Question
Explain briefly any five advantages of accounting.
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Answer
- Financial Information about Business: Financial performance during the accounting period, i.e., profit earned or loss incurred and also the financial position at the end of the accounting period is known through accounting.
- Assistance to Management: The management makes business plans, takes decisions and exercises control over the affairs on the basis of accounting information.
- Replaces Memory: A systematic and timely recording of transactions obviates the necessity to remember transactions. The accounting record provides the necessary information.
- Facilitates Comparative Study: A systematic record enables a businessman to compare one year's results with those of other years and locate significant fac leading to change, if any.
- Facilitates Settlement of Tax Liabilities: A systematic accounting record immensely helps in settlement of income tax and Goods and Services Tax (GST) liabilities, since it is a good evidence of the correctness of transactions.
- Facilitates Loans: Loan is granted by the banks and financial institutions on the basis of growth potential which is supported by the performance. Accounting makes available the information with respect to performance.
- Evidence in Court: Systematic record of transactions is often accepted by the Courts as good evidence.
- Facilitates Sale of Business: If someone desires to sell his business, the accounts maintained by him will enable the ascertainment of the proper purchase price.
- Assistance in the Event of Insolvency: Insolvency proceedings involve explaining many transactions that have taken place in the past. Systematic accounting records assist a great deal in such situation.
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The books of Ramesh did not agree. The difference of ₹ 12,700 in trial balance was placed to the debit of suspense account. Subsequently, the following errors were located. Pass journal entries to rectify the errors and prepare the suspense account:
- The total of the purchases returns book, ₹ 2,100 has not been posted.
- A sale of ₹ 4,300 to Ram has been credited to his account as ₹ 3,400.
- A purchase from Suresh for ₹ 4,000 has been entered in the sales book. However, Suresh has been correctly credited with ₹ 4,000.
- Old furniture sold on credit for ₹ 5,400 has been recorded in the sales account as ₹ 4,500.
- Goods taken away by Ramesh, the proprietor for his personal use worth ₹ 750 has not been recorded in the books of accounts at all.
Fill in the missing information in the Machinery Account given below. Depreciation is charged @ 10% p.a. on Original Cost Method.
Prepare journal Entries of the following postings:
Show the accounting equation on the basis of following transactions:
- Commenced business with Cash ₹ 20,000; Goods ₹ 50,000 and Furniture ₹ 30,000.
- Purchased goods from Gopal on Credit ₹ 40,000.
- Sold goods for Cash ₹ 40,000 (costing ₹ 30,000).
- Sold goods to Ram on Credit ₹ 65,000 (costing ₹ 50,000).
- Withdrew for personal use goods costing ₹ 5,000.
- Purchased typewriter for personal use of the proprietor ₹ 20,000.
- Purchased chairs for office use for Cash ₹ 10,000.
- Paid for printing ₹ 500 and received Commission ₹ 1,200.
- Introduced fresh Capital ₹ 40,000.
- Paid to Gopal ₹ 30,000.
Show the accounting equation on the basis of the following transaction:
(Ans : Assets = Cash ₹ 2,92,000 + Goods ₹ 1,25,000 + Building ₹ 1,92,000 + Debtors ₹ 6,000 = 6,15,000: Laibilities = Creditors ₹ 30,000 + Outstanding Rent ₹ 5,000 + Accounts receiavable ₹ 5,000 + Capital ₹ 5,75,000 = ₹ 6,15,000)
|
a.
|
Udit started business with:
(i) Cash
(ii) Goods
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₹ 5,00,000
₹ 1,00,000
|
|
b.
|
Purchased building for cash
|
₹ 2,00,000
|
|
c.
|
Purchased goods from Himani
|
₹ 50,000
|
|
d.
|
Sold goods to Ashu (Cost ₹ 25,000)
|
₹ 36,000
|
|
e.
|
Paid insurance premium
|
₹ 3,000
|
|
f.
|
Rent outstanding
|
₹ 5,000
|
|
g.
|
Depreciation on building
|
₹ 8,000
|
|
h.
|
Cash withdrawn for personal use
|
₹ 20,000
|
| i. | Rent received in advance | ₹ 5,000 |
| j. | Cash paid to himani on account | ₹ 20,000 |
| k. | Cash received from Ashu | ₹ 30,000 |
The following is the Trial Balance prepared by an inexperienced accountant. Redraft it in a correct form and give necessary notes :-
Prepare the Transfer Vouchers in the books of Mangla Agencies, Faridabad, Haryana from the Source Vouchers:
|
2019
|
Particular
|
₹
|
|
Jan-7
|
Purchased goods from M/s Eufora, New Delhi vide Bill No. 912, paid IGST @ 12%
|
4,700
|
|
Jan-11
|
Sold goods to M/s Yardley, Faridabad, Haryana vide Bill No. 31596, charged CGST and SGST @ 6% each
|
5,000
|
|
Jan-31
|
Depreciation charged on building @ 10% on ₹ 2,00,000
|
20,000
|
Pass entries in the books of Ganguli & Sons. assuming all transactions have been entered in the state of West Bengal:
Assume CGST @ 6% and SGST @ 6%.
|
1.
|
Purchased goods for ₹ 2,00,000 and payment made by cheque.
|
|
2.
|
Sold goods for ₹ 1,60,000 to Devki Nandan & Sons.
|
|
3.
|
Purchased goods for ₹ 50,000 on credit.
|
|
4.
|
Paid for printing and stationery ₹ 4,000.
|
|
5.
|
Received for commission ₹ 5,000.
|
|
6.
|
Output GST adjusted against Input GST.
|
Raja Textiles Co. which closes its books on 31st March, purchased a machine on 1-4-2009 for ₹ 50,000. On 1-10-2010, it purchased an additional machine for ₹ 30,000. The part of the machine which was purchased on 1-4-2009 costing ₹ 10,000 was sold for ₹ 3,600 on 30th Sept., 2012. Prepare the Machine Account for four years, if the depreciation is provided at the rate of 10% p.a. on Diminishing Balance Method.
On 1st April, 2019, Mohit, Delhi started business with a capital of ₹ 50,000. He made the following transactions during the month of April:
You are required to journalise the above transactions and show the respective Ledger accounts.
| 2019 | ₹ | |
| April 3 | Purchased goods from Rita, Delhi on credit for | 20,000 |
| April 4 | Cash paid to Rita | 10,000 |
| April 6 | Goods sold to Rohit, Chandigarh | 25,000 |
| April 8 | Received cash from Rohit | 20,000 |
| April 12 | Goods purchased from Rita | 12,000 |
| April 18 | Cash paid to Rita | 20,000 |
| April 25 | Goods sold to Rohit, Chandigarh | 10,000 |
| April 30 | Received cash from Rohit | 6,000 |