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Question-1

 Other Subsidiary Books

Prepare a purchases return (journal) book from the following transactions for January 2006.

    Rs.
05 Returned goods to M/s Kartik Traders 1,200
10 Goods returned to Sahil Pvt. Ltd. 2,500
 17 Goods returned to M/s Kohinoor Traders. for list price Rs.2,000 less 10% trade discount.  
28  Return outwards to M/s Handa Traders 550

 


Solution:

Date

Debit Note No.

Name of supplier (Account to be debited)

L.F.

Amount (Rs)

 

05.01.06

Kartik Traders

 

1,200

 

10.01.06

Sahil Pvt. ltd

 

2,500

 

17.01.06

Kohinoor Traders

 

1,800

 

28.01.06

Handa Traders

 

550

         
 

31.01.06

   

6,050

 

 

Question-2


Other Subsidiary Books

Prepare Return Inward Journal(Book) from the following transactions of M/s Bansal Electronics for November 2005:

    Rs.
04 M/s Gupta Traders returned the goods 1,500
10 Goods returned from M/s Harish Traders 800
18  M/s Rahul Traders returned the goods not as per specifications 1,200
28 Goods returned from Sushil Traders 1,000

Solution:

Date

Invoice No.

Name of supplier (Account to be debited)

L.F.

Amount (Rs)

04.11.05

 

Gupta Traders

 

1,500

10.11.05

 

Harish traders

 

800

18.11.05

 

Rahul Traders

 

1,200

28.11.05

 

Sushil Traders

 

1,000

         

30.11.05

     

4,500

 

 

Question-3


Recording, Posting and Balancing

Prepare proper subsidiary books and post them to the ledger from the following transactions for the month of February 2006:
 

   

Rs.

01 Goods sold to Sachin 5,000
04 Purchase from Kushal Traders 2,480
06 Sold goods to Manish Traders 2,100
07 Sachin returned goods 600
08 Returns to Kushal Traders 280
10 Sold to Mukesh 3,300
14 Purchased from Kunal Traders 5,200
15 Furniture purchased from Tarun 3,200
17 Bought of Naresh 4,060
20 Return to Kunal Traders 200
22 Return inwards from Mukesh 250
24 Purchased goods from Kirit & Co. for list price of less 10% trade discount 5,700
   
25 Sold to Shri Chand goods less 5% trade discount 6600
   
26 Sold to Ramesh Brothers 4,000
28 Return outwards to Kirit and Co. less 10% trade discount 1,000
   
28 Ramesh Brothers returned goods 500

Solution:

Purchases Book

Date

Invoice No.

Name of supplier

L.F.

Amount (Rs)

04.02.06

 

Kushal Traders

 

2,480

14.02.06

 

Kunal Traders

 

5,200

17.02.06

 

Naresh

 

4,060

24.02.06

 

Kirit & Co

 

5,130

         

28.02.06

     

16,870

 

Sales Book

Date

Invoice No.

Name of supplier

L.F.

Amount (Rs)

01.02.06

 

Sachin

 

5,000

06.02.06

 

Manish Traders

 

2,100

10.02.06

 

Mukesh

 

3,300

25.02.06

 

Shri Chand

 

5,940

26.02.06

 

Ramesh Brothers

 

4,000

28.02.06

     

20,340

 

Purchase Return Book:

Date

Debit Note No.

Name of supplier (Account to be debited)

L.F.

Amount (Rs)

 

08.02.06

Kushal Traders

 

280

 

20.02.06

Kunal Traders

 

200

 

28.02.06

Kirit & Co

 

900

         
 

28.02.06

   

1,380

         

 

Sales Return Book:

Date

Invoice No.

Name of supplier (Account to be debited)

L.F.

Amount (Rs)

07.02.06

 

Sachin

 

600

22.02.06

 

Mukesh

 

250

28.02.06

 

Ramesh brothers

 

500

         

28.02.06

     

1,350

         

 

Ledger posting

Kushal Traders

Dr.             Cr.

Date

Particulars

J.F

Amount (Rs)

Date

Particulars

J.F

Amount (Rs)

08.02.06

Purchase Return

 

280

04.02.06

Purchases

 

2,480

 

   

Kunal traders

     
Dr.            

Cr.

Date

Particulars

J.F

Amount (Rs)

Date

Particulars

J.F

Amount (Rs)

22.02.06

Purchase Return

 

200

14.02.06

Purchases

 

5,200

 

   

Naresh

     
Dr.            

Cr.

Date

Particulars

J.F

Amount (Rs)

Date

Particulars

J.F

Amount (Rs)

       

17.02.06

Purchases

 

4,060

 

   

Kirit & Co

     
Dr.            

Cr.

Date

Particulars

J.F

Amount (Rs)

Date

Particulars

J.F

Amount (Rs)

28.02.06

Purchase Return

 

900

24.02.06

Purchases

 

5,130

 

   

Sachin

     
Dr.            

Cr.

Date

Particulars

J.F

Amount (Rs)

Date

Particulars

J.F

Amount (Rs)

01.02.06

Sales

 

5,000

07.02.06

Sales Return

 

600

 

   

Manish Traders

     
Dr.            

Cr.

