FOA

Fundamental of Accounts
The Institute of Computer Accountants

27, N. S. Road, 4th Floor, Kolkata – 700 001
Table of Contents
Day 1 Day 2 Day 3

Day 4 Day 5 Day 6
Day 7 Day 8 Day 9
Day 10 Day 11 Day 12
Day 19
Day 20 Day 21
Day 23 Day 24
Day 22
4/16/11 The Institute of Computer

DAY 1
LEARNING OBJECTIVES
Ø Concept of Accounting
Ø Event and Transaction

Statement prepared by a business concern
Profit and Loss Account Balance Sheet
Measures success of the business in Ascertains the financial

terms of profit or loss position of the business
4/16/11 The Institute of Computer 1/13

Difference between Event and Transaction
Event Transaction
§ May or may not bring any § Bring changes in the

change in the financial financial position
position
§ May or may not be expressed § Must be expressed in terms
in terms of money of money
§ Example – Placing of order, § Example – Purchase of
Appointment of manager goods, Payment of salary

Event vs Transaction
Mr. X started business with capital of Rs 40,000 Transaction
Paid salaries to staff Rs 5,000 Transaction
Placed an order to ICA Ltd for goods of Rs 5,000
Event
Opened a bank account by depositing Rs 4,000
Transaction
Appointed Mr. B.Sen as manager on a salary of Rs 4,000 p.m.
Event
Received interest from Bank Rs 500 Transaction
Gave lift to a supplier in the business car
Event
Sent peon to post office to bring V.P.P. of Rs 600
Event

Accrual Concept
Ø Recognises revenue and expense as they are
incurred
Ø Income falls due when right to receive the income
arises

Example 1
Determine the Date of Accrual:
a. Tender submitted 25/08/2008

b. Quotation submitted 30/08/2008
c. Tender opened 05/09/2008 – 3.00 p.m.
d. Deal finalized 05/09/2008 – 4.00 p.m.
e. Accepted 07/09/2008
f. Goods delivered / Challan date 10/09/2008
g. Bill received 11/09/2008
h. 1st payment received 30/09/2008
i. 2nd pay received 30/10/2008
j. Final payment received 31/12/2008

Answer
Point a  e can not be the date of accrual as the deal may
be cancelled later
Date of accrual : The day on which challan made & goods
delivered i.e. 10/09/2008

Assignment 1
Insurance policy taken on – 03/04/2008
Fire took place 12/04/2008

FIR lodged 13/04/2008
Claim with insurance company lodged 23/04/2008
Inspection done by insurance co. 02/05/2008
Claim settled 25/05/2008
Claim paid 15/06/2008
Case filed with High Court 30/06/2008
Judgement passed 31/03/2009
Revised Statement filed 10/04/2009
Judgement passed in favour of the client 15/05/2009
Second & Final claim received 30/05/2009
Determine the date of accrual

Matching Concept
Ø Every item of income should be matched with the
expenses incurred to earn that income
Ø Adjustments should be made for all outstanding
expenses, accrued incomes etc. while preparing the final
accounts

Materiality Concept
Ø Relative importance of an item or event in terms of
money
Ø Item is material if the item is such that the judgment of a
reasonable person relying on the report would have been
changed

Example 2
Cost of car purchased  Capital expenditure
Cost of petrol / fuel  Revenue expenditure
On the same principle -
Pen purchased should be treated as Capital Expenditure (since it is

used for more than one accounting year) and
Cost of Ink filled should be treated as Revenue Expenditure
But this is not done so due to the materiality aspect

Entity Concept
Ø Business is treated as a separate entity
Ø Business and its proprietor are separate from each
other

Types of accounts
Assets
Something that the business owns
(Cash, Debtor, Furniture etc)
Liability
Obligation of the business to make a financial payment
(Creditor, Loan, Bank Overdraft etc)
Capital
Investment made by the owner
Expense
Cost of goods and services used up for earning revenue
(Purchase, Rent, Salary etc)
Income
Inflow of money accruing to a business
(Sales, Interest received etc)
Assignment 2
Mention the type of account:
i) Furniture
ii) Cash
v) Closing Stock
vi) Debtors
ix) Dividend received
x) Loan from father
xiii) Interest paid
xiv) Salary & Wages
xvii) Drawings
xviii) Purchases

v
What did you learn today
Ø Concept of Accounting
Ø Event and Transaction
Ø Accounting concepts

DAY 2
LEARNING OBJECTIVES
Ø Rules for debit and credit
Ø Journal Entries

Double Entry System
Ø System of recording transaction
Ø Each transaction should effect at least 2 accounts
Ø Every debit must have equal amount of credit
Profit and Loss Account Balance Sheet

Debit Credit Credit Debit
Expenses Income Capital / Liabilities Assets
Credit Debit Debit Credit

Capital
Ø Investment made by the owner
Ø Excess of assets over liabilities
Ø Can be invested in cash or in kind
Increase in Capital
Investment by owner Profit earned by business
Decrease in Capital
Withdrawal of cash/assets Loss suffered by business

Example 3
Capital introduced into business Rs 3,00,000
Accounting Treatment
Cash A/c …………………..Dr. 3,00,000
To, Capital A/c 3,00,000
Effect in Financial Statement

Contra
Ø Cash deposited into bank
Ø Cash withdrawn from bank
Ø Transfer of fund from one bank to another

Example 4
Deposited Rs 2,50,000 into Bank
Bank A/c…………………… Dr. 2,50,000

To, Cash A/c 2,50,000

Petty Cash
Ø Main cash is the source of this account
Ø Opened specifically to meet low value cash payments

Example 5
Transferred Rs 1,200 in petty cash fund from main cash
Petty Cash A/c……….Dr. 1,200

To, Cash A/c 1,200

Fixed Assets
Ø Long lived assets
Ø Usefulness is likely to extend beyond one accounting
period
Ø Generally used by business in the production of goods /
services

Example 6
● Purchased a delivery van for Rs 2,00,000 by cheque
Delivery Van A/c………..Dr. 2,00,000

To, Bank A/c 2,00,000

Investments
Ø Easily marketable securities purchased out of idle cash
Ø Objective is to get some return

Example 7
● Purchased investments @12% p.a. interest for Rs10,000
12% Investment A/c…..Dr 10,000
To, Cash A/c 10,000

Expenses
Ø Outflow of cash to meet day to day expense

Example 8
● Paid rent of Rs 4,000
Rent A/c……………………Dr. 4,000
To, Cash A/c 4,000

Assignment 3
Amit Arora started a business with cash of Rs 50,000 on 01.01.2008 under the name of Arora Production Ltd. The following transactions took
place during the period 01.01.2008 to 18.01.2008. Make the Journal entries from the following transactions in the books Arora production:
Date Transaction Rs.
5.1.08 Opened a bank Account with SBI 5,000
8.1.08 Furniture purchased for office from M/S Kabita Furniture for cash 2,300
9.1.08 Carriage paid to bring the furniture to office premises by cash 700
10.1.08 Purchased sing board by cash 2,000
11.1.08 Transferred to Petty Cash Fund 2,000
12.1.08 Cash deposited into Bank 20,000
14.1.08 2 Computers purchased for office use @Rs 22,000 from Delta Ltd
16.1.08 Amount paid to Delta Ltd as part payment of their dues by cheque 15,000
18.1.08 Rent paid for the month of January 5,000

Assignment 4
Mr. Narayan Murthy started business under the name M/S Murthy & Co. Make journal entries and show its effect in Profit
and Loss Account and also in Balance Sheet:
1. Introduced cash of Rs 50,000 as capital
2. Purchased machinery of Rs 10,000
3. Paid Rs 5000 to landlord as office rent
4. Loan of Rs 25,000 received from Mr.P.Todi by cheque
5. Opened a bank account with SBI, Park Street Branch by depositing cash of Rs10000
6. Deposited the loan cheque to SBI park street branch
7. Cash of Rs 30,000 deposited into Bank
8. One computer purchased from Akash Computech for Rs 22,000 and paid by cash after withdrawing from Bank account

v
Ø Double Entry System
Ø Passing of Journal Entries

DAY 3
LEARNING OBJECTIVES
Ø Purchase, Purchase Return
Ø Sales, Sales Return

Purchases
Ø Goods bought for the purpose – “to be sold”
Ø For trader it is buying for reselling
Ø For manufacturer, it is buying, to be converted to
finished goods

Example 9
Purchased 50 pcs keyboard @ Rs 200 from Supreme
Computer in cash
Purchases A/c …………………..Dr. 10,000
To, Cash A/c 10,000

Creditors
Ø To whom money is payable for goods or services received on
credit

Example 10
Purchased 250 pcs keyboard @ Rs 210 from Delta Computer
Purchases A/c …………………..Dr. 52,500
To, Delta Computer A/c 52,500

Sales
Ø Amount charged to customers as sale price of products
sold or services provided

Example 11
Sold 100 pcs keyboard @Rs 250 by cash
Cash A/c …………………..Dr. 25,000
To, Sales A/c 25,000

Debtors
Ø From whom money is receivable for goods or service

provided in credit

Example 12
Sold 150 pcs keyboard @Rs 500 to Raj Traders on credit
Raj Traders A/c …………………..Dr. 75,000

Debit Note
Ø Intimation to a party that his account has been debited
Ø Given to party to rectify any bill which was undercharged /
overcharged

Example 13
Returned 10 pcs keyboard @ Rs 225 to Computer World
Computer World A/c …………………..Dr. 2,250
To, Purchases Return A/c 2,250

Credit Note
Ø Document expressing indebtedness of the organisation issuing it
Ø Evidence of credit entry made to a party’s account
Ø Issued to customer for correction in the bill for any discrepancies

Example 14
Dynamic Computer returned 10 pcs keyboard @ Rs 500
Sales Return A/c …………………..Dr. 5000
To, Dynamic Computer A/c 5,000

Assignment 5
Pass the following journal entries in the books of ICA Ltd:
Purchased stationery for Rs 50 by cash
Purchased goods for Rs 20,000 from B on credit
Purchased Computer for Rs 17,500 from S & Co. on credit
Sold goods of Rs 600 in cash
Sold goods of Rs 12,000 to Mohan Brothers ( P ) Ltd
Part payment made of Rs 10,000 to S & Co by cash
Goods of Rs 2,000 returned to B
Payment made to B of Rs 10,000
Mohan Brothers (P) Ltd returned goods of Rs 2,000

