Name: Tina kalwadia

PRN: 1202220225

FY B. Com (Hons)ACCA

Division: B

Q1)
1) In the above case study ,the Accrual concept is being followed by the company . In which,
transaction is recorded when they are entered into whether the amount is received or not.
Similarly, incomes are recorded when it is earned not when it is received and we can say that
transactions related to one year will be recorded in the same year. Whether the settlement
takes place or not . Cash is irrelevant and the amount of ₹ 50 Lakhs should be shown as income
in the first year only and not in the second year.

2) In the above case study, the accountant is correct as he is following the concept of cost
concept, according to which the value of an asset on the balance sheet is recorded at its original
cost at what the asset has been required by the company not the market value. So, the amount
of 40,000 has to be shown of inventory not the amount of 2,00,000 in the books of accounts.

Q2) The different types of accounting approaches they can use :

1. Traditional Accounting Approach :It is the method of accounting followed from the time
period of Britishers and also called British Approach.
It is divided into two:

i) Personal Account are those which belongs to a natural persons or artificial persons.
Personal account are classified into :
Natural personal a/c , Artificial personal a/c and Representative personals a/c

ii) Impersonal Account are those which is not included in a personal account.
Impersonal Account are classified into:
Real account and Nominal account
2. Modern Accounting Approach: The accounts are not debited and credited. Hence the
accounting equation is used to debit and credit an accounts by balancing of the equation.
The modern accounting approach are here :

a. Assets a/c: if Debit increase and Credit decreases

b. Liabilities a/c : if Credit increase and Debit decreases
c. Capital a/c :if Credit increase and Debit decreases
d. Revenue a/c: if Credit increase and Debit decreases
e. Expenses a/c: if Debit increase and Credit decreases
f. Drawings a/c :if Debit increase and Credit decreases

3. Accounting Equation Approach: An accounting equation is a way of displaying that the

company's total assets are equal to the sum of its liabilities and the capital.
* Accounting Equation: ASSETS= LIABILITIES+CAPITAL

Application of different types of accounting are :

1)Application of Traditional Accounting Approach: It is beneficial to business as with a traditional

accounting system, each transaction is entered as a debit, as well as a credit in two separate accounts.
This not only helps users eliminate data entry errors but also helps companies save time and money
against devastating business mistakes.

2) Application of Modern Accounting Approach: It is beneficial to business as it helps to classify data

and accounts very precisely and is beneficial for verification of any particular transaction.

3)Application of Equation Accounting Approach :It is beneficial to business it ensures that all entries in
the books and records are vetted, and a verifiable relationship exists between each liability or expense
and its corresponding source or between each item of income or asset and its source.

Q3)

ASSET CAPITAL LIABILITY

Cash Goods Asset Capital Creditor
+200000 +200000
-50000 +120000 +70000
+100000 -100000 -12000
-12000 -9000 -9000
238000 20000 9000 179000 70000

249000=249000