Date

Particulars

J.F

Amount (Rs)

Date

Particulars

J.F

Amount (Rs)

06.02.06

Sales

 

2,100

       

 

   

Mukesh

     
Dr.            

Cr.

Date

Particulars

J.F

Amount (Rs)

Date

Particulars

J.F

Amount (Rs)

10.02.06

Sales

 

3,300

22.02.06

Sales Return

 

250

 

   

Shri Chand

     
Dr.            

Cr.

Date

Particulars

J.F

Amount (Rs)

Date

Particulars

J.F

Amount (Rs)

25.02.06

Sales

 

5,940

       

 

   

Ramesh brothers

     
Dr.            

Cr.

Date

Particulars

J.F

Amount (Rs)

Date

Particulars

J.F

Amount (Rs)

26.02.06

Sales

 

4,000

28.02.06

Sales Return

 

500

 

 

Question-4


Recording, Posting and Balancing

The following balances of ledger of M/s Marble Traders on April 01, 2006

   

Rs.

  Cash in hand 6,000
  Cash at bank 12,000
  Bills receivable 7,000
  Ramesh (Cr.) 3,000
  Stock (Goods) 5,400
  Bills payable 2,000
  Rahul (Dr.) 9,700
  Himanshu (Dr.) 10,000

149 Recording of Transactions - II

Transactions during the month were:

April

 

Rs.

01 Goods sold to Manish 3,000
02 Purchased goods from Ramesh 8,000
03 Received cash from Rahul in full settlement 9,200
05 Cash received from Himanshu on account 4,000
06 paid to Remesh by cheque 6,000
08 Rent paid by cheque 1,200
10 Cash received from manish 3,000
12 Cash sales 6,000  
14 Goods returned to Ramesh 1,000
15 Cash paid to Ramesh in full settlement 3,700
  Discount received 300
18 Goods sold to Kushal 10,000
20 Paid trade expenses 200
21 Drew for personal use 1,000
22 Goods return from Kushal 1,200
24 Cash received from Kushal 6,000
26 Paid for stationery 100
27 Postage charges 60
28 Salary Paid 2,500
29 Goods purchased from Sheetal Traders 7,000
30 Sold goods to Kirit 6000
  Goods purchased from Handa Traders 5,000

Journlise the above transactions and post them to the ledger.


Solution:
Purchases Book

Date

Invoice No.

Name of supplier

L.F.

Amount (Rs)

02.04.06

 

Ramesh

 

8,000

29.04.06

 

Sheetal Traders

 

7,000

30.04.06

 

Handa Traders

 

5,000

         

30.04.06

     

20,000

 

Sales Book

Date

Invoice No.

Name of supplier

L.F.

Amount (Rs)

01.04.06

 

Manish

 

3,000

18.04.06

 

Kushal

 

10,000

30.04.06

 

Kirit

 

6,000

         

30.04.06

     

19,000

 

Purchase Return Book:

Date

Debit Note No.

Name of supplier (Account to be debited)

L.F.

Amount (Rs)

 

14.04.06

Ramesh

 

1,000

         
 

30.04.06

   

1,000

 

Sales Return Book:

Date

Invoice No.

Name of supplier (Account to be debited)

L.F.

Amount (Rs)

22.04.06

 

Kushal

 

1,200

         

30.04.06

     

1,200

 

Cash Book

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

01.04.06

Balance b/d

 

6,000

12,000

01.04.06

Ramesh

 

3,000

 

01.04.06

Stock

 

5,400

 

01.04.06

Bills Payable

 

2,000

 

01.04.06

Bills Receivable

 

7,000

 

02.04.06

Ramesh

 

8,000

 

01.04.06

Rahul

 

9,700

 

06.04.06

Ramesh

   

6,000

01.04.06

Himanshu

 

10,000

 

08.04.06

Rent

   

1,200

01.04.06

Sales

 

3,000

 

15.04.06

Ramesh

 

3,700

 

03.04.06

Rahul

 

9,200

 

20.04.06

Trade Expenses

 

200

 

10.04.06

Manish

 

3,000

 

21.04.06

Drawings

 

1,000

 

12.04.06

Sales

 

6,000

 

26.04.06

Stationary

 

100

 

24.04.06

Kushal

 

6,000

 

27.04.06

Postage

 

60

 

30.04.06

Kirit

 

6,000

 

28.04.06

Salary

 

2,500

 
         

29.04.06

Purchases

 

7,000

 
         

30.04.06

Handa Traders

 

5,000

 
         

30.04.06

Balance c/d

 

38,740

4,800

                   
     

71,300

12,000

     

71,300

12,000

01.07.06

Balance b/d

 

38,740

4,800

         

 

   

Stock Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

30.04.06

Balance c/d

 

5,400

01.04.06

Cash

 

5,400

     

5,400

     

5,400

 

   

Bills Receivable Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

30.04.06

Balance c/d

 

7,000

01.04.06

Cash

 

7,000

     

7,000

     

7,000

 

   

Rahul Account

     
Dr.             Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

30.04.06

Balance c/d

 

9,700

01.04.06

Cash

 

9,700

     

9,700

     

9,700

 

   

Bills Payable Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

01.04.06

Cash

 

2,000

30.04.06

Balance c/d

 

2,000

     

2000

     

2,000

 

   

Himanshu Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

30.04.06

Balance c/d

 