Assignment 6
The following are the transactions of Mr. A for the month of April’ 2008. Make the journal entries in the books of Mr.A and show the effect on Profit and Loss
Account and on Balance Sheet:
April 1 Started business with Rs.6,00,000 in the Bank
” 3 Bought goods on credit from:
Atlas (P)Ltd- Rs.20,000; BK & Co - Rs.35,000; C. Chandra - Rs.50,000; D. Nag - Rs.45,000
” 4 Cash sales made for Rs.32,000
” 6 Paid rent by cheque Rs.3,000
” 8 Sold goods on credit to:
G. Das Rs.13,000; H. Kar Rs.20,000; J. Gupta Rs.1,50,000
” 16 Paid salaries by cash Rs.6,000
” 19 Bought goods on credit from:
D. Nag Rs.11,000; C. Bose Rs.34,000; K. Mitra Rs.22,000
” 20 Goods returned to: K. Mitra Rs.2,000; D. Nag Rs.5,000
” 21 Bought Motor Van on credit from J. K. Motors for Rs.3,70,000
” 22 Goods returned by: H. Kar Rs.4000; J. Gupta Rs.30,000
” 23 Paid the following by cheque:
Atlas (P) Ltd- Rs.20,000; K. Mitra - Rs.20,000; D. Nag - Rs.25,000
” 25 Received a loan of Rs.50,000 through cheque no 123456 from Mr.M. Guha
“ 25 Deposited the same cheque into the Bank
” 27 Received cheques from H. Kar Rs.16,000; J. Gupta Rs.1,20,000
” 30 Mr. A brings further Rs.90,000 into the business by paying into business bank account

v
Ø Purchases & Purchases Return
Ø Sales & Sales Return

DAY 4
LEARNING OBJECTIVES
Ø Journal Entries

Example 15
1. Mr. Ravi started business with cash Rs 55,000
Cash A/c Dr 55,000
To Capital A/c 55,000
2 Bought Furniture of Rs 10000, Machinery of Rs.25000

Furniture A/c Dr 10,000
Machinery A/c Dr 25,000
To Cash A/c 35,000
3. Opened a current bank account with SBI Rs 20,000

Bank A/c Dr 20,000
To Cash A/c 20,000
4. Deposited Rs 5,000 into bank
Bank A/c Dr 5,000
To Cash A/c 5,000
5. Paid rent to land lord Rs 1,500
Rent A/c Dr 1,500

To Cash A/c1,500
6. Purchased a new chair for Rs 800 by cash

Furniture A/c Dr 800
To Cash A/c 800
7. Purchased stationery for Rs. 500 by cash
Stationery A/c Dr 500

To Cash A/c 500
8. Rs. 710 paid in cash for printing
Printing Charges A/c Dr 710

To Cash A/c 710

9. Loan received from Ashis of Rs 19000 by cash
Cash A/c Dr 19,000
To Loan from Ashis A/c 19,000
10.Received a cheque of Rs 30000 as loan from JB Finance Pvt. Ltd

Cash A/c Dr 30,000
To Loan from JB Finance A/c 30,000
11. Cheque of HDFC has been deposited to SBI
Bank A/c Dr 30,000

To Cash A/c 30,000
12.Purchased goods for Rs 12500 in cash
Purchases A/c Dr 12,500

To Cash A/c 12,500

13. Sold goods for Rs 19000 in cash
Cash A/c Dr 19,000
To Sales A/c 19,000
14. Paid selling expenses Rs 1,000

Selling Expenses A/c Dr 1,000
To Cash A/c 1,000
15. Purchased machinery for Rs 9210

To Cash A/c 9,210
16. Carriage paid for the above machinery Rs 50
Machinery A/c Dr 50
To Cash A/c 50

17. Installation charges for the machinery Rs 100

To Cash A/c 1,00
18. Deposited Rs 5000 at BSNL as security deposit

Security Deposit for Telephone A/c Dr 5,000
To Cash A/c5,000
19. Rs 1000 paid to land lord as electric charges
Electric Charges A/c Dr 1,000

To Cash A/c 1,000
20. Rs 10000 paid for purchase of delivery van by cheque
Delivery Van A/c Dr 10,000

To Bank A/c 10,000

21. Paid salary to marketing Executive Rs 6000 & Office Ex. Rs 5200
Salary A/c Dr 11,200
To Cash A/c11,200
22. Purchased goods from Ratan & Co on credit for Rs 19250

To Ratan & Co. A/c 19,250
23. General Expenses amounting to Rs 820 paid

General Expenses A/c Dr 820
To Cash A/c 820
24. Rs 1001 paid to local club as donation

Donation A/c Dr 1,001
To Cash A/c 1,001
25. Paid audit fees Rs 20,000 by cheque

Audit Fees A/c Dr 20,000
To Bank A/c 20,000
Assignment 7
1 Repairing charges for building paid Rs 5400
2 Rs 15000 paid for purchase of plant and Rs 3000 paid for installation
3 Rs 10,000 paid as salary
4 Rs 1200 paid to land lord as rent
5 Goods sold for Rs 21000 to Ray & Ray Associates
6 Goods sold for cash Rs 950
7 Rs 1110 is paid for advertisement expenses
8 Purchased goods from AKJ Pvt. Ltd. for Rs 11000
9 General expenses amounting to Rs 140 paid
10 Purchased machinery Rs 1,00,000
11 Rs 750 paid as advance to Rajiv, marketing executive for his tour
12 Salary paid to office executive Rs 5,000

13 Rs 19000 paid to Ratan & co through SBI cheque
14 Further capital invested Rs 54000
15 Electricity bill comes to Rs 950 paid immediately
16 Rajiv submitted his tour bill of Rs 600 and paid the balance amount in cash
17 40% due has been received from Ray & Ray Associates
18 Telephone bill is paid for Rs 2100
19 Goods amounting Rs 5,550 was returned from Ray & Ray Associates
20 Rent paid Rs 1,000
21 Salary paid Rs 10,000
22 Goods purchased from Salil Rs 25000
23 Electricity bill paid for Rs 1010
24 General expenses paid for Rs 150
25 Old machinery sold for Rs 5000, which costs Rs 5,500

v
Ø Journal Entries

DAY 5
LEARNING OBJECTIVES
Ø Journal Entries

Example 16
1. Goods returned to Salil for Rs 9300
Salil A/c Dr 9,300

To Purchases Return A/c 9,300
2 Telephone bill paid for Rs1900
Telephone Charges A/c Dr 1,900

To Cash A/c 1,900
3. Rs 1000 paid to Rajiv as tour advance
Tour Advance A/c Dr 1,000

To Cash A/c 1,000
4. Goods sold to APC Enterprise for Rs 26000
APC Enterprise A/c Dr 26,000

To Sales A/c 26,000
5. Salary paid to office executive Rs 2,000
Salaries A/c Dr 2,000

To Cash A/c2,000
6. Rent paid for Rs 2,000

Rent A/c Dr 2,000
To Cash A/c 2,000
7. Rs 11000 paid to Salil
Salil A/c Dr 11,000

To Cash A/c 11,000
8. Rajiv submitted his tour bill for Rs 820, rest of the amount he paid by
cheque
Tour Expenses A/c Dr 820
Bank A/c Dr 120
To Tour Advance A/c 1000
9. SBI cheque issued to AKJ Pvt Ltd for Rs 11000
AKJ Pvt Ltd A/c Dr 11,000
To SBI / Bank A/c 11,000
10. Cash withdrawn from Bank Rs 2,000

Cash A/c Dr 2,000
To Bank A/c 2,000
11. Electricity charges paid for Rs 1000

To Cash A/c 1,000
12. Telephone bill for Rs 1700 paid
Telephone Charges A/c Dr 1,700

To Cash A/c 1,700

13. Furniture introduced by the owner Rs 10,000
14. Transferred Rs 20,000 from SBI to UBI

UBI A/c Dr 20,000
To SBI A/c 20,000
15. Salary paid to staffs Rs 30,000

To Cash A/c 30,000
16. Cheque issued to AKJ Pvt.Ltd Rs 11,000 dishonoured. Bank

charges Rs 100
SBI A/c Dr 10,900
Bank Charges A/c Dr 100
To AKJ Pvt Ltd A/c 11,000
17. Furniture purchased for Rs 1600

To Cash A/c 1,600
18. Goods sold to Balaji Enterpreise for Rs 15000

Balaji Enterprise A/c Dr 15,000
To Sales A/c 15,000
19. Rs 5000 transferred from SBI to cash
Cash A/c Dr 5,000

To SBI A/c 5,000
20. Rs 1200 paid for advertisement by cheque
Advertisement A/c Dr 1,200

To Bank A/c 1 200

21. Rs 2200 paid to Sutapa as tour advance
Tour Advance A/c Dr 2,200
To Cash A/c2,200
22. Telephone charges paid Rs 950

Telephone Charges A/c Dr 950
To Cash A/c 950
23. Electricity charges Rs 1040 paid

To Cash A/c 1,040
24. Goods returned Rs 10,000 to Kamala Traders

Kamala Traders A/c Dr 10,000
25. Old furniture sold for Rs 9000, cost Rs 12,000

Cash A/c Dr 9,000
To Furniture A/c 9,000
Assignment 8
1. Purchased machinery for cash Rs 10,000
2. Sold old furniture to A for cash Rs 200
3. Purchased goods from B on credit Rs 1,500
4. Sold goods Rs 600 in cash
5. Purchased building from C Rs 20,000
6. Purchased stationery Rs 50 in cash
7. Purchased goods from D for cash Rs 900
8. Purchased typewriter from S & Co. on credit Rs 1,600
9. Purchased stationery in cash from Roy and Sons Rs 60
10. Paid to landlord, office rent Rs 300
11. Paid E, his salary for the month of June’08 Rs 400
12. Received cash from G Rs 250 by demand draft
13. Received Rs 360 as interest on Investments
14. Paid wages to factory staff Rs 800

15. Deposited Rs 400 into Bank from office cash
16. Paid R Rs 630 by cheque
17. Paid carriage on purchase of goods Rs 160
18. Paid commission to N Rs 200
19. Paid carriage of Rs 160 on goods sold
20. Returned goods to B Rs 800
21. Received goods returned by P Rs 100
22. Cash deposited into Bank Rs 10,000
23. Taken loan from Kumud Rs 600
24. Purchased goods from Mr. K Rs 10,000
25. Goods returned to Mr. K Rs 2,000

v
Ø Journal Entries

DAY 6
LEARNING OBJECTIVES
Ø Reserve and Provision
Ø Capital and Revenue Expenditure

RESERVE
Ø Amount of profit set aside until used for any particular
purpose
Ø Creation is a result of an accounting entry
Ø No actual set aside of cash or other assets
Ø It is merely a part of the net worth
Generally arises out of the following:

ü Retention of profits
ü Capital receipts
ü Upward revaluation of assets

Reserve
Types
Capital Reserve Revenue Reserve
Capital profits General Reserve
Upward revaluation of fixed assets Specific Reserve
Capital receipts
Prior period non-trading income

General Reserve
Ø Not created for any specific purpose
Ø Created as a safeguard against unforeseen future loss
Ø May be used for further development in future
Specific Reserve
Ø Created and utilised for some specific purpose
Ø Generally earmarked against some particular asset
Ø Amount equaling reserve is invested outside business till used for
the specific purpose

Provision
Ø Amount set aside from profit to provide for future liability

Ø Anticipated liability or loss is likely or certain to be incurred
Ø Amount or date of such liability or loss is uncertain
Ø Debited to Profit and Loss Account to ascertain correct
profit
Ø Shown on the liabilities side of the Balance Sheet

