[Class 11 Accountancy Notes, AHSEC, CBSE, Chapter Wise Notes, Recording of Transactions, Journal, Ledger, Subsidiary Books, BRS]
Class 11 Accountancy Notes
AHSEC Class 11 Notes
Unit – 1: Recording of Transactions
Journal, Ledger, Subsidiary Books, BRS
Q.1. Define the term “Journal”. Mention its features. 2005
Ans: Journal: The word ‘Journal’ has been derived from the French word ‘JOUR’ means
daily records. Journal is a book of original entry in which transactions are
recorded as and when they occur in chronological order (in order of date) from
source documents. Recording in journal is made showing the accounts to be
debited and credited in a systematic manner.
In the words of E. L. Kolher, “A Journal is a
chronological record of accounting transactions showing the names of the
accounts that are to be debited or credited, the amounts of debits and credit,
and any useful supplementary information about the transactions. It is
analogous to a diary.”
Thus, the journal provides a date-wise record of all the transactions
with details of the accounts and amounts debited and credited for each
transaction with a short explanation, which is known as narration.
Features
of Journal
The following are the main characteristics of
Journal:
a) Journal is
a book of original entry.
b) Transactions
are recorded in the journal as and when they occur, i.e., the record is
chronological.
c) Journal is
so ruled that all the transactions can be passed through it.
d) The
process of recording transactions in the journal is called journalising.
e) Any entry
made in the journal is called 'Journal Entry'.
f) Journal
contains all non-cash transactions which have taken place during the accounting
period.
Q.2. Mention the advantages and disadvantages of journal. 2005
Ans: Advantages of Journal: The chief
advantages of the use of the journal are the following:
a) The possibility of errors is reduced. Since the amounts to be
debited and credited are written side by side, the two can be compared to see
that they are equal.
b) Along with the entry in the journal a complete explanations is
written so that later it would be possible to understand the entry property.
c) Transactions are entered in to journal in the chronological order.
Limitations of Journal
It is possible to
record every transaction in the journal. This however may make it unwieldy.
Therefore the usual practice is to have separate journals or books for
different classes of transactions. The reasons for this are the following.
a) The journal will be too long if all transactions are recorded
there.
b) Firms like to ascertain the cash balance everyday; hence they
usually record cash transactions directly in a separate book. This obviated the
necessity of journalizing cash transactions.
c) By recording different classes of transactions in different books,
book-keeping and accounting becomes easier, since, then, entries can often be
made in totals.
Q.3. What
is Journalising? Mention the steps of journalising. 2000, 2004, 2019
Ans:
Journalising: The
process of recording the transaction in the Journal or making entry
in the journal is called Journalizing. Since transactions are first of all
recorded in this book, Journal is also called "The Book of Original
Entry'. Entries in the Journal are recorded on the basis of source Documents
like Cash Memos, Vouchers etc which serve as an evidence of a transaction.
Entries in the Journal are made on the basis of ' Rules of Journalizing'.
In the
words of H. Chakraborty,” the technique of writing a transaction in its
two-fold aspect with proper description in Journal is called Journalising.”
The
following steps lead to the preparation of a journal:
a) Identifying
the Affected Accounts. First of all, the affected accounts in a
transaction should be identified. For example, if goods worth Rs. 20,000 are
sold for cash, then goods and ‘Cash’ are the two affected accounts.
b) Recognizing
the Kinds of Affected Accounts. The kind of the affected accounts
should be determined e.g. in the above case, ‘goods’ and ‘Cash’ are both asset
accounts.
c) Applying
the Rules of Debit and Credit. Then the rules of ‘debit’ and ‘credit’
should be applied to the affected accounts.
Q.4.
Explain the Traditional and modern rules of Debit and Credit. 1997, 1999, 2001, 2003, 2004, 2005,
2010
Ans:
Rules of Debit and Credit
Traditional
Approach: Under this
approach, Accounts are classified in to three namely real accounts, personal
accounts and nominal accounts. There are separate rules for each type of
accounts they are as follows
1. Real accounts: An account
relating to an asset or property is called real account. Cash, furniture, plant
and machinery etc are examples of real accounts the debit, credit rule
applicable to real account is:
Debit what comes in
Credit what goes out
2. Personal accounts: It
includes the account of person with whom the business deals. These accounts are
classified in to three categories
a) Natural personal accounts: The term natural persons mean persons
who are creation of god. For e.g.;-Raja’s accounts, Gupta’s accounts etc.
