Theory Base of Accounting — Account STD 11 Commerce — Question

What are Adjustment Entries?

Give the rules of Debit and Credit and explain them with imaginary examples.
Under Double Entry System of accounting each transaction has two aspects. One aspect is debit, i.e., receiving or incoming aspect. Another aspect is credit, i.e., giving or outgoing aspect. Debit and credit aspects of a transaction form the basis of Double Entry System.
Rules of Double Entry or Rules of Debit and Credit are formed on the basis of these two aspects in each of the business transactions. There are two approaches for deciding when to write on the debit side of account and when to write on the credit side of an account, i.e., which account is to be debited and which account is to be credited. The rules or: the basis of which such decision is taken are called Rules of Debit and Credit.
Rules of Debit and Credit (Traditional Classification) at a Glance:

S.No	Types of Account	Account to be Debited	Account to be Credited
1	Personal Account	Receiver	Giver
2	Real Account	What comes in	what goes out
3	Nominal Account	Expense and Loss	Income and Gain

From the following transactions, state the nature of accounts and state which account will be debited and which account will be credited:

S.No		₹
1	Mohan started business with cash	5,00,000
2	Purchased goods for cash	1,00,000
3	Sold goods for cash	1,50,000
4	Received interest from Ram in cash	500
5	Sold goods to Ashok	60,000
6	Purchased furniture for cash	50,000
7	Paid wages	20.000

Journalise the following:

1. Received a V.P.P. from Mohan Lal for ₹ 25,000. Sent a peon to collect it who paid ₹ 200 as cartage.
2. Received ₹ 1,000 from sales of old newspapers and ₹ 5,000 from sales of old chairs.
3. Goods given away as charity goods costing ₹ 7,000.
4. Received Cash from a debtor written off as bad-debt last year ₹ 20,000.
5. Sold goods costing ₹ 50,000 to Ashok on credit at a profit of 20% on cost.
6. Sold goods costing ₹ 1,00,000 for ₹ 1,40,000.
7. Provide ₹ 50,000 as interest on Capital.
8. Paid rent of building ₹ 60,000 by cheque. Half the building is used by the proprietor for residential purpose.
9. Outstanding salary at the end of the year ₹ 30,000.

Do you think that the Convention of conservatism results in creation of secret reserves?

On which side the increase in the following accounts will be recorded? Also mention the nature of account:

1. Furniture
2. Rent Paid
3. Commission Received
4. Salary Paid
5. Proprietor's Account
6. Debtor
7. Creditor

Prepare bank reconciliation statement as on December 31, 2017. This day the passbook of Mr. Himanshu showed a balance of ₹ 7,000.

1. Cheques of ₹ 1,000 directly deposited by a customer.
2. The bank has credited Mr. Himanshu for ₹ 700 as interest.
3. Cheques for ₹ 3000 were issued during the month of December but of these cheques for ₹ 1,000 were not presented during the month of December.

'A' commenced his cloth business on 1st April, 2011 with a capital of ₹ 3,00,000. On 31st March, 2012 his assets were worth ₹ 5,00,000 and liabilities ₹ 1,00,000. Find out his closing capital and profits earned during the year.

Give difference between Book-keeping and Accounting on the basis of stage, special skills and nature of job.

Give one example of Compensating error.

Give two advantages of GST.