Chapter : 1 Introduction To Accounting

Q1. What is an Account , Accounting and Accountancy ?

Q2. Differentiate Book-keeping and Accounting .

Q3. Give any two advantages and limitations of Accounting.

Chapter : 2 Basic Accounting Terms:

a. Capital b. Drawing c. Expenditure d. Deferred Revenue Expenditure

e. Fictitious Assets f. Profits g. Gain h. Trade Receivables

i. Trade Payables j. Goods k. Goods l. Voucher

m. Entry n Entity o. Live Stock p Bad Debts

q. Solvent r. Insolvent

Chapter : 5 Accounting Equation

Q1. Manu had the following transactions: Rs

1. Started business with cash 1,00,000

2. Deposited cash into bank 60,000
3. Bought a machine by raising a bank loan 50,000
4. Bought goods for cash Rs 20,000 and on credit 40,000
5. Goods bought for cash was sold to Amit 25,000
6. Amit returned goods worth 5,000
7. Amit settled his account by paying 19,500
8. Paid instalment of bank loan Rs 20,000 and paid interest by cheque
9. Charge 10% Depreciation on machine.

Prepare Accounting Equation and a balance sheet from the last new equation.

Q2. X started business on 1st April 2012 with a capital of Rs 1,20,000. During the year, he introduced
further capital of Rs 30,000 but withdrew Rs 25,000 during the year for personal use. At the end of
the year, his assets worth Rs 2,00,000 and liabilities amounting Rs 30,000. Calculate his capital at the
end of the year and profit/loss during the year.
Q3. Prepare T-shape account for capital from the following information.

a. Commenced business with cash Rs 20,000 and goods worth Rs 30,000.

b. Drawing during the year Rs 7,000
c. Additional capital introduced Rs 10,000
d. Loss during the year Rs 4,000

Chapter: 6 Origin of Transactions and Preparation of Vourchers

Q1. What do you mean by Source Documents ?

Q2. Explain:

a. Cash Memo b. Receipt c. Pay-in-slip d. Invoice/Bill e. Debit Note f. Credit

Note g. Cheque

Chapter 7: Journal

Q1. Following balance appeared in the books of Super Garments as on 1st January 2014.You are
required to:

a. Journal Entries b. Post them into the ledger also. c. Trial Balance

Assets: Cash Rs 5,000; Cash at Bank Rs 12,500; Debtors Rs 14,000 (Ashok Rs 5,000; Kewal Rs 6,000;
Mohan Rs 3,000), Stock Rs 24,500 and furniture Rs 14,000

Liabilities : Creditors Rs 12,000 (Ram Rs 4,000; Amit Rs 5,000 and Sunil Rs 3,000); Bank loan Rs
18,000

Following transactions took place during January 2014

Jan 3 Bought goods from Suresh for Rs 25,000 at a trade discount of 20% and cash discount of 2%.
Paid 40% amount immediately.

Jan 5 Sold goods to kewal Rs 10,000.

Jan 8 Received Rs 15,500 from kewal in full settlement of his account.

Jan 10 Received cheque from Ashok Rs 4,900 allowing him discount Rs 100.

Jan 12 Cheque received from Ashok was deposited into bank.

Jan 15 Cheque received from Mohan Rs 2,950 in full settlement of his account, was deposited in
bank on the same day.

Jan 18 Cheque of Ashoka was dishonoured.

Jan 20 Bought goods from Brown for Rs 10,000

Jan 23 Goods bought from Brown was sold to james at a profit of 20%

Jan 25 Withdrew cash from bank Rs 4,000 for office use and Rs 1,000 for private use.

Jan 27 Goods distributed as free sample Rs 3,000 and given as charity Rs 1,000

Jan 29 Ashoka became insolvent and paid 60% only.

Jan 30 Goods sold for cash Rs 11,000 of which Rs 6,000 deposited in bank.

Chapter :8 Cash Book

Q1. Enter the following transactions in the cash book with cash and bank columns and post them
into the ledger.

2017 Rs

Jan 1 Cash in hand 5,000

Cash at bank 13,000

Jan 3 Bought goods for cash 4,500

Jan 5 Received cash from Rakesh 9,000

Jan 8 Received a cheque from Amit and deposited it into bank 11,000

Jan 11 Paid wages by cheque 7,000

Jan 13 Cash deposited into bank 5,000

Jan 14 Sold goods for cash 8,000

Jan15 Bought furniture 3,000

Jan 16 Paid carriage on furniture 100

Jan 17 Received a cheque from Mohan 2,000

Jan 19 Deposited the Mohan’s cheque into bank

Jan 21 Bought goods from Ram on credit 9,000

Jan 23 Sold goods to Rahul 15,000

Jan 24 Paid Ram by cheque 9,000

Jan 25 Received cash Rs 7,000 and Rs 8,000 by cheque from Rahul which was immediately banked.

