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Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 12th Lesson Final Accounts Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 12th Lesson Final Accounts

Essay Type Questions

Question 1.
List out advantages of Final accounts.
Answer:
List out advantages of Final accounts :

1. To know the profit or loss: Business profit or loss can be known to the trader through the trading account and profit and loss account.
2. Financial position: Balance sheet reflects the financial position of the organization.
3. Financial planning : Final accounts are important source of finance information which helps the management to plan the financial activities of the business concern.
4. Decision making: Financial statements of current year can be compared with results of the previous year statements, which helps the trader to take business decisions.
5. To pay the taxes: Final accounts help in completion of tax.
6. To borrow money : Final accounts reveal the solvency position of the organization. This helps to take loan from banks.

Question 2.
Explain the capital and revenue expenditures and incomes with examples.
Answer:
Capital and Revenue Expenditures: Business expenditure of an enterprise are of three kinds as :

1. Capital Expenditure,
2. Revenue Expenditure,
3. Deferred Revenue Expenditure.

1) Capital Expenditure : It is the expenditure which is normally incurred for acquiring fixed assets or assets which increase the earning capacity of the business. Benefits of this expenditure are extended over a number of years. E.g.: Purchase of furniture, Machinery, Buildings, etc.

2) Revenue Expenditure : It is the expenditure incurred in the normal course of business activities. The benefit of this expenditure is restricted to only one accounting year.
E.g.: Rent, Salaries, Selling expenses.

3) Deferred Expenditure : It consists of revenue and capital items. Benefits from these expenses are spread over several years.
E.g.: Huge amount of expenditure on advertisement.

Capital and Revenue Incomes: The business incomes are of three kinds as :

1. Capital Income,
2. Revenue Income and
3. Deferred Income.

1) Capital Income: Any amount received as investment by the owners, raised by way of loans and incomes received on sale of fixed assets is called capital income.
E.g.: Capital, Sale of machinery, etc.
2) Revenue Income: It means an income which arise, during normal course of regular business transactions. E.g.: Commission received, Sale of goods, etc.
3) Deferred Income : This consists of items of revenue and capital nature and spread over several years. E.g.: Rent or Interest received for more than a year.

Question 3.
Draw an imaginary Balance Sheet Pro forma.
Answer:
Balance sheet may be prepared in any one of the following orders.

1. Liquidity order
2. Permanency order

Proforma of Balance sheet on the basis of Liquidity order:
Balance sheet of ____ as on _____

Balance sheet on the order of Permanency: Balance sheet of ____ as on ____

Short Answer Questions

Question 1.
Write the meaning and uses of final accounts.
Answer:
Final accounts (Final statements) are the statements that are prepared at the end of an accounting period. These consist of trading account, profit and loss account and balance sheet.

Uses:

1. To know the profit or loss at the end of a particular period.
2. To know the financial position of the organization.
3. It helps to plan the financial activities of business concern.
4. It helps to take business decision.
5. With the help of financial statements business concerns can get the loans from the banks.

Question 2.
Explain the meaning and advantages of trading account.
Answer:
An account is to be prepared to know the results of trading activities carries during the accounting period. This account is termed as Trading Account.

Advantages:

1. It reveals either gross profit or gross loss
2. Gross profit / loss ratio can be calculated
3. Trading expenses and incomes of the current year can be compared with that of previous year.
4. The trader can estimate his trade revenue for future years.

Question 3.
Write the meaning and importance of profit and loss account.
Answer:
After trading account, the Profit & Loss a/c is to be prepared to find out the net profit or net loss of the business. It is a nominal account. Hence all the expenses and losses should be debited and all the incomes and gains to be credited to this account.

Importance of Profit & Loss Account

1. It reveals net profit or net loss.
2. Net profit ratio can be calculated.
3. Current year’s administrative, selling and other expenses can be compared with the previous year’s amounts.
4. It facilitates for the preparation of balance sheet.

Question 4.
Explain the following with examples:
a) Current Assets
b) Current Liabilities
Answer:
a) Current Assets : The assets which are held for resale or can be converted into cash on a later date are called current assets. E.g.: Stock, Debtors, Bills receivable, etc.
b) Current Liabilities : These liabilities payable by the organization within one accounting period (short term liabilities) not more than 12 months from the date of balance sheet E.g.: Bills payable, Trade creditors, Bank overdraft, etc.

Very Short Answer Questions

Question 1.
Define capital expenditure and give two examples.
Answer:
Capital expenditure is the expenditure which is normally incurred for acquiring fixed assets or assets which increase the earning capacity of the business. Benefits of capital expenditure are extended over a number of years. E.g,: Purchase of fixed assets like furniture, Machinery and Buildings.

Question 2.
Define revenue expenditure with two examples. (Mar. ’17 – A.P.)
Answer:
Revenue expenditure means an expenditure incurred in the normal course of business activities. The benefit of revenue expenditure is restricted to only one accounting year.
E.g.: Office expenses like rent, Salaries, etc.

Question 3.
Define capital income and give two examples. (Mar. 2019, 15 – A.P.)
Answer:
Any amount received as investments by the owners, raised by way of loans and income received on sale of fixed assets is called capital income. E.g.: Capital, Sale of machinery, etc.

Question 4.
Explain the terms tangible and intangible assets with examples.
Answer:
Assets which can be seen and touch are called tangible assets E.g.: Furniture, Machinery, etc. Assets which can neither be seen nor touched are called intangible assets. E.g.: Patents, Good will etc.

Question 5.
Define the term drawings. (Mar. 2019 – T.S.)
Answer:
Drawings may be defined as the amount withdrawn by the proprietor from the business either in cash or in kind for personal use. Drawings should be deducted from capital in the balance sheet on liabilities side.

Problems

Question 1.
Prepare trading account of Srikanth Traders for the year ended 31.12.2013.

Answer:
Dr. Tracing Account of Srikanth Traders for the year ended 31.12.2013

Question 2.
Prepare trading account from the following particulars for the year ended 31.03.2014:

Answer:

Question 3.
Prepare trading account.
Purchases

Answer:

Question 4.
Prepare trading account of Hyderabad Traders as on 31.12.2012:

Answer:

Question 5.
From the following particulars, prepare Profit & Loss A/c as on 31.12.2013:

Answer:

Question 6.
Prepare Profit & Loss A/c from the following particulars:

Answer:

Question 7.
From the following Particulars, prepare Profit & Loss A/c.

Answer:

Question 8.
Prepare Trading A/c, Profit & Loss A/c of Suresh Traders for the year ending 31.12.2012.

Answer:

Question 9.
From the following trial balance, prepare Trading A/c, Profit & Loss A/c for the year ended 31.12.2013:

Answer:

Question 10.
Prepare Trading account and Profit & Loss A/c. (amounts in rupees)

Answer:

Question 11.
Prepare Balance sheet from the following;

Answer:

Question 12.
Prepare balance sheet of Kiran Traders from the following as on 31.03.2913:

Answer:

Question 13.
Prepare balance sheet of Vamsi Traders for the year ended 31.12.2013:

Answer:

Question 14.
From the following Trial Balance, prepare Trading, P& L Account and Balance Sheet:

Answer:

Question 15.
From the following a trial balance prepare final accounts for the year ending 31.03.2014 :

Answer:

Balance sheet for the year ending 31.3.2014

Student Activity

Visit any small undertaking and collect its expenses, income, assets and liabilities during the latest accounting period, and prepare Trading and Profit & Loss A/c and Balance Sheet in vertical form.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 11th Lesson Rectification of Errors Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 11th Lesson Rectification of Errors

Short Answer Questions

Question 1.
Give two examples of Errors of Omission.
Answer:
When a transaction is completely or partly omitted from the books of accounts such error is known as Error of Omission.

1. When no entry is made for a transaction in journal
   E.g.: Purchase of goods are not recorded in the books of original entry.
2. If an entry is not made for a transaction in the Subsidiary Book
   E.g.: Paid cash to Ganesh traders not entered in Cash Book.

Question 2.
Explain the errors of commission with two examples.
Answer:
The errors arise due to wrong recording, wrong posting, wrong casting, wrong entry forwarding, wrong balancing, etc.

1. Wrong recording: When a transaction is incorrectly recorded in the books of original entry E.g.: Slaes of goods to Rama of Rs. 150 recorded as Rs. 50.
2. Wrong casting : If the mistake is committed in totaling, it is called error of commission.
   E.g.: Sales book is overcast by Rs. 100.

Question 3.
Explain the errors of Principle with two examples.
Answer:
Errors which are committed by violating or defective knowledge of accounting principles (rules). These errors may arise, when the clear distinction is not made between the Capital and Revenue nature items.
E.g.:

1. Purchase of land & buildings – debited to purchases a/c instead of land & buildings a/c.
2. Rent paid to landlord – debited to landlord a/c instead of rent a/c.

Question 4.
Explain the compensating errors. (Mar. 2018 – A.P.)
Answer:
If two or more errors are arised and one error nullifies the another error, the net effect is unchanged, these are Called compensating errors.
E.g.: Amount paid to Teja Rs. 2000 recorded as Rs. 200 and Amount received from Krishna Rs. 10,000 recorded as Rs. 9,500.

Question 5.
Define suspense account.
Answer:
Sometimes, despite an accountant’s best efforts, the trial balance may not agree. In such circumstances, the differnce between the debit and credit Totals should be transferred to an account called Suspense Account. It is an imaginary account, opened and used as a temporary measure to make two sides of the trial balance agree.

Essay Type Questions

Question 1.
What are the various types of errors ? Explain. (Mar. 2018 – A.P. – May ’17 – A.P. & T.S.; Mar. 17. ’15 – T.S.)
Answer:
Errors may be classified as:

1) Errors of Principle
2) Errors of Omission
3) Errors of Commission
4) Compensating Errors
5) Writing to wrong head of account

1) Errors of Principle : Errors which are committed by violating or defective knowledge of accounting principles (rules). These errors may arise, when the clear distinction is not made between the Capital and Revenue nature items.
E.g.:

1. Purchase of land & buildings – debited to purchases a/c instead of land and buildings a/c.
2. Rent paid to landlord – debited to landlord a/c instead of rent a/c.

