Accountancy assignment question

with answers
1) Write down all the basic terms used in accounting and explain it.

Ans:-

*Assets*

*Definition:*

Assets are resources owned by a business or individual that are expected to provide future
economic benefits. These can include cash, property, inventory, investments, and accounts
receivable.

*Explanation:*

Assets are categorized into two types:

- *Current Assets:* These are assets that are expected to be converted into cash or used up
within a year, such as cash, inventory, and accounts receivable.

- *Non-Current Assets (Fixed Assets):* These are long-term assets that are not expected to be
converted into cash within a year, such as land, buildings, machinery, and intangible assets
like patents.

*Example:*

A business may have cash in hand (current asset) and a building (non-current asset) used for
its operations.

*2. Liabilities*

*Definition:*

Liabilities represent the financial obligations or debts of a business or individual that must be
settled over time, usually through the transfer of money or other resources.

*Explanation:*

Liabilities are also classified into two categories:

- *Current Liabilities:* Debts that are due within one year, such as accounts payable, short-
term loans, and accrued expenses.
- *Non-Current Liabilities:* Long-term debts that are due beyond one year, such as long-term
loans or bonds payable.

*Example:*

If a company takes a loan from a bank that is due in five years, this loan is considered a non-
current liability.

3. Equity (Owner's Equity)*

*Definition:*

Equity represents the residual interest in the assets of the entity after deducting liabilities. It
is essentially the ownership interest in the business.

*Explanation:*

Equity can be seen as the difference between what a company owns (assets) and what it owes
(liabilities). In a corporation, equity is often referred to as *shareholder’s equity* and includes
common stock, retained earnings, and additional paid-in capital.

*Example:*

If a company has assets worth 500,000 and liabilities of300,000, the equity or ownership
value is $200,000.

*4. Revenue (Income)*

*Definition:*

Revenue is the income generated from the normal business operations, typically from the
sale of goods or services.

*Explanation:*

Revenue is the top-line or "gross income" figure from which costs and expenses are
subtracted to determine net income. It can come from various sources such as product sales,
service fees, or interest income.

*Example:*

A retail store generates revenue from the sale of clothing and accessories. If it sells100,000
worth of goods in a month, that 100,000 is its revenue.

*5. Expenses*

*Definition:*

Expenses are the costs incurred by a business in the process of earning revenue. These are
deducted from revenue to calculate the net income or loss.

*Explanation:*

Expenses can be operational (like rent, salaries, and utilities) or non-operational (like interest
on loans). They are essential for the day-to-day functioning of a business.

*Example:*

A business may spend30,000 on salaries, 5,000 on utilities, and10,000 on rent in a month.

These are all expenses.

---

*6. Profit (Net Income)*

*Definition:*

Profit, often referred to as *net income*, is the amount of money left after all expenses, taxes,
and costs have been deducted from revenue.

*Explanation:*
Profit is a key measure of a company’s financial health and performance. A positive profit
indicates the company is earning more than it is spending, while a negative profit (or loss)
shows the opposite.

*Example:*

If a company has revenue of 100,000 and expenses of70,000, the profit (net income) is
30,000.

*7. Accounts Receivable*

*Definition:*

Accounts receivable is money owed to a business by customers who have purchased goods
or services on credit.

*Explanation:*

It is a current asset for the business, as it represents an amount of money that is expected to
be received within a short period. This is important for understanding a company’s liquidity.

*Example:*

If a company sells goods worth20,000 on credit, that 20,000 is recorded as accounts

receivable until the customer pays.

*8. Accounts Payable*

*Definition:*
Accounts payable refers to the amount of money a business owes to suppliers or creditors
for goods or services that have been received but not yet paid for.

*Explanation:*

It is a liability, as it represents a financial obligation the company needs to settle within a

certain period, usually within one year.

*Example:*

If a company buys inventory worth5,000 on credit from a supplier, the company records this
amount as accounts payable.

---

*9. Depreciation*

*Definition:*

Depreciation is the allocation of the cost of a tangible fixed asset over its useful life.

*Explanation:*

Depreciation allows businesses to expense the cost of an asset over time, rather than all at
once when the asset is purchased. This reflects the asset’s decreasing value as it is used.

*Example:*

If a company buys a machine for 50,000 with a useful life of 5 years, the company would
record depreciation expense of10,000 per year for five years.

---
*10. Balance Sheet*

*Definition:*

A balance sheet is a financial statement that shows the company’s financial position at a
specific point in time by listing its *assets*, *liabilities*, and *equity*.

