Book 9 Account for 2077_final

Key Terms Assembly – gathering of a large number of concerned members of an Auditor organization with same specified objective. Dividend Endorsement of minute – a person who examines the books of account. Meeting Minute – part of profit which is distributed to the shareholders. Minute book Minuting – act of giving approval to the decisions made in meeting by Quorum making signature. Seminar – gathering of few number of concerned individuals of an organization with some specified objective. – the systematic record of the decisions made in meeting or assembly. – a special book used to keep the record of the decisions made in the meeting or assembly. – act of noting down the decisions drawn from the meeting or assembly. – minimum required number of participants to conduct any program or meeting. – gathering of professional academicians or subject experts to discuss over a particular issue to share ideas and draw conclusion. A. Very short answer questions 1. What is meeting? 2. State any two types of meeting. 3. What is assembly? 4. State any two types of assembly. 5. Write any two agenda of annual general assembly. 6. What is meant by multilateral meeting? 7. What is endorsement of minute called in Nepali? Meeting, Assembly and Seminar 151

B. Short answer questions 1. What is meeting? Describe in brief about secret meeting and committee meeting. 2. Describe in brief about unilateral and multilateral meeting with its importance. 3. Define board meeting and mention its provision under company act 2063. 4. What is assembly? Write in brief about mass assembly. 5. Define annual general assembly and mention the agenda for such assembly. 6. Describe in brief about extra ordinary assembly and conference. 7. Differentiate between meeting and assembly in any five points. 8. Describe the forms of meeting or assembly on the basis of agenda or decision process. 9. What is minute? Mention the importance of minute. 10. What is meant by drafting a minute? Write the considerable points for drafting a minute. 11. Write short notes on: a) Endorsement of minute b) Annual general assembly 12. What is seminar? State the sequential steps of organizing seminar. C. Long answer questions 1. Define the term meeting and explain the different types of meeting in brief. 2. What is meant by assembly? Describe the types of assembly in brief. 3. What is minute of meeting? Discuss its importance and confirmation procedure.  152 Office Management and Accountancy

10 Chapter ACCOUNTING Learning Objectives After studying this chapter, the readers will be able to :  define accounting and mention its objectives,  introduce the types of accounting,  understand different terminologies of accounting,  explain the basic accounting concepts or assumptions,  define single entry system and mention its merits and demerits,  define double entry system and explain its features,  state the advantages and disadvantages of accounting,  differentiate between single entry system and double entry system. Introduction Every organization performs the different activities in order to achieve the predetermined objective. It requires to collect a number of information for effective mobilization of office resources. Accounting is a major and reliable source for collection of financial information. According to the nature, objective and need, a number of financial transactions are performed daily in office. Furthermore, a business firm deals with a number of financial events such as purchase and sale of goods, receipt and payment of money, deposit and withdrawal of cash etc. Such transactions should be recorded systematically in the books of account. It helps to know the receivables and payables, income and expenditures, profit and loss, assets and liabilities etc. at the end of certain period. Thus, accounting is the process of recording, classifying, analysing, interpreting and communicating the financial information to the various users. The systematic and scientific recording and reporting of financial transcations play an important role in the business firm. Accounting 153

Concept and definition The term ‘accounting’ is broader than the book keeping. Book keeping is a part of accounting. It is concerned only with the systematic recording of financial transactions. But accounting is concerned with the act of recording, classifying, summarizing and analyzing the financial transactions of a business firm in order to determine the profit or loss and financial condition of the firm. It also helps to communicate the operating results and financial position to all the concerned parties of the firm. Following are the definitions of accounting: “Accounting is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the user of information.” American Accounting Association “An accounting system is a means of collecting, summarizing, analyzing and reporting in monetary terms, information about the business.” R.N. Anthony Accounting is the systematic process of recording, classifying, analyzing and interpreting the financial transactions of the firm and communicating the results of the profit or loss and financial position to the various users . Short Notes to Remember (SNR 10.1)  Book keeping is concerned with the act of maintaining permanent records of day to day financial transactions of the firm in systematic manner and chronological order.  Book keeping is the part of accounting and thus can be said that accounting starts when book keeping ends. Objectives of accounting The main objectives of accounting are as follows:  To keep the permanent record of financial transactions.  To classify the financial transactions as per their nature.  To provide summary of the classified transactions.  To determine the operating result of the business firm.  To disclose the true financial position of the firm on a particular date.  To communicate the financial information of profit or loss and financial condition of the firm to various users.  To facilitate in auditing the books of account of the firm. Branches of accounting Generally, accounting means to financial accounting. It is because accounting was originated from financial accounting and all the organizations have applied it. The types of accounting are as follows: 154 Office Management and Accountancy

Figure: 10.1 Branches of accounting Accounting Financial accounting Cost accounting Management accounting Financial accounting The accounting which is related to the financial activities of the firm is called financial accounting. It maintains the permanent record of financial transactions of the firm and communicates the information to concerned parties. Financial accounting uses single entry system or double entry system for recording the financial transactions. It is adopted by all types of offices to know the financial position at the end of certain period. The accounting discussed in this book is also the financial accounting. Financial accounting is an art or process of recording, classifying and summarizing the financial transactions in systematic manner with a view to communicate the results to concerned parties. Cost accounting The accounting which is related to the cost and cost related information of the manufacturing concern is known as cost accounting. It records, classifies and analyses the cost related data and information in systematic manner. It is used by the organizations involving in production of various goods. Cost accounting helps to determine the cost of production and control the cost. The cost accounting is also useful for formulating plans and policies related to the cost and take an effective decision. It also helps in determining the selling price of the product by providing cost related information to the concerned authority. Cost accounting is the systematic process of recording, classifying, analyzing and communicating the cost related information for the purpose of determining cost of production and selling price of the product. Management accounting Management accounting is another branch of accounting. It refers to the art of making effective decision with the help of information collected from cost accounting, financial accounting and other sources. Nowadays, it is very difficult to run the business organization successfully and efficiently due to tough competition. It requires prompt and proper decision about various business matters to go ahead over the competitors Accounting 155

and get success. Furthermore, new technologies and methods have been introducing day by day for the production and distribution of goods or services. Thus, management accounting aims to provide actual and reliable information to the management for the decision making process. It is useful to the management for planning, policy making, controlling and decision making process of the organization. Management accounting is a branch of accounting which collects the information from cost accounting and financial accounting, analyses them and provides to the management for planning, policy making and controlling purpose. Basic principles or concepts of accounting Accounting is the language of business. It requires to follow certain rules, principles and procedures for systematic recording of financial events of the firm. The main purpose of accounting is to ascertain the real financial position of the organization. Thus, to achieve this objective, accounting maintains the different books of account for systematic and scientific recording. However, the act of maintaining books of account correctly and systematically is not an easy task. Thus, the accounting should follow its own principles and concept for easy, correct and scientific recording and analyzing of financial information. The principles, concepts or assumptions which are followed in accounting for easy, correct, scientific and systematic recording and reporting of financial transactions are known as basic principles or concept of accounting. Short Notes to Remember (SNR 10.2)  Basic accounting concepts or principles are widely accepted and adopted and thus known as Generally Accepted Accounting Principles ( GAAP). Some of the basic principles or concepts of accounting are described below: a. Business entity concept In accounting, the business organization and its owner are treated as two separate entities. Thus, the business entity concept assumes that the financial transactions of the owner and business firm should be recorded separately. Using this concept, amount invested by owner into business is recorded under capital account and the cash or goods taken by the owner is recorded under drawing account. Finally, all the transactions associated with the owner should be adjusted with the capital account. Thus, according to this concept, the transactions of business and the transactions of owner should not be mixed up in books of account. All the financial transactions should 156 Office Management and Accountancy

be recorded from the view point of business firm not from the view point of owner. This concept helps to determine the operating result and financial position of the business firm. The accounting concept that assumes or considers the business and its owners as distinct entity for recording and reporting the financial transactions is known as business entity concept. b. Money measurement concept Human beings perform two types of activities i.e. financial activities and non- M T  emory ips financial activities. The transactions which  Business entity concept can be expressed and measured in terms of  Money measurement concept monetary value i.e. rupees, dollar, pound  Going concern concept etc are called financial transactions. On  Accounting period concept the other hand, non-financial transactions  Cost concept can not be measured and expressed  Matching concept into monetary value. Thus, money  Double entry concept measurement concept assumes that only  Revenue realization concept the financial transactions are recorded in accounting. It means non-financial transactions are not considered for recording purpose in the books of account. The money measurement concept helps to express the value of goods, assets and liabilities into monetary value. The accounting concept of assuming only the financial transactions for recording in the books of account and reporting about the profit or loss and financial condition of the firm is known as money measurement concept. c. Going concern concept From the view point of accounting, every business firm is established to continue its transactions over a indefinite period of time. Thus, the business incurs heavy expenditure with a view to take benefit for many years. Besides, it also purchases different fixed assets such as land, building, machinery, furniture which are used for a number of years and recorded in the books assuming going concern concept. Due to this concept, the value of such fixed assets is always shown in the balance sheet at cost price after deducting the amount of depreciation. The accounting concept which assumes that every business firm is established for indefinite time period and continue its activities for unlimited duration is known as going concern concept. d. Accounting period concept According to going concern concept, the business is run for indefinite period of time. But, it is almost impossible to ascertain the profit or loss and financial Accounting 157

position of the firm for the whole life at once. On the other hand, every businessman is always interested to know its operating result and financial position. Thus, in order to fulfill this objective, the whole life of business is divided into certain interval of time which is known as accounting period. Generally, the accounting period will be of one year i.e. twelve months. Thus, the accounting period concept facilitates the determination of profit or loss and financial position of the firm on a particular date. It may start on any date such as 1st Shrawan, 1st January, 1st Baishakh etc. and ends on completion of twelve months. At the end of accounting period, financial statements are prepared to know the profit or loss and financial position of the business firm. The concept of dividing the indefinite life of the business into different time intervals having each of normally one year for the purpose of communicating financial performance is known as accounting period concept. Short Notes to Remember (SNR 10.3)  In Nepal, accounting period starts on 1st Shrawan of every year and ends on the last day of Ashad of the next year and it is also called fiscal year. e. Cost concept In accounting, cost means the expenses incurred to earn revenue. According to the cost concept, only the cost incurred during a particular period to earn revenue are considered for recording purpose. When a business firm takes benefit from any cost or expenditure in future period, it is not assumed as the cost of present accounting period. It further states that any expenditure which is expired but not paid yet is also included in the cost of current accounting period. On the other hand, all the fixed assets purchased in the business are recorded on their cost price after deducting the amount of depreciation. It means the valuation of such assets is not made on the ever fluctuating market price while preparing balance sheet at the end of accounting period. The accounting concept which assumes that the value of fixed assets should be recorded in the books of account at their cost price not in ever fluctuating market price for the correct ascertainment of financial position is known as cost concept. f. Matching concept The business firm earns revenue from various sources. It also makes expenditure on various heads. At the end of each accounting period, it is necessary to determine the profit or loss of a business by making comparison between total revenue and total expenditure incurred in the same period. Thus, the matching concept assumes that the total revenues earned by the business firm in a period should be matched with the total expenses incurred in the same period to determine the true profit or loss of the firm. If the revenue is higher than expenditure, it is called profit and if the expenditure is higher 158 Office Management and Accountancy

