accounts lectures updated
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Types of Accounts
Real Debit what comes in Credit what goes out
Personal Debit the receiver Credit the giver
Nominal Debit all expenses and los Credit all income and gains
Examples
Printing and Stationery Nominal
Long term asset RealDiscount allowed Nominal
Capital Account Personal
Wages Personal
Prepaid Insurance Personal
Loan Personal
Investment Real
Stocks Real
Tools Real
Stores and Spares Real
Copyright, Goodwill RealOctroi Nominal
State government securiti Real
Debentures Real
Royalty Nominal
Bills Received Amount Real
Employee Provident fund Personal
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Q.1
1) Rajan invested in business
Cash R Dr
Capital P Cr
Cash A/c Dr 20000
To Capital A/c 20000
2) Opened an account with bank of india by depositing cash
Bank Acc R Dr
Cash R Cr
Bank A/c Dr 10000
To Cash A/c 10000
3) Purchased goods for cash
Goods R DrCash R Cr
Purchase Dr 500
To cash A/c 500
4) Purchased machinery for cash
Machiner R Dr
Cash R Cr
Machiner Dr 800To cash A/c 800
5) Cash purchase of goods
Goods R Dr
Cash R Cr
Purchase Dr 300
To cash A/c 300
6) Cash sales (of goods)
Cash R Dr
Sales (go R Cr
Cash A/c Dr 900
To sales A/c 900
7) Withdraw cash for personal use
Drawings P Dr
Cash R Cr
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Drawings Dr 200
To Cash A/c 200
8) Purchased goods from Pritam on credit
Goods R Dr
Pritam's P Cr
Purchase dr 600
To Pritam's account a/c 600
9) Received cash on account from Ramanand
Ramanan P Cr
Cash R Dr
Cash a/c Dr 350
To Ramanand's A/c 350
10) Paid Cash to Minakshi Bros
Cash R Cr
Minakshi' P Dr
Minakshi' Dr 250
To Cash A/c 250
11) Paid Rent
Cash R Cr
Rent N Dr
Rent A/c Dr 125
To Cash A/c 125
12) Received commision
CommmisN Cr
Cash R Dr
Cash A/c Dr 175
To commision A/c 175
13) Ram returned goods
Goods R Dr
Ram's accP Cr
Goods A/cDr 100
Ram's account A/c 100
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Q.2
1) Receievd Cash from Father in law and deposited in business
Cash A/c Dr 10000
To capital A/c
2) Took loan from Shalini
Cash A/c Dr 5000
To Shalini's A/c
3) Paid rent to landlord in advance
Advance rent A/c Dr 75
Cash A/c
4) received rent from sub tenant
Cash A/c Dr 100
To rent A/c
5) Paid for postal stamps
Stationery A?c Dr 10
To Cash A/c
6) Commision Due from gupta
Commision ReceivablDr 40
To Commision A/c
7) Old typewriter stolen
Loss by theft A/c Dr 1000
To Typewriter(Assets) A/c
8) Paid commision to Radhika
Commision (radhika' Dr 80
To Cash A/c
9) purchased securities (rs 60/- Brokerage)
Asset (Securities) Dr 2060
To Cash A/c
10) Paid for Mantri's Club Bill
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Drawings A/c Dr 600
To cash A/c
11) Gave Charity
Donation (Charity) Dr 300
To cash A/c
12) Sold private scooter and invested in Business
Cash A/c dr 2000
To Capital A/c
13) Bought Equity shares of Bharat Fertilizers
Bharat fertilizer shar Dr 900
To cash A/c
14) Invested in National Saving Certificate
NSE A/c Dr 100
To Cash A/c
15) Paid for carraige on machinery
Machinery A/c Dr 200
To Cash A/c
16) Cash Sales
Cash A/c Dr 500
To sales A/c
17) Paid Income tax
Income tax A/c Dr 200
To Cash A/c
18) Bought Typewriter
Typewriter A/c Dr 1000
To Cash A/c
Ledger Account
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Dr Cash A/c Cr
To Capital A/c 10000 By Advance rent 75
To Shalini's A/c 5000 By stationery 10
To rent A/c 100 By commision 80
To Capital A/c 2000 By securities 2060
To sales A/c 500 By drawings 600
By donations 300
By Bharat Fertilizers Shar 900By NSE 100
By Machinery 200
By Income Tax 200
By typewriter 1000
By balance c/d 12075
17600 17600
Dr Capital A/c Cr
To Balance C/d 12000 By Cash A/c 10000
By Cash A/c 2000
12000 12000
Dr Shalini's A/c Cr