b) Artificial
personal accounts: These accounts includes accounts of corporate bodies or
institutions
c) Representative personal account-these
are accounts which represents certain person or group of persons. For example
salary due, rent outstanding etc. The rule of personal account is
Debit the receiver
Credit the giver
3) Nominal accounts: Accounts
relating to expenses and losses and incomes and gains are called nominal
accounts. Salary accounts, commission account etc are examples. The rule of
nominal account is
Debit all expenses and losses
Credit all incomes and gains
Modern
approach: Under this approach accounts are classified into five categories
namely Assets, Liabilities, Capital, Incomes & Gains and Expenses &
Losses. There are separate rules for each particular which are as follows:
|
Asset
A/c |
: |
Increase
Dr. |
: |
Decrease
Cr. |
|
Liability
A/c |
: |
Increase
Cr. |
: |
Decrease
Dr. |
|
Capital
A/c |
: |
Increase
Cr. |
: |
Decrease
Dr. |
|
Revenue
A/c |
: |
Increase
Cr. |
: |
Decrease
Dr. |
|
Expenses
A/c |
: |
Increase
Dr. |
: |
Decrease
Cr. |
Ans: Types of journal Entries: Entries recorded in the
journal may be of two types.
a) Simple Journal Entry and
b) Compound Journal Entry
Simple Journal
Entry: When a
transaction affects only one aspect/account in the debit and one aspect/account
in the credit. It is known as Simple Journal Entry.
Compound Journal Entry: If an entry contains more than one
debit or credit or both, that entry is known as a compound journal entry.
Actually, a compound journal entry is a combination of two or more simple
journal entries. Thus, a
compound journal entry can be passed in the following three ways:
(i) By debiting
one account and crediting more than one account.
(ii) By
crediting one account and debiting more than one account.
(iii) By
debiting more than one account and also crediting more than one account.
Q.6. What is Ledger? Mention its
essential features. 1999,
2001, 2005, 2007, 2019
Ans: Ledger: A Ledger
account may be defined as a summary statement of all the transactions relating
to a person, asset, expense or income, which have taken place during a given
period of time and show their net effect. So every entry recorded in the
journal must be posted into the Ledger.
A ledger account is a statement shaped liked an English alphabet
'T' that systematically contains all financial transactions relating to either
a particular person or thing for a certain period of time. It is the
principal book of accounts.
Features
of ledger
The following are the features of ledger.
a) It has two
identical sides - left hand side and right hand side. The left hand side is
called debit side and right hand side is called credit side.
b) Debit
aspects of all the concerned transactions is recorded on the debit side, while
credit aspect on credit side according to date.
c) The
difference of the total of the two sides represents balance. The excess of
debit side over credit side indicates debit balance, while excess of credit
side over debit side indicates credit balance. If the total of the two sides
are equal there will be no balance.
d) The
closing balance of the current year will be the opening balance of the next
year.
Q.7. Mention the importance of ledger. 1999,
2001, 2004, 2019
Ans:
Importance of Ledger / Advantages of ledgers: Ledger is
an important book of Account. It contains all the accounts in which all the
business transactions of a business enterprise are classified. At the end of
the accounting period, each account will contain the entire information of all
the transactions relating to it. Following are the advantages of ledger.
a) Knowledge
of Business results: Ledger
provides detailed information about revenues and expenses at one place. While
finding out business results the revenue and expenses are matched with each
other.
b) Knowledge
of book value of assets: Ledger records every asset separately. Hence,
we can get the information about the Book value of any asset whenever we need.
c) Useful for
management: It also helps the management in keeping the check on the
performance of business it is managing.
d) Knowledge
of Financial Position: Ledger provides information about assets and
liabilities of the business. From this we can judge the financial position and
health of the business.
e) Instant
Information: The ledger accounts provide this information at a glance through
the account receivables and payables.
Q.8. Explain various sub-division of
ledgers. 2005
Ans:
Sub-division of ledger: In a big business, the number of accounts is
numerous and it is found necessary to maintain a separate ledger for customers,
suppliers and for others. Usually, the following three types of ledgers are
maintained in such big business concerns.
