Account 9

3. Types of Meeting, Seminar and Assembly

It has already been discussed that different types of organizations hold different
types of meetings for different purposes. Thus, there are various types of meeting.
The meeting held by sole proprietorship and partnership differs with that of a joint
stock company and so forth. Some of the common and important types of meeting,
seminar and assembly are described below:

Meeting/Seminar/Assembly

Assembly Meeting Seminar
Mass assembly
Annual general meeting Secret meeting
Extraordinary assembly
Conference Committee meeting

Board meeting

One-sided meeting and two-sided meeting

Staff meeting

Unexpected meeting and regular meeting

i. Assembly

The assembly is organised gathering of large number of individuals and people
for conveying of important issues, views, options and information to the shareholders,
members and general people. Constitutional assembly, assembly of political party,
assembly of shareholders are some examples of assembly. Some important types of
assemblies are given below.

a. Mass Assembly

This is a meeting organised

openly by any political, religious or

social organization to draw the public

attention towards any political,

religious or social matters. Only a

few selected persons representing a

certain group or class deliver speech

and others listen to them. A notice

of such a meeting is given through

mass media like radio, television Mass Assembly
loudspeaker, pamphlets etc. for

inviting the people openly. Since, the number of participants in this meeting is

comparatively larger, it is better to call it a conference or convention.

Meeting, Assembly, Seminar and Minuting 151

b. Annual General Meeting (Annual Assembly of the Shareholders)

According to the Company Act 2063,

every company must hold its annual general

meeting within six months from the expiry of

its financial year. It gives information to the

shareholders about the performance and the

company’s future plan and programme, so

that they can discuss on the matters. A 21 days

pre-notice along with the date, place, time and

agenda of the meeting should be released to Annual General Meeting
the shareholders in written so that they can

prepare for the meeting. The board of directors should follow all the decisions of this

sort of meeting. This meeting is organized for the general subjects like

to elect board of directors : to pass the budget,

to approve the plans and policies, : to approve the audit report,

to appoint the auditors, : to divide the bonus,

to amend the memorandum.

c. Extraordinary general meeting

If any important matters which cannot be considered by the board of directors
nor can be waited till the coming annual general meeting, require immediate action,
extraordinary general meeting is held. The board of directors call this meeting when
some unexpected and abnormal situation arises in the company beyond the board of
directors’ authority. This sort of meeting is called in case if the board of directors feel
necessary at the request of the shareholders representing at least 10 percent of the
paid up capital or at least 25% of total capital. The shareholders should be notified
about the agenda, date, place and time of the meeting in advance of 15 days for such
a meeting.

d. Conference/Convention

Conference is the gathering of a

number of persons in response to a written

notice to the specified persons and through

mass media to the other general, which is

organised by a political, religious, social,

business or government organization to pass

certain documents for its strategic movement.

A conference may be performed through

different stages like inauguration ceremony, Conference

close door session, etc. The participation in the

conference is comparatively a massive than that of other meetings. There are national

and international conferences of different organizations and it is occasional in nature.

152 Aakar’s Office Practice and Accountancy - 9

ii. Meeting

The different types of meeting are as follows:

a. Board of Directors Meeting (BOD Meeting)

It is a meeting of the directors of a

company. The term ‘Board’ is the collective

name of the directors and thus it is termed

as Board of Directors Meeting. When the

directors of a company come together

to determine its plans and policy and to

make decisions regarding its management

activities, it is called the meeting of the

board of directors. The Board Meeting is

held at a regular interval. According to Board Meeting
the Company Act 2063, a public company

must hold such a meeting at least six times a year, not exceeding a three month period.

In case of a private company, it is as prescribed in the articles of the association. At

least 51 percent of the fully qualified directors must be present for quorum. For this

sort of meeting, no proxy is allowed. The general agenda of such a meeting is the

management of the company i.e. forfeiture of shares, recommendation of dividend,

appointment of officers, fixation of the date of general meeting etc. which are of

immense importance to the company’s management.

b. Confidential Meeting

Confidential meeting is such a meeting which is held among a few selected
persons or officials on some confidential matters. This sort of meeting is organized
secretly and the decisions may also remain secret for a long period or even forever.
The meeting related with peace and security, defence and other internal affairs is of
this type. As for the confidentiality of matters, legal obligations, etc., such meetings
may be organized secretly.

