The advantages of book-keeping are:
(i) Transactions are recorded systematically in chronological order in the hooks of accounts.
(ii) Book-keeping is useful to get financial information,
(iii) It helps to have control over various business activities:
(iv) Records provided by business serve as a legal evidence in case of any dispute.
(v) Comparison of financial information over the years is possible. Also comparison of financial information of different business units is facilitated.
(vi) Book-keeping is useful to find out the tax liability.

Bad debts
(i) Debts which cannot be recovered or become irrecoverable are called bad debts.
(ii) It is a loss for the business and should be adjusted against profit
Provision for doubtful debts:
In addition to the actual bad debts, a business unit may estimated at the end of the accounting period that certain debts are doubtful, i.e., the amount to be received from debtors mayor may not be received.
Provision for discount on debtors:
(i) Cash discount is allowed by the suppliers to customers for prompt settlement of cash.
(ii) A provision created on sundry debtors for allowing such discount is called provision for discount on debtors.

(i) Heavy cost of installation:
Computer hardware needs replacement and software needs to be updated from time to time with the availability of newer versions.
(ii) Cost of training:
To ensure effective and efficient use of computerised system of accounting, newer versions of hardware and software are to be introduced.
(iii) Fear of unemployment:
On account of the introduction of computerised accounting system, the employees feel insecure that they may lose employment and show less interest in computer related work.

Note: Method of deriving the rectifying entries

When the two accounts involved in a transaction are cash account and bank account, then both the aspects are entered in cash book itself. As both the debit and credit aspects of a transaction are recorded in the cash book, such entries are called contra entries.
Example:
(i) When cash is paid into bank, it is recorded in the bank column on the debit side and in the cash column on the credit side of the cash book.
(ii) When cash is drawn from bank for office use, it is entered in cash column on the debit side and in the bank column on the credit side of the cash book.

Following are the principles of double entry system:
(i) In every business transaction, there are two aspects
(ii) The two aspects involved are the benefit or value receiving aspect and benefit or value giving aspect.
(iii) These two aspects involve minimum two accounts; at least one debit and at least one credit.
(iv) For every debit, there is a corresponding and equivalent credit. If one account is debited the other account must be credited.

(i) Investors :
1. Persons who are interested in investing their surplus funds should know about the financial condition of a business unit while making their investment decisions.
2. They are more concerned about future earnings and risk bearing capacity of the organisation which will affect the return to the investors.
(ii) Government :
1. The scarce resources of the country are used by business enterprises.
2. Information about performance of business units in different industries helps the government in policy formulation for development of trade and industry, allocation of scarce resources, grant of subsidy, etc.
3. Government also administers prices of certain commodities.

Ledger accounts

Note:
1. Computation of depreciation for the year 2014
Asset purchased on 1.1.14: 60,000 x 10% = 6,000
Asset purchased on 1.7.14: 50,000 x 10% x 6/12 = 2,500 Rs. 8,500
2. Computation of depreciation on the asset sold on 1.7.2015
Original cost on 1.1.2014 = 60,000
Less: Depreciation for 2014 (60,000 x 10%) = 6,000
Written down value on 1.1.2015  = 54,000
Less: Depreciation for 2015 upto 1.7.2015
(54,000 x 10% x 6/12) = 2,700
Book value 51,300
Sale price 40,000
Loss on sale of asset 11,300
3. Depreciation for 2015 for the asset purchased on 1.7.2014
Original cost on 1.7.2014 = 50,000
Less: Depreciation for 2014 (50,000 x 10% x 6/12) = 2,500
Written down value on 1.1.2015 47,500
Less: Depreciation for 2015 (47,500 x 10%) = 4,750

Procedure
i) Enter name and address of the vendor, number and date of invoice
ii) Type billing address
(iii) To create a table – Select Insert menu -> Click Table / Insert Table-> Enter number of rows and columns-> Click OK.
iv) Enter the data.
Output
SOUTH INDIA Ltd., INVOICE
100, Kamarajar Salai,
Chennai – 600006.
Invoice # 009876
Invoice date 31-12-2017
Bill To
Prof. A. Rajesh
HSC College,
123, PH Road,
Chennai – 600001.

External users are the persons who are outside the organisation but make use of accounting information for their own purposes. They are:
(i) Creditors and Financial institutions:
1. Suppliers of goods and services, commercial banks, public deposit holders, debenture holders etc; are included in this category.
2. They are interested in the liquidity position and repaying capacity of the business to know the safety of getting the interest and get back the principal amount.
(ii) Investors:
1. Persons who are interested in investing their surplus funds should know about the financial condition of a business unit while making their investment decisions.
2. They are more interested in future earning and risk.
(iii) Customers :
1. Those who use the products and services of a firm are interested in knowing the justification for the prices charged to them.
2. They examine the expenses, sales and profits to see if they are paying fair prices for the products and services.
(iv) Tax authorities:
1. Accounting information helps them in computing goods and services Tax, Income tax etc., to be collected from business units.
2. They scrutinise the revenues and expenses of business firms to determine their accuracy. "
(v) Government:
1. Government also administers prices of certain trades.
2. In such cases, government agencies have to ensure that the guidelines for pricing are followed.
vi) Researchers:
Researchers to carry out their research can make use of the published financial statements in their analysis and evaluation.

Insolvency is the incapability of a person or an enterprise to pay the debts.

Examples of Readymade software:
(i) TALLY
(ii) MS-EXCEL

Amount of depreciation per year = \(Original\ cost\ of\ the\ asset − Estimated\ scrap\ value\over Estimated\ useful\ life\ of\ the\ asset\ in\ years\)
\(={2,50,000 – 15,000\over 10}={2,35,000\over 10}\) = Rs.47,000 per year
Rate of depreciation = \({Amount\ of\ depreciation\ per\ year\over Original\ cost}\times100\)
\(={47,000\over 2,50,000}\times100=18.8\%\)

i) Capital expenditure
ii) Revenue receipt
iii) Capital expenditure
iv) Capital receipt.

It means balance lying with the bank or the deposits made by the firm are more than its withdrawals.

(i) At the end of the accounting year, all nominal accounts are closed but the business has to be carried on with previous year's assets and liabilities.
(ii) Journal entry made in the beginning of the current year with the balances of assets and liabilities of the previous year is opening journal entry.