Jan 27 Withdrew cash from Bank for office use Rs 3,000 and for personal use Rs 2,000.

Jan 29 Paid charity 500

Jan 31 Cheque received from Rahul dishounoured .

Jan 31 Deposited entire cash to bank after retaining Rs 900 in office.

Q2. What do you understand by Imprest System ?

Chapter : 9 Subsidiary Books

Q1. Record the following transactions of Naveen General Store in appropriate subsidiary books:

2017

Jan 1 Assets: Cash Rs 10,000; bank Rs 15,000; Debtors (A Rs 8,000; B Rs 9,000; C Rs 7,500)

Stock Rs 30,500; Furniture Rs 20,000

Liabilities : Creditors (X – Rs 9,500; Y Rs 8,000; Z Rs 10,500)

Jan 3 Bought from Surya and Co.

20 Tooth paste @ Rs 50 each

10 bottle hair oil @ Rs 60 each

10 Allout @ Rs 50 each

Less: 10% trade discount

Jan 5 Sold goods for cash Rs 6,000

Jan 8 Sold goods to Ram Rs 8,000 and Mohan Rs 9,000

Jan 11 Received Cheque from Ram for Rs 7,800 and Mohan Rs 8,500 in full settlement of their
accounts
Jan 12 Cheque received from Ram is endorsed to Y in full settlement of his account and cheque of
Mohan deposited in banks.

Jan 14 Cash deposited into banks Rs 5,000.

Jan 15 Paid salary Rs 2,000; rent RS 1,200

Jan 18 Bank is instructed to issue draft to X for Rs 6,000. It charged Rs 50 as commission

Jan 20 Bought goods from Amar & Sons for Rs 12,000 less 10% Trade discount.

Jan 22 Sold goods to Karan for Rs 5,000 less 10% Trade discount

Jan 23 Returned goods to Amar & Sons for Rs 2,000

Jan 24 Karan returned goods of value Rs 1,000

Jan 25 Commission received Rs 500.

Jan 27 Settled the account of Amar & Sons by issuing cheque

Jan 28 Karan settled his account by issuing cheque which was lodged in bank

Jan 30 Cheque of Karan was dishonoured and bank charged Rs 50 on it.

Chapter : Bank Reconciliation Statement

Q1. From the following particulars of Khanna and Co. prepare BRS on 30th June 2010

a. Dr balance as per Pass book of Rs 2,400

b. Cheques for Rs 8,500 paid into bank in the month of june but cheques for Rs 4,700 were
credited by bank till 30th June.
c. Of the cheques drawn on 20th June for Rs 3,600, a cheque of Rs 1,100 was presented for
payment on July 3 and a cheque for Rs 200 had not been presented so far.
d. On scrutiny, it was found that bank had given us wrong credit for Rs 300.
e. Interest on overdraft debited by bank Rs 400
f. Bank Column of payment side of cash book was undercast Rs 1,000.

Chapter : Depreciation

Q1. A Company bought a machinery on 1st May 2011 costing Rs 45,000. It bought further machinery
on 1st September 2011 for Rs 30,000 and on 1st July 2012 for Rs 20,000.
On 1st January 2013 , one-third of the machinery bought on 1st May 2011 was sold for Rs 9,000 as it
became obsolete.

Shows how the machinery account would appear in the books for 3 years if accounts are closed on
31st December each year and depreciation is charged @10% p.a. by fixed instalment method.

Q2. The Following balances appear in the books of M/s Kushawaha Sons:

2012

Jan 1 Machinery Account Rs 40,000

Jan 1 Provision for Depreciation Account Rs 18,000

On 1st Jan 2012 they decided to sell a machinery for Rs 4,350. This machinery was purchased in
January 2008 for Rs 8,000. You are required to prepare machinery account and provision for the
depreciation account on 31st December 2012 assuming that firm has been charging depreciation at
10% p.a. on straight line method.