than revenue, it is called loss. For this, profit and loss account is prepared on a particular date at the end of accounting period. The accounting concept which assumes that the total revenue of the business firm in certain period should be matched with the total expenditure of same period in order to determine the profit or loss of the firm is known as matching concept. g. Double entry concept Under double entry concept of accounting, every business transaction is recorded by showing double effects in two sides i.e. debit and credit. It means every transaction affects in two sides of two different accounts. It affects once in debit side of one account and again in credit side of another account. But the amounts remain equal. Due to this, all types of statements and accounts are prepared considering the principle of equality and both sides always remain equal. The accounting concept in which the financial transactions are recorded by showing two fold effects in two different accounts with the equal amount in both sides is called double entry concept. h. Revenue realization concept Under the realization concept of accounting, the actual revenue is considered when goods are sold or services are rendered to the customers. It does not matter whether such goods or services are transferred either on cash or credit. But any amount which is received in advance for the goods to be supplied or services to be rendered later on is not treated as revenue of the period. Further, it is not compulsory to collect the revenue in cash immediately after selling goods or rendering services. Thus, the realization concept states that the revenue should be counted in the period of earning. Due to this concept, the receipt of order is not considered as revenue until the goods are actually supplied against the order. Thus, at the end of accounting period, the amount of receivables, payables, accrued income, advance income, bad debts etc should be considered while preparing financial statements. The accounting concept which assumes that the revenue of the firm should be considered only after the sale of goods or services not at the time of receiving order is known as revenue realization concept. Accounting system The system which is adopted by the business firm for recording, classifying, analyzing and communicating the financial transactions is known as accounting system. Following are the accounting system used for recording the financial transactions: Accounting 159

Figure: 10.3 Accounting system Accounting system Single entry system Double entry system SINGLE ENTRY SYSTEM Concept and definition The accounting system which maintains the record of financial transactions considering the single effect is known as single entry system. It does not follow the basic accounting principles for recording of transactions. It does not consider the dual effect of financial transactions. It maintains only the record of personal accounts and cash items. It ignores real and nominal accounts. Thus, it prepares cash book and personal account of debtors and creditors. For example, while making payment of salary to staffs Rs. 10,000, it records the effect of cash but ignores the salary account as expense. Similarly, for purchase of goods worth Rs. 5,000 on credit, the record is maintained only for creditor not for the goods. Thus, single entry system is called incomplete, unsystematic and traditional type of accounting system. Some of the definitions under single entry system are as follows: “Single entry system is a system of book keeping in which as a rule, the records of only cash and personal accounts are maintained. It is always incomplete double entry varying with the circumstance.” Eric Kohler “Single entry is method employed for recording transactions which ignores the two fold aspects and consequently fails to provide the businessman with the information necessary for him to be able to ascertain the position.” R.N. Carter Single entry system is a traditional, incomplete and unscientific accounting system that maintains the record of financial transactions by considering only the singe effect of each transaction without follwong sepcific rules nd principles. Features of single entry system Single entry system has the following features:  It is a simple type of accounting system to record the financial transactions of a firm.  It does not follow the set of rules and principles for recording the financial transactions.  It does not consider the dual effect of financial transactions. 160 Office Management and Accountancy

 It requires to maintain the less number of books of account and does not require qualified and experienced accounting staffs.  It prepares a cash book in order to know the cash receipt and cash payment in the firm.  It maintains only the transactions relating to personal account and cash items and thus. Short Notes to Remember (SNR 10.4)  The features of single entry system are: - simple - lack of rules and principles - unscientific - economical - preparation of cash book - less time consuming Advantages of single entry system The main advantages of single entry system are as follows:  It does not require to follow the modern accounting rules and principles. Thus, it is easy to maintain the record of financial transactions.  It does not require to maintain a large number of books of account and thus the staffs having less knowledge can also use it.  It becomes easy in determining the amount of profit or loss by comparing opening capital and closing capital.  It is possible to save the valuable time of accounting staffs as it does not maintain the record of all types of account.  It is suitable to small scale business firm having limited number of financial transactions. Short Notes to Remember (SNR 10.5)  The main advantages of single entry system are: - simple - economical - easy to determine profit or loss - saving of time - suitable for smaller firms Disadvantages of single entry system Following are the main disadvantages of single entry system:  It does not follow the accounting principles and rules for recording financial transactions. Thus, it is unscientific and unsystematic system.  It is incomplete type of accounting system because it does not maintain the record of real and nominal accounts.  It is not possible to ascertain the true profit or loss of the business firm due to lack of information relating to nominal accounts.  It is not possible to check the arithmetical accuracy of books of account because this system does not consider the dual effect of transactions. Accounting 161

 It is unacceptable system for the tax authorities due to its incompleteness.  It may have more chances of making frauds and errors by the concerned staffs and others because the arithmetical accuracy can not be proved.  It is not possible to ascertain the true financial position of the firm due to lack of information relating to capital, liabilities and assets on a particular date. Short Notes to Remember (SNR 10.6)  The main disadvantages of single entry system are: - unscientific - incomplete - lack of checking arithmetical accuracy - difficulty in determination of true profit or loss - unacceptable system - chance of errors and frauds - difficult to determine the financial position. DOUBLE ENTRY SYSTEM Concept and definition In order to avoid the disadvantages of single entry system of accounting, a modern and scientific system has been introduced and used in the world which is known as double entry system. Modern business organizations follow this accounting system for recording the transactions. It was originally propounded by Franciscan Monk Luca De Pacioli in 1494 A.D. According to this system, every financial transaction affects two aspects where one aspect is called debit and another aspect is called credit. Thus, each financial transaction is recorded on the debit side of one account and on the credit side of other accounts. Double entry system follows the scientific assumption i.e. every debit has its corresponding credit with equal amount. Under this system, transactions are recorded into personal, real and nominal accounts. It prepares a trial balance with the help of ledger balances to check arithmetical accuracy of books of account. It determines the profit or loss at the end of accounting period by preparing profit and loss account. It also prepares the balance sheet to ascertain the true financial position of the firm on a particular date. Following are the definitions of double entry system of accounting: “Double entry system is the system under which each transaction is regarded to have two fold aspects and both the aspects are recorded to obtain complete record of dealings.” Juneja, Chawla and Saxena “Every business transaction has two fold effects and that it affects two accounts in opposite directions if the complete records were to be made of each such transaction, it would be necessary to debit one account and credit the other. It is the recording of the two fold effect of every transaction that has given rise to the term\"Double entry.” J.R. Batliboi 162 Office Management and Accountancy

Double entry system is a modern, scientific and systematic process of accounting for recording which considers the double effects of each transaction under two different accounts with equal amount. The concept of double entry system is illustrated below: Transaction: Bought a furniture for Rs. 20,000 The journal entry of the above transaction is given below: Journal Entry Date Particulars L.F. Debit Rs. Credit Rs. 20,000 Furniture a/c ................................................................Dr. To Cash a/c 20,000 (Being furniture bought in cash) The effect of above journal entry into ledger accounts will be as follows: Dr. Furniture Account Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount To Cash a/c 20,000 Dr. Cash Account Cr. Date Particulars J.F. Amount Date Particulars J.F. Amount By Furniture a/c 20,000 Objectives of double entry system The main objectives of double entry system are as follows :  To maintain the permanent and systematic record of financial transactions.  To classify the financial transactions into personal, real and nominal accounts.  To find out the arithmetical errors and correct them.  To determine the amount of profit or loss of a business firm during a period.  To ascertain the amount of income and expenditure of non-trading organization.  To ascertain the true financial position of a firm during a period of time.  To communicate the financial information to the various users.  To fulfill the legal formality to the books of account maintained in the firm.  To help in solving the problems and making decision on financial matters.  To facilitate in auditing the books of account in the firm. Accounting 163

Features of double entry system Following are the main features of double entry system: a. Double effect M emory Tips Double entry system considers the two fold  Double effect effect of each financial transaction. It records  Effect of equal amount them into two different accounts in two  Classification of accounts opposite sides. Thus, it shows double effect  Scientific and systematic once by debiting one account and again by  Complete system crediting another account.  Auditing b. Effect of equal amount Double entry system makes the effect on two different accounts with equal amount. Thus, it assumes that debit equals to credit and shows the amount accordingly. c. Classification of accounts Double entry system classifies the accounts into personal, real and nominal heads. It records the transactions as per the rules of debit and credit under different accounts. d. Scientific and systematic Double entry system follows the accounting rules and principles for the financial transactions. It also prepares the financial statements following its own assumptions and concepts which are widely accepted and followed. Thus, it is regarded as scientific and systematic method for maintaining the record of financial transactions. e. Complete system Double entry system maintains the record of all personal and impersonal accounts of the firm. It helps to determine the profit or loss of the business firm. It also facilitates to ascertain the true financial position of the firm. On the basis of personal accounts of debtors and creditors, it helps to know about the amount of receivables and payables. Thus, double entry system is considered as complete type of accounting system. f. Auditing Auditing is the act of examining the books of account to ensure whether they are maintained as per accounting principles or not. Double entry system provides information relating to all types of accounts. Thus, under this system, an authorized auditor examines the books of account maintained in the firm. It minimizes the chances of errors and frauds in accounting and makes the staffs more responsible in their accounting jobs. 164 Office Management and Accountancy