2) Errors of Omission : When a transaction is completely or partly omitted from the books of accounts such error is known as Error of Omission.

1. When no entry is made for a transaction in journal
   E.g.: Purchase of goods are not recorded in the books of original entry.
2. If an entry is not made for a transaction in the Subsidary Book E.g.: Paid cash to Ganesh not entered in Cash Book.

3) Errors of Commission : The errors arise due to wrong recording, wrong posting, wrong casting, wrong entry forwarding, wrong balancing, etc.

1. Wrong recording : When a transaction is incorrectly recorded in the books of original entry E.g.: Sales of goods to Rama of Rs. 150 recorded as Rs. 50.
2. Wrong Casting : If the mistake is committed in totaling is called error of commission. E.g.: Sales book is overcast by Rs. 100.

4) Compensating Errors: If two or more errors are arised and one error nullifies the another error, the net effect is unchanged, these are called compensating errors.
E.g.: Amount paid to Teja Rs. 2000 recorded as Rs. 200. and amount received from Krishna Rs. 10,000 recorded as 9,500.

5) Writing to wrong head of account: Instead of recording one account, recording another account is known as writing to wrong head of a/c.
E.g.: Paid to Vijay Rs. 1,000 is debited to Vinay a/c.

Question 2.
What are the errors disclosed by Trial Balance and not disclosed by Trial balance ? (Mar. 2019 – A.P. & T.S.)
Answer:
Errors may be classified as

I) Errors not disclosed by Trial Balance
II) Errors disclosed by Trial Balance .

I) Errors not disclosed by trial balance :

1. Errors of Principle
2. Errors of Omission
3. Errors of Commission
4. Compensating Errors
5. Writing to wrong head of account

II) Errors disclosed by Trial Balance :

1. Posting of transaction to wrong side of an account
2. Posting of wrong amount to an account
3. Errors in totaling
4. Errors of carrying forward
5. Posting of only one aspect of journal entry into ledger
6. Recording one aspect twice

Question 3.
What is meant by Suspense Account? Why Is It opened ?Explain. (Mar. ’17, ’15 – A.P.)
Answer:
Sometimes, despite an accountant’s best efforts, the trial balance may not agree. In such circumstances, the difference between the debit and credit Totals should be transferred to an account called ‘Suspense Account’. It is an imaginary account, opened and used as a temporary measure to make two sides of the trial balance agree.
The suspense account may show any balance, suspence account will be written off after the errors are detected and rectified. If the opening balance of suspense a/c is not given, the difference of suspense account is to be considered as opening balance.

Problems

Question 1.
Rectify the following errors:
a) A sale of goods to Adithya for Rs. 2500 was passed through the purchases book.
b) Salary of Rs. 800 paid to Sandeep was wrongly debited to his personal account.
c) Furniture purchased on credit from Sekhar for Rs. 1000 was entered in the purchases book.
d) Rs. 5000 spent on the extension of buildings was debited to buildings repairs account.
e) Goods returned by Shailesh Rs. 1200 were entered in the Return Outwards book.
Answer:
Rectification Entries

Question 2.
Rectify the following errors;
a) Furniture purchased for Rs. 10,000 wrongly debited to purchase account.
b) Machinery purchased on credit from Ramana for Rs. 20,000 was recorded through purchases book.
c) Repairs on machinery Rs. 1,400 debited to machinery account.
d) Repairs on overhauling of secondhand machinery purchased Rs. 2,000 was debited to repairs account.
e) Sale of old machinery at book value of Rs. 3,000 was credited to sales account.
Answer:
Rectification Entries

Question 3.
Pass journal entries to rectify the following errors:
a) Machinery purchased for Rs. 5,000 has been debited to purchases a/c.
b) Rs. 700paid to Ruchira as legal charges were debited to his personal account.
c) Rs. 10,000 paid to Escorts Company for machinery purchased stand debited to Escorts company account.
d) Typewriter purchased for Rs. 6,000 was wrongly passed through purchase book.
e) Rs. 20,000 paid for the purchase of Motor-Cycle for proprietor has been charged to General Expenses’a/c.
f) Rs. 15,000 paid for the purchase of Gas engine’ were debited to ‘Purchases’ a/c.
g) Cash paid to Saritha Rs. 400 was debited to the account of Amani.
Answer:
Rectification Entries

Question 4.
Give rectification entries for the following errors:
a) Wages payable to furniture maker Rs. 670 debited to Wages a/c.
b) A credit sale of Rs. ISO to Srinivas debited to Shiva Ram.
c) Payment of salary to Varshini not passed through books at all.
d) A credit purchase ofRs. 140 to Harshini, recorded in the books as Rs. 410.
Answer:
Rectification Entries

Question 5.
Pass journal entries to rectify the following errors:
a) The purchases book of the trader is overadded by Rs. 200. (Overcast by)
b) Old furniture sold for Rs. 100 was wrongly credited to sales a/c.
c) Rs. 100 paid on account of interest was debited to commission account.
d) An amount of Rs. 125 received from Soni was wrongly credited to his account as Rs. 152.
Answer:
Rectification Entries

Question 6.
Rectify the following errors:
a) Purchases of furniture costing Rs. 1,200 have been passed through purchases book.
b) Repairs to machinery Rs. 200 were debited to machinery account.
c) A credit sale ofRs. 200 to Ramesh Kodur through properly entered in the sales book has been credited to his account.
d) The total of purchases book, was overcast by Rs. 200.
e) Salary paid to Sheshu, manager stands debited to his account.
Answer:
Rectification Entries

Question 7.
Rectify the following errors:
a) Sale of old machinery Rs. 500 has been entered in the sales book.
b) Rakesh Vedantam pays 300. This amount has been credited to Rajesh.
c) A sale ofRs. 250 to Shah & Co., has been debited to them as Rs. 520.
d) Returns to Ramanuji Rs. 350 have not been posted to his account.
e) Salary of Rs. 1500 paid to Ramana has been debited to his account.
f) A purchase ofRs. 700 from Gupta & Co., has been entered in the sales book.
Answer:
Rectification Entries

Question 8.
Rectify the following errors:
a) An amount of Rs. 100 paid for the repairs of furniture was debited to furniture account,
b) Sales book total was overcast by Rs. 500.
c) Expenses 15 were posted in the ledger as 150.
d) A sale ofRs. 200 to Mr. S. was wrongly debited to the account of Mr. V.
e) Old furniture sold has been credited to sales a/c Rs. 500,
Answer:
Rectification Entries

Question 9.
Write the entries for the rectification of the following errors:
a) Sales book was overcast by Rs. 300.
b) Sales of Rs. 100 to Madhavi was wrongly debited to account of Sharath.
c) General expenses of Rs. 20 were posted in the general ledger as Rs. 30.
d) Rs. 100 received from Yada was debited to Sandhya.
e) Legal expenses Rs. 200 paid to Saritha was debited to her personal account.
f) An amount of Rs. 200 paid of Ramesh is not posted to his account.
Answer:
Rectification Entries

Question 10.
Pass Journal en fries for rectification of the following errors:
a) The total of purchases book was undercast by Rs. 200.
b) A credit purchase from Vaishnavi for Rs. 1000 has been wrongly passed through the sales book
c) Wages paid Rs. 200 was wrongly debited to salaries account.
d) Rs. 100 receIved on account interest stands wrongly credited to commission account.
e) Salary of Rs. 500 paid to manager Mr. Krishna (s debited to his personal account.
Answer:
Rectification Entries

Question 11.
Rectify the following errors before preparation of trial balance:
a) Purchase book was undercast by Rs. 2000.
b) Rent paid Rs. 350 was debited to that account as Rs. 530.
c) Discount received from Rama & Co. Rs. 250 was not posted to their account.
d) Interest paid Rs. 89 was wrongly credited to that account as Rs. 98.
e) Sales book was overcast byRs. 1700.
f) Purchase returns book undercast by Rs. 275.
Answer:
Rectification Entries

Question 12.
Rectify the following errors discovered before preparation of the trial balance.
a) The sales book has been totaled Rs. 1000 short.
b) Sale of old furniture Rs. 4000 was credited to sales account.
c) Rs. 250 paid towards interest was debited to commission account.
d) Rs. 125 paid by Sandeep but was entered in his account Rs. 152.
e) The purchase a/c was overcast by Rs. 750.
f) Rs. 4500 salary paid to Mr. Shekar head clerk stands debited to his personal account.
Answer:
Rectification Entries

Question 13.
Rectify the following errors dicovered before preparation of the trial balance.
a) Furniture purchased Rs. 3,500 has been passed through the purchases book.
b) The returns inward book was overcast by Rs. 250.
c) Rs. 800 paid for repairs to machinery was debited to machinery account
d) A sale ofRs. 750 made to Srimannarayana was entered in sales book but was credited to his account.
e) A purchase ofRs. 760 made from Radhika was credited to his account Rs. 670.
Answer:
Rectification Entries

Question 14.
Rectify the following errors before preparation of trial balance.
a) Rs. 250paid for proprietors medical bill was debited to sundry expenses account.
b) Sale of goods to Sandhya & Co. for Rs. 2900 was entered through the purchase book.
c) Sale of old machinery Rs. 5000 was posted to the credit of sales account.
d) The total of purchase book was overcast by Rs. 2000.
e) Salary ofRs. 4500 paid to Kittu has been debited to his account.
Answer:
Rectification Entries

Question 15.
Pass necessary entries to rectify the following errors. After the preparation of trial balance.
a) Rs. 1500 received from Gopal has been wrongly credited to Chandu’s a/c.
b) The purchase book was undercast by Rs. 1000.
c) Repairs to machinery Rs. 800 were debited to machinery account.
d) Discount allowed to Chiru Rs. 200 correctly entered in cash book, has not been posted to his account.
e) Bills payable from Mr. Gopichand Rs. 1000 was entered in the bills payables book.
Answer:
Rectification Entries

Student Activity

Visit any small organisation and note down its experiences in rectifying the errors.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 10th Lesson Trail Balance Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 10th Lesson Trail Balance

Short Answer Questions

Question 1.
Define ‘TrialBalance’.
Answer:
“Trial Balance is a statement, prepared with the debit and credit balances of ledger accounts to test the arithmetical accuracy of the books.” – J.R. Batliboi
“A Trial Balance is a list of all the balances standing on the ledger accounts and cash book of a concern at any given date.” – Spicer and Peglar

Question 2.
Give the format of Trial Balance.
Answer:
Trial Balance of ……. as on ……

Question 3.
What are the objectives of the Trial Balance ?
Answer:
Objectives of trial balance are :

1. To verify the arithmetical accuracy of ledger accounts.
2. To know the balances of various ledger accounts.
3. Final accounts can be prepared on the basis of trial balance.
4. Trial balances of various years are useful for comparison and get conclusions.