(i) Debtors’ Ledger: It
contains accounts of all customers to whom goods have been sold on credit. From
the Sales Day Book, Sales Returns Book and Cash Book, the entries are made in
this ledger. This ledger is also known as sales ledger.
(ii) Creditors’ Ledger: It contains
accounts of all suppliers from whom goods have been bought on credit. From the
Purchases Day Book, Purchases Returns Book and Cash Book, the entries are made
in this ledger. This ledger is also known as Purchase Ledger.
(iii) General Ledger: It contains
all the residual accounts of real and nominal nature. It is also known as
Nominal Ledger.
Q.9.
Distinction between journal and ledger. 1998,
2000, 2002, 2004, 2006, 2015, 2018
Ans: Difference between journal and ledger:
(i) Journal is a book of prime entry, whereas
ledger is a book of final entry.
(ii) Transactions are recorded daily in the
journal, whereas posting in the ledger is made periodically.
(iii) In the journal, information about a
particular account is not found at one place, whereas in the ledger information
about a particular account is found at one place only.
(iv) Recording of transactions in the journal
is called journalising and recording of transactions in the ledger is called
posting.
(v) A journal entry shows both the aspects
debit as well as credit but each entry in the ledger shows only one aspect.
(vi) Narration is written after each entry in the journal but no narration is given in the ledger.
Q.10. What do you mean by Balancing of
account? Explain its process. 2003
Ans: Balancing of accounts: Balancing
of an account is the difference between the total of debits and total of
credits of an account. If debit side total is more than the credit side, the
account shows a debit balance. Similarly, the balance will be credit if the credit
side total of an account is more than the debit side total. This process of
ascertaining and writing the balance of each account in the ledger is called
balancing of an account. An account has two sides: debit and credit. Items by
which this account is debited are entered on its debit side with their amounts
and items by which this account is credited are entered on its credit side with
their amounts so all items related to an account are shown at one place in the
ledger. But then we would like to know the net effect of this account i.e. the
balance between its debit amount and credit amount. The following steps are to
be followed in Balancing the Ledger Account:
a) Total up
the two sides of an Account on a rough sheet.
b) Determine
the difference between the two sides. If the credit side is more than the debit
side, the balance calculated is a credit balance.
c) Put the
difference on the ‘Shorter side’ of the account such that the totals of the two
sides of the account are equal.
d) If the
difference amount is written on debit side (i.e., if credit. side is bigger)
then write as “Balance c/d” (C/D stands for carried down). If difference is
written on the credit side (i.e., if debit side is bigger) then write it as
“Balance c/d.
e) Finally at
the end of the year all the ledger accounts are closed by taking out the
balance of each account.
The Balance then should be brought down or
carried forward to the next period. If the difference was put on credit side as
“Balance c/d” it should now be written on the debit side of the account as
“Balance b/d” (b/d stands for brought down) and vice-a-versa. Thus debit
balance will automatically be brought down on the debit side and a credit
balance on the credit side.
Q.11. How Posting is done from journal
to ledger? 2000, 2002,
2004, 2005
Ans: We know
that the purpose of opening an account in the ledger is to bring all related
items of this account which might have been recorded in different books of
accounts on different dates at one place. The process involved in this exercise
is called posting in the ledger. This procedure is adopted for each account.
To take the items from the journal to the
relevant account in the ledger is called posting of journal. Following
procedure is followed for posting of journal to ledger:
1. Identify both the accounts ‘debit’ and
credit of the journal entry. Open the two accounts in the ledger.
2. Post the item in the first account by
writing date in the date column, name of the account to be credited in the
particulars column and the amount in the amount column of the ‘debit’ side of
the account.
3. Write the page number of the journal from
which the item is taken to the ledger in Folio column and write the page number
of the ledger from which account is written in L.F. column of the journal.
4. Now take the second Account and give the
similar treatment. Write the date in the ‘date’ column, name of the account in
the ‘amount’ column of the account on its credit side in the ledger.
5. Write page number of journal in the ‘folio’
column of the ledger and page number of the ledger in the ‘LF’ of column of the
journal.
Q.12. What
is an Account? Define debit and credit. Give a specimen of an account. 1997, 2001, 2003, 2004 2006, 2016
Ans: Account: An account is a statement which records the
transactions at one place relating to a particular subject. It is date wise
summary of transactions relating to persons, assets, expenses or incomes. An
account is divided into two parts. The left hand side of an account is called
“debit side” and the right hand side of the account is called “credit side”.
