in the books of accounts at the purchase price which includes the purchase price, cost of acquisition, transportation and installation, For example, if an asset purchased for Rs. 1,00,000 and spent Rs. 10,000 on its installation. Therefore asset will be recorded in the books of accounts at Rs. 1,10,000. This concept is historical in nature. For example, if machine purchased for Rs. 75,000, the purchase or acquisition price will remain same for all years to come, though its market value ‘may change. The main limitation of this concept is that it does not show the true value of asset and may lead to hidden profits (6) Dual aspect concept This concept provides the very basis for recording the transaction in the books of accounts. It states that every transaction entered in the books has two aspects. For example, Man as started business with cash Rs, 50,000. In this transaction asset (cash) increases and liability (capital ‘of owner) also increases. This principle is also known as duality principle. This principle is commonly expressed in fundamental accounting equation given below. Assets = Liabilities + Capital This equation states that assets of business are always equal to the claims of owners and outsiders, (7) Revenue recognition concept ( Realisation concept) ‘According to this principle revenue is considered to have been realised when a transaction has been entered and obligation to receive the amount has been established. In other words when we receive right to receive revenue than it is called revenue is realised. For example, sales ‘made in March, 2010 and receives amount in April, 2010, Revenue of these sales should be recognised in February month, when the goods sold. For example commission for the March, 2010 even if received in April 2010 will be taken into profit and loss A/e of March, 2010. Similarly if rent for the April, 2010 is received in advanee in March, 2010 it will be taken the profit and loss A/c of the financial year of March, 2011. (8) Matching concept ‘The matching concept states that expense incurred in an accounting period should be matched with revenues during that period. It follows from this that revenue and expenses incurred to cam these revenues must belong to the same accounting period. For example, salary for the month of March, 2010 paid in April, 2010 is recorded in the profit and loss A/c of financial year ending March, 2010 and not in the year when it realized, Similarly we records cost of goods sold and not the goods purchased or produced. So the cost of unsold goods should be deducted from the cost of goods produced or purchased.(9) Full disclosure concept Apart from legal requirement good accounting practice require all material and significant information must be disclosed. Financial statements are the basic means of communicating financial information to its users for taking useful financial decisions. This concept states that all material and relevant fact and financial performance must be fully disclosed in financial statement of the business. Company’s act 1956 has provided a format for making profit and loss A/c and balance sheet, which needs to be compulsorily adhered to for preparation of financial statement, Disclosure of material information results in better understanding. For ‘example, the reasons for low tumover should be disclosed, (10)Consisteney concept This concept states that accounting practices followed by an enterprise should be uniform and consistent over a period of time. For example iff an enterprise has adopted straight line method of charging depreciation then it has to be followed year after year. If' we adopt written down value method from second year for charging depreciation than the financial information will not be comparable. Consistency eliminates the personal bias helps in achieving the results that are comparable. However consistency docs not prohibits the change accounting poli Necessary changes can be adopted and should be disclosed. (11) Conservatism concept (Prudence concept) This concept takes into consideration all prospective losses but not the prospective profit. It ‘means profit should not be recorded until