10,000

01.04.06

Cash

 

10,000

     

10,000

     

10,000

 

   

Manish Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

30.04.06

Balance c/d

 

3,000

10.04.06

Cash

 

3,000

     

3,000

     

3,000


 

   

Sales Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

30.04.06

Balance c/d

 

28,000

01.04.06

Cash

 

3,000

       

12.04.06

Cash

 

6,000

       

30.04.06

Sundries

 

19,000

     

28,000

     

28,000

 

   

Kushal Account

     
Dr.             Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

18.04.06

Sales

 

10,000

01.04.06

Cash

 

6,000

       

22.04.06

Sales return

 

1,200

       

30.04.06

Balance c/d

 

2,800

     

10,000

     

10,000

 

     

Kirit Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

30.04.06

Balance c/d

 

6,000

30.04.06

Sales

 

6,000

     

6,000

     

6,000

 

   

Ramesh Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

01.04.06

Cash

 

3,000

30.04.06

Balance c/d

 

4,000

14.04.06

Purchase return

 

1,000

       
     

4,000

     

4,000

 

     

Rent Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

08.04.06

Bank

 

1,200

30.04.06

Balance c/d

 

1,200

     

1,200

     

1,200

 

   

Trade Expenses Account

   
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

20.04.06

Cash

 

200

30.04.06

Balance c/d

 

200

     

200

     

200

 

   

Drawings Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

21.04.06

Cash

 

1,000

30.04.06

Balance c/d

 

1,000

     

1,000

     

1,000

 

   

Stationary Account

   

 

Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

26.04.06

Cash

 

100

30.04.06

Balance c/d

 

100

     

100

     

100

 

   

Postage Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

27.04.06

Cash

 

60

30.04.06

Balance c/d

 

60

     

60

     

60

 

     

Salary Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

28.04.06

Cash

 

2,500

30.04.06

Balance c/d

 

2,500

     

2,500

     

2,500

 

   

Purchases Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

29.04.06

Cash

 

7,000

30.04.06

Balance c/d

 

27,000

30.04.06

Sundries

 

20,000

     

27,000

 

     

Handa Account

     
Dr.            

Cr.

Date

Particulars

J.F.

Amount (Rs)

Date

Particulars

J.F.

Amount (Rs)

30.04.06

Cash

 

5,000

30.04.06

Balance c/d

 

5,000

     

5,000

     

5,000

 

 

Question-5

Briefly state how the cash book is both journal and a ledger.

Solution:
The transactions relating to cash receipts and cash payments are recorded in this cash book. It starts with the cash or bank balances at the beginning of the period. In general, it is prepared on monthly basis. It is a very popular book and is maintained by all organisations, big or small, profit or not-for-profit. It serves the purpose of both journal as well as the ledger (cash) account. It is also called the book of original entry.

Question-6

What is the purpose of contra entry?

Solution:
When cash is paid into the bank, the amount deposited is written on the left side in the bank column and at the same time the same amount is entered on the right side in the cash column. The reverse entries are recorded when cash is withdrawn from the bank for use in the office. Against such entries the word C, which stands for contra.

Question-7

What are special purpose books?

Solution:
All the business transactions are first recorded in the journal and then they are posted in the ledger accounts. This is possible only incase of a small business entity. As the business expands and the number of transactions becomes large, it may become cumbersome to journalise each transaction. So for easy, efficient and accurate recording of business transactions, Journal is sub-divided into special journals. Many of the business transactions are repetitive in nature. They can be easily recorded in special journals, which are used for recording all the transactions of a similar nature. These special journals are also called daybooks or subsidiary books. Transactions that cannot be recorded in any special journal are recorded in a journal called the Journal Proper. Special journals are very economical and provide for division of labour in accounting work.

Question-8

What is petty cash book? How it is prepared?

Solution:
In every organisation, there will be a large number of small payments such as conveyance, cartage, postage, telegrams and other expenses (collectively recorded under miscellaneous expenses).These are generally repetitive in nature. If all these payments are handled by the cashier and are recorded in the main cash book, the procedure is found to be very cumbersome. The cashier may be overburdened and the cash book may become very bulky. In order to avoid this, large organisations normally appoint one more cashier (petty cashier) and maintain a separate cash book to record these transactions. Such a cash book maintained by petty cashier is called petty cash book.

Question-9

Explain the meaning of posting of journal entries?

Solution:
Posting is the process where the transactions are transferred from the original journal entry to its respective ledger accounts. It also means grouping all the transactions with respect to the particular account for a meaningful conclusion and to continue the accounting process.

Question-10

Write the difference between return Inwards and return outwards.

Solution:

S. No

Return Inwards

Return Outwards

1.

Return inwards is based on the goods sold to customers

Return outwards is calculated based on the purchases made

2.

The revenue that is earned by way of sale of goods is affected in case of return inwards

Production of goods is affected when there is purchase return.

 

 

Question-11

What do you understand by ledger folio?

Solution:
At the time of posting the journal in its respective ledger, a separate column called the ledger folio column appears in the ledger which records the page number of the original book of entry at the time of recording. This column is filled up at the time of posting.

Question-12

What is difference between trade discount and cash discount?

Solution:

S. No

Trade discount

Cash discount

1.

Trade discount is the discount allowed to the persons to whom the sale is made.