c. Committee Meeting Committee Meeting

A committee is a group of persons
formed by government authorities or
any other organizations according to
the provisions of the Act, to which it is
concerned, for a special task i.e. for study
and investigation of any happening or
case. Such committees can be formed in
government as well as in private sectors
for different purposes. The meeting
organised by such a committee is known
as committee meeting. Thus, a committee

Meeting, Assembly, Seminar and Minuting 153

meeting is the one which is organised by a committee among its members to discuss
and draw out decisions on some topics like the study and finding of case, preparation
of final report of the case or problem, etc. The report made by a committee after
its final meeting should be submitted to the authority to which it is accountable. A
committee may be permanent or temporary as its responsibility and the nature of
tasks.

d. One-sided and Two-sided Meetings

The meeting which is conducted among the members of same organization is
called one-sided meeting. The meeting which is conducted between two or more than
two orginasitions in the common issues or problems is called two-sided meeting.

e. Staff Meeting

A staff meeting is an employee

conference. Staff meetings are usually

called by the organization’s CEO,

owner, human resource manager, or

other head management officials. Staff

meeting arrangement is often made by

administrative support such as executive

assistants and secretaries. Staff meetings

are seen by many organizations as an

important venue for communicating with Staff Meeting

personnel directly and efficiently. Some

staff meetings encourage an open exchange of dialogue with staff, while others are

conducted as more of an in-person “memo.”

f. Unexpected Meetings and Regular Meetings

Meeting could be held unexpectedly to know the progress of the employee or
members without giving prior notice about the date. It can be done regularly at fixed
date and time also.

iii. Seminar Seminar

Seminar is a form of academic
instruction, either at a university/
college/school or offered by a commercial
or professional organization. It has the
function of bringing together small groups
for recurring meetings, focusing each
time on some particular subject, in which
everyone present is requested to actively
participate.

154 Aakar’s Office Practice and Accountancy - 9

Increasingly, the term “seminar” is used to describe a commercial event though
sometimes free to attend where delegates are given information and instruction in a
subject such as property investing, other types of investing, internet marketing, self-
improvement or a wide range of topics, by experts in that field. The basic focus of the
seminar is to raise the concerned matters, discuss on the issues and make conclusion.
The seminar proceeds as follows:

i. Arrival of the participants.

ii. Attendance of the participants.

iii. Chairing of the seminar by chairperson and call of the chief guest and
others guests.

iv. Welcome speech.

v. Format inauguration of the seminar by chief guest or chairperson.

vi. Best wishes speech by chief guest and other guests.

vii. Group discussion on the issue of the seminar.

viii. Presentation of discussion and conclusion of the seminar.

ix. Conducting remark and vote of thanks on behalf of the organizer.

x. Closing the seminar by chairperson.

Differences Between Meeting and Conference

A meeting and a conference are similar to some extent and at the same time, these
two terms are different from each other. The main differences between a meeting and
a conference are discussed below:

Points of Difference Meeting Conference

1. Minute Meeting is an assembly of a Conference is a gathering of
small number of persons for a large number of persons
discussion and for making to pass certain documents
decisions on certain topics. and to form the body of the

political, religious, social or
business organization for a
certain period.

2. Participation There’s a comparatively, There’s a large participation in

small participation in a conference but a few selected

meeting and all them can persons deliver their speech

give their opinion in favour and others listen to them.

or against a resolution. The others can vote to certain

persons and documents.

3. Interval A meeting is held from time A conference is held in

to time in a short duration i.e. long interval i.e. two, three,

it is regular in nature. four or of years etc. i.e. it is

occasional.

Meeting, Assembly, Seminar and Minuting 155

4. Procedure The agenda are respectively It is performed generally
5. Purpose
forwarded in the meeting through different sittings i.e.

and through the mutual the inauguration ceremony,

discussion the decisions are close door session and etc.

taken by the same sitting or and the decisions are taken

sometimes in the coming through due discussion in the

meeting, immediately. close door session.

A meeting is intended for A conference is intended

solving problems and for for the information of the

regular communication working committee, approval

of matters and sometimes of documents and making

for supporting plans and strategies for the coming

policies. period.

