1.1 Principles of Accounting, Journal, Ledger, Trial Balance

Principles of Accounting, Journal, Ledger, Trial Balance
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In this post, I am going to discuss with you practically about Principles of Accounting, topics Journal, Ledger, Trial Balance with the help of questions asked in paper 2008 of FBISE Federal Board of Intermediate & Secondary Education Islamabad. Each paper will be segmented into three parts. first part will be extracted from the extensive questions, second part related to short questions and third one will be related to MCQ’s

Principles of Accounting, Paper 2008 ,Journal, Ledger, Trial Balance, Extensive Question & its Solution

Journalize the following transactions, post in the ledger and prepare a trial balance:-

Jan 1 2006 Mr. Nadeem commenced business with Rs.40,000 cash, furniture worth Rs.25,000, motor car valued at Rs.320,000 and stock worth Rs.20,000.

Jan 3 2006 Deposited into Bank Rs.38,000.

Jan .5 2006 Purchased goods on credit from lmran for Rs. 10,000.

Jan 6 2006 Sold goods to Babar on credit for Rs.6,000.

Jan 8 2006 Bought office, supplies from Rafiq & Co. for cash Rs.200.

Jan 10 2006 Goods sold for cash Rs.2,000.

Jan 11 2006 Paid Rs.600 as traveling expenses to salesman.

Jan 12 2006 Withdrew from the bank for personal use Rs. 1,000.

Jan 16 2006 Withdrew from bank for office use Rs.3,000.

Jan 19 2006 Issued a cheque to Imran of Rs. 9200 in full settlement of his account.

Jan 22 2006 Paid carriage in cash Rs.400.

Jan 25 2006 Received a cheque from Babar for Rs.6,000.

Jan 30 2006 Paid rent of the building by cheque Rs.3,000.

Jan 31 2006 Commission received Rs.200.

Jan 31 2006 Bank charges made by bank Rs.250.

Jan 31 2006 Baber’s cheque reported dishonored.

Marks:-

a. Journal

b. Ledger

c. Trial balance

Solution:

(a) Journal

Jan 1 2006 Mr. Nadeem commenced business with Rs.40,000 cash, furniture worth Rs.25,000, motor car valued at Rs.320,000 and stock worth Rs.20,000.

DateParticularsL.FDr.Cr.
Jan 1 2006Cash A/C 40,000 
 Furniture A/C 25,000 
 Motor Car A/C 320,000 
 Stock A/C 20,000 
                 Capital A/C  405000
 (Cash, Furniture Car and stock invested by owner as capital)   

Jan 3 2006 Deposited into Bank Rs.38,000.

Jan 3 2006Bank A/C 38,000 
                 Cash A/C  38,000
 (Cash deposited into bank)   

Jan .5 2006 Purchased goods on credit from lmran for Rs. 10,000.

Jan 5 2006Purchases A/C 10,000 
 Imran’s A/C  10,000
 (Goods bought on credit)   

Jan 6 2006 Sold goods to Babar on credit for Rs.6,000.

Jan 6 2006Babar’s A/C 6000 
 Sales A/C  6000
 (Goods sold on credit)   

Jan 8 2006 Bought office, supplies from Rafiq & Co. for cash Rs.200.

Jan 8 2006Office Supplies A/C 200 
 Cash A/C  200
 (Bought Office Supplies on Cash)   

Jan 10 2006 Goods sold for cash Rs.2,000.

10th Jan, 2006Cash A/C 2000 
                       Sales A/C  2000
 (Goods sold on cash)   

Jan 11 2006 Paid Rs.600 as traveling expenses to salesman.

11th Jan, 2006Travelling Expenses A/C 600 
                       Cash A/C  600
 (Travelling expenses paid)   

Jan 12 2006 Withdrew from the bank for personal use Rs. 1,000.

12th Jan, 2006Drawing A/C 1000 
                       Bank A/C  1000
 (Withdrew from bank for personal use)   

Jan 16 2006 Withdrew from bank for office use Rs.3,000.

16th Jan, 2006Cash A/C 3000 
                       Bank A/C  3000
 (Withdrew from bank for personal use)   

Jan 19 2006 Issued a cheque to Imran of Rs. 9200 in full settlement of his account.

19th Jan, 2006Imran A/C 10,000 
                      Bank A/C  9200
                      Discount A/C  800
 (Amount paid to Imran and discount received)   

Jan 22 2006 Paid carriage in cash Rs.400.

22nd Jan, 2006Carriage A/C 400 
                      Cash A/C  400
 (Carriage paid)   

Jan 25 2006 Received a cheque from Babar for Rs.6,000.