To balance c/d 5000 by cash A/c 5000
Dr Advance Rent Cr
To cash a/c 75 By balance c/d 75
Dr Rent A/c Cr
to balance c/d 100 By cash A/c 100
Dr Stationery A/c Cr
To Cash a/c 10 By balance c/d 10
Dr Commision receivable A/ Cr
To commision earned 40 By balance c/d 40
Dr Commision earned A/c Cr
To balance c/d 40 By commision receivable 40
Dr Loss by theft a/c Cr
To typewriter 1000 By balance c/d 1000
Dr Typewriter Cr
To Cash 1000 By loss of theft 1000
Dr Commision Cr
To Cash 80 By balance c/d 80
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Dr Securities Cr
To Cash 2000 By balance c/d 2000
Dr Drawings Cr
To Cash 600 By balance c/d 600
Dr Donation CrTo Cash 300 By balance c/d 300
Dr Bharat fertilizers shares Cr
To Cash 900 By balance c/d 900
Dr NSE Cr
To Cash 100 By balance c/d 100
Dr Machinery Cr
To Cash 200 By balance c/d 200
Dr Sales Cr
To balance c/d 500 By cash 5
Dr Income tax Cr
To Cash 200 By balance c/d 200
Trial Balance
Dr Cr
Cash 12075 Capital 12000Advance rent 75 Shalini 5000
Commision receivabl 40 Rent 100
Loss by theft 1000 Commision Earned 40
Commision 80 Sales 500
Stationery 10
Securities 2060
Drawings 600
Donation 300
Bharat Shares 900
NSE 100
Machinery 200
Income tax 200
17640 17640
P/L Account
Dr Cr
Stationery 10 Rent 100
Loss by theft 1000 Sales 500
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Commision 80 Commision 40
Donation 300 P/L loss 950
Income tax 200
1590 1590
Balance Sheet
Liabilities Assets
Capital 12000 Cash 12075
Shalini 5000 Securities 2060
P/L A/c -950 Advance rent 75
Drawings -600 Commision receivable 40
Bharat shares 900
NSE 100
Machinery 200
15450 15450
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10000
5000
75
100
10
40
1000
80
2060
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600
300
2000
900
100
200
500
200
1000
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Given:
Trading account
Dr Cr
To opening stock 45000 By Sales 2000000
To purchases (net) 1500000 - Ret 5000
1995000
By Closing stock 70000
To carriage 5000
To wages 30000
To gross profit c/d 485000
Total 2065000 Total 2065000
P/L account
To salary 40000 By Gross Profit b/d 485000
To office rent 15000 By int on investmen 5000To rates and taxes 12000
To travelling expenses 2000
To insurance 2000
To advertising 10000
To bad debts 15000
To discount 5000
To general expenses 20000
To postage 14000
To depreciation (plant and machinery) 3000
To depreciation (furniture) 1000To audit fees 11000
To loss and sale of furniture 3000
To taxes 55000
To net profit c/d 282000
Total 490000 Total 490000
Solution:
Vertical form of P/L Amt Amt Amt
Gross sales 2000000
Less returns -5000
Net sales 1995000
Less: cost of goods sold
Opening stock 45000
Add:
Puchase 1500000
Carraige 5000
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Wages 30000
Depreciation on Plant and Machinery 3000
1583000
Less:
Closing stock -70000
1513000
Gross profits 482000
Less: operating expenditure
A) Administrative exp
Salaries 40000
Office rent 15000
Rates and Taxes 12000
Insurance 2000
General ledger 20000
Postage 14000
Depreciation on Furniture 1000
Audit fees 11000115000
B) Selling and Distribution Exp
Travelling 2000
Advertising 10000
Bad debts 15000
Discount 5000
32000
C) Financial Exp NIL 147000 Sum of A)
Operating profit 335000 Profits - E
Less : Non operating exp
Loss on sale of furniture 3000
332000
Add: Non operating income
Int. on invetsment 5000
Profit before tax 337000
Less: tax -55000
Profit after tax 282000
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, B) and C)
penses
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Given:
Balance Sheet
Liabilities Assets
Share Capital 750000 Goodwill 125000
Capital Reserve 1500 Land 129000
General reserve 120410 Premises 150000
Lease Hold redemption fun 42500 Plant 234395