Q1. Prepare Trading and Profit and Loss Account for the year ended 31st March 2015 and balance
sheet as at that date from the following particulars:

Particulars Amount Particulars Amount

Capital 23,900 Purchases 85,500
Creditors 15,000 Carriage Inward 750
Rent received 300 Wages 11,500
Purchases Return 2,000 Power 4,000
Sales 1,44,800 Depreciation of machinery 500
Provision for Doubtful Debt 300 Salaries 17,200
Advertisement 4,000 Discount Received 900
Plant and Machinery 10,000 General Expenses 4,100
Goodwill 2,500 Prepaid Expenses 200
Patents 1,350 Repairs 4,550
Opening Stock 16,000 Insurance 9,950
Debtors 7,300 Discount Allowed 2,500
Cash in hand 1,055 Sales Return 300
Drawings 2,500 Commission 1,445

Adjustments:

a. Closing Stock was valued at Rs 15,700.

b. Goods costing Rs 1,000 was destroyed by fire. The insurance company admitted at claim for
Rs 790 only.
 c. Write off Rs 500 as bad debts and create a provision for doubtful debts on debtors at 5%.
d. Amortised patents by 33 1/3% .
e. One-fourth of advertisement is to be written off.
f. Charge 5% manager’s commission on net profits after charging his commission.
g. Proprietor withdrew Rs 100 for his private use. This amount was included in general
expenses.

Q2. Go through the formulas of Adjusted purchases, Cost of goods sold, Operating profit. Do
questions based on them.
 ACCOUNTANCY QUESTION BANK

1mark

1. In case of errors of partial omission, will the trial balance agree? Why?
Ans. No, the trial balance will not agree. A trial balance agree only if both
aspects of a transaction are posted into ledger accounts with correct amount.
2. Mention two objectives of preparing trial balance.
Ans. The two objectives of preparing trial balance are
(i) To check the arithmetical accuracy of ledger accounts.
(ii) It helps in identifying
errors.
3. Which of the following is/are the limitation(s) of accounting?
(a) It relates to the past transactions(b) It is quantitative and financial in
nature
(c) Both (a) and (b) (d) It does not act as an evidence
Ans. (c) Both (a) and (b)
4. What adjustment entry is passed at the end of the year for outstanding
expenses?
(a) Expenses A/c Dr
To Outstanding Expenses A/c
(b) Outstanding Expenses A/c Dr To Expenses A/c
(c) Outstanding Expenses A/c Dr To Cash A/c
(d) Expenses A/c Dr
To Cash A/c
Ans. (a) Expenses A/c Dr

To Outstanding Expenses A/c

5. While doing balancing of accounts, personal and real accounts are balanced
and nominal accounts are
(a) taken to profit and loss account.
(b) closed by transferring to trading and profit and loss account.
(c) left with balancing figure.
(d) two-sided entry is passed.
Ans. (b) closed by transferring to trading and
profit and loss account
6. The disagreement of trial balance indicates that an has been committed.
 Ans. error

7. Liability for a discounted bill is a .... liability.

Ans. contingent

8. If the amount is posted in the wrong account or if it is written on the

wrong side of the account, what is the error called?
Ans. Error of commission

9. What will be the effect on the trial balance if ` 5,000 are received as
rent and correctly entered in the books but not posted to rent account?
Ans. Debit side (Cash A/c) of trial balance will exceed by ` 5,000.
10. The debit notes issued are used to prepare which book?
Ans. The debit notes issued are used to prepare
purchase return book.
11.The amount of money that is owed by an
outsider is a/an
(a) asset (b) liability
(c) expense (d)
capital
Ans. (a) asset

12. Sudesh’s salary is ` 10,000 per month. During a month, he withdrew goods
worth ` 2,500 for personal use and also got ` 9,500 in cash. The excess
payment of ` 2,000 will be debited to

(a) Salary A/c (b) Purchases A/c

(c) Salary-in-advance A/c (d) Sales A/c
Ans. (c) Salary-in-
advance A/c

13.State true or
false
Here, we have given some statements. You are required to mention whether
these statements are true or false.

1. Work of identification, recording and classification of business financial

transactions only is known as book-keeping.
 Ans. True. Book-keeping starts with identifying financial transactions,
recording the identified transactions and ends with classifying them.
2. Credit vouchers are always prepared for those transactions from which
no cash is received and for which no cash is paid.
Ans. False

14.Diffrenciate :
Current liability and non-current liability.
Ans Current Liability Non-current Liability
.
Compulsorily payable with an
accounting year. Payable atleast after one year.

e.g. Creditors, outstanding e.g. Long-term loans, debentures, etc.

expenses, etc.
Purchases book and sales book.
Ans Purchases Book Sales Book
.
In this book, only credit purchase In this book, only credit sale of
of goods is recorded. goods is recorded.
Total amount of purchases book is Total amount of sales book is posted
posted to the purchases account. to the sales account periodically.
15. Journal is prepared in ................... order.

