ASC DEGREE COLLEGE

A3, 1st Main Road, Rajajinagar Industrial Estate, Bengaluru-

560010

Unit 1 Introduction to Accountancy I Sem B.Com

SYLLABUS
Introduction – Meaning and Definition of Accounting – Objectives of Accounting
Accounting Principles – Accounting Concepts and Accounting Conventions –
Accounting Process – Journal – Ledger – Trial Balance – Adjusting entries, debit notes,
credit notes, accounting equation- simple problems on accounting equation and
adjusting entries only.

BOOK KEEPING:

Definition: According to Carter “Book Keeping is the science and art of correctly
recording in books of accounts all those transactions that result in the transfer of money
or money’s worth.”

Meaning: Book keeping is the art and science of recording, classifying and summarizing
business transactions in money or money’s worth accurately and systematically so that
the businessman may be able to know his profit or loss during a specified period and also
his financial position on a particular date.

ACCOUNTING:

Definition: According to American Institute of Certified Public Accountant,

“Accounting is the art of recording, classifying, and summarizing in significant manner
and in terms of money transactions and event which are in part at least, of a financial
character and interpreting the results thereof.”

Meaning: Accounting means the process of recording, classifying, summarizing and

analyzing the financial transactions and communicating the result thereof to the persons
interested in such information.

Objectives of Accounting:

Objectives of the accounting differ from business to business depending upon their
requirements. Some of the objectives are follows:

1. To record the business transactions: whenever the organization earns or spends

money within the firm or outside the firm transactions are recorded in the form of
Journal.
 2. To know net profit or net loss: Accounting helps to ascertain the profit earned or
loss suffered in the business during a particular period by preparing Trading and
Profit & Loss A/c (Income Statement)
3. To know the financial position of the business: A businessman must know his
financial position i.e., value of assets and extent of liabilities and whether the
enterprise is solvent or not. Balance sheet helps to know the financial strength of
a business entity.
4. To facilitate decision making: A systematic accounting record provides financial
information which helps the business in making decisions.
5. To protect the financial properties: Accounting record provides up to date
information about the various assets that the firm possesses and the liabilities the
firm owes so that nobody can claim a payment which is not due to him.
6. Compliance with legal requirements: All the companies, societies, public trusts
are compulsorily required to maintain accounts as per the law. Maintenance of
accounts is also compulsory under the sales tax act and income tax act.
7. To provide information to the interested people: Accounting information is
communicated in the form of reports, statements, graphs and charts to the internal
and external users who need it in different situations.
8. To control: Accounting helps in finding out the weaknesses of the operational
system and provides measures of control to check such weaknesses.
Functions/ Activities of Accounting:
1. Identifying the transactions and events: An event is a happening of consequence
to an entity. For example, use of raw material from production. A transaction is
an event which can be expressed in terms of money. For example, purchases of
raw materials Rs. 1,00,000.
2. Recording transactions: Each and every financial transaction should be recorded
in the books of original entry i.e., Journal. Only financial aspects are taken into
account for recording
3. Classifying the transactions: It refers to grouping the similar transactions under
one head. All the journal entries should be classified by posting them to the
appropriate ledger accounts. This is done with a view to find out the total effect of
similar transactions.
4. Summarizing the transactions: It refers to presenting the classified transaction
in an understandable form. After recording and classifying financial transactions
next stage is to prepare Trial balance and Final Accounts with a view to ascertain
profit or loss made during a trading period and the financial position of the business
on a particular date.
 5. Presentation: Presentation means setting out the financial data in a systematic
manner in the statements to facilitate their interpretation. It involves the
preparation of profit and loss account and the balance sheet.
6. Interpretation: Presented data is analyzed and interpreted in such a manner that
the end users can make a meaningful judgment about the financial condition of the
business.
7. Communication of the results: All the information must be provided in time and
presented to the various categories of the persons so that appropriate decisions may
be taken at the right time.

