financial accounting part 4

8/7/2019 Financial Accounting part 4

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Financial and Management Accounting Unit 4

Page No.: 62

Unit 4 Primary Books

Structure:

4.1 Introduction

4.2 Introduction to Primary books

4.3 Journal

4.4 Ground rules of journal entry

4.5 Types of journal

4.6 Purchases Book /Purchases Day book

4.7 Sales Book or Sales Day book4.8 Purchase Returns Book

4.9 Sales Returns Book

4.10 Bills receivable book

4.11 Bills payable book

4.12 Cash book

4.1 Introduction

The accounting process actually begins with recording the transactions in anaccounting book. This book of original recording is called primary book and

of course all transactions are recorded basing on certain documents like

invoices, vouchers or receipts etc., All transactions should invariably be

entered through the primary accounting books. Other wise, the final results

of the business concern project a distorted position or end up in preparing

unreliable statements. So making entries in the primary books is the basis

for further accounting treatment such as posting to ledger, preparation of

trial balance etc.,


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Learning Objectives:

After studying this unit, you should be able to understand the following:1. To know the various primary books, containing original entries.

2. To record transactions in General Journal adopting debit and credit

principles.

3. To know in brief about subsidiary books

4. To open purchases day book and Purchase Returns Book.

5. To open Sales day book and Sales Returns Book.

6. To know about Bill Transactions.

7. To prepare Bills Receivable Book and Bills Payable Book.8. To open Cash Book with Cash column only.

9. To understand the preparation of Cash Book with Cash and Bank

Columns.

10. To understand the preparation of Cash Book with cash, bank and

discount columns.

11. To know the preparation of Petty Cash Book.

12. To know how to prepare ledger accounts from individual subsidiary

books.

4.2 Introduction to Primary Books

Journal is a book of original entry. In French, jour means a day. Therefore

journal is basically a day book in which transactions are first entered in a

systematic manner adopting the principles of debit and credit. If a business

organization is very small and the number of transactions taking place each

day are limited, then all the transactions can easily be recorded in the

journal. But it is not so, in case of organizations of large scale, where

hundreds of transactions take place. To facilitate convenient way of entering

transactions, journal is subdivided into several books of original entry,

namely purchases, sales, cash, bills receivable, bills payable, returns

inwards, returns outwards books. They are also regarded as primary books


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or subsidiary books. When once the transactions are recorded in the journal

or other subsidiary books, posting is made to ledger. It is also possible thatentries are made directly to ledger accounts without bringing them to journal

at all. However, to help in cross checking, both journal and ledger accounts

are prepared.

Self Assessment Questions1:

1. Book of original entry is called ______________________________.

2. Do you regard subsidiary books as primary books of original entry?

3. Transactions are first recorded in the journal and later posted to

____________________.

4.3 Journal

It is a book containing systematic recording of transactions. The entry made

is known as journal entry and the process of writing the journal entry is

called journalizing. Each page of the journal is numbered and it is called

journal folio (JF). Entries are made date wise and they reflect what account

is debited and what account is credited. The form of a journal is given

below.

JOURNAL

Date ParticularsLedgerFolio

Debit

Rs.

Credit

Rs.

2-4-2005 Cash A/c Dr

To Capital A/c

(Being capital brought in cash)

100000

100000

3-4-2005 Furniture A/c Dr

To cash A/c

(Being furniture purchased forcash)

20000 20000

The ledger folio mentioned in the third column indicates the number of page

in the ledger book where the respective account summary is stated. For

instance, the cash account is separately mentioned in page number 120 of

the ledger book, then the ledger folio is 120. Similarly the folio number is


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given to other accounts. Usually the entry is read as cash account debtor to

capital account and so on. For every journal entry, narration is given tobriefly describe the transaction.


