Question 1:

For the following transactions, analyze the accounting transactions using the accounting
equation framework
1. Introduced Rs500000 through a cheque by the Owner as the Initial capital in the
business
2. Purchased goods on credit from Ms. Ritu at Rs 40000
3. Paid Rs 10000 as salary to the employees
4. Invested Rs200000 in a fixed deposit account
5. Paid school fees of the kid Rs 25000, from the business’s bank account.

Ans 1.

Introduction
Any organization's financial health is determined by two fundamental financial statements: assets
and liabilities. Accounting equations demonstrate the interdependence of those three essential
additives. Liabilities represent an organization's commitments, whereas assets are the sources of
the corporation's treasure. The third component of the stability sheet is owners' equity,
sometimes referred to as shareholders' equity. Both duties and shareholders' equity are indicators
of the way a business is financed. In the case of debt financing, it will appear as a liability, while
in the case of equity financing, it will appear to shareholders as fair.
 The balance sheet facts the factors that contribute to the accounting equation:
 Find the company's tangible assets on the balance sheet for the current period.
 Add up all the liabilities, which should be listed separately on the financial statement.
 Multiply the amount of general shareholder fairness with the total liabilities.
 Observations regarding duties and general equity will remain identical to general
property.
 Journal entries for the above given financial transactions would be the following:

Transactions Journal Entry Analyzation

Introduced Rs500,000 Current Bank A/c ---- Dr 5,00,000 Increase in Current
via a cheque via the To Capital A/c 5,00,000 Asset is debited.
proprietor as the
preliminary capital in (Being cheque deposited into the bank Increase in Capital is
the business: towards capital by the owner) credited.
1. Purchased items on Purchases A/c ---- Dr 40,000 Purchases are expense
credit from Ms. Ritu To Ms. Ritu A/c 40,000 Increase in Expenses is
at Rs 40,000 debited.
(Being goods purchased on credit from Ms. Increase in Liability is
Ritu) credited.
2. Paid Rs 10,000 as Salary A/c ---- Dr 10,000 Salaries are expenses.
revenue to the To Bank A/c 10,000 Increase in Expenses is
employees debited.
(Being salary paid to the employees from
the bank) Decrease in current
Asset is credited.
3. Invested Rs200,000 Fixed Deposit A/c ---- Dr 200,000 Increase in long term
in a fixed deposit To Bank A/c 200,000 Asset is debited.
account
(Being fixed deposit created) Decrease in current
Asset is credited.
4. Paid school fees of Drawings A/c ---- Dr 25,000 Drawing decrease
the kid Rs To Current Bank A/c 25,000 capital. Decrease in
25,000from the Capital is debited.
business’s bank (Being drawings made for paying fee to
account kid’s school fees) Decrease in Asset is
credited.
Q2. You started learning the course of financial accounting and analysis in the MBA
Program. You learned about commonly used accounting terms. Discuss about any five
terms which are commonly used by the different users of accounting information for the
sake of understanding the financial statements Student may define and describe about any
five terms (10 Marks)

Ans 2.

Introduction

Accounting is the art of recording the financial transactions of a corporation. Documenting,

analysing, and communicating financial transactions, accounting assists people and groups with
their financial positions--summarizing, evaluating, and watching events to keep an eye on
authorities, regulators, all those entities involved in accounting. Accountants do this by following
spending, profits, and losses based on the following formula: Liability + Equity = Assets. A
successful accountant ensures that corporations are aware of the prison necessities and financial
performance of their corporations, and that they can make budgets and long-term plans based on
this knowledge. Accountants use accounting data to make decisions about buying and selling,
investing, and pricing.

Concepts and Application

Most organizations rely on accounting as a critical component. When it comes to small
businesses, it is handled by the cashier or accountant. However, in large businesses, it is handled
by a substantial financial department with a lot of employees. Reports on financial accounting,
costing, and managerial accounting are essential to support enterprises in making informed
decisions.

Reports which summarize a corporation's cash flow, financial position, and operations are called
financial statements. The financial system is based on a wide array of independent operations.
Consequently, all accounting credentials are the result of years of research and testing that some
business and accounting professionals are proud of.
Five accounting terms that the unique users of accounting records can commonly use for the sake
of understanding the financial statements are:

Balance Sheet
Balance sheets depict assets, debts, and investor fairness for a given period of time. Observing
monetary documentation can be a key to interpreting an employer's economic situation and
determining investor returns. An employer's asset and liability statement shows the amount of
cash invested via shareholders, in a nutshell. A simple analysis or calculation of financial ratios
can be conducted using Stability sheets with other important financial accounts. The popularity
of an organization's finances at a specific time is represented. It cannot give you an awareness of
long-term trends on its own. Therefore, accounting statistics must examine those accounts from
previous quarters.

Accounts Payable
In accounting, accounts payable is an obligation a company has to reimburse lenders or vendors
for short-term debts. In every other standard definition of Accounts Payable, this refers to the
division or unit of the company which creates reimbursements to suppliers or other creditors.
Legal responsibility is shown on its balance sheet in the current liability column as the stability
of its overall bills payable at any given time. Debts Payable are debts you have to pay within a
certain amount of time to avoid defaulting. Accounts payable shows instant credit card debt
payable to suppliers at the business level. This is essentially a brief-term IOU between two
businesses or entities. The alternative partner might record the deal through a corresponding
increase in its accounts receivable.

