Interest on capital is treated in the final accounts as follows:
(i) It is shown on the debit side of Profit &Loss Nc as it is a loss to the firm
(ii) It is added to capital on liabilities side of Balance Sheet.

The rules of debit and credit same for both liability and capital because both are recorded on the right hand side of an accounting equation. Increase in one side of an accounting equation and decrease in other side is called unbalanced accounting equation. Therefore, both the sides of an accounting equation should be equal.

The three advantages of DBMS are as follows:
(i) Saves time as large amount of data is managed by a computer application.
(ii) Reports can be generated for specific needs
(iii) Reduces errors as computer applications have inbuilt controls.

The term maturity refers the date on which a bill of exchange becomes due for payment. In arriving at the maturity date, three days, known as days of grace, must be added to the date on which the period of credit express instrument is payable.

Following are the important special purpose subsidiary books :
(i) Cash Book: Only cash transactions are recorded in this book. In double column cash book, we record cash transactions as well as transactions related to the bank. In such a case Cash account and Bank account is not prepared separately because both the columns are involved in the cash book. A separate Cash Book is maintained for payment of small/petty expenses.
(ii) Purchases Book : Only credit purchases of goods and materials (required for the purpose of production) are recorded in the purchases book.
(iii) Sales Book: Only credit sales of goods are recorded in this book.
(iv) Purchase Returns Book : Goods returned to suppliers are recorded in this book. It is also called 'Returns outward book.'
(v) Sale Returns Book: Goods returned by customers are recorded in this book. It is also called 'Returns inward book'.
(vi) Bills Receivable Book : Bills drawn and accepted by debtors and promissory notes received from them are recorded in this book.
(vii) Bills Payable Book: Bills accepted by the firm and promissory notes issued to creditors are recorded in this book.
(viii) Journal Proper: The business transaction, which cannot be recorded in any of the seven books, mentioned above are recorded in this book. It is also called 'Miscellaneous Journal'.

Distinction between Capital Expenditure and Revenue Expenditure

Basis of Difference	Capital Expenditure	Revenue Expenditure
(i) Objective	It is incurred for the purchase of tangible and intangible fixed assets.	It is incurred for the conduct of day-to- day business activities.
(ii) Period	Capital expenditure benefits the firm for long period, usually more than one year.	The benefits of revenue expenditure are derived immediately or within one year.
(iii) Earning	Capital expenditure increase the earning capacity of the business.	It does not increase the earning capacity. It is incurred for generating revenue and maintaining the fixed assets.
(iv)Accounting	Capital expenditure is shown as an asset in the Balance Sheet.	Revenue expenditure is shown on the debit side of Trading and Profit & Loss A/c.
(v)Depreciation	Depreciation is charged on capital expenditure.	No depreciation is charged on revenue expenditure as it is fully written off in the year of occurrence.

                                              Bank Reconciliation statement 2014

	Particulars	Amount (Rs)	Amount (Rs)
	Balance as per cash book		3,200
Add:	Cheque issued but not presented of Payment	1,800	1,800
			5,000
Less:	Cheque deposited but not collected by Bank.	2,000
	Charges debited by Bank not entered in Cash Book.	150	(2,150)
	Balance as per Pass Book.		2,850

Obsolescence means the fact of being out-of-date. Obsolescence implies that existing assets become out-of-date on account of the availability of better type of assets. It arises from factors such as :
(i) Technological changes.
(ii) Improvements in production methods.
(iii) Change in market demands for the product or services output of the asset.
(iv) Legal or other description.

Two examples of Error of Principle are:
(i) Amount spent on additions to the buildings should be treated as capital expenditure and must be debited to the Asset A/c, instead, if this amount is debited to Maintenance and Repairs Nc, it is treated as a Revenue Expense.
(ii) If a credit purchase of machinery is recorded in Purchase Book instead of journal proper on rent paid to the landlord in the cash book as payment to landlord.

According to this principle, every transaction has two aspects one aspect is debit and the other is credit. and both the aspects are recorded in the accounting books. This concept is the basis of double entry system. To understand the double effect of a transaction, we should also remember the business entity concept. When a person starts business and invests capital in the business, on the one hand it increases the cash in hand (asset) and on the other hand it increases liability of the business towards the proprietor. The following accounting equation is drawn on the basis of this principle:
Assets = Capital (or Owner's Equity) + Liabilities (Claims of Outsider).