Advantages of double entry system The double entry system of accounting has the following advantages:  It maintains the permanent record of financial transactions in systematic and scientific manner.  It helps to know about the receivables and payables of the business firm.  It facilitates to prove the arithmetical accuracy of books of account by preparing trial balance.  It helps to determine the operating result of the business firm by preparing profit and loss account.  It ascertains the true financial position of the firm by preparing a balance sheet at the end of accounting period.  It facilitates for auditing the books of account maintained in the firm.  It communicates the financial information to the internal and external users.  It helps to fulfill the legal formality to the books of account of the business firm. Short Notes to Remember (SNR 10.7)  The main advantages of double entry system are: – systematic and scientific record – information about receivables and payables – facility of checking arithmetical accuracy – determination of operating result – information of true financial position – provision of auditing – communicating the financial information – fulfillment of legal formality. Disadvantages of double entry system The double entry system of accounting has the following disadvantages:  It is complex system for recording because it requires the detailed knowledge of accounting rules and principles.  It is expensive type of accounting system because it requires to maintain a large number of books and needs to appoint qualified and experienced accounting staffs.  It requires to maintain the record of all types of transactions in large number of books, thus it is time consuming system.  It is not suitable for smaller business firms having limited financial transactions because it is complex and expensive.  It does not detect all types of accounting errors and thus errors may remain in the books of account. Short Notes to Remember (SNR 10.8)  The main disadvantages of double entry system are: – complex system – expensive system – time consuming system – suitable only for larger firms – no detection of all accounting errors. Accounting 165

Differences between single entry system and double entry system Following are the main differences between single entry system and double entry system : Basis of difference Single entry system Double entry system 1. Dual effect It maintains the record without It maintains the record by considering dual effect. considering dual effect. 2. Types of account It maintains only the personal It maintains the personal, real accounts and cash book for and nominal accounts for recording the transactions. recording the transactions. 3. Arithmetical It does not check the It checks the arithmetical accuracy arithmetical accuracy as the accuracy of books of account trial balance is not prepared. by preparing a trial balance. 4. Profit or loss It calculates the estimated It calculates the actual profit profit or loss by comparing or loss by preparing profit and opening and closing capital. loss account. 5. Financial It cannot ascertain the true It ascertains the true financial position financial position due to lack position by preparing balance of information about real sheet. 6. Acceptability accounts except cash. It is not acceptable to the tax It is acceptable to the tax authorities. authorities. 7. Suitability It is suitable to small scale It is suitable to large scale organizations. organizations. Accounting terminologies Memory Tips There are various terminologies in accounting.  Financial transaction Some of the terminologies with their meaning are  Capital  Assets as follows:  Liabilities  Debtors  Creditors  Account a. Financial transaction  Debit and credit  Purchase  Sales  Revenue/Income Financial transaction refers to that business  Expenses  Profit or loss dealing which can be measured in terms  Bank overdraft  Drawing of money or money’s worth. Purchase and  Stock  Loan and interest sale of goods, receipt and payment of loan,  Depreciation  Bad debts payment of expenses like salary, rent, wage, commission, receipt of income etc. are some examples of financial transactions. 166 Office Management and Accountancy

b. Capital The amount invested by the owner at the time of starting business is known as capital. The owner may invest cash or any kind to establish and run the business. c. Assets The total resources or properties belonging to the business firm which help to generate revenues are called assets. Such assets may be materials, physical properties and rights of the firm. Land and building, plant and machinery, furniture, cash in hand, cash at bank, debtors, bills receivable etc are some examples of assets. d. Liabilities The amount payable by the business organization to the outsiders within a certain period of time is known as liabilities. Bank loan, creditors, bills payable, bank overdraft, outstanding expense etc are the examples of liabilities. e. Debtors The persons or organizations from whom the business firm has to collect the amount against the credit sale of goods are called debtors. In other words, debtors are the persons or organizations who purchase goods on credit and have to pay to the business firm. f. Creditors The persons or organizations to which the business firm has to pay the amount against the credit purchase of goods are called creditors. In other words, the person or organizations who supplies goods on credit are called creditors. g. Account The financial detail or statement of the particular type of transactions over a certain period relating to any person, property or subject is called account. For example, cash account, furniture account, computer account, salary account, commission account, Ram’s account, Manju’s account etc. h. Debit and credit Debit and credit are the traditional accounting terms used for recording the financial transactions. Debit refers to the left hand side of an account and credit refers to the right hand side of an account. i. Purchase The act of buying goods in a business for the purpose of selling them to customers at a profit either in the same form or after manufacturing them into readymade products is known as purchase. Thus, the business may purchase raw materials, semi finished goods or finished goods. Goods may be purchased in cash or on credit from the suppliers. Accounting 167

j. Sales The act of transferring the ownership of trading goods to customer with the certain monetary value with a view to earn profit is called sales. Sales is the direct income of the business firm. k. Revenue/Income The amount received or to be received by the business firm from sale of goods or providing services to the customer is known as revenue or income. If goods sold to Hari for Rs. 40,000, Rs. 40,000 is revenue or income of the business. l. Expenses The amount which is incurred for the production and distribution of goods or services is called expenses. In other words, an expense is the cost of the business which is borne in order to earn revenue or generate income. Salary, wage, advertisement, communication, rent, insurance etc are the examples of expenses. m. Profit or loss Profit means the excess of income over expense. When all expenses are deducted from total revenue of the firm, it becomes profit. On the other hand, the excess of expenditure over income is known as loss. The profit or loss of business firm is determined at the end of year by preparing profit and loss account. n. Bank overdraft The excess amount of withdrawal from bank over bank balance is known as bank overdraft. It is the facility provided by the bank to its reliable customer against the certain interest rate. For example, if a business firm has bank balance Rs.60,000 and withdraws Rs.70,000, the excess amount of withdrawal Rs.10,000 is called bank overdraft. o. Drawing The value of money or goods withdrawn by the owner from the business firm or bank for his personal or domestic use is known as drawing. The utilization of business cash or goods for the payment of owner’s personal expenses is also termed as drawing and recorded separately by opening a drawing account. p. Stock The value of goods remained unsold in the warehouse of the business firm at the particular date is known as stock. On the basis of time, stock may be of two types i.e. opening stock and closing stock. Opening stock is the value of goods in hand at the beginning of the period where as closing stock means the stock of goods remained unsold at the end of the year. According to the nature, there may be three types of stock i.e. stock of raw materials, stock of semi - finished goods and stock of finished goods. 168 Office Management and Accountancy

q. Loan and interest The amount borrowed from the individual, bank or other financial institutions for utilizing in business is called loan and the additional amount paid at certain rate against the loan borrowed is called interest. r. Depreciation The gradual decrease in the value of fixed assets like plant and machinery, furniture etc due to any reason such as regular use, interval of time, wear and tear etc is called depreciation. Depreciation is non- cash expense of the business firm. s. Bad debts The amount which is declared as uncollectible from the customers out of the credit sales is called bad debts. Sometimes, the customer may not pay the full or partial amount of the credit sales and such irrecoverable amount is termed as bad debts. It is a kind of loss to the business firm. Key Terms Accounting – systematic and scientific act of recording, classifying, summarising and presenting the financial transactions and communicating the results. Assets – the properties or resources utilized by the business for generating revenues.Auditing – act of examining the books of account to ensure the correct application of accounting principles and financial acts and rules. Bank overdraft – excess account of withdrawal from bank over the deposits made in account. Bills payable – amount of credit purchase which is to be paid. Bills receivable – amount of credit sales which is to be received. Book keeping – act of keeping permanent record of financial transactions of a business. Capital – amount invested by an owner either in cash or any kind in the beginning or during the life of the business. Depreciation – the gradual decrease in the value of fixed assets due to regular use, wear and tear, interval of time etc. Double entry system – accounting system which records the transaction by considering two fold effects. Drawing – cash or any kind taken by owner for personal use. Economical – cheaper Liabilities – amount payable by the business to the outsiders within a specific time period. Single entry system – the traditional accounting system which maintains the records of only one aspect of transaction. Work in progress – neither raw material nor finished goods, partly finished goods. Accounting 169

A. Very short answer questions 1. What is accounting? 2. Write any two branches of accounting. 3. Define cost accounting. 4. What is management accounting? 5. Write any two features of double entry system of accounting. 6. What is meant by closing stock? 7. State the types of discount. 8. What is depreciation? 9. Define the term 'assets' and 'liabilities'. 10. What is bank overdraft? 11. Write the full form of GAAP. B. Short answer questions 1. Define the term 'accounting' and state its objectives. 2. State the types of accounting and describe them in brief. 4. What do you mean by basic principles of accounting? Describe in short any four principles of accounting. 5. What is single entry system? Discuss over its major features. 6. State the merits and demerits of single entry system. 7. Define double entry system and explain its features. 8. State the main objectives of double entry system of accounting. 9. Write advantages and disadvantages of double entry system. 10. Differentiate between single entry system and double entry system of accounting. C. Long answer questions 1. What is meant by accounting? State its branches and describe them in brief. 2. Describe the basic concepts or assumptions of accounting in brief. 3. What do you mean by double entry system? Explain its features in brief.  170 Office Management and Accountancy

11 Chapter JOURNAL Learning Objectives After studying this chapter, the readers will be able to :  write the meaning of journal and state its importance,  state the rules of debit and credit for preparation of journal,  apply the rules of debit and credit for journalizing,  prepare journal entry for different types of business transactions. Introduction Every business firm performs a number of financial transactions daily. Such transactions are related with economic activities such as buying and selling of goods, receipt and payment of cash and cheque, expenses and income, withdrawal and deposit of cash etc. The systematic and scientific recording of day to day financial transactions is essential in the business firm. All the financial transaction of a business are first recorded in a primary book called journal. It is a book of original entry which maintains the initial recording of transactions under double entry concept by applying the rules of debit and credit. Journal 171