1. What is journal?

2. What does a Ledger folio indicate ?

4.4 Ground rules of journal entry

As discussed earlier, a transaction affects at least two accounts and the

accounts may be personal or real or nominal. For each class of accounts,

the rules of debit and credit are also discussed. Debit the receiver and

credit the giver is the principle for personal accounts; debit what comes in

and credit what goes out is the rule for real accounts and debit all

expenses and losses and credit all incomes and gains is the rule for

nominal accounts.To draw journal entries, the following steps be followed:

a) Identify the accounts affected in the given transaction

b) Classify the accounts as personal, real or nominal

c) Apply the relevant rule for debit and credit to determine what account to

debit and what account to credit

d) Write the journal entry as described above.

e) Give the narration for the transaction.

Illustration1

Enter the following transactions in the books of Gopichand

1. 10-5-2004 Started business with capital of Rs.50000

2. 12-5-2004 Bought goods worth Rs.30000

3. 14-5-2004 Sold goods to Ram Charan for Rs.5000 for cash

4. 15-5-2004 Sold goods to Kanthilal Rs.12000 on credit

5. 20-5-2004 Paid wages to daily workers Rs.300


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Answer

Journal Entries in the books of Gopichand

Date Particulars LF Debit(Rs.)

Credit(Rs.)

10-5-04 Cash A/c Dr

To Capital A/c

(Being capital brought in cash)

5000050000

12-5-04 Goods A/c Dr

To Cash A/c

(Being Goods purchased for cash)

30000

30000

14-5-04 Cash A/c Dr

To Goods A/c

(Being goods sold on cash to RamCharan)

5000

5000

15-5-04 Kanthilal A/c Dr

To Goods a/c

(Being goods sold on credit to Kanthilal)

12000

12000

20-5-04 Wages A/c Dr

To Cash A/c

(Being wages paid to daily workers)

300

300

97300 97300

Note:

1. The fourth transaction is a credit transaction and so the name of thedebtor, Kanthilal is debited and the goods account is credited because

goods are going out and it is real account

2. The fifth transaction involves an expense and wages account is a

nominal account. It is thus debited and since cash account is real

account and it is going out and therefore it is credited.

3. At the end of accounting period, the total of debits should be equal to

total of credits.


1. All assets should be debited and all liabilities should be

___________________.


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2. When interest is received in cash, Cash account is debited and _____

account is credited3. If bank overdraft is raised, the overdraft account is ________ and cash

account is _____.

4. When creditors are paid out, ______is debited and _____________

account is credited.

5. If furniture is bought for cash from X Co Ltd., the company account is not

credited. Why?

6. If wages are paid for construction of business premises, ___________

A/c is debited and _____________ A/c is credited.7. Write the journal entries for the following transactions in the books of Y

Co Ltd.,

i) Advance of Rs. 500000 received from Damodar & Bros for the

supply of goods.

ii) Sales tax paid Rs. 40000

iii) Amount drawn from Bank of Baroda for miscellaneous expenses

Rs. 5000.

4.5 Types of Journal

Journal is a book of original entry and only one journal is maintained if the

business is very small in size and the transactions are limited. However, if

the transactions are multifarious, then subsidiary books which are known as

books of original entry are prepared. The types of journal include purchases

book, sales book, purchase returns book, sales returns book, bills

receivable book, bills payable book, cash book and journal proper. The

entries are made in these books straight without recording in usual journal.

From the respective books, posting is made to ledger. In fact, from the

entries made in the subsidiary books, journalizing can be done. A detailed

note is given in the following paragraphs on each of the subsidiary books.


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Self Assessment Questions 4: State True or False

1. All subsidiary books are also journal because they are books of originalentry. (True/False)

2. All such transaction which cannot be included under different subsidiary

books are entered in journal proper. (T/F)

3. Can we post the transactions to ledger accounts from the entries made

in subsidiary books ? (T/F)

4. The purpose of subsidiary books is to classify enumerable transactions

into various functional activities. (T/F)

4.6 Purchases Book/purchases day book

Purchases book is also called purchases journal. Only credit purchases of

goods are recorded in this journal. Goods mean items or commodities

procured for resale. Cash purchases are recorded in cash book and credit

purchases are recorded in purchases book. The form of a purchases book is

given below.

Purchases Book of Johnson and Johnson Co

Date Name of Supplier Ledger FolioInwardInvoice

No

Amount

Rs.

