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MGT101 - Financial Accounting - I - Lecture Handout 11

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EXERCISES- RECORDING OF TRANSACTIONS (Continued)

Cash Account

Cash Account Code 01
Date No. Narration Dr. Rs. Date No. Narration Cr. Rs.
01-01--- 01 Capital a/c 200,000 01-01--- 02 Cash a/c 195,000
06-01--- 06 Sales a/c 60,000 08-01--- 07 Purchases a/c 20,000
        31-01--- 15 Cash a/c 10,000
              225,000
            Balance 35,000
      260,000       260,000

 

Name Of the Organization (Ali Traders)
Trial Balance As On
As on January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
       
       
       
Total      

Bank Account

Bank Account Code 02
Date No. Narration Dr. Rs. Date No. Narration
Cr. Rs.
01-01--- 02 Cash a/c 195,000 02-01--- 03 Furniture a/c 15,000
25-01--- 12 Mr. B 20,000 03-01--- 04 Vehicle a/c 50,000
31-01--- 15 Cash a/c 10,000 21-01--- 11 Mr. A 25,000
        31-01--- 13 Salaries a/c 5,000
              95,000
            Balance 130,000
      225,000       225,000

 

Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
     
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
       
       
Total      

Capital Account

Capital Account Code 03
Date No. Narration Dr. Rs. Date No. Narration
Cr. Rs.
        01-01--- 01 Capital a/c 200,000
               
               
        0      
    Balance   200,000      
               
        200,000     200,000

 

Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
Capital Account 03   200,000
       
       
       
Total      

Furniture Account

Furniture Account Code 04
Date No. Narration Dr. Rs. Date No. Narration
Cr. Rs.
02-01--- 03 Furniture a/c 15,000        
               
            Balance 15,000
               
    Balance          
               
      15,000       15,000

 

Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
Capital Account 03   200,000
Furniture Account 04 15,000  
       
       
Total      

Vehicle Account

Vehicle Account Code 05
Date No. Narration Dr. Rs. Date No. Narration
Cr. Rs.
03-01--- 04 Furniture a/c 50,000        
               
            Balance 50,000
               
    Balance          
               
      50,000       50,000

 

Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
Capital Account 03   200,000
Furniture Account 04 15,000  
Vehicle Account 05 50,000  
       
Total      

Purchases Account

Purchases Account Code 06
Date No. Narration Dr. Rs. Date No. Narration
Cr. Rs.
05-01--- 05 Purchases a/c 50,000 10-01--- 08 Purchase return 10,000
08-01--- 07 Purchases a/c 50,000        
               
               
            Balance 60,000
               
      70,000       70,000

 

Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
Capital Account 03   200,000
Furniture Account 04 15,000  
Vehicle Account 05 50,000  
Purchases Account 06 60,000  
Total      

Mr. A (Supplier)

Mr. A (Creditor) Account Code 07
Date No. Narration Dr. Rs. Date No. Narration Cr. Rs.
10-01--- 08 Purchase return 10,000 05-01--- 05 Purchases a/c 50,000
21-01--- 11 Bank a/c 25,000        
               
    Balance   15,000      
              60,000
               
        50,000     50,000

 

Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
Capital Account 03   200,000
Furniture Account 04 15,000  
Vehicle Account 05 50,000  
Purchases Account 06 60,000  
Mr. A (Creditor) 07   15,000
       
Total      

Sales

Mr. A (Creditor) Account Code 07
Date No. Narration Dr. Rs. Date No. Narration Cr. Rs.
18-01--- 10 Sales return 5,000 06-01--- 06 Cash a/c 60,000
        12-01--- 09 Mr. B a/c 40,000
               
    Balance 95,000        
               
               
      100,000       100,000

 

Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
Capital Account 03   200,000
Furniture Account 04 15,000  
Vehicle Account 05 50,000  
Purchases Account 06 60,000  
Mr. A (Creditor) 07   15,000
Sales 08   95,000
Total      

Mr. B (Customer)

Mr. A (Creditor) Account Code 07
Date No. Narration Dr. Rs. Date No. Narration Cr. Rs.
12-01--- 09 Sales a/c 40,000 18-01--- 10 Sales return 5,000
        25-01--- 12 Bank a/c 20,000
               
