Chapter 3 Accounting Books and Records

CHAPTER 3
Accounting Books and Records

The purpose of preparation of Trading, Profit and Loss Account and Balance Sheet to ascertain the
profit or loss made by business and to know the financial soundness of the concern as a whole. In order to
achieve the objectives of the firm, it is essential to maintain several books and records. The number of
books and records are maintained by an -enterprise for the evidence of the recording business transactions.
Cash Receipts, Invoice, Cash Memo, Cheque and other vouchers are the examples of documentary
evidence supported for preparation of income statements.
According to double entry system of accounting each transaction is recorded in the books of accounts
to ascertain the profits earned during a particular period. "Transaction" of a business refers to an event the
recognition of which gives rise to an entry in account records.
While analyzing the review of accounting cycle, the whole process of accounting consists of the
following important stages :
(1) Recording the transactions are done through Journals or Subsidiary Books.
(2) Classifying the transactions are achieved by Ledger.
(3) Summarizing the transactions are done through Trial aalance.
(4) The last stage is concerned with preparing Income Statements (Trading, Profit and Loss
Account and Balance Sheet).
JOURNAL
In the first stage of double entry system each transactions are recorded in the 'Journal' or "Subsidiary
Books." Journal is the book of "Original Entry or First Entry" which is used for recording of all business
transactions in chronological order. Then it is posted to ledger. This process is known as "Entering." In
other words record of the each transaction is called as "Journal Entry." The process of recording in the
Journal is called as "Journalizing."
14 A Textbook of Financial Cost and Management Accounting
Specimen Ruling of Journal
The specimen ruling of Journal is shown below:
Date Particulars L.F. Dr. Cr.
(I) (2) (3) (4) Rs. (5) Rs.
Date, Month Name of Accounts to be Debited .. . .. . ...
a Year Name of Accounts to be Credited .. . ... . ..
From the above specimen ruling of Journal, we can observe the following points:
Column 1
Column 2
Column 3
Column 4
Column 5
It indicates the date, month and year on which each transaction takes place.
It represents (a) name of account to be debited; (b) name of account to be credited.
L.P. Stands for Ledger Folio, i.e, reference to the main book.
Dr. Stands for Debit, i.e., amount to be debited.
Cr. Stands for Credit, i.e., amount to be credited.
If two or more transactions of similar nature occur on the same day and either the debit account or
credit account is common, such transactions can be conveniently entered in the Journal in the form of a
Combined Journal Entry instead of making a separate entry for each transaction. Such type of entry is a
"Compound Journal Entry."
Types of Journals
Journals broadly classified into (I) General Journals and (2) Special Journals. Special Journals are
subsidiary books which are as follows :
l. Sales Book
2. Purchase Book
3. Purchase Returns Book
4. Sales Returns Book
5. Bills Receivable Book
6. Bills Payable Book
7. Cash Book.
These subsidiary books which are used for recording of each transactions. The following points to
be considered before making journal entry :
(1) Capital Account: The initial influx of capital in the form of cash provided by the proprietor is
known as "Capital." It may be further converted into plant and machinery, building etc. Hence it should be
debited to Cash Nc or Plant & Machinery Property Nc and credited to Proprietor's Nc.
(2) Drawing Account : When proprietors withdrawn money or goods from business for personal
use, it should be debited to Drawing Nc and credited Cash Nc or Purchase Nc.
(3) Goods Account : If any transactions relating to purchase or sale of goods, instead of making
journal entries in one Goods Account, separate accounts may be maintained as Sales Nc, Purchase Nc,
Sales Returns Nc, and Purchase Returns Nc.
Accounting Books and Records 15
(a) Sales Account: is meant for recording sale of goods. It should be credited to Sales Nc.
(b) Purchase Account: is meant for recording purchase of goods. It should be debited to
Purchase Nc.
(c) Sales Returns Account: is concerned with recording return of the goods from customers.
It should be debited to Sales Return Nc.
(d) Purchase Return Account: is meant for recording purchased goods return to suppliers. It
should be credited to Purchase Return Nc.
(4) While making journal entry, a brief explanation will be given is known as "Narration."
(5) To apply the rule of debit and credit in each type of account such as ;
(a) Personal Account: Debit the Receiver, Credit the Giver.
(b) Real Account: Debit what comes in, Credit what goes out.
(c) Nominal Account: Debit all Expenses & Losses, Credit all Incomes and Gains.
Illustration: 1
Journalize the following transactions in the books of Nancy Ltd.
2003 March
1 Started business with Cash
1 Paid into bank
2 Goods purchased for Cash
3 Purchase of furniture and payment by cheque
5 Sold goods for cash
8 Sold goods to Rosy
10 Goods Purchased from Thomas
12 Goods Return to Thomas
15 Sold goods to Rahavan for cash
18 Cash received from Rosy Rs.396 & discount allowed to her Rs.4
Date
21 Withdraw from bank for private use
21 Withdraw from bank for use in the business
25 Paid telephone rent for one year
28 Cash paid to Rosy in full settlement of her account
30 Paid for Stationery
Rent paid
Salaries to Staff
Journal of Nancy Ltd.
Particulars
2003 March
1 Cash Account
To Capital Account
(Being cash brought in to start business)
March 1 Bank Account
To Cash Account
(Being Cash paid into Bank)
LF.
Dr.
Dr.
Debit
Rs.
4,500
2,500
Rs. in lakhs
4,500
2,500
1,500
500
600
400
700
100
250
100
500
40
594
20
100
250
(Rs. in lakhs)
Credit
Rs.
4,500
2.500
2 Purchased Account Dr. 1,500
To Cash Account 1,500
(Being goods purchased for cash)
3 Furniture Account Dr. 500
To Bank Account 500
(Being purchase of furniture and payment made by cheque)
5 Cash Account Dr. 600
To Sales Account 600
(Being the goods sold for cash)
8 Rosy Account Dr. 400
(Being the goods sold for credit)
12 Thomas Account Dr. 100
To Returns Outward Account 100
(Being the goods retuned)
(Being the goods sold for cash)
Discount Account Dr. 4
To Rosy Account 400
(Being Rs. 396 received from Rosy and Rs. 4
discount allowed to her)
21 Drawing Account Dr. 100
Cash Account Dr. 500
To Bank Account 600
(Being cash withdrawn for both office and personal use)
25 Telephone Rent Account Dr. 40
To Cash Account 40
(Being payment of telephone rent)
28 Rosy Account Dr. 600
To Cash Account 596
To Discount Account 4
(Being cash paid to Rosy and discount allowed to her)
30 Stationery Account Dr. 20
Rent Account Dr. 100
Salaries Account Dr. 250
To Cash Account 370
(Being payment of stationery, rent and salaries)
Total 13,060 13,060
Illustration: 2
Journalize the following transactions:
2003 Jan.
Date
" I
2
3
4
5
6
7
8
9
10
11
12
13
14
15
2003 Jan.
1
2
3
4
5
6
Jan. 7
Purchased machinery for cash
Sold goods to Ramesh for cash
Sold goods to Kannan
Cash received from Murugan
Cash withdrawn from bank
Paid salaries
Purchased goods worth of Rs. 1000 less 10% trade discount
The errection charges of machinery amounted to Rs. 500
which were paid in cash
Cash paid to Ramasamy
Paid interest
Returned goods to Premkumar
Returned goods by Periasamy
Received dividend on shares
Paid rent
Old furniture sold for
Particulars
Machinery Account
To Cash Account
Journal
~ B e i n g Machinery purchased for cash)
Cash Account
To Sales Account
(Being goods sold for cash)
Kannan Account
To Sales Account
(Being goods sold for credit)
Cash Account
To Murugan Account
(Being cash received from Murugan)
Cash Account
To Bank Account
(Being cash withdrawn from Bank)
Salaries Account
To Cash Account
(Being cash paid for salaries)
Purchase of goods Account
To Cash Account
To Discount Account
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
(Being goods Purchased and discount allowed for Rs. 1(0)
LF. Debit
Rs.
5,000
2,000
1,000
700
500
800
1,000
Rs. in lakhs
5,000
2,000
1,000
700
500
800
400
400
300 .
200
500
400
200
17
(Rs. in lakhs)
Credit
Rs.
5,000
2,000
1,000
700
500
'.
800
900
100
/8 A Textbook of Financial Cost and Management Accounting
8 Machinery Account Dr. 500
To Cash Account 500
(Being the errection charges paid for machinery)
9 Ramasamy Account Dr. 400
To Cash Account 400
(Being cash paid to Ramasamy)
10 Interest Account Dr. 400
To Cash Account 400
(Being cash paid for Interest)
11 Premkumar Account Dr. 300
To Purchase Return Account 300
(Being goods returned to Premkumar)
12 Sales Return Account Dr. 200
To Periyasamy Account 200
(Being goods returned by Periyasamy)
To Dividend on' Shares Account 500
(Being dividend received on shares)
14 Rent Account Dr. 400
To Cash Account 400
(Being rent paid for cash)
To Old Furniture Account 200
(Being old furniture sold for cash)
Total 13,900 13,900
Illustration: 3
Journalize the following transactions in the books of Mr. Sharma:
Jan. 2003
Shanna started business by investing cash of Rs. 40,000. He brought goods of Rs. 10,000, Furniture
Rs. 5,000 and Machinery Rs. 10,000
2 Purchase building Rs. 5,000
3 Sale of goods worth Rs. 7,000 less 10% trade discount
4 Purchase of goods worth Rs. 6,000 less 5% cash discount
5 Sold goods to William on credit Rs. 2,500
6 Amount withdrawn from bank Rs. 800 for office use
7 Paid freight Rs. 500
8 Sold 50 shares in National Ltd @ Rs. 20 per share and commission paid Rs. 30
9 Received cheque from Vijay and deposited in Bank Rs. 5,000
10 Paid to Anderson in full settlement of Rs. 1,500
11 Amount withdrawn from bank for personal use Rs. 500
12 Paid rent Rs. 400 and Salaries Rs. 1,000
13 Paid insurance premium Rs. 300
14 Dividend received Rs. 300
15 Cheque for Rs. 1,000 received from Murgan in settlement of a debt of Rs. 1,250 returned dishonoured
Accmmling Books and Records 19
16 Bank collected interest on our investments Rs. 1,500
17 Charge of depreciation on Machinery @ 10% for six months (Machinery Rs. 20,000)
18 Sold goods to Balu Rs. 2,000
Journal of Mr. Sharma Account
Date Particulars L.F. Debit Credit
Rs. Rs.
2003. Jan.
I Cash Account Dr. 40,000
Goods Account Dr. 10,000
Machinery Account Dr. 10,000
Furniture Account Dr. 5,000
To Capital Account 65,000
(Being the cash, goods, furniture and
machinery brought to start business)
2 Buildings Account Dr. 5,000
(Being the buildings purchased)
3 Cash Account Dr. 6,300
To Sales Account 7,000
(Being the goods sold and discount allowed)
4 Purchase Account Dr. 6,000
To Discount Allowed Account 300
(Being the. goods purchased and discount allowed)
5 William Account Dr. 2,500
(Being goods sold on credit)
To Bank Account 800
(Being amount withdrawn for office use)
7 Freights Account Dr. 500
To Cash Account 500
(Being cash paid for freight)
To Investment in Shares Account 970
(Being 50 shares in National Ltd. sold
@ Rs.20 per share less commission )
9 Bank Account Dr. 5,000
To Vijay Account 5,000
(Being cheque received and deposited in bank)
10 Anderson Account Dr.
To Cash Account
(Being the cash paid in full settlement)
11 Drawing Account Dr.
To Bank Account
(Being amount withdrawn for personal use)
12 Rent Account Dr.
Salaries Account Dr.
To Cash Account
(Being paid rent and salaries)
13 Bank Account Dr.
To Dividend Account
(Being Dividend received)
14 Murugan Account Dr.
To Bank Account
To Discount Allowed Account
(Being Cheque received from Murugan in settlement of a
debt of Rs.1250 dishonoured and discount allowed)
15 Bank Account
To Interest on Investment account
(Being Bank collected interest on investment)
16 Depreciation Account
To Machinery Account
(Being depreciation on machinery charged
@ 10% P.a. on Rs. 2000 for six months)
17 Balu Account
To Sales Account
(Being goods sold to Balu)
Illustration: 4
Journalize the following transactions:
Jan. 2003
1
3
6
7
10
12
16
20
27
29
31
31
Ravi Commenced business with
Goods_purchased for cash
Goods sold to Ramesh on credit
I3rought goods from Ram
Cash received from Ramesh
Paid Ram on account
Goods sold to Rajive
Goods sold for cash
Amount paid to Ram
Cash received from Rajive
Paid rent in cash
Salary paid to office staff
Dr.
.-
Dr.
Dr.
1,500
500
400
1,000
300
1,250
1,500
1,000
2,000
Rs.
42,000
18,400
11,200
6,600
7,200
4,200
7,500
15,000
2,400
7,500
900
1,400
1,500
500
1,400
300
1,000
250
1,500
-1,000
2,000
Solution:
Journal
Date Particulars L.F. Debit Credit
Rs. Rs.
Jan.l To Capital Account 42,000
(Being the amount invested in cash)
(Being cash purchased of goods)
6 Ramesh Account Dr. 11,200
(Being credit sales of goods)
To Ram Account 6,600
(Being credit purchase of goods)
,
To Ramesh Account 7,200
(Being cash received from Ramesh)
12 Ram Account Dr. 4,200
(Being cash paid to Ram)
16 Rajive Account Dr. 7,500
To Sales Accourlt
,
7,500
(Being Credit Sales)
(Being Goods sold for cash)
27 Ram Account Dr. 2,400
(Being amount paid to Ram)
To Rajive Account 7,500
(Being cash received from Rajive)
31 Rent Account Dr. 900
To Cash Account 900
(Being cash paid for rent)
31 Salaries Account Dr. 1,400
(Being cash paid for salaries)
22
Illustration: 5
A Textbook of Financial Cost and Management Accounting
Journalize the transactions given below in the books of Sakesha & Co. :
2003
Jan.l Sakesha starts business with Rs. 40,000
1 Paid in to bank Rs. 36,000
2 Bought furniture for 1,700 and typewriter for Rs. 3,000, payment made by cheque
5 Goods purchased from Ramasamy & Co. for 11,200 on credit
7 Goods purchased from Porwal & Co. for Cash Rs. 2,200
8 Goods sold on credit to Gupta & Co. Rs. 3,000
10 Goods sold on credit to Chandra & Co. Rs. 5,600
11 Paid for office stationery Rs. 500
12 Paid rent Rs. 400
14 Brought fixtures for Rs. 2,000
17 Received cash from Gupta & Co. Rs. 2940; allowed them discount Rs. 60
20 Issued cheque for Rs. 11,000 in full settlement (i.e., nothing more is due them) to Ramasamy & Co.
30 Paid insurance premium Rs. 900 by cheque
Solution:
Journal of Sakesha & Co.
Date Particulars LF. Debit Credit
Rs. Rs.
Jan. 1 Cash Account Dr. 40,000
To Capital Account 40,000
(Being commenced with business Rs. 40,000)
(Being cash paid in to bank)
2 Furniture Account Dr. 1,700
Typewriter Account Dr. 3,000
To Bank Account 4,700
(Being bought furniture & typewriter)
5 Goods Purchased Account Dr. 11,200
To Ramasamy & Co. 11,200
(Being goods purchased on credit)
7 Good Purchased Account Dr. 2,200
Tl' Cash Account 2,200
(Being g o o , j ~ received from Porwal & Co.)
8 Gupta & ( o. Account Dr. 3,000
1 0 Sales Account 3,000
(Being go, ds sold on credit)
10 Chandra l Co. Account Dr. 5,600
le' Sales Account 5,600
(Being gOl,ds sold on credit)
11 Office StatIOnery Account Dr. 500
To Cash Account 500
(Being bought office stationery)
12 Rent Account Dr.
To Cash Account
(Being Rent Paid)
14 Fixtures Account Dr.
To Cash Account
(Being bought fixtures)
17 Cash Account Dr.
To Gupta & Co. Account
To Discount Allowed Alc
(Being cash received in full statement)
20 Ramasamy & Co. Account Dr.
To Bank Account
(Being cheque issued to Ramasamy & Co.)