it realised but all losses, even those which have remote possibility are to be recorded in the books, For example, valuing closing stock at cost ‘or market value whichever is lower, creating provision for doubtful debts ete, This concept censures thatthe financial statements provide the real picture of the enterprise. (12) Materiality concept This concept states that accounting should focus on material fact. Whether the item is material ‘or not shall depend upon nature and amount involved in it, For example, amount spent of repair of building Rs. 4,00,000 is material for enterprise having the sales turnover of Rs.1,50,000 but not material for enterprise having tumover of Rs. 25,00,000. Similarly closure of one plant material but stock eraser and pencils are not shown at the asset side but treated as expenses of that period, whether consumed of not because the amount involved in it are low. (13) Objectivity concept This concept states that accounting should be free from personal bias. This ean be possible when every transaction is supported by verifiable documents. For example, purchase of machinery for Rs. 30,000 should be supported by the voucher and should be recorded in thebooks of accounts, Similarly other supporting documents are cash memo, invoices, receipts provides the basis for accounting and auditing Under this entries in the books of accounts are made when cash id received or paid and not ‘when the receipt or payment becomes due. For example, if salary Rs. 7,000 of January 2010 paid in February 2010 it would be recorded in the books of accounts only in February, 2010, (2) Acerual basis Under this however, revenues and costs are recognized in the period in which they occur rather when they are paid. It means it record the effect of transaction is taken into book in the ‘when they are earned rather than in the period in which cash is actually received or paid by the enterprise. It is more appropriate basis for calculation of profits as expenses are matched against revenue eamed in the relation thereto, For example, raw materials consumed are ‘matched against the cost of goods sold for the accounting period. Accounting Standards (AS) “A mode of conduct imposed on an accountant by custom, law and a professional body.” — By Kohler Nature of accounting standards: (1) Accounting. standards are guidelines which provide the framework credible financial statement can be produced. (2) According to change in business environment accounting standards are being changed or revised from time to time (3) To bring uniformity in accounting practices and to ensure consistency and comparability is the main objective of accounting standards, (4) Where the alternative accounting practice is available, an enterprise is free to adopt. So accounting standards are flexible. (5) Accounting standards are amendatory in nature. Utility of accounting standards: (1) They provide the norms on the basis of which financial statements should be prepared. (2) It ereates the confidence among the users of accounting information because they are reliable, 3) Ithelps accountants to follow the uniform accounting practices and helps auditors in auditing, (4) It ensures the uniformity in preparation and presentation of financial statements by following the uniform practices.International Financial Reporting Standards (IFRS) To maintain uniformity and use of same or single accounting standards, International Financial Reporting Standards (IFRS) are developed by International Accounting Standards board (IASB). Objectives of IASB: (1) To develop the single set of high quality global accounting standards so users of information ‘can make good decisions and the information can be comparable globally. (2) To promote the use of these high quality standards. (3) To fulfill the special needs of small and medium size entity by following above objectives. ‘Meaning of IFRS: IFRS is a principle based accounting standards. IFRS are a single set of high quality accounting Standards developed by IASB, recommended to be used by the enterprises globally to produce financial statements, Benefits of IFRS: (1) Global comparison of financial statements