BASICS OF ACCOUNTING Dr.

Gayatri Pai
Numericals to be solved in class-
Q1) Prepare accounting equation from the following:
(a) Kunal started business with cash Rs.2,50000
(b) He purchased furniture for cash Rs. 35,000
(c) He paid commission Rs. 2,000
(d) He purchases goods on credit Rs. 40,000
(e) He sold goods (Costing Rs.20,000) for cash Rs. 26,000

Q2) Prepare accounting equation on the basis of the following:

(a) Harsha started business with cash Rs.2,00,000
(b) Purchased goods from Naman for cash Rs. 40,000
(c) Sold goods to Bhanu costing Rs.10,000/- for Rs. 12,000
(d) Bought furniture on credit Rs. 7,000

Q3) Rohit has the following transactions :

(a) Commenced business with cash Rs.1,50,000
(b) Purchased machinery on credit Rs. 40,000 from ABC. Ltd.
(c) Purchased goods for cash Rs. 20,000
(d) Purchased car for personal use Rs. 80,000
(e) Paid to creditor ABC. Ltd. in full settlement Rs. 38,000
(f) Sold goods for cash for Rs. 4,500
(g) Paid rent Rs. 1,000
(h) Commission received in advance Rs. 2,000
Prepare the Accounting Equation to show the effect of the above transactions on the assets,
liabilities and capital. Also mention the accounts which are debited and credited

Q4) Use accounting equation to show the effect of the following transactions of
M/s Royal Traders: Also mention the accounts which are debited and credited
(a) Started business with cash Rs.1,20,000
(b) Purchased goods for cash Rs. 10,000
(c) Rent received Rs. 5,000
(d) Salary outstanding Rs. 2,000
(e) Prepaid Insurance Rs. 1,000
(f) Received interest Rs. 700
(g) Sold goods to XYZ ltd. for Rs. 7,000
(h) Goods destroyed by fire Rs. 500
Journal Entries-
2019 Q 5) Following transactions of Ramesh for April, 2019 are ₹
given below. Journalise them.
April 1 Ramesh started business with cash 1,00,000
April 2 Paid into bank 20,000
April 3 Bought goods for cash 50,000
April 4 Drew cash from bank for office use 10,000
April 13 Sold goods to Krishna 15,000
April 20 Bought goods from Shyam 22,500
April 22 Krishna returned goods 2,000
April 24 Received from Krishna 12,500
Allowed him discount 500
April 28 Paid cash to Shyam 21,500
Discount received 1,000
April 30 Cash sales for the month 80,000
April 30 Paid rent 5,000
April 30 Paid salary 10,000

BANK of journal entries

• Ram started business with a capital..

• He withdrew cash for personal use…

• He purchased furniture for …

• He opened an account with a bank depositing….

• He purchased goods for…..

• He sold goods for…..

 • Purchased goods from Sunil on credit for….

• Paid to Sunil on account….

• Sales Return/ Return Inwards

• Govind returned goods worth Rs.8000 out of goods of Rs.30,000 purchased by him

• Purchase Return/ Return Outwards

• Returned Goods worth Rs.200 to Mrs. Sonali

Paid rent for shop to Landlord Ravi ….

Received commission from Sham….

Compound Journal entry…

It’s a single journal entry passed for two or more transactions taking place on the same date.
It can be passed only when at least one of the accounts involved in various transactions is
common.
For eg. Dec 29th Paid rent Rs. 12000
Dec 29th Paid Salary Rs. 28000

Paid Life Insurance Premium Rs.1500 & Fire Insurance Premium Rs.2000
Paid Income tax Rs.1000 & Sales Tax Rs.2000

Received a V.P.P. ( Value payable systems(like Cash on delivery through post office)) from
Ram for Rs. 3200, Sent a peon to collect it , he paid Rs.100 as cartage.
Purchase A/c …………Dr. 3200
Cartage A/c ………….Dr. 100
To Cash A/c 3300
Journal Entries relating to goods
1. Goods worth Rs. 1500 ( Selling price Rs.2000) were given away as
• Charity