2006

August 5

8

16

Rao Bros, Bangalore

Snow white Co,

Best & Company

Total

567

87

146

36,000

45,000

29,000

1,10,000

Inward invoice is the document sent by the supplier while selling the goods.

Every invoice received is numbered and this number is stated in the

purchases book for reference. From the above entries made in the

purchases book, it is possible to record journal entries. Whenever,

purchases are made, goods account is debited because it is real account


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and the suppliers account is credited because the supplier is the giver and it

is personal account. The journal entries for the above transactions appearas under:

Journal entries in the books Johnson and Johnson Co.,

Date Particulars LFDebit

Rs.

Credit

Rs.

5-8-06 Goods A/c Dr

Rao Bros A/c

(Being goods purchased on credit)

36,000

36,000

8-8-06 Goods A/c Dr

Snow White Co A/c(Being Goods purchased on Credit)

45,000

45,000

16-8-06 Goods A/c Dr

To Best & Co A/c

29,000

29,000

Total 1,10,000 1,10,000

Observe that in every case of credit purchase, the suppliers account is

credited and goods account is debited.

At the end of the day or week or month, the total of purchases is transferred

to one ledger account known as Purchases account in the ledger.

Self Assessment Questions 5:

State True or False

1. All purchases cash or credit are entered into purchases day book. (T/F)

2. Purchases of goods and other assets can also be recorded in purchase

book. (T/F)

3. Inwards Invoice is a document to verify the quantity, price and other

details of goods purchased. (T/F)

4. Purchases made from Mr. Ganesh an credit Rs 6000, entered in the

purchases book. What is the journal entry ? (T/F)


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4.7 Sales book or Sales Day book

Sales book or sales day book contains the details of credit sales of goods

made during a particular period. The total of the sales book is transferred to

ledger to an account called sales account. The parties to whom credit sales

are made are known as trade debtors. All debtors are classified as personal

accounts and for each party, ledger account is prepared in the ledger. Sales

account shows credit balance and debtors account shows debit balance. A

pro forma of sales book is as given under.

Sales book of Raghu Medicals

Date Name of customer/debtorLedgerFolio

OutwardInvoice No.

Amount

Rs.

4-3-05 French Medicals 476 6,800

18-3-05 Mandara stores 477 19,200

28-3-05 Shaw Medical and General Stores 478 85,000

Total 1,11,000

Outward Invoice number is the number of the invoice issued by the

businessman to the customer. The total of Rs. 1,11,000 will be transferred

to sales account in the ledger. Similarly the respective ledger accounts of

the customers will be prepared in the ledger.


1. Sales day book contains only credit sales of goods made. (T/F)

2. Sale of any other asset other than goods is also recorded in sales day

book. (T/F)

3. Persons to whom sales are made on credit are called ________.

4. Outward invoice is a document issued to customer, when the goods are

sold on credit. (T/F)

4.8 Purchase Returns Book

When the businessman purchases the goods and finds that the goods are

not as per the specifications or the goods are damaged or for any other valid


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reason, he may decide to return the goods to the supplier from whom the

goods were purchased. All such purchase returns are recorded in a journalcalled purchase returns book. Normally the suppliers account is credited

when the purchases are made. If the goods are returned, then a debit note

will be sent and the number of debit note is recorded in the purchase returns

book.

Purchase Returns Book of Johnson and Johnson Co.,

Date Name of supplierLedger

folioDebit note

No.

Amount

Rs.

2006 August, 12 Snow White Co 25 5000

24 Best & Co 26 7000

Total 12,000

The total of the book is transferred to ledger to an account called purchase

returns account, which shows credit balance. The respective personal

accounts of the suppliers/creditors are debited in their respective ledger

accounts.


1. Purchase returns are also called returns outwards. (T/F)

2. Purchase returns take place when the goods bought are not as for the

specification. (T/F)

3. When goods, bought, are returned, suppliers account is _________ and

purchase return account is _____________.