Cash discount is the discount that is provided when there is a purchase by the firm.

2.

Trade discount appears on the debit side of the cash book.

Cash discount appears on the credit side of the cash book.

 

Question-13

Write the process of preparing ledger from a journal.

Solution:
The process of posting from journal to ledger has been discussed below:

Step 1: Locating the ledger in which the account is to be debited as entered in the journal.

Step 2: Entering the date of transaction in the date column on the debit side.

Step 3: Entering the name of the account in the ‘particulars’ column as debited in the journal.

 

Question-14

What do you understand by Imprest amount in petty cash book?

Solution:
The petty cashier works on the Imprest system. In this system, a definite sum, say Rs. 2,000 is given to the petty cashier at the beginning of a certain period. This amount is called imprest amount. The petty cashier goes on making all small payments out of this imprest amount and when he has spent the substantial portion of the imprest amount say Rs.1, 780, he gets reimbursement of the amount spent from the head cashier. Thus, he again has the full imprest amount in the beginning of the next period. The reimbursement may be made on a weekly, fortnightly or monthly basis, depending on the frequency of small payments.

Question-15

Explain the need for drawing up the special purpose books.

Solution:
All the business transactions are first recorded in the journal and then they are posted in the ledger accounts. This is possible only incase of a small business entity. As the business expands and the number of transactions becomes large, it may become cumbersome to journalise each transaction. So for easy, efficient and accurate recording of business transactions, Journal is sub-divided into special journals. Many of the business transactions are repetitive in nature. They can be easily recorded in special journals, which are used for recording all the transactions of a similar nature. These special journals are also called daybooks or subsidiary books. Transactions that cannot be recorded in any special journal are recorded in a journal called the Journal Proper. Some of the special purpose books are as follows Cash Book
  Purchases Book
  Purchases Return (Return Outwards) Book
  Sales Book
  Sales Return (Return Inwards) Book
  Journal Proper

 

Question-16

What is cash book? Explain the types of cash book.

Solution:
The transactions relating to cash receipts and cash payments are recorded in this cash book. It starts with the cash or bank balances at the beginning of the period. In general, it is prepared on monthly basis. It is a very popular book and is maintained by all organisations, big or small, profit or not-for-profit. It serves the purpose of both journal as well as the ledger (cash) account. It is also called the book of original entry. When a cashbook is maintained, it is not required to record the transactions in the journal, and no separate account for cash or bank is required in the ledger.

 

Single Column Cash Book

The single column cash book records all cash transactions of the business in a chronological order. The cash book contains only one amount column on each (debit and credit) side. The format of single column cash book is shown below:

Dr.

Cash Book

Cr.

Date

Particulars

L.F.

Amount

Rs.

Date

Particulars

L.F.

Amount

Rs.

               

Double Column Cash Book

In Double column cash book, there are two columns of amount on each side of the cash book. Now-a-days bank transactions are very large in number. In many organisations, as far as possible, all receipts and payments are affected through bank. A businessman generally opens a current account with a bank. The Bank, do not allocate any interest on the balance in current account but charge incidental charges, for the services rendered by them.

Dr.

Cash Book

Cr.

Date

Particulars

L.F.

Cash

Rs.

Bank

Rs.

Date

Particulars

L.F.

Cash

Rs.

Bank

Rs.

                   

Large organisations normally appoint one more cashier (petty cashier) and maintain a separate cash book to record these transactions. Such a cash book maintained by petty cashier is called petty cash book.

 

Imprest system:

The petty cashier works on the Imprest system. In this system, a definite sum, say Rs. 2,000 is given to the petty cashier at the beginning of a certain period. This amount is called imprest amount. The petty cashier goes on making all small payments out of this imprest amount and when he has spent the substantial portion of the imprest amount say Rs.1, 780, he gets reimbursement of the amount spent from the head cashier. Thus, he again has the full imprest amount in the beginning of the next period. The reimbursement may be made on a weekly, fortnightly or monthly basis, depending on the frequency of small payments.

The petty cash book generally has a number of columns for the amount on the payment side (credit) besides the first other amount column. Each of the amount columns is allotted for items of specific payments, which are most common. The last amount column is designated as ‘Miscellaneous’ followed by a ‘Remarks’ column. In the miscellaneous column those payments are recorded for which a separate column does not exist. In the ‘Remarks’ the nature of payment is recorded. At the end of the period, all amount columns are totaled. The total amount column l shows the total amount spent and to be reimbursed. On the receipt (debit) side, there is only one amount column. Columns for the date, voucher number and particulars are common for both receipts and payments.

Question-17

What is contra entry? How can you deal this entry while preparing double column cash book?

Solution:
Like cash transactions, all payments into the bank are recorded on the left side and all withdrawals/ payments through the bank are recorded on the right side. Both the cash deposited and withdrawn from the bank are recorded in the cash book. When cash is paid into the bank, the amount deposited is written on the left side in the bank column and at the same time the same amount is entered on the right side in the cash column. The reverse entries are recorded when cash is withdrawn from the bank for use in the office. Against such entries the word C, which stands for contra is written in the L.F. column indicating that these entries are not to be posted to the ledger account.