of any companies is possible (2) Financial statements prepared by using IFRS shall be better understood with financial statements prepared by the country specific accounting standards. So the investors can make better decision about their investments. (3) Industry can raise or invest their funds by better understanding if financial statements are there with IFRS. (4) Accountants and auditors are in a position to render their services in countries adopting IFRS. (5) By implementation of IFRS accountants and auditors can save the time and money. (6) Firm using IFRS can have better planning and execution. It will help the management to execute their plans globally.QUESTIONS Explain cost concept. (1) What is mean by accounting standard? What is the main objective of accounting standard? (2) Explain the following concepts. a. Business entity concept b. Going concern concept ¢. Revenue recognition concept (3) Explain the utility of Accounting Standards. (4) Which principle assumes that a business enterprise will not be liquidated in near future? ‘Ans. Going concem concept. (5) “Closing stock is valued lower than the market price” which concept of accounting is applied here? ‘Ans, Conservatism (prudence) concept. (6) ‘An asset may defined as a bundle of services’ ~ explain with an example. (7) Under which accounting principle, quality of manpower is not recommended in the books of accounts? ‘Ans. Money measurement concept.Chapter - 3 Recording Of Transactions- 1 Accounting Equations Accounting equation shows the relationship between the assets, liabilities and owner’s capital of a person or business A=L+C Where A= assets L= liabilities C= capital The above equation can be presented in the following forms as its derivatives to enable the determination of missing figures of Capital(C) or Liabilities(L) (@) A-L=C (i), A-L=C Since the accounting equation shows the fundamental relationship among the items of the balance sheet, itis also called the Balance Sheet Equation The claim of the proprietors is called capital and that which is taken from another person from the outside is known as liabilities, The asset side of the balance sheet records all the assets of the business. The liabilities side of the balance sheet is the detailed list of owner's capital and outsider’s claims Let us take an example Payal started the business with a capital of Rs 10.00,000. From the accounting point of view, the resources of this business entity is in the form of cash, i.e.Rs. 10,00,000, Sources of this business entity are the contribution by payal (Proprietor) Rs. 10,00,000 as Capital. If we put this detail in the form of equality of resources and sources, the picture will emerge somewhat as follow’ In the Books of Pay Balance sheet as OM... « Liabilities Amount Assets ‘Amount Liabilities 10,00,000 Asset 10,00,000 In the above balance sheet the total of assets is equal to the total of liabilitiesNow we will analyse the transactions listed in example 1 and its effect on different elements and you will observe that the accounting equation always remain balanced:- (J) Opened a bank account in bank of India with an amount of Rs. 500000 (Analysis of transaction: This transaction increases the cash at bank (assets) and decreases cash (asset) by Rs. 500000.) (2) Bought furniture for Rs. 100000 and a cheque was issued on the same day. (Analysis of transaction: This transaction increases furniture (assets) and decreases bank (assets) by Rs. 100000.) (3) Bought plant and machinery for the business for Rs. 1,10,000 and an advance of Rs. 10,000 in cash is paid to M/s Ramjilal. (Analysis of transaction: This transaction increases plant and machinery (assets) by Rs. 1,10,000, decreases cash by Rs. 10,000 and increases liabilities (M/s Ramijilal as creditor) by Rs. 1,00,000.) (4) Goods purchased from M/s Akshay Traders for Rs. 55,000. (Analysis of transaction: This transaction increases goods (assets) and increases liabilities (M/s Akshay Traders as creditors) by Rs. 55,000.) (5) Goods costing Rs. 15,000 sold to Samit Enterprises for Rs. 25,000. Analysis of transaction: This transaction decreases stock of goods (assets) by Rs. 