Expenditure
Capital Expenditure Revenue Expenditure
Increasing Capacity No Increase in Capacity

Capital Expenditure
Ø Incurred for acquiring long term assets
Ø Incurred to improve present capacity of an existing fixed
asset
Ø Increases earning capacity of business
Ø Debited to Fixed Asset
Ø Benefit accruing for more than one accounting period

Examples of Capital Expenditure
Ø Purchase of land, building, machinery or furniture
Ø Cost of acquisition of long-term rights and benefits (e.g.
patents, copyrights)
Ø Cost of additions or extensions to existing assets
Ø Cost of overhauling second-hand machines
Ø Expenditure on putting an asset into working condition

Revenue Expenditure
Ø Money spent on running the business on day-to-day basis
Ø Incurred to maintain the fixed assets in good condition
Ø Debited to expense account
Ø Benefit accruing for one accounting period only

Examples of Revenue Expenditure
Ø Salaries and wages
Ø Rent and rates for factory or office premises
Ø Depreciation
Ø Purchase of raw materials
Ø Insurance Premium
Ø Taxes and legal expenses

Capitalised Expenditure
Ø Revenue expenditure, whose usefulness does not
expire in the year of occurrence
Ø Added to asset account
Ø Subject to depreciation

Examples of Capitalised Expenditure
Ø Wages paid for building factory shed
Ø Installation charges of Machinery
Ø Interest paid before commencement of business

Revenue Receipts
Ø Receipts, obtained in the course of normal business
activities
Ø Business unit cannot survive without any Revenue
Receipts
Ø Example – receipts from sale of goods, interest income

Capital Receipts
Ø Receipts, which are not revenue in nature
Ø Business unit can survive without any Capital Receipts
Ø
Example - receipts from sale of fixed assets, secured or
unsecured loans

Example 17
True or False:
1. Overhauling expenses on second-hand machinery purchased are Revenue False

expenditure
2. Installed AC in car is Revenue expenditure False
3. Legal fees to acquire property are Capital expenditure True
4. Amount spent as lawyer’s fee to defend a suit claiming that the firm’s factory
site belonged to the plaintiff’s land is capital expenditure False
5. Amount spent for replacement of worn out part of machine is Capital
expenditure False
6. Expense incurred on the repairs and white- washing for the first time on
purchase of an old building is Revenue expenditure
False
7. Expenses in connection with obtaining a license for running the Cinema Hall
are Capital expenditure
True
8. Amount spent for the construction of makeshift huts, which were necessary for
construction of the cinema hall and were demolished when the cinema hall was
ready is Capital expenditure
True

v
Ø Reserve and Provision
Ø Capital and Revenue Receipts

DAY 7
LEARNING OBJECTIVES

Assignment 9
S. Ramesh sells and services typewriters. State which of the following are capital
expenditure and which are revenue expenditure giving reasons for your answer:
1. Purchase of a typewriter for office use
2. Purchase of typewriters for re-sale
3. Travelling expenses for servicing typewriters
4. Purchase of spare parts for servicing typewriters
5. Wages of mechanic
6. Wages of office staff
7. Telephone charges
8. Purchase of tools for servicing work

Assignment 10
State with reason whether the following are capital or Revenue Items:
1. Carriage paid on goods purchased, Rs. 3,500
2. Carriage paid on furniture purchased, Rs. 7,090
3. Carriage paid while returning the goods purchased, Rs. 5,000
4. Legal expenses paid for acquiring of Trade Mark, Rs. 1,25,000
5. Traveling expenses paid to the manager for negotiating the purchase of a machinery Rs. 1,47,900
6. Purchased new car in exchange of the old car, and finally paid Rs. 1,35,200 including registration charges of Rs. 23,000
7. Removal of stock from old warehouse, to the new one costing to Rs. 5,380
8. Labour charges paid while carrying goods from factory to warehouse
9. Rs. 3,500 paid for repairing of old plant, being part of maintenance program
10. Rs. 28,400 expended for dismantling, removing and re-installing plant and machinery to other place
11. Cheque dishonour charges debited by bank Rs 30
12. Nuts & Bolts purchased for emergency maintenance of Machinery Rs. 1,000
13. Software’s purchased for accounting purposes for Rs. 10,000
14. Upgradation of Moneyware software costs Rs. 5,000
15. Initial Deposit made to open Current Account with UTI Bank Rs. 25,000.
16. Overhauling expenses made Rs. 5,000 on Second-Hand machinery purchased
17. Advertisement expenses incurred on 01.04.2008, of Rs. 37,00,000 for the launching of new scheme in the market, the scheme will be
continue for 6 months
18. Rs. 30,000 spent for white washing of factory building for the first time

Assignment 11
State with reason whether the following are capital or Revenue Items:
1. Replacement of typewriter purchased for the office
2. Materials purchased but used for the erection of a new office block for the firm’s use
3. Fitting replacement engine to a delivery van.
4. Development costs in opening a new mine
5. Purchase of patent rights
6. Cost of hiring a motor van
7. Installation charges in connection with new gas-fired boiler replacing coal fired
8. Cleaning and greasing new machine
9. Painting and lettering new delivery van
10. Legal fees in connection with acquisition of freehold property
11. Expenses incurred in connection with obtaining a license for starting the factory for Rs. 10000
12. Rings and Pistons of an engine were changed at a cost of Rs. 5000 to get fuel efficiency
13. A factory shed was constructed at a cost of Rs 100000. A sum of Rs 5000 had been incurred in the construction of temporary huts for storing building
material
14. Expenses on a foreign tour for purchasing a new machinery
15. Freight & Insurance on the new machinery
16. Customs duty paid on import of a machinery
17. Wages paid in connection with the erection of new machinery
18. Rs.2000 spent to remove a worn out part and replace it with a new engine
19. A petrol driven engine of a passenger but was replaced by a diesel engine

20. Rs. 800000 spent on advertising the introduction of a new product in the market, the benefit of which will be effective for 3 to 5 years.
21. Rs.5000 spent on repainting the factory.
22. Heavy amount spent on research for a particular product, which ultimately did not result in success.
23. Rs. 10,000 paid as compensation to employees who were retrenched.
24. Interest on a term loan for the purchase of machinery. The commercial production has not begun till the last day of the accounting year.
25. Interest on a term loan for the purchase of machinery. The commercial production has already begun.
26. Compensation paid for breach of contract to acquire stock-in-trade.
27. Rs. 30,000 spent as lawyer’s fee to defend a suit that firm’s factory belonged to the plaintiff. The suit was not successful.
28. A firm buys a typewriter for Rs.7600
29. A firm buys a new typewriter ribbon for Rs.15
30. A firm replaces a manual typewriter worth Rs.840 with an electronic typewriter costing Rs.15,300
31. A firm buys a new delivery van for Rs. 65000
32. A firm buys petrol for its delivery van for Rs. 360
33. A firm has its motor van repaired after a breakdown at a cost of Rs. 1200
34. Cost of re-building factory wall damaged by flood.
35. Purchase of freehold land
36. Cost of building extension to factory

37. Cost of painting new extension
38. Legal costs on acquiring land for the extension
39. Cost of repairs to motor van
40. Repairing roof of extension
41. Materials purchased but used for the erection of a new office block for the firm’s use.
42. Development costs in opening a new mine
43. Purchase of patent rights.
44. Cost of hiring a motor van.
45. Painting and lettering new delivery van
46. Bought various types of goods for re-sale, all amounting to Rs. 5,500
47. Acquired some fixtures and fittings for the office costing Rs. 1800
48. Advertised in a local newspaper for Rs. 350 about the products.
49. Rs. 2000 spent on demolition of a building to construct a bigger building on the same site.
50. Rs. 10000 spent in defending a legal suit for breach of contract to supply goods.
51. Rs. 25,000 spent in searching for a new product but it did not result in any success
52. Purchase of new tyre for Rs. 5000 for an old motor car

v

DAY 8
LEARNING OBJECTIVES
Ø Billing Terms

Types of
Discount
Trade Incentive
Discount
Cash Quantity/
Discount Target
Discount

Trade Discount
Ø Provided to customer whether he purchases goods in
cash or in credit
Ø Calculated as a percentage of list / catalog price
Ø Not recorded in the books of account

Example 18
Goods purchased from M/s A & Co., 20 bales of cotton
@1000 per bale less 10% trade discount
Accounting treatment

{(20 x 1000) –
To, M/s A & Co. 18,000
10%}

Cash Discount
Ø Allowed to encourage a debtor to pay off his debt
within a specific period
Ø Expense to the seller
Ø Income to the buyer

Example 19
Kristi Purchased goods worth Rs 5,500 from M/s. S.K. Impel on credit with a
clause that, if the payment is received within 7 days of the date of invoice,
5% discount will be provided. Kristi paid the entire dues within 7 days
M/s S.K.Impel A/c Dr 5,500
To Cash A/c 5,225
To Discount Received A/c 275

Quantity Discount / Target Discount
Ø Allowed to customers to achieve minimum target / quantity
Example 20:
Condition for sale: Customer achieving sales of Rs 20 Lakhs will get
additional discount of 1% on total sales in addition of 2% trade discount
Kolkata Drinks Pvt Ltd purchased goods of Rs 21,00,000

Kolkata Drinks Pvt Ltd A/c Dr 20,37,000
To Sales A/c 20,37,000

Incentive
Ø Normally treated as gift
Example 21:
Hindustan lever announced a scheme for its dealers that any dealer
crossing over One Crore rupees sales in a month, will be given a Fridge
worth Rs. 10,000
Fridge A/c Dr 1
To Capital Reserve A/c 1

Important Billing Terms
Ø Free on Board(FOB) / Free on Rail(FOR) - Cost upto

sending the goods to the board of the customer will be born by the
seller
Ø Carriage Insurance and freight(CIF) - Carriage Insurance

and freight are to be born by the seller
Ø Carriage and Freight(C&F) – Carriage and freight are to be

born by the seller
Ø To Pay - Freight / carriage to be paid by the receiver of the goods

Important Billing Terms
Ø Excise Duty - Duty on the manufacture of the commodity
Ø Value Added Tax(VAT) – Tax on sale of goods
Ø Cess / Octroi - Entry tax levied by the state government
Ø E&OE - Error and Omission excepted in the bill

Calculation of net amount payable
Sl. In Add/ Less Particulars Amount
1st FOB 1000.00

2nd Less Trade Discount @10% 100.00
3rd 1st – 2nd 900.00
4th Add Packing Charges 200.00
5th 3rd + 4th 1100.00
6th Add Excise Duty (Including E. Cess) @ 14.42% – 158.62
chargeable on 5th
7th 6th +7th 1258.62
8th Add VAT/ Local Sales Tax/ CST @ 4% 50.34
9th 8th + 9th 1308.96
10th Add Freight & Insurance 300.00
11th Net Amount payable (9th 1608.96
+10th)