Question 4.
What are the methods of preparation of Trial Balance ?
Answer:
There are two methods to prepare trial balance.

1. Total Balances Method : Under this method total of debit side and total of credit side of each individual a/c is taken into trial balance. This method is not in use now.
2. Net Balances Method : Under this method, balance in each ledger a/c is taken into trial balance. All the ledger a/cs showing debit balances are put on the debit side of the trial balance and the accounts showing credit balances are put on the credit side.

Essay Type Questions

Question 1.
What is Trial Balance ? How it is prepared ?
Answer:
Trial balance is a statement of balances/totals of accounts of a business concern and prepared to check the arithmetical accuracy of the books.
Preparation of Trial balance : The following points are to be kept in the mind while preparing the Trial Balances.

1. Draw the pro forma of trial balance with the title.
2. Trial balance is a statement; hence we need not use the words ‘to’ or ‘by’.
3. Show all types of assets in debit column.
4. Show all types of liabilities in credit column.
5. Show all types of expenses in debit column,
6. Show all types of incomes in credit column.
7. Show reserves and surpluses / reserve funds / provisions in credit columns.
8. Show intangible assets in debit column E.g. good will, patents, royalties
9. Show purchases and sales returns in debit column.
10. Show sales, purchase returns in credit column.

Question 2.
Explain the merits and demerits of Trial Balance.
Answer:
Merits:

1. It helps in ascertaining the arithmetical accuracy of ledger accounts.
2. It helps in detecting errors.
3. It helps to get a summary of the ledger accounts.
4. It helps in the preparation of final accounts.

Limitations:

1. Certain type of errors remain even when the trial balance tallies.
2. It is possible to prepare trial balance in which double entry book-keeping system is followed which is very expensive.
3. Even if some transactions are omitted the trial balance tallies.

Problems

Question 1.
From the following balances taken from the books of Naveena as on December 2013, prepare a trial balance in proper form :

Answer:
Trial Balance of Naveena as on December 2013

Question 2.
Prepare a Trial Balance from the following balances of Swathi as on 31^st March 2013:

Answer:
Trial Balance of Swathi as on 31^st March 2013

Question 3.
The following Trial Balance has been prepared by an inexperienced accountant. Redraft it in a correct form :


Answer:
Correct Trial Balance

Question 4.
The following are the Balances extracted from the books ofRuthwik, prepare a Trial Balance as on 31-03-2013.


Answer:
Trial Balance of Ruthwik as on 31.03.2013

Question 5.
From the following balances, prepare Trial Balance of Harshini as at 31-12-2013.

Answer:
Trial Balance of Harshini as at 31.12.2013

Question 6.
The following are the balances extracted from the books ofSarayu on 31-08-2013 Prepare the Trial Balance.

Answer:
Trial Balance of Sarayu as on 31.8.2013

Question 7.
The following are the balances extracted from the books of Paddu as on 31 -01 – 2014. Prepare Trial Balance.

Answer:
Trial Balance of Paddu as on 31.1.2014

Question 8.
Prepare the Trial Balance of Renish as on 31.12.2013. (Mar. 2018 – A.P. ; May ’17 – A.P.)

Answer:
Trial Balance of Renish as on 31.12.2013

Question 9.
From the following balances prepare Trial Balance of Manas as on 31.12.2013.

Answer:
Trial Balance of Manas as on 31.12.2013

Question 10.
From the following balances prepare Trial Balance of Mridula as on 31.12.2013. (Mar. ’17 – A.P.)

Answer:
Trial Balance of Mridula as on 31.12.2013

Question 11.
Prepare Trial Balance of Prafulla from the following balances as on 31.12.2013. (Mar. 2019 – T.S.)

Answer:

Question 12.
Prepare Trial Balance of Suchitra as on 31.12.2013 from the following balances:

Answer:
Trial Balance of Suchitra as on 31.12.2013

Question 13.
Prepare trial Balance of Radha from the following balances:

Answer:
Trial Balance of Radha

Question 14.
Prepare Trial Balance of Snigdha form the following balances:

Answer:
Trial Balance of Snigdha

Question 15.
Prepare Trial Balance of Supreeth from the following balances as on 31-12-2010. [May – ’17 – T.S.]

Answer:
Trial Balance of Supreeth as on 31.12.2010

Question 16.
Prepare Trial Balance of Rohitha : (Mar. 2018 – T.S.)

Answer:
Trial Balance of Rohitha

Question 17.
Prepare Trial Balance ofSusmitha from the following balances as on 31.03.2013.

Answer:
Trial Balance of Smith as on 31.12.2013

Question 18.
Prepare Trial Balance of Sudha from the following particulars:

Answer:
Trial Balance of Sudha as on 31.12.2013

Question 19.
Prepare Trial Balance from the following balances.

Answer:
Trial Balance as on 31.12.2013

Student Activity

Visit any organisation and prepare a trial balance by extracting balances of accounts from its ledger.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 9th Lesson Bank Reconciliation Statement Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 9th Lesson Bank Reconciliation Statement

Short Answer Questions

Question 1.
What is meant by Bank Reconciliation Statement ? (May ’17 – T.S.)
Answer:
Bank Reconciliation Statement is a statement prepared to reconcile the difference between the balances as per the bank column of the cash book and the pass book on any given date.

Question 2.
What do you mean by Favourable Balance ? (Mar. ’17 – T.S.)
Answer:
It means cash book shows debit balance at the same time pass book shows credit balance. Favourable balance means our money is in the Bank Account. Hence cash book debit balance and pass book credit balance is called favourable balance.

Question 3.
What do you mean by Unfavourable Balance ?
Answer:
Sometimes a businessman withdraws/excess amount from the bank account and the closing bank balance of a month is a debit balance. This balance amount is called unfavourable balance or overdraft balance.

Question 4.
Describe the Overdraft. (Mar. 2019, ’18 – T.S.; Mar ’15 – A.P.)
Answer:
When withdrawals exceed deposits, cash book bank column shows credit balance and the pass book shows debit balance. It is called unfavourable or overdraft balance. Sometimes business¬man is allowed by the bank to withdraw the amount, in excess of what he has in his bank account after moving prior agreement with banker. This facility is called overdraft.

Question 5.
Cheques deposited with a bank for collection, what is the impact on Cash Book?
Answer:
When the cheques are deposited with a bank for collection, that the cheques amount was debited in the cash book, before sending them for collection. Hence the impact on cash book is the cash balance increased.

Essay Type Questions

Question 1.
Explain the nature and importance of the Bank Reconciliation Statement.
Answer:
A statement prepared to reconcile the balance of cash book and pass book is called the ‘Bank Reconciliation Statement’.
Generally the business concerns would like to maintain an account with a bank and prepare a Bank Reconciliation Statement.

Importance:

1. Locating the mistakes or errors either side of both cash book and pass book.
2. Preventing any fraud and misappropriations.
3. Enabling the business concern to get up-to-date record of transactions from the bank.
4. Ensuring a proper evidence of payment.
5. Help to know exact cash balance at bank.

Question 2.
Enumerate the reasons for differences between the balance shown in the Cash Book and Pass Book.
Answer:
I. Items entered in the bank columns of the Cash Book, but not entered in Pass Book or bank statement.

1. Cheques sent for collection, but not collected by the bank. This will appear only on the debit side of the cash book.
2. Cheques issued but not yet presented for payment. This appears only on credit side of the cash book.

II. Items entered in the bank statement or bank Pass Book, but not in Cash Book:

1. Direct payment into the bank by a customer. This appears only on the credit side of the bank statement.
2. Bank charges : Charges paid by the business for using some of the bank services. This will appear on the debit side of the pass book.
3. When the business instructs the bank to make regular payments of fixed amounts, rent, insurance premium, etc. These will appear on the debit side of the bank statement.
4. Interest on overdrafts or loans appears on the debit side of the bank statement.
5. Interest on deposits appears on the credit side of the bank statement.
6. Dishonour of cheques and bills – first appears on the debit side of the bank statement. But the firm records the same when it receives the information from the bank. As a result, the balance as per cash book and that of pass book will differ.

III. Difference caused by Errors:

1. Errors committed in recording transactions by the firm in cash book : Omission of transaction, wrong recording, wrong totaling, over / under casting, etc.
2. Errors committed in recording transactions by the bank : Sometimes bank may also commit errors. E.g. Omission or wrong recording of transaction, wrong totaling, over/ under casting, etc.

Question 3.
Explain the procedure of preparing the Bank Reconciliation Statement by taking imaginary items and figures.
Answer:
Bank reconciliation statement is prepared to reconcile the two balances of Cash Book and Pass Book. The preparation of Bank Reconciliation Statement starts with banking adjustments to one balance to reach the other balance, which ensures agreement between both the balances.

The BRS is prepared usually at the end of the period, i.e. a month, a quarter, half a year or a year whichever is convenient to the firm. When both the books, cash book and pass book are given in problem, then see whether the two books are related to the same period or different periods. If the books are for different periods, then common items should be considered and if it is for same period, then items not appearing in both the books should be taken into consideration.