*Explanation:*

The balance sheet follows the accounting equation:

*Assets = Liabilities + Equity*

It provides a snapshot of what the company owns and owes, and the equity that remains for
the owners.

*Example:*

A balance sheet will list assets like cash, accounts receivable, and equipment, as well as
liabilities like accounts payable and loans, and the equity representing the owners' share in
the business.

---

*11. Income Statement (Profit and Loss Statement)*

*Definition:*

The income statement, also known as the profit and loss statement, shows the company’s
revenues and expenses over a period of time (usually a quarter or year) and calculates the
net profit or loss.

*Explanation:*
The income statement helps investors and business owners assess the company’s
operational efficiency, profitability, and financial performance over a period.

*Example:*

An income statement may show 200,000 in revenue,150,000 in expenses, and a net profit of
50,000.

*12. Cash Flow Statement*

*Definition:*

A cash flow statement tracks the cash inflows and outflows of a business during a specific
period.

*Explanation:*

It provides insights into a company’s liquidity and ability to meet its short-term obligations.
The cash flow statement is divided into three sections:

- *Operating Activities*: Cash generated or used in the core business activities.

- *Investing Activities*: Cash spent on or received from investments, such as buying or selling
assets.

- *Financing Activities*: Cash from loans, issuing shares, or paying dividends.

*Example:*

A cash flow statement might show that a company received50,000 in cash from customers,
spent 20,000 on equipment, and paid5,000 in dividends.

---
*13. Trial Balance*

*Definition:*

A trial balance is a report that lists the balances of all ledger accounts to ensure that the total
of all debits equals the total of all credits.

*Explanation:*

The trial balance is an internal tool used by accountants to check the accuracy of the
financial records before preparing the financial statements. It helps identify errors in the
ledger accounts.

*Example:*

If a trial balance shows total debits of 100,000 and total credits of100,000, it confirms that
the books are in balance.

---

*14. General Ledger*

*Definition:*

A general ledger is a complete record of all financial transactions of a business, organized by

account.

*Explanation:*

The general ledger is used to create financial statements such as the income statement and
balance sheet. It includes all accounts like assets, liabilities, equity, revenue, and expenses.
*Example:*

In the general ledger, you might find accounts like *Cash*, *Accounts Receivable*, *Accounts
Payable*, and *Sales Revenue*.

---

*15. Journal Entries*

*Definition:*

Journal entries are the initial recording of financial transactions in the accounting system.
They include the date of the transaction, the accounts involved, and the amounts debited
and credited.

*Explanation:*

Every financial transaction must be recorded as a journal entry, which is then posted to the
general ledger. Journal entries follow the double-entry accounting system, where every debit
has a corresponding credit.

*Example:*

If a business buys 1,000 worth of inventory on credit, the journal entry would be:

- *Debit Inventory1,000*

- *Credit Accounts Payable $1,000*

2)Collect information from a business unit about business transaction for month relating to
purchase sales sales return and purchase return and prepare necessary subsidiary books

Ans:- *purchase book* question

 Date Particulars Rs

2023
Purchased goods from Mr Suresh for 10,000
Jan 01

Jan 09 Credit purchase from Mr Santosh for less 10% trade discount 20,000

Jan 11 Purchased from Mahesh traders 8000

Jan 16 What goods from Girish for less 5% trade discount 28,00

Ans:- purchase book

Particulars L.F
Invoic
Date Amount
e no
(Name of suppliers) No

2023
Suresh 10,000
Jan 01

Jan 09 Santhosh(20,000-10%) 18000

Jan 11 Mahesh traders 8000

Jan 26 Girish (28000-5%) 26,600

Total 62,600

*Purchase return*

Jan 2023

05 returned goods to Karthik traders

10 goods returned to sahil private Ltd

17. Goods returned to Kohinoor traders for list price of ₹2000 less 10% trade discount

Ans:- purchase return book

 Debit Purchase
Date note L.F Amount ₹
on (Name of suppliers)

Jan 2023
Karthik traders 1,200
05

10 Sahil private Ltd 2,500

17 Kohinoor traders (2000-10%) 1,800

Total 5,500

*Sales book*

Date Particulars

2023
Sold 4 bags of white floor at rs 500 each to Ashoka hotel at 5% trade
discount
Feb.05

Sold two boxes of spices at rs 800 per box to Amit on account and also
Feb.12
spent rs 200 packing

Vikas what from 5 kg coffee powder at rupees 700 per kg at 8% trade

Feb.19
discount

Feb.28 Sold for bags of rice at rupees 3000 per back to Rajesh

Ans:- sales book

 Invoice Particulars
Date L.F Amount ₹
no ( Name of the customer)

