Question
Explain Debit and Credit note in five sentences.
✓
Answer
Debit Note:
This is referred to a note that is issued by the business to the other concerned parties. It represents the details and reasons for debiting the concerned party's account.
Example: Goods worth ₹ 2,000 returned by the business to Mr. Ramesh (a supplier).
In this case, Ramesh's Account will be debited with ₹ 2,000 as the goods purchased from him were returned to him. A issue of Debit Note in this case explains that Ramesh A/c has been debited with ₹ 2,000 with explanation, i.e. due to the goods returned by the business.
Credit Note:
Similar to the Debit Note, a Credit Note is also issued by the business to the other concerned parties. It represents the details and reasons for crediting the concerned party's account.
Example: Goods worth ₹ 2,000 were returned by Mr. Ramesh (a customer) to the business.
In this case, Ramesh's Account will be credited with ₹ 2,000 as the goods sold to him were returned back to the business. A issue of Credit Note in this case explains that Ramesh's A/c has been credited with ₹ 2,000 with explanation, i.e. due to the goods returned by him.
Both Debit Note as well as Credit Note also contains other important information such as, quantity of the goods (in units), amount of the transaction, Challan Number, Date, Names and Addresses of both the parties involved in the transaction.
This is referred to a note that is issued by the business to the other concerned parties. It represents the details and reasons for debiting the concerned party's account.
Example: Goods worth ₹ 2,000 returned by the business to Mr. Ramesh (a supplier).
In this case, Ramesh's Account will be debited with ₹ 2,000 as the goods purchased from him were returned to him. A issue of Debit Note in this case explains that Ramesh A/c has been debited with ₹ 2,000 with explanation, i.e. due to the goods returned by the business.
Credit Note:
Similar to the Debit Note, a Credit Note is also issued by the business to the other concerned parties. It represents the details and reasons for crediting the concerned party's account.
Example: Goods worth ₹ 2,000 were returned by Mr. Ramesh (a customer) to the business.
In this case, Ramesh's Account will be credited with ₹ 2,000 as the goods sold to him were returned back to the business. A issue of Credit Note in this case explains that Ramesh's A/c has been credited with ₹ 2,000 with explanation, i.e. due to the goods returned by him.
Both Debit Note as well as Credit Note also contains other important information such as, quantity of the goods (in units), amount of the transaction, Challan Number, Date, Names and Addresses of both the parties involved in the transaction.
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Explain the types of Reserves.
The accountant of a firm finds that the Trial Balance as on 31st March, 2019 is out by an excess debit of ₹ 283. He placed the amount in the Suspense Account. In the first week of April, 2019, he discovered the following errors. Pass the Journal entries necessary to rectify these errors and show the Suspense Account as it would appear at the end of the week. Have you any comment to make?
- Cash paid to Amar Nath, ₹ 75, was posted to the credit of Amar Singh's Account as ₹ 57.
- Discount allowed by Brijesh of ₹ 5 was not entered in the Cash Book but Brijesh stands debited correctly.
- No entry was made for goods worth ₹ 40 taken away by proprietor for personal use.
- ₹ 500 received from Jhaveri Bros. for interest on loan advanced to them were recorded in the Cash Book. But the entry was not posted in the Ledger.
- The total of Returns Outward Book was short by ₹ 100.
Prepare journal Entries of the following postings:
Journalise the following transaction in the Book of M/s. Beauti traders Also post them in the ledger.
|
Dec. 2017
|
|
₹
|
|
1
|
Started business with cash
|
2,00,000
|
|
2
|
Bought office furniture
|
30,000
|
|
3
|
Paid into bank to open an current account
|
1,00,000
|
|
5
|
Purchased a computer and paid by cheque
|
2,50,000
|
|
6
|
Bought goods on credit from Ritika
|
60,000
|
|
8
|
Cash sales
|
30,000
|
|
9
|
Sold goods to Karishna on credit
|
25,000
|
|
12
|
Cash paid to Mansi on account
|
30,000
|
|
14
|
Goods returned to Ritika
|
2,000
|
|
15
|
Stationery purchased for cash
|
3,000
|
|
16
|
Paid wages
|
1,000
|
|
18
|
Goods returned by Karishna
|
2,000
|
|
20
|
Cheque given to Ritika
|
28,000
|
|
22
|
Cash received from Karishna on account
|
15,000
|
|
24
|
Insurance premium paid by cheque
|
4,000
|
|
26
|
Cheque received from Karishna
|
8,000
|
|
28
|
Rent paid by cheque
|
3,000
|
|
29
|
Purchased goods on credit from Meena Traders
|
20,000
|
|
30
|
Cash sales
|
14,000
|
Prepare Bank Reconciliation Statement as on 31st March, 2019 from the following particulars:
|
|
|
₹
|
|
(i)
|
Bank balance as per Pass Book.