Following are the characteristics of the accounting:
(i) Economic events: Accounting requires events to be expressed in terms of money. Transactions should involve transfer or exchange of monetary value between the business entity and outsiders.
(ii) Identification, measurement, recording and communication : Accounting is a process of identifying the transactions to be recorded, quantifying the transactions into financial terms, recording the transactions in a systematic manner and communicating the desired information to various interested groups.
(iii) Users of information : Accounting is complete when information is communicated to various groups interested in the functioning of business entity.

Transaction	Assets Cash Machinery		Goods	Liabilities	Capital
						(i)	1,50,000	-	-	-	1,50,000
(ii)	1,50,000	40,000	-	40,000	1,50,000
(iii)	(20,000)
	1,30,000	40,000	20,000	40,000	1,50,000
(iv)	(80,000)				(80,000)
	50,000	40,000	20,000	40,000	70,000
(v)	(38,000)			(40,000)	+2,000
	12,000	40,000	20,000	-	72,000
(vi)	+4,500				(500)
	16,500	40,000	(5,000)	-	71,500
(vii)	(1,000)				(1,000)
	15,500	40,000	15,000	-	70,500
(viii)	2,000				2,000
	17,500	40,000	15,000	2,000	70,500
Final Equation	17500 + 40,000 + 15,000		=	2,000 + 70,500
	72,500			72,500

Net Sales = Sales - Sales Returns
= Rs. 16,000 - Rs. 1,000
= Rs. 15,000
Cost of goods sold = Net Sales - Gross Profit
= Rs. 15,000 - Rs. 6,000 = Rs. 9,000
Cost of goods sold = Opening Stock + Purchases Purchases Returns + Carriage Inward - Closing stock.
Rs. 9,000 = Rs. 5,000 + Rs. 10,000 - Rs. 900 + Rs. 1,000
Closing Stock
Closing Stock = Rs.15,100 - Rs. 9,000
= Rs. 6,100.

(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.

             Bank Reconciliation statement as on December 31, 2005

	Particulars	Amount (Rs)	Amount (Rs)
Add:	Overdraft as per Pass Book		20,000
	(iii) Payment received directly by customer	4,600
	(iv) Cheque issued but not presented for Payment	6,980
	(v) Interest Credited by bank	100
			11,680
			31,680
Less:	(i) Bank cheque debited by bank	500
	(ii) Cheque recorded in cash book, but not presented for collection	2,500
	Collection	2,500
	(vi) L.I.c. paid by Bank	3,500	(9000)
	(vii) Cheque deposited in bank but not collected
	Overdraft as per Cash Book		22,680

Main objective of preparing a Trial Balance is to check the accuracy of the accounts. However, the equality of debits and credits of Trial Balance does not mean that there are absolutely no errors in the books of account. There may be number of errors which may remain undetected inspite of the agreement of a trial balance As such, it is true that "Trial Balance is not a conclusive proof of the accuracy of book of accounts." There are certain errors which do not affect the agreement of the Trial Balance. Such errors are also called limitations of Trial Balance. These are the following errors.
(i) Errors of Omission
(ii) Errors of Commission
(iii) Compensating errors
(iv) Errors of Principles
(v) Errors of posting in wrong account
Sometimes inspite of best efforts of an accountant, all the errors are not located and the Trial Balance does not tally. So, the Trial Balance has certain limitations.

In India, convergence of IFRS with its domestic accounting standards will be made in phased manner starting from 1st April,2011 as under:
Following companies are required to converge with IFRS from April,2011 in the first phase:
(i) Companies listed in India or outside.
(ii) Companies not listed but have net worth of Rs1000 crore or more.
Accounting to Institute of Chartered Accountants of India(ICAI),IFRS was to be implemented from April,2011 but was put on hold and is under review. The expected date of implementation is yet to be declared.