P/L account 18777 Furniture 8575
5% Debentures 157500 3% GP Notes 71400
Sundry Creditors 73900 Srocks 196770
Proposed dividend 75000 Debtors 203942
Provision for taxation 25000 Cash and Bank 120280
Advanced Tax 23675
Preliminary expense 1550
Total 1264587 Total 1264587
Solution:
I) Source of funds Amt Amt
Shareholders funds
Share Capital 750000
Capital reserve 1500
General reserve 120410
Leashold redemption fund 42500
P and L A/c 18777
933187
Less: Fictitious AssetsPreliminary exp -1550
931637
Loan Funds
5% Debentures 157500
Total Sources of Funds 1089137
II) Application of Funds
A) Fixed Assets
Goodwill 125000land 129000
premises 150000
Plant 234395
Furniture 8575
646970
B) Investments
3% GP Notes 71400
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C) Net current Assets (Working Capital)
Current Assets
Stock 196770
Debtors 203942
Cash and bank 120280
Advance Tax 23675
544667
Less: Current Liabilities
Creditors 73900
Proposal Dividend 75000
Provision for Tax 25000
173900
370767
Total Application of Funds 1089137
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April 15, 1992 Machinery bought 90000
Transportation cos 10000
Depreciation on return down value method at 10%
March 25, 1995 machinery sold 70000
Pass all journal entries for 3 years and show P and L account taking into accoutn deprecia
Date Particular Amt Amt
4/15/1992 Machinery A/c Dr 100000
To Cash A/c 100000
3/31/1993 Depreciation A/c D 10000
To machinery A/c 10000
3/31/1993 P/L A/c Dr 10000
To Depreciation A/c 10000
3/31/1994 Depreciation A/c D 9000
To machinery A/c 9000
3/31/1994 P/L A/c Dr 9000To Depreciation A/c 9000
3/31/1995 Depreciation A/c D 8100
To machinery A/c 8100
3/31/1995 P/L A/c Dr 8100
To Depreciation A/c 8100
3/25/1995
To machinery A/c 72900
Machinery A/c
3/31/1993
Dr Cr
To Cash A/c 100000 By Depreciatio 10000
By Balance c/d 90000
100000 100000
3/31/1994
Dr Cr
To Balance b/d 90000 By Depreciatio 9000
By Balance c/d 81000
90000 90000
3/31/1995
Dr Cr
To Balance b/d 81000 By Depreciatio 8100
By P/L A/c 2900
Cash A/c DrP/L A/c Dr
700002900
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By Cash A/c 70000
81000 81000
Depreciation A/c
3/31/1993
Dr Cr
To Machinery A/c 10000 By P/L A/c 10000
10000 10000
3/31/1994
To Machinery A/c 9000 By P/L A/c 9000
9000 9000
3/31/1995
To Machinery A/c 8100 By P/L A/c 8100
8100 8100
Balance Sheet
Liabilities Assets
Cash 100000 Machinery 90000
- P/L 10000
90000 90000
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tion Provision For Depreciation
Date Particular Amt Amt
4/15/1992 Machinery A/c Dr 100000
To Cash A/c 100000
3/31/1993 Depreciation A/c Dr 10000
To Prov. For Depreciation A/c 10000
3/31/1993 P/L A/c Dr 10000
To Depreciation A/c 10000
3/31/1994 Depreciation A/c Dr 9000
To Prov. For Depreciation A/c 9000
3/31/1994 P/L A/c Dr 9000To Depreciation A/c 9000
3/31/1995 Depreciation A/c Dr 8100
To Prov. For Depreciation A/c 8100
3/31/1995 P/L A/c Dr 8100
To Depreciation A/c 8100
3/31/1995 Prov for Depreciation A 27100
To machinery A/c 27100
3/25/1995
To machinery A/c 72900
Machinery A/c
3/31/1993
Dr Cr
To Cash A/c 100000 By Balance c/d 100000
100000 100000
3/31/1995
Dr Cr
To Balance b/d 100000 By Prov. For Deprecia 27100
By P/L A/c 2900
By Cash A/c 70000
100000 100000
Cash A/c DrP/L A/c Dr
700002900
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Depreciation A/c
3/31/1993
Dr Cr
To Prov. For Depreciation A 10000 By P/L A/c 10000
10000 10000
3/31/1994
To Prov. For Depreciation A 9000 By P/L A/c 9000
9000 9000
3/31/1995
To Prov. For Depreciation A 8100 By P/L A/c 8100
8100 8100
To Prov. For Depreciation A/c
3/31/1993
Dr Cr
To bal c/d 10000 By Depreciation A/c 10000
10000 10000
3/31/1994
To bal c/d By Bal b/d 10000By Depreciation A/c 9000
19000 19000
3/31/1995
27100 By Bal b/d 19000
By Depreciation A/c 8100