               
            Balance 15,000
               
      40,000       40,000

 

Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
Capital Account 03   200,000
Furniture Account 04 15,000  
Vehicle Account 05 50,000  
Purchases Account 06 60,000  
Mr. A (Creditor) 07   15,000
Sales 08   95,000
Mr. B (Debtor) 09 15,000  
Total      

Salaries

Mr. A (Creditor) Account Code 07
Date No. Narration Dr. Rs. Date No. Narration Cr. Rs.
31-01--- 13 Cash a/c 5,000        
               
            Balance 5,000
               
               
               
      5,000       5,000

 

Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
Capital Account 03   200,000
Furniture Account 04 15,000  
Vehicle Account 05 50,000  
Purchases Account 06 60,000  
Mr. A (Creditor) 07   15,000
Sales 08   95,000
Mr. B (Debtor) 09 15,000  
Salaries 10 5,000  
       
Total      

Expenses

Mr. A (Creditor) Account Code 07
Date No. Narration Dr. Rs. Date No. Narration Cr. Rs.
31-01--- 14 Exp. accrued 20,000        
               
            Balance 20,000
               
               
               
      20,000       20,000
Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
Capital Account 03   200,000
Furniture Account 04 15,000  
Vehicle Account 05 50,000  
Purchases Account 06 60,000  
Mr. A (Creditor) 07   15,000
Sales 08   95,000
Mr. B (Debtor) 09 15,000  
Salaries 10 5,000  
Expenses 11 20,000  
Total      

Expenses Payable

Mr. A (Creditor) Account Code 07
Date No. Narration Dr. Rs. Date No. Narration Cr. Rs.
        31-01--- 14 Exp. accrued 20,000
               
            Balance 20,000
               
               
               
      20,000       20,000

 

Name Of the Organization (Ali Traders)
Trial Balance
As On January 31, 20--
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 35,000  
Bank Account 02 130,000  
Capital Account 03   200,000
Furniture Account 04 15,000  
Vehicle Account 05 50,000  
Purchases Account 06 60,000  
Mr. A (Creditor) 07   15,000
Sales 08   95,000
Mr. B (Debtor) 09 15,000  
Salaries 10 5,000  
Expenses 11 20,000  
Expenses Payable 12   20,000
       
Total   330,000 330,000

Profit & Loss Account (Account Form)

Name of the Entity (Ali Traders)
Profit and Loss Account
For the Month Ending January 31, 20--
Debit   Credit  
Particulars Rs. Particulars Rs.
Cost of Sale (Purchases) 60,000 Income 95,000
Gross Profit
(income – Cost of Sale)
35,000    
Total 95,000 Total 95,000
Admin Expenses
Salaries 5,000
Expenses 20,000
25,000 Gross Profit 35,000
Net Profit
(gross Profit – expenses)
10,000    
Total 35,000 Total 35,000

 

Profit & Loss Account (Report Form)

Name of the Entity (Ali Traders)
Profit and Loss Account
For the Month Ending January 31, 20--
Particulars Amount
Rs.
Amount
Rs.
Income / Sales / Revenue
Less: Cost of Goods Sold
  95,000
(60,000)
Gross Profit
Less: Administrative Expenses
(25,000) 35,000
(25,000)
Net Profit   10,000

Rules of Debit & Credit

  • Any account that obtains a benefit is Debit.
  • Anything that will provide benefit to the business is Credit.
  • Both these statements may look different but in fact if we consider that whenever an account benefits as a result of a transaction it will have to return that benefit to the business then both the statements will look like different sides of the same picture.

Rules of debit & credits can also be explained like:

  • Expenditure
    o Increase in Expenditure is Debit
    o Decrease in Expenditure is Credit
  • Income
    o Increase in Income is Credit
    o Decrease in Income is Debit
  • Assets
    o Increase in Asset is Debit
    o Decrease in Asset is Credit
  • Liability
    o Increase in Liability is Credit
    o Decrease in Liability is Debit

Now we will explain these rules with the help of the following illustration:

Sr.
#
Date Particulars
01 Jan 01 Mr. Rizwan invests Rs. 100,000 to commence his business.
02 Jan 03 He opened an account with bank & deposited Rs. 30,000.
03 Jan 05 He borrows Rs. 50,000 from Mr. Saleem at 12% per annum.
04 Jan 07 He purchased furniture worth Rs. 20,000 for cash.
05 Jan 09 He purchased goods (for resale) worth of Rs. 10,000 from Mr. Afzal on credit.
06 Jan 10 He sold goods for cash Rs. 5,000
07 Jan 12 He sold goods for Rs. 5,000 to Mr. Naeem on credit basis.
08 Jan 15 Cash deposited in bank Rs. 5,000
09 Jan 16 He purchased stationery for Rs. 3,000.
10 Jan 18 He purchased office equipment for Rs. 10,000 and paid by cheque.
11 Jan 19 He returned defective goods to Mr. Afzal worth Rs. 1,000.
12 Jan 25 Goods are returned by Mr. Naeem Rs. 500 to the business.
13 Jan 30 Cash paid to Mr. Afzal Rs. 9,000 in full settlement of his claim.
14 Jan 31 Cash received from Mr. Naeem Rs. 4,500 in full settlement of his account.
15 Jan 31 Cash withdrawn from the bank Rs. 500.

Now first document that we prepare in accounting is the voucher. We will record first entry in voucher,
i.e.

Name Of Company
Type Of Voucher
Date: 1-1-02-- No: 01
Description Code
#
Debit
Amount
Credit
Amount
Cash a/c 01 100,000  
To Capital a/c 02   100,000
       
Total:   100,000 100,000
Narration: Capital Introduced in Cash by Mr. Rizwan.
Prepared By: Checked by:

Same entry is presented in simpler form:

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
01-01-2002 Cash A/c
Capital A/c
Capital Introduced in Cash by Mr.
Rizwan
01
02
100,000 100,000

In this case, cash account is debited because cash account has obtained benefit and Capital account is credited because business has obtained benefit because of capital account.

This statement can also be interpreted like this:
As cash is an asset and it is increased in this case, so cash is debited. Capital is a liability and increase in liability is credit. In this case capital is increased, hence it is credited.

Entry # 2

First, we will book this entry in voucher.

Name Of Company
Type Of Voucher
Date: 3-1-02-- No: 01
Description Code
#
Debit
Amount
Credit
Amount
Bank a/c 03 30,000  
To Cash a/c 01   30,000
       
Total:   30,000 30,000
Narration: Capital Introduced in Cash by Mr. Rizwan.
Prepared By: Checked by:

Again, the same entry in simple form

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-01-2002

Bank A/c

Cash A/c


Deposited cash in bank.

03


01

30,000 30,000

Again, bank account is debited because bank account has obtained benefit and Cash account is credited because business has obtained benefit because of cash account.
This statement can also be interpreted like this:
As bank is an asset and it is increased in this case, so bank is debited. Cash is an asset and decrease in asset is credit. In this case cash is decreased, hence it is credited

From now onward, we will present entry in simple form

Entry # 3

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
05-01-2002

Cash A/c


Loan A/c
Obtained loan from Mr. Saleem.

01


04

50,000 50,000

Cash account is debited because cash account has obtained benefit and Loan account is credited because business has obtained benefit because of Loan account.
This statement can also be interpreted like this:

As cash is an asset and it is increased in this case, so cash is debited. Loan is a liability and increase in liability is credit. In this case Loan is increased, hence it is credited

Entry # 4

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
07-01-2002

Furniture A/c


Cash A/c
Purchased furniture for cash

05


01

20,000 20,000

Again, furniture account is debited because furniture account has obtained benefit and Cash account is credited because business has obtained benefit because of cash account.
This statement can also be interpreted like this:
As furniture is an asset and it is increased in this case, so furniture is debited. Cash is an asset and decrease in asset is credit. In this case cash is decreased, hence it is credited.

Entry # 5

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
09-01-2002

Purchases A/c


Mr. Afzal(Creditors) A/c
Purchased goods from Mr. Afzal on
credit

06


07

10,000 10,000

Purchase account is debited because purchase account has obtained benefit and Creditors account is credited because business has obtained benefit because of Creditors account.
This statement can also be interpreted like this:
As purchase is an expense and it is increased in this case, so purchase is debited. Creditors are liabilities and increase in liability is credit. In this case Creditors are increased, hence it is credited.

Creditor is any third person or organization, to whom business has to pay in future.