Following are the limitations of financial accounting:
(i) Incomplete information: The accountant measures only those events that are financial in nature, i.e., that are capable of being expressed in money. Nonmonetary items or events, however, significant they may be, are not measured or recorded in accounting. For example, competency of management, competition in the market, industrial relations, etc.
(ii) Inexactness: Accounting data is some-times based on estimations and it may be inaccurate. Therefore, profits and financial position disclosed by such accounts may not be true and exact. For example, stocks are also valued on some assumptions. Actual useful life of an asset cannot be accurately calculated for the purpose of depreciation.
(iii) Personal influence of accountant: Accounting may be influenced by the personal judgement of the accountant. He applies a choice between different methods of inventory valuation, depreciation methods, provision for doubtful debts, treatment of capital and revenue items and so on. Thus, due to lack of objectivity, income measured may not be true in certain cases.
(iv) Assets may not be shown at their real value: Fixed assets are shown at written down value, i.e., cost less depreciation. There may be a great difference between book value at which assets are shown and current replacement cost. Certain valueless assets are also sometimes shown in Balance sheet, such as, goodwill, patents and trademark, preliminary expenses, etc.
(v) Effect of price level changes not considered : Accounting statements are prepared at historical cost. Money as a measurement unit, change, it is not thus, considered while preparing Profit & Loss Account, thus, the accounting information will not show true financial results.
(vi) Non-monetary transactions are ignored: Financial statements record only monetary transactions. Certain important and valuable assets like Human Resources, do not find a place in a Balance sheet. This is because, there is no yard- stick to measure the value of Human Resources in monetary terms.

"A bill of exchange is an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument." (Section 5 of the Negotiable Instruments Act, 1881).
Advantages of Bills of Exchange: The following advantages accrue from bills of exchange:
(i) Purchase and sale of goods on credit:
With the help of bills of exchange, goods can be sold and purchased on credit without difficulty since the bills of exchange contains an unconditional promise to pay.
(ii) Discounting facility:
The bills of exchange can be discounted at a bank, so that the firm allowing the credit can receive cash immediately without the debtor having to pay before time.
(iii) Easy to recover the amount:
If a bill of exchange is dishonoured, it would be easier to recover the amount legally than in the case of an ordinary debt.
(iv) Endorsement:
A bill of exchange can be endorsed to other parties; thus they serve almost the same purpose as cash.
(v) Certainty as to payment:
The date of payment is certain, so the firm which has to pay and that which has to receive the amount, can thus plan cash operations.
(vi) No reminder to debtor:
The recovery of the debt is possible without having to remind the debtor.
(vii) Convenient means of remittance in foreign trade:
In foreign trade, bills of exchange are of great assistance in enabling firms to make and receive payment. It, thus, avoids the risks of carrying the currency to different places of trade.

Dr. In the Books of Mohan Trading and Profit & Loss Account for the year ended 31st March, 2014 Cr.

Particulars		Amount (Rs)	Particulars		Amount (Rs)
To Opening Stock		6,800	By Sales	1,10,000
To Purchases	66,000		Less : Returns	8,000	1,02,000
Less: Returns	1,500	64,500	By Closing Stock		7,000
To Carriage Inward		3,000
To Gross Profit c/d		34,700
		1,09,000			1,09,000
To Salaries	9,000		By Gross Profit b/d		34,700
Add: Outstanding Salary	200	9,200	By Discount		500
To Rent & Insurance	3,000		By Rent Received		300
Less: Prepaid	200	2,800
To Bad Debts	500
Add: New Provision	1,000
	1,500
Less: Old provision	700	800
To Interest on Loan		300
To Carriage Outward		2,500
To Advertising		3,500
To General Expenses		3,400
To Depreciation on:
Land & Buildings	300
Motor Vehicles	2,000	2,300
To Net Profit transferred to Capital A/c		10,700
		35,500			35,500

Balance Sheet as at 31st March, 2014

Liabilities		Amount (Rs)	Assets		Amount (Rs)
Creditors		10,000	Cash		2,000
Bills Payable		2,000	Bank		3,500
Loan		9,500	Debtors	20,000
Outstanding Salaries		200	Less : Provision	1,000	19,000
Capital:			Bill Receivable		6,000
Opening Balance	30,000		Stock		7,000
Add: Profit	10,700		Motor \ehicles	10,000
	40,700		Less : Deprecation	2,000	8,000
Less: Drawings	5,000	35,700	Land & Building	12,000
			Less : Depreciation	300	11.700
			Prepaid Insurance		200
		57,400			57,400