15,000 and increases assets (Samit Enterprises as debtors Rs. 25,000) and capital (with the profit of Rs. 10,000) In the Books of Payal Journal entries for the year ending...... Date | Particulars L.F | Debit Credit 1 Bank a/c. Dr. 5,00,000 To cash ale 5,00,000 (Being a/c opened in the bank.) 2. Furniture a/c. Dr. 1,00,000 To bank a/c 1,00,000 (Being furniture purchased and Payment made through the bank.)3. | Plant and machinery a/e. Dr. 1,10,000 To cash ale 10,000 To Ramjilal ale 1,00,000 (Being plant and machinery purchased on credit and some amount is paid in cash) 4. | Purchases a/c. Dr. 55,000 To Akshay Traders a/c 55,000 (Being goods purchased on credit from Akshay traders.) 5. |Cashale Dr. 25,000 To sales a/c 15,000 To profit and loss alc 10,000 (Being goods sold on profit) The final equation as per the above transactions analysis table can be summarised i the form of balance sheet :- Balance sheet as on... L s Amount (Rs) | Assets ‘Amount(Rs,) Outsiders liabil 1,55,000 Cash 4,90,000 (creditors) Bank 4,00,000. Furniture 1,00,000. Debtors 25,000 Capital 10,10,000, Stock 40,000, Plant and 1,10,000 machinery 11,65,000 11,65,000 Using debit and credit # In the double entry system, every transaction affects two sides of the account. © The right side of the T shape account is credit side and the left side is debit. Rules of debit and credit:-Every accounts are categorized into five types for the purposes of recording the transactions: (a) Asset (b) Liability (c) Capital (d) Expenses/Losses, and (e) Revenues, The two fundamental rules to be followed while recording the changes in these accounts: (1) For recording changes in Assets/Expenses (Losses): (i) “Increase in asset is to be debited, and decrease in asset is to be credited.” (ii)“Increase in expenses/losses is to be debited, and decrease in expenses! losses is credited. ‘The rules applicable to the various kinds of accounts that have been summarised in the below charts: Assets (Increase) (Decrease) + - Debit Credit Liabilities Decrease Tnerease . + Debit Credit Capital Decrease Increase - + Debit Credit Expenses/losses Increase Decrease + . Debit Credit Gains/revenue Decrease Inerease : + Debit CreditBooks of original entry: The process of recording transaction in the journal is called Journalising After the completion of Journalising there after they are transferred to another account and that process is called posting Journal is further divided into some number of books of original entry 1, Journal proper 2. Cash book 3. Other day books:- (a) Purchase book (b) Sales book (c) Purchase return book (d) Sales return book (e) Bills receivable book (Bills payable book Journal: In this book transactions are recorded in chronological order as and when they take place. Each transaction is debited as well credited with same amount Let us have a look at the format of the journal. Journal Date Particulars L.F | Debit amount Credit amount Let us take an example, for clearance of the journal format Example:- sale of goods worth 10000 ‘The golden rule says that debit what comes in and credit what goes out Here, we are selling goods, and in return we receiving cash So debit what comes in i.e, cash and credit what goes out i goods, Here is tubular represent of this transaction:~_ Date | Particulars L.F [Debit Credit Cash ale 10000To sales ale (Being goods sold) 10000 the books of Miss Payal. In the Books of Payal Joumal Entries for the year ending. Now, refer to example | which we have done already, let's record the transition in (Being goods sold on credit) Date | Particulars L.F | Debit Credit, 1 |Casha/e 1000000 To Capital ale 1000000 ( business started with cash) 2 | Bank ale 500000 To cash we 500000 (Cash deposited in bank) 3__[Fumiture a/c 1,00,000 To bank ale 1,00,000 (Being furniture purchased) 4 __ | Plant and machinery a/c 1,10,000 To cash ae 10,000 To Ramjilal we 1,00,000 (Being plant and machinery purchased on credit and some amount is paid in cash) 3__ [Purchases ae 35,000 To m/s Akshaya Traders ale 35,000 (Being goods purchased on credit) 6 | Samit enterprises a/e 25,000 To sales alc 25,000 Discount There are two types of discount that are