The way how to prepare BRS may be illustrated as follows.
Bank Reconciliation Statement of …… as on …….

Problems

Question 1.
Pass Book of a trader shows a balance of Rs. 12,600. On comparing the Pass Book with the cash Book, the following discrepancies were noted. (Mar. 2018 – A.P.)
a) Cheques deposited in bank but not collected Rs. 2,100
b) Cheques issued but not presented for payment Rs. 1,800
c) Bank Charges Rs. 175
d) Bank paid insurance premium Rs. 1,500
e) The Debtor paid directly into bank account Rs. 1200
Answer:
Bank Reconciliation Statement

Question 2.
Murthy and Son’s Pass Book showed a balance of Rs. 21,700 as on 30^th September, 2013. On comparing the Cash Book the following discrepancies were noted.
a) Cheques issued but not yet presented for payment Rs. 2,500
b) Directly deposited by a customer Rs. 3,000
c) Interest credited by bank is found in Pass Book only Rs. 575
d) Cheques deposited in bank but not credited Rs. 3,500
e) Bank Charges Rs. 150
Prepare a Bank Reconciliation Statement showing balance as per Cash Book.
Answer:
Bank Reconciliation Statement of Murthy and Son as on 30th September 2013

Question 3.
Giri Ind Ltd’s bank balance as per Pass Book is Rs. $,900. There is disagreement between Cash Book and Pass Book balances as, on 31.3.2014. Prepare Bank Reconciliation statement by considering following transactions.
a) Cheque issued but not yet presented for payment Rs. 2100
b) Cheque deposited for collection, but not yet realized Rs. 900
c) A wrong debit given by bank in Pass Book Rs. 500
d) Bank charges debited only in Pass Book Rs. 210
e) Direct payment of insurance premium as per standing instructions Rs. 600
Answer:
Bank Reconciliation Statement of Giri lnd Ltd’s as on 31.03.2014

Question 4.
On comparing the bank Pass Book of BBR Ltd., with its Cash Book (bank column), the following differences were noticed. Prepare BRS with the help of Cash Book Balance Rs. 15,000.
a) Cheque sent for collection, notyet realized Rs. 5,600
b) Cheques issued but not yet presented for payment Rs. 4,200
c) The receipts side of Cash Book has been overcast by Rs. 300
d) A cheque drawn on firm’s current a/c, wrongly debited in its savings a/c, Rs. 2,100
e) A cheque ofRs. 900 deposited into bank, bit forgot to enter in Cash Book
Answer:
Bank Reconciliation Statement of BBR Ltd

Question 5.
Reddy’s Cash Book shows a favourable balance ofRs. 25,500 as on 31^st December, 2013. On comparing the same with his Pass Book following differences were noticed. Calculate bank balance as per Pass Book.
a) A cheque for Rs. 2,450 received from Saritha & Co was entered twice in the Cash Book.
b) The receipts column of the Cash Book has been over added by Rs. 1940.
c) Several cheques, totaling Rs. 6,000 were issued to different suppliers. Of these, cheques worth Rs. 1,500 were debited in Pass Book on 2nd January, 2014 and Rs. 2,500 on 4th January. The balance being debited before 31st December, 2013.
d) Bills discounted, got dishonored Rs. 750.
e) A cheque ofRs. 400 was credited in Pass Book, but was not recorded in Cash Book.
f) Uncredited cheque Rs. 1,000
Answer:
Bank Reconciliation Statement of Reddy’s as on 31^st December 2013

Question 6.
On 31^st December, 2013 the Cash Book showed an unfavourable balance Rs. 29,000. Prepare a Reconciliation Statement with the following information.
a) Cheques had been deposited into the bank but were not collected Rs, 4,530
b) A cheque issued to Karthik Reddy, the supplier, has not been encashed Rs. 5,040.
c) There was a debit entry in the Pass Book ofRs. 600 for bank charges.
d) Bills worth Rs. 2000 were discounted but dishonored.
Answer:
Bank Reconciliation Statement as on 31^st December 2013

Question 7.
From the following particulars prepare a Bank Reconciliation Statement.
a) Bank Overdraft as per Cash Book Rs. 16,100
b) Debit side of the bank column of Cash Book cast short Rs. 200
c) Bills collected directly by bank Rs. 3,500
d) Bank charges recorded twice in the Cash Book Rs. 240
e) A cheque deposited as per bank statement but not recorded in the Cash Book Rs. 1100
f) The cheques of 6,000 deposited but collections as per statement Rs. 2,600
g) Interest on investment collected by the banker, same was shown only in Pass Book Rs. 2,000
Answer:
Bank Reconciliation Statement

Question 8.
From the following particulars prepare Bank Reconciliation Statement as on 31^st March, 2014.
a) Overdraft balance as on 31-3-2014 as per Bank statement Rs. 22,470.
b) As per standing instructions given to bank, Chamber of Commerce fee Rs. 2,530 was paid by the bank but was not recorded in the Cash Book.
c) On 23-3-2014, the credit side of the bank column of the Cash Book was cast Rs. 1,900 short.
d) Cheque deposited into the bank but not recorded in Cash Book Rs. 2,500
e) In the Cash Book, a Bank charge ofRs. 290 was recorded twice while another bank charge of Rs. 120 was not recorded at all.
f) Divided on shares Rs. 3,200 was collected by bank directly the trader has no information.
g) Two cheques ofRs. 1850 and Rs. 1,500 were issued but out of them only one cheque ofRs. 1850 was presented for payment up to reconcile day.
Answer:
Bank Reconciliation Statement as on 31.03.2014

Question 9.
Prepare Bank Reconciliation statement ofKarthik as on 31 – 03 – 2014.
a) Bank overdraft as per Pass Book Rs. 6,500
b) Cheques deposited into bank Rs. 5,000, but only Rs. 2,000 was collected.
c) Cheques issued but not presented for payment Rs. 1500
d) A customer directly deposited in our bank Rs. 1200
e) Bank charges Rs. 200; Insurance premium Rs. 300 has debited in the Pass Book only
f) Divided Rs. 300 collected by the bank has credited in the Pass Book only
Answer:
Bank Reconciliation Statement of Karthik as on 31.03.2014

Question 10.
Prepare Bank Reconciliation Statement of P.R.G. Rao & Sons as on 31.03.2014
a) Bank overdraft as per Cash Book Rs. 14,500
b) Cheques issued but not yet presented for payment Rs. 4,500
c) Directly deposited by a Customer in our bank account Rs. 3,500.
d) Cheques deposited in bank but not credited Rs. 7,500
e) Bank charges debited in pass book only Rs. 200
f) Interest debited in the pass book only Rs. 500
Answer:
Bank Reconciliation Statement of P.R.G. Rao as on 31.03.2014

Student Activity

Visit any business careers and enquire about what discrepancies generally they notice in the items. Make a list of the discrepancies and show the effect on the bank balance.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 8th Lesson Cash Book Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 8th Lesson Cash Book

Essay Type Questions

Question 1.
Describe the meaning and importance of cash book.
Answer:
Among the entire subsidiary books cash book is one of the important books. In this book we record cash receipts and cash payments. The main objective of cash book is to know the balance of cash at any given time. The person who maintains cash book is known as cashier. Business transactions are mainly two kinds.

1. Cash Transactions
2. Credit Transactions

All cash transactions are two types :

1. Cash receipts
2. Cash payments

Cash receipts should be recorded on debit side and cash payments are on the credit side. Generally cash book shows debit balance, because a business unit cannot pay more than its receipts.

Question 2.
Briefly explain the different types of cash books.
Answer:
The form of the cash book depends on the need, nature and scope of activities of a business firm.
They are as follows :

1) Simple cash book
2) Double column cash book
i) With cash and discount columns
ii) With bank and discount columns
3) Triple column cash book
4) Analytical petty cash book

1) Simple Cash Book: The simple cash book is maintained by small business concern. Only cash transactions are recorded in this book. Cash receipts are to be recorded on the debit side and cash payments are on credit side. After entering all the transactions, the balance is ascertained like other accounts.

2) Double Column Cash Book:

a) Cash Book with Cash and Discount Columns: The transactions pertaining to cash and cash discounts are also recorded. To record the discount involved in any transactions one additional column on both sides of the cash book is provided. Discount column on the debit side should be named as discount allowed, and on the credit side discount received. They should not be balanced.

b) Cash Book with Bank and Discount Columns : Modern business organisations carry their transactions in the form of cheques through banks. The receipts and payments of the business are made through cheques. They maintain bank column in the cash book. The traders deposit money and cheques into bank account and make payments by cheques. The traders’ deposit through bank is having advantages of safety and convenience.

3) Triple Column Cash Book: This book also known as cash book with cash discount and bank columns. It contains three columns on both the sides. Three column cash book is used by big trading organisations, to record large number of cash and bank transactions of different nature.

4) Analytical Petty Cash Book: In large scale business organisation cash is paid and received through banks, but every day the organisation has to pay various small payments. It is not possible to pay small payments through cheques and enter in the cash book. Hence all petty payments of the business are recorded in a separate cash book which is called a Petty Cash Book.

Question 3.
Write the importance of Triple column cash book and draw its pro forma.
Answer:
Triple column cash book contains three columns on both sides (debit and credit) in addition to date, particulars and L.F columns. Three column cash book is very useful to the big trading organisations for the following reasons.

1. It helps to record cash Receipts and also Receipts through cheques.
2. It is useful to record Cash Payments and also Payments by Cheques.
3. It helps to record large number of cash and bank transactions of different nature.
4. It is useful to record Contra Entries.
   

Question 4.
Explain the important points to be followed in the preparation of three column cash book.
Answer:
The following points are to be noted carefully while preparing three column cash book.