Trading and Profit and Loss Account for the year ended March 31, 2014

Particulars	Amount Rs	Particulars		Amount Rs
To Opening Stock	50,000	By Sales	4,21,000
To Purchase	3,50,000	(-) Sales Return	5,000	4,16,000
To Carriage on purchases	12,000	By Closing Stock		2,500
To Wages	8,000	By Gross Loss c/d (b/f)		1,500
	4,20,000			4,20,000
To Gross Loss b/d	1,500	By Commission		4,000
To Rent	15,000	By Net Loss		41,500
To Bad Debts	7,000
To Stationery	6,000
To Travelling Expenses	2,000
To Insurance	7,000
To Discount	5,000
To Office Expenses	2,000
	45,500

Balance Sheet for the year ended March 31, 2014

Particulars		Amount Rs	Particulars	Amount Rs
Capital	3,00,000		Cash in Hand	32,000
(-) Net Loss	41,500		Furniture	1,28,000
	2,58,500		Debtors	1,40,000
(-) Drawings	24,000	2,34,500	Plants	60,000
Creditors		1,00,000	Closing Stock	2,500
Bank Overdraft		28,000
		3,62,500		3,62,500

Dr.                                            Machinery A/c                                                       Cr.

Date	Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
1-1-15	To Balance b/d	15,00,000	31-3-15	By Dep.A/c	1,30,000
1-1-15	To P&L (Profit)	5,000	31-3-15	By Bank A/c	75,000
1-5-15	To Bank A/c	6,00,000	31-12-15	By Bal. c/d	19,00,000
		21,05,000			21,05,000
1-1-16	To Balance b/d	19,00,000

 

Provision for Depreciation Account

Date	Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
1-4-15	To Machine Desponsal A/c	1,30,000	1-1-15	By Bal.b/d	3,50,000
31-12-15	To Bal. c/d	7,50,000	1-1-15	By dep.A/c	10,000
			31-3-15	By dep.A/c	3,20,000
			31-12-15	(i) 2,60,000
				(ii) 60,000
		8,80,000			8,80,000
			1-1-16	By Balance b/d	7,50,000

Working Note:
Calculation of profit & loss on sale of machine-

Particulars	Amt(Rs.)
1-1-12 (Value)	2,00,000
Less: Dep. upto 31-12-12	40,000
1-1-13	1,60,000
Dep. upto 31-12-13	40,000
1-1-14	1,20,000
Dep. upto 31-12-14	40,000
Bal. on 1-1-15	80,000
Less: Dep. upto 31-3-15	10,000
	70,000
Sale of Machine	75,000
Profit on sale	5,000

                                                      Journal Entries in the books of Lilly

Date	Particulars		L.F.	Amount Dr. (Rs)	Amount Cr. (Rs)
2015 Mar. 01	Mathew	Dr.		12,000
	To Sales A/c				12,000
	(Being Goods sold to Mathew on credit)
Mar. 01	Bill Receivable A/c	Dr.		12,000
	To Mathew				12,000
	(Being B/R drawn on account)
Mar. 01	Bank A/c	Dr.		11,820
	Discounting charges A/c	Dr.		180
	To Bills Receivable  A/c				12,000
	(Being B/R discounted at 9% p.a. for 2 months)
May 04	Mathew A/c	Dr.		12,045
	To Bank A/c				12,045
	(Being B/R dishonoured on due date and noting charges Rs 45 due)
May 04	Mathew A/c	Dr.		241
	To Interest A/c				241
	(Being interest due on the amount of B/R)
May 04	Cash A/c	Dr.		12,286
	To Mathew A/c				12,286
	(Being amount received of B/R along with interest and noting charges)

Dr.                                                     Mathew's A/c in the books of Lilly                               Cr.