Minute

4. Introduction

As it has been already discussed in the meeting, a number of resolutions are
presented or forwarded in a meeting or conference for discussion and decision. These
all matters i.e. the resolutions and the decisions made therein are to be written in a
separate book for the purpose of creating evidence in the future. Such a book is called
a minute book. Different minute books are maintained for different types of meeting.
Each meeting should mention in the minute about the chairmanship of the meeting,
the agenda, the notable opinions of the members and note of dissent, if any, and
the decisions on each resolution. All the participants give their signature at the last
to endorse the decisions in the minute. Thus, a minute book may refer to a register
which is maintained by an organization or committee to record the necessary details
i.e. the agenda and the decisions along with the signature of the participants.

A minute book may contain the following particulars:
i. Name, date and time of the meeting.

ii. The name of the person under whose chairmanship the meeting is conducted.

iii. The name and post of the members i.e. participants.

iv. The decisions of the meeting along with the respective resolution and notes of
dissent, if any.

v. The signature of the chairperson and then of the other participants.

vi. The minute book is the complementary to the meeting. The act of writing the
minute book is known as minuting.

Key Point The process of recording the resolutions and the decisions
made in a meeting in a separate book in systematic way for the
purpose of creating evidence for the future is known as minute.

156 Aakar’s Office Practice and Accountancy - 9

5. Objectives/Need/Importance of Minute

A minute is of immense importance to any sort of organization as it minutes all
the conclusions of a meeting. A minute helps the executive in formulation of plans
and policies, maintaining rules and order and the sub-ordinates to get guidelines in
their regular performance. The following points may highlight the objectives and
importance of a minute.

i. Helpful in Formulation of Plans and Policies

A minute provides much information for the formulation of plans and policies
through the decisions of various meetings.

ii. History of the Past Decision

A minute is the source of the decisions of the meetings and thus it is the history
of decisions and through which much information of the past activities especially
the resolutions, decisions and sometimes the notes of dissent etc. are supplied for
reference or even as an evidence for the regular operation of an organization.

iii. Guidance and Follow-up of T

Since, a minute contains the remedies for problems and difficulties in the form
of decisions, it can provide guidelines to the executives as well as the staff in the
regular course of operation. A minute may be referred as a guideline for the similar
cases in the present and future.

iv. Proof and Evidence

A minute of a meeting can be produced as an evidence to settle some of the
disputes and conflicts. It is a legally valid document.

v. Execution of Decisions

For better execution of decisions of a meeting, all the staff of the organization
should be notified about the decisions. It is the minute, which reminds and enables
the staff to execute the decisions. The decisions of a meeting may work as the policy
of that organization.

Points to Remember

i. Joint investment ii. Productive organization

iii. Guidance and follow-up of tasks iv. Proof and evidence v. Execution of decisions

Meeting, Assembly, Seminar and Minuting 157

6. Drafting of Minute/Minuting

Drafting of a minute simply means the act of writing down the decisions drawn
by the meeting. The meeting secretary under the instruction of the chairperson writes
a minute. It is prepared in different format and style. It is not an easy task to write
a minute in a systematic way. One should have enough skill, experience and even
a training to write a minute. There are some factors to be taken into mind while
drafting a good and effective minute. These common factors are mentioned below:

i. The date and name of the meeting along with the name of the person under
whose chairmanship the meeting is conducted, should be written in a simple
and clear manner.

ii. The procedures of minuting like writing the agenda, the name and post of
the participants, the decisions of the respective resolutions, etc. should be
systematically mentioned.

iii. Since, a minute is a legally valid document, it should be written in a lawful
way.

iv. If any one of the members has disagreement with the decision, a note of dissent
may be noted down by taking the mandate of the meeting and the signature of
all the participants should be obtained for its endorsement.

v. It should be brief, factual and free from ambiguity.

vi. It should be simple and clear and thus crossing, rubbing, use of literary words
and phrases should be avoided.

vii. A copy of minute should be dispatched to all the concerned members within 15
days of the meeting.