Accounting Cycle: The accounting cycle is a collective process of identifying,

analyzing, and recording the accounting events of a company. It is a standard process that
begins when a transaction occurs and ends with its inclusion in the financial statements.

Uses (or) Advantages of Accounting:

Following are the main advantages of accounting:
 1. Replacement of memory: It is very difficult for a businessman to remember all
the transactions. Accounting provides records which will furnish information as
and when required and thus replaces human memory.
2. Evidence in court: Properly maintained accounts are often treated as good
evidence in the court to settle a dispute.
3. Settlement of tax liability: If accounts are properly maintained, it will be of great
assistance to the businessman in settling the income tax and sale tax liability
otherwise tax authorities may impose any amount of tax which the businessman
will have to pay.
4. Comparative study: It provides for comparisons of the current year performance
with previous year performance and helps businessman to identify factor leading
to the change.
5. Sale of business: If the accounts are properly maintained, it helps to ascertain the
proper purchase price in case the businessman wants to sell his business.
6. Raising loans: Accounting facilitates raising loans by providing required financial
information to the lenders.
7. Decision making: Assists management in taking managerial decisions.
8. Control: Accounting helps in exercising control measures over assets by providing
information regarding cash balance, bank balance, debtors, fixed assets etc.
9. Assistance to insolvent person: If a businessman becomes insolvent, he can
explain things about the part with the help of accounts and can start a fresh life.

10. Assistance to various parties: It provides information to various parties like

owners, creditors, investors, government, management, researchers, public etc. so
that they can know about the financial position of the enterprise.
Limitations/Disadvantages of Accounting:
Following are the disadvantages:

1. Records only monetary transactions: Accounting records only those

transactions which can be measured in monetary terms. Transactions that cannot
be expressed in terms of money like conflicts between production manager and
marketing manager, efficient management etc. which affects profitability are not
recorded.
2. Historical in nature: Accounting supplies information related to past
performance. Profit and Loss Account and Balance Sheet is prepared at the end of
 the accounting period. It does not provide quick and timely information for
planning, control and decision making.
3. No realistic information: Accounting information may not be realistic as
accounting statements are prepared by following basic concepts and conventions.
There are occasions when these concepts and conventions conflict with each other.
4. Ignores changes in money factors: The effect of changes in price level or
inflation is not recorded. Accounting transactions are recorded at cost in the books.
5. Personal bias of accountant: Certain accounting estimates depend on the
personal judgment of the accountant, for example, provision for doubtful debts,
methods of depreciation adopted, valuation of stock etc. Judgment based on
integrity and competency of the accountant will definitely influence the
preparation of accounts.
6. Window dressing in Balance Sheet: When an accountant resorts to window
dressing in the balance sheet, then balance sheet cannot exhibit the true and fair
view of the state of affairs of the business.
7. Accounts can be manipulated: Accounting permits treatment of same item in
different ways. For example depreciation can be calculated at straight line method
or diminishing balance method. Similarly closing stock can be valued by FIFO
method (first in first out) or LIFO method (last in last out) method. Different
methods give different results. Hence accounting can be manipulated.

Users of Accounting information:

Accounting information is required to persons in various walks of life for various
purposes. Users of accounting information can be classified into two categories namely:
I. External users II. Internal users

I. External Users: are those who are outside the organization for whom accounting
function is performed. Following are the various external users:
1. Investors: Those who are interested in investing money in the organization need
accounting information to know financial health of the organization. They can
know how safe is the investment already made and how safe their proposed
investment will be.
2. Creditors: Creditors can be suppliers of goods and services on credit or bankers,
financial institutions and other lenders. They want accounting information to know
the financial position of the enterprise before giving loan or credit.
 3. Government: Govt. is also interested in accounts of business concerns to impose
tax. Moreover, such information is helpful in framing economic policies of the
nation.
4. Consumers: They need accounting information to know whether the prices of
goods and services of an enterprise is reasonable or not.
5. Researchers: They need accounting information extensively for the purpose of
their research work.
6. Investment agencies: Investment institutions use the accounting information to
serve their clients better regarding the safety and assurance of investments.
7. Stock Exchange: Stock Exchange use the accounting information for the purpose
of listing the companies in the stock exchange.
8. Economists: Economists use the accounting information for the purpose of their
studies to understand the economy of the nation.
9. General Public: General public will get to know the contribution of business firm
to the society in the form of payment of tax, employment generation, welfare
activities etc.