Example 22
Purchased 500 units of goods @ Rs 250 on FOB price
Other information regarding the purchase:
i) 10% trade discount to be given
ii) 14% Excise duty to be charged
iii) Rs 2 per unit to be charged as Freight
Calculate the net amount payable

Answer

v
Ø Trade and Cash Discount
Ø Target Discount and Incentive
Ø Billing Terms

DAY 9
LEARNING OBJECTIVES
Ø Billing Terms

Example 23
1. Furniture purchased for office from Ram & Co. for Rs 2,300 by cash

To Cash A/c2,300
● 2 Carriage paid to bring the furniture to office Rs 700.00
Furniture A/c Dr 700

To Cash A/c 700
● 3. Purchased Sign-Board for Rs 2,000 in cash

To Cash A/c 2,000
● 4. Purchases made on credit from Urmila & Co. for Rs 47,000

To Urmila & Co. A/c 47,000
● 5. Sales made on credit for Rs 21,000 to Abhisek Ltd
Abhisek Ltd A/c Dr 21,000

To Sales A/c 21,000
6. Abhisek Ltd Returned certain goods valued Rs 2,500

Sales Return A/c Dr 2,500
To Abhisek Ltd A/c 2,500
7. The same goods returned to Urmila & Co. (Purchase price – Rs 2,000)
Urmila & Co. A/c Dr 2,000

8. Computers purchased from Malik Infotech for Office use – Rs 44,000
Computer A/c Dr 44,000

To Malik Infotech A/c 44,000

● 9. Computers purchased from Malik Infotech for resale - Rs
88,000
To Malik Infotech A/c 88,000
● 10. Full payments received from Abhisek Ltd after giving discount of
5%
Cash A/c Dr 17,575
Discount Allowed A/c Dr 925
To Abhisek Ltd A/c 18,500
● 11. Rs 30,000 paid to Urmila & Co. as part payment by cheque
Urmila & Co. A/c Dr 30,000

To Bank A/c 30,000
● 12. One of the Computers purchased for office use costing returned
to Malik Infotech due to poor quality
Malik Infotech A/c Dr 22,000

To Computer A/c 22,000
13. Opened Bank Account with SBI by making initial deposit of Rs 5,000
SBI A/c Dr 5,000

To Cash A/c5,000
● 14. Computers sold for Rs 1,20,000 to Ajay Enterprise and received
cheque
Ajay Enterprise A/c Dr 1,20,000
● 15. All dues to Malik Infotech has been cleared vide cheque No. 567890.
Malik Infotech A/c Dr
To, SBI A/c
● 16. Computer purchased from Azad Computers on credit Rs 21,500

To, Azad Computers A/c 21,500

17. Payment made to Urmila & Co. for their balance dues in cash
Urmila & Co. A/c Dr
To Cash A/c
18. Coolie charges paid for computer purchase Rs 500

Computer A/c Dr 500
To Cash A/c 500
● 19. Rs 10,000 paid for shares purchased (50% in personal name
and the rest in the name of the business)
Investment A/c Dr 5,000
Drawings A/c Dr 5,000
To Cash A/c 10,000
● 20. Purchased Computer from Z for Rs 3,78,000
Computer A/c Dr 3,78,000

To Z A/c 3,78,000

● 21. Goods sold for Rs. 4,05,000 to Asha Music by cheque
Bank A/c Dr 4,05,000

● 22. Asha Music returned goods of Rs 10,000 due to poor quality
To Asha Music A/c 10,000
● 23. Sold 1 Computer to Mr. A.K. Bansal for Rs. 22,000.00 on credit
Mr. A.K.Bansal A/c Dr 6,000
To Sales A/c 6,000
● 24. Paid in full to Z Computers through cheque
Z Computers A/c Dr
To SBI A/c
● 25. Credit Sales Rs 50,000. Trade discount and cash discount @
10%.
Debtors A/c Dr 45,000
To Sales A/c 45,000
● 26. Submitted Quotation for three computers to Eastern
Railway
and received Order for the same
No Entry
● 27. Cash of Rs 50,000 deposited into Bank
Bank A/c Dr 50,000

To Cash A/c 50,000
● 28. Paid Rs 5,000 for purchase of office table through credit card of
the owner.
●
Mr. Furniture A/c Dr 6,000


Assignment 12
● 1 Paid salary to Office executive Rs 10,000 after adjusting advance of Rs 2,000.
● 2 Paid 3 months rent of Rs 10,000 in advance.
● 3 Rs.25500 received from APC Enterprise in full settlement of his due of Rs 26,000 by cheque
● 4 The cheque has been deposited to SBI.
● 5 Goods costing Rs.2000 distributed as free sample.
● 6 Stationery purchased for Rs. 1000.
● 7 Telephone charges paid for Rs. 1100
● 8 Electricity charges paid for Rs. 950.
● 9 Goods purchased for Rs. 10000 from Sanjay.
● 10Advance received from Kumar & Co (Debtors) Rs. 1500.
● 11 Rs. 9500 paid to Sanjay in full settlement of Rs 10,000.
● 12Goods sold to Kumar & co for Rs. 6500 in cash at a trade discount of 10%
● 13Interest paid of Rs 10,000 alongwith penalty of Rs 500
● 14Purchased machinery for cash Rs. 10000 after adjusting discount @10%.

● Sold old furniture to A for cash Rs. 200;
● Purchased goods from B on credit Rs. 1500 and target discount of 1% received.
● Sold goods Rs. 560 and cash discount allowed Rs 40;
● Purchased building from C Rs. 2,00,000;
● Purchased paper for Rs. 50 at a trade discount of Rs 20%;
● Purchased goods from D for cash Rs. 100 – trade and cash discount @10% received ;
● Purchased typewriter from S & Co. on credit Rs. 160000 and received a mobile of Rs 5,000 as gift
● Purchased stationery from Roy and sons Rs. 60;
● Office rent due of Rs. 300 till the end of the month;
● Paid E, his salary for the month of April’08 Rs. 400;
● Received from G Rs 250 by DD..

v
Ø Journal Entries

DAY 10
LEARNING OBJECTIVES
Ø Billing Terms

Example 24
1. Borrowed Rs.15,000 from father and introduced the money into the
business in cash
Cash A/c Dr 15,000
● 2 Made cash purchases totaling Rs 9,000
To Cash A/c 9,000
3. Made cash sales totaling Rs 12,000
Cash A/c Dr 12,000

To, Sales 12,000
● 4. Bought a delivery van for Rs 7600 for cash

Delivery Van A/c Dr 7600
To Cash A/c 7600
5. Paid rent for one month Rs 360
Rent A/c Dr 360

To Cash A/c360
6. Made credit purchases totaling Rs.6,000

To Creditors A/c 6,000
7. Made credit sales totaling Rs.11,400

To Sales A/c 11,400
8. Received from a legacy cash Rs 3,000 and paid the same into the
business bank account
Cash A/c Dr 3,000

● 9. Paid electricity for one month Rs 270
Electric Charges A/c Dr 270
To Cash A/c 270
● 10. Drew Rs 360 in cash for owner’s personal expenses
Drawings A/c Dr 360

To Cash A/c 360
● 11. Purchases made from owner’s personal cash worth Rs15,100

● 12. Cash sales amounted to Rs 16,000
Cash A/c Dr 16,000


13. Credit sales totaled Rs.10,000

To Sales A/c 10,000
● 14. Delivery van was purchased at a cost of Rs.4,800
Delivery Van A/c Dr 4,800

To Cash A/c 4,800
● 15. Sundry expenses paid Rs.2,500

Sundry Expenses A/c Dr 2,500
To Cash A/c 2,500
● 16. Outstanding Rent Rs 3,600
Rent A/c Dr 3,600

To Outstanding Rent A/c 3,600

17. Salary paid to assistants Rs 1,800
To Cash A/c 1,800
18. Bought goods on credit from D. Nag Rs 11,000 ………………

To D. Nag A/c 11,000
● 19. Goods returned to D. Nag Rs 5,000 ………..
D. Nag A/c Dr 5,000

20. Bought Motor Van on credit from J. K. Motors Rs 3,70,000
Motor Van A/c Dr 3,70,000

To J.K.Motors A/c 3,70,000

● 21. Goods returned by H. Kar Rs 4000
To H.Kar A/c 4,000
22. Paid cheque to A. Sen Rs 20,000 ……….
A.Sen A/c Dr 20,000
To Bank A/c 20,000
23. Given a loan of Rs 50,000 through cheque to M. Guha

Loan to M,Guha A/c Dr 50,000
To Bank A/c 50,000
●24. Received cheques from H.Kar Rs 16,000 …………..
Bank A/c Dr 16,000
To H.Kar A/c 16000
25. Proprietor brings a further Rs 90,000 into the business, by a

deposit into business bank account
Bank A/c Dr 90,000
Assignment 13
1. Machinery worth Rs. 1,60,000 was purchased in credit from M/s. Machine Makers, Down payment made
Rs. 40,000
2. A Cheque of Andhra Bank for Rs. 18,000/- was received from our customer Mr. Ranjan Singh towards his
dues of Rs. 20,000.00 in full settlement
3. The above cheque was sent to our ICICI bank account
4. Insured our stock valued Rs. 7,50,000 with National Insurance Co. Ltd. Against premium of Rs. 4,545.
The first premium was paid on 1.2.2009
5. Paid Rs. 5,000 to our petty cashier Mr. Subhrajit for the month of Feb. 2004
6. Mr. Subhrajit our petty cashier reported total expenses Rs. 4,640 for the month of Feb. 2004
7. Paid Rs. 4640 to Mr. Subhrajit, our petty cashier for the month of March 2004, as petty cash is maintained
on the basis of imprest system
8. Employed Mr. Mahendra Kumar as cashier and received Rs. 20,000 as security deposit from him in
cheque
9. Paid Mahendra Kumar Rs. 200 as interest on his security deposit

10. One of our tenant paid rent of Rs. 2,70,000 after adjustment of advance of Rs. 30,000
11. Paid Railway freight Rs. 2,994 on behalf of our customer Madhuri
12. Paid office expenses from personal cash Rs. 450 and stationary expenses from office cash Rs. 750
13. Purchased goods for Rs. 11,000 from Rajaram and supplied it to Balaram at Rs. 14,300.
14. Balaram returned goods worth Rs. 4290 being of inferior quality, which in turn returned to Mr. Rajaram
15. Life Insurance premium paid for the proprietor Mr. Ramlal Rs. 1,247 in cash
16. Income tax Rs. 5,468/- was paid under self assessment tax (proprietorship organization)
17. Received dividend Rs. 9,600
18. Credit note was issued to our customer M/s XYZ (Retailer) for the advertisement expenses made on
behalf of us for Rs. 12,000 by M/s. XYZ. The same has been duly confirmed by us
19. Debit note was issued to our customer M/s. ABC (Retailer) for the advertisement expenses made on
behalf of him for Rs. 21,000. The same has been duly confirmed by us
20. Debit note was received from our C & F Agent M/s. Trimurty Enterprisers for the advertisement expenses
made by them on behalf of us for Rs. 12,000. The same has been duly confirmed by us
21. Depreciated Machinery @20% on Rs 1,00,000
22. Advance rent paid Rs 10,000
23. Paid interest on loan Rs 8,000
24. Purchased furniture Rs 20,000 from Saatrang. He paid Rs 800 as freight on our behalf
25. A fully depreciated machinery is sold for Rs 20,000 to Giridhari.

v
Ø Journal Entries

DAY 11
LEARNING OBJECTIVES
v End of Period Adjustments
Ø Stock Valuation

Stock
Meaning
Ø Items not sold in the current period
Objective
ü Stock automatically affects profit and loss account and
Balance Sheet
ü Current year’s closing stock automatically becomes the
opening stock of the next year

Valuation of Stock
Ø Lower of cost and net realisable value
Ø Cost of inventories comprise of —
Costs of purchases - Purchase price inclusive of taxes and duties,

transport, handling and other costs directly attributable to the acquisition of
finished goods
Cost of conversion – from raw materials to finished goods
Other costs - incurred to bring the inventories to their present position

Example 25
ABC Ltd. purchased 1000 units of raw materials @ Rs.
100 per unit less 10% trade discounts. Central Sales tax
is chargeable @ 4% on the net price. The excise duty
element on the product is Rs. 10 per unit against which
cenvat can be claimed. The company spent Rs. 1,000 on
transportation and Rs. 500 for loading and unloading.
Calculate cost of purchases.

