Accounting - An Introduction
Accounting Conventions and Standards
Accounting for Business Transactions
Special Purpose Books
TRIAL BALANCE AND COMPUTERS
9. Bank Reconciliation Statement
10. Trial Balance
11. Errors and their Rectification
12. Computer and Computerised Accounting System
QUESTIONS FOR PRACTICE
State the meaning of the term Accounting. Explain in brief any four objectives of accounting.
Explain Realisation concept giving example. Explain in brief its significance.
Explain the accounting convention of conservatism by giving an example.
What is Petty Cash Book? Explain with example Imprest system used in Petty Cash Book.
Name and explain the various Special Purpose Books.
Prepare accounting equation on the basis of the following transactions :
Commenced business with cash
Paid into bank
Purchased goods from Sridhar
Sold goods for cash
Purchased furniture and paid by cheque
Paid by cheque to Sridhar
discount allowed by him
Paid for office Rent
Withdraw from bank for domestic use
Journalise the following transactions and post them into ledger :
Business started with cash Rs.120000
Opened Bank account with PNB Rs.60000
Purchased goods for cash Rs.40,000
Cartage paid Rs.1000
Sold goods to M/s Sunil Trader on credit Rs.30000
Purchased goods from M/s Meena Traders Rs.36000
Cash received from Sunil Traders Rs.29500
Discount given Rs.500
Cash paid to M/s Meena Traders on A/c Rs.16000
Rent paid Rs.4000
Salary paid Rs.2000
Cash sales Rs.12000
Cash purchase Rs.7000
Make journal entries of the following transactions :
(a) Paid by cheque to Shah, a creditor Rs.2750 discount allowed Rs.150
(b) Paid for charity to Blind Relief Fund Rs.500
(c) Provide depreciation on machine of the book value of Rs.20000 @10% p.a.
(d) Rakesh who owed to us Rs.5000 becomes insolvent 50 paisa in the rupee is received
from his official assignee as first and final dividend.
(e) Goods of Rs.1200 are taken away by the proprietor for domestic use
Prepare Bank Column Cash Book from the following transactions :
Cash balance Rs.1500 bank Balance Rs.4600
Cash received form Mohni Rs.3700
Paid cash to Roshni Rs 2000
Purchased goods for cash Rs.3200
Cash sales Rs.12000
Paid into bank Rs.6000
Paid electricity bill by cheque Rs.2300
Withdrew cash from bank for domestic use Rs.1000.
Enter the following transaction in Special Purchase Books of M/s Bansal Furniture Mart
for the month of October 2005.
Sold on credit to M/s T.R. Woodcraft as per invoice No. 07234
10 chairs @300 each
2 double bed @ 9000 each
Trade discount @10%
Sold on credit to M/s Woodland as per Invoice No. 7264
20 fancy chairs @ 600 each
10 tables @ 2000 each
Trade discount 10%
Purchase from M/s Wood Furniture Mart as per Invoice No. 472
20 glass tables @3000 each
Trade discount 10%
Bought from M/s Steel Furniture as per Invoice No. 1072
5 sofa set @ 14000 each
Trade discount 5%
Goods returned to M/s Wood furniture Mart as per debit note No. 22/06
3 glass table @ 3000 each
Trade discount 10%
Goods Returned from M/s T.R. Wood craft is per credit note No. 14/06
2 chairs @ 300 each
Trade discount @ 10%
Sold on creidt to M/s King Furniture as per Invoice No. 7294
10 Fancy show case @ 5000 each
What is meant by Bank Reconciliation statement? Why is it prepared?
Explain the following with two examples each :
(a) Error of omission
(b) Error of principle
What are one sided errors and two sided errors? Explain with examples.
What can be the possible reasons of difference between the bank balance of a businessman
shown by Cash Book and bank pass book on a particular date? Enlist any four such reasons.
How does computer help in preparing accounts? Explain.
What is Trial Balance? What purpose does it serve? Explain in brief the various methods
of preparing Trial Balance.
“Trial Balance if tallied is not the conclusive proof of the correctness of the ledger posting”
Do you agree? What are those errors that do not affect the Trial Balance?
Asha a trader has the bank balance as per cash book Rs.17600 on 31st December, 2005.
While comparing with the bank pass book it was found that following discrepencies
(a) Cheques of Rs.18700 were deposited in the bank but of Rs.14000 were credited by
(b) Cheques of Rs.8400 were issued by a cheque of Rs.1200 was presented in the first week
of January 2006.
(c) Bank paid Rs.1200 for insurance premium as per the instructions of the trader.
(d) A cheque of Rs.600 was paid in the bank but was returned and dishonoured.
(e) Bank has allowed an interest of Rs.140 on the balance
Prepare Bank Reconcilliation Statement as on 31st December, 2006.