The bank column is balanced in the same way as the cash column. However, in the bank column, there can be credit balance also because of overdraft taken from the bank. Entries in respect of cheques received should be made in the bank column of the cash book. When a cheque is received, it may be deposited into the bank on the same day or it may be deposited on another day. In case, it is deposited on the same day the amount is recorded in the bank column of the cash book on the receipts side. If the cheque is deposited on another day, on the date of receipt it is treated as cash received and hence recorded in the cash column on the receipts side. On the day of deposit to the bank, it is shown in the Bank Column on receipt (Dr.) side and in the Cash Column on the payment (Cr.) side. This is a contra entry.

Question-18

What is petty cash book? Write the advantages of petty cash book?

Solution:
In every organisation, there will be a large number of small payments such as conveyance, cartage, postage, telegrams and other expenses (collectively recorded under miscellaneous expenses). These are generally repetitive in nature. If all these payments are handled by the cashier and are recorded in the main cash book, the procedure is found to be very cumbersome. The cashier may be overburdened and the cash book may become very bulky. In order to avoid this, large organisations normally appoint one more cashier (petty cashier) and maintain a separate cash book to record these transactions. Such a cash book maintained by petty cashier is called petty cash book.

Advantages of Maintaining Petty Cash Book

  1. Saving of Time and efforts of chief cashier: It saves time and labour and helps chief cashier to discharge his duties more effectively.

  2. Effective control over cash disbursements: Cash control becomes easy and effective because of division of work. This way the chances of making frauds and embezzlements become very difficult.

  3. Convenient recording: Recording of petty disbursements in the main cash book makes it bulky and unmanageable. As the petty expenses are maintained in a separate book the cash book reveals only material and useful information.

Recording of such small payments becomes easy as the totals of different types of expenses are posted to ledger. It also saves time and effort of posting individual items in the ledger.

 

Question-19

Describe the advantages of sub-dividing the Journal.

Solution:
  1. Opening Entry: In order to open new set of books in the beginning of new accounting year and record therein opening balances of assets, liabilities and capital, the opening entry is made in the journal.

  2. Adjustment Entries: In order to update ledger account on accrual basis, adjustment entries are made at the end of the accounting period. Such as Rent outstanding, Prepaid insurance, Depreciation and Commission received in advance.

  3. Rectification entries: To rectify errors in recording transactions in the books of original entry and their posting to ledger accounts this journal is used.

  4. Transfer entries: Drawing account is transferred to capital account at the end of the accounting year. Expenses accounts and revenue accounts which are not balanced at the time of balancing are opened to record specific transactions. Accounts relating to operation of business such as Sales, Purchases, Opening Stock, Income, Gains and Expenses etc and drawing are closed at the end of the year and their Total/balances are transferred to Trading and Profit and Loss account by recording the journal entries. These are also called closing entries.

  5. Other entries: In addition to the above mentioned entries recording of the following transaction is done in the journal proper:

  1. At the time of a dishonour of a cheque the entry for cancellation for discount received or discount allowed earlier.

  2. Purchase/sale of items on credit other than goods.

  3. Goods withdrawn by the owner for personal use.

  4. Goods distributed as samples for sales promotion.

  5. Endorsement and dishonour of bills of exchange.

  6. Transaction in respect of consignment and joint venture, etc.

  7. Loss of goods by fire/theft/spoilage.

 

Question-20

What do you understand by balancing of account?

Solution:
The ledger accounts are periodically balanced at the end of the accounting period, with the object of ascertaining the net position of each amount. Balancing of an account means that the two sides are totaled and the difference between them is shown on the side, which is shorter in order to make their totals equal. The words ‘balance c/d’ are written against the amount of the difference between the two sides. The amount of balance is brought (b/d) down in the next accounting period indicating that it is a continuing account, till it is finally settled or closed. In case the debit side exceeds the credit side, the difference is written on the credit side, if the credit side exceeds the debit side, the difference between the two appears on the debit side and is called debit and credit balance respectively. The accounts of expenses losses and gains/revenues are not balanced but are closed by transferring to trading and profit and loss account.

Question-21


Simple Cash Book

Enter the following transactions in a simple cash book for December 2005:

    Rs.
01 Cash in hand 12,000
05 Cash received from Bhanu 4,000
07 Rent Paid 2,000
10 Purchased goods Murari for cash 6,000
15 Sold goods for cash 9,000
18 Purchase stationery 300
22 Cash paid to Rahul on account 2,000
28 Paid salary 1,000
30 Paid rent 500

Solution:

 

Date

Particulars

L.F.

Amount (Rs)

Date

Particulars

L.F.

Amount (Rs)

01.12.05

Balance b/d

 

12,000

07.12.05

Rent

 

2,000

05.12.05

Bhanu

 

4,000

10.12.05

Purchases

 

6,000

15.12.05

Sales

 

9,000

18.12.05

Stationery

 

300

       

22.12.05

Rahul

 

2,000

       

28.12.05

Salary

 

1,000

       

30.12.05

Rent

 

500

       

31.12.05

Balance c/d

 

13,200

               
     

25,000

     

25,000

               

01.01.06

Balance b/d

 

13,200

       

 

 

Question-22


Simple Cash Book

Enter the following transactions in a simple cash book for December 2005:

    Rs.
01 Cash in hand 12,500
04 Cash paid to Hari 600
07 Purchased goods 800
12 Cash received from Amit 1,960
16 Sold goods for cash 800
20 Paid to Manish 590
25 Paid cartage 100
31 Paid salary 1,000

Solution:

 

Date

Particulars

L.F.