Answer
Rs.
Particulars
Purchase price (1000 × 100) 1,00,000
Less: Trade discount 10,000
Net price 90,000
Add: Central Sales tax @ 4% 1,800
Net price including sales tax 91,800
Less: Cenvat Credit 1,000
Add: Transportation charges 1,000

Valuation Method
First In First Out (FIFO) Weighted Average Method

Example 26
Item D has been purchased in four lots and has been issued in four lots. Each lot was issued after the purchase of
the lot bearing the same number
Purchases Sales
Lot No. 1 - 1500 units @ Rs. 10 Lot No. 1 – 1400
Lot No. 2 - 3000 units @ Rs. 12 Lot No. 2 – 2700
Lot No. 3 -2400 Units @ Rs. 24 Lot No. 3 – 1700
Lot No. 4 -2000 units @ Rs. 20 Lot No. 4 - 2500

Computation of cost of closing stock using FIFO Method
Receipts Issues Balance
Qty. Rate Amount (Rs) Qty. Rate Amount Qty. Rate Amount
(Rs) (RS)
1 1500 10 15,000 1500 10 15,000

1400 10 14,000 100 10 1,000
2 3000 12 36,000 100 10 1,000
3000 12 36,000
100 10 1,000
2600 12 31,200 400 12 4,800
3 2400 24 57,600 400 12 4,800
2400 24 57,600
400 12 4,800
1300 24 31,200 1100 24 26,400
4 2000 20 40,000 1100 24 26,400
2000 20 40,000
1100 24 26,400
1400 20 28,000 600 20 12,000
Computation of cost of closing stock using Weighted Average Method
Lot No. Purchase Issue Balance
Qty. Rate (Rs.) Qty. Rate (Rs.) Qty. Rate (Rs.)
P01 1500 10 1500 10

I01 1400 10 100 10
P02 3000 12 3100 11.94
I02 2700 11.94 400 11.94
P03 2400 24 2800 22.28
I03 1700 22.28 1100 22.28
P04 2000 20 3100 20.81
I04 2500 20.81 600 20.81
Value of closing stock = 600 units x Rs 20.81 = Rs 12,486

Assignment 14
From the following transaction extracted from the books of accounts of X

Ltd. As on 31st December,2008 work out the value of closing stock
under:
(a) FIFO and (b) Weighted average method
Dec 1 Opening Stock 300 units @ Rs 9.70

2 Purchases 250 units @ Rs 9.80
11 Issue 400 units
15 Purchases 300 units @Rs 10.05
20 Issue 210 units
25 Purchases 150 units @Rs 10.30
26 Issue 100 units

Assignment 15
Calculate the value of closing stock using FIFO and Weighted Average method of pricing the issue of materials:
April 1 Opening Balance 10850 kgs @ Rs. 130 per kg.

2 Purchased 20000 kgs @ 134 per kg.
3 Issued 6750 kgs. to production
7 Purchased 17550 kgs. @ 128 per kg.
9 Physical stock verification revealed a loss of 250 kgs.
10 Issued 8950 kgs to production
15 Purchased 10000 kgs. @ Rs. 132 per kg.

v
Ø Valuation of Stock
Ø FIFO Method
Ø Weighted Average Method

DAY 12
LEARNING OBJECTIVES

Ø Calculation of depreciation
Ø Treatment of selling of fixed assets

Depreciation
Ø Fall in value of asset or to become worth less than before
Ø Asset is depreciated as its usefulness is exhausted over
a period of time
Ø Cost of the asset is spread over the period of use of the
fixed asset
Ø A portion of cost of the asset is charged against the
profit

Depreciation
Factors affecting Depreciation
Cost Useful Life Scrap Value
Cost - Costs incurred in acquiring the asset and bringing

the asset into working condition
Useful life - Expected number of accounting periods during
which asset will be used in the business

Depreciation
Methods of Calculating Depreciation
Straight Line Method (SLM) Written Down Value (WDV) Method
Straight Line Method

Cost of the assets expires by equal amount each year (Used only
in power sector)
Written Down Value Method
A fixed rate is charged as depreciation every year on the

reducing balance of the asset

Example 27
Purchase price of a plant is Rs 40 lakhs inclusive of excise duty of Rs
2 lakhs against which Cenvat credit is available. Expenses incurred
for transport, installation, trial run, etc., are Rs 3 lakhs. Estimated
useful life and scrap realization are 10 years and Rs 2 lacs
respectively. Calculate the amount of depreciation under SLM and
WDV Method

Answer
In this case original cost of the plant and SLM depreciation is calculated below:
Original Cost Rs. in lacs
Purchase price 40.00
Less: CENVAT credit available 2.00 38.00
Add: Expenses for transport, etc. 3.00
41.00
SLM depreciation:
Rs. 41.00 lacs - Rs. 2.00 lacs / 10 years = Rs. 3.90 lakhs p.a.

Depreciation under WDV method (25%)
YEAR OPENING BALANCE DEPRECIATION CLOSING BALANCE

Rs. in lacs Rs. in lacs Rs. in lacs
01 41.00 10.25 30.75
02 30.75 7.69 23.06
03 23.06 5.77 17.30
04 17.30 4.32 12.97
05 12.97 3.24 9.73
06 9.73 2.43 7.30
07 7.30 1.82 5.47
08 5.47 1.37 4.10
09 4.10 1.03 3.08
10 3.08 0.77 2.31

Comparative Depreciation
1 2 3 4
SLM WDV Difference between

Year SLM & WDV
Depn. Depn.
(2-3)
Rs in lakhs Rs in lakhs Rs In lakhs

01 3.90 10.25 - 6.35
02 3.90 7.69 - 3.79
03 3.90 5.77 - 1.87
04 3.90 4.32 - 0.42
05 3.90 3.24 0.66
06 3.90 2.43 1.47
07 3.90 1.82 2.08
08 3.90 1.37 2.53
09 3.90 1.03 2.87
10 3.90 0.77 3.13

SELLING OF FIXED ASSETS
Ø Sale price > book value = profit
Ø Sale price < book value = loss
Ø Asset sold must be eliminated from books of account

Example 28
A delivery van, the written down value of which is Rs 1,12,500 (original
cost – Rs 2,00,000) on 1.4.2007 has been sold on 31.3.2008 for Rs
40,000. The van is subjected to depreciation under WDV method @
25%. Pass necessary journal entries

Answer
Depreciation A/c Dr 28,125
To Provn for Depn A/c 28,125
Asset Disposal A/c Dr 2,00,000

To Delivery Van A/c 2,00,000
Provn for Depn A/c Dr 1,15,625

To Asset Disposal A/c 1,15,625
Bank A/c Dr 40,000

Loss on sale of Van A/c Dr 44,375
To Asset Disposal 84,375

Fixed Assets Schedule
Sl
Gross block Depreciation Net block
No.
Description
Upto As at
As at As at Upto As at
Addition Dedu- for the Dedu- 31.- 31-
01-04- 31-03- 01-04- 31-
s ctions year ctions 03-
07 08 07 03-97
08 03-08
Plant &
1 -- 300 - 300 - 25 - 25 275 --
Machinery
Furniture &
2 100 100 - 200 33 20 - 53 147 67
Fixture

v
Ø Methods of Depreciation
Ø Treatment of Depreciation
Ø Selling of Fixed Assets
Ø Fixed Assets Schedule

DAY 13
LEARNING OBJECTIVES
Ø Depreciation

Assignment 16
A. Kaiser purchased on 1st April, 2007 a plant for Rs 53,000 and spent Rs
5000 on its installation. The estimated life of the plant is 8 years, after
which its break-up value will be Rs 6000 only.
Find out the amount of annual depreciation according to straight line
method, and give the journal entries and prepare Plant Account for the first
three years, assuming that the accounting year ends on 31st March

Assignment 17
ICA & Co. purchased second-hand machinery on 1st April, 2005 for Rs.
23000 and spent Rs. 2000 on its repair. It was decided to depreciate
machinery at 20% every year by WDV method.
Show Journal entries and prepare Machinery Account from 2005-06 to
2008-09 and show the effect in profit or loss, if it is sold on 31st March,
2009 for Rs. 10800

Assignment 18
A trader purchased a machine on 1st July, 2007 at a cost of Rs.

50000.. On 1st January, 2008 another machinery of same type was
purchased at a cost of Rs 22000. The scrap value of the machine was
estimated at Rs. 3000 and its life at 10 years.
The installation costs of the first and the second machines were Rs
5000 and Rs. 1000 respectively. Show the Journal Entries and
Machinery Account for 2007-08 assuming books are closed on 31st
March every year and depreciation rate is 20% under WDV method.

Assignment 19
ICA InfoTech Pvt Ltd purchased a machine for Rs 100000 on 1st

January, 2007. On 1st June, 2007 it purchased another machine for Rs
60000. On 1st March, 2008, Roy & Co. sold the second machine
(purchased on 1st June, 2007) for Rs 50000 and on the same day
purchased another machine for Rs 54000. Roy & Co. calculated
depreciation @ 20% under WDV method. The accounts of the business
were closed every year on 31st March.
Show the Machinery Accounts for the two-year ending 31st March, 2007
and 31st March, 2008.

