CHAPTER-2

RULES OF ACCOUNTING AND THE JOURNAL

Important question and answers

Q1. Write a short note on rules of  debit and credit?

Ans- Rules of debit and credit are of three types:

1. Personal account:- Personal account are related person. personal account are futher classified into three types:

• Natural account:- ram and shyam,etc
• Artifical Personal Account:- Name of the company like XYZ LTD., Kapoor and sons,etc
• Representative personal account:- It is an account like Capital, Drawing, Debtors, Creditors, etc.

                                                     "Debit the receiver,

                                                       Credit the giver".

2. Real Account:- Real account are the accounts like building,machinery, furniture, cash, goodwill, live stock, etc.

                                            "Debit What comes in,

                                              Credit What goes out".

3. Nominal Accounts:- It is related to all expenses and income. Example Rent, interest, commission, wages, insurance, depreciation, etc.

                                              "Debit all expenses and losses,

                                                Credit all income and gains."

Q2. Difference between the Trade Discount and Cash Discount?

Ans-  Trade discount are differ from cash discount:--

Q3. What are journal? Why is the journal called a book of original entry?

Ans- A journal is a book of original entry in which transactions are recorded in the order in which they occur i.e., in chronological order.

A journal is called a book of original entry because all transactions are entered first in this book.

Q4. What is Compound Journal Entry and Opening Entry? 

Ans- Compound Journal Entry:- Two or more transactions relating to one particular account take place on the same date. In such cases, instead of passing separate entries for all such transactions, only one entry is passed. Such entry is called Compound Journal Entry.

Opening Entry:- Opening entry is a compound entry which carries forward all the balances of assets and liabilities of previous year to current year.

Q5. Journalise the following transactions:-

March

2012

       1 Started business with cash Rs 50,000.

       2 Purchased machinery for cash Rs 20,000. Paid installment charges on machinery Rs 2000.

      5 Purchased goods from X of the list price of Rs 25,000, Trade Discount 20% and Cash Discount           5%. Payment was made in cash. 

     10 Sold goods to Y costing Rs 10,000 at 30% profit on costless 10% trade discount.

     15 Paid Rent Rs 1,000.

     20 Goods stolen from business Rs 2,000.

    22 Gave as charity: cash Rs 100 and Goods Rs 200.

    31 Purchased a typewriter for business Rs 5,000.

Ans- 

Q6. Goods of the list price of Rs 80,000 are sold by Mr. Mahesh to Mr. Jagmohan. Trade Discount is 9% and Cash Discount is 5%, 60% payment is made in cash. Give Journal Entries in the books of Mr. Mahesh and Mr. Jagmohan.

Ans- 

Q7. Journalise the following:-

1. Purchased goods for Rs 25,000 for cash and paid Rs 200 for carriage on these goods.
2. Purchased goods for Rs 40.000 on credit from sudhir and paid Rs 500 for carriage on these goods.
3. Received an order of goods for Rs 50,000 from gopal.
4. Purchased machinery for Rs 20,000 and spent Rs 500 on its carriage and Rs 300 on its installation.
5. Purchased goods from Anil for Rs 15,000.
6. Sold 1/3rd of the above goods at a profit of 20%.
7. Gopal's order was executed and cartage Rs 2000 was paid in this connection.
8. Goods costing Rs 12,000 sold to Mr. X, issued invoice at 25% above costless 10% trade discount.
9. Provide 20% depreciation furniture costing Rs 10,000.

Ans-