Debit is abbreviated as “Dr.” and credit as “Cr.” in accounting.
Specimen
of an account
|
Date |
Particulars |
J.F. |
Amount |
Date |
Particulars |
J.F. |
Amount |
|
|
To |
|
|
|
By |
|
|
Q.13. What do you mean by Sub-Division
of Journal? Mention its Objectives and Advantages. 1997, 1999, 2001, 2002, 2003
Ans: SUB-DIVISION OF JOURNAL: When
innumerable number of transactions takes place, the journal, as the sole book
of the original entry becomes inadequate. In order to overcome this problem,
the journal is sub-divided into many subsidiary books which are called special
journals. The journal in which transaction of a similar nature is recorded is
known as special journal or subsidiary book.
The special journals are ruled differently on
the basis of the nature of transactions to be recorded. Transactions that
cannot be recorded in any of the special journals are recorded in a journal
called journal proper or miscellaneous journal.
Objects of
preparing subsidiary books:
a) Economy in labour: If the transaction are
recorded in the book of accounts directly if will be consume less time than if
transaction are recorded in the journal then posted to the ledger
b) More accuracy: There will be more accuracy
in the book of accounts as entries are made in total only.
c) Statistical record: Additional information
is collected while maintaining a subsidiary book as a book of original entry.
d) Journalizing of transaction: Recording a
transaction in journal is called journalizing.
Advantages
of subsidiary books
1. Division of work: since there are so many
subsidiary books, the accounting work may be divided amongst a number of
clerks.
2. Specialization: when the same work is
allotted to a period of time he acquires full knowledge of it and becomes
efficient thus the accounting works will be done more efficiently.
3. Save in time: the trader can save time and
labor by avoiding repetitions
4. Availability of information: since separate
subsidiary book is kept for each class of transactions, information relating to
that will be readily available.
5. Facility in checking: checking is
facilitated in subsidiary books which will prevent errors and frauds.
Q.14. Name various types of subsidiary
books. 1997, 2004
Ans: Important Subsidiary Books: There are
many types of journals and the following are the important ones:
1. Cash Book-
to record all cash transactions of receipts as well as payments.
2. Sales Day
Book- to record all credit sales.
3. Purchases
Day Book- to record all credit purchases.
4. Sales
Returns Day Book- to record the return of goods sold to customers on credit.
5. Purchases
Returns Day Book- to record the return of goods purchased from suppliers on
credit.
6. Bills
Receivable Book- to record the details of all the bills received.
7. Bills
Payable Book- to record the details of all the bills accepted.
8. Journal
Proper-to record all residual transactions which do not find place in any of
the aforementioned books of original entry.
Q.15. What is cash book? Mention its features. 1999,
2017
Ans: Cash Book: Cash Book
is a sub-division of Journal recording transactions pertaining to cash receipts
and payments. Firstly, all cash transactions are recorded in the Cash Book
wherefrom they are posted subsequently to the respective ledger accounts. The
Cash Book is maintained in the form of a ledger with the required explanation
called as narration and hence, it plays a dual role of a journal as well as
ledger.
All cash receipts are recorded on the debit
side and all cash payments are recorded on the credit side. All cash
transactions are recorded chronologically in the Cash Book. The Cash Book will
always show a debit balance since payments cannot exceed the receipts at any
time.
A Cash
Book has the following features:
(1) It plays a dual role. It is both a
book of original entry as well as a book of final entry.
(2) Only one aspect of cash transaction is
posted to the ledger account. The other cash aspect needs no posting in Cash
A/c.
(3) It has two identical sides: left hand
side, the debit side and right hand side, the credit
(4) All the items of cash receipts are
recorded on the left hand side and all items of cash payments are recorded on
the right hand side in order of date.
(5) The difference between the total of
two sides shows cash in hand.
(6) Its balance is verified by counting
actual cash in the cash box.
(7) It always shows debit balance. It can
never show credit balance.
Q.16.
Is cash book a ledger or journal? 1999,
2016
Ans:
Cash Book is both journal and a ledger.
Cash Book is a journal in the sense that all
the transactions relating to receipt or payment of cash are recorded only in
Cash Book and not in the journal. Cash Book is a ledger also because there is
no need to open a separate account in the ledger. In case of Cash Book, only
one posting is required unlike in journal where two postings are required. Cash
Book is ruled like a ledger account.
