SUMMARY NOTES OF BOOK KEEPING & ACCOUNTANCY

1) JOURNAL (SUMMARY NOTES)

1) The accounting process starts with the recording of transactions in the form of journal entries.
2) The recording is based on double entry system. This book or register called journal is the book of first or original entry.
3) Next step is to post the entries in the ledger which is covered in the next unit.

Theory Questions
1) Write short note on classification of accounts.

Accounts are broadly classified into assets, liabilities and capital. The basic accounting equation specifies broad categories, which are as follows:

(i) Assets: These are resources controlled by the enterprise as a result of past events and from which future economic benefits are expected toflow to the enterprise, namely cash, stock of goods, land, buildings, machinery etc.

(ii) Liabilities: These are financial obligations of an enterprise other than owner’s equity namely longtermloans, creditors, outstanding expenses etc.

(iii) Capital: It generally refer to the amounts invested in an enterprise by its owner(s), the accretion to it or a reduction in it. Since capital is affected by expenses and incomes of revenue nature, there are two more categories of accounts, namely expenses and incomes. The difference between incomes and expenses are taken in to capital account.

 Expenses: These represents those accounts which show the amount spent or even lost in carrying on operations.
 Incomes: These represent those accounts which show therevenue amounts earned by the enterprise.
However, traditionally accounts are classified as follows:
(i) Personal Accounts: These accounts relate to persons, institutions, debtors or creditors.
(ii) Impersonal Accounts: These represent accounts which are not personal. These can be further sub-divided as follows:
 Real Accounts: These accounts relate to assets of the firm but not debt e.g. accounts relating to land, buildings, cash in hand etc.
 Nominal accounts: These accounts relate to expenses, losses, gains, revenues etc.

2) Distinguish between Real account and nominal account.

A real account is an account relating to properties and assets, other than personal accounts of the firm. Examples are land, buildings, machinery, cash, investments etc. Nominal accounts relate to expenses or losses, incomes and gains. Examples are: wages, salaries, rent, depreciation etc. The net result of all the nominal accounts is reflected as profit or loss which is transferred to the capital account. Nominal accounts are therefore, temporary.The real accounts are shown in the balancesheet along with personal accounts.

2) LEDGER

3) SUBSIDIARY BOOKS 

4) CASH BOOK 

5) PETTY CASH BOOK 

6) RECTIFICATION OF ERRORS

7) TRIAL BALANCE

8) FINAL ACCOUNTS

9) BANK RECONCILIATION STATEMENT

10) DEPRECIATION

11) SINGLE ENTRY

TRUE OR FALSE OF BOOK KEEPING & ACCOUNTANCY

1) JOURNAL  (TRUE OR FALSE)

True : As per the modern accounting equation approach- it is the basic formula in the accounting process
2) In the traditional approach, for an entity a debtor will be receiver after sale of goods.

False: In the traditional approach, a debtor will be giver since he will be paying money for the sale of goods by the entity.
3) The rule of nominal account states that all expenses & losses are recorded on credit side.

False:The rule of nominal account states that all expenses & losses are recorded on debit side.
4) Journal proper is also called a subsidiary book.

True: It is one of the book where in the transactions not entered in the other books are entered in this book.
5) Capital account has a debit balance.

False: Capital account has a credit balance.
6) Purchase account is a nominal account.

True: As it is considered as an expense.
7) All the personal & real account are recorded in P&L A/c.

False: All the personal & real account are recorded in balancesheet.
8) Asset side of balancesheet contains all the personal & nominal accounts.

False: Asset side of balancesheet contains all the personal & real accounts.
9) Capital account is a personal account.

True: As it is in the name of the proprietor who is bringing in the capital to the business.
10) Journal is also known as the book of original entry.

True: As the transactions are entered first in this book as a first hand record.