explained below: 1. Trade discount:- Trade discount is allowed by wholesalers and manufacturers to the retailers at a fixed percentage. Trade discount is not to be shown in the books,2, Cash discount:- Cash discount is allowed to the customers for making an early payment Example: If a retailer sells goods of list price Rs.10000 at 10% trade discount and 2% cash discount Ans: List price 10000 Less: trade discount @10% 1000) 9000 Less: cash discount @2%. (180) (9000%2100) 8,820 Accounting entries under goods and services tax: Record necessary Journal entries assuming CGST @ 5% and SGST @ 5% and all transactions have occurred within Delhi (1) Amit bought goods Rs. 5,00,000 on credit (II) He sold them for Rs. 100000 in the same state on credit (IID) He paid for railway transport Rs. 4000 (IV) He bought a computer printer for Rs.10000 (VY) Paid postal charges Rs. 1000 Journal Entries for the year ending Date | Particulars LFF | Debit (Rs) | Credit (Rs) 1 [Purchases a/e Dr. 500000 Input CGST ale Dr. 25000 Input SGST we Dr. 25000 To creditors ale 550000 (Purchased goods on credit) 2 [Debtors ave Dr. 1100000 To sales a/e 100000 To output CGST ale 50000 To output SGST alc 50000 (Sales goods on credit) 3 | Transportation charges a/e Dr. 40000 Input CGST a/e Dr. 2000 Input SGST a/e Dr. 2000 To bank a/e 44000(Being transport charges paid) 4 [Computer printer a’e Dr. 10000 Input CGST ale Dr. 500 Input SGST ae Dr. 500 To bank ale 11000 (Being Computer printer purchased) 3 [Postal charges ale Dr. 1000 Input CGST ale Dr. 50 Input SGSTa/e Dr. 50 To bank ale 1100 (Being Postal charges paid) © | Output CGST ave Dr. 50000 Output SGST ale Dr. 50000 To input CGST ale To input SGST ale To electronic ledger ale (Being output CGST, SGST and input CGST, SGST adjusted) Ledger: Business transactions are first recorded in a journal and thereafter the next step is transferring the entries to the respective accounts in the ledger. The left-hand side is known as the debit side and the right-hand side is the credit side. This account is in ‘T” shape. Format of ledger account Dr. Cr. Date [Particul |J.F | [Amoun|Date |Particul ]J.F | Amoun ars t ars t Example: 1. Capital introduced- Rs. 100000 on 1/4/2019 2. Furniture purchased- Rs. 15000 on 1/4/2029 3. Goods purchases- Rs. 75000 on 1/4/2019 4. Salaries paid- Rs. 10000 on 30/4/20195. Sold goods- Rs. 95000 in April 2019 Journal Entri ies For the year ending. Date Particulars L ]Debit | Credit 1742019 [Cashale Dr. 1,00,000 To capital ale 1,00,000 (Being capital invested) 142019 |Fumiture and equipment ale {| 15,000 Dr. To cash ale 15,000 (Being furniture and equipment purchased) 1/4 72019 _| Purchase ale Dr. 75,000 To cash ale 75,000 (Being goods are purchased) 30/4/2019 _| Salaries alc Dr. 10,000 To cash ale 10,000 (Being salaries paid) April 2019 [Cash ale Dr. 95,000 To sales ale 95,000 (Being goods are sold) Ledger Accounts Cash account Date | Particulars | J.| Amount | Date | Particulars | J. | Amount F EF 1747201 | To balance - 174720 | By furniture 15000 9 bid 19 | and equipment 1/47201 | To capital 1,00,000 | 1/4720 | By 75000 9 19 _| purehases April | To sales 95000 | 3074/2 | By salaries 10000 2019 019 30/472 | By balance 95000 019 | ed 1,95,000 1,95,000Capital account Date | Particula |J. [Amount [Date | Particulars [J. | Amount irs F FE 1/4/20 | By balance - 19 bid 30/4/20 |To 1,00,000 | 1/4/20 | By cash 1,00,000 19 balance 19 old 1,00,000 1,00,000 Furniture account Date | Particulars [J. |Amou |Date | Particulars | J. | Amount F [nt FE 1/4/201 | To balance - & bid 1/4201 | To cash ale 15,000 | 30/4720 | By balance 15,000 9 19 old 15,000 15,000 Purchases account Date Particula | J. [Amou | Date Particula | J. | Amount rs F | nt rs F 17472019 |To - balance bid 1472019 | To cash 75,000 | 30/4/2019 | By 75,000 ale balance old 75,000 75,000 Sales account Date Particular | J | Amoun | Date Particular |J.F | Amount s |e s F 1/4/2019 | By balance bid30/4/2019 | To 95,000 | 30/4/201 | By cash ale 95,000 balance % cid 95,000 95,000 Salaries account Date Particula | J. | Amou | Date Particulars | J. | Amount rs F {nt FE 1/4/2019 | By balance 10,000 b/d 30/4/2019 | To 20,000 | 