25 Bank Account Dr.
To Cash Account
(Being cash paid into bank)
30 Insurance Premium Account Dr.
To Bank Account
(Being insurance premium paid by cheque)
Illustration: 6
Journalize the following transactions :
2003
K. Singh started business with cash Rs. 80,000
Paid in to bank Rs. 4,000
Goods purchased from Prasad & Co. for cash Rs. 30,000
Goods sold for cash Rs. 12,000
400
2,000
3,000
11,000
2,400
900
March 1
2
4
7
9
11
13
15
16
17
19
21
24
29
Bought furniture from Kapur & Co. for Rs. 10,000 and paid by cheque
Goods sold to Sethi & Co. for Rs. 8000 on credit
31
Goods purchased from Gupta & Co. Rs. 20,000 on credit
Damaged goods returned to Gupta & Co. Rs. 10,000
Cash received from Sethi & Co. Rs. 7880 in full settlement
Withdraw goods for personal use Rs. 2000
Withdraw cash from business for personal use Rs. 4000
Paid telephone rent Rs. 2000
Paid cash to Gupta & Co. in full settlement of Rs. 9800
Brought stationery Rs. 400
Paid rent to office building Rs. 1000
Paid salaries to office staff Rs. 4000
Paid advertisement expenses of Rs. 2000
23
400
2,000
2,940
60
11,000
2,400
900
Journal
Date Particulars LF. Debit Credit
Rs. Rs.
Mar. 1 To Capital Account 80,000
(Being commenced of business)
(Being goods purchased for cash)
9 Furniture Account Dr. 10,000
To Bank Account 10,000
(Being purchase of furniture)
11 Sethi & Co. Account Dr. 8,000
To Gupta & Co. Account 20,000
(Being goods purchased on credit)
15 Gupta & Co. Account Dr. 10,000
To Purchase Return Account 10,000
(Being damaged goods returned)
To Sethi & Co. Account 8,000
(Being cash received from Sethi & Co. in full
settlement and allowed Rs. 140 as discount)
17 Drawings Account Dr. 2,000
To Purchases Account 2,000
(Being withdrawal of goods for personal use)
19 Drawings Account Dr. 4,000
(Being cash withdrawal from the
business for personal use)
21 Telephone Rent Account Dr. 2,000
(Being telephone rent paid)
24 Gupta & Co. Account Dr. 10,000
To Discount Account 200
(Being cash paid to Gupta & Co.
and allowed discount Rs. 200)
29
31
QUESTIONS
Stationery Account
Rent Account
Salaries Account
To Cash Account
(Being expenses paid)
Advertisement Expenses Nc
To Cash Account
(Being advertisement expenses paid)
1. What do you understand by accounting books.and records?
2. What is meant by Journal?
3. Explain the different types of Journals.
4. Draw a specimen ruling of Journal.
Dr.
Dr.
Dr.
Dr.
5. What are the factors to be considered while making journal entry?
400
1,000
4,000
2,000
6. What do you understand by source of document? Explain briefly various sources of documents.
PRACTICAL PROBLEMS
(1) Journalize the following transactions in the books of Mrs. Sharma & Co. :
2003
Jan. 1 Commenced business with cash
1 Purchased Machinery
2 Purchased goods on Credit from Ram
3 Purchase goods for cash
7 Goods purchased from Ramesh
9 Goods return to Ram
10 Goods sold to Murugan
13 Goods returned by Murugan
15 Draw cash from bank for office use
17 Draw cash from bank for private use
19 Purchased furniture
22 Paid for office rent
25 Paid for Salaries
27 Paid for Advertisement
30 Sold goods Rs. 25,000 less 10% Discount.
(2) Pass the necessary Journal entries of Mrs. Cupta & Co.:
April 2003
1 Paid into Bank
2 Purchased Furniture for cash
5 Deposited into Bank
6 Purchased goods from Rahul
7 Sold goods on credit to Siva
9 Cash Sales
10 Cash Purchases
Jl Amount withdrawn from bank for office use
15 Paid insurance premium
17 Dividend received
19 Paid rent
22 Paid Salaries
24 Drawn cash from bank for personal use
25 Goods returned from Siva
27 Goods returned to Rahul
5,400
2,000
Rs.
2,00,000
25,000
10,000
20,000
10,000
5,000
500
15,000
300
1,000
2,000
5,000
1,500
20,000
4,000
Rs.
50,000
10,000
15,000
5,000
7,000
9,000
15,000
3,000
5,000
3,000
2,000
15,000
4,000
300
200
1,000
25
(3) Journalize the following transactions in the books of Ramesh & Co.:
2003
Jan. I
3
5
7
9
11
13
15
17
19
21
25
27
31
Started business with Rs. 50,000 and paid into Bank Rs. 25,000
Sold goods for cash Rs. 20,000
Brought Furniture for Rs. 7,000
Purchased goods from Pandey & Co. Rs. 15,000
Withdrawn Rs. 700 from bank for office use
Sold goods to Jain & Co. Rs. 10,000
Paid Salaries Rs. 20,000
Paid Telephone charges Rs. 1,000
Paid into Bank Rs. 50,00
Sold goods to Mrs. Gowda on credit for Rs. 15,000 less 10% Discount
Goods returned from Pandey Rs. 500
Received cash from Jain & Co. Rs. 5,500 Discount allowed Rs. 250
Withdraw Rs. 1,500 from bank for personal use
Paid for advertisement Rs. 2,000
(4) Journalize the following transactions in the books of Mrs. Sam & Co.:
2003
Jan. Started business with cash
I Paid in to Bank
2 Furniture purchased for cash
5 Machinery purchased
7 Goods sold for cash
9 Purchased goods from Reddy & Co.
10 Goods returned to Gupta.
13 Goods Returned from Reddy & Co.
15 Cash received from Jain Rs. 8,000 and discount allowed to him Rs. 100
17 Withdrawn from bank for office use
19 Paid Telephone rent
21 Paid Salaries
23 Goods sold to Ram on credit for
25 Paid rent and rates
27 Withdrawn from bank for personal use
29 Cash paid to Reddy & Co. for full settlement of his account
31 Goods sold to Ramesh for 10,000 less 10% trade discount.
(5) Journalize the following transactions, in the books of Hariprasad & Co.:
2003
Jan. I
I
2
2
3
5
7
9
11
\3
15
17
19
21
23
25
27
29
31
Business started with cash Rs. 2,50,000
Cash deposited into Bank Rs. 25,000
Machinery purchased from Krishna on credit for Rs. 10,000
Furniture purchased for cash Rs. 5,000
Sold goods to Murugan less trade discount of 10% for Rs. 20,000
Goods purchased from Jain for Rs. 5,000 at 10% trade discount.
Goods returned from Murugan for Rs. 250
Goods returned to Jain for Rs. 100
Withdrawn Rs. 5,000 from bank for office use
Paid for Advertisement Rs. 2,000
Goods purchased for cash Rs. 5,000
Paid salaries for Rs. 30,000
Paid interest Rs. 2,000
Dividend received for Rs. 4,000
Withdrawn cash from bank for personal use for Rs. 1,000
Cash paid to Jain in full settlement of his account for Rs. 5,000
Deposited cash into Bank Rs. 3,000
Sold goods to Karthik on credit Rs. 7,000
Rs.
2,00,000
50,000
25,000
30,000
10,000
20,000
500
1,000
3,000
4,000
25,000
8,000
1,000
2,000
15,000
(6) Journalize the following transactions:
200]
Jan. 1 Started business with Rs. 2,00,000; paid in to Bank Rs. 1,00,000
3 Purchased furniture for cash Rs. 10,000
7 Goods Purchased for cash Rs. 60,000
8 Goods Sold for cash Rs. 12,000
10 Purchased one typewriter for Rs. 4,000 from Ram & Co. on credit
12 Goods sold to Kannan & Co. for Rs. 10,000 on credit
15 Bought goods from Mahandra & Co. for Rs. 20,000 on credit
16 Paid Rs. 5,000 for advertisement
24 Goods sold to Varma & Co. Rs. 8,000 for cash
25 Paid salaries to office staff Rs. 5,000
27 Paid telephone rent Rs. 1,000
30 Withdraw from b a ~ Rs. 2,500 for private use
31 Bought one delivery van for Rs. 40,000 from Mumbai Motor Co. on credit.
(7) Journalize the following transactions :
200]
Aprl. 1 Gill Commenced business with Rs. 1,00,000
2 Paid in to Bank Rs. 60,000
3 Purchased goods from Lindo Rs. 40,000
5 Sold goods to Moorthi Rs. 30,000
7 Purchased Furniture for Rs. 2,500
8 Returned goods to Lindo Rs. 5,000
10 Stationery purchased for Rs. 250
11 Paid Lindo Rs. 35,000 by cheque
14 Moorthi returned goods worth Rs. 2,000
16 . Moorthi paid us Rs. 28,000
18 Cash sales Rs. 1,500
19 Purchased goods from Gopal Rs. 10,000
20 Sales to Meenashi & Co. Rs. 6,000
21 Cash purchases Rs. 3,000
22 Returned goods to Gopal Rs. 2,000
23 Paid Gopal by cheque Rs. 8,000
25 Received cheque from Meenashi & Co. Rs. 6,000
26 Drawings Rs. 2,500
27 Sold goods to Valen and cash received Rs. 1,500
28 Paid rent Rs. 1,500 by cheque
30 Paid Salary Rs. 2,000
200]
Mar. I Goods purchased for cash from Murthy Rs. 34,000
3 Goods sold to Narayan Rs. 34,000 on credit
5 Returned damaged goods to Dinkar Rs. 1,000
7 Paid salaries Rs. 1,700
10 Commission received for Rs. 1.400
15 Goods sold to Rajendra for cash Rs. 4,000
19 Goods sold on cash Rs. 10,000
23 Purchased furniture from Prasad & Co. at Rs. 9,000 on credit
25 Paid cash to Prasad & Co. Rs. 9,000
31 Paid Rent Rs. 2,500
200]
Mar. P.S. Rao started business with cash Rs. 10,000 and bank balance Rs. 1,60,000,
building Rs. 60,000 and furniture Rs. 4,000
2 Purchased goods from Rajendra Rs. 1,00,000
3 Goods sold to Prasad Rs. 24,000
27
5 Goods purchased from Ghosh and paid by cheque Rs. 10,000
6 Damaged goods returned to Rajendra Rs. 10,000
7 Received goods returned by Prasad Rs. 4,000
8 Received cheque from Prasad Rs. 20,000
10 Paid in to bank to Rs. 20,000
11 Paid Rajendra by cheque Rs. 90,000
12 Commission received Rs. 6,000
14 Purchased plant and machinery
15 Wiihdrawn from bank Rs. 4,000
17 Goods sold to Rajan and cheque received Rs. 4,000
23 Cash received from Ashok Rs. 40,000
25 Commission paid to broker Rs. 1,000
30 Paid advertisement Rs. 5,000
(10) The foilowing are the transactions of Rajan Nair & Co. for the month of April 2003, Journalize the transactions:
2003
Apr!. 1
I
2
3
5
7
10
12
15
16
17
19
21
25
27
29
30
Capital paid in to bank Rs. 50,000
Bought stationery for cash Rs. 300
Bought office furniture from Gupta & Co. Rs. 5,000
Goods sold to Anand Rs. 10,000
Goods purchased for cash Rs. 21,000
Received cheque from Bharathan Rs. 10,000
Bought postage stamps Rs. 100
Paid salaries to office staff Rs. 2,500
Paid Gupta & Co. by cheque Rs. 5,000
Goods sold to Ashok & Co. Rs. 5,000
Goods purchased from Lakshman & Co. Rs. 7,000
Goods purchased for cash from Thaker & Co. Rs. 2,250
Goods sold to Anand Rs. 3,500
Cheque received from Ashok & Co. Rs. 5,000
Paid Thaker & Co. by cheque in fuil settlement of Rs. 2,250
Withdrawn from bank Rs. 2,500
(11) Pass journal entries in the books of Jain & Co. from the following transactions:
2004
Mar. 1
5
7
9
13
17
22
25
31
31
Jain & Co. started business with cash Rs. 80,000; Goods Rs. 80,000 and furniture Rs. 20,000
Goods sold to Ravi for cash Rs. 20,000
Damaged goods returned from Ravi Rs. 4,000
Received from Ravi Rs. 15,980 in full settlement of his account
Bought goods from Sherlekar of the list price of Rs. 20,000 at Rs. 15 trade discount
Goods returned to Sherlekar of the list price of Rs. 2,000
Settled the account of Sherlekar by paying cash, under a discount of 10%
Bought a furniture for Rs. 2,400 for the domestic use of Jain & Co.
Paid for trade expenses Rs. 1,400
Paid for travelling expenses Rs. 760
2004
Jan. I
2
4
5
7
8
9
15
16
20
Nataraj started with cash Rs. 2,00,000
Paid in to bank Rs. 2,00,000
Purchased goods from Thangarn & Co. on credit Rs. 10,000
Paid Postage & Telegram Rs. 500
Bought furniture Rs. 10,000
Purchased adding machine Rs. 20,000
Sold goods on credit to Mohan & Co. Rs. 50,000
Paid to Thangam & Co. Rs. 9,950 and discount allowed by him Rs. 50
Sold goods to Ramesh & Co. Rs. 15,000
24 Received cheque from Mohan & Co. in full settlement of amount due to them Rs. 49,500
31 Paid rent by cheque Rs. 5,000
(13) Pass journal entries for the following transactions:
(I) Goods purchased from Kapil Dev for Rs. 80,000 at a trade discount of 10% and cash discount of 2% paid 75% of
the amount immediately
(2) Received a cheque from Prem Kumar for Rs. 16,000 this cheque was deposited in to bank the next day
(3) Cheque received from Premkumar was dishonoured
(4) Sold old news papers Rs. 100
(5) Bought goods from Raj & Co. and paid by cheque Rs. 14,000
(6) Sold half of the above goods to Sam & Co. at a profit of 35% on cost
(14) Record the following transactions in the account of Hari & Co. :
2004
Jan. 1 Goods sold to Swaminathan Rs. 12,000
3 Cash received from Swaminathan Rs. 1l,600
and allowed him discount Rs. 400
15 Bought goods from Rajan on Credit Rs. 16,000
20 Paid cash to Rajan in full settlement of his account Rs. 15,900
25 Paid cash for trade expenses Rs. 200
27 Paid cash for stationery Rs. 375
29 Paid wages Rs. 500
30 Cash Sales Rs. 12,000
(15) Journalize the following transactions :
(I) Bought goods for cash Rs. 50,000
(2) Paid cash for stationery Rs. 500
(3) Bought furniture for cash Rs. 4,000
(4) Sold goods for cash Rs. 16,000
(5) Sold goods to Jhon on credit Rs. 5,000
(6) Sold goods to William for cash Rs. 7,000
(7) Paid rent Rs. 1,500
(8) Paid salary Rs. 1,000
(9) Paid freight on goods purchased Rs. 500
(10) Paid wages Rs. 700
(Il) Received from James Rs. 5,000
(12) Received Interest from James Rs. 1,000
LEDGER
Meaning and Definition
Ledger refers to the book of Main Entry and it contains various accounts such as Personal Accounts,
Real Accounts and Nominal Accounts. In the first stage of accounting cycle, all business transactions are
recorded separately through Journal or Subsidiary Books during a particular date or period. Hence, Journal
fails to bring the similar transactions together and it is not useful for any reference. In order to have a
consolidated view of the similar transactions, the transactions entered in the journal will have to be posted
to Ledger Account.
A Ledger Account may be defined as a "Summary Statement of all transactions relating to a person,
asset, expense or income which have taken place during a given period of time and showing their net
effect." From the above definition, we can observe that Ledger is designed as the book of second stage in
the accounting cycle which is used for recorded transactions which are classified and grouped into
different heads of accounts.
Specimen Rulings or Ledger
Dr.
The specimen of ruling of each account in the ledger is as follows :
Name or Account Cr.
Date Particulars J.F. Amount Rs. Date Particulars J.F. Amount Rs.
To Name of Debit Alc By Name of Credit Alc
From the above specimen rulings of ledger account, we can observe the following points :
(1) Ledger Account is usually in the "T" form which contain two sides-Debit side and Credit side.
(2) Left hand side is called Debit Side (Dr.)
(3) Right hand side is called Credit Side (Cr.)
(4) Each side further divided into four columns:
(a) Column 1 meant for date, month and year.
(b) Column 2 meant for particulars.
(c) 'F' stands for Folio (Page Number) of the Journal or Subsidiary Books.
(d) Accounts to be Debited or Credited.
(5) The name of accounts to be debited find an entry on the left side.
(6) The name of accounts to be credited find an entry on the right side.
Posting or Journal to Ledger
The term "Posting" refers to the process of ents:ring in the ledger the information given in the journal.
In other words, the process of transferring the transactions from the journal to the ledger during the
particular period is known as "Posting." Accordingly separate account should be opened into the ledger
for posting the transactions relating to the individual persons, assets, expenses or losses as shown in the
journal. The following example will make you clear the process of posting.
Jan.]
2003, Kannan Sold goods to Gupta Rs. 5,000.
Journal Entry
2003 Particulars Debit Rs. Credit Rs.
Jan.l Gupta Account Dr. 5,000
To Sales Account 5.000
(Being goods Sold to Gupta on Credit)
Dr. Gupta Account Cr.