Concept and definition The word journal is derived from the French word jour which means daily. Thus, the journal contains a daily record of business transactions which is maintained in a chronological order i.e. in order of date. Journal is also known as primary book of original entry because the financial transactions are recorded at first in journal before posting them into respective ledger accounts. It is the chronological record of financial transactions showing the name of accounts debited and credited along with the amount of debit and credit. Each journal entry should be supported by a brief explanation to make the transaction clear which is known as narration. It is made on the basis of source documents like cash memo, invoice, bill, voucher, cheque, pay-in- slip etc. Following are the important definitions of journ “A journal is a book employed to classify or sort-out transactions in a form convenient for their subsequent entry in the ledger.” L.C. Cropper ‘The journal or daily record as originally used was a book of prime entry in which transactions were copied in order of date from a memorandum or waste book. The entries as they were copied were classified into debits and credits so as to facilitate their being correctly posted after wards in the ledgers.” R.N. Carter Journal is the primary document which is prepared for systematic and chronological recording of the financial transactions showing the accounts debited and credited along with their amounts. Short Notes to Remember (SNR 11.2)  The book which contains the journal or primary recording of financial transactions is called journal book.  The act of recording or entering the transaction in the journal book is called journalizing.  The transaction which is recorded systematically in journal book applying the rules of debit and credit is called journal entry.  The short explanation of the transaction written inside the bracket just below the accounts debited and credited is known as narration. The narration can be written starting with the word ‘Being’ or ‘For’. Specimen of journal The specimen of journal is as follows: Journal Entry Date Particulars L.F. Debit Rs. Credit Rs. 172 Office Management and Accountancy

The journal contains five columns as shown above. The information to be written in each columns are as follows: S. No. Column Information 1. Date The date of financial transaction in order of their 2. Particulars occurance is mentioned in this column. 3. L.F. (Ledger The name of accounts to be debited and credited along Folio) with the narration is mentioned in this column. 4. Debit Rs. The page number of the ledger book where the transaction posted is shown in this column. 5. Credit Rs. The debit amount of debited account is written in this column. The credit amount of credited account is written in this column. Short Notes to Remember (SNR 11.2)  The account which receives the benefit is termed as debit and the account which gives the benefit is termed as credit.  The terms ‘debit’ and ‘credit’ are originated from the latin words ‘debito’ and ‘credito’ where ‘owed to’ is denoted by ‘debito’ and ‘owed by’ is denoted by ‘credito’. Importance of journal Following are the major importance of journal:  It maintains the record of all types of financial transaction in systematic manner.  It provides information about the accounts debited and credited along with their amounts.  It provides a legal evidence for settlement of disputes and misunderstanding.  It facilitates for preparing various ledger accounts.  It ensures the principle of double entry system of accounting. Steps of journalizing The following steps should be considered while preparing the journal entry. Step 1 Identify whether the transaction is of financial nature or not, if not avoid it. Step 2 Determine the accounts affected by the transaction. Step 3 Correlate the determined accounts into types of account or nature of transactions. Step 4 Apply the rules of debit and credit on the basis of types of account or nature of transactions. Journal 173

Step 5 Prepare the journal entries in the book in chronological order writing the necessary information. Rules of debit and credit All the financial transactions have double effect. Under double entry system, at least two accounts are affected i.e. one aspect is debited and another aspect is credited. While journalizing the financial transactions, certain rules should be followed. Such accounting rules are called rules of debit and credit. Here, to debit means to record in left hand side of an account and to credit means to record in right hand side of an account. There are two bases for applying the rules of debit and credit: 1. Traditional approach (Rules based on types of account) 2. Modern approach (Rules based on nature of transactions) Traditional approach (Rules based on types of account) In order to apply the rules of debit and credit under this basis, firstly, it is necessary to know about types of account. Under double entry system, all accounts and the rules of debit and credit are presented below: Figure: 11.1 Types of account with rules of debit and credit Accounts and rule of debit and credit Personal Real Nominal account account account Debit the receiver Debit what comes in Debit all losses and expenses Credit the giver Credit what goes out Credit all gains and incomes Personal account The accounts which are related to individuals or organizations are called personal account. Personal accounts are the accounts of persons and organizations with whom a business deals for its financial transactions. Here, the person may be natural person like Manju, Binay, Sunita, Ashok or artificial person (firm, organization or institution) like XYZ concern, Himalayan Bank Ltd., Sunflower Academy, and Asian Thai Foods (Pvt.) Ltd etc. The rules of debit and credit under personal account is as follows: - Debit the receiver - Credit the giver 174 Office Management and Accountancy

Real account The accounts which are related to the physical things like assets and properties are called real account. The asset and properties may be cash, furniture, goods, land and building, computer etc. and the accounts maintained for them are called real accounts. The rules of debit and credit under real account is as follows: - Debit what comes in - Credit what goes out Nominal account The accounts which are related to expenses, losses, gains and incomes of the business are called nominal accounts. These accounts do not have any physical existence but affect the position of the business. Salary, wage, discount, commission, rent, insurance premium, advertisement etc. are some examples of nominal account. The rules of debit and credit under nominal account is as follows: - Debit all losses and expenses - Credit all gains and incomes Short Notes to Remember (SNR 11.3)  The accounts which are related to assets or properties of the business are called real accounts.  The accounts which are related to expenses, losses, incomes and gains are called nominal accounts.  Capital and drawing are the personal accounts maintained for the dealings with owner of the firm.  Real accounts and nominal accounts are also called impersonal accounts. Modern approach (Rules based on nature of transactions) In order to apply the rules of debit and credit under this basis, all the transactions are classified into following accounts: a) Assets account b) Liabilities account c) Capital account d) Expense or loss account e) Revenue or gains account The rules of debit and credit on the basis of nature of transactions are as follows: S.N Nature of transaction Rules of debit and credit a) Assets account Increase in assets is debited Decrease in assets is credited b) Liabilities account Decrease in liabilities is debited c) Capital account Increase in liabilities is credited d) Expenses or losses Decrease in capital is debited account Increase in capital is credited e) Revenue or gains Increase in expenses or losses is debited account Decrease in expense or losses is credited Decrease in revenue or gain is debited Increase in revenue or gains is credited Journal 175

Short Notes to Remember (SNR 11.4)  The rule of debit and credit on the basis of nature of transactions is also called accounting equation based rule.  Accounting equation is the statement of assets and liabilities plus capital which states that the total of assets always will be equal to the sum total of liabilities and capital at any point of time. It can be expressed mathematically as: Assets (A) = Liabilities (L) + Capital (C)  Under equation based rules, journalizing is based on the following rule: Increase in assets, losses and expenses is debited and decrease in assets, losses and expenses is credited.Decrease in liabilities, capital, revenues and gains is Preparation of journal entries Business firm performs a number of financial transactions. In this grade, the journal entries are prepared for the following types of transactions: a) Commencement of business b) Deposit and withdrawal of cash c) Purchase and purchase return d) Sales and sales return e) Buying and selling of assets f) Expenses and income g) Partial receipt and partial payment h) Drawing i) Depreciation j) Discount Commencement of business A business may be started either with cash or bank balance or with the combination of cash, bank balance or other assets like stock of goods, furniture etc. While starting business, assets come into the business and such things are provided by the owner. According to the rule of real account, the things coming into the business are debited and the giver of such things is credited. Ill-1 Journalize the following transactions: January 1 Sushan started business with cash Rs. 2,50,000 March 4 A business is started with capital of Rs. 1,40,000 May 5 Ram commenced business with cash Rs. 1,50,000 and land Rs. 1,00,000 July 6 A business is started with cash Rs. 1,00,000, building Rs. 80,000, furniture Rs. 40,000 and stock of goods Rs. 60,000. 176 Office Management and Accountancy

Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. January 1 2,50,000 2,50,000 March 4 Cash a/c .....................................................Dr. May 5 To Sushan’s capital a/c 1,40,000 July 6 (Being business started with cash) 1,40,000 Cash a/c .....................................................Dr. 1,50,000 To capital a/c 1,00,000 (Being business started with cash) 2,50,000 Cash a/c .....................................................Dr. 1,00,000 Land a/c .....................................................Dr. 80,000 40,000 To Ram’s capital a/c 60,000 (Being business started with cash) 2,80,000 Cash a/c .....................................................Dr. Building a/c ...............................................Dr. Furniture a/c .............................................Dr Stock of goods a/c ....................................Dr To Capital a/c (Being business started with cash,bank balance, furniture and stock of goods) Short Notes to Remember (SNR 11.5  While starting business, all the things coming into the business are debited and the owner is the giver of such things and thus always capital account (personal Deposit and withdrawal of cash The business firm may open account into any bank and deposit cash into it. Similarly, it may withdraw cash from bank by issuing cheque for business purpose. While depositing cash into bank, cash and bank two accounts are affected. Cash is real account and bank is personal account. According to the rule of real account, the things coming in are debited and the things going out from business are credited. Similarly, according to the rule of personal account, the receiver is debited and the giver is credited. Ill-2 Prepare journal entries of the following transactions: Kartik 2 Opened a bank account in Nabil Bank with Rs. 1,50,000 Kartik 4 Cash deposited into bank Rs. 10,000 Kartik 6 Withdrawn cash Rs. 6,000 from Nabil Bank. Kartik 15 Cash Rs. 50,000 withdrawn from bank for office use through cheque. Journal 177

Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. Kartik 2 1,50,000 1,50,000 Kartik 4 Nabil Bank a/c.................................................................Dr. To Cash a/c 10,000 Kartik 6 (Being bank account opened in Nabil Bank) 10,000 Kartik 15 Bank a/c...........................................................................Dr. 6,000 6,000 To Cash a/c 50,000 50,000 (Being cash deposited into bank) Cash a/c...........................................................................Dr. To Nabil Bank a/c (Being cash withdrawn from Nabil Bank) Cash a/c...........................................................................Dr. To Bank a/c (Being cash withdrawn from bank for office use) Purchase and purchase return The business firm may purchase goods either in cash or on credit. When the goods are purchased in cash, goods come into the business and thus purchase account (being real account) is debited. Similarly cash goes out and thus cash account (being real account) is credited. If the goods are purchased on credit, creditor’s account is credited instead of cash account since the creditor is the giver of the goods. Sometimes, the goods purchased from creditors are returned due to some reasons such as defective, low quality, late delivery etc. While returning the goods, creditor receives the goods which go out from the business. Thus, the creditor’s account (personal account) is debited and purchase return account (real account) is credited. Ill-3 Journalize the following transactions in the book of Bipana Traders: Falgun 2 Purchased goods for cash Rs. 40,000. Falgun 4 Purchased goods for Rs. 25,000. Falgun 7 Cash purchase Rs. 20,000. Falgun 8 Bought goods from Sukanya for Rs. 15,000. Falgun 10 Bought goods from Bipasa on credit Rs. 37,000. Falgun 15 Purchased goods of Rs. 15,000 in cash from Anand Traders. Falgun 17 Returned goods valued Rs. 2,000 to Bipasa. Falgun 20 Purchased goods for Rs. 20,000 and paid by cheque. Falgun 25 Bought goods on credit Rs. 50,000. 178 Office Management and Accountancy

Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. Falgun 2 40,000 40,000 Falgun 4 Purchase a/c...................................................................Dr. 25,000 25,000 Falgun 7 To Cash a/c 20,000 Falgun 8 15,000 20,000 Falgun 10 (Being goods purchased in cash) 37,000 15,000 Falgun 15 15,000 37,000 Falgun 17 Purchase a/c..................................................................Dr. 2,000 15,000 Falgun 20 To cash a/c 20,000 2,000 Falgun 25 50,000 20,000 (Being goods purchased in cash) 50,000 Purchase a/c....................................................................Dr. To Cash a/c (Being goods purchased in cash) Purchase a/c....................................................................Dr. To Sukanya’s a/c (Being goods purchased from Sukanya) Purchase a/c....................................................................Dr. To Bipasa’s a/c (Being goods purchased from Bipasa on credit) Purchase a/c....................................................................Dr. To Cash a/c (Being goods purchased from Ananda Traders in cash) Bipasa’s a/c....................................................................Dr. To Purchase return a/c (Being goods returned to Bipasa) Purchase a/c....................................................................Dr. To Bank a/c (Being goods purchased and paid by cheque) Purchase a/c....................................................................Dr. To Creditor’s a/c (Being goods bought on credit) Short Notes to Remember (SNR 11.6)  While buying trading goods (goods bought for resale purpose), purchase account is debited and while returning goods, purchase return account is credited. However, both are related to goods account.  If the personal account or name is mentioned in the transaction without word ‘cash’, it is assumed as credit transaction.  If nothing (cash or personal account) is mentioned, it should be assumed as cash transaction.  If the amount of purchase is paid through cheque, bank account is credited instead of cash account.  While buying goods on credit, if name of person or organization is not mentioned, creditor’s or supplier’s account is credited.  Cash purchase does not mean to the purchase of cash, instead, it also means to the purchase of goods in cash. Journal 179

Sales and sales return The business firm may sell goods either in cash or on credit. When the goods are sold in cash, cash come into the business and thus cash account (real account) is debited. Similarly, goods go out and thus sales account (real account) is credited. If the goods are sold on credit, the debtor’s account is debited instead of cash account since the debtor or customer is the receiver of the goods. Sometimes, the customer may return goods due to some reasons. In case, the goods are returned by the customer, goods come into the business and the customer will be the giver. Thus, sales return account (real account) is debited and the customer’s account (personal account) is credited. Ill-4 Journalize the following transactions: Chaitra 2 Sold goods for cash Rs. 30,000. Chaitra 4 Sold goods for Rs. 40,000. Chaitra 6 Cash sales Rs. 38,000. Chaitra 7 Sold goods to Nabina & Sisters for Rs. 20,000. Chaitra 12 Sold goods to Pravasha on credit Rs. 22,000. Chaitra 16 Goods sold to Amrita & Traders in cash Rs. 32,000. Chaitra 20 Returned goods worth Rs. 2,000 by Nabina & Sisters being defective. Chaitra 25 Sold goods for Rs. 25,000 and received a cheque. Chaitra 30 Goods sold on credit Rs. 36,000. Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. Chaitra 2 Cash a/c...........................................................................Dr. 30,000 30,000 Chaitra 4 To Sales a/c 40,000 40,000 Chaitra 6 (Being goods sold in cash) Cash a/c...........................................................................Dr. 38,000 38,000 Chaitra 7 20,000 20,000 To Sales a/c (Being goods sold in cash) Cash a/c...........................................................................Dr. To Sales a/c (Being goods sold in cash) Nabina & Sister’s a/c.....................................................Dr. To Sales a/c (Being goods sold to Nabina & Sisters) 180 Office Management and Accountancy

Chaitra 12 Pravasha’s a/c................................................................Dr. 22,000 22,000 Chaitra 16 To Sales a/c 32,000 32,000 Chaitra 20 2,000 2,000 Chaitra 25 (Being goods sold to Pravasha on credit) 25,000 25,000 Chaitra 30 36,000 36,000 Cash a/c........................................................................Dr. To Sales a/c (Being goods sold to Amrita and Traders in cash) Sales return a/c...............................................................Dr. To Nabina & Sister’s a/c (Being goods returned by Nabina & Sisters being defective) Bank a/c........................................................................Dr. To Sales a/c (Being goods sold and received a cheque) Debtor’s a/c....................................................................Dr. To Sales a/c (Being goods sold on credit) Short Notes to Remember (SNR 11.7)  While selling goods, sales account is credited and for returning of goods by customer, sales return account is debited. However, both are related to goods account.  While selling goods on credit, if name of person or organization is not mentioned, debtor’s (customer) account is debited.  While receiving the cheque for sale of goods, Bank account can be debited. Buying and selling of assets A business organization may purchase various assets for its own use and sells those assets when become old, useless and unnecessary. Such assets may be furniture, land, building, machinery and equipments etc. Like purchase and sale of trading goods, assets may also be bought and sold either in cash or on credit. While buying assets, they are debited and while selling such assets, assets accounts are credited. Ill-5 Prepare journal entries for the following transactions. Shrawan 5 Bought building for Rs. 1,50,000. Shrawan 8 Sold old furniture to Nirajan for Rs. 1,20,000. Shrawan 15 Purchased a furniture from Radhika for Rs. 6,00,000. Shrawan 20 Sold a plot of land to Hari Trading Ltd. and received a cheque of Rs. 10,00,000. Shrawan 25 Sold an old machine in cash Rs. 60,000. Shrawan 30 Sold two computers of Rs. 20,000 each to Rekha. Journal 181

Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. Shrawan 5 Building a/c....................................................................Dr. 1,50,000 1,50,000 Shrawan 8 To Cash a/c Shrawan 15 1,20,000 1,20,000 Shrawan 20 (Being Building bought in cash) Shrawan 25 Nirajan’s a/c...................................................................Dr. 6,00,000 Shrawan 30 To Furniture a/c 6,00,000 (Being old furniture sold to Nirajan on credit) Furniture a/c.................................................................Dr. 10,00,000 To Radhika’s a/c 60,000 10,00,000 (Being furniture purchased from Radhika) 60,000 Bank a/c..........................................................................Dr. 40,000 40,000 To Land a/c (Being land sold to Hari Trading Ltd. and received a cheque) Cash a/c...........................................................................Dr. To Machine a/c (Being old machine sold in cash) Rekha’s a/c......................................................................Dr. To Computer a/c (Being computer sold to Rekha on credit) Short Notes to Remember (SNR 11.8)  For purchase and sale of assets, respective assets account are debited or credited instead of purchase account or sales account respectively. Expenses and income In a business firm, various expenses are paid and incomes are received. The business firm may pay in cash or issue cheque for various expenses like salary, rent, wages, commission etc. Similarly, the business firm receives cash or cheque for various incomes like commission, interest, rent etc. While making payment for expenses, concerned expense account is debited being nominal account and cash or bank account is credited being real or personal account. In case of income, opposite entry is passed. Ill-6 Journalize the following transactions: December 5 Paid salary Rs. 10,000. December 10 Paid rent Rs. 15,000 through cheque. December 15 Paid commission Rs. 6,000 to Manita. December 20 Paid wages Rs. 8,000 to Harimohan through cheque. December 22 Received commission Rs. 5,000. December 23 Received rent Rs. 6,000 through cheque. 182 Office Management and Accountancy

December 25 Received interest Rs. 8,000 from Sushma. December 30 Received dividend Rs. 12,000 from Bijeta through cheque. Solution Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. Dec. 5 Salary a/c....................................................................Dr. 10,000 10,000 Dec. 10 To Cash a/c 15,000 15,000 Dec. 15 6,000 Dec. 20 (Being salary paid) 8,000 6,000 Dec. 22 Rent a/c.......................................................................Dr. 5,000 8,000 Dec. 23 6,000 5,000 Dec. 25 To Bank a/c 8,000 6,000 Dec. 30 (Being rent paid through cheque) 12,000 8,000 Commission a/c.............................................................Dr. 12,000 To Cash a/c (Being commission paid to Reeta) Wages a/c.......................................................................Dr. To Bank a/c (Being wages paid to Harimohan through cheque) Cash a/c........................................................................Dr. To Commission received a/c (Being commission received) Bank a/c...............................................................Dr. To Rent received a/c (Being rent received through cheque) Cash a/c........................................................................Dr. To Interest received a/c (Being interest received from Sushma) Bank a/c........................................................................Dr. To Dividend a/c (Being dividend received from Bijeta through cheque) Short Notes to Remember (SNR 11.9)  If the name of person or organization is mentioned in the transaction relating to income or expenses, it should be ignored. Partial receipt and partial payment While purchasing goods or assets, sometimes the whole amount of purchase may not be paid at once. Some amount may be paid immediately and rest on credit. This is called partial payment. Similarly, the firm may receive cash partially while selling goods or other assets. This is called partial receipt. Ill-7 Prepare journal entries for the following transactions: Bhadra 2 Purchased goods of Rs. 30,000 from Chandani and made a partial payment of Rs. 20,000 Journal 183

Bhadra 6 Sold goods of Rs. 25,000 to Nitu and received cash Rs. 15,000 partially. Bhadra 10 Bought a computer for Rs. 18,000 from Niroj and issued a cheque of Rs. 8,000 as partial payment Bhadra 15 Sold furniture to Sakura suppliers for Rs. 30,000 and received a cheque of Rs. 10,000 as partial receipt. Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. 30,000 20,000 Bhadra 2 Purchase a/c....................................................................Dr. 10,000 Bhadra 6 To Cash a/c Bhadra 10 To Chandani’s a/c 15,000 25,000 Bhadra 15 10,000 8,000 (Being goods purchase from Chandani and made partial 18,000 10,000 payment) Cash a/c...........................................................................Dr. 10,000 30,000 Nitu’s a/c.........................................................................Dr. 20,000 To Sales a/c (Being goods sold to Nitu and received amount partially) Computer a/c.................................................................Dr. To Bank a/c To Niroj’s a/c (Being computer bought from Niroj and paid amount partially by cheque) Bank a/c...........................................................................Dr. Sakura suppliers a/c......................................................Dr. To Furniture’s a/c (Being computer sold to Sakura Suppliers and received a cheque as partial receipt) Drawing The amount of cash, goods or assets of the business firm taken by the owner or proprietor for his personal or domestic use is called drawing. For withdrawal of such things, a separate account is opened which is called drawing account. While withdrawing cash, goods or other assets, drawing account is debited being personal account and the cash, goods or other assets going out from the business are credited to respective goods or assets account being real account. If the owner has withdrawn cash from bank, bank is credited being the giver. Ill-8 Prepare journal entries for the following transactions: Kartik 5 Drew cash Rs. 5,000 by owner for personal use. Kartik 6 Kartik 7 Withdrawn goods of Rs. 10,000 by owner for his personal use. Withdrawn cash Rs. 2,500 and goods of Rs. 5,000 by owner from business for domestic use. 184 Office Management and Accountancy