II Internal Users: are those who are within the organization. They are:

1. Owners: They provide funds for the operation of a business and they want to know
whether their funds are being properly utilized or not. They are also interested in
knowing the profitability and financial position of their business.
2. Management: Information available in the books of accounts is of great help to
the management to plan the future activities of the business. It also helps in
decision making, control and to take corrective actions wherever necessary.
3. Employees: They want to know the earning capacity of the firm so that they can
claim for better working conditions, bonus and other benefits.

ACCOUNTING PRINCIPLES:
Introduction: Accounting is the language of business. As an accountant, a person is in
need of common accounting principles for maintaining the accounts. Thus accountants
all over the world have developed certain rules, procedures and conventions which are
commonly accepted by the majority of the business people, and are called as Generally
Accepted Accounting Principles (GAAP).
Meaning: GAAP may be defined as conventions, rules and procedures necessary to
define accounting practices. These are rules of action or conduct which are derived from
experience and practice. These are common set of accounting principles, standards and
procedures that companies use while preparing financial statements.

Accounting principles are classified into 2 types. Namely,

I. Accounting Concepts
II. Accounting Conventions

Accounting Concepts Accounting Conventions

Business entity concept Convention of Consistency
Money measurement concept Convention of Disclosure
Accounting period concept Convention of Conservatism
Going concern concept Convention of materiality
Dual concept
Matching concept
Realization concept
Cost concept
Accrual concept
Legal aspect concept

I. Accounting Concepts:
It refers to basic assumptions or conditions that the accountants try to follow. The
following are the important concepts:

1. Business entity concept: This concept implies that a business unit is separate and
distinct from the persons who supply capital to it (owner). The transactions of the
business are recorded separately. The affairs of the business should not be mixed
with personal affairs of the owner.

2. Money measurement concept: According to this concept only those transactions

that can be expressed in terms of money are recorded in the books of accounts.
Non-monetary transactions such as honesty, efficiency etc. cannot be recorded
since they cannot be converted into real money value.
3. Accounting period concept: According to this concept, the life of the business is
divided into suitable accounting period. This division is made to ascertain the
profit or loss of the business for a particular period and to know the financial
position of the business on a particular date (in India accounting period is 1 st April
to 31st March).
4. Going concern concept: This concept refers to the continuous existence of the
business concern. Business is carried on for a number of years and does not come
to an end within a year.
5. Dual aspect concept: According to this concept every transaction has two-fold
aspect. That is: i. Receiving aspect &
ii. Giving aspect
There must be a double entry to have a complete record of each business
transaction, an being made in the receiving account and an entry of the same
amount in the giving account. Thus for every debit there must be corresponding
credit.
6. Matching concept: According to this principle, the expenses incurred in an
accounting period should be matched with the revenues recognized in that period.
For example if revenue is recognized on all goods sold during the period, cost of
those goods sold should also be charged to that period.

7. Realization concept: As per this concept, a business has to record revenue or

income only after it has been realized. For example, Mr. X sells goods to Mr. Y
on 1st April 2016. Mr. Y takes the delivery of the goods on the same date and
agrees to make payment on 5th June 2016. So, in the above example revenue is
realized on 5th June 2016 but not on 1st April 2016.