2003
Jan.l To Sales Alc 5.000
Cr. Dr. Sales Account
2003
Jan.l By Gupta Alc 5,000
Balancing of Ledger Account
In order to prepare the financial statements, balancing of various accounts in the ledger is essential.
The following procedure to be adopted while balancing of various accounts in the ledger.
(1) Debit and Credit sides of an accounts are totalled separately.
(2) Find the difference between the total of both sides.
(3) The difference is entered on the side on which the total is smaller and this difference is the
closing balance shown by the account and this will be carried forward to the next year as the
"opening balance" in the account.
(4) If the debit side of an amount is more, it is called Debit Balance and it is entered on the credit
side to close the account and written as by balance c/d.
(5) If the credit side of an amount is more it is called Credit Balance and it is entered on the debit
side to close the account and written as To Balance c/d.
Difference between Journal and Ledger
In the process of accounting cycle, both the Journal and Ledger serve as important books which are
indispensable for each other. The following are the important points that differentiate the Journal and
Ledger:
jOllrllai
(1) Journal is the book of Original Entry or
First Entry
(2) It is the book of Chronological Record
(3) The process of recording in the
journal is called journalizing
(4) Journal as a book supported by
greater sources of evidence
(5) Journal lays focus on recording
transactions
(6) The process of Journalizing is
a continuous one.
Illustration: 7
Ledger
(1) Ledger is the book of Second entry
(2) It is the book of Analytical Record
(3) The process of recording in ledger is posting
(4) Ledger is dependent on journal
(5) Ledger focuses on process of classification
of grouping of different heads of accounts.
(6) The process of posting in ledger to be
done according to the needs and convenience.
By Solving illustration I, Chapter 3, "Accounting Books and Records."
32
Solution:
Dr.
Date
2003
Mar. 31
Dr.
Date
2003
Mar. I
5
15
18
21
Apr!. I
Dr.
Date
2003
Mar. I
Apr!. I
Dr.
Date
2003
Mar.2
Aprl.l
Particulars l.F.
To Balance c/d
Particulars l.F.
To Capital Nc
To Sales Nc
To Sales Nc
To Rosy Nc
To Bank Nc
To Balance bId
Particulars l.F.
To Cash Nc
To Balance bId
Particulars l.F.
To Cash Nc
To Balance bId
Ledger,
Capital Account
Amount Rs. Date
2003
4,500 Mar. I
4,500
Aprl.l
Cash Account
Amount Rs. Date
2003
4,500 Mar. I
600 2
250 25
396 28
500 30
30
30
31
6,246
1,242
Bank Account
,
Amount Rs. Date
2003
2,500 Mar.3
3
21
31
2,500
1,400
Purchases Account
Amount Rs. Date
2003
1,500 Mar.31
1,500
1,500
(Rs. In lakhs) Cr.
Particulars l.F. Amount Rs.
By Cash Nc 4,500
4,500
By Balance bId 4,500
Cr.
By Bank Nc 2,500
By Purchase Nc 1,500
By Telephone rent Nc 40
By Rosy Nc 594
By Stationery Nc 20
By Rent Nc 100
By Salaries Nc 250
By Balance c/d 1,242
6,246
Cr.
By Furniture Nc 500
By Cash Nc 500
By Drawings Nc 100
2,500
Cr.
Particulars J.F. Amount Rs.
1,500
Dr.
Date Particulars J.F.
2003
Mar. 2 To Bank Nc
Apr!. I To Balance bId
Dr.
2003
Mar.31 To Balance c/d
Dr.
2003
Mar. 12 To Return onwards Nc
Dr.
2003
Mar.31 To Balance c/d
Dr.
2003
Mar. 31 To Sales Nc
28 To Cash Nc
28 To Discount Nc
Furniture Account
Amount Rs. Date Particulars
2003
500 Mar.31 By Balance c/d
500
500
Sales Account
2003
1,250 Mar.6 By Cash Nc
8 By Rosy Nc
15 By Cash Nc
1,250
Aprl.l By Balance bId
Thomas Account
2003
100 Mar.31 By Balance c/d
100
100
Return Outwards Account
2003
100 Mar. 12 By Thomas Nc
100
Aprl.l By Balance bId
Rosy Account
2003
400 Mar. 18 By Cash Nc
594 18 By Discount Nc
6 31 By Balance c/d
1,000
1,000
J.F.
J.F.
J.F.
J.F.
J.F.
33
Cr.
Amount Rs.
500
500
Cr.
Amount Rs.
600
400
250
1,250
1,250
Cr.
Amount Rs.
100
100
Cr.
Amount Rs.
100
100
100
Cr.
Amount Rs.
396
4
600
1,000
34
Dr.
Date
2003
Mar.l8
31
Dr.
Date
2003
Mar. 21
Apr!. 1
Dr.
Date
2003
Mar. 25
Aprl. 1
Dr.
Date
2003
Mar. 30
Aprl. 1
Dr.
Date
2003
Mar.30
Aprl.l
Particulars l.F.
To Rosy A/c
To Balance cld
Particulars l.F.
To Bank Nc
To Balance bId
Particulars l.F.
To Cash Nc
To Balance bId
Particulars l.F.
To Cash Nc
To Balance bId
Particulars l.F.
To Cash Nc
To Balance bId
Discount Account Cr.
Amount Rs. Date Particulars l.F. Amount Rs.
2003
4 Mar.28 By Rosy Nc 6
2
6 6
Aprl.l By Balance bId 2
Drawings Account Cr.
2003
100 Mar. 31 By Balance c/d 100
100 100
100
Telephone Rent Account Cr.
2003
40 Mar. 31 By Balance cld 40
40 40
40
Account Cr.
2003
20 Mar.31 By Balance cld 20
20 20
20
Rent Account Cr.
Amounts Rs. Date Particulars l.F. Amount Rs.
2003
100 Mar.31 By Balance c/d 100
100 100
100
Dr. Salaries Account
Date Particulars 1.F. Amount Rs. Date Particulars
2003 2003
Mar.30 To Cash Nc 250 Mar.31 By Balance c/d
250
Aprl.l To Balance bid 250
Illustration: 8
By Solving illustration 2, Chapter 3, "Accounting Books and Records."
Solution:
Dr.
Date" Particulars 1.F.
2003
Jan. 1 To Cash Nc
31 To Cash Nc
Feb. 1 To Balance bid
Dr.
"Date Particulars 1.F.
2003
Jan. 1 To Sales Nc
4 To Murugan Nc
5 To Bank Nc
13 To Dividend Nc
15 To Old Furniture Nc
31 To Balance c/d
Dr.
Date Particulars 1.F.
2003
Jan. 31 To Balance c/d
Ledger
Machinery Atcount
Amount Rs. Date
2003
5,000 Jan.31
500
5,500
5,500
Cash Account
Amount Rs. Date
2003
2,000 Jan.l
700 6
500 7
500 8
200 9
4,500 10
14
8,400
Api. 1
Sales Account
Amount Rs. Date
2003
3,000 Jan. 2
2
3,000
Feb. 1
Particulars
By Balance c/d
Particulars
By Machinery Nc
By Salaries Nc
By Purchase of }
goods Nc
By Machinery Nc
By Ramasamy Nc
By Interest Nc
By Rent Nc
By Balance bid
Particulars
By Cash Nc
By Kannan Nc
By Balance bid
1.F.
1.F.
J.F.
1.F.
35
Cr.
Amount Rs.
250
250
(Rs. in lakhs)
Cr.
Amount Rs.
5,500
5,500
Cr.
Amount Rs.
5,000
800
900
500
400
400
400
8,400
4,500
Cr.
Amount Rs.
2,000
1,000
3,000
3,000
36
Dr.
Date
2003
Jan. 2
Feb. 1
Dr.
Date
2003
Jan. 31
Dr.
Date
2003
Jan. 31
Dr.
Date
2003
Jan. 6
Feb. 1
Dr.
Date
2003
Jan. 7
Jan. 7
Feb. 1
Dr.
Date
2003
Jan. 31
Particulars J.F.
To Sales Nc
To Balance bId
Particulars J.F.
To Balance c/d
Particulars J.F.
To Balance c/d
Particulars J.F.
To Cash Nc
To Balance bId
Particulars J.F.
To Cash Nc
To Discount Alc
To Balance bId
Particulars J.F.
To Balance cld
Kannan Account Cr.
Amount Rs. Date Particulars J.F. Amount Rs.
2003
1,000 Jan. 31 By Balance c/d 1,000
1,000 1,000
1,000
Murugan Account Cr.
2003
700 Jan. 4 By Cash Nc 700
700 700
Feb. 1 By Balance bId 700
Bank Account Cr.
Amounts Rs. Date Particulars J.F Amount Rs.
2003
500 500
Salaries Account Cr.
2003
SOO Jan. 31 By Balance cld SOO
SOO SOO
SOO
Purchases of Goods Account Cr.
2003
900 Jan. 31 By Balance cld 1,000
100
1,000 1,000
1,000
2003
100 Jan. 7
By Purchase of }
Goods Nc 100
100 100
Dr.
2003
Jan.9 To Cash Alc
Feb.l To Balance bId
Dr.
2003
Jan.W To Cash Alc
Feb.l To Balance bId
Dr.
2003 7
Jan. 11 To Purchase Return Nc
Feb. 1 To Balance bId
Dr.
2003
Jan.31 To Balance cld
Dr.
2003
Jan.12 To Periyasarny Alc
Dr.
2003
Ramasamy Account
2003
400 Jan.4 By Balance cld
400
400
Interest Account
2003
400 Jan.3l By Balance cld
400
400
Premkumar Account
2003
300 Jan.3l By Balance cld
300
300
Purchases Return Account
2003
300 Jan. 11 By Premkumar Alc
300
Feb.l By Balance bId
Sales Return Account.
2003
200 Jan.31 By Balance cld
200
200
Periyasamy Account
2003
200 Jan. 12 By Sales Return Alc
200
Feb. 1 By Balance bId
J.F.
J.F.
J.F.
J.F.
J.F.
J.F.
37
Cr.
Amount Rs.
400
400
Cr.
Amount Rs.
400
400
Cr.
Amount Rs.
300
300
Cr.
Amount Rs.
300
300
300
Cr.
Amount Rs.
200
200
.
Cr.
Amount Rs.
200
200
200
38
Dr.
Date
2003
Jan.3J
Dr.
Date
2003
Jan. 14
Feb.l
Dr.
Date
2003
Jan.31
Paniculars
To Balance cld
Paniculars
To Cash Alc
To Balance bId
Paniculars
To Balance c/d
Illustration: 9
l.F.
l.F.
l.F.
A Textbook of Firuzncial Cost and Management Accounting
Dividend on Shares Account Cr.
Amount Rs. Date Paniculars l.F. Amount Rs.
2003
500 500
Rent Account Cr.
2003
400 Jan.31 By Balance cld 400
400 400
400
Old Furniture Account Cr.
2003
200 Jan.15 By Cash Alc 200
200 200
Feb. I By Balance bid 200
By Solving illustration 3, Chapter 3 of "Accounting Books and Records."
Solution:
Dr.
Date Paniculars l.F.
2003
Ledger
Capital Account
Amount Rs. Date
2003
65,000 Jan. I
1
1
I
65,000
AprI.l
Cr.
Paniculars l.F. Amount Rs.
By Cash Alc 40,000
By Goods Nc 10,000
By Machinery Alc 10,000
By FUflliture Alc 5,000
65,000
By Balance bid 65,000
Dr. Bank Account
Date Particulars J.F. Amount Rs. Date
2003 2003
Jan. 1 To Capital Nc 40,000 Jan.2
3 To Sales Nc 6,300 4
6 To Bank Nc 800 7
8 To Share Capital Nc 970 10
12
12
31
48,070
Feb. 1 To Balance bId 33,970
Dr. Goods Account
2003 2003
Jan.l To Capital Nc 10,000 Jan.31
10,000
Dr. Machinery Account
2003 2003
Jan.l To Capital Nc 10,000 Jan. 19
31
10,000
Feb.! To Balance bId 9,000
Dr. Furniture Account
2003 2003
Jan.l To Capital Nc 5,000 Jan.31
5,000
Dr. Buildings Account
2003 2003
Jan.l To Cash Nc 5,000 Jan.31
5,000
,
Particulars J.F.
By Buildings Nc
By Purchase Nc
By Freight Nc
By Anderson Nc
By Rent Nc
By Salaries Nc
By Balance c/d
, ,
Particulars J.F.
By Balance c/d
,- -
Particulars J.F.
By Depreciation Nc
By Balance c/d
Particulars J.F.
By Balance cld
Particulars .,.F.
By Balance c/d
39
Cr.'
Amount Rs.
5,000
5,700
500
1,5qO
400
I,OOQ '
- 33;970
' ...
'48,070'
Cr.
Amount Rs.
10,000
10,000
. , ~ , .
Cr.
AmouniRs.
1,000
9,00'0
10,000
Cr.
Amount Rs.
5,000
5,000 '
Cr.
Amount Rs .
5,000
5,000
40
Dr.
Dr.
Dale
2003
Jan.3
IS
Feb. 1
Date
2003
Jan.31
Dr.
Date
2003
Jan.4
4
Feb.l
Dr.
Date
2003
Jan.5
Feb.l
Dr.
Date
2003
Jan. 9
14
16
Feb.l
Particulars J.F.
To Sales Ale
By Murugan Ale
To Balance bid
Particulors J.F.
To Balance c/d
Particulars J.F.
To Cash Ale
To Discount Ale
To Balance bid
Particulars J.F.
To Sales Ale
To Balance bid
Particulors J.F.
To Vijay Ale
To Dividend Ale
To Interest on }
Investment Ale
To Balance bid
Anwuht Rs. Date Particulars J.F. Amount Rs.
2003
700 Jan.4 By Purchases Ale 300
250 31 By Balance e/d 150
700 700
ISO
Sales Account Cr.
. Amount Rs. Date Particulars J.F. Amount Rs.
2003
11,500 Jan.3 By Cash Ale 6,300
3 By Discount Ale 700
5 By William Ale 2,500
20 By Balu Ale 2,000
11,500 11,500
Feb.l By Balance bid 11,500
Purchases Account Cr.
2003
5,700 Jan.31 By Balance c/d 6,000
300
-,
6,000 6,000
6,000
William Account Cr.
Anwunt Rs. Date Particulars J.F. Amount Rs.
200J
2,500 Jan.31 By Balance e/d 2,500
2.500 2,500
2,500
Bank Account Cr.
2003
5,000 Jan.6 By Cash Ale 800
300 11 By Drawings Ale 500
15 By Murugan Ale - 1,000
1.500 31 By Balance e/d 4,500
6,800 6,800
4.500
Dr.
2003
Jan.7 To Cash Ale .
Dr.
2003
Jan.31 To Balance c1d
Dr.
2003
Dr.
2003
Jan.lO To Cash Alc
Feb. I To Balance bId
Dr.
2003
Jan. 11 To Bank Ale
Feb. I To Balance bId
Dr.
2003
Jan.12 To Cash Alc
Feb.l To Balance bid
Freight Account
2003
500 Jan.31 By Balance c1d
500
500
Share Capital Account
2003
970 Jan.31 By Cash Alc
970
Feb. 1 By Balance bid
VJjay Account
2003
5,000 Jan.9 By Bank Alc
5,000
Anderson Account
2003
1,500 Jan.31 By Balance cld
1,500
.
1.500
Drawings Account
2003
500
500
Rent Account
2003
400
400
J.F.
J,F.
1.F.
1.F.
1.F.
1.F.
41
Cr.
Amount Rs.
500
500
Cr.
AmoUflt Rs.
970
970
970
Cr.
Amount Rs.
5,000
5,000
5,000
Cr.
Amount Rs.
1.500
1.500
Cr.
Amount Rs.
500
500
Cr.
Amount R$.
400
400
42
Dr.
Date
2003
Jan.12
Feb. 1
Dr.
Date
2003
Jan.31
Dr.
Date
2003
Jan.! 5
15
Feb. I
Dr.
Date
2003
Jan.31
Dr.
Date
2003
Jan.19
Feb. 1
Dr:.
Date
2003
Jan.20
Feb. 1
Particulars
To Cash Alc
To Balance bId
Pafticulars
To Balance cld
Particulars
To Bank Alc
To Discount Alc
To Balance bId
Particulars
To Balance cld
...
Particulars
To Machinery Alc
To Balance bId
Particulars
To Sales Alc
To Balance bId
Salaries Account Cr.
l.F. Amount Rs. Date Particulars l.F. Amount Rs.
2003
1,000 Jan.31 By Balance cld 1.000
1,000 1.000
1,000
Dividend Account Cr.
2003
300 Jan.14 By Bank Alc 300
300 300
~ u r u g a n Account Cr.
2003
1,000 Jan.31 By Balance cld 1,250
250
1,250 1,250
1,250
Interest on Investment Account Cr.
,.F. Amount Rs. Date Particulars l.F. Amount Rs.