Amount (Rs)

Date

Particulars

L.F.

Amount (Rs)

01.11.05

Balance b/d

 

12,500

04.11.05

Hari

 

600

12.11.05

Amit

 

1,960

07.11.05

Purchases

 

800

16.11.05

Sales

 

800

20.11.05

Manish

 

590

       

25.11.05

Cartage

 

100

       

31.11.05

Salary

 

1,000

       

31.11.05

Balance c/d

 

12,170

               
     

15,260

     

15,260

               

01.12.05

Balance b/d

 

12,170

       

 

 

Question-23

Simple Cash Book

Enter the following transaction in Simple cash book for December 2005 :

   

Rs.

01 Cash in hand 7,750
06 Paid to Sonu 45
08 Purchased goods 600
15 Received cash from Parkash 960
20 Cash sales 500
25 Paid to S.Kumar 1,200
30 Paid rent 600

Solution:

 

Date

Particulars

L.F.

Amount (Rs)

Date

Particulars

L.F.

Amount (Rs)

01.12.05

Balance b/d

 

7,750

06.12.05

Sonu

 

45

15.12.05

Prakash

 

960

08.12.05

Purchases

 

600

20.12.05

Sales

 

500

25.12.05

S. Kumar

 

1,200

       

30.12.05

Rent

 

600

       

31.12.05

Balance c/d

 

6,765

               
     

9,210

     

9,210

               

01.01.06

Balance b/d

 

6,765

       

 

 

Question-24


 Bank Column Cash Book

Record the following transactions in a bank column cash book for December 2005:

   

Rs.

01 Started business with cash 80,000
04 Deposited in bank 50,000
10 Received cash from Rahul 1,000
15 Bought goods for cash 8,000
22 Bought goods by cheque 10,000
25 Paid to Shyam by cash 20,000
30 Drew from Bank for office use 2,000
31 Rent paid by cheque 1,000

 


Solution:

 

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

01.12.05

Balance b/d

 

80,000

 

04.12.05

Bank

C

50,000

 

04.12.05

Cash

C

 

50,000

15.12.05

Purchases

 

8,000

 

10.12.05

Rahul

 

1,000

 

22.12.05

Purchases

   

10,000

30.12.05

Bank

C

2,000

 

25.12.05

Shyam

 

20,000

 
         

30.12.05

Cash

C

 

2,000

         

31.12.05

Rent

   

1,000

         

31.12.05

Balance c/d

 

5,000

37,000

                   
     

83,000

50,000

     

83,000

50,000

                   

01.01.06

Balance b/d

 

5,000

37,000

         

 

 

Question-25


 Bank Column Cash Book

Prepare a double column cash book with the help of following information for December 2005 :

    Rs.
01 Started business with cash 1,20,000
03 Cash paid into bank 50,000
05 Purchased goods from Sushmita 20,000
06 Sold goods to Dinker and received a cheque 20,000
10 Paid to Sushmita cash 20,000
14 Cheque received on December 06, 2005 deposited into bank  
18 Sold goods to Rani 12,000
20 Cartage paid in cash 500
22 Received cash from Rani 12,000
27 Commission received 5,000
30 Drew cash for personal use 2,000

 


Solution:

 

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

01.01.05

Balance b/d

 

1,20,000

 

03.12.05

Bank

C

50,000

 

03.12.05

Cash

C

 

50,000

06.12.05

Sushmita

 

20,000

 

06.12.05

Dinker

   

20,000

20.12.05

Cartage

 

500

 

18.12.05

Rani

 

12,000

 

30.12.05

Drawings

 

2,000

 

27.12.05

Commission

 

5,000

 

31.12.05

Balance c/d

 

64,500

70,000

                   
     

1,37,000

70,000

     

1,37,000

70,000

                   

01.01.06

Balance b/d

 

64,500

70,000

         

 

 

Question-26


Bank Column Cash Book

Enter the following transactions in double column cash book of M/s Ambica Traders for November 2005:

    Rs.
01 Commenced business with cash 50,000
03 Opened bank account with ICICI 30,000
05 Purchased goods for cash 10,000
10 Purchased office machine for cash 5,000
15 Sales goods on credit from Rohan and received chaeque 7,000
18 Cash sales 8,000
20 Rohan’s cheque deposited into bank  
22 Paid cartage by cheque 500
25 Cash withdrawn for personal use 2,000
30 Paid rent by cheque 1,000

 


Solution:

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

01.11.05

Balance b/d

 

50,000

 

03.11.05

Bank

C

30,000

 

03.11.05

Cash

C

 

30,000

05.11.05

Purchases

 

10,000

 

15.11.05

Rohan

   

7,000

10.11.05

Machine

 

5,000

 

18.11.05

Sales

 

8,000

 

22.11.05

Cartage

   

500

         

25.11.05

Drawings

 

2,000

 
         

30.11.05

Rent

   

1,000

         

30.11.05

Balance c/d

 

11,000

35,500

                   
     

58,000

37,000

     

58,000

37,000

                   

01.12.05

Balance b/d

 

11,000

35,500

         

 