8. Cost concept: According to this concept, asset is recorded at the price at which it
is acquired i.e., cost price. Assets are not recorded at their realizable values
because there values keep on changing from time to time.
9. Accrual concept: While preparing P & L A/C, all transactions relating to that
period are taken into consideration irrespective of the fact whether these items are
paid or payable. For example, outstanding salaries, prepaid insurance etc.
10. Legal aspect concept: The accounting record should reflect legal validity of the
transaction. For example, a firm should not say anybody as its debtors unless he
is legally liable to pay to the firm.
II. Accounting Conventions:
Conventions denote customs or traditions that guide the accountants in preparation of
financial statements. For example, Debit on the left hand side and credit on the right hand
side. Following are the important accounting conventions:

a) Conventions of Consistency: Accounting rules, practices and conventions should

be continuously observed and applied i.e., they should not change from one year
to another. The results of different years can be compared only when accounting
rules are stable. For example, the principle of valuing closing stock at cost or
market price whichever is lower should be followed year after year. If change
becomes desirable, the change and its effect should be stated clearly.
b) Convention of full disclosure: According to this convention, financial statements
must disclose all the relevant and reliable information, so that the users of the
financial statements can make correct assessment about the performance of the
enterprise.
c) Convention of Conservatism: It is a policy of caution or playing safe and as a
safeguard against possible losses in a world of uncertainty. It is often stated in
business “anticipate no profit, provide for all possible losses.” Accountant should
record assets and revenues at lowest possible value and liabilities and expenses at
highest possible value. As a result assets are likely to be understated and income
is likely to be understated.
d) Convention of materiality: this convention states only important items should be
recorded in the books. It is done to make a clear and understandable financial
statements. Accounting statements with unnecessary information will lead to
confusion among the reader.
Basis of Accounting:
There are two methods/basis for recording transactions in the accounts. They are:

1. Cash basis
2. Mercantile/Accrual basis
1. Cash basis of Accounting:

Under this method, transactions related to revenues, cost, assets and liabilities are
recorded in the accounts for the period in which cash receipts and cash payments are
made. Income earned but not received, i.e., accrued income or expenses occurred but not
paid, i.e., outstanding expenses are completely ignored.
2. Mercantile/Accrual basis of Accounting:

Under this method, transactions related to revenue, cost, assets and liabilities are recorded
in the accounts for the period in which they accrue irrespective of actual receipts or
payment of cash. Prepaid or outstanding expenses and prepaid or outstanding incomes
are considered.

Branches of Accounting:
The three major branches of Accounting are:

1. Financial Accounting
2. Cost Accounting
3. Management Accounting
1. Financial Accounting:

This branch of accounting deals with preparation of financial statements to ascertain

profit or loss during a specific period and to determine financial position of an enterprise
on a particular date. It also includes communicating the accounting information to the
users and making interpretations thereof. It is concerned with preparation of;

a) Profit & Loss Account or Income Statement

b) Balance Sheet
2. Cost Accounting:

This branch of accounting deals with ascertaining cost of product and various activities
of business. The main task of the cost accountant is to record, allocate, summaries and
interpret cost data for the use of management in cost control and in planning for future.
It includes techniques like:

a) Cost control
b) Cost forecasting
c) Standard Costing
d) Marginal Costing
e) Budgetary Control etc.
3. Management Accounting:

This branch of accounting supplies significant information to management in order to

assist management in planning, control, evaluation of performance and decision making.
The techniques used in Management Accounting are;
 a) Ratio analysis
b) Funds flow statement
c) Cash flow statement
d) Comparative statements
e) Trend analysis
f) Common size statements etc.
Other branches of Accounting:
Recent developments in the field of accounting have gave rise to other branches in
accounting namely;

1) Tax Accounting
2) Social responsibility Accounting
3) Human Resource Accounting
1) Tax Accounting:
Different types of taxes have to be paid by an enterprise such as income tax, sales tax,
excise duties, custom duties etc. Tax accounting is helpful in complying the provisions
of complex tax laws governing different taxes.