2003
1,500 Jan.16 By Bank Alc \,500
1,500 1,500
Feb.! By Balance bId 1.500
Depreciation Account Cr.
2003
1,000 1.000
1,000
Balu Account Cr.
2003
2,000 2,000
2,000
QUESTIONS
1. What do you understand by Ledger?
2. Draw a specimen ruling of ledger. Explain it briefly.
3. What are the differences between Journal and Ledger?
PRACTICAL PROBLEMS
(1) Record the following transactions in the Ledger of Mrs. Pandey & Co.:
2003
Jan. 1 Commensed business with cash
1 Purchased Machinery
2 Purchased goods on credit from Ram
3 Purchased goods for cash
7 Goods purchased from Ramesh
9 Goods Return to Ram
10 Goods Sold to MUrugan
13 Goods returned by Murugan
15 Draw cash from bank for office use
17 Draw cash from bank for private use
19 Purchased furniture
22 Paid for office rent
25 Paid for Salaries
30 Sold goods of Rs. 35,000 less 10% discount
(1) From the following transactions, you are required to prepare Journal and Ledger Account of Ram & Co.:
(3)
2003
Jan.1 Paid into Bank
2 Purchased Furniture for cash
5 Deposited into Bank
6 Purchased goods from Rahul
7 Sold goods on credit to Siva
9 Cash Sales
10 Cash Purchases
11 Amount withdrawn from Bank for office use
15 Paid insurance premium
17 Dividend paid by cheque
17 Dividend received
19 Paid rent
22 Paid salaries to office staff
24 Draw cash from bank for personal use
25 Goods returned from Siva
27 Goods returned to Rahul
Enter the following transactions in a Ledger AccouQt of Ramesh & Co.:
2003
Jan. I Started business with Rs. 50,000 and paid into Bank Rs. 25,000
3 Sold goods for cash Rs. 20,000
5 Brought Furniture for Rs. 7,000
7 Purchased goods from Pandey & Co. Rs. 15,000
9 Withdrawn Rs. 700 from bank for office use
11 Sold goods to Jain & Co. Rs. 10,000
13 Paid Salaries Rs. 20,000
15 Paid Telephone charges of Rs. 1,000
17 Paid into Bank Rs. 5,000
19 Sold goods to Mrs. Gowda & Co. on Credit for Rs. 15,000 less 10% discount
Rs.
4,00,000
50,000
20,000
20,000
10,000
10,000
1,000
30,000
500
2,000
5,000
10,000
4,000
30,000
4,000
Rs.
50,000
10,000
15,000
5,000
7,000
9,000
15,000
3,000
5,000
2,000
5,000
1,500
15,000
4,000
300
200
1,000
43
44
& Co.:
21 Goods returned from Pandey Rs. 500
25 Received cash from Jain & Co. Rs. 5,500 discount allowed Rs. 250
27 Withdrawn Rs. 1,500 from bank for personal use
31 Paid for advertisement Rs. 2,000
(4) From the following transactions. you are required to prepare Journal and Ledger Account of Mrs. Sam & Co.:
2003
Jan. I Started business with cash Rs. 2,00,000
I Paid into Bank Rs. 50,000
2 Goods sold to Ramesh for Rs. 10,000 less 10% trade discount
4 Furniture purchased for cash Rs. 25,000
7 Withdrawn from bank for personal use Rs. 2,000
9 Machinery Purchased for cash Rs. 30,000
II Goods sold to Ram on credit for Rs. 8.000
13 Good sold for cash Rs. 10,000
15 Purchased goods from Reddy & Co. Rs. 20,000
17 Goods returned from Reddy & Co. Rs. 1,000
20 Goods returned to Gupta Rs. 500
23 Cash paid to Reddy & Co. for full settlement of his account Rs. 15,000
25 Withdrawn cash from bank for office use Rs. 3.000
27 Paid telephone rent Rs. 1,500
29 Cash received from John & Co. Rs. 8.000 and discount allowed to him Rs. 100
31 Goods sold for cash Rs. 5,000
(5) From the following transactions, you are required to prepare Journal and Ledger Account in the books of Hari Prasad
2003
Jan. I Business started with cash Rs. 3,00,000
I Cash paid into Bank Rs. 25,000
I Purchased Furniture Rs. 5,000
2 Machinery purchased from Krisha on credit for Rs. 10,000
3 Goods sold for cash Rs. 10.000
5 Goods sold to Murugan less trade discount of 10% for'Rs. 20,000
7 Goods purchased from Ramesh for Rs. 5,000 at 10% trade discount
9 Goods returned from Murugan for Rs. 500
II Goods returned to Ramesh for Rs. 3,000
14 Paid for Advertisement Rs. 2,000
15 Withdrawn Rs.4,000 from bank for office use
17 Goods purchased for cash Rs. 5,000
23 Paid interest Rs. 1,500
25 Dividend received Rs. 3,400
27 Withdrawn cash from bank for personal use for Rs. 1,400
29 Cash paid to Ramesh in full settlement of his account for Rs. 5,000
30 Deposited cash into bank Rs. 3,000
31 Sold goods to Karthik on credit for Rs. 5,000
TRIAL BALANCE
Meaning
To ensure the proof of completion and arithmetical correctness of the books of account. it is essential
to prepare the trial balance. In the first stage of accounting all business transactions are recorded in Journal
or Subsidiary Books. Then they are transferred to ledger by posting to relevant accounts. The fundamental
principle of double entry system of accounting is that for every debit. there must be a corresponding and
equal credit. Therefore. when all the accounts of a concern are thus balanced in the ledger at the end of the
period, a statement is prepared to show the list of debit balances on one side and credit balances on the
other side. This list so prepared is called as "Trial Balance." Accordingly the total of the debit side of trial
balance must be equal to that of its credit side.
Objectives of Trial Balance
The following are the important objectives of preparing the Trial Balance:
(1) To ensure the arithmetical correctness of the book of accounts.
(2) It is the statement that shows a summary of all business transactions recorded in the ledger
accounts and reveals the net position at glance.
(3) To ensure that the preparation of Journal and Ledger are based on the principles of double entry
system.
(4) To have a basis for preparation of income statements such as Trading, Profit and Loss
Accounts.
Errors Not Disclosed by Trial B ~ l a n c e
The statement of Trial Balance is not a final and conclusive proof of the complete correctness of
books. This is because, there are certain errors in the books of accounts which may be committed while
recording, classifying or summarizing the financial transactions which are not disclosed by the trial
balance. The following are some of the errors which will not affect the agreement of Trial Balance:
Classification of Errors
Errors can be classified on the basis of its nature :
I. Errors of Omission.
II. Errors of Commission.
III. Errors of Principles.
IV. Compensating Errors.
I. Errors of Omission : Errors of Omission refers to recording the transaction which is completely
omitted in the books of journal or subsidiary books. Therefore errors are not disclosed by trial balance due
to the transactions not being recorded and omitted in the book of original entry.
II. Errors of Commission: Errors of Commission may be occurred by wrong recording in the books
of original entry. The committed errors arise due to the negligence of the Accountant while recording,
totaling, carrying forward and balancing the accounting process. Therefore errors not disclosed by Trial
Balance due to the errors committed by the negligence of the Accountants. The errors of commission may
arise due to the following ways :
(1) Entering the wrong amount to the correct side of correct subsidiary books
(2) Entering the correct amount to the wrong side of correct subsidiary books
(3) Entering the correct amount to the correct side of wrong subsidiary books
(4) Posting wrong amount to the correct side of the accounts
(5) Posting correct amount to the wrong side of the accounts
(6) Posting to the correct side of the account but making double posting.
III. Errors of Principles : Transactions are recorded on the basis of the fundamental principles of
double entry system of accounting. Errors of principles arise due to ignorance of the principles of
accounting. Such errors do not affect the agreement of trial balance. The errors of principles occur due to
the following ways :
(1) Errors committed due to inability to properly allocate between revenue and capital items.
(2) Errors committed due to inability to make the difference between capital expenditure and
revenue expenditure.
(3) Errors committed due to inability to make the difference between productive expenses and
unproductive expenses.
IV. Compensating Errors : Compensating errors refer to those errors which are compensated by
each other. In other words, the effect of one error is compensated by the other. Such errors which do not
affect the agreement of the trial balance. For example, if wage paid Rs. 1,000 is debited in the Wage
Account at Rs. 1,500 and dividend received Rs. 1,500 is credited in the Dividend Account at Rs. 2,000, the
excess debit in Wage Account is compensated by an excess credit of Rs. 500 in Dividend Account.
Errors Disclosed by Trial Balance
A Trial Balance disclosed any errors due to affect the one side of account. The following are the
examples of errors disclosed by the trial balance :
(a) Errors committed in casting the books of subsidiary books.
(b) Errors committed in carrying forward the total amount from one page to another.
(c) Errors committed during posting from the books of journal or subsidiary books to ledger.
(d) Errors committed in balancing the ledger accounts.
(e) Errors committed during preparation of debtors' and creditors' list of accounts.
(f) Errors committed due to ignorance in carrying forward a balance of an account to the Trial
Balance.
Location of Errors
If the trial balance disagrees, it is essential to find out errors before proceeding further. The
following is the usual procedure adopted to find out the errors :
(1) Check the total of two side of the trial balance once again.
(2) Divide the difference of the two sides of the trial balance by two and find out whether there
appears an entry for the same amount either sides of the trial balance. It is possible that a
balance may have been recorded in the wrong side of the trial balance thus resulting in the
difference of double the amount.
(3) If the mistake is not located by the first step then divide difference by 9. If the difference is
evenly divisible by 9, the error can be an error of transposition of figure. For example, if Rs.
816 is written as Rs. 618 the difference is Rs. 198. and Rs. 198 is evenly divisible by 9. Thus.
it can be concluded that where the difference is divisible by 9 there can be a possibility of this
type of error.
(4) Check the list of total balances of all debtors and creditors to find out the errors.
(5) Check whether balances of cash and balances of bank have been taken in the trial balance or not.
(6) Check the totals of different ledger accounts and carry forward to trial balances.
(7) See the casting and carrying forward of subsidiary books.
(8) Check the posting from the subsidiary books to ledger.
Suspense Account
47
If the efforts are not to locate the errors, the difference of the trial balance is temporarily transferred
to the Suspense Account. This is made because, the preparation of financial statements cannot be delayed
further. In Suspense Account all those errors can be rectified only by making suitable journal entries.
Methods of Preparation of Trial Balance
The following are the two methods of preparing the Trial Balance :
I. Total Method.
II. Balance Method.
I. Total Method: Under this method, the total of debits and credits of all accounts are shown in the
respective debit and credit side of the trial balance.
II. Balance Method: In this method, only balance of each account of ledger is recorded in trial
balance. In other words, all the list of debit balances recorded in one column and the list of credit balances
recorded in the other. Of the two methods, this method is very widely used in practice.
Specimen Ruling of Trial Balance
The following is the specimen ruling of Trial Balance:
Trial Balance as on Mrs. I. M. Pandey's Book
s. No. Name of Accounts LF. Debit Balance Rs. Credit Balance Rs.
Illustration: 10
From the accounts prepared in illustration 7, of Chapter 3 [Accounting Books and Records], you are
required to prepare a Trial Balance :
48
Solution:
Trial Balance as on 30
th
April 2003 (Rs. in Lakhs)
s. No. Name of Accounts L.F Debit Balance Rs. Credit Balance Rs.
1 Capital Account
-
4,500
2 Cash Account 1,242
3 Bank Account 1,400
4 Purchase Account 1,500
5 Furniture Account 500
6 Sales Account
-
1,250
7 Thomas Account 100
-
8 Return Outwards Account
-
100
9 Rosy Account 600
-
10 Discount Account
-
2
11 Drawing Account 100
12 Telephone Account 40
13 Stationery Account 20
14 Rent Account 100
15 Salaries Account 250
Total 5,852 5,852
lIIustration: 11
required to prepare a Trial Balance :
Solution:
Trial Balance as on Feb. 2003 (Rs in Lakhs)
s. No. Name of Accounts L.F. Debit Balance Rs. Credit Balance Rs.
1 Machinery Account 5,500
-
2 Cash Account
-
4,500
3 Sales Account
-
3,000
4 Kannan Account 1,000
-
5 Murugan Account
-
700
6 Bank Account
-
500
7 Salaries Account 800
-
8 Purchase of Goods Account 1,000
-
9 Discount Account
-
100
10 Ramasamy Account 400
-
11 Interest Account 400
-
12 Premkumar Account 300
-
13 Purchase Return Account
-
300
14 Sales Return Account 200
-
15 Periasamy Account
-
200
16 Dividend on Shares Account
-
500
17 Rent Account 400
-
18 Old Furniture Account
-
200
Total 10,000 10,000
Accounling Books and Records 49
Illustration: 12
requested to prepare a Trial Balance :
Solution:
Trial Balance as on 29
th
Feb. 2003
S. No. Name of Accounts L.F. Debit Balance Rs. Credit Balance Rs.
I Capital Account
-
65,000
2 Cash Account 33,970
-
3 Goods Account 10,000
-
4 Machinery Account 9,000
-
5 Furniture Account 5,000
-
6 Buildings Account 5,000
-
7 Discount Account 150
-
8 Sales Account
-
11,500
9 Purchase Account 6,000
-
10 William Account 2,500
-
II Bank Account 4,500
-
12 Freight Account 500
-
13 Share Capital Account
-
970
14 Vijay Account
-
5,000
15 Anderson Account 1,500
-
16 Drawings Account 500
-
17 Rent Account 400
-
18 Salaries Account 1,000
-
19 Dividend Account
-
300
20 Murugan Account 1,250
-
21 Interest on Investment
-
1,500
22 Depreciation Account 1,000
-
23 BaJu Account 2,000
-
Total 84,270 84,270
Illustration: 13
Journalize the following transactions. Post in the ledger. Extract balances and prepare list of such
balances:
2003
Mar. 1 Jain commenced business with Rs. 80,000 cash and also brought into business furniture worth Rs. 10,000;
motor car valued for Rs. 24,000 and stock worth Rs. 40,000
5 Goods purchased from Ramesh on credit for Rs. 18,000
7 Goods sold to James on credit for Rs. 12,000
8 Brought stationery from Javier & Co. for cash Rs. 400
10 Goods Sold to Ram & Co. for cash Rs. 4,000
II Paid traveling expenses to manager for Rs. 1,200
13 Withdrawn cash Rs. 2,000 from bank for personal use
15 Withdrawn from the bank Rs. 6,000 for office use
17 Issued by cheque Rs.17,600 to Ramesh in full settlement of his account
21 Paid clearing charges Rs. 800
24 Received cheque for Rs. 12,000 from James
29 Paid Rs. 600 by cheque to owner's house being the house rent of Jain
30 Interest credit by bank for Rs. 400
31 Bank charges Rs. 50 debited in Jain Alc
Journal
Date Particulars LF.
2003 Cash Alc
Mar. 1 Furniture Alc Dr.
Motor Car Alc Dr.
Stock Alc Dr.
To Jain's Capital Alc
(Being Jain's commenced business)
4 Bank Alc Dr.
To Cash Alc
5 Purchases Alc Dr.
To Ramesh Alc
(Being goods purchased on credit )
7 James Alc Dr.
To Sales Alc
8 Stationery Alc Dr.
To Cash Alc
(Being office stationery purchased)
10 Cash Alc Dr.
To Sales Alc
11 Traveling. expenses Alc Dr.
To Cash Alc
(Being payment of traveling expenses)
13 Drawing Alc Dr.
To Bank Alc
(Being amount withdrawn for personal use)
15 Cash Alc Dr.
To Bank Alc
(Being amount withdrawn for office use)
17 Ramesh Alc Dr.
To Bank Alc
To Discount Alc
(Being received cheque in full settlement)
21 Clearing Charges Alc Dr.
To Cash Alc
(Being expenses paid)
Debit Credit
Rs. Rs.
Dr. 80,000
10,000
24,000
40,000
1,54,000
76,000
76,000
18,000
18,000
12,000
12,000
400
400
4,000
4,000
1,200
1,200
2,000
2,000
6,000
6,000
18,000
17,600
400
800
800
24
29
30
31
Dr.
Date
2003
Mar. 1
"10
" 15
Apr!. 1
Dr.
Date
2003
Mar. 4
" 24
" 30
Apr!. 1
Dr.
Date
2003
Mar. 5
Apr!. 1
Bank Nc Dr.
To James Nc
(Being cheque received from James)
Drawing Nc Dr.
To Bank Nc
(Being payment to owner's house towards rent)
Bank Nc Dr.
To Interest Nc
(Being interest credited by bank)
Bank Charges Nc Dr.
To Bank Nc
(Being bank charges debited to Jain Nc)
Particulars J.F.
To Capital
To Sales
To Bank
To Balance bid
Particulars J.F.