25th Jan, 2006Bank A/C 6000 
                      Babar’s A/C  6000
 (Amount received from Babar through cheque)   

Jan 30 2006 Paid rent of the building by cheque Rs.3,000.

30th Jan, 2006Rent A/C 3000 
                      Bank A/C  3000
 (Rent of building paid through cheque)   

Jan 31 2006 Commission received Rs.200.

31st Jan, 2006Cash A/C 200 
                      Commission A/C  200
 (Commission Received)   

Jan 31 2006 Bank charges made by bank Rs.250.

31st Jan, 2006Bank Charges A/C 250 
                      Bank A/C  250
 (Bank charges paid)   

Jan 31 2006 Baber’s cheque reported dishonored.

31st Jan, 2006Babar’s A/C 6000 
                      Bank A/C  6000
 (Babar’s Cheque returned dishonored)   

(b) Ledger

Cash A/C

DateParticularsAmountDateParticularsAmount
1st Jan, 2006Capital A/C40,0003rd Jan, 2006Bank A/C38,000
10th Jan, 2006Sales A/C20008th Jan, 2006Office Supplies A/C200
16th Jan, 2006Bank A/C300011th Jan, 2006Travelling Expense A/C600
31st Jan, 2006Commission A/C20022nd Jan, 2006Carriage A/C400
   31st Jan, 2006Balance c/d6000
  45,200  45,200

Bank A/C

DateParticularsAmountDateParticularsAmount
3rd Jan, 2006Cash A/C38,00012th Jan, 2006Drawing A/C1000
25th Jan, 2006Babar’s A/C600016th Jan, 2006Cash A/C3000
   19th Jan, 2006Imran A/C9200
   30th Jan, 2006Rent A/C3000
   31st Jan, 2006Bank Charges A/C250
   31st Jan, 2006Babar’s A/C6000
      
   31st Jan, 2006Balance c/d21550
  44,000  44,000

Furniture A/C

DateParticularsAmountDateParticularsAmount
1st Jan, 2006Capital A/C25,000   
      
   31st Jan, 2006Balance c/d25,000
  25,000  25,000

Motor Car A/C

DateParticularsAmountDateParticularsAmount
1st Jan, 2006Capital A/C320,000   
      
   31st Jan, 2006Balance c/d320,000
  320,000  320,000

Stock A/C

DateParticularsAmountDateParticularsAmount
1st Jan, 2006Capital A/C20,000   
      
   31st Jan, 2006Balance c/d20,000
  20,000  20,000

Capital A/C

DateParticularsAmountDateParticularsAmount
   1st Jan, 2006Cash A/C40,000
   1st Jan, 2006Furniture A/C25,000
   1st Jan, 2006Motor Car A/C320,000
   1st Jan, 2006Stock A/C20,000
      
31st Jan, 2006Balance c/d40,5000   
  40,5000  40,5000

Purchases A/C

DateParticularsAmountDateParticularsAmount
5th Jan, 2006Imran A/C10,000   
      
   31st Jan, 2006Balance c/d10,000
  10,000  10,000

Imran’s A/C

DateParticularsAmountDateParticularsAmount
19th Jan, 2006Bank A/C92005th Jan, 2006Purchases A/C10,000
19th Jan, 2006Discount A/C800   
      
  10,000  10,000

Babar’s A/C

DateParticularsAmountDateParticularsAmount
6th Jan, 2006Sales A/C600025th Jan, 2006Bank A/C6000
31st Jan, 2006Bank A/C6000   
   31st Jan, 2006Balance c/d6000
  12,000  12,000

Sales’s A/C

DateParticularsAmountDateParticularsAmount
   6th Jan, 2006Babar’s A/C6000
   10th Jan, 2006Cash A/C2000
31st Jan, 2006Balance c/d8000   
  8000  8000

