Account 1 Marks Question

Integrated Goods and Services Tax (IGST).

An account is divided into two sides. The left side of an account is known as debit and right side known as credit.

The column ‘Ledger Folio' is filled at the time of posting into the ledger and not at the time of Journalising.

An account is not opened in the name of the proprietor, he is represented by Capital Account.

Increase an asset and increase a liability: Purchase goods on credit i.e., increase in stock and increase in creditors.

Capital account is a pesonal account. Because capital account is related to owner personal capital and thats why this is treated in the liabities side of balance sheet.

Journal being Book of Original Entry contains all the important information relating to a transaction in a chronological order.

Yes, it will be recorded in the books of account, as drawings by Rajan.

Two advantages of a Journal are:

1. It reduces the possibility of error.
2. It provides an explanation of the transactions.

An account is said to have a debit balance if the total of its debit side is more than the total of its credit side.

An account is said to have a credit balance if the total of its credit side is more than the total of its debit side.

Opening Entry is the Journal entry through which the closing balances of the previous year are brought forward in the current year's books of account.

Nominal (Revenue or Expense) Accounts: Accounts which relate to expenses, losses, gains, revenue, etc., are termed as Nominal Accounts. These are Salary Account, Purchases Account, Interest Paid Account, Sales Account and Commission Received Account. The net result of all the Nominal Accounts is profit or loss which is transferred to the Capital Account.

Advantages of Trade Discount are:

1. It improves sales as purchaser is encouraged to buy large quantity.
2. It reduces purchase cost for purchaser and thus, improves profit margin.

GSC Co. will not get any Cash Discount because it has not paid the total amount due. It was entitled to 2% Cash Discount, if it had paid the amount due in full.

Note:
No cash discount will be allowed as the payment is received after the stipulated time period of 7 days.

Discount allowed by HCL is a Trade Discount. It is not recorded separately in the books of account. Instead purchase is recorded at net value, i.e., Sale Price less Trade Discount.

Advantages of a Journal:

1. Provides Accounting Data in Chronological Order: Transactions in the Journal are recorded as they take place. Thus, it makes available the accounting record in chronological order as well as datewise.
2. Possibility of Error Reduces: Possibility of errors is reduced as the amounts to be debited and credited are written side by side and the two can be compared to verify whether they are equal or not. If the accounts are written up directly in the ledger account, there is a possibility of wrong amount being written or the amount written on the debit side may be more or less than on the credit side.

Two advantages of Cash Discount are:

1. Seller gets the due amount within the due date. Thus, his liquidity remains good.
2. Purchaser gets Cash Discount thus, it increases the profits.

Both these accounts are personal account because they belong to propreitor. For accounting purpose transactions related to propreitor (capital infusion or withdrawal) are done in capital and drawings account respectively.

Two points of differences between Trade Discount and Cash Discount are:

1. Trade Discount is allowed to encourage large purchases whereas Cash Discount is allowed to encourage prompt payment.
2. Trade Discount enables the retailer to sell goods at list price and earn better profit. Cash Discount will improve the cash flow.

The main objective is to keep systematic records:

• To determine profits and loss.
• To ascertain financial position.
• To communicate the information.

Journal is a primary book of account in which transactions are first recorded in a chronological order.

Journalising is a process of recording a transaction in a Journal.

Compound Journal Entry: Compound Journal entry is a Journal entry in which more than two accounts are affected, i.e., one or more accounts are debited and/or one or more accounts are credited or vice versa. For example, a sale of 5,000 is made to Satish. It is discharged by Satish by paying ₹ 2,000 in cash, balance to be paid later.
Entry for the transaction is a compound entry as follows:

Cash Discount is the discount allowed to the debtor for making prompt payment or for making payment before the due date.

Roshan will debit ₹ 40,000 to Purchases Account, i.e., the amount of Purchases after Trade Discount. He will also debit Input CGST Account and Input SGST Account by ₹ 2,400 each. Cash Discount received is an income for Roshan. It will be credited to Discount Received Account.

Nominal (Revenue or Expense) Accounts: Accounts which relate to expenses, losses, gains, revenue, etc., are termed as Nominal Accounts. These are Salary Account, Purchases Account, Interest Paid Account, Sales Account and Commission Received Account. The net result of all the Nominal Accounts is profit or loss which is transferred to the Capital Account.

Increase an asset and decrease another asset: purchase of machinery in cash i.e., increase in asset and decrease in cash.

Compound Journal Entry is the entry in which more than one account is debited or credited. For example, following is a compound entry:

Rebate is the discount allowed for reasons other than those for which Trade Discount is allowed. Say for poor quality of goods.

Journal is a book of primary entry or a book of original entry in which transactions ar first recorded in a chronological order, i.e., in the order or sequence they are entered Transactions are recorded in the Journal book from the accounting vouchers that are prepared on the basis of source documents, i.e., cash memo, invoices, purchase bills, etc.

Decrease an asset and decrease capital: Drawings (withdrawn by partners) i.e., decrease in capital ad decrease in cash.

Simple Journal Entry means a Journal entry in which only two accounts are affected, i.e., one account is debited and another account is credited.

No. Debt written off as bad, if recovered subsequently, is treated as a gain. It is credited to the Bad Debts Recovered Account because the debt had earlier been debite to expenses.

Real Accounts: Real Accounts are the accounts which relate to tangible or intangible assets of the firm (excluding debtors). Examples of tangible assets are: land, building, investments, plant and machinery, stock or cash in hand. Examples of intangible assets are: goodwill, patents and trademarks.

1. Central Goods and Services Tax (CGST).
2. State Goods and Services Tax (SGST).

Rahul will credit ₹ 3,75,000 to Sales Account, i.e., the amount of Gross Sales less Trade Discount. Cash Discount allowed is an expense and is debited to Discount Allowed Account.

Discount allowed by HCL is a Cash Discount. It is recorded in the books of account by crediting it to ‘Discount Received Account'.

Posting means transferring the entries from the Journal to the Ledger Account.

Trade Discount is the discount allowed when the goods are sold to the purchaser for resale to the ultimate consumer or when the goods are purchased in large quantity.

Book of Original Entry: Journal is called a Book of Original Entry (also called Book of Primary Entry) because a transaction is first recorded or written in this book and thereafter transferred, i.e., posted into the Ledger Account.

Capital Accounts: These are the accounts of proprietors/ partners who have invested amount in the business. It includes both Capital and Drawings Account.