Kartik 18 Cash Rs. 2,000, goods of Rs. 3,000 and a furniture of Rs. 6,000 Kartik 20 taken by proprietor for his household purpose. Solution: Cash Rs. 18,000 withdrawn by owner from bank for payment of his life insurance premium. Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. Kartik 5 5,000 5,000 Kartik 6 Drawing a/c....................................................................Dr. Kartik 7 To Cash a/c 10,000 Kartik 18 (Being cash withdrawn by owner for his personal use) 10,000 Kartik 20 Drawing a/c....................................................................Dr. 7,500 To Purchase (goods) a/c 2,500 (Being goods withdrawn by owner for his personal use) 5,000 Drawing a/c....................................................................Dr. 11,000 To Cash a/c To Purchase (goods) a/c 2,000 3,000 (Being cash and goods withdrawn by owner for domestic use) 6,000 Drawing a/c....................................................................Dr. 18,000 To Cash a/c To Purchase (goods) a/c 18,000 To Furniture a/c (Being cash, goods and furniture withdrawn by owner for household purpose) Drawing a/c....................................................................Dr. To Bank a/c (Being cash withdrawn by owner from bank for payment of his life insurance premium) Short Notes to Remember (SNR 11.10)  The amount of cash, goods or other assets withdrawn by owner for personal or domestic use is always debited to drawing account. It represents the personal account.  The payment of life insurance premium or rent of owner’s residential flat utilizing business money is also concerned with drawing account.  While withdrawing goods, purchase account may also be credited, instead of goods account since it reduces the amount of purchase. Depreciation Depreciation is the gradual decrease in the value of fixed assets due to any reasons such as wear and tear, regular use, fall in market price etc. It is treated as non-cash expenses to the business firm. Depreciation is related to nominal account and is therefore debited while charging depreciation on any fixed assets. The concerned fixed assets account is credited applying the rule of real account. Journal 185

Ill-9 Prepare journal entries of the following transactions: a) Depreciation Rs.20,000 charged on plant and machinery. b) Depreciate furniture by 10% on value of furniture Rs.1,50,000. c) Depreciate computer and equipment and building by Rs. 5,000 and Rs.20,000 respectively. d) Depreciation charged at 10% on machinery valued at Rs. 90,000 and at 15% on furniture of Rs. 50,000. Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. a) 20,000 20,000 Depreciation a/c.............................................................Dr. b) To Plant and machinery a/c (Being depreciation charged on plant and machinery) Depreciation a/c.............................................................Dr. 15,000 To Furniture a/c 15,000 (Being depreciation charged on furniture) c) Depreciation a/c.............................................................Dr. 25,000 To Computer and equipment a/c 5,000 To Building a/c 20,000 (Being depreciation charged on computer and building) d) Depreciation a/c.............................................................Dr. 16,500 To Machinery a/c To Furniture a/c 9,000 7,500 (Being depreciation charged on machinery and furniture) Discount Discount is a kind of facility, rebate or concession offered by a seller to the buyer on the goods sold or offered by the creditor to the debtor while making payment. There are two types of discounts i.e. trade discount and cash discount. The meaning of each type of discount and their effects is given below: Trade discount Trade discount is the deduction made in the invoice price while purchasing goods in large quantity as specified by the seller. It is the facility given by the seller to the buyer to encourage him to purchase large quantity of goods. It is neither gain nor loss and thus not shown in journal and ledger separately. 186 Office Management and Accountancy

Ill-10 Journalise the following transactions: a) Purchased goods for Rs.10,000 from ABC Company at 5% trade discount. b) Sold goods for Rs.9,000 to Nabina at 10% trade discount. c) Purchased goods from Mahesh at 5% trade discount, list price Rs. 4,000. d) Sold goods to Rabindra at 3% trade discount, list price Rs.7,000. Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit 9,500 Rs. a) Purchase a/c....................................................................Dr. To ABC Company a/c 9,500 (Being goods purchased from ABC Company at 5% trade 8,100 8,100 discount) b) Nabina’s a/c....................................................................Dr. To Sales a/c (Being goods sold to Nabina at 10% trade discount) c) Purchases a/c................................................................Dr. 3,800 3,800 To Mahesh a/c 6,790 6,790 (Being goods purchased from Mahesh at 5% trade discount) d) Rabindra’s a/c................................................................Dr. To Sales a/c (Being goods sold to Rabindra at 3% trade discount) Cash discount Cash discount is the deduction made in credit bill while making payment of the goods. It is a rebate or facility offered by a creditor to a debtor in order to motivate him/her to make the payment promptly within the due date. Allowing cash discount to a debtor is loss and receiving it is gain. Therefore, cash discount is shown separately by opening discount account. Ill-11 Give the journal entries to record the following transactions: a) Purchased goods for Rs.20,000 for cash at 10% discount. b) Purchased goods for Rs. 5,000 at 5% discount. c) Sold goods for Rs.10,000 at 10% discount. d) Received cash from Bijaya Rs.1,500 and allowed her discount Rs. 100. Journal 187

e) Paid cash Rs. 2,000 to Rani and received discount Rs.200. f) Cash paid to Rabina Rs.9,900 for full settlement of her debt Rs.10,000. g) Received a cheque of Rs.1,900 from Nabin after deducting 5% discount. h) Issued a cheque of Rs. 3,800 to Rajani for full settlement of her account of Rs. 4,000. Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. a) b) Purchases a/c.................................................................Dr. 20,000 c) To Cash a/c d) To Discount a/c 18,000 e) 2,000 f) (Being goods purchased at 10% discount) g) 5,000 h) Purchase a/c...................................................................Dr. To Cash a/c 4,750 To Discount a/c 250 (Being goods purchased at 5% discount) 9,000 1,000 Cash a/c...........................................................................Dr. Discount a/c....................................................................Dr. 10,000 To Cash a/c 1,500 (Being goods sold on 10% discount) 100 Cash a/c...........................................................................Dr. 1,600 Discount a/c....................................................................Dr. 2,200 To Bijaya’s a/c (Being cash received from Bijaya and allowed discount) 2,000 200 Rani’s a/c........................................................................Dr. To Cash a/c 10,000 To Discount a/c 9,900 (Being cash paid to Rani and received discount) 100 Runa’s a/c.......................................................................Dr. 1,900 To Cash a/c 100 To Discount a/c 2,000 (Being cash paid to Runa and received discount ) 4,000 Bank a/c...........................................................................Dr. Discount a/c....................................................................Dr. 3,800 200 To Nabin a/c (Being cheque received from Nabin and allowed discount) Rajani’s a/c......................................................................Dr. To Bank a/c To Discount a/c (Being cheque issued to Rajani and received discount) 188 Office Management and Accountancy

REVIEW ILLUSTRATIONS (ILL) Ill-12 Following transactions are made available for you: Baishakh 2 Binayak commenced business with capital of Rs. 2,00,000. Baishakh 3 Opened bank account with cash Rs. 1,50,000. Baishakh 7 Purchased goods for cash Rs. 22,000. Baishakh 10 Bought goods from Sujan for Rs. 57,000. Baishakh 13 Sold goods for Rs. 20,000. Baishakh 17 Sold goods to Sapana for Rs. 25,000. Baishakh 20 Purchased furniture for Rs. 51,000 and paid by cheque. Baishakh 23 Withdrawn cash from bank for office use Rs. 35,000. Baishakh 25 Returned goods to Sujan Rs. 7,000 being defective. Baishakh 26 Paid rent Rs. 14,000 through cheque. Baishakh 27 Returned goods of Rs. 1,000 from Sapana. Baishakh 28 Paid salary Rs. 10,000. Baishakh 29 Purchased goods of Rs. 25,000 from Yonjan and made a partial payment of Rs.7,000. Baishakh 30 Withdrawn cash Rs. 9,000 from bank by proprietor for personal use. Baishakh 31 Depreciate furniture @ 10% on Rs. 51,000. Required: Journal entries Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. Baishakh 2 Cash a/c...........................................................................Dr. 2,00,000 2,00,000 Baishakh 3 To Binayak’s capital a/c 1,50,000 1,50,000 (Being business started with cash) Bank a/c...........................................................................Dr. To Cash a/c (Being opened bank account) Journal 189

Baishakh 7 Purchase a/c....................................................................Dr. 22,000 22,000 Baishakh 10 To Cash a/c 75,000 75,000 Baishakh 13 20,000 20,000 Baishakh 17 (Being goods purchased for cash) 25,000 25,000 Baishakh 20 Purchase a/c....................................................................Dr. 51,000 51,000 Baishakh 23 Baishakh 25 To Sujun’s a/c 35,000 35,000 Baishakh 26 (Being goods purchased from Sujan) 7,000 7,000 Baishakh 27 Cash a/c........................................................................Dr. 14,000 14,000 Baishakh 28 1,000 1,000 Baishakh 29 To Sales a/c 10,000 10,000 (Being goods sold for cash) 25,000 18,000 Baishakh 30 Sapana’s a/c....................................................................Dr. 7,000 Baishakh 31 9,000 To Sales a/c 5,100 9,000 (Being goods sold to Sapana on credit ) 5,100 Furniture a/c...................................................................Dr. To Bank a/c (Being furniture purchased and payment made by cheque) Cash a/c...........................................................................Dr. To Bank a/c (Being cash withdrawn from bank for official use) Sujan’s a/c.......................................................................Dr. To Purchase return a/c (Being goods returned to Sujan being defective) Rent a/c...........................................................................Dr. To Bank a/c (Being rent paid by cheque) Sales return a/c...............................................................Dr. To Sapana’s a/c (Being goods returned by Sapana) Salary a/c........................................................................Dr. To Cash a/c (Being salary paid) Purchases a/c.................................................................Dr. To Yonjan’s a/c To Cash a/c (Being goods purchased from Yonjan and made partial payment) Drawing a/c....................................................................Dr. To Bank a/c (Being cash withdrawn from bank for personal use) Depreciation a/c.............................................................Dr. To Furniture a/c (Being depreciation charged on furniture) Ill-13 Journalize the following transactions in the book of Sujan: January 1 Sujan started business with cash Rs. 5,00,000. January 3 Opened a bank account in Global IME Bank with Rs. 4,00,000. January 5 Purchased goods of Rs. 30,000 in cash from Bipin. January 6 Sold goods to Durga for Rs. 20,000 at 10% trade discount. January 10 Commission received Rs. 13,000. 190 Office Management and Accountancy

