Examples of provisions are:
(i) Provision for depreciation.
(ii) Provision for bad and doubtful debts.
(iii) Provision for taxation.
(iv) Provision for discount on debtors.
Examples of reserves are:
(i) General Reserve
(ii) Workmen Compensation Fund.
(iii) Investment Fluctuation Fund.
(iv) Capital Reserve.

A manager may be entitled to a commission on profits. It is usually given as a fixed percentage on the net profits earned by the firm. In this case, first of all, net profit before commission is calculated. Then, commission payable is calculated as follows:
(i) When commission is payable on net profit before charging such commission:
Commission = Net Profits Before Commission\(\times\)Rate/ 100
(ii) When commission is payable on net profit after charging such commission:
Commission = Net Profits Before Commission \(\times\) \(\frac { Rate }{ 100+Rate } \)

The main components of a Computer System are :
(i) Input Unit
(ii) Central Processing System
(iii) Output Unit
These are the essential building blocks of a Computer System.

(i) Bills of exchange,
(ii) Promissory Note.

Liabilities side of the Balance Sheet:
(i) Capital
(ii) Long-term Liabilities
(iii) Current Liabilities
(iv) Secured Loans
(v) Unsecured Loans.

(i) Compound Journal entries are the entries combining two or more Journal entries. A compound Journal entry contains more than one debit or credit or both.
Following is an example of a compound Journal entry.
Wages A/c Dr.
Salaries A/c Dr.
Rent A/c  Dr.
To Cash A/c
(ii) (a) Credited.
(b) Credited.
(c) Debited.
(d) Credited.

Accounting is not an end in itself. However, the ultimate product of accounting may be the balance sheet of any enterprise as it depicts the financial position of the business for which accounting is done.

There is a violation of prudence concept. "Do not anticipate profits but provide for all losses" is the premise on which conservatism (prudence) concept is based. This concept suggests that if choice is available, the accountant should anticipate all probable losses and should provide for them but he should not anticipate probable gains and revenues. Following are some of the examples of conservatism:
(i) Making the provision for doubtful debts and discount on debtor.
(ii) Valuing the stock in trade at market price or cost price, whichever is less.
(iii) Creating provision against fluctuation in the price of investments.
(iv) Charging of small capital items, like crockery, to revenue.
(v) Adopting written-down-value method of depreciation.
(vi) Amortization of intangible assets like goodwill.
(vii) Showing joint life policy at surrender value as against the amount paid.
(viii)Not providing for discount on creditors.

Net Profit = Operating Profit + Non- operating Income - Non-operating Expenses
= 17,00,000 + 1,50,000 - 3,75,000 = Rs. 14,75,000
Net profit earned by M/S Arora and Sachdeva in 2013-14 was Rs. 14,75,000

(i) Purchase Book
Reason: Because Goods are purchased on credit
(ii) Journal Proper
Reason: Furniture is purchased on credit
(iii) Journal Proper
Reason: This can not be recorded in subsidiary books.
(iv) Returns Inward/Sales Return Book
Reason: Goods received back due to defect.

(i) Journal Proper:
Reason: Furniture is not goods and credit purchase of goods is recorded in the Purchases Book.
(ii) Sales Book:
Reason: Cash sales is recorded in Cash Book and credit sales is recorded in Sales Book.
(iii) Sales Returns Book:
Reason: Goods returned by debtors is sales returns.
(iv) Purchases Book:
Reason: Purchase of stock on credit means purchase of goods.
(v) Journal Proper:
Reason: Interest on capital is an adjustment entry and cannot be recorded in any other book.
(vi) Purchase Returns Book:
Reason Goods returned to creditors is purchase returns.
(vii) Bills Payable Book:
Reason: Bill accepted by proprietor from creditor is bill payable.
(viii) Cash Book:
Reason: Sale of goods for cash involves receipt of cash.

In all activities whether business activities or nonbusiness activities used by student of business and other interested groups like schools, colleges, hospitals, libraries, clubs, political parties, etc. require accounting knowledge due to monetary transaction involved in these organisations. Accounting serves the basic purpose of information regarding flow of money and finds in the organisation. Following there are the reasons for studying the accounting and familiarise with accounting discipline:
(i) Facilitates to replace memory
(ii) Facilitate to ascertain net result of operations
(iii) Facilitates the Users to take decisions
(iv) Helpful in comparative study
(v) Control over the assets
(vi) Acts as legal evidence.

(i) Dual Aspect: According to Dual Aspect principle every business transaction has two aspects, i.e., debit and credit with same amount. e.g., Rent paid Rs 1,000. So this transaction has two aspect one is debit as rent and other is cash which will be credit. Trial Balance is also prepared as per the Dual Aspect principle.
(ii) Accrual: According to this principle, all anticipated losses and expenses should be recorded in the books of accounts, but all anticipated gains should be ignored.
(iii)Conservatism: It is also called Prudence Principle. Conservatism principle says that provide for all possible anticipated losses but not for profits. But the biggest drawback of this principle is creation of secret reserve. For example: Creation of Provision for doubtful debts.

(i) Renewal of a Bill:
When the acceptor of a bill finds himself in financial difficulty to honour the bill on the due date, he may request the drawer of the bill to cancel the original bill and to draw another bill of the amount plus some interest to extend the time of credit. This process is known as the renewal of a bill.
When a bill is renewed, acceptor will have to pay interest to the drawer for the extended period of credit.
(ii) Noting Charges:
When a bill is dishonoured or not paid on maturity, it is customary for the holder of the bill to get the fact noted on the bill by a notary public. When asked by the holder, the notary public presents the bill before the acceptor for payment and if still the acceptor does not pay, the notary public notes the fact of dishonour and the reason of dishonour of the bill. It is called noting of a bill. For this service, Notary Public charges fee, known as noting charges. At the moment, the charges are paid by the holder and ultimately recoverable from the person who is responsible for dishonour.