In the words of Spicer and Pegler, “Cash book
is actually a ledger account but owing to the large number of entries made
therein, it is kept in a separate book called cash book, which is also used as
a book of prime entry.”
|
Cash
Book as Journal |
Cash
Book as Ledger |
|
1. All cash
transactions are first recorded in cash book like a journal. 2. Like
Journal, in cash book also, transactions are recorded in chronological order. 3. Transactions
recorded in cash book are ultimately posted to relevant accounts in the
ledger. |
1. Cash
book is maintained in account form (“T” form) like a ledger. 2. Like a
ledger, cash book too has debit and credit sides. 3. Like a
ledger accounts, cash and bank columns of cash book are periodically
balanced. |
Q.17. Mention some advantages of cash
book. 2017
Ans:
The advantages of cash book are as follows:
1. It prevents duplication of work in entering
cash transaction in journal and then posting the same into the ledger.
2. Cash and Bank transactions can be recorded in
cash book.
3. It is possible to find out daily cash and bank
balance.
4. Cash book also serves the purpose of book of
original entry as well as ledger.
5. Frauds involving cash are likely to be
minimized and where committed are likely to be detected at an early stage.
Q.18. Mention various types of cash
book. 1999
Ans: Kinds of Cash Book:
Cash Book serves both as a subsidiary
books as well as ledger. Depending upon the nature of business and the type of
cash transactions, various types of Cash books are used. They are:
a) Single Column Cash Book
b) Two Column Cash Book or Cash Book with cash
and discount columns. 2015,
2018
c) Three Columnar Cash Book or Cash Book with
cash, bank and discount columns.
d) Petty Cash Book. 2015, 2018
a) Single column
Cash Book: Simple Cash Book has only one amount column on
each side. This book serves the purpose of cash account. It is suited to
concerns which have only cash transactions.
b) Two-column
Cash Book: Two-column Cash Book has two amount columns.
One for cash and another for Bank on each side. This book serves the purpose of
cash account as well as Bank account It is suited to concerns which have cash
transactions and banking transactions. There may be a two-column cash book
containing cash column and discount column also.
c) Three-column
Cash Book: Three-column Cash Book is prepared when there
are a large number of cash and banking transactions. This Cash Book has three
amount columns on each side namely cash column, bank column and discount
column.
d) Petty Cash
Book: In order to make the task of the cashier easy, a petty cashier is
appointed and handed over a small sum of money. He meets out small payments
like stationery postage, conveyance, cartage etc. At the end of the given
period, the petty cashier submits the account to the cashier who reimburses him
for payments.
Q.19. What is Trade discount and Cash
discount? Distinguish between them. 1997,
2000, 2002, 2004, 2005, 2008, 2015, 2018
Ans: Trade Discount and Cash Discount
Trade discount is an allowance or concession
granted by the producers to the wholesalers or by the wholesalers to the
retailers on bulk purchase. Trade discount is normally deducted in the purchase
book, sales book or returns books, and the net amount is posted to the ledger
accounts.
Cash discount is a deduction allowed from
amount receivable from a credit customer on his paying the same within a
specified time. This cash discount is always associated with payment .A firm
may allow cash discount when it receives payment from customers and may
receives cash discount when it makes payment to suppliers.
Difference
between Trade Discount and Cash Discount
|
Trade Discount |
Cash Discount |
|
a) It helps the retailers to make some
profit. b) It allowable at time of sale cash credit c) Only retailers are entitled to get it. d) It is calculated at a given rate on the
published price. e) It is not generally accounted for. |
a) It encourages the debtors to pay within
specified time b) It is allowed only at time of cash
receipt or cash payment. c) All categories of costumers are entitled
to get it. d) It calculated at a given late on the net
amount payable. e) It is accounted. |
Q.20.