To Cash
To James
To Interest
To Balance bId
Particulars J.F.
To Ramesh
To Balance bid
Ledger
Cash Account
Amount Date
Rs.
2003
80,000 Mar. 4
4,000 "8
6,000 "11
" 21
" 31
90,000
11,600
Bank Account
Amount Rs. Date
2003
76,000 Mar. 13
12,000 " 15
400 "17
" 29
" 31
" 31
88,400
62,150
Purchase Account
Amount Rs. Date
2003
18,000 Mar. 31
18,000
18,000
51
12,000
12,000
600
600
400
400
50
50
Cr.
Particulars J.F. Amount
Rs.
By Bank 76,000
By Stationery 400
By Traveling }
Expenses 1,200
By Clearing charges 800
By Balance cld 11,600
90,000
Cr.
By Drawings 2,000
By Cash 6,000
By Ramesh 17,600
By Drawings 600
By Bank charges 50
By Balance dd 62,150
88,400
Cr.
By Balance dd 18,000
18,000
52
Dr.
Dr.
Dr.
Dr.
Dr.
Date
2003
Mar. 31
Date
2003
Mar. 31
" 17
Date
2003
Mar. 31
Apr\. 1
Date
2003
Mar. 1
Apr\. 1
Date
2003
Mar. 1
Apr\. 1
Particulars J.F.
To Balance cld
Particulars J.F.
To Bank
To Discount
.
Particulars J.F.
To Balance c/d
By Balance bid
Particulars J.F.
..
To Capital.
To Balance bid
Particulars J.F.
To Capital
To Balance bid
Sales Account Cr.
2003
16,000 Mar. 7 By James 12,000
"10 By Ram & Co 4,000
16,000 16,000
Apr\. 1 By Balance bid 16,000
Ramesh Account Cr.
2003
17,600 Mar. 5 By Purchases 18,000
400
18,000 18,000
Jain's Capital Account Cr.
2003
1,54,000 Mar. 1 By Cash 80,000
" 1 By Furniture 10,000
" 1 By Motor car 24,000
" 1 By Stock 40,000
1,54,000 1,54,000
1,54,000
Furniture Account Cr.
2003
10,000 Mar. 31 By Balance cld 10,000
10,000 10,000
10,000
Motor Car Account Cr.
2003
24,000 Mar. 31 By Balance c/d 24,000
24,000 24,000
24,000
Dr. Stock Account
2003 2003
Mar. 1 To Capital Alc 40,000 Mar. 31
40,000
Aprl. 1 To Balance bId 40,000
Dr. James Account
2003 2003
Mar. 7 To Sales 12,000 Mar. 24
12,000
Dr. Stationery Account
2003 2003
Mar. 8 To Cash 400 Mar. 31
400
Aprl.l To Balance bId 400
Dr. Traveling Expenses Account
2003 2003
Mar. 11 To Cash 1,200 Mar. 31
1,200
Dr. Drawing Account
2003 2003
Mar. 13 To Bank 2,000 Mar. 31
"29 To Bank 600
2,600
Dr. Discount Account
Date Particulars l.F. Amount Rs. Date
2003 2003
Mar. 31 To Balance cld 400 Mar. 17
400
Aprl. 1
Particulars J.F.
By Balance cld
Particulars J.F.
By Bank
Particulars l.F.
By Balance c/d
.
Particulars J.F.
By Balance cld
Particulars J.F.
By Balance c/d
Particulars l.F.
By Ramesh
By Balance bId
53
Cr.
Amount Rs.
40,000
40,000
Cr.
Amount Rs.
12,000
12,000
Cr.
Amount Rs.
400
400
Cr.
Amount Rs.
1,200
1,200
Cr.
Amount Rs.
2,600
2,600
Cr.
Amount Rs.
400
400
400
54
Dr.
Dr.
Dr.
Date Particulars l.F.
2003
Mar. 21 To Cash
Apr!. 1 To Balance bId
2003
Mar. 31 To Balance cld
2003
Mar. 31 To Bank
Apr!. 1 By Balance bId
Name of Accounts
Cash Account
Bank Account
Purchases Account
Sales Account
Jain's Capital Account
Furniture Account
Motor Car Account
Stock Account
Stationery Account
Traveling Expenses Account
Drawing Account
Discount Account
Clearing Charges Account
Interest Account
Bank Charges Account
Clearing Charges Account
Amount Rs. Date
2003
800 Mar. 31
800
800
Interest Account
Amount Rs. Date
2003
400 Mar. 30
400
Apr!. 1
Bank Charges Account
Amount Rs. Date
2003
50 Mar. 31
50
50
Trial Balance
QUESTIONS
1. What is a Trial Balance?
2. What are the important objectives of Trial Balance?
3. Explain the errors which are disclosed by the Trial Balance.
4. Discuss the classification of Errors.
5. What do you meant by Suspense Account?
6. What are the procedures adopted for locating errors?
Particulars
By Balance c/d
Particulars
By Bank
By Balance bId
Particulars
By Balance c/d
Debit Balance
Rs.
11,600
62,150
18,000
10,000
24,000
40,000
400
1,200
2,600
800
50
1,70,800
Cr.
l.F. Amount Rs.
800
800
Cr.
l.F. Amount Rs.
400
400
400
Cr.
l.F. Amount Rs.
50
SO
Credit Balance
Rs.
16,000
1,54,000
400
400
1,70,800
7. Explain the methods of preparation of Trial Balance.
S. Explain the errors disclosed by Trial Balance.
9. Write short notes on:
(a) Errors of Commission
(b) Errors of Principles
(c) Suspense Account
PRACTICAL PROBLEMS
(1) From the following incorrect Trial Balance of Gupta & Co., you are required to prepare a correct Trial Balance:
Name of Accounts Dr. Rs. Cr. Rs.
Sales 5,00,000
-
Sales Return 10,000
-
Purchases
-
3,00,000
Purchase Return
-
5,000
Sundry Debtors 4,00,000
-
Sundry Creditors 1,50,000
-
Fixed Assets
-
2,50,000
Opening Stock 1,50,000
Closing Stock 2,00,000
-
Capital
-
4,70,000
Operating Expenses 1,00,000
-
General Reserve
-
1,00,000
Outstanding Expenses
-
10,000
Cash at Bank
-
25,000
Suspense Account
-
50,000
Total 13,60,000 13.60,000
[Aos : Total Trial Balance Rs. 12,35,(00)
(2) From,the following wrong trial balance of Mrs. Sharma & Co., you are required to prepare a correct Trial Balance:
Name of Accounts Dr. Rs. Cr. Rs.
Sales
-
42,000
Purchase 1,76,000
-
Stock
-
4,00,000
Furniture 40,000
-
Buildings 2,00,000
-
Cash in hand
-
11,600
Interest 4,000
-
BankNc 5,00,000
-
Plant
-
1,06,000
Kumar 20,000
-
Capital 40,000
-
Govind's Loan Nc
-
2,00,000
RameshNc
-
1,00,000
Bad Debits 6,000
-
Discount Account
-
7,600
Jain Nc
-
1,00,000
Salary 40,000
-
Drawings 4,000
-
Interest on Loan 10,000
Total 10,40,000 9.67.200
(3) From the following information, you are required to prepare a Trial Balance of M & S & Co.:
Purchases
Purchase Return
Sales
Rs.
35,400
550
64,000
55
Sales Return
Opening Stock
Manufacturing Expenses
Salaries
Interest paid
Dividend paid
Discount received
Rent and Rates
Tax paid
Bank Overdraft
Cash in hand
Sundry Debtors
Bills Payable
Bills Receivable
Drawings
Machinery
Debenture
Capital
Sundry Creditors
[Ans: Total of Trial Balance Rs. 2,20,100]
500
23,500
1,250
4,750
2,300
50
2,000
1,000
1,750
3,000
6,700
25,000
2,000
2,600
3,000
2,250
5,000
12,000
21,500
(4) The following balances are extracted from the books Patel & Co. as on 31" December 2003.
Rs.
Capital 1,00,000
Drawings 25,000
Purchases 4,50,000
Sales 6,50,000
Return Inwards 3,500
Return Outwards 4,500
Carriage Inwards 5,500
Carriage Outwards 4,000
Duty on Purchases 10,000
Stock on (31.12.2003) 55,000
Motor Van 30,000
Prepare a Trial Balance as at 31.12.2003
[Ans : Total Trial Balance of Rs.7,84,500]
Salaries
Rent
Taxes
Insurance
Sundry Debtors
Sundry Creditors
Cash on hand
Cash at bank
Furniture
Land
(5) Prepare the Trial Balance of Ramesh as at 31" March 2004
Rs.
Cash 3,700 Land and Buildings
Opening Stock 57,000 Rent Received
Debtors 32,000 Electricity
Sales 6,39,000 Bills Receivable
Wages 1,32,000 Traveling Expenses
Sundry Creditors 52,000 Insurance
Bad Debts Reserve 4,000 Purchases
Carriage 3,000 Purchases Returns
Trade Marks 53,000 Discount
Advertising 12,500 Bad Debts
Salaries 1,09,000 Bank
Machinery 2,89,000 Capital
[Ans: Trial Balance Total Rs.13,32,200]
Rs.
25,000
10,000
1,500
3,000
40,000
30,000
2,500
12,500
5,000
1,02,000
Rs.
2,80,000
50,000
65,000
17,000
23,000
36,000
1,20,000
5,000
3,000
7,000
85,000
5,87,200
(6) The following trial balance of Rajive & Co., although it adds up to the same total on both sides, is incorrect:
Dr. Rs. Cr. Rs.
Capital 1M Jan. 2003 8,950 -
Drawings
-
1,050
Stock I U Jan. 2003 3,725 -
Purchases 23,100 -
Sales -
39,425
Wages and Salaries 6,205
-
Lighting and heating 310
-
Equipment 3,600
-
Carriage Outward
-
230
Return Inwards 105
-
Return Outwards
-
290
Provision for bad debts 350 -
Discount allowed 285
-
Discount received
-
315
Rent, Rates and Insurance 1,115
-
Motor Vehicles 1,475
-
Cash in hand 110
-
Sundry Creditors 4,925
-
Sundry Debtors
-
13,920
Bank overdraft 975
55,230 55,230
(7) The following Trial Balance of a firm as on 31" March 2004 is not correct. Recast it correctly.
Debit Balances Credit Balances
Rs. Rs.
Debtors 65,000 Discount allowed 26,000
Purchases 3,20,000 Carriage 5,500
Wages 1,30,000 Cash in hand 4,500
Salaries 40,000 Bank Balances 60,500
Traveling Expenses 10,000 Repairs 2,100
Insurance 3,000 Sundry Expenses 1,100
Mortgage Interest 3,000 Sales 6,00.000
Buildings 80,000 Capital 2,50,000
Machinery 1,30,000 Rent & Taxes 16,500
Furniture 15,000
Stock 54,000
Mortgage loan 70,000
Creditors 42,000
Commission earned 4,200
9,66,200 9,66,200
(8) Prepare a Trial Balance from the following balances:
Rs. Rs.
Opening Stock 1.20,000 Cash at bank 2,41,000
Machinery 3,00,000 Sundry Debtors 2,35,000
Sales 9,00,000 Wages 1,18,000
Sundry Creditors 1,88,000 Postage & Telegrams 1,000
Rent Received 27,000 Advertising 9,100
Repairs 5,500 Printing & Stationery 6,200
Salaries 60,000 Cash on hand 5,200
Purchases 5,30,000 Land & Buildings 6,50,000
General Expenses 22,000 Furniture 12,000
Capital 12,00,000
[Aos : Trial Balance Total Rs. 23,15,OOOJ
(9) From the following balance, prepare a Trial Balance as on December 31,2003:
Rs. Rs.
Capital (1.1.2003) 1,80,000 Purchases 1,60,000
Stock of goods 50,000 Plant 1,80,000
Insurance 3,000 Discount earned 2,000
Wages 80,000 Creditors 65,000
Bad Debts 3,250 Salaries 8,000
Sales 3,80,000 Debtors 56,500
Cash at bank 34,000 Rent 20,000
Returns Inwards 10,750 General Expenses 13,000
Cash in hand 6,000 Discount allowed 2,500
[Ans : Trial Balance Total Rs. 6,27,000]
Subsidiary Books (Special Journals)
In order to understand the procedure of recording transactions of business, it is necessary to consider
the special journals of each book are given below:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Sales Book
Purchase Book
Sales Returns Book
Purchase Returns Book
Bills Receivable Book
Bills Payable Book
Cash Book:
(a) Simple Cash Book
(b) Cash Book with Discount Column
(c) Cash Book with Bank and Discount Column
(d) Petty Cash Book
These Books can be exhibited in the following chart :
Types of Subsidiary Books (Special Journals)
!
Sales
Book
r
Purchase
Book
Simple Cash
Book
~
r r r
Sales Return
Book
r
Cash Book with
Discount Column
Purchase Return
Book
r
Cash Books with
Bank and Discount
Column
Bills
Payable
Book
r 1
Bills Cash
Receivable Book
Book
r
1
Petty Cash Book
Purpose of Subsidiary Books
The following are the purpose of subsidiary books summarized as :
(1) Sales Book
(2) Purchase Book
(3) Sales Return Book
(4) Purchase Return Book
(5) Bills Receivable Book
To record credit sales of goods ..
To record credit purchases of goods.
To record return outwards to suppliers.
To record return inwards from customers.
To record bills received.
(6) Bills Payable Book To record bills payable accepted.
(7) Cash Books To record all cash receipts and payments.
59
(1) Sales Book: Sales Book is also termed as "Day Book." This book deals with recording sale of
goods on credit. In other words all credit sales are recorded in this book. Cash Sales are not recorded in
Sales Journal.
(2) Purchases Book: Purchases Book is also known as "Brought Day Book" or "Invoice Book" or
"Invoice Journal." This book deals with recording purchase of goods on credit. In other words all credit
purchases are recorded in this book. The purchase of goods which are meant for resale. Cash purchase of
goods are not recorded in Purchase Books, it will be recorded in the Cash Books only.
(3) Sales Returns Book: This book is also called as "Return Inwards Book." This book is meant for
recording transactions relating to sales return made by the customers to whom the goods have been sold on
credit. As soon as goods return from the customers a 'Credit Notes' sent to the customers indicating that
his account has been credited.
(4) Purchase Returns Book: It is also known as "Purchase Outward Book" or "Purchase Outward
Journal." This book is maintained to record of transactions relating to return of purchased goods on credit.
As soon as goods are return to the supplier a "Debit Note" has been prepared and sent to the supplier
indicating that his account has been debited.
(5) Bills Receivable Book: This is otherwise termed as "Bills Receivable Journal." This book is used
for recording the details of bills received from the customers. In other words, ~ t is the document
acknowledge the amount of receivable from the customer or drawer.
(6) Bills Payable Book: This book is also called as "Bills Payable Journal." It is used for recording
the details of bills accepted by the firm. In other words, it is the written proof prepared by the firm to
acknowledge the amount payable to supplier.
Illustration: 14
Enter the following transactions in the purchase book of Ravi & Co. :
2003
January 1 Goods purchased from Raju & Co., Mumbai on credit 100 bags rice @ Rs.2()(), trade discount
allowed 10%.
" 10 Bought goods from Gupta & Co., New Delhi on credit 200 bags coffee @ Rs.l00, less 1'0% Trade
Discount.
"30 Bought goods from Ram & Co., Bangalore on credit 100 tins of ghee @ Rs. 500 less 10% discount
60
Solution:
Purchase Journal
Date Name of Suppliers L.F. Debit Note Amount
2003 Raju & Co. 100 bags of rice @ 200 20,000
Jan. 1 Less : 10% Trade Discount 2,000 18,000
" 10 Gupta & Co. 200 bags coffee & 100 20,000
Less : 10% Trade Discount 2,000 18,000
" 30 Ram & Co. 100 tins of ghee @ 500 50,000
Less : 10% discount 5,000 45,000
Purchase Nc 81,000
Illustration: 15
Record the following transactions in the Sales Day Book and post them in to the ledger:
2003
March 1 Sold to James & Co.
10 Meters Silk @ Rs.20
10 Meters Wool @ Rs.30
March 15 Sold to William & Co.
10 Meters Cotton @ Rs.l00
20 Meters Velvet @ Rs.50
March 30 Sold to Ram & Co.
30 Meters Knitted @ Rs.50
SolVltion:
Date
-
2004
Mar. 1
" 15
" 30
Dr.
Sales Journal
Name of Suppliers
James & Co.
IOMeters Wool @ Rs.30
Williams & Co.
10 Meters Cotton @ Rs.IOO
20 Meters Velvet @ Rs.50
Ram & Co.
30 Meters Knitted @ Rs.50
Sales Nc
Ledger
James & Co.
LF. Outward Invoice No. Amount
200
300
1,000
1,000
500
1,500
4,500
Cr.