27100 27100
19000/9000
To bal c/d Machinery
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4/10/1992 Machinery A/c Dr 100000
To Cash A/c ###
3/31/1993 Depreciation A/c Dr 10000
To Prov. For Depreciation A/c 10000
3/31/1993 P/L A/c Dr 10000
To Depreciation A/c 10000
3/31/1994 Depreciation A/c Dr 9000To Prov. For Depreciation A/c 9000
3/31/1994 P/L A/c Dr 9000
To Depreciation A/c 9000
3/31/1995 Depreciation A/c Dr 8100
To Prov. For Depreciation A/c 8100
3/31/1995 P/L A/c Dr 8100
To Depreciation A/c 8100
3/31/1995 Prov for Depreciation A/c 27100
To machinery A/c 27100
3/25/1995
To machinery A/c 72900
Depreciation A/c
3/31/1993
Dr Cr
To Prov. For Depreciation A 10000 By P/L A/c 10000
10000 10000
3/31/1994
To Prov. For Depreciation A 9000 By P/L A/c 9000
9000 9000
3/31/1995
To Prov. For Depreciation A 8100 By P/L A/c 8100
8100 8100
To Prov. For Depreciation A/c3/31/1993
Dr Cr
To bal c/d 10000 By Depreciation A/ 10000
10000 10000
3/31/1994
To bal c/d 19000 By Bal b/d 10000
By Depreciation A/ 9000
Cash A/c DrP/L A/c Dr
700002900
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19000 19000
3/31/1995
To bal c/d 27100 By Bal b/d 19000
By Depreciation A/ 8100
27100 27100
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From the following balance sheet of A ltd. Prepare
a) statement of changes in working capital
b) funds flow statement
BALANCE SHEET OF A LTD.
LIABILITIES 1989 1990 ASSETS
equity share capital 300000 400000 goodwill
8% redemmbale pref share 150000 100000 land and buil
general reserve 40000 70000 plantprofit and loss a/c 30000 48000 debtors
proposed dividend 42000 50000 stock
creditors 55000 83000 bills recievab
bills payable 20000 16000 bank
provision for taxation 40000 50000 cash
TOTAL 677000 817000 TOTAL
ADDITIONAL INFORMATION :
1) Depreciation to the extent of 10000 & 20000 provided on plant, land and building in 19
2) An interim dividend of 20000 has been paid in 1990
3) income tax of 35000 paid during 1990
SOLUTION :
statement for change in A/C increase in W/C decrease in W/C
CURRENT ASSETSdebtors 40000
stocks 32000
bills recievables 10000
bank 5000
cash 2000
CURRENT LIABILITIES
creditors 28000
bills payable 4000
TOTAL 86000 35000
CHANGE IN WORKING CAPITAL = INCREASE - DECREASE IN WORKING CAPITAL
therefore, change in working capital is : 51000
ADJUSTED P & L A/C
TO depreciaction on plant 10000 By balance brought down 30000
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land and building 20000
to interim dividend 20000 by funds from operations 218000
to provision for tax 45000 (balancing figure)
To proposed dividend 50000
To goodwill w/off 25000
To balance carried down 48000
to general reserve 30000
248000 248000
PROVISION FOR TAX
To cash 35000 by bal bd 40000
by p & l a/c 45000
To bal cd 50000 (balancing figure)
85000 85000
PLANT A/C
To bal BD 80000 by depriciation 10000
To cash 130000
by balance cd 200000
210000 210000
FUNDS FLOW STATEMENT
SOURCES OF FUNDS :
Issue at equity capital
sale of land and building
fund from operation
APPLICATION OF FUNDS :
redemption of preferance shares
purchase of plant
payment of dividend
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payment of interim
payment of tax
increase in working capital
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1989 1990
115000 90000
ing 200000 170000
80000 200000160000 200000
77000 109000
les 20000 30000
15000 10000
10000 8000
677000 817000
0
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LAND AND BUILDING
To bal cd 200000 by depriciation 20000
by sale of asset 10000
by balance cd 170000
200000 200000
100000
10000
218000
328000
50000
130000
42000
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20000
35000
277000
51000
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BALANCE SHEET OF A LTD.