Difference between Cash Book and Cash Account
|
Cash Account |
Cash
Book |
|
a)
It is an
account in the ledger |
a)
It is one of
the subsidiary book in which all cash transactions are recorded |
|
b) Cash account is opened in the ledger and
posting is done in this account from journal |
b)
It is a book of
original entry because all cash transactions are first of all recorded in
cash book and then posted from cash book to various accounts in the ledger |
|
c)
When cash
transactions are already in journal, it is necessary to open a cash account
in the ledger |
c)
When cash
transactions are recorded in cash book, there is no necessity to open a cash
account in the ledger |
Ans:
Petty Cash Book - Simple and Analytical
Large firms maintain their transactions
through bank. They deposit cash and Cheques to meet their obligations to the
creditors by issuing Cheques. Besides these transactions, the firm has to pay
for petty and small expenses like postage, transportation, stationery that
require very small amount, to pay these expenses through bank is very time
consuming process. So, to facilitate immediate and easy payment, firms maintain
a small amount of cash with them always. All the payments made through this
amount and recorded in a separate cash book called ‘petty cash book’. The
person who assists the head cashier in maintaining these books is called ‘petty
cashier’.
The Proforma resembles the cash book. All
receipts are recorded on the debit side and all payments on the credit side. A
detailed analysis of expenses will be shown on the credit side. Hence, the
petty cash book is called as analytical petty cash book. These books help us to
know the expenditure spent on each head.
Features
of Petty Cash Book: 2019
1. The amount
of cash received from head cashier is recorded on the left hand side column.
2. Payment of
petty cash expenses are recorded on the right hand side in the respective
columns.
3. It never
shows credit balance because the cash payment can never exceed the cash
receipts.
4. Its
balance represents unspent petty cash in hand.
5. Recording
is done on the basis of internal as-well-as external vouchers.
6. Petty cash
is both, a book of original entry as-well-as a book of final entry.
Following
are the advantages of maintaining a petty cash book:
1. Saving of
time: The head
cashier is not bothered to make petty expenses and record their entries. This
saves his time which can be utilised for other important matters.
2. Saving of
labour: Petty Cash Book saves the labour of head cashier in recording each
and every entry in Cash Book and posting them to the ledger accounts.
3. Simple to
adopt: This is a simple method. Imprest system of petty cash facilitates
its easy use.
4. Lesser mistakes: Since
the petty cash book is maintained separately, the possibility of mistakes is
reduced. The head cashier can check the accuracy of every entry.
5. Control over
payments: The head cashier supervises the maintenance of petty cash book and
verifies the different payments from vouchers. This reduces the chances of
fraud and wrong payment.
Ans: Imprest System of Petty Cash
book: In this system, petty cash requirements for a specific period of
time, a week or month is estimated and that money is given to the petty
cashier. The petty cashier makes payments for various expenses during the
period and is reimburse exactly by the cashier at the end of the period. So,
that he can start the next week or month with the full estimated money. This
system of book keeping is called the ‘imprest system’.
Features
of Imprest System of Petty Cash Book:
a) Under this Imprest system, the amount of money
in the petty cash is kept at a fixed sum or float which is depending on the
size of the organization and its uses.
b) An initial fixed amount is given to the
cashier or the custodian. At each balancing period or when the fixed amount is
utilized, a cheque or cash is issued for the exact amounts that have been
utilized.
c) The petty cash book looks much the same as the
main cash book.
Advantages of Imprest system of Petty
cash book: 1999
a)
It reduces the chances of fraud and misappropriations.
b)
It minimises the possibility of accumulation of large sums of cash within the
petty cashier.
Q.23. What is Journal Proper? Mention
the various transactions recorded in it. (Mention only name) 1999, 2001, 2003,
2005, 2006, 2007, 2015, 2018
Ans: Journal Proper: Journal proper is book of original entry (simple journal) in which miscellaneous
credit transactions which do not fit in any other books is recorded. It is also
called miscellaneous journal. This book is used to record all the
residual transactions which cannot find place in any of the subsidiary books.
While recording, the entries are made in the journal covering both the aspects
of the transaction. The form and procedure for
maintaining this journal is the same that of simple journal.
The following are some of the examples of
transactions which are entered in this book:
a)
Opening
entries: When a businessman wants to open the
book for a new year, it is necessary to journalise the various assets and
liabilities before the new accounts are opened in the ledger. The journal
entries so passed are called “opening entries".
b) Closing entries: At the close of the accounting period balances from the various
accounts are transferred in order to balance the books of accounts. Thus, this
process of transferring balances of the trading and profit and loss account at
the end of year is called closing the books and entries passed at that time are
called closing entries.
c)
Adjusting
entries: Modification of the accounts at the
end of an accounting period is called adjustments. If there be any event
affecting the related period of accounts but left out of the books, the same
should be incorporated in the books before the preparation of the final
accounts. This is done by means of adjusting entries through the journal
proper.