2) Social responsibility Accounting:

It is concerned with social responsibility aspect of a business. Business enterprise use
the resources like men, raw materials etc. of the society. It is obligation of the business
enterprise to contribute to the society’s wellbeing and progress. Social responsibility
accounting is the process identifying, measuring and communicating the effects of
business decisions on the society.
3) Human Resource Accounting:
It is a new branch of accounting. It provides data to the interested persons about the cost
of human resources and correspondingly comparing it with the benefit obtained out of its
utilization. It is the process of identifying and measuring data about human resources
and communicating this data to the interested persons.

Accounting Process
Meaning of Accounting process
Accounting is a process that helps in recording the financial transactions which are necessary for the
business. This process includes summarizing, analyzing and reporting the transactions to give an
overview to the agencies, regulators and tax collection entities. The financial statements that are used in
accounting are in a concise summary format. Financial transactions which occurred over an accounting
period summarizes the company's operations, the financial position and also the cash flows.
Recording the transaction (Journal)
This is the basic book of original entry. In this book, transactions are recorded in the
chronological order, as and when they take place. Afterwards, transactions from this book are
posted to the respective accounts. It is also called the Book of first entry. Each transaction is
separately recorded after determining the particular account to be debited or credited.
Journal is a defined as “a book containing a chronological record of transactions entered under
double entry system”.
Features of Journal
• It is a book of prime, first or original entry
• It shows dual aspects of each and every transactions
• It is a subsidiary book I,,e. used for simplifying the ledger
• It helps to identify nature of accounts.
• It contains a day-to-day record of transactions :Journal records all the financial transactions of a
business in one place on a time and date basis.
• The transactions are recorded, in support of a bill, to check the authenticity of each of these
journal entries with their bills.
• The accountant writes each journal entry’s narration below every journal entry so that another
auditor can audit it without any confusion.
• In a journal, we record these transactions which help in the deep analysis of the two accounts
based on a double-entry system, and this prevents a minimum chance of mistake in the journal.
• Journal posts the transactions in their respective ledger accounts. Without making this journal,
an accountant will be unable to make the ledger accounts.
• In case of a mistake in the ledger accounts, this can be easily rectified with the help of a journal
or by passing a rectified journal entry in the journal.

Journalizing
It is the process of recording transactions in journal book is called journalizing or Journalizing is the
practice of documenting a business transaction in accounting records.

Journal Entries
The transactions when recorded in the journal book are termed as Journal Entries or A journal entry is a
record of a business transaction in your business books. Each journal entry contains the data significant
to a single business transaction, including the date, the amount to be credited and debited, a brief
description of the transaction and the accounts affected. Depending on the company, it may list affected
subsidiaries.

Types of Journal Entries

• Simple journal entries : In double-entry bookkeeping, simple journal entries are types of
accounting entries that debit one account and credit the corresponding account. A simple entry
does not deal with more than two accounts. Instead, it simply increases one account and
decreases the matching account.
 • Compound journal entries : A compound journal entry is an accounting entry in which there
is more than one debit, more than one credit, or more than one of both debits and credits. It is
essentially a combination of several simple journal entries.An example of a compound journal
entry is a payroll entry, where there is a debit to salaries expense, another debit to payroll taxes
expense, and credits to cash and a variety of deduction accounts.

Classifying the recording transactions (Ledger)

A ledger is a book or collection of accounts in which account transactions are recorded. Each
account has an opening or carry-forward balance, and would record each transaction as either
a debit or credit in separate columns, and the ending or closing balance.
According to ‘Croper’, “The book which contains a classified and permanent record of all the
transactions of a business is called a Ledger”.