Ans. chronological

16. Pass journal entry for debts which were written-off as bad but are
subsequently recovered.

Ans. Cash/Bank A/c Dr

To Bad Debts Recovered A/c

17 Should a transaction be first recorded in a journal or ledger? Why?

Ans. A transaction should be recorded in journal first because the journal

entry is the basic record of business transaction. On the other hand, a
ledger is the collection of the accounts, debited or credited in the journal.
18.Which balance of the bank column in the cash book signifies bank overdraft?
 Ans. Credit balance in the bank column of the cash book signifies bank
overdraft.
19.Double entry principle means

(a) writing twice the same entry

(b) writing ail the entries twice in the book
(c) having a debit for every credit and credit for every debit
(d) All of the above
Ans. (c) having a debit for every credit and credit for every debit

20 Nominal accounts are generally accounts related to

(a) liabilities (b) capital
(c) assets (d) losses and incomes
Ans. (d) losses and incomes

21. Journalise the following -To record interest on capital.

Ans. Interest on Capital A/c Dr

To Capital A/c

(Being interest on capital provided)

22. A credit purchase of ` 460 from Sudhakar was recorded as ` 640. Pass a
journal entry to rectify this mistake.

Ans. Particulars LF Amt (Dr) Amt (Cr)

Sudhakar Dr 180
To Purchases A/c
180
(Being credit purchase of ` 460 recorded as ` 640, now
rectified)

23.State true or false :

1. Rule of personal account is applicable/applied on liabilities.
Ans. True. Personal account relates to a person i.e. individual, firm etc. like
capital account and drawings account which forms part of the liabilities.
2. All transactions other than cash are recorded only in journal proper as
special purpose books.
Ans. False. All transactions other than cash are recorded in other subsidiary
 books (except cash book) as special purpose books.
24 . Define rectifying entry.

Ans. Rectifying entry means an entry passed to correct the error committed in
passing a journal entry.
25 .Goods worth ` 2,500 were distributed as free
samples will be credited to account.

Ans. purchases

26 .Which accounting concept is applied when closing stock is valued at lower

of cost (purchase cost) or market price of goods?

Ans. Prudence concept (conservatism principle) is applied when closing stock

is valued at lower of cost or market price of goods.
27 .Find the total assets of the firm, if the capital is ` 1,60,000 and liabilities
are ` 40,000.

Ans. Total Assets = Liabilities + Capital => 40,000 + 1,60,000 =>` 2,00,000
28. “A trial balance is only a prima facie evidence of the arithmetical
accuracy of records." Do you agree with this statement?
Ans. Yes, trial balance essentially proves the arithmetical accuracy of the
books of accounts. If total of both the sides of a trial balance are same, then
it is proved that the books are atleast arithmetically correct.
29 . Which of the following is an example of representative personal account?

(a) Gopal and Sons (b) Outstanding salary

(c) Prepaid rent (d) Both (b) and (c)
Ans. (d) Both (b) and (c)
30. Journalise the following
1. Rent paid` 56,000 through cheque. Out of which ` 16,000 treated as
advance for the next year.
Ans. JOURNAL

Date Particulars LF Amt Amt

(Dr) (Cr)
Rent A/c Dr 40,000
Prepaid Rent A/c Dr 16,000
To Bank A/c 56,000
 (Being rent paid for current year ` 40,000 and for
next year as
advance ` 16,000)

31 .The amount of depreciation goes onevery subsequent year under written

down value method.
Ans. decreasing

32 .General reserve is shown on the side of the balance sheet.

Ans. liabilities

33. Is cash book a journal or a ledger? Give reason in support of your answer.

Ans. Cash book is both a journal and a ledger.

It is a journal because transactions are recorded for the first time in cash
book and it is a ledger, because when cash book is maintained, no separate such
account is prepared.

34. If total assets of a business at the end of the year are ` 20,00,000,
capital is ` 8,00,000 and drawings are ` 60,000. Calculate creditors.
Ans. Assets = Liabilities + Capital 20,00,000 = Creditors + 8,00,000 Creditors
=20,00,000 - 8,00,000=` 12,00,000
Note Drawings are already deducted from opening capital. So, drawings are
not required to be deducted from closing capital.

35. Due to a labour strike in a factory, the production had to stop for a
week. The accountant estimated the loss of production and likely loss of
profit and recorded it in the books of accounts. Is the accountant
correct?
Ans. No, as per the money measurement concept, only those transactions and
events, which can be recorded in money terms and on the basis of evidences,
are recorded in the books of accounts.
36 . Give any two methods of creating secret reserves.

Ans. Secret reserves can be created by writing down the value of goodwill to
a nominal value or providing excess depreciation to fixed assets.
37 . Compensating error is not disclosed by the trial balance. Why?