Office Supplies A/C

DateParticularsAmountDateParticularsAmount
8th Jan, 2006Cash A/C200   
      
   31st Jan, 2006Balance c/d200
  200  200

Travelling Expense A/C

DateParticularsAmountDateParticularsAmount
11th Jan, 2006Cash A/C600   
      
   31st Jan, 2006Balance c/d600
  600  600

Drawing A/C

DateParticularsAmountDateParticularsAmount
12th Jan, 2006Bank A/C1000   
      
   31st Jan, 2006Balance c/d1000
  1000  1000

Discount A/C

DateParticularsAmountDateParticularsAmount
   19th Jan, 2006Imran A/C800
      
31st Jan, 2006Balance c/d800   
  800  800

Carriage A/C

DateParticularsAmountDateParticularsAmount
22nd Jan, 2006Cash A/C400   
      
   31st Jan, 2006Balance c/d400
  400  400

Rent A/C

DateParticularsAmountDateParticularsAmount
30th Jan, 2006Cash A/C3000   
      
   31st Jan, 2006Balance c/d3000
  3000  3000

Bank Charges A/C

DateParticularsAmountDateParticularsAmount
31st Jan, 2006Bank A/C250   
      
   31st Jan, 2006Balance c/d250
  250  250

Commission A/C

DateParticularsAmountDateParticularsAmount
   31st Jan, 2006Cash A/C200
      
31st Jan, 2006Balance c/d200   
  200  200

(c) Trial Balance

Account TitleDr.Cr.
Cash A/C6000 
Bank A/C21550 
Furniture A/C25,000 
Motor Car A/C320,000 
Stock A/C20,000 
Capital A/C 40,5000
Purchases A/C10,000 
Babar’s A/C6000 
Sales A/C 8000
Office Supplies A/C200 
Travelling Expense A/C600 
Drawing A/C1000 
Discount A/C 800
Carriage A/C400 
Rent A/C3000 
Bank Charges A/C250 
Commission A/C 200
   
Total414,000414,000

Principles of Accounting, Paper 2008 ,Journal, Ledger, Trial Balance, Short Questions

(i) Define double entry system of book keeping.

Answer:It is an Accounting method of recording transactions in which at-least two accounts are used in Debit and Credit aspects. In double entry book-keeping, debit side must be equals to credit side.

(ii) Define and explain three classes of account.

Answer:Under Classical approach there are three types of accounts as given below:

  • Personal Accounts: are accounts of real persons and organizations such as Ali’s Account, Google’s Account etc.
  • Real Accounts: are accounts related to assets both tangible and intangibles such as property, land, building, goodwill, patents etc.
  • Nominal Accounts: are accounts related to Income, Profits, Expenses and losses such as rent, commission, interest, sales, wages, gain or loss etc.

(iii) Define the term ‘owner’s equity’.

Answer:Owner’s Equity is share of ownership of shareholder in the company after paying all the liabilities of the company at the time of liquidation of the company.

(iv) State different types of transactions for drawings.

Answer:Drawing is simply withdrawal of owner’s asset out of business for his/her personal use. It is contra to owner’s equity or capital. Types of transactions are given below:

Cash Drawing

Drawing A/C (Dr.)

                  Cash/Bank A/C (Cr.)

Drawing of goods

Drawing A/C (Dr.)

                  Purchases/Stock A/C (Cr.)

Drawing of assets other than goods

Drawing A/C (Dr.)

                  other Asset A/C (Cr.)

(v) State two types of trial balance.

Answer: There are two types of trial balance.

  • Unadjusted Trial Balance: It is made before recording adjusting entries. It is simply verification of accounts either debit side is equal to credit side or not.
  • Adjusted Trial Balance: It is made after making unadjusted trial balance. All the adjusting entries are taken into account and included in unadjusted trial balance and result is called adjusted trial balance.

Principles of Accounting, Paper 2008 ,Journal, Ledger, Trial Balance, MCQ’s

(i) What is the art of recording, classifying and summarizing business transactions called?

A. Journalizing                                    B. Book keeping

C. Accounting                         D. All of these

(ii) What is the modern system of book keeping called?

A. Most modern                                  B. Single entry

C. Double entry                                  D. None of these system

(iii) What account are the items or goods purchased by the business for the sole use of its proprietor debited to?

A. Merchandize                                  B. Goods

C. Purchases                                        D. Drawings

(iv) What is the business called that purchases goods and sells them without changing their shape?

A. Manufacturing concern                  B. Trading concern

C. Services business                            D. None of these

(v) Which of the following is the true form of accounting equation?

A. Liabilities = assets – capital            B. Assets = liabilities – capital

C. Capital = assets – liabilities             D. Assets = liabilities + capital

(vi) What is trial balance known as?

A. Classification of transactions.        B. Recording of transactions.

C. Summary of transactions    D. None of these.

(vii) What account do expenses and losses fall under?

A. Personal accounts               B. Nominal accounts

C. Real accounts.                    D. All of these

(viii) Which one of the following results in decrease in assets and liabilities?

A. Purchase of goods on credit.         B. Sale of assets on credit.

C. Payment to creditors.                     D. Receipt of bank loan.

(ix) Which of the following is correct according to the rules?

A. Increase in assets and decrease in liabilities is debited.

B. Increase in purchases and decreases in sales is debited.

C. Increase in expenses and decrease income.

D. All of these.

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