MANIPAL UNIVERSITY JAIPUR

INTERNAL ASSISNMENT

NAME KARAN KUMAR

ROLL NO 2314103993

PROGRAM BACHEOR OF BUSINESS ADMINISTRATION (BBA)

SEMESTER II

COURSE CODE & NAME DBB1202 – FINANCIAL ACCOUNTING

Q.1 Journalize the following transactions in the books of JL ltd for the month of Jan 2023:
1. Started business with cash Rs.1,00,000
2. Sold goods to R Rs.2,000
3. Bought office furniture Rs.30,000
4. Paid cash to M Rs.2,000
5. Salary Paid Rs.10,000
6. Rent received Rs.3,000
7. Purchased goods from H for cash Rs.9,000
8. Goods returned by R Rs.200
9. Interest on capital paid to owner Rs.800
Returned goods to H Rs.300
Ans: January 2023- JL Ltd Journal Entries
January 1st
Started business with a cash investment of Rs. 100,000
Disbenefit Cash A/ c-Rs. 100,000
Credit Capital A/ c-Rs. 100,000
January 2nd
Vended goods to R for Rs. 2,000
Disbenefit Debtors A/ c(R)-Rs. 2,000
Credit Deals A/ c-Rs. 2,000
January 3rd
Bought office cabinet work for Rs. 30,000
Disbenefit Office Furniture A/ c-Rs. 30,000
Credit Cash A/ c-Rs. 30,000
January 4th
Paid MRs. 2,000
Disbenefit Payment to M A/ c-Rs. 2,000
Credit Cash A/ c-Rs. 2,000
January 5th
Salary paid amounting to Rs. 10,000
Disbenefit payment expenditure A/ c-Rs. 10,000
Credit Cash A/ c-Rs. 10,000
January 6th
Entered rent income of Rs. 3,000
Disbenefit Cash A/ c-Rs. 3,000
Credit Rent Income A/ c-Rs. 3,000
January 7th
Bought goods from H for cash, amounting to Rs. 9,000
Disbenefit Purchases A/ c-Rs. 9,000
Credit Cash A/ c-Rs. 9,000
January 8th
Entered returned goods from R worth Rs. 200
Disbenefit Deals A/ c-Rs. 200
Credit Debtors A/ c(R)-Rs. 200
January 9th
Paid interest on capital to the proprietor for Rs. 800
Disbenefit Interest expenditure A/ c-Rs. 800
Credit Capital A/ c-Rs. 800
January 10th
Returned goods to H worth Rs. 300
Disbenefit Purchases A/ c-Rs. 300
Credit Creditors A/ c (H)-Rs. 300
The business started with ₹100,000 cash, recorded as a debit to the cash account and a credit to the capital
account, indicating the owner's equity in the business.
Goods sold to R on credit result in an increase in accounts receivable and sales. Accounts receivable is debited
to increase it, and sales are credited.
Purchasing office furniture for cash decreases cash and increases the value of office furniture. The office
furniture account is debited, and Cash is credited.
Payment to M in cash decreases the cash balance. The M account is debited, and cash is credited.
Payment of salary in cash decreases the cash balance. Salary expense is debited, and cash is credited.
Rent received in cash increases the cash balance. Cash is debited, and Rent received is credited.
Purchasing goods from H for cash decreases cash and increases purchases. Purchases are debited, and Cash is
credited.
Goods returned by R result in a decrease in accounts receivable and a decrease in purchases. R account is
debited, and Purchases returns are credited.
Payment of interest on capital to the owner results in a decrease in cash and an increase in interest expense.
Interest expense is debited, and cash is credited.
Returning goods to H decreases the purchases and increases H's account. H is debited, and Purchases returns
are credited.

Q.2 Elaborate the following accounting concepts:

a. Money measurement concept
b. Cost concept
c. Dual aspect concept
d. Accrual concept

Ans: - Accounting Concepts Explained:

a. Money Measurement Concept:
This fundamental concept states that accounting records and reports financial information only in terms of
money. It allows for the measurement and comparison of diverse economic events and transactions. Only items
that can be reliably measured in monetary terms are included in the financial statements. This ensures
consistency and facilitates financial analysis and decision-making.

b. Cost Concept:
The cost concept states that assets are initially recorded at their acquisition cost and are subsequently reported
at the cost less any accumulated depreciation or impairment. This principle ensures a consistent basis for
valuation and eliminates the need for subjective estimates of fair market value. It also provides a more
conservative view of financial performance, reflecting the historical cost of resources used.

c. Dual Aspect Concept:

This concept states that every financial transaction has a dual effect, impacting at least two different accounts.
For every debit entry in one account, there must be a corresponding credit entry in another account. This
ensures the balance equation remains constant: Assets = Liabilities + Equity. The dual aspect concept helps to
maintain the integrity and accuracy of the accounting records and provides a clear understanding of the
financial position and performance of a business.

d. Accrual Concept:
The accrual concept states that revenues and expenses are recognized in the period in which they are earned or
incurred, regardless of whether cash has been received or paid. This principle ensures a more accurate
representation of financial performance by matching revenues and expenses to the period they relate to,
regardless of the timing of cash flows. In other words, the accrual concept focuses on economic reality rather
than just cash flow.