|
10,000
|
|
(ii)
|
Cheque deposited into the Bank, but no entry was passed in the Cash Book.
|
500
|
|
(iii)
|
Cheque received and entered in the Cash Book but not sent to bank.
|
1,200
|
|
(iv)
|
Credit side of the Cash Book bank column cast short.
|
200
|
|
(v)
|
Insurance premium paid directly by the bank under the standing advice.
|
600
|
|
(vi)
|
Bank charges entered twice in the Cash Book.
|
20
|
|
(vii)
|
Cheque issued but not presented to the bank for payment.
|
500
|
|
(viii)
|
Cheque received entered twice in the Cash Book.
|
1,000
|
|
(ix)
|
Bill discounted dishonoured not recorded in the Cash Book.
|
5,000
|
|
(x)
|
Bank had wrongly allowed interest of ₹ 5,000, which was reversed by it on 5th April, 2019
|
What is matching concept? Why should a business concern follow this concept? Discuss.
Journalise the following:
|
2017
|
|
|
March 4
|
Purchased building for ₹ 1,50,000 and incurred expenses of ₹ 10,000 on its purchase.
|
|
March 10
|
Satish who owed us ₹ 20,000 is declared insolvent and 60 paise per ₹ is received from his estate.
|
|
March 15
|
Paid ₹ 500 for repairing the office furniture.
|
|
March 18
|
Proprietor withdrew for his personal use cash ₹ 5,000 and goods worth ₹ 2,000.
|
|
March 20
|
Purchased the following items for business: Iron Safe ₹ 15,000; Filing Cabinet ₹ 5,000; Computer ₹ 12,000; Postage ₹ 200 and Stationery ₹ 150
|
|
March 28
|
Paid electricity charges ₹ 1,600.
|
|
March 31
|
Charge depreciation on Machinery @ 10% for one year (Machinery ₹ 75,000).
|
|
March 31
|
Outstanding wages at the end of the year ₹ 6,000.
|
On 1st July, 2010, X Ltd. purchased a machinery for ₹ 15,00,000. Depreciation is provided @ 20% p.a. on the original cost of the machinery and books are closed on 31st March each year. On 31st May, 2012, a part of this machine purchased on 1st July 2010 for ₹ 3,60,000 was sold for ₹ 2,40,000 and on the same date new machinery was purchased for ₹ 4,20,000. You are required to prepare (a) Machinery Account, (b) Provision for Depreciation Account, and (c) Machinery Disposal Account.
Journalise the following transactions of Ram, Delhi :
→2018 |
| Rs. |
Jan-01 | Ram commenced business with cash | 30,000 |
Jan-02 | Opened a bank account with Union Bank by cheque from savings account | 21,000 |
Jan-03 | Purchased goods from Rahul in Cash | 10,000 |
Jan-07 | Withdrew cash from bank for office use | 3,000 |
Jan-10 | Sold goods to Hari, Delhi on credit | 5,000 |
Jan-15 | Purchased goods from Shyam, Meerut (UP) | 15,000 |
Jan-20 | Cash sales | 3,000 |
Jan-25 | Paid to Shyam | 14,750 |
| Discount Received | 250 |
Jan-31 | Paid Salaries | 10,000 |
CGST and SGST is levied @ $6 \%$ each on intra-state sale and purchase. IGST is levied @ $12 \%$ on inter-state sale and purchase.
Prepare bank reconciliation statement of Dinesh on 30th June 2014 with following particulars:
- Pass Book showed an overdraft of ₹ 15,000 on 30th June 2014.
- A cheque of ₹ 200 was deposited in bank but not recorded in Cash Book.
- Cheques of ₹ 17,000 were issued but cheques worth only ₹ 10,000 were presented for payment up to 30th June 2014.
- Cheques of ₹ 2,000 were received and recorded in Cash Book but not sent to bank.
- Cheques of ₹ 10,000 were sent to bank for collection; out of these cheques of ₹ 2,000 and of ₹ 1,000 were credited respectively on 8th July and 10th July and the remaining cheques were credited before 30th June 2014.
- Bank paid ₹ 300 fee of Chamber of Commerce on behalf of Dinesh, which was not recorded in Cash Book.
- Bank charged interest on overdraft ₹ 800 which was not recorded in Cash Book.
- ₹ 40 for bank charges were recorded two times in Cash Book and bank expenses of ₹ 35 were not at all recorded in Cash Book.
- Total of credit side of bank column of Cash Book was undercast by ₹ 1,000 by mistake.