4. Debit note is a document to slow the supplies account being debited.

(T/F)

4.9 Sales Returns Book

Just as goods which do not conform with specifications are sent back to

suppliers, our customers may also send the goods sold to them back to us

owing to similar reasons. Then a credit note is prepared to show that the


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customers/debtors account is credited to the extent of the value of the

goods returned by them to us. Goods are received from the customers anda credit note is sent to them.

Sales Returns Book of Raghu Medicals

Date Name of customer/debtor LFCredit

Note No.

Amount

Rs.

10-3-05 French Medicals 56 2,000

30-3-05 Shaw Medicals and Gen. Stores 57 4,000

Total 6,000

As usual the total of the book is transferred to an account called salesreturns account in the ledger and this account shows debit balance. The

respective personal accounts of the customers are credited with the value of

the goods returned by them.


1. Sales return are also called returns inwards. (T/F)

2. Credit not is a document to indicate that the goods are recived as

returned by customers. (T/F)

3. Credit noted is sent by _____________ to __________.

4.10 Bills Receivable Book

When a businessman sells goods on credit, he does not receive cash

immediately. But the businessman requires cash for which he draws a bill of

exchange against the customer and the customer accepts it. Such a bill of

exchange can be discounted with a banker for commission. The

businessman who draws the bill is called drawer and the customer on whom

it is drawn is drawee or acceptor. So bill of exchange is a document in

writing, promising to pay a certain sum of money or moneys worth to the

drawer at a certain date for value received. The businessman maintains a

journal/ subsidiary book containing the details of the bills receivable. The


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bills receivable account shows debit balance and the amount receivable

against them is an asset.

Bills Receivable Book of Sham Sundar & Co.,

No. ofthe bill

Date ofReceipt

Date ofthe bill

FromWhom

received

Acceptor

Wherepayable

Term ofthe bill

Due Date LFAmount

Rs.Remarks

1 04-7-04 04-7-04 Mr.X Mr. X Delhi 3 mths 7-10-04 7,000

2 1-8-04 01-8-04 Mr. Y Mr. Y Noida 4 mths 4-12-04 9,000

3 9-9-04 09-9-04 Mr. A Mr. A Agra 3 mths 12-12-04 12,000

4 10-9-04 10-9-04 Mr. B Mr. B Delhi 4 mnth 13-1-05 10,000

38,000

For every bill the due date is calculated after adding three days of grace.The person from whom the bill is received and the person who accepted the

bill could be the same person or different persons. The total of the bill

receivable is transferred to bills receivable account in the ledger.


1. A bill is an instrument in writing similar to that of a promissory note. (T/F)

2. Who is a drawer of a bill of exchange in a business ?

3. Who is the acceptor of a bill of exchange in a business ?

4. Bills Receivable account shows _____________- balance.

5. Can bills receivable be discounted ?

4.11 Bills Payable Book

What is bills receivable for a drawer, is bills payable to the drawee. In a

business concern, proprietor draws bills on debtors and accepts bills drawn

by trade creditors. All such bills accepted by the proprietor are recorded in a

separate book called bills payable book. The sum of the value of bills

payable for a period ending will be transferred to the ledger. Usually bills

payable account shows credit balance and hence is a liability. The form of

bills payable book is given here under.


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Bills Payable Book of Sun Shine Co.,

No.ofthebill

Dateofthebill

To whomgiven

Drawer PayeeWhere

payableTerm ofthe bill

Duedate

LFAmount

Rs

Datepaid

Re-marks

1 2000

June07

Ram & Co Ram &Co

Ram& Co.

Agra 3 months 2000

Sept10

56,000

2 June12

Sundaram Sundaram Sundaram

Delhi 4 months Oct15

72,000

3 June20

KV & Co KV & Co KV &Co

Chennai 5 months Nov23

50,000

Total 1,78,000


1. Bills accepted by the proprietor of the business and drawn by supplies

are called _________.

2. Every bill has ________ number of grace days .

3. Bill payable account shows _________ balance.

4. Bill payable represent ________.

5. when bills payable account is credited ________ account is debited.

4.12 Cash Book

Cash book is an important subsidiary book and a book of original entry. It is

a record of cash receipts and cash payments made during a particular

period. On the right hand side, receipts are recorded and on the left hand

side, payments are recorded. A simple cash book has two sides, receipts

side and payment side. The receipts are on debit side and the payments are

on credit side. Just as a ledger account, the words To and By are used.