Posting: It is the act of transferring an entry or item from a book of original entry to the proper account
in a ledger.
Features of Ledger
1. A Ledger book is an Accounts book to which various transactions of an enterprise are posted
under different Accounts.
2. It follows the double-entry system.
3. It is also known as the Principal book of Account as it is the book of final entry of transactions
after the journal or all-purpose books.
4. In the Ledger, all the types of Accounts relating to assets, liabilities, capital and revenue are
maintained.
5. It is the only record of the business transaction classified into relevant Accounts.
6. It facilitates the preparation of financial statements in future.
7. This contains all the accounts (Personal, Real, Nominal)
8. It is a permanent record of business transactions
9. It is a book of final entry

Balancing of Accounts
Balancing of account is a way to balance the various ledger accounts. Accounts in the ledger are
periodically balanced, generally at the end of the accounting period, with the object of ascertaining the
net position of each amount.
Balancing of an account means that the two sides are totalled and the difference between them is shown
on the side, which is shorter in order to make their totals equal. The words 'balance carried down (c/d)'
are written against the amount of the difference between the two sides.

Trial Balance
A trial balance is a financial report showing the closing balances of all accounts in the general
ledger at a point in time. A trial balance is a bookkeeping worksheet in which the balances of
all ledgers are compiled into debit and credit account column totals that are equal. A company prepares
a trial balance periodically, usually at the end of every reporting period. The general purpose of
producing a trial balance is to ensure that the entries in a company’s bookkeeping system are
mathematically correct. A trial balance is so called because it provides a test of a fundamental aspect
of a set of books, but is not a full audit of them. A trial balance is often the first step in an audit
procedure, because it allows auditors to make sure there are no mathematical errors in the bookkeeping
system before moving on to more complex and detailed analyses.

Definition : According to J.R Batliboi, "A trial balance is a statement, prepared with the debit and credit
balances of the ledger accounts to test the arithmetical accuracy of the books."

Debit Note

• A debit note is a commercial document issued by a buyer to a seller or acts as the Source
document to the Purchase returns journal.
• In other words it is an evidence for the goods returned.

Credit note

• A receipt given by a shop to a customer who has returned goods.

• A credit note or credit memo is a commercial document issued by a seller to a buyer. Credit
notes act as a source document for the sales return journal.

Accounting Equation
The accounting equation illustrates the mechanism of accounting based on ‘dual aspect’ or dual concept
of accounting. Under accounting equation mechanism, at any point of time the assets of any business
enterprises are equal in monetary terms to its equities both internal and external. Internal equities are the
amount contributed by proprietor as capital plus profit retained in the business. External equities are
liabilities (amount payable to outsiders) which may short-term or long-term liabilities.
Assets = Liabilities + Capital
Or
Assets – Liabilities = Capital
Or
Assets – Capital = Liabilities

Steps in developing Accounting Equations:

Step – 1: Ascertain the variables of an equation (i,e., Assets, liabilities or capital) affected by a
transaction.
Step -2: Find out the effect (i.e., increase or decrease) of a transaction on the variables of an equation.
Step – 3: show the effect on appropriate side of an equation and ensure that the total of the right hand
side (Asset side) is equal to the total of left hand side(Liabilities + Capital side)
Problems on Accounting Equations
1) Prepare accounting equation from the following
1. Commenced business with ₹ 50,000.
2. Bought computer for ₹ 10,000.
3. Bought goods for cash ₹ 5,000.
4. Sold goods for cash ₹ 7,000.
5. Paid salaries ₹ 10,000.

2) From the following information prepare accounting equation:

1. Purchased goods on credit from X for ₹ 80,000.
2. Sold goods on credit to Y for ₹ 1,00,000.
3. Returned goods to X ₹ 5,000.
4. Returned goods by Y ₹ 8,000.
5. Commission received ₹ 15,000.

3) Prepare accounting equation from the following:

1. Started business with cash ₹ 90,000. Plant and machinery ₹ 50,000 and stock ₹ 10,000.
2. Borrowed loan from bank ₹ 60,000.
3. Purchased goods from Mr. Amar ₹ 20,000.
4. Sold goods to Mr. Ananth ₹ 30,000.
5. Received from Mr. Ananth on account ₹ 25,000.
6. Paid to Mr. Amar on account ₹ 15,000.