LIABILITIES 1989 1990 ASSETS
equity share capital 300000 400000 goodwill
8% redemmbale pref share 150000 100000 land and buil
general reserve 40000 70000 plant
profit and loss a/c 30000 48000 debtors
proposed dividend 42000 50000 stock
creditors 55000 83000 marketable secbills payable 20000 16000 cash & ban
provision for taxation 40000 50000
TOTAL 677000 817000 TOTAL
ADDITIONAL INFORMATION :
1) Depreciation to the extent of 10000 & 20000 provided on plant, land and building in 192) An interim dividend of 20000 has been paid in 1990
3) income tax of 35000 paid during 1990
ADJUSTED P & L A/C
TO depreciaction on plant 10000 By balance brought down 30000
land and building 20000
to interim dividend 20000 by funds from operations 218000
to provision for tax 45000 (balancing figure)
To proposed dividend 50000To goodwill w/off 25000
To balance carried down 48000
to general reserve 30000
248000 248000
PROVISION FOR TAX
To cash 35000 by bal bd 40000
by p & l a/c 45000To bal cd 50000 (balancing figure)
85000 85000
PLANT A/C
To bal BD 80000 by depriciation 10000
To cash 130000
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by balance cd 200000
210000 210000
LAND AND BUILDING
To bal cd 200000 by depriciation 20000
by sale of asset 10000
by balance cd 170000
200000 200000
CASH FLOW STATEMENT
1) CASH FROM OPERATING ACTIVITIES:Closing balance of P & L A/C
less: opening balance of P & L A/C
Add: Proposed dividend
add: Interim dividend
add: transfer to General Reserve
add: provision for taxation
net profit before tax and extra ordinary items
add: depreciationadd: goodwill written off
OPERATING PROFIT before change in working capital
ADD: decrease in C.A & increase in C.L
creditors
stock
LESS: increase in C.A & decrease in C.L
bills payable
debtorsCash generated from operating activities
LESS: Tax paid (net & refund)
1) CASH FROM OPERATING ACTIVITIES
2) CASH FROM INVESTING ACTIVITIES:
Add: sale of land and building
less: purchase of plant
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2) CASH FLOW FROM INVESTING ACTIVITIES
3) CASH FROM FINANCING ACTIVITIES:
add: issues of equity shares
less: preference shares redeemed
less: interim dividend paid
less: dividend paid
3) CASH FROM FINANCING ACTIVITIES
4) NET CHANGE IN CASH AND CASH EQUIVALENTS
5) CASH AND CASH EQUIVALENT AT THE BEGINNING OF THE PERIOD
cash and bank
mareketable securities
6) CASH AND CASH EQUIVALENT AT THE END OF THE PERIOD
cash and bankmarketable securities
answer: 6) = 5) + 4)
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1989 1990
115000 90000
ing 200000 170000
80000 200000
160000 252000
97000 87000
rities 15000 10000k 10000 8000
677000 817000
0
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AMOUNT AMOUNT
we add back all non operating and non cash activi48000
-30000
50000
20000
30000 from p&l a/c
45000 from prov for taxation a/c
163000
3000025000 55000
218000
28000
10000 38000
-4000
-92000 -96000160000
-35000
125000
10000
-130000
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-120000
100000
-50000
-20000 from additional information
-42000 last years proposed diviend is paid during this ye
-12000
-7000 1) + 2) + 3)
10000
15000 25000
800010000 18000
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ties
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r.. It is from balance sheet 1989