Cash book may also contain cash column and bank column. Cash column

represents cash in the business and bank column represents cash kept in

the bank. Bank column of cash book is a reflection of bank pass book.

In this connection, it is important to note that in a few transactions, affecting

both cash and bank accounts, contra entries are drawn. For example, cash


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is deposited in the bank is a transaction in which cash goes out and bank is

the receiver. In cash account, it is recorded as payment and in bank accountit is treated as a receipt. Similarly when cash is withdrawn from bank for

office purpose, contra entry is drawn, debiting cash account and crediting

bank account.

Cash book containing cash and bank columns is known as two column cash

book. In the case of three column cash book, on the receipt side, cash, bank

and discount allowed columns are stated. On the credit side, cash, bank and

discount received columns are mentioned.

Single column Cash Book of Rekha & Bros

Date Receipts Cash

Rs.

Date Payments Cash

Rs.

2003

July 1

4

10

20

28

30

To Balance b/d

To Sales

To Interest on FD

To Commission

To Sale of goods

To Balagopalan

4,500

8,050

2,000

4,000

10,000

5,000

2003

July 1

3

14

20

28

31

By Rent of shop

By Postage

By Purchases

By Stationery

By wages

By Narasimhan

By balance c/d

500

50

7,000

800

2,000

9,000

13,800

33,550 33,550

Two-Column Cash Book of Sampson Co.,

Date ReceiptsCash(Rs.)

Bank(Rs.)

Date PaymentsCash(Rs)

Bank(Rs)

2003

Apr 5

6

7

11

20

To Balance b/d

To Sales

To Ashok Co

To Beta Co

To Sales

1,500

900

500

13,000

2,000

2,350

2003

April 2

5

8

15

30

By Wages

By Electricity

By repairs

By Yenki Ltd

By Balance

c/d

50

400

2,350

400

10,800

6,150

2,800 17,350 2,800 17,350


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Three-Column Cash Book of Janardhan Works

Date Receipts DiscountRs

CashRs

BankRs

Date Payments DiscountRs

CashRs

BankRs

2002

Jan 2

5

10

15

30

31

To balance b/d

To Patel

To Neelima

To Bank C

To Cash C

To Dividendfrom X Co

100

3,700

2,400

3,000

4,500

6,000

1,000

2,000

2002

Jan 6

3

15

22

30

31

31

By wages

By Agarwal

By Cash C

By drawings

By Bank C

By rent

By bal c/d

50

1,550

950

1,000

5,600

3,000

2,000

1,500

7,000

100 9,100 13,500 50 9,100 13,500

Note the following points from the above illustration:

a) Discount column on the debit side represents discount allowed and on

the credit side, it represents discount received. Balancing is not done for

these columns for a simple reason to find out separately the discount

allowed and received.

b) There are two contra entries each on 15th and 30th. On 15th the

transaction is cash withdrawn from bank Rs. 3,000. It is a payment from

bank and it is receipt to business cash. Similarly on 30

th

Cash isdeposited to bank Rs.1000. It is a receipt to the bank account and

payment from cash account.

c) To indicate contra entry, C is mentioned against the entry.

d) Drawings represent the amount withdrawn from bank for business

purposes.

e) Dividend from X Co is received by cheque and the company should have

remitted the dividend directly to the bank account of the businessman.

f) The balance c/d is the closing balance for the month of January 2002

and this becomes opening balance for February, 2002.


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State True or False1. Cash book and cash account are one and the same. (T/F)

2. Cash book may be single column, two column or three column are. (T/F)

3. Trade discount allowed to customers or received from suppliers are not

recorded in cash book.

4. cash discount allowed to customers appears an ____ side of cash book.

Cash discount received appears are ____ side of cash book.

5. discount columns are independently totaled and not balanced. (T/F)

6. Bank columns of cash book indicates Bank transations made bybusiness man. (T/F)

7. contra entry is an entry where both cash account and bank account are

affected. (T/F)

4.12 (a) Petty Cash Book

In large organizations, petty expenses like stationery, postage, stamps,

refreshments, carriage, cartage, daily wages etc are incurred day in and day

out. All these expenses are more in number and very insignificant in value.