1. Opening cash and bank balances are recorded on the debit side of the cash and bank column as “To Balance b/d” in the particulars column.
2. If the overdraft is given as opening bank balance, it should be recorded on the credit side of Bank column.
3. All cash receipts should be recorded on the debit side cash column and cash payments are recorded in the cash column on the credit side.
4. If any cheque is received from customers and if it was not deposited in the bank on the same day, it should be debited to cash column.
5. If cheque is received and sent to bank on the same day, it should be debited to bank column.
6. Any payment made through cheque, should be credited to bank column on the credit side.
7. If discount amounts are involved either in cash or in bank transactions, discount allowed should be recorded on the debit side and discount received should be recorded on the credit side in the discount column.
8. If the cheques sent to bank for collection are dishonoured, it should be recorded in the bank column on debit side.
9. The transaction which is passed on both sides of the cash book is called ‘Contra Entry’. While opening bank a/c, cash deposited in bank, cash withdrawn from bank for personal use and cheque received on one day but deposited on another day. Contra entries will appear on both sides. It is denoted by “C”.

Short Answer Questions

Question 1.
Explain the advantages of cash book.
Answer:
Advantages of Cash Book:

1. It helps to know the amount of cash received and the amount of cash paid by the Business Unit.
2. It gives the Cash and Bank balances of a business unit at any given period.
3. Mistakes or Fraud can be detected by verifying the closing balance of cash book with the actual amount of cash in hand.
4. As cash book acts as Cash A/c, preparation of a separate Cash A/c (ledger) is not required.

Question 2.
Give the characteristics of cash book.
Answer:
Characteristics of Cash Book :

1. Cash book is a Subsidiary Book.
2. It records only Cash Transactions.
3. Cash book serves as Cash Account.
4. It records cash receipts on the debit side and cash payments on the credit side.
5. Cash book will show Debit Balance only.

Very Short Answer Questions

Question 1.
Cash Discount (Mar. ’17 – T.S.)
Answer:
It is given for prompt and early payment. If a debtor pays the amount to the creditor on or before the due date, he may receive discount in the form of cash. It is known as cash discount. It is discount received for the debtor and discount allowed for the creditor. The discount column is maintained on both sides of the cash book.

Question 2.
Discount Allowed
Answer:
Discount given or allowed by the creditor is known as discount allowed. It is a loss for the ‘ creditor. This was allowed to the debtor for prompt payment.

Question 3.
Discount Received
Answer:
If a debtor pays the amount on or before the due date, he may receive discount in the form of cash. It is gain for the debtor. It is called discount received.

Question 4.
Contra entry (Mar. 2019 ; May ’17 – T.S.) (Mar. 2018 – A.P.)
Answer:
The transaction which is recorded on both sides of Triple column cash book i.e. Cash and Bank on the opposite sides is called contra entry. Contra means opposite side. It should be denoted by “C” in the L.F column on both sides of Triple Column Cash Book.

Question 5.
Imprest System
Answer:
In this system petty cash payments for a period is estimated and that amount is given to the petty cashier as advance. The cashier makes payments from this amount and records them in petty cash book. At the end of a particular period the petty cashier submits petty cash book to the Head Cashier. The Head Cashier scrutinizes the petty payments and issues a fresh cheque equal to the amount of petty expenses paid. This system of book keeping is called Imprest System.

Problems

Question 1.
Prepare süaple cash book as on 1.1.2014 from the following particulars:

Answer:

Question 2.
Enter the following transactions in single column cash book of Farma traders

Answer:

Question 3.
Prepare Simple Cash Book as on 31.3.2014.

Answer:

Question 4.
Record following transactions in Two Column Cash book as on 31.1.2014:

Answer:

Question 5.
Prepare Double Column Cash Book with Cash and Discount Columns:

Answer:

Question 6.
Prepare Double Column Cash Book from the following:

Answer:

Hint: Transaction dated 20th is a credit Transaction.

Question 7.
Prepare Two column cash book with Bank and Discount columns from the following: (Mar. 17 T.S.)

Answer:

Question 8.
Prepare Three Column Cash Book. (Mar. 2019, ’17 – A.P.)

(Hint: Transactions dated 25^th and 28^th are Contra entries.)
Answer:

Question 9.
Prepare three column cash book from the following particulars :

Answer:

Question 10.
Prepare Triple Column Cash Book from the following:

Answer:

Question 11.
Record the following transactions in Cash, Bank, and Discount Columns Cash Book

Answer:

Question 12.
From the following particulars, prepare three column cash book:

Answer:

Question 13.
Prepare triple column cash book from the following information, 2014 (May -17 – T.S.)

Answer:

Question 14.
Prepare triple column cash book from the following particulars: (Mar. 2019, 18 – T.S.)

Answer:

Question 15.
Prepare Three Column Cash Book from the following: (Mar. 2018 – A.P.)

Answer:

Question 16.
Prepare Three Column Cash Book from the following:

Answer:

Question 17.
Prepare Three Column Cash book from the following particulars.

Answer:

Question 18.
Prepare Three Column Cash book of Mr.Stephen from the following particulars.

Answer:

Question 19.
Prepare Three Column Cash book of Mrs. Vijaya from the following particulars 2010

Answer:

Question 20.
Prepare Analytical Petty Cash from the following particulars:

Answer:

Question 21.
Prepare Analytical Petty Cash Book.

Answer:

Question 22.
From the following information, prepare Analytical Petty Cash Book and also prepare ledger:

Answer:

Student Activity

1. Collect Cash and Bank transactions during a month from any organisation or firm and prepare Cash Book.
2. Collect daily expenses of small amount and prepare petty Cash Book.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 7th Lesson Journal Proper Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 7th Lesson Journal Proper

Questions

Question 1.
What is Journal Proper?
Answer:
There are some transactions which cannot be recorded in any of the remaining seven subsidiary books, are entered in special book known as “Journal proper”.

Question 2.
Explain various kinds of transactions that are recorded in Journal Proper.
Answer:
The following are the transactions recorded in journal proper.
1) Opening entries : Opening entries are passed at the commencement of the new year, to record the balances of assets and liabilities brought forward from the previous year.
The rule to be applied as
Assets A/C
To Liabilities a/c
To Capital a/c
(Being last year balance brought forward).

2) Purchase and sale of fixed assets: Business organisations either purchase or sell the assets for cash and sometimes on credit. If it is purchased on credit, then the entry should be recorded in the journal proper.
Example : Purchased machinery from Godrej Company 40,000.

3) Rectification entries : Sometimes errors may occur while recording transactions, posting them into the ledger or while balancing the ledger accounts. In such cases certain entries should be passed in order to rectify the errors. Such entries are called “Rectification entries”.
Example : Rama paid Rs. 1000. This was credited to Bheema’s A/c.

4) Adjustment entries: At the time of preparation of final accounts of the business firm some adjustments are to be made. The journal entries relating to these adjustments are known as “Adjustment entries”.
Example: Outstanding expenses, prepaid expenses, incomes receivable, income received in advance, depreciation, etc.

5) Closing entries: At the end of every financial year the balances of all the Nominal accounts are transferred to the Trading and Profit & Loss accounts. These transferred entries are known as Closing entries. All expenses and losses are debited and incomes and gains are credited to Trading, Profit & Loss account.

6) Transfer entries: Sometimes the trader transfers the amount from one account to another account. This type of journal entries are known as ‘Transferred journal entries’.
Example : Transfer of Profit to Reserve Fund.

7) Other entries : It is not possible to enter same transactions in journal and hence they are recorded in Journal Proper.
Example: Interest on drawings, interest on capital, goods lost due to fire & theft, goods sent on consignment, etc.

Question 3.
Explain the following in not more than 5 lines.
a) Opening Entries
b) Rectification Entries
c) Adjustment Entries
d) Closing Entries
Answer:
a) Opening Entries : Opening entries are passed at the commencement of the new year, to record the balances of assets and liabilities brought forward from the previous year.
The rule to be applied as
Assets a/c Dr
To Liabilities a/c
To Capital a/c
(Being the last year balance brought forward).

b) Rectification Entries : Sometimes errors may occur while recording transactions, posting them into the ledger or while balancing the ledger accounts. In such cases certain entries should be passed in order to rectify the errors. Such entries are called “Rectification entries”.
Example : Rama paid Rs. 100. This was credited to Somu’s A/c.

c) Adjustment Entries: At the time of preparation of final accounts of the business firm some adjustments are to be made. The journal entries relating to these adjustments are known as “Adjustment entries”.
Example: Outstanding expenses, prepaid expenses.

d) Closing Entries: At the end of every financial year the balances of all the Nominal accounts are transferred to the Trading and Profit & Loss accounts. These transferred entries are known as Closing entries. All expenses and losses are debited and incomes and gains are credited to Trading, Profit & Loss account.

Problems

Question 1.
Record the Opening entry from the following particulars on 1st April 2013: (Mar. 2019 – T.S.) (Mar. 2018 : May 17 – A.P.)

Answer:

Question 2.
Write the Opening entry on 1st Jan. 2013 in the books of Ram from the following:

Answer:

Question 3.
Record the Opening entry from the following assets and liabilities as on Jan. 1st, 2014:

Answer:

Question 4.
Pass Opening Journal Entry from the following particulars on 1^st April, 2013.

Question 5.
Record Opening entry on 1^st Jan. 2014 from the following assets and liabilities:


Answer:

Question 6.
Rectify the following errors dated on Dec. 31^st, 2013:
1. Machinery purchased Rs. 20,000, wrongly debited to Purchases a/c,
2. Commission received Rs. 3,000, wrongly credited to Interest received a/c,
3. Salaries paid to Accountant Prakash Rs. 10,000, debited to his personal a/c,
4. Purchased goods for Rs. 8,000, recorded as Rs. 80,000,
5. Paid cash to Rohit Rs. 5000, wrongly debited to Mohit a/c.
Answer:

Question 7.
Pass adjustment journal entries for the following:
1. Salaries Outstanding Rs. 2,000,
2. Insurance Paid in Advance Rs. 500,
3. Credit 5% Reserve for Bad and Doubtful Debts on Debtors amounted to Rs. 10,000,
4. Provide 10% Depreciation on Machinery. Machinery Value Rs. 20,000,
5. Closing Stock Rs. 15,000.
Answer:

Question 8.
Record the Closing Entries from the following Ledger Balances ofAshrith :

Answer:

Question 9.
Write Opening Entry as on Jan. 1^st 2014 from the following balance sheet of Venkat: Balance Sheet of Venkat as on 31^st Dec. 2013

Answer:

Question 10.
Write Opening Journal Entry from the following as on 1^st April 2013 : (Mar. 2018-T.S.)