Debts Receivables
Generally, the amount of cash that a company will receive from its clients who have purchased
goods or services on credit is called Debt Receivable. Credit terms are usually short, from a few
days to a few months or a year in rare cases. Payments that have not yet been received are
referred to as receivables. The company must have provided credit lines to its customers. A lot of
the time, the organization sells coins and credit for its products and services. A receivable is a
credit that a business extends to one or more customers. Receivables refer to situations in which
payments are required within a short period of time. Short days can occur as well as full
economic or schedule years.

Income statement
In a statement of earnings, you can see how profitable your company was at a particular point in
time. You can see your profits after subtracting your losses and prices. You can use the assertion
of profits as well as the cash flow statement to determine the economic health of your company.

Gross income
Gross income and gross margin, as well as gross profit, are the same. Using an income statement,
a company's gross income can be calculated by subtracting the price of merchandise bought from
total revenue. Gross margin is the term used to describe gross income. Gross margin can also be
referred to as gross earnings margin. Profitability is measured by gross margin. Margin is better
defined as a percentage. An organization's gross revenue is determined by subtracting the direct
costs it incurs in creating its products or offering its services.

Conclusion:
In conclusion, the economic declaration of any corporation can be recognized by five key
accounting phrases. A complete understanding of financial statements requires understanding
many other important terms.
Q3. From the given information

Amount in Lakhs

cost of goods sold 580

opening stock 40

closing stock 70

creditors at the beginning of the year 60

creditors at the end of the year 100

cash purchases 45

Original cost of equipment sold 400

Gain on the equipment sold 50

Accumulated depreciation on the 80

equipment

Calculate:

a. Total purchases, credit purchases and payment to creditors

Ans 3a.

Introduction

The term creditor refers to a person who has given a product, service, or loan that is eligible for
repayment via one or more debtors. A debtor is the person who owes the money. A creditor must
charge and pay an amount to the supplier after the goods/services have been provided and the
terms have been accepted.
How much inventory did an agency purchase in a given accounting period? Information about
this may be used for estimating the additional money needed to satisfy ongoing working capital
requirements. This sum can be calculated using the following records:

 A rate for the entire primary inventory. These statistics usually appear in an
announcement of the financial results of the previous accounting period.
 Once the length is taken into account, the cost of the stock is determined. These details
may appear on a financial statement for a series of accounts where acquisitions are
constantly tracked.
 It is the charge for the products. The income assertion for the accounting period during
which the purchases were assessed may demonstrate this fact.

Total Purchases = (Closing Stock – Opening Stock) + (Cost of goods sold)

Total Purchases = (70 – 40) + (580)
Total Purchases = 610

As of now, these are the steps to calculate the number of inventory purchases:
 Calculate the total price of beginning and ending stock and the cost of products bought.
 Take the initial inventory and subtract it from the completing stock.
 To the disparity among the closing and beginning inventories, add the price of items
bought.

Now, let us calculate the Credit Purchases:

Total Purchases = Cash Purchases + Credit Purchases
610 = 45 + Credit Purchases
Therefore, Credit Purchases = 610 – 45
Credit Purchases = 565
 To calculate the payment to lenders allow us to create creditors accounts based on the facts
given to us:

Creditors Account
Dr. Cr.
Particulars Amount (Rs) Particulars Amount (Rs)

To Cash 525 By Balance b/d 60

(Balancing Figure)
By Purchases A/c 565

To Balance c/d 100

Therefore, the payment made to the creditors is worth Rs. 525 lakhs.
Question 3b: Define the term Net book value, Accumulated depreciation calculate the net
book value and cash proceeds from sale of investment.

Answer 3b:

Introduction

Depreciation is an accounting term that defines assigning a price to a tangible or physical object
during its useful life. An asset's depreciation can be explained as a process by which a significant
portion of its value is eaten up. Businesses will generate money through the sale of these assets
over time.

Concepts & Application

Net Book Value

An asset's net book value corresponds to the total value at which the asset is recorded in the
financial statements. The initial fare is subtracted from the cumulative depreciation, accumulated
depletion, collected amortization, and the accrued impairment to achieve net book value.
Accounting for these losses over time reduces the reported cost of an asset over time. It does not
always mean that the market charge for hard and fast assets is the same at any given time.

Accumulated Depreciation

Depreciation expenses incurred on an asset since it was first used are added together to form
accumulated depreciation. Negative assets can be viewed as investment accounts that cancel out
their linked assets, so a deficit account implies a negative investment account. A company credits
the cumulative depreciation account with the same amount when it has information depreciation
expenses. The company can thus display both the asset's value and its depreciation over time. On
the company's website, you can also see the asset's book value.
Calculation of the net book value and cash proceeds from sale of investment:
Given,
Original cost of equipment sold = 400
Gain on the equipment sold = 50
Accumulated depreciation on the equipment = 80

Net Book Value = Original Purchases Cost – Accumulated Depreciation

Net Book Value = 400 – 80

Net Book Value = 320

For businesses using financial facts or statements, the notion of internet proceeds needs to be
understood. Understanding the net proceeds will assist an organization in making informed
business decisions. The final earnings of a retailer are termed net proceeds once all initial
expenditures are subtracted from gross, or total, sales of the transaction.

Cash Proceeds from Sale of Equipment = (Original Cost of the Equipment – Accumulated
Depreciation) + Gain on Sale of the Equipment

Cash Proceeds from Sale of Equipment = (400 – 80) + 50

Cash Proceeds from Sale of Equipment = 320 + 50

Cash Proceeds from Sale of Equipment = 370

Conclusion

Hence, the conclusion drawn from the calculation is that the net book value of the gadget is 320
lakhs and the coin obtained on the sale of the system is 370 lakhs. This indicates there are
earnings of 50 lakhs on the equal.