2003 2003
Mar. 1 To Sales Nc 500 Mar. 31 By Balance cld 500
500 500
Apr\. 1 To Balance bId 500
Dr.
2003
Mar. 15 To Sales Nc
Dr.
2003
Mar. 30 To Sales Nc
Dr.
2003
Mar. 31 To Balance cld
Illustration: 16
Williams & Co.
Amount Rs. Date
2003
2000 Mar.31
2000
2000
Ram & Co.
Amount Rs. Date
2003
2000 Mar. 31
2000
2000
Williams & Co.
Amount Rs. Date
2003
4500 Mar. 31
" 15
" 30
4500
Apr!. 1
Particulars l.F.
By Balance cld
Particulars l.F.
By Balance cld
Particulars l.F.
,
By James & Co.
By William & Co.
By Ram & Co.
By Balance bId
61
Cr.
Amount Rs.
2000
2000
Cr.
Amount Rs.
2000
2000
Cr.
Amount Rs.
500
2000
2000
4500
4500
From the following transaction of MIs J. Chandra, you are required to prepare a Bills Receivable
Book and Bills Payable Book
2003
Jan. 1
Solution:
7
10
21
25
26
27
30
31
Acceptance received from Jhon payable six months after date for Rs. 13,000
7 Accepted Mary Ellen's draft for Rs. 8,000 for 4 months
Draw a bill on Dixon for Rs. 5,000 for 6 months
Gave Ram our acceptance for Rs. 10,000 payable 6 months after date
Jhon's acceptance for Rs. 13,000 was retired under a rebate of Rs. 200
Received a bill from Reddy for Rs. 2,000 for 2 months
Accepted a bill of Edward for Rs. 9,000 for 3 months
Accepted May Ellen's draft Rs. 4,000 for 2 months
Drew a bill on Dixon for 4,000 for 3 months and accepted by him payable at State Bank of India, Madras.
Bills Payable Book
Bills Dateo! From Whom Nameo! Dateo! Term Dateo! Where LF. Amount Remarks
S.No Receipts Received Acceptor Bill Maturity Payable
I 2003 Jhon Self 2003 2003
Jan. 1 Jan. 1 6 Months June 4 13,000 Retired
2 "10 Dixon Self "10 6 Months June 13 5,000
3 " 26 Reddy Self
.. 26
2 Months March 29 2,000
4 "31 Dixon Self " 31 13 Months May 3 S81, Madras 4,000
24,000
Bills Payable Book
Bills Dateo! Nameo! the Nameo! Term When Due LF. Where Amount Remarks
S.No. Bill Drawer the Payee Payable
I 2003 2003
Jan. 7 Mary - Ellens Mary - Ellens 4 Months May - 10 8,000
2 "21 Ram Ram 6 Months July - 24 10,000
3 "27 Edward Edward 2 Months April- 30 9,000
4 "30 Mary - Ellens Mary - Ellens 3 Months April-3 4,000
31,000
Dr.
2003
Jan. 31 To Balance cld
Dr.
2003
Jan. 31 To Balance c/d
Dr.
2003
Jan. 31 To Balance cld
Dr.
2003
Jan. I To Jhon
.. 10
To Dixon
.. 26
To Reddy
.. 31
To Dixon
Ledger Account
Jhon Account
Amount Rs. Date
2003
13,000 Jan. 1
13,000
Feb. 1
Ledger Ale
Jhon Ale
Dixon Account
Amount Rs. Date
2003
9,000 Jan. 10
..
31
9,000
Feb. 1
Reddy Account
Amount Rs. Date
2003
2,000 Jan. 26
2,000
Feb. 1
Bills Receivable Account
Amount Rs. Date
2003
13,000 Jan. 31
5,000
2,000
4,000
24,000
24,000
63
Cr.
By Bills }
Receivable Alc 13,000
13,000
Cr.
By Bills }
By Bills }
9,000
Cr.
By Bills }
2,000
Cr.
24,000
64
Dr.
Mary Ellens Account
Date Particulars J.F. Amount Rs. Date Particulars
2003 2003
Jan. 7 To Bills Payable Alc 8,000 Jan. 31 By Balance cld
.. 30
To Bills Payable Alc 4,000
12,000
Feb. 1 By Balance bId 12,000
Dr. Ram Account
2003 2003
Jan. 21 To Bills Payable Alc 10,000 Jan.31 By Balance cld
10,000
Dr. Edward Account
2003 2003
Jan. 27 To Bills Payable Alc 9,000 Jan. 31 By Balance cld
9,000
Feb. 1 To Balance BId 9,000
Dr. Bills Payable Account
2003 2003
Jan. 31 To Balance cld 31,000 Jan. 7 By Mary Ellens
.. 21
ByRam
.. 27
By Edward
.. 30
By Mary Ellens
31,000
Illustration: 17
Enter the following transactions in proper subsidiary books and post in to ledger:
2003
January 1 Goods purchased from Ahuja & Co. Rs. 40,000
3 Goods sold to Sharma & Co. Rs. 20,000
5 Kumar & Co Sold Goods to us Rs. 20,000
10 William purchased goods from us Rs. 14,000
15 Damaged goods returned by Sharma & Co. Rs. 1,600
20 Damaged gods returned to Ahuja & Co. Rs. 1,000
22 Damaged goods returned by William 1,800
25 Goods sold to Ravi & Co. for cash Rs.lO,OOO
27 Bought goods from Jhon & Co. Rs.12,OOO
29 Damaged goods returned to James & Co. Rs.2000
31 Goods sold to Ram & Co. Rs.l2,OOO
Cr.
J.F. Amount Rs.
12,000
12,000
Cr.
J.F. Amount Rs.
10,000
10,000
Cr.
J.F. Amount Rs.
9,000
9,000
Cr.
J.F. Amount Rs.
8,000
10,000
9,000
4,000
31,000
31,000
Solution:
Purchases Book
Date Name of suppliers L.F. Inward Invoice No. Amount Rs.
2003
Jan. 1 Ahuja & Co. 40,000
" 5 Kumar & Co. 20,000
" 27 Jhon & Co. 12,000
72,000
Sales Book
Date 'Name of Customers LF. Outward Invoice No. Amount Rs.
2003
Jan. 3 Sharma & Co. 20,000
"10 William 14,000
" 25 Ravi & Co. 10,000
" 31 Ram & Co. 12,000
56,000
Purchases Return Book
Date Name of Suppliers LF. Debit Note No. Amount Rs.
2003
Jan. 20 Ahuja & Co. 1,000
" 29 James & Co. 2,000
3,000
Sales Return Book
Date Name of Customers LF. Credit Note No. Amount Rs.
2003
Jan. 15 Sharma & Co. 1,600
" 22 William & Co. 1,800
3,400
Ledger
Dr. Ahuja & Co. Account Cr.
Date Particulars J.F. Amount Rs. Date' Particulars J.F. Amount Rs.
2003 2003
Jan. 20 To Purchase Return 1,000 Jan. 31 By Purchases 40,000
" 31 To Balance c/d 39,000
"
"
40,000 40,000
66
Dr.
Dr.
Dr.
Dr.
Dr.
Date
2003
Jan. 31
Date
2003
Jan. 31
Date
2003
Jan. I
..
5
.. 27
Feb. I
Date
2003 <
Jan. 3
Feb. 1
Date
2003
Jan. 10
Feb. I
Particulars J.F.
To Balance cld
Particulars J.F.
To Balance cld
Particulars J.F.
To Ahuja & Co
To Kumar & Co
To Jhon & Co
To Balance bId
Particulars J.F.
To Sales
To Balance bId
Particulars J.F.
To Sales
To Balance bId
Kumar & Co. Account Cr.
Amount Rs. Dale Particulars J.F. Amoullt Rs.
2003
20,000 Jan. 31 By Purchases 20,000
20,000 20,000
Feb. I By Balance bId 20,000
Jhon & Co. Account Cr.
2003
12,000 Jan. 27 By Purchases 12,000
12,000 20,000
2003
Feb. I By Balance bId 12,000
Purchases Account Cr.
2003
40,000 Jan. 31 By Balance cld 72,000
20,000
12,000
72,000 72,000
72,000
Sharma & Co. Account Cr.
2003
20,000 Jan. 15 By Sales Return 1,600
.. 31
By Balance cld 18400
20,000 20,000
18,400
William Account Cr.
2003
14,000 Jan. 22 By Sales Return 1,800
.. 31
By Balance cld 12,200
~ 4 , O O O 14,000
12,200
Dr. Ravi & Co. Account
2003 2003
Jan. 25 To Ravi & Co. 10,000 Jan. 31
10,000
Feb. 1 To Balance bid 10,000
Dr. Sales Account
2003 2003
Jan. 31 To Ram & C ~ 12,000 Jan. 31
12,000
Dr. Sales Account
2003 2003
Jan. 31 To Balance cJd 56,000 Jan. 3
.. 10
.. 25
.. 31
56,000
Feb. 1
Dr. James & Co. Account
2003 2003
Jan. 31 To Purchase Return 2,000 Jan. 31
2,000
Dr. Purchase Return Ale
2003 2003
Jan. 31 To Balance cld 3,000 Jan. 20
..
29
3,000
Feb. 1
Particulars J.F.
By Balance cJd
Particulars J.F.
By Balance cld
Particulars J.F.
By Shanna & Co.
By William
By Ravi & Co .
By Ram & Co.
By Balance bid
Particulars
.
J.F.
By Balance cJd
Particulars J.F.-
By Ahuja & Co.
By James & Co.
To Balance bid
67
Cr.
Amount Rs.
10,000
10,000
Cr.
Amount Rs.
12,000
12,000
Cr.
Amount Rs.
20,000
14,000
10,000
12,000
56,000
56,000
Cr .
Amount Rs.
2,000
2,000
Cr.
Amount Rs.
1,000
2,000
3,000
3,000
68
Dr.
Date
2003
Jan. 15
..
22
Feb. I
Particulars 1.F.
To Sharma & Co.
To William & Co .
To Balance bId
Sales Return Ale Cr.
Amount Rs. Date Particulars 1.F. Amount Rs.
2003
1,600 Jan. 31 By Balance c/d 3,400
1,800
3,400 3,400
3,400
Illustration: 18
From the following transactions, you are required to enter in the related subsidiary books and post
them in the ledger :
2003
March I
2 -
3
4
5
16
28
30
Solution:
Date
2003
March I
28
Date
2003
March I
4
30
Dale
2003
March 3
Purchase of goods from Sharma Rs. 2,000
Sold goods to Varma Rs. 5,000
Goods return to Sharma Rs. 200
Sold goods to Murugan Rs. 10,000
Goods return by Varma Rs. 400
Goods return by Murugan Rs. 200
Goods Purchased from Aravind Rs. 4,000
Sold goods to Mahesh Rs. 7,000
Purchases Book
Name of Suppliers L.F.
Sharma ...
Aravind ...
Sales Book
Name of Customers LF.
Varma ...
Murugan ...
Mahesh ...
Inward Invoice No.
Outward Invoice No.
Purchases Return Book
Name of Suppliers L.F. Debit Note No.
Sharma ...
...
Amount Rs.
2,000
4,000
6,000
Amount Rs.
5,000
10,000
7,000
22,000
Amount Rs.
200
200
Date Name of Customers
2003
March 5 Varma
16 Murugan
Dr.
2003 1 to Purchase Return
March 31 To Balance c/d
Dr.
2003
:
March 31 To Balance c/d
Dr.
2003
March 1 To Sharma
28 To Aravind
Sales Return Book
L.F.
...
...
Ledger
Sharma Account
Amount Date
Rs.
200 2003
1,800 March 1
2,000
Feb. 1
-
Aravind Account
Amount Date
Rs.
2003
4000 Mar. 28
4000
Feb. 1
Purchase Account
Amount Date
Rs.
2003
2,000 Mar. 31
4,000
6,000
6,000
69
Credit Note No. Amount Rs.
400
200
600
Cr.
Particulars l.F. Amount
Rs.
By Purchases 2,000
2,000
By Balance bid 1,800
Cr.
Rs.
By Purchases 4000
4000
4000
By Balance bId 4000
Cr.
Ks.
6,000
70
Dr.
Dr.
Date
2003
Mar. 2
Feb. 1
Date
2003
March 4
Feb.l
Dr.
Date
2003
March 4
Feb. 1
Dr.
Date
2003
March 2
31
Paniculars J.F.
To sales
To Balance bid
Paniculars J.F.
To Sales
To Balance bid
Paniculars J.F.
To Sales
To Balance bid
Paniculars J.F.
To Balance c/d
Varma Account Cr.
Amount Date Paniculars J.F. Amount
Rs. Rs.
2003
5,000 Mar. 5 By Sales Returns 400
.. 31
5,000 5,000
4,600
Account Cr.
Rs. Rs.
2003
10,000 Mar. 16 By Sales Return 200
.. 31
10,000 10,000
9,800
Account Cr.
Rs. Rs.
2003
7,000 Mar. 31 By Balance c/d 7,000
7,000 7,000
7,000
Sales Account Cr.
Rs. Rs.
2003
22,000 Mar. 31 By Varma 5,000
..
4 By Murugan 10,000
.. 30
By Mahesh 7,000
22,000 22,000
Feb. 1 By Balance bid 22,000
Dr.
Date Particulars
2003
March 31 To Balance cld
Dr.
Date Particulars
2003
March 5 To Varma
16 To Murugan
Purchase Return Account
l.F. Amount Date
Rs.
2003
200 Mar. 3
200
Feb. 1
Sales Return Account
l.F. Amount Date
Rs.
2003
400 Mar. 31
200
600
600
Particulars l.F.
By Sharma
To Balance bid
Particulars l.F.
By Balance c/d
71
Cr.
Amount
Rs.
200
200
200
Amount
Rs.
600
60()'
(7) Cash Book : Cash Book is used for recording the transactions relating to cash receipts and casll
payments. In order to adjust the cash book according to the needs and convenience, the Cash Book has divided
into two sides for recording the cash receipts and payments. Accordingly cash receipts are recorded on one
side (Debit Side) and cash payments are recorded on the other side (Credit Side). Thus, Cash Books is used is
practice and it services the purpose of original entry as well as a book of ledger account.
The following are the classification of Cash Book such as:
(1) Simple Cash Book (Single Column)
(2) Two Column Cash Book (Cash Book with Discount Column)
(3) Three Column Cash Book (Cash Book with Bank and Discount Column)
(4) Petty Cash Book
(1) Simple Cash Book
This type of cash book is usually used like an ordinary cash account. It refers to recording of
transactions relating to all receipts and payments of cash during a particular period. The specimen ruling of
the Simple Column Cash Book is as follows :
Dr. Simple Cash Book (Single Column) Car.
Date Receipts R.N. LF. Amount Date Payment R.N. LF. Amowrt
Particulars Rs. Particulars Rs .
.
From the above spetimen of Simple Cash Book Journal the following points can be observed:
(1) It has divided into two parts, i.e., Debit Side and Credit Side.
(2) All receipts of cash are recorded in Debit Side and all payments of cash are recorded in Credit
Side of Cash Book.
(3) L.F. - Stands for Ledger Folio, i.e., reference to Main Book
(4) R.N. - Stands for Receipt No., i.e., reference for Receipts.
(5) V.N. - Stands for Voucher No., i.e., reference for Payments
Illustration: 19
From the information given below, you are required to prepare Simple Cash Book of Mr. John:
2003
Jan. 1 Cash in hand Rs. 10,000
1 Cash paid into Bank Rs. 20,000
5 Cash received from David Rs. 10,000
9 Paid for stationery Rs. 5,000
10 Paiq to rent Rs. 4,000
15 Cash received from Govind Rs. 7,000
17 Paid for advertisement Rs. 5,000
23 Paid Interest Rs. 2,000
25 Bought goods for cash Rs. 10,000
27 Cash received from Ram Rs. 15,000
31 Paid for repair charges Rs. 1,000
Solution:
Dr. Cash Book of John (Single Column)
Date Receipts V,N. LF. Amount Date Payment
Particulars Rs. Particulars
2003 2003
Jan. 1 To Balance bId 10,000 Jan.! By Bank
5 To David 10,000 3 By Purchases
7 To Sales 30,000 9 By Stationery
15 To Govind 7,000 10 By Rent
18 To Sales 10,000 13 By Bank
20 To Dividend 3,000 17 By Advertisement
27 To Ram 15,000 23 By Interest
25 By Purchases
31 By Repair Charges
31 By Balance cld
85,000
Feb.! To Balance bId 8,000
Cr.
V,N. LF. Amount
Rs.