Date	Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
2015 May 01	To Sales A/c	12,000	2015 Mar. 01	By B/R A/c	12,000
May 04	To Bank A/c	12,045	May 04	By Cash A/c	12,286
May 04	To Interest A/c	241
		24,286			24,286

                                      Journal Entries in the Books of Mathew

Date	Particulars		L.F.	Amount Dr. (Rs)	Amount Cr. (Rs)
2015 Mar. 01	Purchase A/c	Dr.		12,000
	To Lilly				12,000
	(Being goods purchased on credit)
Mar. 01	Lilly	Dr.		12,000
	To Bills Payable A/c				12,000
	(Being B/P accepted on account)
May 04	Bills Payable A/c	Dr.		12,000
	Noting charges A/c	Dr.		45
	To Lilly				12,045
	(Being Bills dishonoured on due date & noting charged paid)
May 04	Interest A/c	Dr.		241
	To Lilly				241
	(Being payment made to Lilly of B/P along with interest and noting charges)
May 04	Lilly A/c	Dr.		12,286
	To Cash A/c				12,286
	(Being B/P net on maturity)

                                     Lilly A/c in the books of Methew

Date	Particulars	Amount (Rs)	Date	Particulars	Amount (Rs)
2015 May 01	To Bills Payable A/c	12,000	2015 Mar. 01	By Purchase A/c	12,000
May 04	To Cash A/c	12,286	May 04	By B/P A/c	12,000
			Mar. 04	By Interest A/c	241
			May 04	By Noting Charges A/c	45
		24,286			24,286

                                                     Journal

Date	Particulars	L.F	Amount Dr. (Rs)	Amount Cr. (Rs)
April 01	Cash in Hand A/c                                               Dr.		6,000
	Cash at Bank A/c                                               Dr.		12,000
	Bills Receivable A/c		7,000
	Stock A/c		5,400
	Rahul		9,700
	Himanhsu		10,000
	To Ramesh			3,000
	To Bills Payable A/c			2,000
	To Capital A/c			45,100
	(Being opening balances)
April 01	Manish                                                                Dr.		3,000
	To sales A/c			3,000
	(Being goods sold on credit)
April 02	Purchase A/c                                                     Dr.		8,000
	To Ramesh			8,000
	(Being goods purchased on credit)
April 03	Cash A/c                                                            Dr.		9,200
	Discount A/c                                                      Dr.		500
	To Rahul			9,700
	(Being cash received from Rahul in Full settlement)
April 05	Cash  A/c                                                          Dr.		4,000
	To Himanshu			4,000
	(Being cash received)
April 06	Ramesh                                                             Dr.		6,000
	To Bank A/c			6,000
	(Being payment made to Ramesh)
April 08	Rent A/c                                                            Dr.		1,200
	To Bank A/c			1,200
	(Being rent Paid)
April 10	Cash A/c                                                           Dr.		3,000
	To Manish			3,000
	(Being cash received)
April 12	Cash A/c                                                          Dr.		6,000
	To sales A/c			6,000
	(Being cash sales)
April 14	Ramesh                                                           Dr.		1,000
	To Purchase Return A/c			1,000
	(Being goods returned to Ramesh)
April 15	Ramesh                                                          Dr.		4,000
	To Cash A/c			3,700
	To Discount A/c			3,00
	(Being cash paid in full settlement)
April 19	Kushal                                                            Dr.		10,000
	To Sales A/c			10,000
	(Being goods sold on credit)
April 20	Trade Expenses A/c                                      Dr.		200
	To Cash A/c			200
	(Being trade Expenses paid)
April 21	Drawing A/c                                                    Dr.		1,000
	To Cash A/c			1,000
	(Being drawing for personal use)
April 22	Sales Return A/c                                            Dr.
	To Kushal		1,200
	(Being goods returned)			1,200
April 24	Cash A/c                                                         Dr.		6,000
	To Kushal			6,000
	(Being cash received)
April 26	Stationery A/c                                                 Dr.		100
	To Cash A/c			100
	(Being stationary paid)
April 27	Postage charges A/c                                      Dr.		60
	To Cash  A/c			60
	(Being postage paid)
April 28	Salary A/c                                                       Dr.		2,500
	To Cash A/c			2,500
	(Being payment of salary)
April 29	Purchases A/c                                               Dr.		7,000
	To Sheetal Traders A/c			7,000
	(Being goods purchased on credit)
April 30	Kirti		6,000
	To Sales A/c			6,000
	(Being goods sold)
April 30	Purchases  A/c                                              Dr.		5,000
	To Handa Traders A/c			5,000
	(Being goods purchased)