7. Endorsement of Minute (Nirnaya Pustikaran)

Endorsement of a minute, which is also termed as confirmation of minute, is
the act of approving the decisions taken by a meeting by signing on it. Generally, the
signature of the members is collected on the same day in the minute by taking the
consent from all of them ultimately even by noting down the notes of dissent, if any.
Otherwise, if the decisions are too long to fair immediately, decisions are written
in a next register or even in a piece of paper with the authorized signature of the
chairperson and secretary and sent to all the members attending the meeting. The
members are given the time of 24, 36 or 48 hours to approve, amend or oppose the
decisions. The members will either give their consent to the decisions or any of them
may write a note of dissent on the decisions and give their signature to the minute.
In this way, the minute is endorsed by signing by all the members. Sometimes, if
the decisions are approved, they are written in the minute and are forwarded for
endorsement in the beginning of the coming meeting. When the minute is endorsed,
it becomes a legally valid document and the policy of the organization.

158 Aakar’s Office Practice and Accountancy - 9

Glossary : elected members among the shareholders
: fee/salary/wage/pay, etc.
Board of directors : a person who checks books of accounts
Remuneration : a part of profit distributed to shareholders
Auditor : additional benefit
Dividends : owners
Bonus : minimum required presence
Shareholders : penalty/give up
Quorum : capital divided into small units (generally of Rs. 100)
Forfeiture : answerability/responsibility
Share : order/command
Accountable : approval/authorisation
Mandate : permission/agree
Endorsement : disagree
Consent : one financial year
Dissent : a place where some programme is held
Fiscal year : a large official meeting
Venue : a systematic record of the decisions made in a meeting
Conference
Minute

Exercise

A. Answer the following questions in one sentence.

1. What is a conference?
2. What is meeting?
3. What is meant by endorsement of minute?
4. Define conference.
5. Write any two purposes of annual general meeting.
6. What is assembly?
7. Write the types of meeting.
8. What is seminar?
9. What is minuting?

Meeting, Assembly, Seminar and Minuting 159

B. Give short answers to the following questions.

10. What is meeting? Describe its important objectives.
11. Describe the importance of meeting.
12. Distinguish between meeting and conference.
13. Briefly describe the need/importance of a minute.
14. What procedures are to be followed while drafting an effective minute?
15. ‘A minute is the document of a meeting’. Justify this statement.

C. Give long answers to the following questions.

12. What are the different types of meeting? Explain.
13. What is meant by a minute? Mention its objectives.
14. What does ‘drafting a minute’ mean? Mention the things to be considered

while drafting it.

Pr oject Work

a. Conduct House/Club meeting in your house/club of school, draft
minute and also do the endorsement of it.

b. Ask your principal or head administrator of your school to show the
minute of meeting.

c. Did you see any kind of mass meeting? List out when and where?

160 Aakar’s Office Practice and Accountancy - 9

Unit 8 Book-keeping

CDC Syllabus 10 Periods

8.1 Introduction, Types and Concepts
8.2 Single Entry System: Introduction
8.3 Double Entry System:
(i) Introduction,
(ii) Objectives and Characteristics

ObjeLcetiarvneisng After studying this unit, students will
be able to :

know the meaning, objectives and
importance of book-keeping,

describe the types of accounting,

describe the meaning, differences,
merit and demerits of double entry
and single entry book-keeping system,

know the some terminologies of
book-keeping.

Meeting, AssemBbolyo,kS-ekmeeipnainrgand Minuting 161

1. Introduction

Organization performs the monetary transactions to achieve the goals.
Investment of capital, taking loans, purchase of assets, materials or suppliers, payment
of wage, salary, rent, interest, commission, sales of goods, etc. are some examples of
business transactions. All these transactions cannot be recalled by a human memory
whenever required and thus they are to be regularly and systematically recorded
in a set of books for ascertaining profit or loss during a certain period and financial
position till the date.

The term ‘Book-Keeping’ is comprised of the two words ‘Book’ and ‘Keeping’.
where `Book’ means the documents where to keep the records i.e. journal, ledger,
etc. and `Keeping’ means the systematic management of book for future reference.
Book-keeping is the art of recording the transactions in a systematic and scientific
way for the future references.

Different scholars have defined book-keeping in different words. Some of them are
quoted below:

J.R. Batliboi, “Book-keeping is the art of recording business dealings in a set of books.”

Dr. A. N. Agrawal, “Book-keeping is the science and art of recording transactions in money
or money’s worth so accurately and systematically that the true state of a businessman’s
affairs can be ascertained.”