4) Prepare accounting equation from the following:

1. Commenced business with cash ₹ 1,00,000, furniture ₹ 20,000.
2. Opened a current account in state bank of india ₹ 50,000.
3. Purchased securities for ₹ 30,000.
4. Sold securities for ₹ 40,000.
5. Received cash dividend on securities ₹ 20,000.

5) Prepare accounting equation from the following transactions.

1. Commenced business with cash ₹ 1,20,000.
2. Purchased assets for cash ₹ 25,000.
3. Sold assets of ₹ 10,000 for 12,000.
4. Sold assets of ₹ 5,000 for 4,000.
5. Goods destroyed by fire ₹ 1,000.
6. Withdrew cash for personal use ₹ 5000.
7. Rent outstanding ₹ 5000.
8. Insurance paid in advance ₹ 400.
9. Interest on loan allowed ₹ 6000.
 10. Depreciation on furniture ₹ 2500.

6) Mr. Ramanashree started a business under the name of "Ramanashree & Co." The detils of the
transactions of his business are given below:
1. Commenced business with capital of ₹ 1,00,000.
2. Bought goods on credit from Ramesh ₹ 80,000.
3. Bought furniture for cash ₹ 10,000.
4. Sold goods for cash ₹ 40,000.
5. Paid Ramesh on account ₹ 40,000.
6. Paid shop rent ₹ 10,000.
7. Paid salaries ₹ 5,000.
8. Sold goods on credit to vimal ₹ 25,000.
9. Withdraw cash for personal use ₹ 10,000.
10. Received commission ₹ 5,000.
Prepare accounting equation from the above transactions.

7) Prepare accounting equation from the following:

1. Commenced business with ₹ 5,00,000.
2. Bought computers for ₹ 1,00,000.
3. Bought goods from X for cash ₹ 50,000.
4. Sold goods to Y for cash ₹ 70,000.
5. Paid Salaries ₹ 50,000.

8) Prepare accounting equation from the following:

1. Commenced business with cash ₹ 5,00,000, furniture ₹ 2,00,000.
2. Opened a current account in Canara bank ₹ 2,50,000.
3. Purchased furniture for ₹ 30,000.
4. Sold goods for cash ₹ 60,000.
5. Received Commission ₹ 20,000.

9) Prepare accounting equation from the following transactions

2020 January
1st Rajini started business with a capital of Rs. 50,000
2nd Purchased furniture for Rs. 5,000
3rd Bought goods on credit from Vinod for Rs. 8,000
14th Sold goods to Suresh for Rs. 5,000
15th Received cash from Suresh Rs. 3,000
18th Purchased goods for cash Rs. 12,000
25th Sold goods for cash Rs. 8,000
28th Paid rent by cash for Rs. 1,200
29th Paid Vinod Rs. 3,000 on account
30th Returned goods to Vinod Rs. 800
 31st Suresh returned goods Rs. 1,000
Prepare accounting equation from the above transactions.

10) Prepare accounting equation from the following transactions

March 2019
1st Kumar started business with cash Rs. 10,000, Plant and Machinery Rs. 15,000 and stock Rs.
5,000
2nd Bought furniture from Ram Rs. 2,000
4th Purchased goods worth Rs. 6,000
6th Sold goods Rs. 1,000
7th Purchased goods from Venu on account Rs. 500
9th Sold goods to Ramesh Rs. 2,000
11th Returned damaged goods by Ramesh Rs. 100
13th Received cheque from Ramesh Rs. 1,000
14th Opened a current account with SBI abd deposited Rs. 10,000
16th Insurance paid in advance Rs. 400
18th Purchased securities for cash Rs. 2,000
20th Sold securities costing Rs. 2,000 for Rs. 2,500
22nd Sold Securities costing Rs. 1,000 for Rs. 800
24th Goods destroyed by fire Rs. 500
26th Withdrew cash for personal use Rs. 1,000
27th Rent outstanding Rs. 600
28th Received cash for dividend on securities Rs. 1,000
30th Depreciation on furniture Rs. 200
31st Interest on loan payable Rs. 1,000