Dr.                                                        Cash A/c                                                             Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April				April
01	To Balance b/d		6,000	15	By Ramesh		3,700
03	To Rahul		9,200	20	By Trade Exp. A/c		200
05	To Himanhsu		4,000	21	By Drawings A/c		1,000
10	To Manish		3,000	26	By Stationary A/c		100
12	To Sales A/c		6,000	27	By Postage Stamps		60
24	To Kushal		6,000	28	By Salary A/c		2,500
				30	By Balance c/d		26,640
			34,200				34,200
May 01	To balance b/d		26,640

Dr.                                                     Bank A/c                                                          Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount(Rs)
April				April
01	To Balance b/d		12,000	06	By Ramesh		6,000
	(Sundries)			08	By Rent A/c		1,200
				30	By Balance c/d		4,800
			12,000				12,000
May 1st	To Balacnce b/d		4,800

Dr.                                            Bills Receivable A/c                                                                       Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
01	To Balance b/d		7,000	30	By Balance c/d (b/f)		7,000
	(Sundries)
			7,000				7,000

Dr.                                                                Purchae A/c                                                                     Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
01	To Balance b/d		5,400	30	By Balance A/c (b/f)		25,400
	(Sundries)		8,000
02	To Rarnesh		7,000
29	To Sheetal Traders		5,000
30	To Handa Traders
			25,400				25,400

Dr.                                                          Rahul A/c                                                                 Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
01	To Balance b/d		9,700	03	By Cash A/c		9,200
	(Sundries)			03	By Discount A/c		500
			9,700				9,700

Dr.                                                         Himanhsu A/c                                                         Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
01	To Balance b/d		10,000	05	By Cash A/c		4,000
	(Sundries)			03	By Balance c/d (b/f)		6,000
			10,000				10,000

Dr.                                                    Ramesh A/c                                                                         Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
06	To Bank A/c		6,000	01	By Balance b/d (Sundries)		3,000
14	To Purchase Return A/c		1,000	02	By Purchase A/c		8,000
15	To Cash A/c		3,700
15	To Discount A/c		300
			11,000				11,000

Dr.                                                   Bills Payable A/c                                                                        Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
30	To Balance c/d (b/f)		2,000	01	By Balance b/d (Sundries)		2,000
			2,000				2,000

Dr.                                                         Capital A/c                                                                              Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
30	To Balance c/d		45,100	01	By Balance b/d (Sundries)		45,100
			45,100				45,100

Dr.                                                         Manish A/c                                                         Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
01	To Sales A/c		3,000	01	By Cash A/c		3,000
			3,000				3,000

Dr.                                                   Sales  A/c                                                                        Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
30	To Trading A/c (b/f)		25,000	01	By Manish		3,000
				12	By Cash A/c		6,000
				18	By Kushal		10,000
				30	By Kirti		6,000
			25,000				25,000

Dr.                                                         Discount A/c                                                      Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
03	To Rahul		500	15	By Ramesh		300
				30	By P & L A/c (b/f)		200
			500				500

Dr.                                                        Rent A/c                                                         Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
03	To Bank		1,200	30	By P& L A/c		1,200
			1,200				1,200

Dr.                                                        Purchase Return A/c                                       Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
30	To Trading A/c (b/f)		1,000	14	By Ramesh		1,000
			1,000				1,000

Dr.                                                        Kushal A/c                                                       Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
18	To Sales A/c		10,000	22	By Asles Return A/c		1,200
				24	By Cash A/c		6,000
				30	By Balance c/d		2,800
			10,000				10,000

Dr.                                                       Trade Expenses A/c                                       Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
20	To Cash A/c		200	30	By P & L A/c (b/F)		200
			200				200

Dr.                                                              Drawing A/c                                                     Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
21	To Cash A/c		1,000	30	By Balance c/d		1,000
			1,000				1,000

Dr.                                                         Sales Return A/c                                                 Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
22	To Kushal		1,200	30	By Trading A/c (b/f)		1,200
			1,200				1,200

Dr.                                                         Stationary A/c                                                 Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
26	To Cash A/c		100	30	By P & L A/c (b/f)		100
			100				100

Dr.                                                         Postage Stamps A/c                                                 Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
27	To Cash A/c		60	30	By P & L A/c (b/f)		60
			60				60

Dr.                                                         Salary A/c                                                       Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
28	To Cash		2,500	30	By P & L A/c (b/f)		2,500
			2,500				2,500

Dr.                                                         Sheetal A/c                                                       Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
30	To Sales A/c		7,000	29	By Purchases A/c		7,000
			7,000				7,000

Dr.                                                         Kirti                                                                       Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
30	To Sales A/c		6,000	30	By Balance c/d		6,000
			6,000				6,000

Dr.                                                         Handa                                                                     Cr.