Likewise, Rosenkampff, “Book-keeping is the art of recording business transactions in a
systematic manner.”

With the study of the above meaning and definitions, it may be defined as a science
of collecting and recording the financial transactions of an entity regularly and
systematically in a set of books so as to ascertain its operational result i.e. profit/loss
during a certain period and the financial position up to the date.

Key Point Book-keeping is the act of collecting and recording the financial
transactions in a systematic and scientific way in a set of books.

2. Objectives of Book-keeping

There are various objectives of book-keeping and accounting to different
parties i.e. the owners, managers, creditors, government, customers, etc. The common
important objectives of book-keeping are shortly described below.

i. Ascertainment of Result of Operation

Book-keeping is intended to the ascertainment of the result of operation i.e.
the profit/loss of a firm or company by recording all the revenue income and gains

162 Aakar’s Office Practice and Accountancy - 9

and expenses and losses of a certain period and by comparing them. It is ascertained
by preparing the income statement or profit and loss account at the end of each
fiscal year.

ii. Ascertainment of the Financial Position

It helps to ascertain the financial position of a firm or company by recording
the appropriate values of different types of assets, specially in its net cost, and the
capital and liabilities up to the date. It is found by preparing the balance sheet at the
close of the fiscal year.

iii. Maintaining Control over the Assets and Budget

Book-keeping maintains control on the assets, income and expenses of all types
by making their complete records. It helps one to see how efficiently the assets are
utilized and the budget is disposed off. Thus, it establishes financial discipline by
controlling frauds on budget and its expenditure.

iv. Prediction of the Volume of Cash for Future

Book-keeping helps the future forecast of cash by verifying the receipt and
payments of an organization and the proposed expansion programmes. Specially, it
is important for those whose financial system is based upon cash budget.

v. Assessment of Tax Liabilities

Book-keeping keeps the complete records of all business transactions and get
them audited. Book-keeping involves the income statement and balance sheet at the
end of the fiscal year. It gives the details about the financial affairs of an organization,
including the sales and net income on the basis of which tax liabilities i.e. sales tax,
income tax, etc. can be easily assessed.

Points to Remember

i. Ascertainment of result of operation ii. Ascertainment of the financial position

iii. Maintaining control over the assets and budget iv. Prediction of the volume of cash for future

v. Assessment of tax liabilities

3. Importance and Advantages of Book-keeping

Book-keeping is important for all, who are engaged in any sort of occupation
and rather is important for the organizations for ascertaining the true state of the
organization’s affairs. The importance of book-keeping may be studied with respect
to the different sectors.

Book-keeping 163

i. Importance to the Professional and the other Individuals

Book-keeping is important for the professionals like doctor, engineer,
mechanics, lawyer, auditor, etc. for recording their incomes and expenses and profits
and losses, etc. regularly and systematically for controlling expenses and gaining
income. Similarly, it is important for the general people for making a proper balance
of their income and expenses for their personal and household affairs.

ii. Importance to Business Organizations

Book-keeping is essentially important for a business organization for keeping
the complete records of the transactions. It is important, specially to determine
the result of operation, financial position, controlling assets and other resources,
establishing financial discipline, assessing tax liabilities, etc.

iii. Importance to the Government

Book-keeping is important for the government to evaluate the progress of
the government projects, to collect necessary statements, data and information for
the preparation of government budget, to control over the leakage, misuse and
misappropriation of budget, etc. of the government property and resources.

iv. Importance to other Parties

Book-keeping is equally important for the financial analysts and other
interested parties like investors, creditors, banks, customers, etc. to study and analyse
the different financial statements of a certain firm or company. It is also important for
the job seekers for better opportunity for getting employment.

Points to Remember

i. Importance to the professional and the other individuals ii. Importance to business organizations

iii. Importance to the government iv. Importance to other parties

4. Book-keeping Vs Accounting

The terms ‘Book-keeping’ and ‘Accounting’ are used in the same sense, at the
‘beginners’ level. One should be clear of the fact that book-keeping is a method and
practice of recording the financial transactions, summarising them and preparing
the final statements, after a certain period, whereas accounting refers to the analysis
and interpretation of the financial data in addition to the book-keeping. Thus, book-
keeping is more clerical in nature in the sense that it records and summarises the
transactions but accounting is wider, in the sense that it analyses and interprets the
data, which helps the managers in taking decisions. Accounting includes the book-
keeping as its elementary course. It is more than book-keeping. It is analysis and

164 Aakar’s Office Practice and Accountancy - 9

interpretation of the data and hence more helpful in decision making. But in the
introductory course, both the terms are studied in the same sense.