Ans. A compensating error is not disclosed by the trial balance as one error is
nullified by another error.
 38 . Bank reconciliation statement is prepared by the

Ans. Company or firm (customer of bank)

39 Pass journal entry to rectify undercasting of purchase book through
suspense account.
Ans. Purchases A/c Dr

To Suspense A/c
(Being purchase book undercast, now rectified)

40 Identify the principle/convention involved in making provision for

doubtful debts in profit and loss account.
(a) Convention of conservatism (b) Convention of consistency
(c) Convention of disclosure (d) None of these
Ans. (a) Convention of conservatism
41 Give the journal entry to record
prepaid expenses. Ans. Prepaid
Expenses A/c Dr To Cash A/c
(Being prepaid expenses recorded)
42 Unlike computer hardware, computer software cannot be seen or touched.
Is it true or false?
Ans. True.

43 Cost of goods purchased for resale is an example of

(a) capital expenditure (b) revenue expenditure
(c) deferred revenue expenditure (d) None of these
Atis. (b) revenue expenditure

44 Trading account is a
(a) personal account (b) nominal account
(c) real account (d) asset account
Ans. (b) nominal account

45 Rent paid during the year @ ` 1,000 p.m., amounts to ` 11,000 and rent
of ` 1,000 is outstanding. Give the journal entry to record the outstanding
rent.

Date Particulars LF Amt (Dr) Amt (Cr)

 Rent A/c Dr 1,000
1,000
To Outstanding Rent A/c (Being
outstanding rent recorded)
46 Differentiate between gross profit and net profit.

Ans. Gross Profit Net Profit

It is calculated from the
It is calculated from the trading profit and loss account.
account.
Gross profit is that profit which is Net profit is that profit which is
calculated by deducting only direct calculated after deducting all the
expenses from the net sales. expenses (direct + indirect) of
the business.

4marks:
1 .A firm bought plant for ` 14,80,000 on 1st April, 2019 and ` 20,000 is
spent on its installation. Its useful life is estimated to be of 5 years. Its
estimated realisable value at the end of the period was estimated at `
1,00,000.

Find out the amount of annual depreciation and rate of depreciation.

Ans. Cost of Plant = Acquisition Cost + Installation Cost =»` 14,80,000 +
20,000 = ` 15,00,000
Annual Depreciation = Cost-Scrap Value/Useful Life = 15,00,000-1,00,000/5 =
14,00,000/5 =` 2,80,000 Annual Depreciation = Annual Depreciation/Cost of
Asset x 100 = 2,80,000/15,00,000 x 100 = 18.67%

2. From the following information, draw up a trial balance in the books of Shri
Manmohan as on 31st March, 2019
Capital ` 1,12,000; purchases ` 28,800; discount allowed ` 960; carriage
inwards ` 6,960; carriage outwards ` 1,840; sales ` 48,000; return inwards `
240; return outwards ` 560; rent and taxes ` 960; plant and machinery `
64,560; stock on 1st April, 2018 ` 12,400; sundry debtors ` 16,160; sundry
creditors ` 9,600; investments ` 2,880; commission received ` 1,440; cash in
hand ` 80; cash at bank ` 8,080; motor cycle` 27,680 and stock on 31st
March, 2019 (not adjusted) ` 16,400.
3. Record the following transactions in the purchase return book of
Shyama Prasad. 2019
Feb 8-> Returned goods to Ram Book Center, Delhi for`
6,000, trade discount 10%

Feb 18 —» Returned goods to Pooja Book Center, Mumbai for ` 20,000 as

goods are not as per sample, trade discount 5%
Feb 25 —> Return goods to Ramesh Chand for ` 10,000
Ans. Purchase Return Book

Date Details Amt (`)

Particulars Debit Note LF (`)
No.
2019
Feb 8 Ram Book Center, Delhi 6,000

(-) Trade Discount 10% (600) 5,400

Feb 18 Pooja Book Center, Mumbai 20,000
(-) Trade Discount 5% (1,000) 19,000
Feb 25 Ramesh Chand 10,000
Feb 28 To Purchase Return A/c Cr 34,400

4. On 31st December, 2019, the cash book of Rohan showed

an overdraft of ` 56,000. From the following particulars,
make out a bank reconciliation statement.
(i) Cheques drawn but not cashed before 31st December, 2019 amounted to `
39,460.
(ii) Cheques paid into the bank but not credited before 31st December, 2019
amounted to` 48,910.
(iii) A bill receivable for ` 5,200 previously discounted with the bank had
been dishonoured and bank charges debited in the pass book amounted to `
550.
(iv) Debit is made in the pass book for ` 1,200 on account of interest on
overdraft.
(v) The bank has collected interest on investment and credited ` 7,600 in the
pass book.
Ans. Bank
Reconciliation
 Statement as on 31st
December, 2019