Date	Particulars	L.F.	Amount (Rs)	Date	Particulars	L.F.	Amount (Rs)
April 2017				April 2017
30	To balance c/d		5,000	30	By Purchases A/c		5,000
			5,000				5,000

Statement of Affairs of Krishna Kulkarni as at Jan. 01,2013

Liabilities	Amount (Rs)	Assets	Amount (Rs)
Creditors	10,000	Cash in hand	10,000
B/P	4,000	Debtors	20,000
Capital (Bal. figure)	2,24,000	Bills Receivable	20,000
		Stock	40,000
		Furniture	8,000
		Investment	40,000
		Bank Balance	1,00,000
	2,38,000		2,38,000

 

Statements of Affairs of Krishna Kulkarni as at Jan. 01,2013

Liabilities	Amount (Rs)	Assets	Amount (Rs)
Sundry Creditors	46,000	Cash in hand	36,000
B/P	42,000	Debtors	80,000
Capital (Bal. figure)	3,50,000	Bills Receivable	24,000
		Car	80,000
		Stock	30,000
		Furniture	48,000
		Investment	50,000
		Bank Balance	90,000
	4,38,000		4,38,000

 

Statement of Profit or loss for the year ended Dec. 31, 2013

Particulars		Amount (Rs)
Capital at the end		3,50,000
Add : Drawings during the year (5,000 x 12)		60,000
		4,10,000
Less : Additional Capital Introduced		30,000
Adjusted Capital at the end		3,80,000
Less : Capital at the beginning		2,24,000
Profit before adjustment		1,56,000
Less : Depreciation on car (5% of 80,000)	4000
Depreciation on furniture
(10% of 48,000	4,800
O/s Rent	6.000	(14,800)
Net Profit		1,41,200

 

Statement of Affairs (Adjusted) of Krishna Kulkarni as at Dec. 31, 2013

Liabilities		Amount (Rs)	Assets		Amount (Rs)
Creditors		46,000	Cash in Hand		36,000
B/P		42,000	Debtors		80,000
Rent O/s		6,000	B/R		24,000
Opening Capital	2,24,000		Car	80,000
Add: Net Profit	1,41,200		Less: Depreciation	4,000	76,000
	3,65,000		Stock		30,000
Add: Additional			Furniture	48,000
Capital	30,000		Less: Depreciation	4,800	43,200
	3,95,000		Investment		50,000
Less : Drawings	60,000	3,35,200	Bank Balance		90,000
		4,29,200			4,29,200

It is a fact that more than 80% of computers have been used to process business data. Business users were one of the earliest users of computers. The accounting department is generally the first one to get computerized.
Following are the main benefits of using AIS:
(i) The computers are more efficient in processing numeric data as compared to humans. As accounting work mainly deals with numeric data, computers are faster in processing accounting data. Moreover, accounting deals with basic mathematical calculations and it is very easy to develop software for processing accounting data on computers.
(ii) Accounting calculations are carried out in a step by- step manner and by following accounting rules. Every transaction is entered as per its type. As the nature of accounting data is algorithmic, softwares can be easily designed to process accounting data.
(iii) The basic methods and rules for processing accounting data are same regardless of size and type of the business. Due to this reason a general type of accounting information system can serve every type of business. If some organizations need to have some customized control, a customized package can be developed after minor
modifications.
(iv) The performance of computers remain unaffected by the size and volume of data to be processed. Computers will not make mistakes with increase in volume of data nor will they get bored when same process is repeatedly processed. Therefore, computers are better in processing accounting data than humans.
(v) It is much easy to maintain accounting standards and control the accounting data of an organization.