January 12 Bought goods from Sugarika on credit Rs. 67,000. January 15 Purchased machinery and equipment for Rs. 40,000. January 18 Paid office expenses by cheque Rs. 4,000. January 20 Sold goods for Rs. 32,000 to Dikshya and received cash only January 23 Rs. 12,000 as partial receipt. Sujan withdrew cash Rs. 5,000 from bank for personal expenses. January 27 Sold equipment for Rs. 3,000. January 29 Returned goods worth Rs. 3,000 by Durga. January 30 Cash deposited into bank Rs. 21,000. January 31 Received a cheque of Rs. 14,500 from Durga in full settlement of Rs. 15,000. Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. January 1 Cash a/c...........................................................................Dr. 5,00,000 To Sujan’s capital a/c 5,00,000 (Being business started with cash) January 3 Bank a/c...........................................................................Dr. 4,00,000 To Cash a/c 4,00,000 (Being opened bank account at Global IME Bank) January 5 Purchase a/c...................................................................Dr. 30,000 To Cash a/c 30,000 (Being goods purchased in cash) January 6 Durga’s a/c....................................................................Dr. 18,000 To Sales a/c 18,000 (Being goods sold to Durga on credit) January 10 Cash a/c........................................................................Dr. 13,000 To Commission a/c 13,000 (Being commission received) January 12 Purchase a/c....................................................................Dr. 67,000 To Sugarika’s a/c 67,000 (Being goods purchased from Sugarika on credit ) Jaunary 15 Machinery and equipment a/c..................................Dr. 40,000 To Cash a/c 40,000 (Being purchased machinery and equipment) Journal 191

Jaunary 18 Office expenses a/c........................................................Dr. 4,000 4,000 To Bank a/c 12,000 January 20 20,000 32,000 January 23 (Being office expenses paid by cheque) 5,000 January 27 Cash a/c...........................................................................Dr. 5,000 3,000 Jaunary 29 Dikshaya’s a/c................................................................Dr. 3,000 3,000 Jaunary 30 3,000 21,000 To Sales a/c 21,000 (Being goods sold to Dikshya and received cash 14,500 15,000 partially) Drawing a/c....................................................................Dr. 500 To Bank a/c (Being cash withdrawn from bank for personal use) Cash a/c...........................................................................Dr. To Equipment a/c (Being equipment sold for cash) Sales return a/c...............................................................Dr. To Durga’s a/c (Being goods returned by Durga) Bank a/c...........................................................................Dr. To Cash a/c (Being cash deposited into bank) January 30 Bank a/c...........................................................................Dr. Discount a/c ...................................................................Dr. To Durga’s a/c (Being cheque received from Durga and allowed discount) Ill-14 Journalize the following transactions in the book of Durga Traders: a) Durga started business with cash Rs. 3,00,000, goods Rs. 50,000 and furniture Rs. 10,000. b) Opened bank account at Nabil Bank with Rs. 2,00,000. c) Purchased goods worth Rs.40,000 from Harish and paid by cheque. d) Cash withdrawn from bank Rs. 10,000 for official purpose. e) Purchased computer from Computer Point for Rs. 40,000. f) Paid office rent to house owner Rs. 20,000. g) Received commission by cheque Rs. 10,000. h) Bought goods of 50,000 from Hemlal and paid by cheque only Rs. 20,000 as partial payment. i) Withdrawn goods Rs. 2,000 and cash Rs. 1,000 from business by proprietor for domestic use. j) Sold goods on credit Rs. 18,000. 192 Office Management and Accountancy

k) Paid salary Rs. 10,000 to Rekha through cheque. l) Purchased goods on credit Rs. 13,000. m) Received cash 3,200 from Nimesh in full settlement of Rs. 3,500. n) Received cheque of Rs. 3,800 from Kebal after deducting 5% discount. Solution: Journal Entries Date Particulars L.F. Debit Rs. Credit Rs. a) Cash a/c...........................................................................Dr. 3,00,000 3,60,000 b) Stock of goods a/c ............................................................. 50,000 c) ............ Dr. 10,000 Furniture a/c ..................................................................Dr. 2,00,000 2,00,000 To Durga’s capital a/c 40,000 40,000 (Being business started with cash, goods and furniture) Bank a/c...........................................................................Dr. To Cash a/c (Being opened bank account at Nabil Bank) Purchase a/c...................................................................Dr. To Bank a/c (Being goods purchased and payment made by cheque) d) Cash a/c..........................................................................Dr. 10,000 10,000 To Bank a/c 40,000 40,000 (Being cash withdrawn from bank for official use) Computer a/c..................................................................Dr. e) To Computer Point a/c (Being computer purchased from Computer Point on credit) f) Rent a/c............................................................................Dr. 20,000 20,000 To Cash a/c 10,000 10,000 50,000 30,000 (Being rent paid to house owner ) 20,000 g) Bank a/c...........................................................................Dr. 3,000 2,000 To Commission a/c 1,000 (Being commission received by cheque) h) Purchase a/c....................................................................Dr. To Hemlal a/c To Bank a/c (Being goods purchased from Hemlal and paid amount partially by cheque) i) Drawing a/c....................................................................Dr. To Purchase a/c To Cash a/c (Being goods and cash withdrawn by proprietor from business) j) Debtors a/c......................................................................Dr. 18,000 18,000 To Sales a/c (Being goods sold on credit) Journal 193

k) Salary a/c.........................................................................Dr. 10,000 10,000 To Bank a/c 13,000 13,000 3,200 3,500 (Being salary paid to Rekha by cheque) 4,000 l) Purchase a/c....................................................................Dr. 300 3,800 To Creditors a/c (Being goods purchased on credit) 200 m) Cash a/c...........................................................................Dr. Discount ..........................................................................Dr. To Nimesh a/c (Being cash received from Nimesh and allowed discount) n) Bank a/c...........................................................................Dr. Discount a/c ...................................................................Dr. To Kebal a/c (Being cheque received from Kebal and allowed discount) Key – mathematical relationship expressed in terms of Terms Assets = Liabilities + Capital. Accounting equation – irrecoverable amount of debt. – right hand side of a ledger account. Bad debt – left hand side of a ledger account. Credit – taken. Debit – a business facility, rebate or concession offered by a seller to the Derived Discount buyer or creditor to the debtor. – book used to record the primary entry of business transactions. Journal – act of recording the transactions into journal. Journalising – brief explanation of the transaction mentioned in the journal. Narration – an account of expenses, loss, income and gains. Nominal account – an account of individuals and organizations. Personal account – act of transferring the financial records from journal to ledger. Posting – an account of assets and properties. Real account – financial activities resulted from giving and taking of Transactions something. A. Very short answer questions 1. What is meant by primary recording? 2. Write the rules of debit and credit under personal account. 194 Office Management and Accountancy

3. State the rules of debit and credit under real account. 4. Which accounts are debited and credited while buying furniture on credit? 5. How many columns are there in journal? 6. Write the rules of journalizing under nominal account. B. Short answer questions 1. Define the term journal and show its specimen. 2. Write down the objectives of preparing journal entry. 3. What is journalizing? Mention the steps in journalizing. 4. Classify the following items into personal, real and nominal accounts: a) Furniture b) Cash c) Goods d) Telephone charge e) Discount f) Building g) Wages h) Drawing i) Bank j) Loan k) Capital l) Debtor m) Creditor n) Salaries o) Machine p) Insurance premium q) Commission r) Rent s) Bank balance t) Hari Narayan u) Himalayan Bank v) Investment C. Long answer questions 1. What are the types of account? Explain them with five examples in each. 2. What are the rules of debit and credit under types of account basis ? Illustrate them. 3. Write down the rules of debit and credit on the basis of nature of transactions. PRACTICAL PROBLEMS(PP) PP-1 Journalize the following transactions: Baishakh 2 Ganesh started business with cash Rs. 2,00,000. Jestha 6 Mamata commenced business with capital Rs. 3,00,000. Kartik 5 Archana invested Rs. 1,40,000 in cash to start the business. Marga 1 Anusha invested Rs. 3,00,000 in a trading concern. Marga 8 Binayak started business with cash Rs. 1,50,000 and goods Rs. 80,000. Falgun 1 Ashwini invested the following in the business firm: Cash Rs. 50,000, Office equipment Rs. 20,000, Furniture Rs. 10,000. Journal 195