20,000
15,000
5,000
4,000
15,000
5,000
2,000
10,000
1,000
8,000
85,000
Illustration: 20
Enter the following transactions in the cash book of James & Co.:
2003
Mar. 1 James & Co. commences business with Rs. 60,000 in cash
Goods purchased for cash from Pande & Co. Rs. 7,400
Cash Sales Rs. 9,000
3
16
25
26
27
28
29
30
31
Solution:
Paid cash to Chandra & Co. Rs. 3,000
Paid cash for furniture Rs. 4,000
Paid commission Rs. 300
Paid salaries to office staff Rs. 500
Paid for Advertising Rs. 400
Received commission Rs. 500
Paid office rent Rs. 1,000
Dr. Simple Cash Book
Date Particulars J.F. Amount Date
Rs.
2003 2003
Mar. 1 To Capital 60,000 Mar. 3
..
16 To Sales 9,000
..
25
..
30 To Commission 500
..
26
..
27
..
29
..
29
..
31
..
31
69,500
Apr!. 1 To Balance bid 52,900
(2) Two Column Cash Book
Particulars
By Purchases
By Chandra & Co.
By Furniture Nc
By Commission
By Salaries
By Advertising
By Office Rent
By Balance cld
73
Cr.
J.F. Amount
Rs.
7,400
3,000
4,000
300
500
400
1,000
52,900
69,500
It is also known as Cash Book with Discount Column. This Cash Book is meant for recording
transactions relating to all receipts and payments of cash and discount. In the two column cash book, on
each side there are two columns which are as follows :
(1) Two columns with each side:
Cash and Discount Columns with Debit Side.
Cash and Discount Columns with Credit Side.
(2) Discount Column indicates: recording all discounts allowed and received:
Debit Side: recording all discounts allowed by firm.
Credit Side: recording all discounts received by firm.
(3) Cash Column indicates: recording all cash receipts and cash payments:
Debit Side: recording all cash receipts.
Credit Side: recording all cash payments.
fllustration: 21
. From the following transactions, you are required to prepare a Cash Book with Cash and Discount
Columns:
2003
.March 1
2
3
4
5
6
7
8
10
14
17
27
29
Solution:
Dr.
Date
2003
Mar. 1
6
7
17
27
31
Balance of cash in hand Rs. 10,000
Purchased goods and paid by cheque Rs. 2,000
Paid for advertising Rs. 100
Purchased furniture and paid by cheque Rs. 200
Received for cash sales Rs. 1,000
Received a cheque for Rs. 1,400 from Mr. M and allowed him a discount of Rs. 15
Gave a cheque for Rs. 1,700 and was allowed a discount of Rs. 20
Mr. R directly paid into Bank in our account Rs. 900
Withdraw for office use Rs. 100
Received from Mr. K by money order Rs. 95
Withdraw by cheque for personal use Rs. 75
Cash Book (Double Columns)
Particulars LF. Discount Cash Date Particulars
Rs. Rs.
2003
To Balance bid 10,000 Mar.2 By Bank
To Sales 1,000 3 By Purchases
To Mr. M 15 1,400 4 By Advertisement
To Bank 100 5 By Furniture
To Mr. K 95 8 By Bank
10 By Mr. R
To Balance cld 2,380 14 By Bank
29 By Drawings
15 14,975
Apr. 1 By Balance bId
L.F.
Ihstration: 22
Cr.
Discount Cash
Rs. Rs.
8,000
2,000
100
200
20 1,700
900
2,000
75
20 14,975
2 ,380
From the following particulars, you are required to prepare a Cash Book with Cash and Discount Col-
tmmsonly:
2003
3 Purchase office furniture by cheque Rs. 5,000
7 Paid Sharma Rs.l,OOO and was allowed a discount of Rs. 60
10 Received Rs. 2,000 from cash Sales
11 Paid for cash purchases Rs. 2,840 and received Rs. 160 as discount
13 Withdrawn for personal use Rs. 2,000
20 Drawn from bank for office use Rs. 500
25 Paid salaries in cash Rs. 500
29 Received for cash sales Rs. 1,500
31 Deposited in bank Rs. 5,000
Solution:
Dr. Cash Book (Double Columns)
Date Particulars L.F. Discount Cash Date Particulars
Rs. Rs.
2003 2003
Jan.1 To Balance bId 20,000 Jan.2 By Bank
4 To Sales 3,000 3 By Furniture
10 To Sales 2,000 7 By Sharma
20 To Bank 500 11 By Purchases
29 To Sales 1,500 13 By Drawings
25 By Rent
31 By Bank
31 By Balance cld
27,000
Feb. I To Balance bId 660
Illustration: 23 .
75
Cr.
L.F. Discount Cash
Rs. Rs.
10,000
5,000
.
60 1,000
160 2,S40
2,000
500
5,000
660
220 27,000
From the following transactions of Chandha & Co., you are required to prepare a Double Column
Cash Book : ' .
2003
Mar.! Balances of cash in hand Rs. 3,200
Dr.
Date
2003
Mar. I
"6
"10
"12
"13
4 Paid to Srivastava (discount allowed Rs. 40) Rs. 1,460
6 Goods sold to Ram for cash Rs. SOO
S Brought furniture for cash Rs. 3,000
10 Sale of old newspapers Rs. 40
12 Received cash from Basu & Co. in full settlement of his debt Rs. 1,200 (Rs. 1,140)
13 Received cash from Shukla & Co. (discount allowed Rs. 30) Rs. SOO
15 Paid Salaries to office staff Rs. 1,000
20 Received from Tandan & Co. against debt 'previously written off Rs. 300
25 withdraw from bank Rs. SOO
31 Sale of old furniture Rs. 600
Cash Book (Double Column)
Particulars L.F. Discount Cash Date Particulars
Rs. Rs.
2003
To Balance bId 3,200 Mar.4 By Srivastava Alc
To Sales Alc SOO "s By Furniture Alc
To Old }
Newspaper's Alc 40 " 15 By Salaries Alc
(Sales for Cash)
To Basu & Co. Ale 60 1,140 " 31 By Balance eld
To Shukla & Co. Alc 30 SOO
L.F.
Cr.
Discount Cash
Rs. Rs.
40 1,560
3,000
1,000
3,120
"20 To Bad Debts Nc 300
"25
To Bank Nc } 800
(Withdrawals)
"31 To Old Furniture Nc 600
(Sale of Old furniture)
90 7,680 40 7,680
Apr!. 1 Th Balance bId 3,120
(3) Three Column Cash Book
Three Column Cash Book is also known as "Cash Book with Discount and Bank Column." This
cash book has divided into three columns on each side which are as follows :
(1) Three Columns with Each Side:
(a) Cash, Discount and Bank Columns with Debit Side.
(b) Cash, Discount and Bank Columns with Credit Side.
(2) Cash Column Indicates: Recording all Cash Receipts and Cash Payments.
Debit Side Recording all Cash Receipts.
Credit Side Recording all Cash Payments.
(3) Discount Column Indicates : Recording all discounts allowed and discounts received.
Debit Side
Credit Side
Recording all discounts allowed by firm.
Recording all discounts received by firm.
(4) Bank Column Indicates: Recording all deposits and withdrawals made in the bank.
Debit Side
Credit Side
Recording all deposits (both cash and cheque) are made in the bank.
Recording all withdrawals from the bank.
(5) 'C' - Stands for reference.
(6) L.F. - Stands for Ledger Folio reference to main book.
(7) Contra Entries : When the deposit is made in the bank, it is entered in debit side (receipts
side) and credited in cash column on the credit side of the cash book. Similarly, when any
amount withdrawn from bank for business purposes, it is recorded in debit side (receipts side)
of cash column and bank column is credited on the payment side. Thus. both cash column and
bank column in the cash book serves as Cash Account and Bank Account. There is no need to
post them in ledger. Such type of entry appearing on both sides of the cash book is known as
"Contra Entry." The capital letter 'C' is used for this purpose.
(8) Cheque Received : When the cheque is received and it is encashed or deposited on the same
day then it is directly recorded in the transactions on the debit side of bank column without
entering in the cash-column. If the cheques are received and they are encashed or deposited on
the different dates. Contra Entry will be recorded in the cash book by entering debited in bank
column and credited in cash column on the debit side of the cash book. Similarly. cheque
payments are recorded on the credit side of the bank column in cash book.
(9) Cheques Dishonoured : When the cheque is dishonoured, it should be recorded transactions
credited in the bank column on the credit side of the cash book.
Illustration: 24
From the following transactions, you are required to Prepare Three Column Cash Book of Ramesh
for the month of Jan. 2003:
2003
Jan. 1 Cash balance Rs. 10,000
1 Bank balance Rs. 5,000
3 Paid office rent by cheque Rs. 500
8 Goods purchased by cheque Rs. 7,000
11 Deposited into bank Rs. 5,000
14 Goods purchased by cash Rs. 2,000
17 Withdrawn from bank for office use Rs. 500
18 Withdrawn from bank for personal use Rs. 400
20 Nancy settled her account for Rs. 4,000 by giving a cheque for Rs. 3,850
23 Received from Sharma Rs. 4,900 in full settlement of Rs. 5,000
25 Paid into bank Rs. 4,000
26 Goods purchased from Murugan for Rs. 1,500 by cheque
30 Paid telephone charges Rs. 500
Solution:
CASH BOOK OF RAMESH (Three Columns)
Date Paniculars V.N. LF. Dis Cash Bank Date Paniculars
count Rs. Rs.
Rs.
2003 2003
Jan.l To Balance bid 10,000 5,000 Jan.2 By Bank Ale (c)
2 To Cash Nc (c) 2,000 3 By Rent
7 To Sales Nc 10,000 5 By Salaries Nc
II To Cash (c) 5,000 8 By Purchase
17 To Bank (c) 500 II By Bank Nc (c)
20 To Nancy Nc 150 3,850 14 By Purchase
23 To Sharma Nc 100 4,900 17 By Cash Nc (c)
25 To Cash Nc (c) 4,000 18 By Drawings
25 By Bank Nc (c)
26 By Murugan
30
By TelePhOne}
500 Charges
31 By Balance c/d
250 20,500 24,750
Feb 1 To Balance bid 2,500 14,350
V.N. LF. Dis- Cash Bank
count Rs. Rs.
Rs.
2,000
500
5,000
7,000
5,000
2,000
500
400
4,000
1,500
500
500
2,500 14,350
20,500 24,750
U1ustration: 2S
Enter the following transactions in Cash Book with Bank and Discount Columns :
2003
Jan.l Jhon commenced business with Rs. 4,500
3 Remitted in to current account with Indian Bank Rs. 3,500
5 Issued a cheque to William for acquired a building Rs. 2,500
8 Paid to Ram for office furniture by cheque Rs. 500
12 Purchased goods by cheque Rs. 400
14 Drawn Rs. 50 from bank
17 Goods sold to Kumar for Rs. 600
22 Deposits in to bank Rs. 1,000
24 Goods purchased for Rs. 500
25 Goods sold to Wilson by Cheque Rs. 750
27 Paid Rs. 50 by cheque as the premium for insuring building against fire
28 Paid office rent Rs. 25
29 Withdrew from bank for personal use Rs. 250
30 Paid wages Rs. 45
31 Paid to James Rs. 540 in full settlement by cheque we owed to James Rs. 550 for goods purchased
31 Received from Ravi & Co. a cheque for Rs.740 in full settlement of Rs. 755
Solution:
Dr. Cash Book (Three Column)
Date Paniculars LF. Dis- Bank Cash Date Paniculars
count Rs. Rs.
Rs.
2003 2003
Jan. I To Capital 4,500 Jan.3 By Bank
" 3 To Cash C 3,500
., 5
By Building
" 14 To Bank C 50 " 8 By Office Furniture
"17 To Sales 600 "12 By Purchases
"22 To Cash C 1,000 "14 By Cash
"25 To Sales 15 750 "22 By Bank
" 31 To Ravi &Co 740 "24 By Purchases
" 27 By Insurance Premium
"28 By Office rent
"29 By Drawings
" 30 By Wages
" 31 By James
" 31 By Balance c/d
15 5,990 5,150
Feb. 1 To Balance bid 1,700 80
Illustration: 26
Enter the following transactions in the appropriate type of cash books :
2003
Mar. 1 Opening balance :
Cash in hand Rs. 15,000
Cash at Bank Rs. 20,000
3 Rent paid by cheque Rs. 10,000
5 Cash received on account of sale of merchandise Rs. 15,000
LF.
C
C
C
10 Paid to Mahesh & Co. by cheque Rs. 10,000 and earned Rs. 1,000 as cash discount
Dis- Bank
count Rs.
Rs.
2,500
500
400
50
50
250
10 540
1,700
10 5,990
Cr.
Cash
Rs.
3.500
1,000
500
25
45
80
5,150
Accounting Booles and Records 79
14 Received from Gupta & Co. by cheque Rs.lO,OOO and allowed him Rs. 500 as cash discount
17 Cash Sales Rs. 1,00,000
25 Good purchased for cash Rs. 75,000
31 Salaries paid to office staff Rs. 25,000
Solution:
Dr. Cash Book (Three Column)
Date Particulars LF. Dis Cash Bank Date Particulars
count Rs. Rs.
Rs.
Mar. 1 To Capital 15,000 20,000 Mar. 3 By RenlNc
"5 To Cash 15,000 "10 By Mahesh & Co. Nc
"14 To Bank 10,000 "25 By Purchase Nc
"17 To Sales "31 By Salaries Nc
"22 To Cash 500 1,00,000 "31 By Balance cld
500 1,30,000 30,000
Aprl. 1 To Balance bid 30,000 10,000
Petty Cash Book
Cr.
LF. Dis; Cash I Bank
caul." Rs. Rs.
Rs.
10,000
1,000 10,000
75,000
25,000
30,000 10,000
-
1,000 1,30,000 30,000
Petty Cash Book has been designed in order to minimize the recording of numerous-transactions in
the cash book. This is also termed as "Analytical Petty Cash Book." In a business concern many small
expenses incurred frequently relating to postage, stationery, carriage, cleaning, and travelling etc. These
small expenses are recorded and maintained in a separate cash book is known as "Petty Cash Book." .
A person who is responsible for recording and maintaining this Petty Cash Book is known as "Petty
Cashier." Accordingly all small payments supported by vouchers or receipts are recorded in the petty cash
book during a particular period.
To ensure the more convenient and efficient method of recording petty payments, it has divided in to
separate column according to their respective heads of expenses in the petty cash book. This is used to
record the total expenses incurred under each head is debited to the concerned expenses account (Nominal
Alc) and credited to the Petty Cash Account.
Specimen Ruling of Petty Cash Book
The following is a specimen ruling of Petty Cash Book:
Dr. Petty Cash Book Dr.
Cash Date Particulars Vr. Total Postage Printing Carriage Traveling Sundry
Received No Amt. Paid & Telegram & Expenses Expenses
Rs. Rs. Rs. Stationery Rs. Rs. Rs.
Illustration: 27
Enter the following transactions in a columnar Petty Cash book of Ram & Co. The cashier Mr.
Anand started with an imprest of Rs. 250 on 1st March 2003, and was reimbursed the total amount
expected at the end of the month. .
2003
March 2
3
5
7
10
12
15
17
19
20
23
27
29
30
Typing papers Rs. 10, Telegrams Rs. 15
Postage Rs. 6, Conveyance Rs. 17
Traveling Rs. 18, Postage Rs. 14
Postage Rs. 10
Typing Papers Rs. 7
Telephone Charges Rs. 10
Office Cleaning Rs. 8
Telegrams Rs. 9
Miscellaneous Expenses Rs. 15
Stationery Rs. 16
Conveyance Rs. 15
Postage Rs. 16
Ink and Typing Paper Rs. 10
Telegrams Rs. 10
Solution:
Petty Cash Book
Date farticulars of c.F. Total Date Particulars of V. No. Sationery Postage Telegrams Travelling Conveyance Office Misces. Total
Receipts Rs. Payments Rs. Rs. Rs. Rs. Rs. Cleaning Rs. Rs. Rs.
2003 Cash from 2003
Mar. 1 Cashier 250 Mar.2 By Typing
} paper &
Telegram 10 15 25
3 Postage & }
Conveyance 6 17 23
5 Traveling & 14 18 32
Postage
7 Postage 10 10
10 Typing paper 7 7
12 Telephone 10 10
ElPenses
15 Office Cleaning 8 8
17 Telegrams 9 9
19 Miscellaneous 15 15
20 Stationery 16 16
23 Conveyance 15 15
27 Postage 16 16
29 Ink and Type 10 10
Paper
30 Telegrams 10 10
f---
~
43 56 34 18 32 8 15 206
2003
Apl.l To balance bid 44 By Balance cld 44
1
To cash r}
from Cashier 206 250
00
-
Illustration: 28
A petty cashier received Rs.300 as the petty cash imprest on Monday, the 2
nd
January 2004. During
the week his expenses were as under :
Jan. 3 Paid for carriage Rs. 12
4 Postage stamps purchased Rs. 25
6 Purchased stationery Rs. 30
8 Purchased stationery for office use Rs. 40
10 Paid newspaper Rs. 15
15 Paid Telegram Rs. 15
19 Paid for cool drinks Rs. 20
25 Purchased postal stamps Rs. 25
30 Wages to Clerk Ram Rs. 40
You are required to prepare a Petty Cash Book for the month of January 2004.