                                                                    Journal Entries

Date	Particulars		L.E	Debit(Rs)	Credit(Rs)
1-Apr-14	Cash A/c	Dr		100,000
	Furniture A/c	Dr		50,000
	To Capital A/c				1,50,000
	(Being cash and furniture brought as capital)
4-Apr-14	Bank A/c	Dr		50,000
	To Cash A/c				50,000
	(Being bank Nc opened)
10-Apr-14	Machinery A/c	Dr		53,000
	To Mukesh A/c				50,000
	To Cash A/c				3,000
	(Beingmachinery purchased, and cartage and installation charges paid in cash)
15-Apr-14	Purchase A/c	Dr		20,000
	Carriage A/c	Dr		500
	To Cash A/c				20,500
	(Being goods purchased, and cartage paid in cash)
20-Apr-14	Cash A/c	Dr		12,000
	To Sales A/c				12,000
	(Being goods sold at a profit of 20% on cost)
25-Apr-14	Charity A/c	Dr		2,000
	To Purchase A/c				2,000
	(Being goods given as charity)

The process of ascertaining the amount of profit earned or the loss incurred during a particular period it involves deduction of related expenses from the revenue earned during that period. The matching concept emphasises exactly on this aspect. It States that expenses incurred in an accounting period should be matched with revenues during that period. It follows that the revenues and expenses incurred to earn these revenues must belong to the same accounting period. Revenue is recognised when a sale is complete or services is rendered rather when cash is received. Similarly an expense is recognised not only when cash is paid but when an asset or services has been used to generate revenue. For example, expenses such as salaries, rent, insurance are recognised on the basis of period to which they relate and not when these are paid. Similarly, costs like depreciation of fixed asset is divided over the periods during which the assets is used.
The matching concept, thus, implies that all revenues earned during an accounting year, whether received during that year, or not and all costs incurred, whether paid during the year, or not should be taken into account while ascertaining profit or loss for that year.

    Rectifying Entries

Date	Particulars	L.F.	Debit Amount (Ts)	Credit Amount (Rs)
(i)	Purchases A/c  Dr To Raghu		20,000	20,000
	(Being credit purchases from Raghu omitted to be recorded,now corrected)
(ii)	Purchases A/c  Dr To Raghu		10,000	10,000
	(Being credit purchases from Raghu recorded as Rs 10,000instead of Rs 20,000, now corrected)
(iii)	Raghu  Dr. To Purchases  A/c		5,000	5,000
	(Being credit purchases from Raghu recorded as Rs 25,000instead of Rs 20,000,now corrected
(iv)	Suspense A/c To Raghu		20,000	20,000
	(Beingcreditpurchases fromRaghunot posted to his account,now corrected.)
(v)	Suspense A/c   Dr. To Raghu		18,000	18,000
	(Being credit purchases from Raghu Rs 20,000posted to hisaccount as Rs 2,000, now corrected.)
(vi)	Raghav's A/c  Dr. To Raghu		20,000	20,000
	(Being credit purchases from Raghu wrongly credited to Raghav, now corrected)
(viii)	Suspense A/c  Dr. To Raghu		40,000	40,000
	(Being credit purchases from Raghu Rs 20,000wrongly postedto the debit of his account, now corrected
(viii)	Suspense A/c  Dr. To Raghav To Raghu		40,000	20,000 20,000
	(Being credit purchases from Raghu Rs20,000wrongly debitedto Raghav, now corrected
(ix)	Sales A/c  Dr. Purchases A/c  Dr. To Raghu (Being credit purchases from Raghu wrongly recorded through sales book, now corrected		20,000 20,000	40,000

                        Bank Reconciliation Statement as on March 31, 2014

	Particulars	Amount (Rs)	Amount (Rs)
	Balance as per Cash Book		12,000
Add:	Cheques issued but not yet presented for payment	7,000
	Interest allowed by Bank	200	7,200
			19,200
Less:	Cheques deposited but not cleared	3,500
	Bank charges debited by Bank	100	3,600
	Balance as per pass Book		15,600

Accounting is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. It reveals profit or loss for a period, and the value of assets, liabilities and owner's equity.
The objectives of accounting are follows:
(i) To keep systematic records.
(ii) To protect business properties.
(iii) To ascertain the operational profit or loss.
(iv) To ascertain the financial position of business.