Make journal entries to rectify the following accounting errors :
(a) The total of Sale Return Book was undercost by Rs.1000
(b) A motor cycle was purchased for Rs.12500 for proprietors’ son was debited to Motor
(c) Purchase of furniture of Rs.4000 was entered in the Purchases Book.
(d) Cash of Rs.2170 was paid to Jeet Singh was entered correctly in the cash Book but
was credited to ParamJeet Singh’s Account as Rs.1270.
(e) Salary of Rs.2500 paid to Accounts clerk Jai Dev was debited to his account.
Following are the balances of accounts taken from the ledger of Bhagawat Gupta; a trader
prepare Trial Balalnce as on 31st December, 2006
Cash in hand
Cash at bank
CURRICULUM IN ACCOUNTANCY
business world. The course in Accountancy will
The last decade has witnessed tremendous
prepare learners to logically analyse, evaluate
changes in business education. The liberalisation
and respond to changes which affect business
and globalisation have been the primary cause
operations. It opens the doors for higher
for such changes. With the fast changing
education as well as sharpens the skills for those
economic scenario, the elementary business
who are going for self-employment.
education along with Accountancy ‘as a language
of business’ is gaining its importance. The
curriculum in Accountancy provides a firm
This course aims at enabling the learners to:
foundation in basic accounting concepts and
also keeps them informed of changes in its
familiarise towards the usage of basic
methodology concerning particular aspects of
develop the skills of recording of business
transactions and preparation of the financial
The thrust of the course follows new trends in
statements and their analysis thereof;
accounting practices and developing a basic
understanding of the nature and purpose of the
provide firm base for higher education;
accounting information and reporting. Further,
inculcate values and ethics of accounting
information technology has occupied a vital
place in business activities. Therefore, a lesson
make aware about the utility of computers
designed on computer and computerised
in the business world;
accounting shall expose the learners to the basic
knowledge about the utility of computers in the
join professional courses in Accounting.
Trial Balance and Computers
Financial Statements of Profit and
Not for profit Organisations
Accounting for Shares and Debentures
Analysis of financial statements
Elementary cost accounting
Unit 1.2 Recording of Transactions
Module 1 : Basic Accounting
1.2.1 Accounting for Business Transactions
Origin of Transactions Source documents
and Accounting Vouchers
This module has been designed to introduce
Accounting to the learners. This familiarises the
Accounting equation-Meaning, effects of
learners with some important basic accounting
transactions on Accounting equation
terms, accounting standards, accounting
Rules of Accounting - Meaning and types of
concepts, etc. This enables them to show the
accounts: Assets. liabilities, Capital, Revenue
effect of transactions on accounting equation,
and Expense, Double Entry Mechanism.
Journal, Special Purpose Books and posting of
transactions from Books of Original entry to
1.2.2 Journal/Books of original entry
Journal : Meaning, format and recording of
Unit 1.1 Introduction to Accounting
transactions, classification of journal into
special journals and journal proper.
1.1.1 Accounting - An introduction
Meaning of Book keeping
Meaning, features and importance, types,
Accounting - Meaning, objectives, need and
posting from journal and special purpose
scope, branches, limitation of accounting.
books, balancing of an account.
Accounting as an information system
1.2.4 Special Purpose Books
Basic accounting terms - Assets, Liabilities,
Capital, Drawings, Expenses, Income,
Cash Book-Simple, Cash Book with bank
Expenditure, Revenue, Debtors, Creditors,
Column, Petty Cash Book, Purchase returns
Goods, Cost, Gain, Stock, Purchases, Sales,
Book, Sales Book, Sales Returns Book,
Loss, Profit, Voucher, Discount,
Purchases returns book, Journal proper.
Transactions, Debit Note, Credit Note,
Module 2 Trial Balance and Computers
1.1.2 Accounting Concepts and Conventions
Basic Accounting concepts : Business entity,
Money measurement, going concern,
This has been designed to prepare Bank
accounting period, cost concept, realisation
Reconciliation Statement and to know
concept, Duality aspect concept, Accrual
preparation of Trial Balance and detection of
concept, Matching concept
errors. This will expose the learners to the utility
of computers in the accounting.
Accounting conventions : Materiality
consistency, conservatism, full disclosure
Unit 2.1 Bank Reconciliation Statement
Generally Accepted Accounting Principles.