Entry # 6

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
10-01-2002

Cash A/c


Sale A/c
Sold goods for cash

01


08

5,000 5,000

Cash account is debited because cash account has obtained benefit and Sale account is credited because business has obtained benefit because of Sale account.
This statement can also be interpreted like this:
As cash is an asset and it is increased in this case, so cash is debited. Sale is an income and increase in income is credit. In this case income is increased, hence it is credited

Entry # 7

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
12-01-2002

Mr. Naeem (Debtors) A/c
Sale A/c
Sold goods to Mr. Naeem on credit

09
08

5,000 5,000

Debtors account is debited because Debtors account has obtained benefit and Sale account is credited because business has obtained benefit because of Sale account.
This statement can also be interpreted like this:
As Debtors is an asset and it is increased in this case, so debtors account is debited. Sale is an income and increase in income is credit. In this case income is increased, hence it is credited
Debtor is any third person or organization, from whom cash is receivable by the business.

Entry # 8

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
15-01-2002

Bank A/c
Cash A/c
Cash deposited in bank

03
01

5,000 5,000

Entry # 9

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
16-01-2002

Stationery expense A/c
Cash A/c
Stationery purchased for cash

10
01

3,000 3,000

Stationery account is debited because stationery account has obtained benefit and Cash account is credited because business has obtained benefit because of Cash account.
This statement can also be interpreted like this:
As stationery is an expense and it is increased in this case, so stationery is debited. Cash is an asset and decrease in asset is credit. In this case Cash is decreased, hence it is credited

Entry # 10

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
18-01-2002

Office Equipment A/c
Bank A/c
Office equipment purchased by
cheque

11
03

10,000 10,000

Office Equipment account is debited because Office Equipment account has obtained benefit and Bank account is credited because business has obtained benefit because of Bank account.
This statement can also be interpreted like this:
As Office Equipment is an asset and it is increased in this case, so Office Equipment is debited. Bank is an asset and decrease in asset is credit. In this case bank account is decreased, hence it is credited

Entry # 11

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
19-01-2002

Mr. Afzal (Creditors) A/C
Purchase return A/C

07
12

1,000 1,000

Creditors account is debited because Creditors account has obtained benefit and Purchase return account is credited because business has obtained benefit because of Purchase return account.
This statement can also be interpreted like this:
As Creditors is a liability and it is decreased in this case, so Creditors is debited. Purchase return is an expense and decrease in expense is credit, so it is credited.

Entry # 12

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
25-01-2002

Sales return A/C
Mr. Naeem(Debtors) A/C
Goods returned by Mr. Naeem
(Debtors)

13
09

500 500

Sales return account is debited because Sales return account has obtained benefit and Debtors is credited because business has obtained benefit because of Debtors account.
This statement can also be interpreted like this:
As sales return is decrease in income and decrease in income is debit, so it is debited. Debtors account is decreased and decrease in asset is credit, so it is credited.

Entry # 13

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
30-01-2002

Mr. Afzal(Creditors) A/C
Cash A/C
Cash paid to Mr. Afzal(Creditors)

07
01

9,000 9,000

Entry # 14

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
31-01-2002

Cash A/C
Mr. Naeem(Debtors) A/C
Cash received from Mr.
Naeem(Debtors)

01
09

4,500 4,500

Entry # 15

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
31-01-2002

Cash A/C
Bank A/C
Cash withdrawn from bank

01
03

500 500

Cash Book and Bank Book

Ledger is a book that keeps separate record for each account; the Account or Head of Account is a systematic record of transactions of one type; and Like other things, a separate account is also required to record the movements in cash (usually called cash in hand) and bank account (usually called cash at bank). If the volume of transactions is high then we can separate books for cash and bank account. These separate books for cash and bank account are called cash book and bank book respectively. The Cash Book records all the movements in the cash account.
A Cash Book would look like one of the two samples shown below:

Cash Book Account Code 01
Receipt Side Payment Side
Date No. Narration /
Particulars
Ledger
Code
Receipt
Amount
Date No. Narration /
Particulars
Ledger
Code
Payment
Amount
                   

or

Cash Book Account Code 01
Date Voucher
Number
Narration /
Particulars
Ledger
Code
Receipt
Amount
Payment
Amount
Balance
Dr/(Cr)
             