Answer:

Student Activity

Visit any organisation/firm and record opening, closing and other entries of Journal proper.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 6th Lesson Subsidiary Books Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 6th Lesson Subsidiary Books

Questions

Question 1.
Explain the various Subsidiary Books with suitable examples.
Answer:
Separate Books or special books which are maintained to record a particular category of trans¬actions are known as “Subsidiary books”.
The journal is divided into eight subsidiary books. They are :
a) Purchase book : This book records all the goods purchased on credit. Cash purchases and purchase of assets are not recorded in this book.
Whenever goods are bought on credit we receive an invoice from the seller. It is called “Inward Invoice”. It is evidence for recording in purchase book.

b) Sales book : The goods sold on credit are recorded in this book. Cash sales and assets sold for cash or credit are not recorded in this book.
Whenever goods are sold on credit we send an Invoice to the customer. It is called “Outward Invoice”. It is evidence for recording in sales book.

c) Purchase returns book: This book is also known as returns outward book. This book records the goods returned to the suppliers. When goods are returned to their sellers a Debit Note’ is prepared and sent to the suppliers along with goods.

d) Sales returns book: This book is also known as returns inward book. This book records the goods returned by the customers. When the sellers receive goods back from the customer along with a debit note, then he prepares a credit note and sends to the customer.

e) Cash book: Cash book is used for recording all cash transactions i.e. cash receipts and cash payments either in cash or by cheque are recorded in this book.

f) Bills receivable book: This book is used to record all the bills received from the customers for the amount due. It contains details of acceptor of the bill, its due date, date bill, the amount due, etc.

g) Bills payable book: If the goods are purchased on credit and bills are accepted for the due amounts, all these bills payable are recorded in this book. It contains the amount due, date of bill, place of payment, due date, etc .

h) Journal proper : This book is used to record only those transactions, which cannot be recorded in any one of the seven subsidiary books side above.

Question 2.
Give the advantages of subsidiary books.
Answer:
Subsidiary Book Advantages:
a) Saving of Time : No need of writing the Journal Entries. Transactions are directly entered into their respective journals.
b) Division of Work: By entrusting different Subsidiary Books to different persons, division of principle can be implemented.
c) Easy Recording: Transactions can be recorded very fast and easy.
d) Improves Efficiency: Accounting work will be done efficiently by allotting work to different experts who prepare the Special Books.
e) Detection of Errors : Since Separate Books are maintained to record a particular set of transactions, errors can be easily noticed.

Question 3.
Explain about Purchases book and draw the pro forma of it.
Answer:
This book records all the goods purchased on credit. Cash purchases and purchase of assets are not recorded in this book.

Whenever goods are bought on credit we receive an invoice from the seller. It is called “Inward Invoice”. It is evidence for recording in purchase book. It is numbered serially and filed in a separate file.
Proforma of purchase book:

Purchase book contains five columns, such as Date, Particulars, Invoice No., L.F.No. and Amount.

Question 4.
Explain about Sales book and draw the pro forma of it.
Answer:
The goods sold on credit are recorded in this book. Cash sales and assets sold for cash or credit are not recorded in this book.
Whenever goods are sold on credit we send an invoice to the customer. It is called “Outward invoice”. It is evidence for recording in sales book. It is serially numbered and kept in a separate file.

Proforma of sales book:

Sales book contains five columns, such as Date, Particulars, Invoice No., L.F.No. and Amount.

Question 5.
Answer the following in not more than 5 lines. (Mar. ’17 – A.P.)
a) Invoice
b) Debit Note
c) Credit Note
d) Trade Discount
e) Journal Proper
Answer:
a) Invoice:
It is the document prepared by the supplier of goods with all the details like quantity, price discount offered and other terms and conditions. This is also known as “Inward Invoice”.

b) Debit Note: (Mar. 2019 – A.P.) (Mar. 2018 – T.S.)
If goods are returned to the supplier, a debit note or letter is sent along with goods, informing the supplier about the debit given to his account for the value of the goods returned. This note is known as debit note.

c) Credit Note:
If the customer returned the goods, a credit note is sent to him by the traders informing the customer that his account has been credited with the value of the goods returned.

d) Trade Discount:
It is a reduction in the catalogue price of an article. This is given by the wholesaler to the retailer to enable him to sell at a catalogue price and make a profit. It is not entered in books.

e) Journal Proper: (May ’17 – A.P.)
This book is used for recording only those transactions which cannot be recorded in any one of the seven subsidiary books said above.
Examples: Opening entries, closing entries, adjustment entries, transfer entries.

Problems

Question 1.
Record the following transactions in the purchase book.

Hint 1: For transaction dated on 11^th Calculate trade discount @ 10% on Rs. 5,000/- i.e. 5000 × \(\frac{10}{100}\) = 500, and take net purchases as 5000 – 500 = 4500.
Hint 2: Transaction dated 17^th March is a cash transaction. So, it is not to be taken in purchase book.
Answer:

Question 2.
Prepare Purchase Book from the following:

Hint 1: For transaction dated on 10^th calculate discount @ 10% on 10,000/-
i.e. 1,000 and takes net purchases as 10,000 – 1,000 = 9,000.
Hint 2: Transaction dated on 12^th is a cash transaction. So, it is not entered in purchases book.
Answer:

Question 3.
Record the following in Purchases Book:
2012
March 1^st Purchase goods on credit from Chand traders Invoice No. 301.
120 reams of white paper @15 per ream
60 dozen ink pots @ 25 per dozen

March 8^th Purchased from Gupta traders Invoice No. 403
10 Drawing boards @ 30 each
40 Notebooks @ 20 each

March 10^th Purchased goods from Goyal and Company for cash 3,000.

March 15^th Purchased goods from Ankit Rs. 10,000 as per Invoice No. 450.

Hint 1 : Transaction dated on March 1^st Net Purchases amount is to be calculated as, (120 × 15) + (60 × 25) = 1800 + 1500 = 3300
Hint 2 : Transaction dated on March 8^th Net Purchases amount is,
(10 × 30) + (40 × 20) = 300 + 800 = Rs. 1100
Answer:

Question 4.
Enter the following in Purchase Book and Purchase Returns Book: (Mar. 2019 – A.P. & T.S.)

Answer:

Question 5.
Prepare Sales Book (May 17 – T.S.)

Hint 1: Trade discount is 4000 × 5/100. Net sales = 3,800.
Hint 2: Transaction dated on 14th is a Cash transaction.
Answer:

Question 6.
Enter the following transactions in Sales Book and prepare Ledger.

Hint 1: For transaction dated on 18^th calculate trade discount i.e. 8000 × 10/100 = 800, net sales = 7200.
Hint 2: Transaction dated on 20th is a cash transaction.
Answer:

Ledgers:

Question 7.
Prepare Sales Book and Sales Returns Book from the following. (Mar. 2018 – A.P. & T.S.)

Answer:

Question 8.
Record the following transactions in Proper Subsidiary Books.

Answer:

Question 9.
Enter the following transactions in the related Subsidiary Books.

Hint 1: For transaction dated on 10^th Trade discount is 15000 × 10/100 = 1500
Net purchases = 13500
Hint 2: Transaction dated on 18^th is a cash transaction.
Hint 3: For transaction dated on 20^th Trade discount is 3000 × 5/100 = 150
Net sales = 2850
Hint 4: Transaction dated on 26^th is to be entered in journal proper.
Hint 5: For transaction dated on 27^th Trade discount is 8000 × 15/100 = 1200
Net sales = 6,800
Answer:

Question 10.
Prepare Purchases Book.

Answer:

Question 11.
Enter the following transactions in Purchases Book and post them in Ledger.

Answer:

Ledgers:

Question 12.
Record the following in Sales Book and Sales Returns Book.


Answer:

Question 13.
Enter the following transactions in Proper Subsidiary Books: (May ’17 – A.P.)

Hint : Transaction dated Nov. 19^th trade discount 15% of 10000 i.e.,
10000 × 15/100 = 1500 is to be deducted from purchase amount Rs. 10000.
Net purchases 10000 – 1500 = 8500

Question 14.
From the following transactions prepare Sales Book and Sales Returns Book. (IPE. Mar. 14)

Answer:

Question 15.
Enter the. following transactions in proper Subsidiary Books. (IPE. Mar. 14)

Answer:

Student Activity

Collect the invoices, debit notes, credit notes from any business organization.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 5th Lesson Ledger Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 5th Lesson Ledger

Short Answer Questions

Question 1.
Define ledger and explain the advantages of ledger.
Answer:
Ledger is a book which facilitates recording of all types of transactions related to Personal, Real and Nominal. All the debit and credit aspects which are recorded in the journal are transferred to the respective accounts in the ledger.
According to L.C.Cropper, “the book which contains a classified and permanent record of all transactions of a business is called the Ledger”.

Advantages:

The following are the advantages of ledger.

1. Complete information at a glance : All the transactions pertaining to an account are collected at one place in the ledger. By looking at the balance of that account, one can understand the collective effect of all such transactions at a glance.
2. Arithmetical accuracy: With the help of ledger balances, Trial balance is prepared to know the arithmetical accuracy of accounts.
3. Result of business operations: It facilitates the preparation of final accounts for ascertaining the operating result and the financial position of the business concern.
4. Accounting information : The data supplied by various ledger accounts are summarized, analyzed and interpreted for obtaining various accounting information.