30/4/2019 | By cash ale’ 10,000 balance old 20,000 20,000Chapter 4 Recording Of Transactions - II CASHBOOK This book is used for recording all the transactions related to cash payment and cash receipt. All bank related transactions are also recorded in this book ference between cash account and cash book. Cash account Cash book Cash account is an account in a ledger. It is a separate book maintained for recording all cash related transactions. It records only one aspect of cash related transactions. It records both the aspects of a transaction, It is necessary to open a cash a/e in the ledger when the transactions are recorded in a journal It is not necessary to open a cash account in the ledger, when transactions are recorded in the cash book.—» Single column cash book Cashbook Dr. Cr. Date | Particulars | V. | LF. | Amount | Date | Particulars | V. | L.F | Amount No No To... By.eon Let’s practice it with a questi Enter the follo 5. 10. 13. 18. 20. 24. 26. 28. ‘Commenced business with cash Rs10000, Bought goods for cash Rs 2500. Sold goods for cash Rs 2000. Goods purchased from Ravi on credit Rs 5000. Paid to Ravi Rs 3500. Cash sale Rs 4000. Purchased furniture for cash Rs 3099, Paid wages Rs 190. Paid rent Rs 200. Received commission Rs 300. Withdrew for personal use Rs 500. Paid salary Rs 450. g transaction in a single column cash book:~Ans: Dr. Cr. Date | Particulars [V. [Lf [Amount | Date [Particulars | V. [Lf] Amount no (in Rs) no (in Rs) 2017 2017 March | To capital 10000 | Mare 1 awe h | By 5 To sales 2000 |2 — | purchases 2500 1S ale 4000 alc To sales By ravi 3500 26 ale 300 [13 Jae To 18 | By 3000 commissi furniture onale ale 190 20 | By wages ae 200 24 | Byrent ale 500 28 | By drawings ae 450 31 | Bysalary 16300 ale 10340 Total Total payment receipts 31 | By 5960 balance 16300 cid 16300 April 1 5960 To balance bidDOUBLE COLUMN CASH BOOK Double column cash book is a cash book with two columns on each side, one column for recording cash transactions and the other for recording bank transactions . Dr. Gr. Date |Particu [V. [L. [Cash [Bank | Date [Particul | V. [L. [Cash | Bank lars__|no | F ars no |[F To... By... Let's practice it with a question , Amounts Date Details (in Rs) Sep I Bank balance. 21000 Sep I Cash balance 7500 Sep 4 Purchased goods by cheque . 6000 Sep 8 Sale of goods for cash . 3000 Sep 13 Purchase of machinery by cheque. 2750 Sep16 Sold goods and received cheques (deposited | 2250 same day, 8700 Sep 17 Purchase goods from Miraula in cash, 550 Sep 20 Purchase stationery by cheque. 750 Sep 24 Cheque given to Rohit. 5000 Sep 27 Cash withdrawn from the bank. 1250 Sep 31 Rent paid by cheque. 1750 Sep 31 Paid salary. 1550Solution: Dr. Cr. Date | Particula | V. Cash [Bank [Date [Particula | V. [L. | Cash [Bank rs No (Rs) | (Rs) is N o 4 sept [By 6000 1 sept | To 7500 | 2100 purchase balance o 43 |s 2750 bid sept | By 8 sept | To sales 3000 17 | machiner 8700 sept ly 16 | Tosales 5000 | 2250 By sept 20 | purchase 550 sept |s 27 | To bank 24 | By 730 sept sept | stationer a ly 5000 sept | By Rohit 31 1250 sept | By cash 31 1750 sept | By rent 31 5050 | 6950 sept | By 1550 salary 1550 | 2325 0 | 2328 By 0 jo 0 balance 5050 cid 6950 Oct | To balance bidBooks of original entry- Special purpose subsidiary books:- Purchase book or purchase journal Purchase book records all the credit purchases of goods. It records only those things in which a firm or Business organisation deals in. Format of purchase book:- Inpu | Inpu | Inpu Total Particu | Invoice | L. i. Pure t t t Date | “tars | No. | F | Pettils | hase| cas | scs | 1s | Amu rir{r|™ Let's practice with a question: Enter the following transactions in the purchase book of superior cloth House, New Delhi, assuming CGST % and SGST @ 2.5%. 2018 April 4 | Purchased from rashi krishna & sons, of new Delhi, no. 305. 100 meter cotton @ 2200 per metre 80 metre woolen cloth @%500 per metre Trade discount 20% Vide invoice April | Purchased from Raghuraam parshad & Co. , of Kanpur, U. P. , 12 Vide invoice no. 140 50 metre silk cloth @% 600/metre 40 metre cotton cloth @250/metre Trade discount 10% Purchased from stylish furniture house, Delhi