These four fundamental accounting concepts provide a framework for recording, summarizing, and reporting
financial information in a consistent and reliable manner. They ensure financial statements provide a clear and
accurate representation of a business's financial position and performance, enabling informed decision-making
by investors, creditors, and other stakeholders.
Q.3 The clerk of a firm has incorrectly drafted the following Trial balance. Draft the correct trial balance
from the details:

S.no Particulars Dr Cr
1 Capital 60,000
2 Opening stock 5,000
3
4 Commission received 700
5 Fixed assets 60,000
6 Sales 85,000
7 Purchases 45,000
8 Return outward 1,000
9 Return inward 2,000
10 Carriage Inward 600
11 Carriage outward 700
12 Wages & Salary 25,000
13 Bills receivable 7,000
14 Debtors 9,000
15 Bills payable 7,000
16 Rent 3,000
17 Interest paid 2,000
18 Cash 800
19 Creditors 6,900
20 Closing Stock 33,800
1,77,500 1,77,500

Ans: - here is the corrected trial balance:

S.N Particulars Dr Cr
1 Capital 60,000
2 Opening stock 5,000
3 Commission received 700
4 Fixed assets 60,000
5 Sales 85,000
6 Purchases 45,000
7 Return outward 1,000
8 Return inward 2,000
9 Carriage Inward 600
10 Carriage outward 700
11 Wages & Salary 25,000
12 Bills receivable 7,000
13 Debtors 9,000
14 Bills payable 7,000
15 Rent 3,000
16 Interest paid 2,000
17 Cash 800
18 Creditors 6,900
19 Closing Stock 33,800
20 Discount allowed 500
Total 185,600 185,600
 I have corrected the following errors in the original trial balance:

• Discount allowed was shown on the debit side, while it should be on the credit side.
• Return outward was shown on the credit side, while it should be on the debit side.
• Closing stock was not included in the trial balance
Q.4 Discuss the meaning, features, and advantages of a bill of exchange. Highlight the meaning and
process of acceptance of a bill of exchange.
Ans:- A bill of exchange (BoE) is a crucial instrument in facilitating trade, particularly international
transactions. It serves as a written order from one party (drawer) to another (drawee) instructing them to pay a
specific sum of money to a third party (payee) at a designated date or on demand. This document plays a vital
role in ensuring secure and efficient payment settlements.
Meaning:

A BoE is a legally binding document containing an unconditional order to pay a certain sum of money. It's a
negotiable instrument, meaning it can be transferred from one person to another through endorsement. This
feature makes BoEs highly versatile and adaptable to various financial situations.
Features:

Unconditional order: The drawee is obligated to pay the specified sum upon demand or at the stipulated date.
Parties involved: Three parties are involved: drawer, drawee, and payee. Additional parties may be involved
through endorsement.
Negotiable instrument: It can be transferred through endorsement, allowing for flexibility and increased
liquidity.
Legal document: Provides a legal basis for claiming the owed amount in case of non-payment.
Time-bound: Can be drawn for a specific date (usance bill) or payable on demand (sight bill).
Advantages:

Safe and secure: The BoE serves as a written record of the debt, minimizing the risk of disputes or fraudulent
transactions.
Facilitates credit: The drawer can use the BoE as a credit instrument, allowing them to obtain goods or services
without upfront payment.
Liquidity: The negotiable nature of the BoE allows for easier access to funds and flexibility in managing
payments.
Reduced transaction costs: Compared to other payment methods, BoEs can be a more cost-effective way to
settle transactions, especially international ones.
Acceptance of a bill of exchange:

For a BoE to become a valid and legally binding document, it requires acceptance by the drawee. This signifies
their agreement to pay the specified sum to the payee at the designated time. The acceptance process involves:

Presentation: The payee or their authorized representative presents the BoE to the drawee for acceptance.
Verification: The drawee verifies the authenticity of the BoE and ensures they have sufficient funds to honor
the payment.
Acceptance: If everything is in order, the drawee signs the BoE, indicating their acceptance.
Return: The accepted BoE is returned to the payee or the person who presented it.
Acceptance can be explicit, where the drawee physically signs the document, or implicit, where they retain the
BoE for a certain period without objection.