2023
Ashoka hotel in (4 × 500 - 5%) 1,900
Feb.05

Amit [(2×800) rs.200 packing

Feb.12 1,800
charges]

Feb.19 Vikas (5×700-8%) 3,220

Feb.28 Rajesh (4×3000) 12,000

Total 18,920

*Sales return*

Nov 2022

04. m/s Gupta traders returned goods. ₹1500

10. Goods return by Harish traders. ₹800

18. Rahul traders returned goods.

₹1000

Ans:- sales returns book

Credit Particulars
Date L.F Amount ₹
note no (Name of the customer)

Nov 2022
Gupta traders 1,500
04

10 Harish traders 800

18 Rahul traders 1,200

Total 3,500
3) prepare petty cash book by collecting one month petty expense made by a business
concern.

Date Particulars Rs

2022
Received an impressed cheque worth 300
August 01

04 Ped for stationery 20

08 Purchased postal stamp 10

12 Paid cartage and coolie 16

15 Purchased paper and pencil 40

18 Auto fare 25

20 Paid taxi chargers 50

24 Pet tips to peons 5

26 Refreshments to coustomers 50

27 Register post charges 10

30 Tea charges 28

31 Sent telegrams 10

Ans:-

. Analysis of payment
 Amount Voucher Amount Postage and Cartage and Traveling
Date Particulars Stationery Sundry experience
received number paid telegram coolie Exp.

₹ ₹ ₹ ₹ ₹ ₹

2022

300 Aug Bank cheque

01

04 Stationery 20 20

08 Postal stamps 10 10

Cartage and
12 16 16
coolie

15 Paper and pencil 40 40

18 Auto fare 25 25

20 Taxi charges 50 50

24 Tips to peons 5 5

Refreshments to
26 50 50
customers

Registered post
27 10 10
charges

30 Tea Charges 28 28

31 Telegram 10 10

Total 264 60 30 16 75 83

31 Balance c/d 36

300 300

36 Sep Balance

264 01 Bank (300-36)

4) collect information about different types of errors committed by accountants and collect
at least 20 transaction which are wrongly recorded and rectify them by passing rectification
entries.

Ans:-*Types of Errors Committed by Accountants (Short Answer)*

1. *Errors of Omission*

*Definition:* A transaction is completely omitted from the records.

*Example:* A sale is not recorded in the books.

*Impact:* Leads to incomplete financial records.

2. *Errors of Commission*

*Definition:* A transaction is recorded in the wrong account but with the correct amount.

*Example:* A sale is recorded in the *accounts payable* instead of the *sales account*.

*Impact:* The financial statements are incorrect but the trial balance may still tally.

3. *Errors of Principle*

*Definition:* A transaction is recorded in violation of accounting principles.

*Example:* Capital expenditure is recorded as an expense.

*Impact:* Distorts the financial position of the business.

4. *Clerical Errors*

*Definition:* Simple mistakes like incorrect addition or posting.

*Example:* A transaction amount is incorrectly entered.

*Impact:* Leads to minor discrepancies in the records.

5. *Compensating Errors*

*Definition:* Errors that cancel each other out.

*Example:* Under-recording of sales is compensated by an under-recording of expenses.

*Impact:* Trial balance may still balance, but financial statements are still inaccurate.

6. *Errors of Duplication*

*Definition:* A transaction is recorded twice.

*Example:* A purchase is recorded two times.

*Impact:* Overstates the financial figures like assets and liabilities.

7. *Errors of Original Entry*

*Definition:* The initial entry of a transaction is incorrect.

*Example:* A sale of ₹5,000 is recorded as ₹4,000.

*Impact:* Leads to incorrect financial statements.

8. *Errors in Posting*

*Definition:* A journal entry is posted to the wrong ledger account.

*Example:* A payment to a supplier is posted to the wrong supplier's account.

*Impact:* Affects subsidiary ledgers and financial reports.

9. *Errors in Balancing*

*Definition:* Incorrect calculation of balances in ledger accounts.

*Example:* Incorrectly totaling a ledger account.

*Impact:* Results in wrong final balances.

10. *Errors in Trial Balance*

*Definition:* Debit and credit totals do not match due to errors.

*Example:* A transaction is omitted or incorrectly posted.

*Impact:* Trial balance does not balance, indicating an error.

---

*Conclusion*

Errors in accounting can range from simple clerical mistakes to more serious violations of
accounting principles. Identifying and correcting these errors is crucial for accurate financial
reporting.