Assignment 20
ICA Ltd purchased machinery on 1.4.08 for Rs 30,000. It further

purchased a machine costing Rs 20,000 on 1.10.08 and another
machine costing Rs 10,000 on 1.7.09. On 1.1.10, 1/3 of the machinery
which was installed on 1.4.08 became obsolete and was sold for Rs
3,000.Show how the machinery account would appear in the books of
the company. The depreciation is to be charged @ 10% p.a. on WDV
method.

v What did you learn today
Ø Depreciation

DAY 14
LEARNING OBJECTIVES

Ø Bad Debt
Ø Petty Cash Book

Bad Debt
Ø Arises only out of credit sales
Ø Arises on failure to realise full or part of amount due from debtors
Ø Adjustment entry is passed to eliminate such debt from books of
accounts
Ø Reduces the value of debtor as well as revenue

Example 29
Rs 55,000 received from Raj Traders in full settlement of his account of Rs
60,000
Cash A/c Dr 55,000
Bad Debt A/c Dr 5,000
To, Raj Traders A/c 60,000

Petty Cash Book
Ø Some cash set aside to cater to the small payments
Ø Small amounts of money paid out by petty cashier as the need arises
Ø Such transactions are recorded in petty cash book
Ø Reduction in the petty cash balance is filled up by periodic transfer

from main cash balance
Ø Petty cashier states the amount required to restore the original

balance
Ø Statement of petty cash to be supported by petty cash voucher

Following expenses were paid from the petty cash during the month of January 2008

Answer

Postage A/c Dr 229
Stationery A/c Dr 516
Travelling A/c Dr 279
To, Cash A/c 1,024

v
Ø Bad Debt
Ø Petty Cash Book

DAY 15
LEARNING OBJECTIVES
v End of the Period Adjustments
Ø Outstanding Expenses
Ø Pre paid Expenses
Ø Accrued Income
Ø Prereceived Income
Ø Unearned Income

Outstanding Expenses
Ø Expenses incurred during the current period but not
paid
Ø Treated as current liability
Ø Example – Outstanding Salary

Example 30
Salary of Jan’08 Rs 4,000 not yet paid
Salary A/c …………………..Dr. 4,000
To, Outstanding Salary A/c 4,000

Pre paid Expenses
Ø Expenditure of future period paid in current period
Ø Expenditure to be matched with the revenue of the relevant
period
Ø Treated as current asset

Example 31
Rent of Apr’08 paid in Mar’08 – Rs 2,000
Advance Rent A/c Dr 2,000
To, Cash A/c 2,000

Accrued Income
Ø Income due in the current period but not yet received
Ø Treated as current asset
Ø Included in the income of the current year

Example 32
Rent of Mar’08 of Rs 1,000 not yet received
Rent Receivable A/c Dr 1,000
To, Rent A/c 1,000

Pre received Income
Ø Income received in advance
Ø Treated as current liability

Example 33
Rent of Rs 4,000 received in advance
Cash A/c Dr 1,000
To, Pre received Rent A/c 1,000

Unearned Income
Ø Income which has not been accrued
Ø Not recognised as income in the current year
Ø Example – interest income in case of installment sale

Assignment 21
Pass necessary journal entries from the following –
1. Salary of Jan,09 Rs 10,000 not yet paid
2. Rent of Feb,09 Rs 3,000 paid in advance
3. Interest of Rs 5,000 not yet received
4. Salary received in advance Rs 20,000
5. Rent to landlord of Rs 2,000 due till the end of the month
6. Wages of Rs 5,000 of Feb,09 paid in the month of Jan,09
7. Interest of Rs 6,000 is receivable
8. Amount received in advance from Mr. Ujjal, a debtor for sale of goods – Rs 10,000

v What did you learn today
Ø End of the period adjustment

DAY 16
LEARNING OBJECTIVES

Ø Ledger
Ø Trial Balance

Ledger
Ø Principal books of account
Ø Similar transactions are recorded at one place
Ø Each journal is posted in ledger
Ø The closing balances of each account are listed in the trial
balance

Trial Balance
Ø Statement showing names and balances of all the

accounts in the ledger
Ø Accounts having debit balances are kept in one column
Ø Accounts having credit balances are kept in another

column
Ø Due to dual effect the total of both the columns should be

equal

Example 34
On 1st April 2008, Ajmal Khan commenced business with Cash – Rs 1,000, Bank – Rs 3,000, Furniture
& Fittings – Rs 2,000. The following transactions took place during the month:
2008 1 Mr. Ajmal took a loan of Rs. 3,000.00 from Begum Akhtar and deposited the same into bank.
April Withdrew Rs. 300 from bank for petty cash purposes. Sold Yash goods on credit Rs. 1,000. Paid by
cheque as security deposit for obtaining electricity connection Rs. 40
3 Sold goods to Lalji on credit Rs. 600
5 Sold goods to Qureshi for cash Rs. 340, paid direct into bank on the same day.
6 Sold goods to Yash on credit Rs. 800
8 Yash returned goods to the value Rs. 100.
12 Purchased typewriter (second hand) by cheque Rs. 240.
13 Received cheque from Yash in payment for goods purchased on 1st April less 10% cash discount
paid into bank.
14 Bought goods on credit from Dayal Rs. 2400. Paid wages by cash Rs. 100
15 Bought goods from Gurinder Rs. 3000 less 10% trade discount.
18 Lalji pays cash Rs. 600, and he same deposited into bank.
20 Returned goods to Gurinder Rs. 1000 (list price).
23 Ajmal Khan drew out of bank Rs. 800 to pay premuim on his life policy. He was allowed 2 ½ %
commission by insurance company. Net premium was paid in cash, balance retained in business.
25 Bought goods by cheque from Rajinder Rs. 300

26 Withdrew goods from stock of Rs. 300 goods for private purposes.
Sold goods to Lalji on credit Rs. 400.
27 Paid Begum Akhtar Rs. 200 cheque on account of loan plus Rs. 40 for interest.
28 Paid electricity bill for the month by cheque Rs. 20. Received from Lalji cheque for Rs. 380 in full
and final settlement of his account, and the same deposited into bank.
30 Lalji’s cheque dishonored and debit written off as bad – Acquired second hand car in exchange for
furniture Rs. 100, goods Rs. 160 and cheque Rs. 2200.
At the end of the month the expenses paid out of cash were sundry expenses Rs. 60, carriage Rs. 80. Write up
the books and prepare trial balances as at 30th April’2008
TRIAL BALANCE as on April 30, 2008
Dr. (Rs.) Cr. (Rs.)

Cash A/c 1080
Bank A/c 3700
Bad Debts A/c 400
Capital A/c 4920
Carriage A/c 80
Motor Car A/c 2460
Discount Allowed A/c 100
Doyal A/c 2400
Electricity Charges A/c 20
Security Deposit to Electric Supply A/c 40
Furniture & Fixture A/c 1900
Gurinder A/c 1800
Interest on Loan A/c 40
Loan from Begum Akhtar A/c 2800
Purchase A/c 4940
Purchase Return A/c 900
Sales A/c 3140
Sales Return A/c 100
General Expenses A/c 60
Type Writer A/c 240
Wages A/c 100
Yash A/c 700
TOTAL 15960 15960

Assignment 22
From the following particulars prepare the trial balance as at 31st Dec’ 2008
Particulars Amt (Rs.) Particulars Amt (Rs.)

Capital A/c 28,900 Wages & salaries 8,606
Purchases 46500 Discount allowed 1,061
Sales 60,900 discount received 814
ReturnsOutwards 5,700 Rent Received 300
Repairs to Buld. 848 Drawings 2,400
Carriage inwards 2,500 Rates Insurances 248
Return Inwards 4,800 Bad Debts 359
Motor car 950 Provision for bad debs 140
Car Expenses 318 Opening Stock 6,300
Carriage Outward 960 Trade Debtors 5,213
Free Hold prims. 10,000 Trade creditors 4,035
Bank Overdraft 560 Investments 4,000
Furniture 1,460 General Expenses 1,586
Loan On mortgage 5,000 Cash In hand 240
Goodwill 8,000 Closing Stock 7,600

Assignment 23
The following trial Balance is incorrect. Draw up a corrected Trial balance
Sl. No Heads of Account Dr Balance (Rs) Cr Balance(Rs)

1 Capital 8900
2 Drawings 1000
3 Stock(1.4.2007) 3700
4 Purchases 23125
5 Sales 39400
6 Motor Car 1450
7 Cash in hand 135
8 Sundry Creditors 4976
9 Sundry Debtors 13970
10 Bank overdraft 900
11 Wages &Salaries 6200
12 Lighting & Heating 315
13 Equipment 3500
14 Carriage outward 231
15 Returns Inward 205
16 Provisions For Bad Debts 425
17 Return Outwards 316
18 Discount Allowed 280
19 Discount Received 315
20 Rent ,Rates & insurance 1121
Total 55,232 55,232
v
Ø Creation of ledger
Ø Preparation of Trial Balance

DAY 17
LEARNING OBJECTIVES
Ø Bank Reconciliation Statement

Transactions required to be recorded in Bank book –
Ø Standing Order
Ø Direct debit
Ø Credit transfer
Ø Cheque Dishonour
Ø Bank charges
Ø Interest
Ø Errors

Items which may appear in Bank book but not in Bank
Statement –
Ø Unpresented cheques
Ø Uncredited cheques

Procedure for bank reconciliation –
Step 1- Pass entries in the Bank Book for the transactions
which appears in the Bank Statement but not in the
Bank Book
Step 2- Prepare a Statement showing
the difference between Bank Statement and Bank
Book

Example 35
Bank Statement Bank Book

Step 1 : Entries in Bank Book
To Bank A/c 100
Bank A/c Dr 783

To Bank Interest A/c 783

Step 2 : BRS

Assignment 24
Mr. Sudip, the Accountant of Renuka Pvt. Ltd. reconciled the Bank Book with the Bank Statement every month. Bank
Reconciliation statement for the month of Mach. 2008 was as follows:
Bank Reconciliation Statement as on 31-3-2008

Prepare Bank Reconciliation Statement as on 30th April’08.