If an error comes into notice before preparing the Trial Balance, it should be rectified immediately. One-sided errors include errors of casting and carry forward, errors of posting and errors of balancing. Sometimes one account may not be shown in Trial Balance. At Stage-I, i.e., before the preparation of Trial Balance, such errors are rectified by giving an explanatory note in the same account. In other words, no rectifying journal entry is passed to rectify one-sided errors at Stage-I. Only the amount is written on the debit or credit side of the account which is affected by the error, giving the details of the error in the particulars column. Following table will help in understanding the rectification of one-sided errors:

Part - A

Part - B

Following are the main disadvantages or limitations of computerized accounting:
(i) High Cost: The computerized accounting system is a very costly system. It includes the cost of computers, peripherals and network devices. It also includes the cost of software that is to be used to automate the system. Computerized accounting also includes the cost of media that has to be used to take regular backups of data. For example, tape drives and compact disks are generally used for backup purpose.
(ii) Problem of Obsolescence: Obsolescence is the major problem of computerized accounting. The hardware and software industry is continuously growing at a rapid rate. It has been found that the size of an average hardware chip reduces to its half after every 18 months, that too without compromising on its processing power. Due to such high speed developments, new hardware devices replace the older ones. The software industry is also growing at a similar rate and newer versions of software are being introduced on routine basis. Newer versions of software require newer hardware devices to run. Therefore, the organization has to spend a considerable amount of money to purchase new hardware and software.
(iii) Dependence on Computer Accountant: Computerized accountancy requires computer accountants to record and analyse the transactions. These are the people who have complete knowledge of accounts and computers. In a computerized accounting system, a computer illiterate person cannot do anything in the system. The company is completely dependent on computer accountant for all their accounting needs. In few companies, the managers also have the knowledge of computerized accounting but most of the companies depend on computer accountants.
(iv) Problem of Security and Secrecy: The computers are not faithful machines. They just obey the commands of the person who is sitting in front of it. If a person manages to get access to the computer, he or she may harm the information stored in the computer. Several types of other problems like virus or failures may lead to data loss. Computer networks also cause security problems as the information of one computer can be accessed from the other. Very strict and careful handling of the
information is needed in computerized accounting system. This security can be implemented by using separate cabins and lock and key mechanisms or by using password mechanisms.
(v)Training Requirements: The computerized accounting system requires the training of accountants as per the software that has been installed to automate the accounting system. The duration and cost of this training varies with the type of accounting software. The customized accounting softwares are generally easy to use and require less training. In most of the cases, the training is provided by the software vendors.

There are four different types of errors that are usually committed in recording business transaction which are as follows:
(i) Errors of Commission: These are the errors which are committed due to wrong posting of transactions wrong totalling or balancing of the accounts, wrong casting of the subsidiary books, or wrong recording of amount in the books of original entry, etc. For example, Rajhans Traders paid Rs 25,000 of Preetpal Traders (a supplier of goods). This transaction was correctly recorded in the cash book. But while posting to the ledger, Preetpals account was debited with Rs 2,500 only. This constitutes in error of commission. Such an error by definition is of clerical nature and most of the errors of commission are reflected in the trial balance.
(H)Errors of Omission: The error of omission may be committed at the time of recording the transaction in the books of original entry or while posting to the ledger. It can be of two types:
(a) Error of complete omission.
(b) Error of partial omission. When a transaction is completely omitted from recording in the books of original record, it is an error of complete omission, for example, credit sales to Mohan Rs 10,000, not entered in the Sales Book. When the recording of transaction is partly omitted from the books, it is an error of partial omission. If in the above example, credit sales had been duly recorded in the sales book but the posting from sales book to Mohan's account was not made, then, it will be the error of partial omission.
(iii) Errors of Principle: A transaction recorded in contravention of accounting principle is known as errors of principle. Such error where committed does not effect the trial balance as amounts are placed on the correct side but in a wrong account. Example of such error is treating the purchase of an asset and/or amount spent such as freight etc. on its acquisition as revenue expense instead of capital expenditure. The effect of such treatment is that financial results get distorted but the trial balance will agree. Continuing with the above example, the above treatment would result in lower profits than actual.
(iv) Compensating Errors: When two or more errors are committed in such a way that the net effect of these error on the debits and credits of accounts is nil, such errors are called compensating errors. Such errors do not affect the tallying of the trial balance.

Dr.      Trading and Profit & Loss Account for the year ending on 31st March, 2016                  Cr.

                                    Balance Sheet as at March 31, 2016

Qualitative characteristics are the attributes of accounting information which tend to enhance its understandability and usefulness. It must possess the characteristics of reliability, relevance, understandability and comparability
(i) Reliability :
Reliability means the users must be able to rely on the information. The reliability of accounting information is determined by the degree of correspondence between what the information conveys and the transaction or event that have occurred, measured and displayed.
(ii) Relevance :
To be relevant, information must be available in time, must help in prediction and feedback. Information is said to be relevant when it must influence the decision of users by confirming or correcting their past evaluation.
(iii) Understandability:
Understandability means decision makers must interpret accounting information in the same sense it is prepared and conveyed to them.
(iv) Comparability :
It is not sufficient that financial information is relevant and reliable at a particular time in a particular circumstances or for a particular reporting entity.