Particulars Plus (`) Minus (`)

Unfavourable/Credit Balance/Overdraft as per Cash Book — 56,000

(+) Cheque issued but not presented for payment 39,460 —
Interest collected by bank 7,600 —
(-) Cheque deposited into bank but not cleared — 48,910
Bill discounted dishonoured not recorded in cash book
including bank charges (5,200 + 500) 5,750

Bank debited for charges but not recorded in the cash book — 1,200
Unfavourable/Debit Balance/Overdraft as per Pass Book 64,800 —
1,11,860 1,11,860

5. Prepare a bank reconciliation statement from the

following particulars on 30th June, 2019. Bank
statement showed a favourable balance of ` 30,657.
(i) On 29th June, 2019, the bank credited the sum of ` 4,700 in error.
(ii) Certain cheques, valued at` 14,500 issued before 29th June, 2019 were not
cleared.
(iii) A hire purchase payment of ` 5,250, made by a standing order was not
entered in the cash book.
(iv) A cheque of ` 6,750 received, deposited and credited by bank, was
accounted as a receipt in the cash column of the cash book.
(v) Other cheques for` 32,000 were deposited in June but cheques for`
25,000 only were cleared by the bankers.

6. Prepare return outward journal (book) from the following transactions of

M/s Nageen Prakesh for December 2018.

Date Amt (`)

Particulars
Dec 8 M/s Radha Traders returned goods to us 1,700
Dec 14 M/s Mukesh & Brothers returned goods to us 2,800
Dec 19 Goods returned to M/s Rama Traders 7,500
Dec 28 Goods returned to M/s Suman Enterprises 4.000

7. Journalise the following transactions in the books of Harpreet Brothers.

(i) Goods worth ` 2,000 were used by the proprietor, plus CGST 6% and SGST
6%.
(ii) Charge depreciation @ 10% p.a. for 2 months on machine costing ` 30,000.
(iii) Provide interest on capital of` 1,50,000 at 6% per annum for 9 months.
(iv) Rahul became insolvent, who owed us ` 2,000. A final dividend of 60
paise in a rupee is received from his estate.
JOURNAL

Date Particulars LF Amt Amt (Cr)

(Dr)
(i) Drawings A/c Dr 2,240
To Purchases A/c 2,000
To Input CGST A/c (6%) 120
To Input SGST A/c (6%)
120
(Being goods worth ` 2,000 used by the
proprietor)
Depreciation on Machinery 500
A/c Dr To Machinery A/c
500
(Being depreciation @ 10% charged on machinery
for 2 months costing ` 30,000)
Interest on Capital A/c Dr 6,750
To Capital A/c
6,750
(Being interest on capital ` 1,50,000 @ 6% is
provide for 9 months)
Cash A/c 1,200
Bad Debts A/c Dr 800
To Rahul (Debtor) Dr 2,000
(Being 60 paise in a rupee received from Rahul who
owed `
2,000)
Total 11,490 11,490
8. Journalise:
(i) An old machine with the book value of` 4,40,000 is exchanged for a new
machine of ` 10,00,000. The old machine is valued at ` 1,50,000 for exchange
purposes by Machine Tools Ltd.
(ii) A cheque from a customer amounted to ` 8,750 deposited in the bank was
returned dishonoured.
(iii) Paid landlord ` 45,000 for rent. One-third of the premises is occupied
by the proprietor for his own residence.
(iv) Goods costing ` 19,150 given as charity (Sales price ` 20,000).
Ans. JOURNAL

Dat Particulars LAmt (Dr) Amt (Cr)

e F
(i) Machine A/c (New) 10,00,000

Dr Profit and Loss 2,90,000

A/c Dr To Machine 4,40,000

A/c (Old)
8,50,000
To Machine Tools Ltd
(Being the exchange of old machine worth ` 4,40,000
valued at `
1,50,000 for a new machine of ` 10,00,000)
(ii) Customer (Cheque Dishonoured) Dr 18,750
To Bank A/c 18,750
(Being the cheque deposited into bank
dishonoured)
(iii) Rent A/c (2/3rd of ` 45,000) Dr 30,000
Drawings A/c Dr 15,000
To Cash A/c 45,000
(Being the rent paid to landlord, 1/3rd of rent
debited account, as 1/3rd of the premises is occupied
by the proprietor for personal residence)
(iv) Charity A/c Dr 19,150
To Purchases A/c 19,150
(Being the goods costing ` 9,150 given as
 charity)

9. Show how the accounting equation is satisfied in the following cases

(i) Mahesh started business with cash ` 80,000 and goods ` 40,000.
(ii) Sold half of the goods at a profit of 25% to Ramesh.
(iii) Sold remaining goods at a loss of 10% for cash.
(iv) Paid salary ` 3,000.