Assignment 25
Sri A.Basu maintained two separate bank accounts, one with UBI and another with SBI . On 31st Dec, 2008, the
bank balances as per UBI and SBI statement were Rs.2556 and Rs.2548 respectively. But the bank balances in
Basu’s books as on that date was Rs.2870 (Dr.) and Rs.4680 (Dr.) respectively. From the records, the following
information was ascertained:
a) Cheque for Rs.250 from Sri D.Ray, which was directly remitted to UBI, was not entered in Basu’s book
b) A cheque for Rs.700 drawn on SBI and paid to M/S. Sen & Co. was entered in the UBI’s A/C in Basu’s Cash
Book
c) Payment of Rs.1020 by UBI to LIC under a standing order was not recorded in Basu’s book
d) Cheques lodged but not yet credited Rs.212 for UBI and for Rs.1600 for SBI
e) A cheque for Rs.57 paid into SBI was returned dishonoured but this was not recorded in Basu’s book
f) Bank Charges of Rs.32 and Rs.45 for UBI and SBI respectively. were not accounted by Basu
g) Rs.350 recorded to be deposited into SBI on 30.12.2008 was actually credited by the Bank on 4.1.2001
h) Ascertain the actual bank balance of Sri Basu on 31.12.2008 and prepare a Bank Reconciliation Statement

v
Ø Preparation of BRS

DAY 18
LEARNING OBJECTIVES
Ø Final Accounts

Trading Account
Ø Shows the result of buying and selling of goods and services
Ø To know the Gross profit or Loss
Trading Account
Expenses Section Income Section
Shows Cost of Goods Sold Shows Sales less Sales return

Trading Account
Cost of goods sold is aggregate of the following –
1) Purchases less returns
2) Carriage inward
3) Customs duty
4) Packing materials
5) Wages
6) Other direct expenses

Specimen of aforTrading
Trading Account Account
the year ended…..
Particulars Amount Particulars Amount

……
……
To Opening stock By Sales ……
……
……
…… Less: Return Inwards
To Purchases …. ……
……
Less: Returns outward .… ……
…… By Other Direct Income ……….
……
To Wages
…… By Stock Destroyed
………. (e.g. by fire)
To Carriage Inward
To Freight By Closing stock
To Royalty on Production
To Other Direct Expenses
To Profit & Loss A/c

(Gross Profit transferred)
Profit and Loss Account
Expenses section includes– Income section includes–
1) Administrative Expn 1) Gross profit
2) Selling Expn 2) Operating revenue
3) Distribution Expn 3) Non-operating revenue

Profit and Loss Account for the year ended…..
Specimen of Profit and Loss Account
To Salary ……
To Carriage Outward ……
By Gross Profit ……
To Selling / Trading Expenses …… By Interest earned ……
To Export Duty …… By Discount earned
To Packing cost of finished …… By Commission earned ……
Goods …… By Bad Debt Recovery ……
To Advertisement ……
To Sales Tax …… By Miscellaneous Income ……
To Rent & Rates & taxes …… By Profit on of Asset ……
To Stationery …… By Rent Received ……
To Conveyance / Travelling ……
To Repairs ……
……
To Interest Paid
……
To Bad Debt
To Depreciation of Assets ……
To Discount Allowed ……
To Loss on of Assets ……
To Miscellaneous / General ……
Expenses ……
To Net Loss of Stock ……
To Charity/Donation
To Net Profit

Balance Sheet
Provides information about business organisation regarding –
Ø Assets owned
Ø Liabilities to outsiders
Ø Indicates capital of the owner in the business
Major groupings
Ø Capital Ø Fixed assets

Ø Long Term Liabilities Ø Investments
Ø Current Liabilities and Ø Current assets, Loans
Provisions and Advances

Current Assets
Elements constantly changing their form and circulating

from cash to goods and back to cash again
Cash
Debtors Raw Materials
Finished Goods
Loans and Advances

ü Any long term or short term advances given to any person
(e.g- staff advance, advance to creditor etc.)
Current Liability
Ø Amount owed by a business to outsider

Ø Increase in current liability increases the resources of
the business in the form of current asset

Example 35
From the following Balance sheet, prepare the vertical form of Balance Sheet

Balance Sheet (Vertical Form)

Example 36
From the following particulars prepare Manufacturing, Trading and Profit & Loss Accounts
Purchase of Raw Materials 10000

Returns Inward 200
Stock on 01.01.99 Raw Materials 500
“ Work-in-Progress 1300
“ Finished Goods 2000
Direct Wages 2500
Factory Expenses 1200
Salaries 2500
General Expenses 1700
Stock on 31.12.99 Raw Materials 200
“ Work-in-Progress 1200
“ Finished Goods 1500
Depreciation of Machinery 2100
Depreciation of Furniture 1250
Sales 35000
Carriage Outward 500
Sale of Scrap 1200

Rs.
In the Books of ………….
Rs.
Dr. Manufacturing, Trading and Profit and Loss Account for the year ended …… Cr.
To Opening Stock By Closing Stock

- Raw Materials - Raw Materials
- Work-in-Progress 500 200
- Work-in-Progress
To Purchase of Raw Materials 1300 1200
By Trading A/c
To Direct wages 10000 16200
To Factory expenses 2500(Transfer of Cost of production)
To Depreciation on Machinery 1200
2100
17600
17600
To Opening stock
(Finished Goods) 2000By Sales
To Manufacturing A/c
16200 35000 34800
(Cost of production)
To Gross Profit c/d Less: Returns Inward 1500
18100 200
36300By Closing Stock
To Salaries (Finished Goods)
To General Expenses 2500 36300
To Depreciation on Furniture 1700
To Carriage Outward 1250 18100
To Net Profit 500 1200
13350
19300By Gross Profit b/d
By of Scrap
19300

v
Ø Preparation of -
ü Trading Account
ü Profit and Loss Account
ü Balance Sheet

DAY 19
LEARNING OBJECTIVES
Ø Final Accounts

Example 37
The following Trial Balance has been extracted from the books of M/s. Goodwill Trading Co., a proprietorship concern. Prepare Trading and Profit and Loss A/c and Balance Sheet as on 31-03-2008
Trial Balance as on 31-3-2008
Particulars AMOUNT(Dr) AMOUNT(Cr.)

Capital A/c 100000
Drawings 10500
Building 15000
Furniture & Fitting 7500
Motor Van 25000
Loan from Harish 15000
Sales 100000
Purchases (adjusted) 65000
Closing Stock 15000
Commission received 10000
Sundry Debtors 22000
Bank Balance 35000
Sundry Creditors 10000
Rent & Rates 10000
Salaries 30000
Total 235000 235000

Answer
In the Books of M/s. Goodwill Trading Co.

Trading and Profit & Loss a\c for the Year ended 31st March, 2008
Dr. Particulars Amount Particulars Cr.
Amount
65000
To Purchase By Sales 100000
35000
To Gross Profit c/d
100000
100000
10000
To Rent & Rates By Gross Profit b/d 35000
30000
To Salaries By Commission received 10000
5000
To Net Profit
(Transfer to Capital A/c) 45000
45000
As Purchase is adjusted (as per Trial Balance), Opening and Closing stocks
are not required to be shown separately in trading account.

Balance Sheet as on 31st March, 2008
Liabilities Amt. (Rs.) Assets Amt. (Rs.)
Capital Account: Fixed Assets:
Opening Bal. 100000 Buildings 15000
Add: Net Profit 5000 Furniture & Fit. 7500
Less: Drawings 10500 Motor Car

22500
Loan from Harish Current Assets:
25000
Current Liabilities: 94500 Closing Stock
Sundry Creditors 15000 Sundry Debtors

15000
Bank
22000
10000
35000
119500 119500

Assignment 26
Following is the Trial Balance of Central Tutorials. Prepare Profit and Loss Account and Balance Sheet as on 31-03-08
Debit Credit
Particulars
(Rs.) (Rs.)
Cash in hand 1500
Cash at Bank 47000
Building 80000
Plant & Machinery 75000 Other information:
Capital 150000
Depreciation is to be charged on –
Furniture 50000 Building @ 10% p.a.
Debtors 60000 Plant & Machinery @ 10% p.a.
Furniture @ 5% p.a.
Creditors 38500
Rent 4500
Salary 14500
Printing & Stationery 1500
Office expenses 5000
Fees collected 150000
Interest received 500

Assignment 27
From the following Trial Balance prepare trading, Profit & Loss Account and Balance Sheet as on
31-03-2008.
Particulars Dr. (Rs.) Cr. (Rs.) Other Information:

Cash in hand 1400
Cash at Bank 2600 1. Closing Stock - Rs 72000
Sundry Debtors 86000
Stock as on 1-04-2007 62000 2. Depreciate – Building by 10% p.a.
Furniture 21400 Furniture by 10%
Equipment 16000 p.a.
Building 60000 Equipment by 15% p.a.
Motor Car 20000 Motor Car by 20% p.a.
Sundry Creditors 43000
Loan from Ram 33000 3. Outstanding Salaries amounted to Rs
Purchases 144200 1500
Sales 232600
Salaries 16500 4. Rent Rates and taxes were prepaid to
Rent, rates and taxes 8400 the extent of Rs. 250
Discount received 1600
Drawings 14000
Printing and Stationery 1800
Electric charges 7700
Bad debts 3000
Bank charges 7200
Capital Account 162000
472200 472200
v
Ø Preparation of Final Accounts

DAY 20
LEARNING OBJECTIVES
Ø Final Accounts

Assignment 28
The following is the Trial Balance obtained from the books of Mr. B Swaminathan as on 30th June, 2008. Prepare Trading, Profit and Loss Account and the Balance Sheet.
Particulars Dr (Rs) Cr (Rs) Other information:

Capital 50,000
Drawings 1,000 ● Stock and Loose Tools were
Stock as on 1.7.2007 28,000 valued on 30.6.2008 at Rs
Loose Tools as on 1.7.2007 1,000 25,000 and Rs 800 respectively
Debtors and Creditors 25,000 15,000
Purchases and Sales 90,000 1,72,000
● Salaries were outstanding to the
extent of Rs 800 and insurance
Returns 750 550
unexpired amounted to Rs 400
Discounts 250 300
Land and Building 88,000 ● Depreciation is to be provided
Salaries and Wages 33,000 for Land and Building @5% p.a.
Carriage Inward 1,200
Carriage Outward 1,500 ● 4. Bad Debts to be written off
Insurance 1,000 amounted to Rs 900.
Commission 18,550
Cash in Hand 1,700
Bank Overdraft 20,000
Advertisement 2,000
Bills Receivable and Payable 7,500 5,500
Total 2,81.900 2,81,900

Assignment 29
The following is the Trial Balance 31.12.2008. Prepare Trading, Profit and Loss Account and the Balance Sheet.
Particulars Dr (Rs) Cr (Rs) Other information:

Capital 12,500
Furniture and Fixtures 640 ● Closing Stock was Rs 3,250
Vehicles 6,250
● Depreciate building @5%,
Buildings 7,500 Furniture and Fixtures @10% and
Bad Debts 125 Vehicles @ 20%
Provision for Doubtful Debts 200
● Rs 85 is due for interest on Bank
Debtors and Creditors 3,800 2,500
Overdraft
Stock on 1.1.08 3,460
Purchases and Sales 5,475 15,450 ● Salaries Rs 300 and Taxes Rs
Bank Overdraft 2,850 120 are outstanding
Returns 200 125 ● Insurance outstanding to Rs 100
Advertisement 450 is prepaid
Interest on Bank Overdraft 118
Commission 375
● 1/3rd of the commission received
is in respect of work to be done
Cash 650 next year
Insurance and Taxes 1,250
General Expenses 782 ● 7. Write off a further sum of Rs 100
as Bad Debts
Salaries 3,300
Total 34,000 34,000

v
Ø Preparation of Final Accounts

DAY 21
LEARNING OBJECTIVES
v Important Entries
Ø Debit Card / Credit Card sale
Ø Free sample
Ø Drawing by Proprietor
Ø Mutual indebtedness
Procedure by seller
ü Everyday the seller should sum up the different amounts sold