d) Transfer entries from one account to another
account: Such entries are the entries which
are passed in order to transfer one account to another account.
e) Rectification entries: When an error is detected in the books, the same is
rectified through an entry in the journal proper which is called rectification
entry.
f) Entries for
rare transactions: Journal
proper is used for rare transactions.
g)
Entries for which there is no special journal: When the transactions cannot be recorded in the above
Ans:
The difference between Special Journal and Journal Proper are:
|
Special
Journal |
Journal
Proper |
|
a) It records transactions of similar nature
and is in the form of a statement. b) It arises as a result of credit transactions
only and it is not a part of the double entry book-keeping system. c) It is necessary for preparation of the Trial
Balance and it records only external transactions. d) Each transaction is not recorded in the
ledger separately. e)
A mistake in the
journal proper is not rectified by a special journal. |
a)
It does not
record the transactions of similar nature and it is in the form of a journal. b)
It arises not
only due to credit transactions but for other reasons also; it is a part of
the double entry book-keeping system. c)
Some entries
are recorded after the preparation of the trial balance and it records both
internal and external transactions. d)
Each
transaction is recorded in the ledger separately. e)
A mistake in
the special journal is rectified by the journal proper. |
Q.25. What
is BRS? Mention its utility and need. Mention some causes of difference in
balance of cash book and pass book. 1997,
1998, 2000, 2002, 2008, 2015, 2016, 2017, 2018, 2019
Ans: The
statement which is prepared for verifying and reconciling the bank balances,
shown by the cash book and pass book on a certain date and incorporates the
reasons of disagreement between them is called a bank reconciliation statement.
Utility of B.R.S 2001
1) It gives an authentic proof of the accuracy of the cash and
pass book balances.
2) Entries in both the book are automatically checked.
3) The cash book may be made up- to-date by recording some
hitherto unknown entries.
4) It helps to detect any mistake in the cash book and pass book
Need of preparing: - The needs of B.R.S. can
be summarized as follow:-
a)
It reflects
actual bank balances position.
b)
It helps to
direct any mistake in the cash book and pass book.
c)
It prevents fraud in recording banking transactions
d)
It explained any
delay in the collection of cheque.
e)
It identifies
valued transaction recorded by one party but not by other.
The following are the causes of difference
between balance as per cash book and pass book.
a)
Cheque issued but
not yet presented for payment.
b)
Cheque deposited
but not yet collected by the bank.
c)
Bank charges not
entered in the cash book.
d)
Interest credited
by bank but not debited in the cash book.
e)
Amount, directly
deposited in the bank by debtor.
Ans: Difference between Cash book and
Pass Book
|
Cash
Book |
Pass
Book |
|
It is written
by the depositor. Money deposited
is recorded on the debit side and money withdrawn on credit side. A check
deposited for collection is recorded on the date of deposit. A check when
issued to a creditor is recorded on the date of issue. Its debit
balance shows cash at bank and credit balance shows bank overdraft. |
It is written
by the bank but remains in the depositor’s possession. Money deposited
is entered on the credit side and withdrawn on the debit side. It is recorded
on the date when it is actually collected from the debtor’s bank. It is recorded
when it is paid by the bank to the creditor. Its debit balance
shows bank overdraft and credit balance shows cash at bank. |
a)
Compare cash book and pass book items.
b)
Give sign to all the items of cash book and
pass book which are matched with each other.
c)
Make a list of unmatched items found in cash
book and pass book.
d)
Prepare bank reconciliation statement taking
balance either from cash book or pass book as a basis.
e)
Adjust the items which cause the disagreement
in the balances. Add the items which have decreased the balance on the book
with which reconciliation is to be made. On the contrary subtract the amount of
those items which have increased the balance.
These procedures should be followed only when
the cash book and pass book are to be compared. But if causes of differences
are already given, the above procedures need not be followed. If the causes of disagreement between the cash book
and pass book balances are given, the bank reconciliation statement can be
prepared either by taking the balance of cash book or pass book. The bank
reconciliation statement can be prepared by using either of the following
bases.
a)
Debit balance shown by cash
book
b)
Credit balance shown by cash
book (bank overdraft)
c)
Credit balance shown by pass
book
d)
Debit balance shown by pass
book (bank overdraft)