• Free Samples

2. Goods worth Rs.1500 ( cost of which was Rs.1100)

• .. were stolen by an employee

• …Were lost in transit

• …Were withdrawn goods for personal use

3. Goods used in furnishing office

• Office Furniture A/c ………………Dr.
To Purchase A/c
4. Goods Destroyed by fire/Accident worth Rs. 10000
1. If goods are not Insured (Uninsured) :
Loss by fire A/c...............................Dr. 10000
To Goods destroyed by fire A/c or Purchases A/c 10000
(Being goods destroyed by fire)
 2. If goods are insured & full claim is admitted by the Insurance company
Insurance Co. A/c...............................Dr. 10000
To Goods destroyed by fire A/c or Purchases A/c 10000
(Being insurance claim accepted by the company)

3. If the claims is partly admitted by the Insurance Co (goods worth Rs.10000 destroyed
by fire, Insurance company admitted a claim of 60%)
Insurance Co. A/c................................Dr. 6000
(Amt. of claim accepted / admitted)
Loss by fire A/c ...................................Dr. 4000
(Amt. of loss)
To Goods destroyed by fire A/c or Purchases A/c 10000
(Being goods destroyed and Insurance co. admitted the claim partly)
Bad Debts
Arun who owed us Rs. 500 becomes insolvent. Only 40paise in a rupee is realized from his
estate.

Bad Debt Recovered

Rs.300 were written off as bad debts last year but this year Rs.150 out of that were received
from Arun

Trade Discount ( allowed by manufacturer or wholesaler to retailer for bulk purchases). The
trade discount will used for calculation of the price of the goods but will not be shown as a
part of the journal entry.
Bought goods of list of Rs.5000 at 20% trade discount from Gopal
Cash Discount is allowed by the trader to the customer to encourage them to make early cash
payment before the due date. Cash Discount allowed or cash discount received is recorded at
the time of receipts or payments. It will form a part of the journal entry.
Paid Gopal his bill for Rs.4000 after deducting 5% cash discount

Trade Discount with Cash Discount ( Always calculate trade discount and then cash
discount)
1. Sold goods of list price of Rs.3000 @ 15% trade discount and 2% cash discount to
Mohan for cash

2. Bought goods of list price of Rs.5000 at 20% trade discount and 5% cash discount
from Raja. Half the payment was made in cash immediately.

Purchased a Computer for Rs.60000 from ABC Ltd. on credit

Depreciation @50% on computer

Sale of Furniture costing Rs.30000 for 25000

Sale of Furniture costing Rs.20000 for 25000

Expenses incurred on purchase of an asset like installation charges, carriage/ wages on
transportation of the asset/ import duty/freight or repairs on second hand asset – will be
charged to that particular asset account and not shown as an expense.
Bought a machinery for Rs.50000 and spent 2000 on its repairs

Paid installation charges of the machinery Rs.1000

50shares of ABC ltd. Are purchased at the rate of Rs.40 per share and Rs.50 paid as
brokerage

Sold 30 shares of ABC Ltd. at Rs.80 per share and Rs.30 paid as brokerage

Interest paid on loan Rs. 1000

Interest/ Dividend received on Investment Rs.560

Interest on Capital @ 5% on Capital of 100000

(Always calculated on opening balance of capital)

Interest on Drawings of Rs.500

Opening Entry- in the beginning of the new year, the new books of accounts are opened &
the balance appearing in the books at the close of the previous year are bought forward in the
new books though the opening entry. It is based on the accounting equation.
Jan 1st 2023,
Debit Balance : Cash –Rs.12000, Furniture –Rs.4000, Stock of goods – Rs.4000,Building –
Rs.8000, Debtors – Ashok –Rs.7000, Rakesh –Rs.3000
Credit balance – Creditors – Ram –Rs.18000, Loan from SBI – Rs.5000