 

Question-27


Bank Column Cash Book

Prepare double column cash book from the following information for September 2005:

    Rs.
01 Cash In hand 7,500
  Bank overdraft 3,500
03 Paid wages 200
05 Cash sales 7,000
10 Cash deposited into bank 4,000
5 Goods purchased and paid by cheque 2,000
20 Paid rent 500
25 Drew from bank for personal use 400
30 Salary paid 1,000

 


Solution:

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

01.09.05

Balance b/d

 

7,500

 

01.09.05

Balance b/d

   

3,500

05.09.05

Sales

 

7,000

 

03.09.05

Wages

 

200

 

10.09.05

Cash

C

 

4,000

10.09.05

Bank

C

4,000

 

30.09.05

Balance c/d

   

1,500

15.09.05

Purchases

   

2,000

         

20.09.05

Rent

 

500

 
         

25.09.05

Drawings

 

400

 
         

30.09.05

Salary

 

1,000

 
         

30.09.05

Balance c/d

 

8,400

 
                   
     

14,500

5,500

     

14,500

5,500

                   

 

 

Question-28


Bank Column Cash Book

Enter the following transaction in a double column cash book of M/s. Mohit Traders for January 2005 :

    Rs.
01 Cash in hand 3,500
  Bank overdraft 2,300
03 Goods purchased for cash 1,200
05 Paid wages 200
10 Cash sales 8,000
15 Deposited into bank 6,000
22 Sold goods for cheque which was deposited into bank same day 2,000
25 Paid rent by cheque 1,200
28 Drew from bank for personal use 1,000
31 Bought goods by cheque 1,000

 


Solution:

 

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

01.01.05

Balance b/d

 

3,500

 

01.01.05

Balance b/d

   

2,300

10.01.05

Sales

 

8,000

 

03.01.05

Purchases

 

1,200

 

15.01.05

Cash

C

 

6,000

05.01.05

Wages

 

200

 

22.01.05

Sales

   

2,000

15.01.05

Bank

C

6,000

 

         

25.01.05

Rent

   

1,200

         

28.01.05

Drawings

 

1,000

 
         

31.01.05

Purchases

   

1,000

         

31.01.05

Balance c/d

 

3,100

3,500

                   
     

11,500

8000

     

11,500

8000

01.02.05

Balance b/d

 

3,100

3,500

         

 

 

Question-29

 Bank Column Cash Book

Prepare double column cash book from the following transactions for the year December 2005:

    Rs.
01 Cash in hand 17,500
  Cash at bank 5,000
03 Purchased goods for cash 3,000
05 Received cheque from Jasmeet 10,000
08 Sold goods for cash 7,000
10 Jasmeet’s cheque deposited into bank  
12 Purchased goods and paid by cheque 20,000
15 Paid establishment expenses through bank 1,000
18 Cash sales 7,000
20 Deposited into bank 10,000
24 Paid trade expenses 500
27 Received commission by cheque 6,000
29 Paid Rent 2,000
30 Withdrew cash for personal use 1,200
31 Salary paid 6,000

(Ans. Cash in hand Rs. 8,800 cash at bank Rs. 10,000)


Solution:

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

01.12.05

Balance b/d

 

17,500

5,000

03.12.05

Purchases

 

3,000

 

05.12.05

Jasmeet

   

10,000

12.12.05

Purchases

   

20,000

08.12.05

Sales

 

7,000

 

15.12.05

Establishment exp

   

1,000

18.12.05

Sales

 

7,000

 

20.12.05

Bank

C

10,000

 

20.12.05

Cash

C

 

10,000

24.12.05

Trade expenses

 

500

 

27.12.05

Commission

   

6,000

29.12.05

Rent

 

2,000

 
         

30.12.05

Drawings

 

1,200

 
         

31.12.05

Salary

 

6,000

 
         

31.12.05

Balance c/d

 

8,800

10,000

                   
     

31,500

31,000

     

31,500

31,000

                   

01.01.06

Balance b/d

 

8,800

10,000

         

 

 

Question-30


Bank Column Cash Book

M/s Ruchi trader started their cash book with the following balances on Dec. 01 2005 : cash in hand Rs.1,354 and balance in bank current account Rs.7560. He had the following transaction in the month of December, 2005:

    Rs.
03 Cash sales 2,300
05 Purchased goods, paid by cheque 6,000
08 Cash sales 10,000
12 Paid trade expenses 700
15 Sales goods, received cheque (deposited same day) 20,000
18 Purchased motor car paid by cheque 15,000
20 Cheque received from Manisha (deposited same day) 10,000
22 Cash Sales 7,000
25 Manisha’s cheque returned dishonoured  
28 Paid Rent 2,000
29 Paid telephone expenses by cheque 500
31 Cash withdrawn for personal use 2,000

Prepare bank column cash book

 


Solution:

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

Date

Particulars

L.F.