2.1.1 Bank Reconciliation Statement
Accounting standards : Introduction and list
Meaning, need and its preparation
of Indian accounting standards
Unit 2.2 Trial Balance and Errors
3.1.3 Financial Statements-II
Adjustments : Closing Stock. Outstanding
2.2.1 Trial Balance
Expenses, Prepaid Expenses. Accrued
Meaning objectives and its preparation
Income. Income earned in advance
depreciation, provision for bad and doubtful
2.2.2 Errors and their Rectifications
debts, interest on capital, interest on
Meaning, classification of errors, methods
drawings, preparation (with adjustments)
of rectification of errors, Suspense Account
Unit 3.2 Not-for-Profit Organisations
Unit 2.3 Computer Awareness
3.2.1 An Introduction to Not-for-profit
Computer and Computerised
Meaning, Characteristics, Receipts and
Characteristics and components of a
Payments A/c : Meaning, need and
computer, limitations, role of computer in
preparation, distinction between Receipts
accounting, need and requirements of
and Payments A/c and Cash Book.
3.2.2 Financial statements
Module 3 Financial Statements for Profit and
Meaning, need and items, preparation,
Income and Expenditure A/c, adjustments :
Subscription, donation, etc. preparation (with
adjustments), preparation of Balance sheet.
This module has been designed to prepare
Module 4 Partnership Accounts 17 Marks
Income Statement and Position Statement of
Profit Organisations and Receipts and Payments
Account and Income and Expenditure Account
and Balance Sheet of Not-for-Profit
This module has been designed to explain to the
learners the fundamentals of Partnership,
accounting procedure regarding admission,
retirement and Death of a Partner and Dissolution
of partnership firm.
3.1.1 An introduction to Financial Statements
Unit 4.1 Fundamentals of Partnership
Meaning, need and objectives, distinction
between capital expenditure and Revenue
expenditure, capital receipts and revenue
4.1.1 Partnership - An Introduction
receipts : Types of financial Statements:
Meaning, Characteristics of Partnership,
Trading Account, Profit and Loss Account
Meaning of Partnership Deed, Accounting
and Balance Sheet meaning, need, objectives.
Treatment in the absence of Partnership
Deed - distribution of Profits, interest on
3.1.2 Financial Statements-I
capital, Interest on Drawings, Interest on
Preparation of Trading Account. Profit and
Partner’s Loan, Salaries and commission,
Loss Account. Balance Sheet, Marshalling
capitals-fixed and fluctuating, Drawings.
of Balance Sheet.
Profit and Loss Appropriation A/c - Meaning,
Purpose and its Preparation, Preparation of
liabilities. Treatment of unrecorded assets
and liabilities. Preparation of Accounts -
Realisation Account. Partners Capital
Unit 4.2 Admission of a partner
Account, Bank or Cash Account.
4.2.1 Admission of a Partner
Accounting for Shares and
Meaning, new profit ratio, sacrificing ratio,
Treatment of undistributed profits and
reserves and accounting treatment of
goodwill. Goodwill : Nature, factors affecting
This module has been designed to impart to the
goodwill and methods of valuation
learners the knowledge of shares and debentures
Revaluation of assets and reassessment of
as a source of finance and their accounting
liabilities, Adjustment of capitals of partners.
Preparation of Accounts : Revaluation A/c,
Partners capital Account and Balance Sheet.
Unit 5.1 Shares
Unit 4.3 Retirement and Death of partner
5.1.1 An introduction to Company
4.3.1 Retirement of a partner
Meaning, Characteristics, kinds of companies
Meaning, new profit sharing ratio, gaining
differences between public and private
ratio Treatment of goodwill, treatment of
company, types of shares, kinds of share
undistributed profits and reserves,
Revaluation of assets and reassessment of
Issue of Shares
liabilities. Settlement of dues, adjustment of
capital, preparation of accounts - Revaluation
Issued at par, premium and at discount: for
Account, Partner’s Capital Account and
cash and consideration other than cash;
minimum subscription, over subscription
and under subscription, calls in advance,
4.3.2 Death of a partner
calls in arrears. Recording of issue of shares
Ascertainment of profit and loss upto the
in the books of company. Preparation of
date of death of a partner, settlement of dues,
relevant accounts and Balance Sheet.
new profit sharing ratio gaining ratio.
5.1.3 Forfeiture and Reissue of shares
treatment of goodwill. Treatment of
undistributed profits and reserves. revaluation
Meaning of forfeiture of shares, Accounting
of assets and reassessment of liabilities,
treatment of forfeiture of shares, Meaning of
Preparation: Revaluation Account. Partner’s
reissue of Shares. Accounting Treatment for
capital Account. Executor’s Account,
reissue of shares.
Unit 5.2 Debentures
Unit 4.4 Dissolution
5.2.1 Issue of Debenture,
4.4.1 Dissolution of partnership firm
Meaning, kinds of Debentures. issue of
Meaning, difference between dissolution of
Debentures at par, at premium and at discount
partnership and dissolution of partnership
(with reference to terms of issue) Issue of
firm, realisation of assets and settlement of
debentures in consideration other than cash,