The Cash Book

In the first format / presentation, receipts (Debits) are written on left hand side of the page and payments (Credits) on the right hand side. In the second presentation, instead of using two pages, we use two columns on the same page. Both these presentations are correct. In the second format, we have an additional facility of knowing the balance of the account after every transaction. Whereas in the first one, we have to add up the receipts and payments every time we need to know the balance. Moreover, the second format utilizes less space, therefore, we will use this format in our future discussions

The Bank Book

The Bank book records all the movements in the bank account. The format of the bank book is the same as that of cash book except for an additional column for Cheque Number. Again, we can use either two pages OR two columns to present the bank book.

Bank Book (Bank Account Number) Account Code 02
Date Voucher
Number
Chq.
No.
Narration /
Particulars
Ledger
Code
Receipt
Amount
Payment
Amount
Balance
Dr/(Cr)
               

As you can see that except for a few minor differences, the format of Cash and Bank book are almost similar to that of the General Ledger.

The differences are explained here:

  • The title of debit and credit columns has been changed to receipt and payment respectively. It is not necessary to make this change. But, it is done to simplify things as we know that in case of cash and bank, debit side would signify receipt and credit side would represent payment.
  • There is an additional column titled ledger code. In this column, we write the code of the other head of account that is affected by the transaction. This helps in understanding the complete transaction at a glance.
  • There may be a column for cheque number in the bank book.
  • It may be noted that in case the organization operates more than one bank account, separate ledger accounts will be opened in bank book for each account.

Now we will summarize all cash transactions in both two page cash book & one page cash book for the convenience of the reader.

Two page cash book will be presented as under:

Cash Account Account Code 01
Receipt Side Payment Side
Date No. Narration /
Particulars
Ledger
Code
Receipt
Amount
Date No. Narration /
Particulars
Ledger
Code
Payment
Amount
Jan-1   Capital
introduced
02 100,000 Jan-3   Deposited in
bank
03 30,000
Jan-10   Loan received 04 50,000 Jan-7   Furniture
purchased
05 20,000
Jan-05   Goods sold 08 5,000 Jan-15   Deposited in
bank
03 5,000
Jan-31   Received from
debtors
09 4,500 Jan-16   Stationery
purchased
10 3,000
Jan-31   Cash drawn
from bank
03 500 Jan-30   Paid to
creditors
07 9,000

Same record will be presented in two column cash book now

Date Voucher
Number
Narration /
Particulars
Ledger
Code
Receipt
Amount
Payment
Amount
Balance
Dr/(Cr)
Jan-1   Capital introduced 02 100,000   100,000
Jan-3   Deposited in bank 03   (30,000) 70,000
Jan-5   Loan received 04 50,000   120,000
Jan-7   Furniture purchased 05   (20,000) 100,000
Jan-10   Goods sold 08 5,000   105,000
Jan-15   Deposited in bank 03   (5,000) 100,000
Jan-16   Stationery purchased 10   (3,000) 97,000
Jan-30   Paid to creditors 07   (9,000) 88,000
Jan-31   Received from debtors 09 4,500   92,500
Jan-31   Cash drawn from bank 03 500   93,000

Now, we will present Bank entries in bank book.

Bank Book (Bank Account # xxx) Account Code 02              
Date Voucher
Number
Chq.
No.
Narration /
Particulars
Ledger
Code
Receipt
Amount
Payment
Amount
Balance
Dr/(Cr)
Jan-3     Cash deposited 01 30,000   30,000
Jan-15     Cash deposited 01 5,000   35,000
Jan-18     Off. Equip.
purchased
11   (10,000) 25,000
Jan-31     Cash drawn 01   (500) 24,500

Recommended readings:

  • Chapter # 2 of Business Accounting by Frank Woods
  • Chapter # 2, 3 of Accounting by M. Arif & Sohail Afzal

Illustration

Nawab Sons started their business in the month of March, 2002. Following are their transactions for the month. Pass journal entries, prepare Ledger Accounts, and make their profitability analyses.