ü Submit all forms thus obtained to his bank
ü The seller’s bank credits these amounts to his bank account as
deposits and debits the Credit Card Company
ü A commission (1% to 4%) is charged by the credit card company for
each transaction
ü It is extracted from the seller’s bank account by direct debit

Example 38

Answer

Goods Distributed As Free Sample
Ø One kind of advertisement to promote volume of business

Ø Treated as an expense
Example 39:
Castle Ltd sold 100 cases Apple Juice @Rs. 500 per case to “Gita
Food Corner” and 1200 pieces Shampoo pack as free gift. Castle
Ltd purchased 1200 pieces shampoo for Rs 1,000
4/16/11 4/15
Advertisement A/c Dr 1,000
To, Cash A/c 1,000
Gita Food Corner A/c Dr 50,000
To Sales A/c 50,000

Drawings by proprietor
Ø Withdrawal by the owner either in cash or in kind
Example 40:
Mr. Sabyasachi Sarkhel, proprietor, withdrew cash of Rs 15,000 from
business

Drawings A/c Dr 15,000
To, Cash A/c 15,000

Mutual Indebtedness
Ø Debtor may also be a creditor and vise-versa

Ø At the time of closing the accounts, the account having
lower balance is to be adjusted

Mutual Indebtedness
Example 41:
Sold goods to B - Rs 60,000
Purchased four computers from B - Rs. 80,000
Paid balance by cash

B A/c Dr 60,000
To, B A/c 80,000
B A/c Dr 20,000
To, Cash A/c 20,000

Dishonour of cheque
Ø Old position of debtors and creditor is restored
Ø Extra charges charged by bank for cheque dishonour
Example 42:
Cheque issued to Atlas Ltd for Rs 50,000. The same was
dishnoured and Bank charges debited by bank Rs 100

Atlas Ltd A/c Dr 50,000
To, Bank A/c 50,000
Bank A/c Dr 50,000
To, Atlas Ltd A/c 50,100

Loss of stock
Ø Loss of the organization and borne by the business
Ø Does not affect the cost of the goods
Example 43:
Fire broke out at the shop of a businessman and 50
calculators @ Rs 500 were destroyed. Insurance claim of
Rs 20,000 has been settled and received after 7 days of
settlement
Abnormal Loss A/c Dr 25,000
To, Purchases A/c 25,000
Insurance Claim A/c Dr 20,000
To, Abnormal Loss A/c 20,000
Bank A/c Dr 20,000
To, Insurance Claim A/c 20,000

Assignment 30
Pass necessary entries from the following information:
1. Purchased Office table of Rs 2,000 through personal credit card. The seller paid
2% commission from his own pocket
2. Cheque paid to Mr. Singh of Rs 10,000. But the same was dishnoured and bank
debited Rs 200 as bank charges
3. Goods distributed for promotion of new product. The cost of the same is Rs 5,000
4. The proprietor withdrew goods of Rs 2,000
5. Goods of Rs 20,000 destroyed by flood. Salvage realised Rs 2,000. Insurance

claim settled for Rs 15,000

v
Ø Entries for –
ü Debit / Credit card Sale
ü Free Sample
ü Drawings
ü Cheque Dishonour
ü Abnormal Loss

DAY 22- 24
LEARNING OBJECTIVES
v Accounts Documentation
Ø Financial Instruments
Ø Business related documents

Pay-in-slip
Flow of
Money Receipt
Accounts Documents
Cheque / Demand Draft
Debit / Credit Note

Invoice
Consignment Note
Challan
Purchase Order
Quotation
Enquiry
Other Documents
Ø Voucher
Ø Confirmation of Accounts
Ø Request for Cheque Book

Assignment 31
Quotation
1. Quote the price of a computer
Sl. Product Quantity Rate Amount

1 P IV Mother Board 1 5500 5500
Ii) PIV 1.6 CPU 1 7500 7500
Iii) 256 MB SB RAM 1 2200 2200
Iv) 40 GB H Disk 1 5200 5200
v) 1.44 Floppy 1 550 550
vi) Monitor Color 1 7800 7800
vii) Key Board 1 600 600
Viii) Mouse Scroll 1 550 550
ix) Cabinet 1 1400 1400
x) 56.6 Modem 1 750 750
xi) Speaker 1 550 550
xii) C.D. Writer 1 5900 5900
38500 38500
2. Makhan Kumar Akash Kumar (Cloth Merchant) gives you the following for preparing a quotation
Amoun
Qty Size / product Item Rate
t
2 ¼ 88cm X’color Black 250 500
1 Satin White color 1000 1000
4 Cotton Diff. Color 500 2000
8 AKL R&Pay Suit Length 2000 16000

Purchase Order, Invoice and Challan
1. Sold 10 ltrs Mustard Oil to Spicy Food (P) Ltd. @ Rs 51 p.l. on credit
2. Raise an Invoice in the name of Software Engineering Co. for Printing of the following as on 16-08-08
Sl
Description Qty Rate
No.
1 Students manuals 500 42
2 Faculty Manuals 75 50
3 Module-1 125 50
4 Module-II 125 75
5 Module-III 75 200

Consignment Note
Received goods of the following description from Irani Foods of Raipur to be transported to Priya Foods,
Jamshedpur with consignment note no. CN/001/08-09 dated 25/10/2008
Qty Items Weight
20 Ghee 400 kgs
15 Oil 225 Ltrs.
25 Wheat Flour 625 Kgs.
Transportation charges @ Rs 1.20 per kg/ltr

Debit Note / Credit Note
1. Software Engineering Co. returned 2 pcs Faculty manuals being
excess in supply
2. Returned 10 pcs of computers @ Rs 25,000 less 10% trade discount
to M/s Computech on 1.10.2008

Cheque
1. Prepare an A/c Payee cheque of Rs 10,000 for a creditor payment Mr. Mohan Agarwal.
2. Self/Cash withdrawal of Rs 15,000
3. Pay Bearer cheque to Mr. Asutosh Rana for an amount of Rs 5,000
4. Show a treatment of cheque cancellation.
5. Pay Mr. Akash Banerjee Rs 50,000 (A/c Payee) for account of office rent.
6. Cancel the above cheque and issue a fresh cheque
7. Now make a record of the above cheques issued in the records provided at the back of the
chequebook.
Request for issuing cheque book
1 Book = 100 cheques
Issuing Branch – N. S. Road
Account No. CC/S214
Signature of Account Holder – R. Saha

Demand Draft
1. Prepare a draft in favour of M/s Starline Plastic and Pens (P) Ltd.
payable at Bangalore for Rs 40,000 on 21st January 2009
Applicant’s Name: A. K. Agarwal, Exchange Rate: Rs 75
2. Make a draft of Rs 10,000 in favour of Magnum Consultants payable at
Kanpur (Exchange – Rs 25)
3. Make a draft of Rs 5000 in favour of ICA payable at Kolkata. The
exchange rate is Rs 25. This is required to be made by issue of a Self
cheque

Money Receipt
Prepare a Money Receipt for the amount mentioned in the 2nd
Invoice, which is being received on 14/10/2008 through cheque
drawn on SBI vide chq. No. 125768 dated 15/10/2008

Pay in Slip / Deposit Slip
Cash Deposit
1. Deposited Cash Rs 2000 (100 x 20 )
2. Deposited Cash Rs 15000(10x1000 + 4x500 + 20x100 + 100x10)
Cheque Deposit
1. Deposited cheque of Mr. A. K. Saha for Rs 5000 (chq no. 125687 dt.
14/10/2008 of Allahabad Bank)
2. Cheque received from M/s Vinay Traders and deposited -
c) Drawn on ABN Amro, cheque no. 154789 dated 16/09/2008 for Rs 3000
d) Drawn on Canara Bank, cheque no. 264795 dated 10/11/2008 for Rs 5000

Voucher
1. Paid to Mr. Ramswarup for conveyance, travelling and tiffin
allowance Rs 50, Rs 150 and Rs. 25 respectively.
2. Pay to Mr. P. K. Banerjee Rs 500 as advance salary for the
month of Jan’09

Confirmation of Accounts
1. ABC (P) Ltd. advanced a loan of Rs 50,000 to XYZ & Co. as on 1.4.08. On 1.7.08, it
further advanced Rs 1,50,000 and on 31.12.08, XYZ & Co. refunded Rs 2,00,000 back to
ABC (P) Ltd. ABC (P) Ltd charges interest @ 15% p.a. on the basis of the period of use.
ABC (P) Ltd.  10 N. S. Road, Kolkata – 1 - PAN – ABCCA1234P
Xyz & Co.  31 R. N. Mukherjee Road, Kol – 1 PAN – AFGCX2346J
Prepare a confirmation of accounts on behalf of ABC (P) Ltd.
2. Rajamani took a loan from Sundermani of Rs 100000 on 1st Jan, 2009. Sundermani
charges interest @ 18% p.a. Give a confirmation on behalf of Rajamani to Sundermani
stating the transaction during the year ended 31st March 2009.
PAN NO. OF RAJAMANI – ALQPO4767R
PAN NO. OF SUNDERMANI – ASQPH2456S

v
Ø Preparation of Accounts Documents

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Fundamental of Accounts

The Institute of Computer Accountants

Day 1 Day 2 Day 3

4/16/11 The Institute of Computer

4/16/11 The Institute of Computer

Profit and Loss Account Balance Sheet

Measures success of the business in Ascertains the financial

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§ May or may not bring any § Bring changes in the

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Ø Recognises revenue and expense as they are

Ø Income falls due when right to receive the income

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Determine the Date of Accrual:

a. Tender submitted 25/08/2008

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Point a  e can not be the date of accrual as the deal may

Date of accrual : The day on which challan made & goods

delivered i.e. 10/09/2008

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Fire took place 12/04/2008

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Ø Every item of income should be matched with the

expenses incurred to earn that income

Ø Adjustments should be made for all outstanding

expenses, accrued incomes etc. while preparing the final

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Ø Relative importance of an item or event in terms of

Ø Item is material if the item is such that the judgment of a

reasonable person relying on the report would have been

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On the same principle -

Pen purchased should be treated as Capital Expenditure (since it is

Cost of Ink filled should be treated as Revenue Expenditure

But this is not done so due to the materiality aspect

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Ø Business is treated as a separate entity

Ø Business and its proprietor are separate from each

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ix) Dividend received

x) Loan from father

xiii) Interest paid

xiv) Salary & Wages

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Ø Event and Transaction

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Ø Rules for debit and credit

4/16/11 The Institute of Computer

Profit and Loss Account Balance Sheet

Expenses Income Capital / Liabilities Assets

Credit Debit Debit Credit

Investment by owner Profit earned by business

Withdrawal of cash/assets Loss suffered by business

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Effect in Financial Statement

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Ø Cash deposited into bank

Ø Cash withdrawn from bank

Ø Transfer of fund from one bank to another

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Bank A/c…………………… Dr. 2,50,000

Effect in Financial Statement