10. On 31st December, 2019, the cash book of Subhash Bros showed an
overdraft of ` 19,890. From the following particulars, prepare a bank
reconciliation statement and ascertain the balance as per pass book.
(i) Debited by bank ` 315 on account of interest on overdraft and ` 75 on
account of charges for collecting bills.
(ii) Cheques drawn but not encashed before 31st December, 2019 for ` 6,500.
(iii) The bank has collected interest and has credited ` 925 in pass book.
(iv) A bill receivable for 1825 previously discounted with the bank had been
dishonoured and debited in the pass book.
(v) Cheques paid into bank but not collected and credited before 31st
December, 2019 amounted ` 7,250.
(vi) Debit side of cash book (bank column)
overcasted by ` 1,000.
11. From the following transactions, prepare the purchases returns book of
Karim & Co., a saree dealer and post them to the ledger.
2019
Jan 4 Returned to Mohan Mills, Kerala,10 polyester sarees @ ` 1,600 each (-)
Trade discount @ 10% (Debit note no. 101)
Jan 8 Srimala Mills, Kota accepted the returns of goods (which were
purchased for cash) from us, 8 Kota sarees @ ` 640 each (Debit note no. 102).
Jan 12 Returned to Sonica Mills, Bombay, 12 silk sarees @ ` 1040 each (-)
Trade discount @ 10% (Debit note no. 103).
Jan 30 Returned one typewriter (being defective) @ ` 7,200 to Vishaka & Co.

Ans. In the Books of

Karim & Co. Purchases
Returns Book
 Date Particulars Debit L
Note F Details Total
No. Amt (`) Amt (`)

2019 Mohan Mills, Kerala 10

Jan 4 Polyester Sarees @ ` 101 16,000
1,600 each (-) Trade (1,600) 14,400
Discount @ 10%
Jan Sonica Mills, Bombay 12 Silk Sarees @ 103 12,480
12 ` 1040 each (-) Trade Discount @ 10% (1,248) 11,232

Jan To Purchases Returns Cr 26,632

31 Account
Note Return of Kota sarees will be recorded in the cash book and return of
typewriter will be recorded in the journal (or journal proper), since in the
purchases returns book, only the return of merchandise purchased on credit
are recorded.

12.Rectify the following errors

(i) Depreciation provided on machinery ` 13,250 was not posted.

(ii) Bad debts written-off ` 1,750 were not posted.
(iii) Discount allowed to a debtor ` 63 on receiving cash from him was not
posted.
(iv) Bills receivable for ` 7,500 received from a debtor was not posted.
Rectification Entries in Journal

Dat Particulars LF Amt (Dr) Amt (Cr)

e
(i) Depreciation A/c Dr 13,250
To Machinery A/c 13,250
(Being depreciation charged on machinery
was not recorded, now rectified)
(ii) Bad Debts A/c Dr 1,750
To Debtor’s A/c 1,750
(Being bad debts written-off on debtors were not
recorded, now rectified)
(iii) Discount Allowed A/c Dr 63
To Debtor’s A/c 63
 (Being discount allowed to debtor was not recorded,
now rectified)
(iv) Bills Receivable A/c Dr 7,500
To Debtor's A/c 7,500
(Being bills receivable received from debtor not
recorded, now rectified)

13. Journalise the following transactions in the books of

Rajeev. 2019 Mar 4 Opened bank account with SBI `
80,000.
Mar 9 Purchased furniture worth ` 1,60,000 and tools
worth ` 32,000. Mar 10 Cash sent to bank ` 4,00,000.
Mar 12 Bought shares in Arihant Ltd for ` 40,000 and brokerage paid @
2%. The payment is made by cheque.
Mar 15 Paid to Vansh out of business funds for repair of Rajeev's house `
64,000.
Mar 19 Supplied goods costing ` 96,000 to Rohan, issued invoice at 10%
above cost less 5% trade discount.
In the Books of Rajeev JOURNAL

Date Particulars LF Amt (Dr) Amt (Cr)

2019
Mar 4 Bank A/c Dr 80,000
To Cash A/c
80,000
(Being amount deposited in SBI)
Mar 9 Furniture A/c Dr 1,60,000
Tools A/c Dr 32,000
To Cash A/c 1,92,000
(Being furniture and tools purchased)