PP-2 Prepare journal entries for the following transactions: a) Sapana invested Rs. 3,75,000 cash in her business. b) Yojana began the business by placing Rs. 4,00,000 into a business. c) Arpana invested Rs. 6,00,000 in a stationery business. d) Rubina invested Rs. 1,40,000 in cash to start the business. e) Yashika started business with cash Rs. 8,50,000 and land and building Rs. 5,00,000 f) Kalpana invested the following in the business firm: Cash Rs. 3,50,000, Furniture Rs. 1,25,000, Computer Rs. 15,000 PP-3 Prepare journal entries for the following transactions: Shrawan 1 Opened a bank account in Prime Bank with Rs. 5,00,000. Shrawan 25 Opened a bank account with cash Rs. 6,00,000. Bhadra 10 Deposited cash Rs. 1,00,000 into bank. Aswin 13 Cash Rs. 75,000 withdrawn from Prime Bank. Aswin 23 Withdrawn cash Rs. 45,000 from bank for office use. PP-4 Prepare journal entries for the following transactions: a) Ranjan started business with capital of Rs. 2,50,000. b) He deposited cash Rs. 1,00,000 into bank. c) Cash Rs. 35,000 withdrawn from bank. d) Cash Rs. 5,000 withdrawn from bank for office use through cheque. e) Palikhe started a business with capital of Rs. 1,00,000 in the bank. f) Cash Rs. 15,000 withdrew from bank. g) Kamini commenced business with cash Rs. 2,70,000 and bank balance Rs. 1,50,000 PP-5 Journalize the following transactions in the book of Dharan Traders: Shrawan 2 Purchased goods for cash Rs. 50,000 Shrawan 10 Purchased goods for Rs. 40,000 Shrawan 23 Bought trading goods for Rs. 60,000 Bhadra 3 Cash purchase Rs. 10,000 Bhadra 25 Purchased goods for Rs. 1,00,000 and paid by cheque. Ashwin 1 Purchased goods from Malvika on credit Rs. 75,000 Ashwin 20 Bought goods from Bikash for Rs. 68,000 Ashwin 25 Bought goods of Rs. 25,000 in cash from Yojana Traders. Ashwin 30 Purchased goods on credit Rs. 30,000 PP-6 Journalize the following transactions in the book of Pokhara Traders: a) Purchased goods for cash Rs. 58,000. b) Bought goods of Rs. 1,40,000 and paid by cheque. c) Purchased goods for Rs. 90,000 from Ranjan and paid by cheque. d) Cash purchase Rs. 80,000. 196 Office Management and Accountancy

e) Bought goods from Lalit on credit Rs. 1,00,000. f) Bought goods of Rs. 70,000 from Yunish Suppliers. g) Bought goods on credit Rs. 37,000. h) Purchased goods of Rs. 1,00,000 from Dipika and payment made in cash. PP-7 Prepare journal entries for the following transactions : a) Baishakh 10 Purchased goods from Sofiya for Rs. 78,000. b) Baishakh 29 Purchased goods from Biplab Traders on credit Rs. 1,00,000. c) Baishakh 30 Returned goods to Sofiya of Rs. 8,000 being defective. d) Jestha 3 Bought goods of Rs. 60,000 from Tej Enterprises. e) Jestha 10 Returned goods valued Rs. 5,000 to Biplab Traders. f) Jestha 27 Returned goods worth Rs. 2,000 to Tej Enterprises. g) Jestha 30 Returned goods to Banira of Rs. 13,000. h) Ashadh 1 Goods purchased on credit for Rs. 31,000. i) Ashadh 18 Returned goods to Manus Traders for Rs. 10,000. PP-8 Record the following transactions in a journal book of Samjhana Traders : Magh 3 Sold goods for cash Rs. 4,00,000. Magh 7 Sold goods for Rs. 35,000. Magh 18 Cash sales Rs. 50,000. Magh 20 Sold goods for Rs. 40,000 and received a cheque. Magh 27 Sold goods for Rs. 13,000 to Ramesh on credit. Magh 29 Sold goods to Triveni Traders Rs. 18,000. Magh 30 Sold goods to Nabina on cash Rs. 14,000. Falgun 7 Sold goods for Rs. 10,000 to Brijesh and received a cheque. Falgun 20 Sold goods on credit Rs. 27,000. PP-9 Give journal entries for the following transactions: a) Sold goods for Rs. 50,000. b) Goods sold for cash Rs. 17,000. c) Cash received Rs. 18,000 for sale of goods. d) Cash sales Rs. 13,000. e) Sold goods for Rs. 24,000 and payment received by cheque. f) Sold goods for Rs. 37,000 to Mithun on credit. g) Sold goods to Pratima Rs. 28,000 h) Sold goods to Madhav in cash Rs. 22,000 i) Sold goods for Rs. 19,000 to Pallavi and payment received by cheque. j) Sold goods on credit Rs. 45,000 Journal 197

PP-10 Give entries to record the following transactions in journal book: a) Chaitra 3 Sold goods to Jayanti for Rs. 70,000. b) Chaitra 9 Sold goods to Aava Rs. 1,00,000. c) Chaitra 15 Returned goods worth Rs. 3,000 by Jayanti. d) Chaitra 28 Returned goods of Rs. 2,000 by Aava. e) Baishakh 7 Sold goods to Kamalesh for Rs. 27,000. f) Baishakh 13 Returned goods valued Rs. 3,500 by Kamalesh being defective. g) Baishakh 18 Returned goods to Ram Traders of Rs. 5,000. PP-11 Journalize the following transactions: a) Falgun 10 Purchased machine for Rs. 6,00,000. b) Falgun 28 Purchased land and building for cash Rs. 1,30,000. c) Chaitra 7 Purchased computer for Rs. 1,00,000. d) Chaitra 9 Bought furniture for Rs. 70,000. e) Chaitra 19 Purchased a printer for Rs. 30,000 and payment made by cheque. f) Chaitra 27 Purchased a machinery from Honda Traders for Rs. 41,000. g) Chaitra 30 Purchased a computer from Prime Computer Traders on credit Rs. 35,000. h) Baishakh 1 Bought loose tools in cash Rs. 13,000. PP-12 Journalize the following transactions: a) Jestha 2 Sold land for Rs. 10,00,000. b) Jeshta 7 Sold machinery for cash Rs. 1,70,000. c) Jestha 13 Sold old computer for Rs. 7,000. d) Jestha 23 Sold plant and machinery to Prabin for Rs. 81,000. e) Jestha 26 Sold furniture to Sarika on credit Rs. 5,000. f) Jestha 28 Sold old furniture to Yojana and received a cheque of Rs. 7,000. Sold machinery to Daman in cash Rs. 10,000. g) Jestha 29 PP-13 Prepare journal entries for the following transactions: a) Paid rent Rs. 50,000. b) Paid wages in cash Rs. 25,000. c) Paid advertisement Rs. 10,000. d) Paid telephone bill Rs. 7,000. e) Paid salary by cheque Rs. 13,000. f) Paid commission to Malvika Rs. 21,000. g) Received commission Rs. 2,000. 198 Office Management and Accountancy

h) Received interest Rs. 23,000 through cheque. i) Received rent Rs. 16,000 through cheque. PP-14 Journalize the following transactions: a) Falgun 3 Paid insurance premium Rs. 10,000. b) Falgun 7 Paid audit fee Rs. 5,000. c) Falgun 10 Received cash Rs. 20,000 as commission. d) Falgun 13 Paid office expenses by cheque Rs. 18,000. e) Falgun 18 Received interest Rs. 13,000 in cash. f) Falgun 20 Paid advertisement by cheque Rs. 9,000. g) Falgun 24 Purchased office supplies for Rs. 3,500. h) Falgun 28 Paid wages in cash Rs. 2,000. i) Falgun 30 Paid for travelling expenses by cheque Rs. 14,500. PP-15 Journalize the following transactions of a business house: a) Purchased goods from Himal for Rs. 13,000 and made partial payment of Rs. 5,000. b) Purchased goods from Harati for Rs. 45,000 and paid Rs. 10,000 by cheque partially. c) Purchased furniture and fixture of Rs. 50,000 from Krishna Furniture Suppliers and paid cash Rs. 20,000 partially. d) Sold goods for Rs. 80,000 to Anupama and received cash Rs. 25,000 as partial receipt. e) Sold goods for Rs. 60,000 toArabindra and received cheque of Rs. 20,000 as partial receipt. f) Sold land and building for Rs. 10,00,000 and received Rs. 2,00,000 as partial receipt. PP-16 Prepare journal entries for the following transactions: a) Jestha 3 Purchased goods for Rs. 50,000 from Puskar and made partial payment of Rs. 10,000. b) Jestha 18 Bought goods of Rs. 1,00,000 from Hitaishi Traders and paid cash Rs. 25,000 partially. c) Jestha 29 Purchased goods for Rs. 20,000 and made partial payment of Rs. 6,000 by cheque. d) Ashadh 1 Purchased plant and machinery for Rs. 2,00,000 from Nirmal Trade Concern and paid Rs. 50,000 as partial payment. e) Ashadh 3 Sold goods for Rs. 40,000 to Shilu and received cash Rs. 7,000 as partial receipt. f) Ashadh 15 Sold goods to Sarita for Rs. 15,000 and received a cheque of Rs. 5,000 as partial receipt. Journal 199

g) Ashadh 32 Sold computer to Laxman for Rs. 25,000 and received cash Rs. 9,000 partially. PP-17 Record the following transactions in a journal book: a) Baishakh 3 Withdrawn cash Rs. 10,000 by proprietor for personal use. b) Baishakh 28 Withdrawn goods of Rs. 5,000 by owner for domestic use. c) Jestha 17 Withdrawn cash Rs. 7,000 from bank for private use. d) Ashad 11 Withdrawn computer by owner from business for domestic use. e) Ashad 27 Withdrew cash Rs. 25,000 for personal use. f) Ashad 30 Cash Rs. 12,000 used by proprietor for personal use. g) Shrawan 14 Withdrawn goods worth Rs 5,000 by proprietor from business for private use. PP-18 Record the following transactions in journal book: a) Withdrawn cash Rs. 3,000 by owner for personal use. b) Withdrawn goods of Rs. 7,000 by proprietor for domestic use. c) Withdrawn cash Rs. 5,000 from bank for private use. d) Goods costing Rs. 15,000 were taken by owner for household use. e) Withdrawn office table of Rs. 6,000 by owner from business for domestic use. f) Cash Rs. 13,000 used by owner for domestic use. g) Cash Rs. 9,000 and goods of Rs. 3,000 taken by owner for his household purpose. PP-19 Prepare journal entries for the following transactions: a) Depreciation Rs. 10,000 charged on furniture. b) Depreciation charged @ 10% on computer valued Rs. 40,000 c) Depreciate plant by Rs. 50,000. d) Purchased goods worth Rs. 10,000 from Arun at 10% trade discount. e) Sold goods of Rs. 8,000 to Manoj at 5% trade discount f) Sold goods to Pandey at 10% trade discount, list price Rs.10,000. PP-20 Journalize the following transactions: a) Depreciation charged on machinery Rs. 5,000. b) Depreciate building by Rs. 25,000. c) Depreciate by 20% on office equipment valued at Rs. 50,000. d) Purchased goods worth Rs. 25,000 from Rajan at 20% trade discount. e) Sold goods of Rs. 10,000 to Manish at 10% trade discount. f) Sold goods to Anupama at 8% trade discount, list price Rs.50,000. 200 Office Management and Accountancy