Solution:
Petty Cash Book
Date Particulars C.F. Total Date Particulars of V. No. Stationery Telegrams Postages Carr age Sundry Wages Total
ofn!ceipts Rs. Payments Rs. Rs. Rs. Rs. Expenses Rs. Rs.
2004 2004
Jan. 2 To Cash from 300 Jan.3 Carriage 12 12
Cashier "4 Postage 25 25
"6 Stationery 30 30
"8 Stationery 40 40
" 10 News Papers 15 15
" 15 Telegram 15 15
" 19 Cold Drinks 20 20
"25 Postage Stamps 25 25
"30 Wages 40 40
300 70 15 50 27 20 40 222
2004
Feb. 1 To Balance bid 78 Jan.31 To Balance cJd 78
"1 To Cash from
Cashier 222 300
84
QUESTIONS
1. What do you understand by Special Journal?
2. What are the different types of Subsidiary Books?
3. Briefly explain the purpose of Subsidiary Books?
4. What are the types of Cash Book? Explain it briefly.
5. What do you understand by Contra Entries?
6. Write short notes on :
(a) Two Column Cash Book.
(b) Contra Entries.
(c) Sales Return Book.
(d) Bills Payable Book.
7. Draw a specimen ruling of Three Column Cash Book? Explain it briefly.
8. What do you understand by Petty Cash Book?
9. How do you prepare a Petty Cash Book? Explain it briefly.
PRACTICAL PROBLEMS
(1) From the fol.1owing particulars, you are required to prepare a Cash Book with Cash and Discount Columns:
2003
3 Cash received from Ramesh Rs. 600 and discount allowed of Rs. 15
5 Purchased goods for cash Rs. 1,800
7 Paid Ramkumar Rs. 200 and was allowed a discount of Rs. 20
10 Purchased stationery Rs. 40
12 Received from Cash Sales Rs. 1,300
15 Brought furniture for Rs. 250
17 Paid for Advertisement Rs. 175
19 Ramesh who owed Rs. 535 settled his account by paying Rs. 500
29 Received from William Rs. 400 and allowed him a discount of Rs. 10
31 Paid Salaries Rs. 120
[Ans : Cash Balance: Rs. 4515]
(2) From the following particulars, you are required to prepare a Cash Book with Cash and Discount Columns :
2003
4 Cash withdrawn for personal use Rs. 2,400
6 Cash Sales Rs. 15,000
8 Paid Kumar Rs. 10,850 and discount allowed of Rs. 50
11 Goods purchased from Ram on Credit Rs. 10,000
13 Paid Kumar Rs. 5,000 in full settlement of his account
15 Goods purchased from Ram on Credit of Rs. 4,000
23 Paid rent Rs. 4,000
24 Purchased goods from Ram on Credit Rs. 4,300
25 Cash Purchases Rs. 13,500
25 Paid interest Rs. 600
26 Cash withdrawn for office use Rs. 17,500
28 Paid cash to Ram less discount Rs. 14,200
29 Cash received from William Rs. 19,000 and was discount allowed him for Rs. 200
31 Paid cash to Sharma Rs. 2,950 and was discount received from him for Rs. 50
[Ans : Cash Balance Rs. 3,750]
(3) From the given informations, you are required to prepare Cash Book with Discount and Bank Columns:
2003
Jan. Cash in hand Rs. 5,000
Cash paid into Bank Rs. 5,900
Accou;uing Books and Records
5 Purchased goods for cash Rs. 700
7 Cash received from Bank for office use Rs. 350
9 Goods sold for cash Rs. 100 and cheque Rs. 190
13 Received from William Rs. 1,500 and allowed him a discount of Rs. 20
15 Paid James by cheque Rs. 570 in settlement of his account for Rs. 600
17 Received commission by cheque Rs. 220
19 Paid advertisement expenses Rs. 50
23 Cash received from Bank for personal use Rs. 170
25 Paid rent by cheque Rs. 200
27 Sam paid direct into our account in the Bank Rs. 620
29 Received from Kumar a cheque for Rs. 490 and allowed a discount of Rs. 10
30 Cash in excess of Rs. 400 was paid into Bank
[Aos : Cash Balance Rs. 400, Bank Balance Rs. 11,640]
(4) From the following transactions, you are required to prepare Simple Cash Book:
2003
7 Cash received from Govind Rs. 20,000
8 Goods sold to Ramesh for cash Rs. 7,500
12 Purchased goods from John for cash Rs. 3,500
19 Paid advertisement expenses Rs. 3,000
23 Paid interest Rs. 3,000
25 Goods purchased from Murugan for cash Rs. 30,000
26 Cash paid into Bank Rs. 1,00,000
31 Cash received from John Rs. 90,000
[Aos : Closing Cash Balance : Rs. 75,500]
(5) Enter the fonowing transactions in the Purchase Book and Sales Book of Mr. Jain:
2003
Jan. 1 Goods sold to Murugan Rs. 50,000
3 Goods purchased from Ramu Rs. 25,000
5 Sold goods to Govind Rs. 10,000
7 Bought goods from Ramesh Rs. 20,000
9 Goods purchased from John Rs. 30,000
11 Goods sold to Sharma Rs. 50,000
15 Bought goods from Srinivasan Rs. 25,000
17 Goods sold to Ram Rs. 15,000
[Aos : Total of Purchase Book Rs. 1,00,000
Total of Sales Book Rs. 1,25,000]
85
(6) From the following particulars, you are requi!>"..d to prepare Purchase Book, Sales Book, Purchase Return Book and
Sales Return Book:
2003
Jan. 1 Goods Purchased from Gupta Rs. 15,000
2 Brought goods from Jain Rs. 25,000
3 Returned goods to Gupta Rs. 700
5 Goods sold to Reddy Rs. 5,000
7 Sold goods to Sultan Rs. 15,000
15 Purchased goods from Pandey Rs. 20,000
17 Goods retuned from Reddy Rs. 500
19 Received goods returned by Sultan Rs. 1,000
86
22 Sold goods to Kalyani Rs. 25,000
23 Bought goods from Gowda Rs. 30,000
25 Kalyani returned goods worth Rs. 1,500
29 Returned goods to Gowda Rs. 1,700
31 Goods sold to Ramesh Rs. 10,000
[Ans : Total of Purchase book Rs. 90,000
Purchase Returns Books Rs. 2,400
Sales Book Rs. 55,000, Sales Returns Book Rs. 3,000]
(7) From the following information, you are required to prepare a Petty Cash Book under Imprest System:
2003
Jan. 1 Amount received from Cashier for Petty Payments Rs. 400
3 Office cleaning Rs. 25
4 Postage Rs. 10
5 Stationery Rs. 15
6 Telegram Rs. 9
7 Cartage Rs. 12
10 Conveyance Rs. 15
12 Postage Rs. 10
13 Traveling Expenses Rs. 15
15 Cartage Rs. 10
16 Office Cleaning Rs. 15
19 Stamp Rs. 10
21 Telegrams Rs. 20
25 Stationery Rs. 17
27 Typing Paper Rs. 10
29 Ink and Typing Paper Rs. 15
31 Entertainment Rs. 20
[Ans : Closing Balance Rs. 172]
(8) From the information given below, you are required to Prepare a Petty Cash Book Under Imprest System:
2003
Jan. I Cash received from Cashier Rs. 500
2 Postage Rs. 20
3 Stationery Rs. 15
4 Office Cleaning Rs. 15
6 Typing Paper Rs. 10
7 Entertainment Rs. 25
9 Conveyance Rs. 30
10 Telegram Rs. 15
12 Cartage Rs. 20
14 Traveling expenses Rs. 15
17 Postage Rs. 10
19 Telegram Rs. 20
21 Typewriting ribbon Rs. 10
22 Office cleaning Rs. 14
23 Windowpanes Rs. 17
25 Ink Bottle Rs. 22
27 Cartage & Coolie Rs. 14
29 Postage Rs. 15
31 Stationery Rs. 10
[Ans : Closing Balance Rs. 203]
(9) Enter the following transactions in the Bills Receivable Book and Bills Payable Book and Post them in to ledger:
2003
Mar. 1 Received from Ravi his Promissory Note for Rs. 600
10 Accepted a bill of 3 months for Rs. 1,500 drawn by Vimal & Co.
15 Sent out acceptance to Rahul & Co. for Rs. 750
20 Jawahar & Co. drew upon us for 4 months and acceptance given for Rs. 690
25 Sent our draft to Kannan who returned it to us duly accepted for Rs. 300
30 Did not accept a bill drawn by Kumar & Co. for Rs. 400 payable after 3 months
(10) From the following particulars, you are required to prepare a purchase book:
2004
Jan. Bought of Ramesh & Co. Mumbai 20 bags of rice @ Rs. 1,200 per bag 40 tons of wheat @ Rs. 1,500 per ton,
Trade discount 15%
7 Purchased from Sharma & Co. Bangalore Desi Ghee 20 tins, each containing 16kg @ Rs.120 per kg.
Lubricant oil 1,000 litre @ Rs. 6 per litre Trade discount 10%
15 Purchased from Pandey & Co, Madras wheat 30 quintals @ Rs. 500 per quintal; Gram 20 qumtals @ Rs.
1,200 per quintal; rice 10 quintals @ Rs. 1,400 per quintal; cartage and other expenses paid in cash Rs. 700
25 Purchased goods from Moorthi & Co. for cash New Delhi, 50 bales of cotton @ Rs. 1,500 per bale
30 Brought furniture for office use from cartage house, Cochin, on credit, 20 Godraj chairs @ Rs. 300 per chair,
20 Godraj Tables @ Rs. 1600 per table
[Ans: Total of purchase book Rs. 1,64,360]
(11) Enter the following transactions in the Sales Book and Post them in to ledger:
2004
Mar. I Sold Goods to Murthy & Co. : 200 pieces long cloth @ 100
200 pieces shirting @ 75 Packaging and delivery Rs.50
15 Sold goods to Raman & Co.
30 pieces coating @ Rs.loo
20 Sold to Srivastava & Co.
250 blankets @ Rs.75
125 blankets @ Rs.loo
[Ans : Total Sales Book Rs. 69,350]
(12) Record the following transactions in Bills Receivable Book and Bill Payable Book of Ram Lal & Co. and post them in
to ledger:
2004
Jan. I Received a bill from Govind at 2 months for Rs. 3,000
7 Accepted a bill for Rs. 8,000 drawn by Kumaram & Co. for 3 months
15 Drew a bill for Rs. 2,600 by Murugan & Co. was accepted this date for one month
20 Acceptance received from Ram & Co. for 3 months for Rs. 2,500
25 Gave acceptance to Gopal's bill for Rs. 2,400 payable for 2 months
30 Did not accept a bill drawn by Kumar & Co. Cpr Rs. 2,500 payable after 3 months
(13) Vasudavan & Co. start business with Rs. 20,000 on I" January 2003. Of this he pays Rs. 18,000 in to his bank account.
His cash transactions during the month of July were :
July I Bought furniture for cash Rs. 4,000
4 Purchased goods for cash Rs. 65,000
7 Purchase stationery fixtures Rs. 20,000
13 Received from Mishra & Co. Cash as advance Rs. 20,000
15 Paid to Varma & Co, cash Rs. 14,000
25 Paid for Signboard Rs. 13,000
30 Purchased old machinery Rs. 30,000
Make out the cash book (Single Column)
[Ans : Balance in band Rs. 5,000]
(14) Tandon & Co. owned Rs. 28,000 to the bank and had cash in hand Rs. 4,600 on I" April 2003. During the month his
cash transactions were as under:
2003
Apr\. 2 Drewcash for office use Rs. 16,000
3 Paid salaries Rs. 10,000
6 Drew for domestic use cash Rs. 3,000
88
7
8
8
9
9
10
15
17
23
24
27
30
Goods sold for cash Rs. 4.000
Goods purchased for cash Rs. 5.000
Received cheque from Basu & Co. Rs. 13.000 in full settlement of his debt of Rs. 14.000
Issued cheque in favour of Sundram & Co. in full settlement of the amount due to them of
Rs. 8.000 and 2.5 per cent discount
Received by sale of old packing cases etc. Rs. 2.000 Received from Kapur & Co. cheque for Rs. 8000;
discount allowed Rs. 200
Bought fixtures. paid by cheque Rs. 5.000
Paid rent in cash Rs. 2.000
Cheque received from Dewett & Co. returned dishonoured by bank. The bank charges Rs. 100 as expenses
Issued cheque in favour of Singh & Co. for Rs. 9.600 discount received 4 per cent
Received from the estate of Varma & Co. against debt previously written off Rs. 5.000
Own cheque to Singh & Co. returned dishonoured because of wrong stamping
Issued new cheque to Singh & Co. for full amount of original debt
Prepare triple column cash book from the above particulars. Also post the ledger accounts.
(15) Enter the following transactions in a cash book with cash. Bank and discount columns. Balance the cash book and bring
down the balance :
2003
July 1 Cash Balance Rs.350
1 Bank Balance Rs.2,450
2 Cash received on sale of shares Rs.4.000
3 Paid in to bank Rs.3.150
4 Paid to Mani & Co Rs.750 Discount allowed by him Rs.25
S Paid wages Rs.50
6 Received from Kannan Rs.350 Allowed him discount Rs.50
12 Sold goods for cash Rs.510
IS Bought goods for cash Rs.l.000
18 Cash withdrawn for personal expenses Rs.200
20 Paid in to bank Rs.SOO
22 Received from Kishore Rs.l.250 Allowed him discount Rs.60
2S Paid cheque for cash purchase Rs.350
28 Drew cheque for office use Rs.200
31 Paid cheque for office rent Rs.80
[Ans: Cash Balance Rs.I010 ; Bank balance Rs.5,470]
(16) Enter the following transactions in Kapur's Cash Book with cash. bank and discount columns and strike the balances at
the end of the period :
2003
July 1 Balances of Cash Rs.13.6OO
1 Balance at Bank Rs.36.800
4 Paid Kumar by cheque Rs.12.500
7 Goods sold for cash Rs.5.300
IS Goods purchased and paid by cheque less 8% discount Rs.24.000
20 Received Rs.630 from Kannan in settlement of his debt for Rs.6.500
25 Bought fixtures for cash Rs.l.800
31 Withdrawn Rs.2.200 from bank and paid for purchases Rs.2.000
[Ans: Balances Rs.19.400 ; Bank Balance Rs.4.220]
(17) Record the following transactions in Peter's Three columnar cash book :
2003
Jan.l Cash Balance Rs.1,200
1 Bank Balance Rs.l4.6OO
5 Goods sold to Jhon for cash Rs.4.000
14 Withdrew from bank Rs.lO.OOO
17 Paid wages in cash Rs.12.000
20 Received cheque Rs.16.000 from Raman & Co. and allowed discount Rs.l.6OO
23 Withdrew from bank Rs.l.600
25 Brought furniture by cheque Rs.400
31 Paid salary to office staff by cheque Rs.3.000
[Ans : Cash Balance Rs.18.800 ; Bank Balance R1i.l.600]
(18) Prepare a petty cash book on the imprest system from the following:
2003
Mar. 1 A Petty cashier in a firm received a cash of Rs.l50 for petty cash
2 Traveling expenses Rs.5
3 Wages to casual workers Rs.l5
4 Bus fare to workmen R$.2
5 Stationery purchased Rs.l 0
6 Paid for postage Rs.4
8 Paid for Telegram Rs.1O
10 Paid for revenue stamps Rs.5
12 Repairs to typewriter Rs.4
17 Paid electric lighting charges Rs.l7
20 Paid wages to coolies Rs.4
23 Bus fare Rs.5
25 Paid Telegram Rs.1O
27 Locks purchased Rs.8
29 Paid for stationery Rs.4
31 Refreshment to customers Rs.2
89
(19) Record the following transactions in an analytical petty cash book and balance the same. On I" January 2003. the petty
cashier started with an imprest of Rs.l00 :
2003
Jan. 1 Postage stamp purchased Rs.5
3 Sweeper and scavenger paid Rs.5
5 Conveyance to manager Rs.2
6 Telegram to Delhi Rs.l
7 Stationery purchased Rs.5
10 Lorry hire for goods sent Rs.15
11 Greeting cards purchased Rs.5
13 Cartage and coolly Rs.7
17 Salary to office boy Rs.15
18 Repairs to cycles Rs.9
19 Serving charges to Typewriters Rs.6
22 Ink and Gum purchased Rs.3
24 Advertisement charges Rs.8
27 Subscription paid to newspaper Rs.7
30 Tea to customers Rs.3
DOD

Chapter 3 Accounting Books and Records

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CHAPTER 3

Accounting Books and Records

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