Mar Bank A/c Dr 4,00,000

10
To Cash A/c 4,00,000
(Being amount deposited into bank)
 Mar Investment A/c Dr 40,800
12
To Bank A/c 40,800
(Being investment in shares of Arihant Ltd for
` 40,000 and brokerage paid @ 2%)
Mar Drawings A/c Dr 64,000
15
To Cash A/c 64,000
(Being amount paid for repairs of
proprietor’s residential house)
Mar Rohan A/c Dr 1,00,320
19
To Sales A/c 1,00,320
(Being goods sold to Rohan at 10% above
cost and allowed 5% discount)
Total 8,77,120 8,77,120

Working Note Amt (`)

Cost of Goods Sold 96,000

(+) 10% of` 96,000 9,600

1,05,600
(-) Trade Discount 5% (5,280)
1,00,320

6marks:
1. On 1st January, 2016, Satkar Transport Ltd purchased 3 buses for `
10,00,000 each. On 1st July, 2018, one bus was involved in an accident
and was completely destroyed and ` 7,00,000 were received from the
insurance company in full settlement. Depreciation is written-off @ 15%
p.a. on diminishing balance method. Prepare bus account from 2016 to
2019. Books are closed on 31st December, every year.
Dr Bus Account
Cr

Date Particulars J Amt (`) Date Particulars J Amt (`)

 F F

2016 2016
To Bank A/c
(10,00,000 x
Jan 1 3) 30,00,000 Dec By Depreciation A/c 4,50,000
31
Dec By Balance c/d 25,50,000
31
30,00,000 30,00,000
2017 2017
Jan 1 To Balance b/d Dec By Depreciation A/c 3,82,500
25,50,000
31
(@15% on `
25,50,000)
Dec By Balance c/d 21,67,500
31
25,50,000 25,50,000
2018 2018
Jan 1 To Balance b/d 21,67,500 Jul 1 By Depreciation A/c 54,188
Jul 1 To Profit and Loss 31,688 (6 months)
A/c
(Profit) Jul 1 By Bank A/c 7,00,000
(Insurance claim)
Dec By Depreciation A/c 2,16,750
31
Dec By Balance c/d 12,28,250
31
21,99,188 21,99,188
2019 2019
Jan 1 To Balance b/d Dec By Depreciation A/c 1,84,237
12,28,250
31
Dec By Balance c/d 10,44,013
31
12,28,250 12,28,250
Working Note
 Cost of Accidental Bus on 1 st January, 2018 = ` 7,22,500
Depreciation on Accidental Bus on 1 st July, 2018 = 7,22,500 @ 15% for 6
Months = ` 54,188 Value of Bus as on 1st July, 2018 = 7,22,500-54,188=`
6,68,312 Profit on Accidental Bus = 7,00,000-6,68,312=` 31,688
Cost of the Remaining 2 Buses = 21,67,500-` 7,22,500=` 14,45,000
Depreciation on these Buses = ` 14,45,000(5) 15%=` 2,16,750

2. A truck was purchased on 1st April, 2018 for ` 10,00,000. On 1st

October, 2018, another truck was purchased for ` 6,00,000. Estimated
scrap values were 140,000 and ` 20,000 respectively. Depreciation is to
be provided @ 10% p.a. on the trucks under the reducing balance system.
(i) Show the truck account for the year ended 31st March, 2019 and 2020.
Show how the truck account will appear in the balance sheet as at 31st March,
2020.

3. From the following balances, prepare trading and profit and loss account
and a balance sheet as on 31st March, 2019.

Particulars Amt (`) Amt (`)

Particulars
Capital 16,40,000 Sundry creditors 1,80,000
Life Insurance premium 56,000 Sales 24,80,00
0
Plant and machinery 1,00,000 Return outwards 20,000
Stock in the beginning 3,00,000 Special rebates (debit) 16,000
Purchases 17,44,000 Special rebates (credit) 24,000
Return inwards 1,20,000 Rent for premises sublet 20,000
Sundry debtors 4,20,000 Lighting 8,000
Furniture 1,82,000 Motor car expenses 1,26,000
Motor car 8,00,000 Bank balance 3,04,000
Freight and duty 40,000 Loan from Vishal @ 12% p.a. 2,00,000
Carriage inward 16,000 Interest on loan from Vishal 18,000
(debit)
 Carriage outward 6,000
Trade expenses 3,08,000
Additional Information
(i) Stock on 31st March, 2019 was valued at ` 5,00,000 (realisable value `
6,40,000).
(ii) Stock of ` 1,20,000 was burnt by fire on 25th March. It was fully
insured and the insurance company admitted the claim in full.
(iii) Goods worth ` 36,000 were distributed as free samples. Goods worth `
30,000 were used for personal purposes by the proprietor and goods worth `
10,000 were given away as charity.
(iv) Depreciate motor car by 15%.
(v) Included in trade expenses is insurance premium of ` 48,000 paid for the
year ending 30th June, 2019.