 

Sr. # Date Particulars
01 Mar. 01 Started business with Rs. 150,000
02 Mar. 05 Purchased office furniture for cash Rs. 2,000
03 Mar.07 Purchased goods for cash Rs. 9,000
04 Mar. 10 Paid carriage on purchases Rs. 250
05 Mar. 12 Purchased goods from Saleem & co. Rs. 7,000
06 Mar. 13 Sold goods for cash Rs. 12,000
07 Mar. 15 Sold goods to Usman & Sons Rs. 25,000
08 Mar. 21 Received cash From Usman & Sons Rs. 25,000
09 Mar. 21 Paid cash to Saleem & co Rs. 7,000
10 Mar.23 Paid salaries for the month Rs. 2,500
11 Mar. 25 Paid rent Rs. 3,000
12 Mar. 29 Purchased stationery Rs.2,000
12 Mar. 31 Utility bills are accrued Rs. 5,000

Journal Entries

Entry # 1

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-01-2002 Cash A/c
Capital A/c
Started business with cash.
01
02
150,000 150,000

Entry # 2

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-05-2002 Office Furniture A/c
Cash A/c
Purchased office furniture
03
01
2,000 2,000

Entry # 3

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-07-2002 Purchases A/c
Cash A/c
Purchased goods for cash.
04
01
9,000 9,000

Entry # 4

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-10-2002 Carriage on purchase A/c
Cash A/c
Paid carriage on purchase.
05
01
250 250

Entry # 5

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-12-2002 Purchases A/c
Salim & co.(Creditors)
Purchased goods on credit
04
06
7,000 7,000

Entry # 6

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-13-2002 03-13-2002
Cash A/c
Sale A/c
Goods sold for cash.
01
07
12,000 12,000

Entry # 7

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-15-2002 Usman & Sons (Debtors) A/c
Sale A/c
Goods sold on credit.
08
07
25,000 25,000

Entry # 8

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-21-2002 Cash A/c
Usman & Sons (Debtors A/c
Cash received from Usman & Sons
01
08
25,000 25,000

Entry # 9

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-21-2002 Salim & co.(Creditors) A/c
Cash A/c
Paid cash to Salim & co.
06
01
7,000 7,000

Entry # 10

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-23-2002 Salaries A/c
Cash A/c
Started business with cash.
09
01
2,500 2,500

Entry # 11

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-25-2002 Rent A/c
Cash A/c
Paid rent.
10
01
3,000 3,000

Entry # 12

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-29-2002 Stationery A/c
Cash A/c
Stationery purchased.
11
01
2,000 2,000

Entry # 13

Date Particulars Code # Amount(Dr.)
Rs.
Amount(Cr.)
Rs.
03-31-2002 Utility Bills A/c
Accrued Expenses A/c
Accrual of utility bills for the month..
12
13
5,000 5,000

Ledger Accounts

Cash Account (Account code # 1)
Date Particulars Code
#
Amount
Rs. (Dr.)
Date Particulars Code
#
Amount
Rs. (Cr.)
1-3-02 Capital a/c 02 150,000 5-3-02 Office furniture a/c 03 2,000
  Goods sold            
13-3-02 Received from 07 12,000 7-3-02 Purchases a/c 04 9,000
21-3-02 debtors     10-3-02 Carriage 05 250
    08 25,000 21-3-02 Paid to creditors 06 7,000
        23-3-02 Salaries a/c 09 2,500
        25-3-02 Rent a/c 10 3,000
        29-3-02 Stationery a/c 11 2,000
          Balance   161,250
  Total   187,000   Total   187,000

 

Capital Account (Account code # 2)
Date Particulars Code # Amount
Rs.
(Dr.)
Date Particulars Code # Amount
Rs.
(Cr.)
        1/3/2002 Cash a/c 1 150,000
  Balance   150,000        
  Total   150,000   Total   150,000

 

Office furniture Account (Account code # 3)
Date Particulars Code # Amount
Rs.
(Dr.)
Date Particulars Code # Amount
Rs.
(Cr.)
  Office furniture 1 2,000        
          Balance   2,000
  Total   2,000   Total   2,000

 

Purchases Account (Account code # 4)
Date Particulars Code # Amount
Rs.
(Dr.)
Date Particulars Code # Amount
Rs.
(Cr.)
7-3-02 Cash 1 9,000        
12-3-02 Slim & Co(A/P)   7,000   Balance   16,000
  Total   16,000   Total   16,000

 