Question 2.
What do you mean by posting ? Explain the rules relating to posting.
Answer:
The process of transferring the entries recorded in the journal or subsidiary books to the respective accounts opened in the ledger is called ‘Posting’. In other words’, posting means process of grouping of all the transactions relating to a particular account at one place.

RULES:

Following steps should be taken into account while making posting.

A) Opening of separate accounts: Each transaction affects minimum two accounts for which separate accounts are to be opened in the ledger. All transactions relating to an account, debit as well as credit, are to be posted to know the net position of the account.

B) Posting journal entry to concerned side: If an account is debited in the journal, posting will be made on the debit side of the account in the ledger. Similarly, if an account is credited in the journal, that account would be credited in the ledger.

C) Use of word ‘To” and “By” : While writing the debit side, commence with word “To” and write the name of the account, which is credited in the journal. Write the word “By” on the credit side before writing the name of the account that is debited in the journal.

D) Balance in account: The difference between debit and credit totals of an account is the net position of the account, known as balance of the account.

Very Short Answer Questions

Question 1.
What is ledger ? (Mar. ’15 – T.S.)
Answer:
Ledger is a book which facilitates recording of all types of transactions related to Personal, Real and Nominal accounts separately in related accounts. In other words, the group of accounts recorded in a book is called Ledger’. Ledger is also called ‘Book of Final Entry’.

Question 2.
What is posting ? (Mar. ’17 – T.S.)
Answer:
The process of transferring the entries recorded in the journal or subsidiary books to the respective accounts opened in the ledger is called Posting’. It is also process of grouping of all the transactions relating to a particular account at one place.

Question 3.
What do you mean by balancing of an account ?
Answer:
Balancing means the writing of the difference between the amount columns of the two sides in the ledger (smaller total) side, so that the totals of the two sides become equal.

Question 4.
What is debit balance ?
Answer:
The excess of debit total over the credit total is called the debit balance.

Question 5.
What is credit balance ?
Answer:
The excess of credit total over the debit total is called the credit balance.

Problems

Question 1.
Journalise the following transactions of Mr. Prahlad and post them in the ledger and balance the same.
2013
February 01 Prahlad invested Rs. 5,00,000 cash in the business
February 03 Paid into Bank Rs. 60,000
February 05 Purchased building for Rs. 2,00,000
February 07 Purchased goods for Rs. 50,000
February 10 Sold goods for Rs. 80,000
February 15 Withdrew cash from bank Rs. 12,000
February 25 Paid internet Rs. 2,000
February 28 Paid Salary Rs. 18,000
Answer:
Journal Entries in the books of Mr. Prahlad


Ledger Accounts :

Question 2.
Prepare Pavan account from the following: (May ’17 – T.S.)

Answer:

Question 3.
Prepare Sudha account from the following: (Mar. 2019 – T.S.) (May 17 – A.P.)

Answer:

Question 4.
Prepare Swami’s account from the following: (Mar. 2018 – T.S.)

Answer:

Question 5.
Prepare Machinery account from the following:

Answer:

Question 6.
Prepare the Ledger account of Bhavya from the following particulars:

Answer:
Journal Entries in the books of Bhavya

Question 7.
From the following information prepare Praveen’s Account as on 31-3-2014. (Mar. 2018 – A.P.)

Answer:

Question 8.
Prepare Vamsi’s Account from the following.

Answer:

Question 9.
Prepare Anurudh ‘s Account from the following. (Mar. 2019 – A.P.)

Answer:

Student Activity

Visit any bank or any organisation and find the process of preparation of accounts.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 4th Lesson Journal Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 4th Lesson Journal

Very Short Answer Questions

Question 1.
What is Journal ?
Answer:
The word ‘Journal, is derived from the Latin word Journ’ which means a day. Therefore journal means a day book where in day-to-day business transactions are recorded in chronological order. This is also known as ‘Book of original entry’ or ‘Book of primary entry’.

Question 2.
What is Journalizing ?
Answer:
The process of recording the transaction in the Journal is called “Journalizing”.

Question 3.
What is Journal Entry ?
Answer:
The entry made in the Journal is called “Journal entry”.

Question 4.
What is Narration ?
Answer:
Narration means a brief explanation of the transaction for which the entry is recorded is written within the brackets known as ’narration’.

Problems

Question 1.
Mr. Anil started business with cash Rs. 75,000 on 1^st January 2014. The details of business transactions for the month of January are as follows.

Answer:

Question 2.
Pass journal entries in the books of Mr. Varan.

Answer:

Question 3.
Journalize the following transactions.

Answer:

Question 4.
Journalize the following transactions in the books of Bhagat.

Answer:

Question 5.
Journalize the following transactions.

Answer:

Question 6.
Journalize the following transactions in the books of Atma Ram.

Answer:
Journal Entries in the books of Atma Ram

Question 7.
Journalize the following transactions.
March 01 Commenced business with cash Rs. 13,000 and stock 7,000
March 02 Bought plant Rs. 5,000
March 03 Paid for postage Rs. 500
March 04 Withdrew cash for office use Rs. 1000
March 05 Paid for Sundry Expenses Rs. 500
March 06 Paid into bank Rs. 10,000
March 07 Paid salaries Rs 5,000
Answer:

Question 8.
Write journal entries in the books of Sudha & Co.

Answer:
Journal Entries in the book of Sudha & Co

Student Activity

Visit any organisation and find journal entries from its journal.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 3rd Lesson Double Entry Book Keeping System Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 3rd Lesson Double Entry Book Keeping System

Short Answer Questions

Question 1.
Define double entry system Of accounting and explain its features.
Answer:
According to J.R. Batliboi “Every business transaction has two-fold effect and that it affects two accounts in opposite directions and if a complete record were to be made of each such transaction, it would be necessary to debit one account and credit another account. This recording of the two-fold effect of every transaction has given rise to the term Double Entry System”.

Features:

1. Every business transaction affects two accounts.
2. Each transaction has two aspects i.e. debit and credit.
3. It is based upon accounting assumptions, concepts and principles.
4. It helps in preparing balance which is a test arithemetical accuracy in accounting.
5. Finally it helps in preparation of final accounts with the help of trial balance.

Question 2.
Explain different types of accounts along with their debit, credit rules. (Mar. 2019; May ’17 – A.P. & T.S.) (Mar. 2018, ’17 – A.P.)
Answer:
All the transactions are divided into two types of accounts. Personal accounts and Impersonal accounts. The impersonal accounts are further subdivided into Real accounts and Nominal accounts. There are three types of accounts in all. They are Personal accounts, Real accounts and Nominal accounts.

1) Personal accounts : The accounts which relate to individuals or persons are known as “Personal accounts’. Personal accounts are of two types. They are Natural persons and Artificial persons.
Ex: Ramesh a/c, Sita a/c, Andhra bank a/c, capital a/c, drawing a/c, outstanding salaries a/c.
Rule :
Debit the receiver
Credit the giver

2) Real accounts : Accounts relating to properties and assets which are owned by the business concern are, real accounts which include tangible and intangible assets.
Ex: Cash a/c, bills receivable a/c, goods a/c, furniture a/c, goodwill a/c.
Rule : Debit what comes in
Credit what goes out

3) Nominal accounts : These accounts do not have any existence, form or shape. They relate to incomes and expenses or gains and loss of a business concern.
Ex : Salaries a/c, commission a/c, rent a/c, discount a/c, bad debts a/c.
Rule : Debit all expenses and losses
Credit all incomes and gains

Question 3.
Explain the advantages of double entry system.
Answer:
Advantages : The following are the main advantages of double entry system.

1. Complete record of transactions : Double entry system maintains a complete record of all business transactions, because it records both the aspects of financial transaction.
2. Scientific system : This is the only scientific system of recording business transactions. It helps to attain the objectives of accounting.
3. Ascertainment of profit or loss : It helps in ascertainment of profit or loss for a particular period by preparing the profit and account.
4. Ascertainment of the financial position : The financial position of the concern can be as¬certained at the end of each period by preparing balance sheet.
5. Full details for control : This system permits accounts to be kept in a very detailed form, and thereby provides sufficient information for the purpose of control.
6. Comparative study: The results of one year may be compared with those of previous years and the reasons for change may be ascertained.
7. Helps in decision making: This system provides sufficient information to the management for making decision.

Very Short Answer Questions

Question 1.
Double entry book keeping system (May. ’17 – A.P. ; Mar. ’15 – T.S.)
Answer:
According to J R. Batliboi Every business transaction has a two-fold effect that it affects two accounts in opposite directions and if a complete record were to be made of each such transaction, it would be necessary to debit one account and credit another account. This recording of the two-fold effect of every -transaction has given rise to the term Double Entry System”.

Question 2.
What is an account ? (Mar. 2019 – T.S.)
Answer:
Every transaction has two aspects and each aspect has an account. It is stated that an account is ‘a summary or relevant transactions at one place relating to a particular head’.

The common form of an account has three parts.

1. A Title’ that describes the name of the asset, liability or equity account.
2. A ‘left side’ or the “debit” side
3. A right side’ or the “credit” side

Format of Account

Question 3.
Explain accounting equation.
Answer:
Accounting equation is based on dual aspect concept (Debit and Credit). The accounting equa¬tion shows the relationship between the economic resources of a business and the claims against those resources.
Economic Resources = claims
Another term for economic resources is assets.
The claims consist of liabilities and owners claims or equity.
Assets = Equities or Capital + Liabilities

Question 4.
Impersonal accounts
Answer:
Impersonal accounts are two types i.e. Real accounts and Nominal accounts.

1. Real accounts: Accounts relating to properties and assets which are owned by the business concern are, Real accounts, which include tangible and intangible accounts.
   Ex: Cash a/c, bill receivable a/c, goodwill a/c, goods a/c, furniture a/c.
2. Nominal accounts: These accounts do not have any existence, form or shape. They relate to incomes and expenses or gains, and losses of a business concern.
   Ex: Salaries a/c, bad debts, rent a/c, commission a/c, discount a/c etc.