Cash (Rs)

Bank (Rs)

01.12.05

Balance b/d

 

1,354

7,560

05.12.05

Purchases

   

6,000

03.12.05

Sales

 

2,300

 

12.12.05

Trade Expenses

 

700

 

08.12.05

Sales

 

10,000

 

18.12.05

Purchases

   

15,000

15.12.05

Sales

   

20,000

25.12.05

Manisha

   

10,000

20.12.05

manisha

   

10,000

28.12.05

Rent

 

2,000

 

22.12.05

Sales

 

7,000

 

29.12.05

Telephone exp

   

500

         

31.12.05

Drawings

 

2,000

 
         

31.12.05

Balance c/d

 

15,954

6,060

                   
     

20,564

37,560

     

20,564

37,560

                   

01.01.06

Balance b/d

 

15,954

6,060

         

 

 

Question-31


Petty Cash Book

Prepare petty cash book from the following transactions. The imprest amount is Rs.2,000.

January  

Rs.

01 Paid cartage 50
02 STD charges 40
02 Bus fare 20
03 Postage 30
04 Refreshment for employees 80
06 Courier charges 30
08 Refreshment of customer 50
10 Cartage 35
15 Taxi fare to manager 70
18 Stationery 65
20 Bus fare 10
22 Fax charges 30
25 Telegrams charges 35
27 Postage stamps 200
29 Repair on furniture 105
30 Laundry expenses 115
31 Miscellaneous expenses 100

 


Solution:

Amount recd. (Rs.)

Date

Jan

Particulars

V No.

Amt. paid(Rs.)

Postage

Telephone exp

Conve

Stationary

Cartage

Miscel

2,000

01

Cartage exp

 

50

       

50

 
 

02

STD charges

 

40

 

40

       
 

02

Bus fare

 

20

   

20

     
 

03

Postage

 

30

30

         
 

04

Refreshment for employees

 

80

         

80

 

06

Courier

 

30

30

         
 

08

Refreshment for customer

 

50

         

50

 

10

Cartage

 

35

       

35

 
 

15

Taxi fare for manager

 

70

   

70

     
 

18

Stationary

 

65

     

65

   
 

20

Bus fare

 

10

   

10

     
 

22

Fax charges

 

30

         

30

 

25

Telegram charges

 

35

35

         
 

27

Postage stamos

 

200

200

         
 

29

Repair on furniture

 

105

         

105

 

30

Laundry expenses

 

115

         

115

 

31

Miscellaneous

 

100

         

100

                     

2000

     

1065

295

40

100

65

85

480

935

Feb 01

Balance c/d

               

 

 

Question-32

Petty Cash Book

Record the following transactions during the week ending Dec.30, 2005 with a weekly imprest Rs. 500

    Rs.
24 Stationery 100
25 Bus fare 12
25 Cartage 40
26 Taxi fare 80
27 Wages to casual labour 90
29 Postage 80

Solution:

 

Imp amt

Date

Particulars

Amount

Stationary

Conv

Cartage

Wages

Postage

500

24.12.05

Stationary

100

100

       
 

25.12.05

Bus fare

12

 

12

     
 

25.12.05

Cartage

40

   

40

   
 

26.12.05

Taxi fare

80

 

80

     
 

27.12.05

Wages

90

     

90

 
 

29.12.05

Postage

80

       

80

500

   

312

100

92

40

90

80

98

01.01.06

Balance c/d

           

 

 

Question-33


Other Subsidiary Books

Enter the following transactions in the Purchase Journal (Book) of M/s Gupta Traders of July 2005 :

01 Bought from Rahul Traders as per invoice no.20041 40 Registers @ Rs.60 each

80 Gel Pens @ Rs.15 each

50 note books @ Rs.20 each

Trade discount 10%.

15 Bought from Global Stationers as per invoice no.1132 40 Ink Pads @ Rs.8 each

50 Files @ Rs.10 each

20 Color Books @ Rs. 20 each

Trade Discount 5%

23 Purchased from Lamba Furniture as per invoice no.3201 2 Chairs @ 600 per chair

1 Table @ 1000 per table

25 Bought from Mumbai Traders as per invoice no.1111 10 Paper Rim @ Rs.100 per rim

400 drawing Sheets @ Rs.3 each

20 Packet water colour @ Rs.40 per packet

 


Solution:

Date

Invoice No.

Name of supplier

L.F.

Amount (Rs)

01.07.05

20041

Rahul Traders

 

4,140

15.07.05

1132

Global Stationers

 

1,159

25.07.05

1111

Mumbai Traders

 

3,000

         

31.07.05

     

8,299

 

 

Question-34


Other Subsidiary Books

Enter the following transactions in sales (journal) book of M/s.Bansal electronics:

September    
01 Sold to Amit Traders as per bill no.4321 20 Pocket Radio @ 70 per Radio

2, T.V. set, B&W.(6") @ 800 Per T.V.

10. Sold to Arun Electronics as per bill no.4351 5 T.V. sets (20") B&W @ Rs.3,000 per T.V.

2 T.V. sets (21") Colour @ Rs. 4,800 per T.V.

22 Sold to Handa Electronics as per bill no.4,399 10 Tape recorders @ Rs. 600 each

5 Walkman @ Rs. 300 each

28 Sold to Harish Trader as per bill no.4430 10 Mixer Juicer Grinder @ Rs. 800 each.

 


Solution:

 

Date

Invoice No.

Name of supplier

L.F.

Amount (Rs)

01.09

4321

Amit Traders

 

27,600

22.09

4399

Handa Electronics

 

7,500

28.09

4430

Harish Trader

 

8,000

         

30.09

     

43,100

 





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