Carriage on purchase Account (Account code # 5)
Date Particulars Code
#
Amount
Rs. (Dr.)
Date Particulars Code
#
Amount
Rs. (Cr.)
10-3-02 Cash 01 250   Balance   250
  Total   250   Total   250

 

Salim & co.(Creditors) Account (Account code # 6)
Date Particulars Code
#
Amount
Rs. (Dr.)
Date Particulars Code
#
Amount
Rs. (Cr.)
12-3-02 Cash a/c 04 7,000 21-3-02

Purchases a/c

Balance

  7,000
  Total   7,000   Total   7,000

 

Sale Account (Account code # 7)
Date Particulars Code
#
Amount
Rs. (Dr.)
Date Particulars Code
#
Amount
Rs. (Cr.)
  Balance 04 7,000

13-3-02

15-3-02

Cash a/c

Usman & Sons
(Debtors) a/c

01

08

12,000

25,000

  Total   37,000   Total   37,000

 

Usman & sons(Debtors) Account (Account code # 8)
Date Particulars Code
#
Amount
Rs. (Dr.)
Date Particulars Code
#
Amount
Rs. (Cr.)
15-3-02 Sales a/c 07 25,000

21-3-02

Cash a/c

Balance

01

25,000

0

  Total   25,000   Total   25,000

 

Salaries Account (Account code # 9)
Date Particulars Code
#
Amount
Rs. (Dr.)
Date Particulars Code
#
Amount
Rs. (Cr.)
23-3-02 Cash a/c 01 2,500

 

 

Balance

 

 

2,500

  Total   2,500   Total   2,500

 

Rent Account (Account code # 10)
Date Particulars Code
#
Amount
Rs. (Dr.)
Date Particulars Code
#
Amount
Rs. (Cr.)
25-3-02 Cash a/c 01 3,000

 

 

Balance

 

 

3,000

  Total   3,000   Total   3,000

 

Stationery Account (Account code # 11)
Date Particulars Code
#
Amount
Rs. (Dr.)
Date Particulars Code
#
Amount
Rs. (Cr.)
29-3-02 Cash a/c 01 2,000

 

 

Balance

 

 

2,000

  Total   2,000   Total   2,000

 

Utility Bills Account (Account code # 12)
Date Particulars Code
#
Amount
Rs. (Dr.)
Date Particulars Code
#
Amount
Rs. (Cr.)
31-3-02 A/P 13 5,000

 

 

Balance

 

 

5,000

  Total   5,000   Total   5,000

 

Accrued Expenses Account (Account code # 13)
Date Particulars Code
#
Amount
Rs. (Dr.)
Date Particulars Code
#
Amount
Rs. (Cr.)
31-3-02 Balance   5,000

 

A/P

 

12

5,000

 

  Total   5,000   Total   5,000

 

Saeed & co.
Trial Balance
As On January 31, 2002
Title of Account Code Dr. Rs. Cr. Rs.
Cash Account 01 161,250  
Capital Account 02   150,000
Furniture Account 03 2,000  
Purchases Account 04 16,000  
Carriage on purchase account 05 250  
Salim& co. (Creditor) 06   0
Sales 07   37,000
Usman & co. (Debtor) 08 0  
Salaries 09 2,500  
Rent 10 3,000  
Stationery 11 2,000  
Utility bills 12 5,000  
Accrued expenses 13   5,000
Total   192,000 192,000

 

Saeed & Co.
Profit & Loss Account for the period ended January 31, 2002
Particulars Amount
Rs.
Amount
Rs.
Income / Sales / Revenue (See Note #1)
Less: Cost of Goods Sold (See Note # 1)
  37,000
(16,250)
Gross Profit
Less: Admin. Expenses (See Note # 2)
  20,750
(12,500)
Net Profit/ (Loss)   8,250

Note # 1 Cost of goods sold

Purchases 16,000
Add: carriage on purchase 250
Cost of goods sold 16,250

Note # 2 Admin. Expenses

Salaries 2,500
Rent 3,000
Stationery 2,000
Utility bills 5,000
Total Administrative Expenses 12,500

Recommended readings:

  • Chapter # 3 of business accounting by Frank Woods
  • Chapter # 5 of accounting by M. Arif & Sohail Afzal.

Related Content: MGT101 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Financial Accounting