To look after payment of such expenses, a separate petty cashier is

appointed, who obtains a definite sum of money at the beginning of a month

and gives a statement of account at the end of the period to the chief

cashier. To record such payments, a separate book, known as petty cash

book is maintained.

There is a distinct method, namely imprest system which is adopted in

maintaining such petty cash book. Under this system, at the beginning of a

month, a definite sum of money is given by chief cashier to petty cashier for

petty expenses. At the commencement of the next period, the petty cashier

receives money equal to what is spent during the earlier period. For

instance, in the beginning of January, 2004, a sum of Rs.10000 is given to


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petty cashier assuming that such miscellaneous expenses may be to the

order of Rs.10000. By the end of January, it may be found that the actualexpenses are only Rs.9000. Then the chief cashier will reimburse Rs.9000

so that the opening balance for the month of February will be Rs.10000.

This is also called analytical petty cash book.


State True or False

1. Petty cash book is maintained in case of petty organization.

2. Imprest system of cash book is a system where the expenses paid are

reimbursed.

3. The closing balance in case of imprest system of petty cash book

always remains the same .

4. Imprest system of cash book is also called analytical cash book.

Illustration:

Enter the following transactions in an analytical petty cash book.

2005

November 1st . Received a cheque for petty cash Rs.1000

2nd . Paid bus fare to messengers Rs50

4th . Paid auto fare Rs.70

10th . Postal stamps purchased Rs.80

12th . Paid for stationery Rs90

15th . Paid for carriage Rs.60

16th . Purchased envelopes Rs.50

20th . Wages paid Rs 100 .

25th . Tips given to driver Rs.50

30th . Telephone calls paid Rs. 20


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Amt

Recd

Rs

CBF Date ParticularsV

No

Total

Payment

sRs

Analysis of payments LFLedger

A/cs

1,000 Nov

1st

2nd

4th

10th

12th

15th

16th

20th

25th

30th

Nov 30th

Dec 1st

To Bank

By bus fare

ByAutofare

By postal

By Stationery

By Carriage

By Envelopes

By Wages

By tipsBy Telegram

By Balance C/d

50

70

80

90

60

50

100

5020

570

430

1,000

Tra

Rs

Post

Rs

Carr

Rs

P&S

Rs

Wages

Rs

SundryExpsRs

50

70

___120

80

____80

60

20

80

90

50

140

100

____

100

50

_____

50

Note:

1. CBF stands for cash book folio

2. V.No. stands for Voucher No.3. Tra stands for Travelling expenses

4. Carr indicates Carriage expenses

5. P & S stands for printing and stationery

Terminal Question

1. Purchases book records___________________ purchases.

2. Cash purchases are recorded on-_____________ side of cash book.

3. Credit sales are entered in ____________________________ book.

4. Record a journal entry for drawings made for personal purposes of the

businessman.

5. If drawings are made from bank for office purpose, what is the entry?


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6. During the year, if the total owners equity of Beta Co. increased from

Rs. 50,000 to Rs. 60000, it is because of earnings made during the year.Is this statement necessarily true?

7. Complete the following matrix by entering either debit or credit in each

cell.

Item Increases Decreases

Assets

Liabilities

Owners equity

Income

Expenses

8. Listed below a number of transactions. Identify which account to be

debited and which account to be credited, as shown for the first

transaction.

Transaction Debit Credit

Paid to Gopal, a creditor Gopal account Cash account

Paid rent in advance for the next year

Purchased stationery

Paid rent for the proprietors house

Purchases machinery on part payment

Charged customers for services provided

Collected cash for the services provided

Received a cheque from customer on account

Paid dividend

Paid wages for construction of business premises

Paid interest charges on loan

Electricity bill paid

Salaries paid


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9. Journalise the following transactions in the books of Harinam Singh for

the month of April, 2005.

Rs.

