Machine hour rate Method:
(i) Under this method, depreciation per machine hour is calculated.
(ii) The cost of the machinery after deducting, the residual value, if any, is divided by the estimated working hours of the machine to find the depreciation per hour.
(iii)The actual depreciation for any given period depends upon the working hours during that year.
The following formula is used to determine the rate of depreciation:
Rate of Depreciation per Machine Hour = \(\frac { Original\quad cost-Estimated\quad Scrap\quad value }{ Life\quad of\quad the\quad asset\quad in\quad hours } \)

1. Errors committed in recording the transactions by the business:
(i) Sometimes errors may be committed in the cash book. For example, omission or wrong recording of transaction relating to cheques deposited or issued, wrong balancing, etc.
(ii) In these cases, obviously, there will be differences between bank balance as per bank statement and bank balance as per cash book.
2. Errors committed in recording the transactions by the bank
(i) Sometimes errors may be committed in the banker's book. For example, omission or wrong recording of transaction relating to cheques deposited and wrong balancing.
(ii) In these cases, obviously, there will be differences between bank balance as per bank statement and bank balance as per cash book.

There are two approaches for recording business transactions, namely,
i) Accounting equation approach and
ii) Traditional approach
(i) Accounting Equation approach :
(a) The relationship of assets with that of liabilities to outsiders and to owners in the equation form is known as accounting equation.
(b) Under the Double entry system of book keeping, every transaction has two fold effects, which causes the changes in assets and liabilities or capital in such a way that an accounting equation is completed and equated
Equity + Liabilities =Assets
(ii) Traditional approach :
(a) Under this approach, the two fold aspects (Debit and Credit) in each transaction are recorded in the journal under double entry system.
(b) For the purpose of recording, the transactions are classified into three categories as
i) Transactions relating to persons,
ii) Transactions relating to assets, properties and liabilities and
iii) Transactions relating to expenses, losses, incomes and gains.

The important features of a bill of exchange are as follows :
(i) It is a written document.
(ii) It is an unconditional order.
(iii) It is an order to pay a certain sum of money.
(iv) It is signed by the drawer.
(v) It bears stamp or it is drafted on a stamp paper.
(vi) It is to be accepted by the acceptor.
(vii) The amount of the bill is paid to the drawer or the endorsee.

(i) Ledger is known as the principal book of accounts because it is very useful for a business enterprise.
(ii) It is a book which contains all sets of accounts, namely, personal, real and nominal accounts.
(iii) Account-wise Balance can be determined from the Ledger.
(iv) The Ledger Accounts are opened or maintained based on journal entries passed.
(v) The balances in the ledger accounts show the net effect of transactions during a particular period in various accounts.
(vi) The personal accounts give the net amount due to creditors and the net amount due from debtors, real accounts show the values of assets and nominal accounts will show sources of incomes and expenses.
(vii) The financial statements can be prepared from the ledger balances.

Importance of cash book is discussed below:
(i) Serves as both journal and ledger: When cash book is maintained; it is not necessary to open a separate cash account in the ledger. Thus, cash book serves the purpose of a journal and a ledger.
(ii) Saves time and labour: When cash transactions are recorded through journal entries, a lot of time and labour will be involved. To avoid this, all cash transactions are straightaway recorded in the cash book, which saves time and labour.
(iii) Shows the cash and bank balance: It helps to know the cash and bank balance at any point of time by comparing the total cash receipts and cash payments.
(iv) Benefit of division of labour: As cash book is a separate subsidiary book, an independent person can maintain it. Hence, the business can get the benefit of division of labour.

Process of Accounting cycle

(i) When a businessman starts his business activities, he records the day-to-day transactions in the journal.
(ii) From the journal the transactions move further to the ledger where accounts are written up.
(iii) Preparation of trading and profit and loss account is the next step.
(iv) The balancing of profit and loss account gives the net result of the business transactions.
(v) Thus this cyclic movement of the transactions through the books of accounts (accounting cycle) is a continuous process.

a) Income:
 Income is the difference between revenue and expense.
b) Expense:
(i) Expenses is the amount spent in order to produce and sell the goods and services.
(ii) For example, purchase of raw materials, payment of salaries, wages etc.
 c) Revenue:
Revenue means the amount receivable or realised from sale of goods and earnings from interest, dividend, commission, etc.