Student Activity

Visit a nearest business organization and make a list of various personal, real and nominal accounts from the books of accounts.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 2nd Lesson Accounting Principles Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 2nd Lesson Accounting Principles

Essay Type Questions

Question 1.
What are accounting concepts? Explain any four accounting concepts in detail.
Answer:
The term concept means an idea or thought. Basic accounting concepts are the fundamental ideas underlying the theory and practice of financial accounting. The Ifnpdftant accounting concepts are –

1. Business Entity Concept: Business is treated as separate form the proprietor. All the transactions are recorded in the books of business and not in the books of the proprietor. The accounting system gives information only about the business and not its owner. The proprietor is also treated as a creditor for the business.
2. Dual Aspect Concept: Dual aspect concept principle is the basis for Double Entry System of book-keeping. All business transactions recorded in accounts have two aspects : receiving benefit and giving benefit.
   For example, when a business acquires as asset: receiving of benefit. It must pay cash : giving of benefit.
3. Going Concern Concept: According to this concept it is assumed that the business will continue for long time. All transactions are recorded from this point of view. The investors lend money and the creditors supply goods with the expectation that the enterprise would continue for long period of time. Hence financial statements are prepared on a going concern basis and not on liquidation basis.
4. Money Measurement Concept: This concept suggests that accountancy should record only the transactions which can be measured in terms of money. The transactions which cannot be measured in terms of money fall beyond the scope of accountancy.
   For example the events of machinery breakdown is not recorded as it does not have monetary value. However, the expenditure incurred for the repair of the machinery can be measured in monetary value.

Question 2.
What are accounting conventions ? Explain them briefly.
Answer:
Conventions mean customs or traditions. These conventions provide useful guidance in preparing accounts or financial statements. The important accounting conventions are –

1. Convention of Disclosure : Accounting statements should disclose fully and completely and significant information, based on which, decisions can be taken by various interested parties. It involves proper classification and explanations of accounting information which are published in the financial statements.
2. Convention of Materiality : According to this convention only those events should be recorded which have a significant bearing and insignificant things should be ignored. The avoidance of insignificant things will not materially off the records of the business.
3. Convention of Consistency: The accounting practices should be remained same from one year to another year. This is useful to the entrepreneur to compare the financial statements of one year with that of the other years. For example, an organization should not change its method of depreciation every year.
4. Convention of Conservation : According to this convention the accountant has to record the actual financial position. We should be careful in calculating profits. Profits should never be anticipated or exaggerated. But losses should be anticipated and provided for. Example : While taking the value of the closing stock the market cost or actual cost which ever is less is to be taken into the books of accounts.

Short Answer Questions

Question 1.
Explain business entity concept of accounting. (Mar. 2018 – A.P. & T.S.; Mar. ’17 – A.P.; May 17 – T.S.)
Answer:
Business is treated as separate from the proprietor. All the transactions are recorded in the books of business and not in the books of the proprietor. The accounting system gives information only about the business and not its owner. The proprietor is also treated as a creditor for the business.

Question 2.
Explain money measurement concept. (Mar. 2019 – T.S.)
Answer:
This concept suggests that accountancy should record only the transactions which can be measured in terms of money. The transactions which cannot be measured in terms of money fall beyond the scope of accountancy.
For example the event of machinery breakdown is not recorded as it does not have monetary value. However, the expenditure incurred for the repair of the machinery can be measured in monetary value.

Question 3.
Explain convention of conservatism. (Mar. ’17 – T.S.)
Answer:
According to this convention the accountant has to record the actual financial position. We should be careful in calculating profits. Profits should never be anticipated or exaggerated. But losses should be anticipated and provided for.
Example : While taking the value of the closing stock the market cost or actual cost whichever is less is to be taken into the books of accounts.

1. Convention of Disclosure : Accounting statements should disclose fully and completely and significant information, based on which, decisions can be taken by various interested parties. It involves proper classification and explanations of accounting information which are published in the financial statements.
2. Convention of Materiality : According to this convention only those events should be recorded which have a significant bearing and insignificant things should be ignored. The avoidance of insignificant things will not materially off the records of the business.
3. Convention of Consistency: The accounting practices should be remained same from one year to another year. This is useful to the entrepreneur to compare the financial statements of one year with that of the other years. For example, an organization should not change its method of depreciation every year.
4. Convention of Conservation : According to this convention the accountant has to record the actual financial position. We should be careful in calculating profits. Profits should never be anticipated or exaggerated. But losses should be anticipated and provided for.
   Example : While taking the value of the closing stock the market cost or actual cost which ever is less is to be taken into the books of accounts.

Short Answer Questions

Question 1.
Explain business entity concept of accounting. (Mar. 2018 – A.P. & T.S.; Mar. ’17 – A.P.; May 17 – T.S.)
Answer:
Business is treated as separate from the proprietor. All the transactions are recorded in the books of business and not in the books of the proprietor. The accounting system gives information only about the business and not its owner. The proprietor is also treated as a creditor for the business.

Question 2.
Explain money measurement concept. (Mar. 2019 – T.S.)
Answer:
This concept suggests that accountancy should record only the transactions which can be measured in terms of money. The transactions which cannot be measured in terms of money fall beyond the scope of accountancy.
For example the event of machinery breakdown is not recorded as it does not have monetary value. However, the expenditure incurred for the repair of the machinery can be measured in monetary value.

Question 3.
Explain convention of conservatism. (Mar. ’17 – T.S.)
Answer:
According to this convention the accountant has to record the actual financial position. We should be careful in calculating profits. Profits should never be anticipated or exaggerated. But losses should be anticipated and provided for.
Example : While taking the value of the closing stock the market cost or actual cost whichever is less is to be taken into the books of accounts.

Question 4.
Explain convention of consistency.
Answer:
The accounting practices should be remained same from one year to another year. This is useful to the entrepreneur to compare the financial statements of one year with that of other years. For example, an organization should not change its method of depreciation every year.

Question 5.
Write a brief note on accounting standards.
Answer:
Accounting standard is a principle that guides and standardizes accounting practices. The Generally Accepted Accounting Principles (GAAP) are a group of accounting standards that are widely accepted as appropriate to the field of accounting. Accounting standards are necessary so that financial statements are meaningful across a wide variety of businesses; otherwise, the accounting rules of different companies would make comparative analysis almost impossible.

Student Activity

Visit a nearest business organization and observe the book keeping and accounting systems adopted by it.

Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 1st Lesson Book Keeping and Accounting Textbook Questions and Answers.

AP Inter 1st Year Accountancy Study Material 1st Lesson Book Keeping and Accounting

Short Answer Questions

Question 1.
Explain the advantages and limitations of Accounting.
Answer:
Advantages of Accounting: The following are the main advantages of accounting.

1. Permanent and Reliable Record : Accounting provides permanent record for all business transactions and provides reliable information to different interested parties.
2. Net Result of Business Operations: Accounting provides the final result (Profit or Loss) of business for a given period of time.
3. Ascertainment of Financial Position: It is not enough to know only the profit or loss, but the proprietor requires a full picture of his financial position to plan for the next year’s business.
4. Facility of Comparative Study: Accounting provides the facility of comparative study of the various aspects of the business such as profits, sales, expenses, etc.
5. Control over Assets: In the course of business, the proprietor acquires various assets like building, machinery, furniture, etc. which are well protected by generating records.

Limitations of Accounting: The following are the limitations of Accounting.

1. Records only monetary transactions : Accounting considers monetary transactions only, non-monetary transactions like quality, organization culture, units of production sales, etc. are ignored in accounting.
2. Historical in nature : Accounting considers only historical transactions, i.e transactions which have occurred in the past only recorded in accounting books.
3. Price level changes are not considered: Accounting does not consider price level changes which may occur from time to time, thus, it does not reflect the current position.
4. Does not provide realistic information: While preparing the books of account, subjectivity of the accountant may influence the final results of the business enterprise. This may not provide realistic information which in turn affects the overall results of the business concern.

Question 2.
Distinguish between Book-keeping and Accounting.
Answer:

Question 3.
Explain the steps involved in Accounting process.
Answer:
Accounting process:

1. Identifying: Identifying the business transactions from the source documents.
2. Recording: The next function of accounting is to keep a systematic record of all business transactions, which are identified in an orderly manner, soon after their occurrence in the journal or subsidiary books.
3. Classifying : This is concerned with the classification of the recorded business transactions so as to group the transactions of similar type at one place.
4. Summarizing : It is the process of finding the totals of balances of all accounts so as to prepare trial balance.
5. Reporting : The classified information available from the trial balance is used to prepare – profit and loss account and balance sheet in a manner useful to the users of accounting
   information.
6. Analysing: It establishes the relationship between the items of the profit and loss account and the balance sheet.
7. Interpreting : It is concerned with explaining the meaning and significance of the relationship so established by the analysis. Interpretation should be useful to the users.

Very Short Answer Questions

Question 1.
What is Book-keeping ? (Mar. 2018 – A.P. ; Mar. ’17 – T.S. ; May ’17 – A.P. & T.S.)
Answer:
Book-keeping is the art of recording business transactions in a systematic manner. It covers four activities i.e. identifying the transactions, measuring the identified transactions, recording in a chronological order and classifying the recorded transactions.

Question 2.
Define Accounting. (Mar. 2019, ’17 – A.P.)
Answer:
The American Institute of Certified Public Accountants has defined the Accounting as “the art of recording, classifying and summarizing in a significant manner in terms of money transactions and events which in part, at least of a financial character and interpreting the results thereof”.

Question 3.
What is an Accounting cycle ? (Mar. 2018 – T.S. ; Mar. ’15 – A.P. & T.S.)
Answer:
An accounting cycle is a complete sequence beginning with the recording of transaction and ending with preparation of financial statements. It involves journalizing, ledger posting, balancing, trial balance, preparation of trading, profit and loss account and balance sheet.

Student Activity

1. Goto nearest business organizations and observe the book keeping and accounting systems adopted by them.
2. Observe the accounting procedures adopted by large size or medium size organizations located nearby them.