1st

Harinam Singh started business with cash 60,000

2nd

Purchased furniture for cash 10,000

4th

Purchased goods for cash 25,000

5th

Bought goods from Karmesh 25,000

7th

Sold goods for cash 44,000

9th

Sold goods to Ramesh 30,000

10th

Paid cash Kamalnath 15,000

11

th

Received cash from Ramanath 10,00018

thPurchased goods from Sohan Kumar 12,000

25th

Purchased computers on credit from Shivshankar 28,000

29th Paid salaries 7,000

30th

Withdrew cash for personal use from the office 10,000

30th

Paid wages 5,500

10. Record the following transactions in the subsidiary books of

Ramachandra and Sons of Chennai and show the totals of each book

for the month of January, 2000.

Date Transaction Amount (Rs.)

Jan 1 Bought goods from Das Gupta 20,000

2 Sold to Sen Gupta 12,500

3 Sold goods to Ramesh 30,000

5 Bought goods from Suresh 15,000

7 Sold goods to Anand 13,000

8 Received goods returned by Sen Gupta 5,500

9 Purchased goods from Shyam Sundar 16,000

10 Roy bought goods from us 25,000

11 Roy returned goods to us 3,000

14 Sold goods to Ram 45,000

16 Bought goods from Naresh 20,000

20 Returned goods to Naresh 4,000

22 Purchased furniture from Vibhu 10,000

30 Sold goods on cash to Khadju 9,000

30 Paid cash to Suresh 10,000


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11. Enter the following transactions in the single column cash book of

Gopichand.March, 2003

1st .Commenced business with cash 20000

2nd Bought goods for cash 5000

3rd . Sold goods for cash 4000

4th . Goods purchased from Ravi Kumar 10000

10th .Paid to Ravi Kumar 7000

14th . Cash sales 8000

18th

. Purchased furniture for office 400022nd . Paid wages 500

25th . Paid rent 600

30th . Received Commission 4000

30th . Withdrew for personal purpose 1000

31st

. Paid salary 900

12. Record the following transactions in two column cash book(Cash and

Bank)in the books of Soft Silk Co., for the month of July, 2004.Find out

the closing balances.

July, 2004 Rs.

01st . Opening balance b/d(Cash) 14,500

(Bank) 7,000

04th . Cash purchases 6,700

05th . Rent for June month paid by cheque 2,500

09th . Cash sales 15,200

12th . Dividend received from X Co. and paid it into bank 4,350

15th . Cash deposited into bank 5,000

18th . cash paid to Rahim Bros to settle his account 10,000

20th . Repairs paid 1,000

22nd . Commission paid by cheque 2,000

23rd . Customer, Deepak remitted to our bank account 20,000


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Page No.: 83

25th . Cash withdrawn from bank for office use 5,000

27th

. Drawings made from business cash for personal purposes 2,00028th . Purchased stationery by cash 3,000

30th . Cash withdrawn for personel use from bank 1,400

13. Enter the following transactions in the cash book with discount, cash

and bank columns

May 1st . Balance of cash in hand Rs. 14000; bank overdraft at bank

Rs.5000

4th Invested further capital Rs. 10000 out of which Rs.6000 was

deposited in the bank.

6th . Sold goods for cash Rs. 30000

6th Collected from debtors of last year Rs. 80000; Discount allowed to

them Rs. 2000.

10th . Purchased goods for cash Rs. 55,000

11th . Paid Ram Vilas, our creditor Rs. 25,000; discount allowed by

him Rs.650

13th . Commission paid to our agent Rs. 5,300

14th . Office furniture purchased for cash Rs. 2,000

14th . Rent paid Rs. 400; electricity charges paid Rs. 1,000

14th . Drew cheque for personal use Rs. 7,000

17th . Cash sales Rs. 25,000

18th . Collection from Atal Bihari Rs.40,000, deposited in the bank on

19th April.

19th . Drew from the bank for office use Rs.5,000

22nd . Drew cheque for petty expenses Rs.1,500

24th . Dividend received by cheque Rs.500, deposited in the bank on

the same day.