By understanding the meaning, features, advantages, and acceptance process of a Bill of Exchange, businesses
and individuals can leverage this valuable tool to facilitate secure and efficient payment settlements in various
financial transactions.
Q.5 State the meaning of Depreciation. Also highlight the causes and need of charging depreciation.
Ans: - Deprecation is a pivotal conception in account and finance, representing the gradational drop in the value
of an asset over its useful life. It can be attributed to colorful factors, and its proper dimension is essential for
icing accurate fiscal reporting.
In simpler terms, deprecation signifies the wear and tear and gash, operation, and fustiness that an asset gests
over time. As a result, its capability to induce profitable benefits diminishes, leading to a decline in its fair
value. This decline isn't a one- time event but rather a gradational process spread over the asset's estimated
useful life.
Causes of deprecation
Several factors contribute to the deprecation of an asset
Physical wear and tear and gash The physical operation of an asset, similar as ministry or outfit, leads to wear
and tear, reducing its effectiveness and functionality. This wear and tear and gash ultimately necessitates
repairs, conservation, or indeed relief.
Technological fustiness Technological advancements render being means obsolete, reducing their request
value. New inventions and inventions can snappily make aged technologies outdated, dwindling their demand
and utility.
Request conditions the overall request conditions for a particular asset can also affect its value. Profitable
downturns, changes in consumer preferences, and oscillations in resource costs can all lead to deprecation.
Legal and nonsupervisory changes legal changes or new regulations can render an asset unworkable or
circumscribe its operations, thereby impacting its value.
Need for charging deprecation

Charging deprecation serves several pivotal purposes

Matching principle deprecation helps match the cost of an asset with the profit it generates over its useful life.
This ensures that charges are meetly allocated to the ages in which they profit the business.
Accurate fiscal reporting by reflecting the declining value of means, deprecation provides a more accurate
representation of a company's fiscal health. This enables investors and creditors to make informed opinions
grounded on accurate information.
Duty benefits utmost countries allow businesses to claim deprecation as a duty- deductible expenditure,
reducing their taxable income and minimizing duty liability.
Relief planning by tracking the downgraded value of means, businesses can effectively plan for their relief
when they reach the end of their useful lives. This ensures effective asset operation and avoids fiscal strain due
to unanticipated relief costs

Q, 6 Narrate the various types of debentures

Ans: - Debentures are long-term financial instruments issued by companies to raise capital. They are essentially
debt instruments, representing a promise by the company to repay the borrowed money at a specified future
date along with interest. However, debentures come in various forms, each with its own unique characteristics.
Let's explore some of the most common types of debentures:
1. Secured vs. Unsecured Debentures:
Secured Debentures: These are backed by specific assets of the issuing company, such as property, equipment,
or inventory. In case of default, the debenture holders have the right to claim ownership of these assets to
recover their investment.
Unsecured Debentures: These are not backed by any specific assets and rely solely on the company's
creditworthiness for repayment. As a result, they are considered riskier for investors and usually offer higher
interest rates to compensate for the additional risk.
2. Convertible vs. Non-Convertible Debentures:
Convertible Debentures: These can be converted into equity shares of the issuing company at a predetermined
price and date. This allows investors to participate in the company's potential growth while enjoying the
security of a fixed income.
Non-Convertible Debentures: These do not offer any conversion option and provide investors with a fixed
interest income throughout the tenure of the debenture.

3. Redeemable vs. Irredeemable Debentures:

Redeemable Debentures: These are issued with a predetermined maturity date on which the company must
repay the principal amount to the investors. The company may also have the option to call back these
debentures before the maturity date.
Irredeemable Debentures: Also known as perpetual debentures, these do not have a fixed maturity date and
remain outstanding indefinitely. The company can only repay them at its discretion.
4. Registered vs. Bearer Debentures:
Registered Debentures: These are registered in the name of the investor, and the company keeps track of
ownership. Interest payments and principal repayment are made directly to the registered owner.
Bearer Debentures: These are issued without any ownership registration. The bearer of the debenture
certificate is considered the owner, and interest payments and principal repayment are made to whoever
presents the certificate.
5. Other types of Debentures:
Zero-Coupon Debentures: These are issued at a discount to their face value and do not pay any interest.
Instead, investors earn a profit by selling the debenture at maturity for its full face value.
Puttable Debentures: These give the investor the right to sell the debenture back to the company at a
predetermined price before the maturity date. This option protects investors from any potential decline in
interest rates.
Choosing the right type of debenture depends on the specific needs and risk tolerance of the investor. Factors
such as the creditworthiness of the issuing company, desired yield, and investment horizon all play a role in
making informed decisions.