25th . Commission received by cheque Rs.2,300, deposited in the

bank on 28th April

29th . Drew from the bank for salary of the office staff Rs.15,000

30th . Deposited cash in the bank Rs.10,000.


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Answer for Self Assessment Questions

Self Assessment Questions 1:1. Journal

2. Yes

3. Ledger


1. It is a book containing the entry of transactions

2. It indicates the pages number in which the summary of respective

account is found in ledger.


1. Credited

2. Interest

3. Credited, debited

4. Creditors account, cash

5. Because it is cash transaction and X Co. is insignificant.

6. Business premises, cash

7. i. Cash A/c Dr. 5,00,000 to Damodar & Bros. 5,00,000 (Being advance

received)

ii. Sales Tax A/c 40,000, To Cash A/c 40,000 (sales Tax paid )

iii. Cash A/c the 5000 To BOB A/c 5000 (cash drawn for mis.expenses)


1. True

2. True

3. Yes

4. True


1. False

2. False

3. True


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4. Purchases A/c Dr. To Ganesh account (Being purchases made)


1. True

2. False

3. Debtors

4. True


1. True

2. True

3. Debited, Credited4. True


1. True

2. True

3. Business, Customer.


1. True

2. Owner of the business who is the seller

3. Customer / debtor

4. Debit

5. Yes


1. Bills payable

2. Three

3. Credit

4. Liability

5. Suppliers account / Creditors account


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1. True2. True

3. True

4. Debit, Credit

5. True

6. True

7. True.


1. False

2. True

3. False

4. True

Answer for Terminal Questions:

Answer

1. Credit

2. Credit

3. Sales Day

4. Drawing are A/c , Dr. To Cash a/c

5. Cash account Dr. To bank account.

6. The statement is true if additional capital is not brought in during the

year. Owners equity increases if profits are added or additional capital is

brought in.

7.Debit Credit

Credit DebitCredit Debit

Credit Debit

Debit Credit


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Page No.: 87

8.

9.

1 1st

Cash a/c Debited Capital a/c Credited

2 2nd

Furniture a/c Debited Cash a/c Credited

3 4th

Goods a/c Debited Cash a/c Credited

4 5th

Purchases a/c Debited Kamalesh a/c Credited

5 7th

Cash a/c Debited Goods a/c Credited

6 9th

Ramesh a/c Debited Sales a/c Credited

7 10th

Kamel nath a/c Debited Cash a/c Credited

8 11

th

Cash a/c Debited Kamanath a/c Credited9 18

thPurchases a/c Debited Sohan Kuma Credited

10 25th

Computers a/c Debited Shiva Shankar Credited

11 29th

Salaries a/c Debited Cash a/c Credited

12 30th

Drawings a/c Debited Cash a/c Credited

13 30th Wages a/c Debited Cash a/c Credited

10. Total of Purchases Day book:

Das Gupta Rs. 20,000

Suresh Rs. 15,000

Shyan sunda Rs. 16,000

Naresh Rs. 4,000

Rs. 55,000

Prepaid Expenses Cash

Stationery CashDrawings Cash

Machinery Supplier

Customers Services

Cash Customers

Cash Customers

Dividend Cash

Business Premises Cash

Interest on loan Cash

Electricity Cash

Salaries Cash


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Page No.: 88

Purchase Returns BookNaresh Rs. 4,000

Sales Returns Book

Sen Gupta Rs. 5,500

Roy Rs. 3000

Rs. 8,500

Total sales Day book

Sen Gupts Rs. 12,500

Ramesh Rs. 30,000

Anand Rs. 13,000

Ray Rs. 25,000

Ram Rs. 45,000

Rs. 1,25,500

11. Cash Book

To Capital 20,000 By Goods 5000

To Sales 4,000 By Ravi Kumar 7000

To Sales 8,000 By office furniture 4000

To Commission 4,000 By wages 500

By rent 600

By drawings 1000

By salary 900

By bal c/d 17,000

36,000 36,000

Hint: Goods Purchased from Ravi Kumar is a credit purchase.


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By balance c/d 59,300 25,300

Total 2000 2,00,300 58800 Total 650 2,00,300 58,800

financial accounting part 4

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