Accounting is broader than book keeping. Book keeping is a part of accounting. The
following are some of the main definitions of accounting.

According to R.N. Anthony, “ An accounting system is a means of collecting, summarizing,
analysing and reporting, in monetary terms, information about the business.”

Likewise, Lewis and Gillespie, “Accounting may be seen as consisting of recording,
classification, presentation and interpretation of financial information.”

In conclusion, it is the systematic process of recording, classifying, summarizing,
interpreting and communicating the information of a business for making financial
decisions.

5. Types/Branches of Accounting

Financial accounting is the most common and first accounting in accounting
history. At first, accounting was started in financial institutions. Gradually, it was
used in other organizations. Different types of accounting we use are as follows:

Types/Branches of Accounting

Financial Management Cost Social Responsibility
Accounting Accounting Accounting Accounting

i. Financial Accounting

Financial accounting is one branch of accounting and historically has involved
processes by which financial information about a business is recorded, classified,
summarized, interpreted, and communicated; for public companies, this information
is generally publicly accessible. Financial accounting is the art of recording financial
transactions which provides the necessary information to the investors, government,
employees, etc. It is single entry as well as double entry system.

ii. Management Accounting

Management accounting is concerned with the provisions and use of accounting
information to managers within organizations, to provide them with the basis, to
make informed business decisions that will allow them to be better equipped in their
management and control functions.

In contrast to financial accountancy information, management accounting
information is:

Usually confidential and used by management, instead of publicly reported.

Book-keeping 165

Forward-looking, instead of historical.
Pragmatically computed using extensive management information systems

and internal controls, instead of complying with accounting standards.

iii. Cost Accounting

Cost accounting is that part of management accounting which establishes budget
and actual cost of operations, processes, departments or product and the analysis
of variances, profitability or social use of funds. Managers use cost accounting to
support decision making to reduce a company’s costs and improve its profitability.

iv. Social Responsibility Accounting

It is related with contribution, communication and measurement provided
by the business organization to the society where the business organizations are
establish and grown. Social responsibility accounting is the process of accounting for
social aspects and values of the business. Employment generation, environmental
contribution, financial aid to the society, providing residential accommodation to poor
people of the society, etc. are the examples of subject matter of social responsibility
accounting.

6. Basic Concepts/Principles of Book-keeping and
Accounting

Every discipline like economics, political science, statistics, etc. is studied under
certain theoretical bases. Book-keeping and accounting are also not the exception.
Hence, for recording transactions in the books of account, certain fundamental
concepts/principles should be followed as the assumptions. Some of the important
concepts/principles are briefly discussed below.

i. Business Entity Concept

This concept assumes that the entity of a business is exactly different from
that of its owner. The business transactions of a firm must not be mixed up with
the private transactions of the owner. Thus, a separate book of account is prepared
for recording the business transactions of a firm, which is separate from that of the
owner and the other firms.

ii. Going Concern Concept

Under this concept, the books of account are maintained continuously in a
set of books by assuming that the business has a long existence and carries out its
activities continuously onward. In other words, this concept assumes that a firm or
company carries on its operation for an indefinite period in future.

166 Aakar’s Office Practice and Accountancy - 9

iii. Money Measurement Concept

This concept refers to the recording of those transactions, which show at least a
monetary character i.e. involvement of money or money’s worth. The non-monetary
transactions are irrelevant to book-keeping Since, they do not show a monetary
character.

iv. Accounting Period Concept

Even though, a business is intended to run its activities continuously onwards,
the true position of its affairs should be ascertained at frequent intervals. The owners,
managers, creditors, banks and other interested parties need to know the position
of its affairs i.e. profit/loss and the financial position for a certain period. The time
interval is generally known as accounting or trading period, which is of 12 months.
A firm may follow the calendar year or any period of 12 consecutive months as its
fiscal year. The books of account are prepared and maintained accordingly.

v. Cost Concept

The assets of a business, specially the machineries, equipment and materials are
recorded at their cost prices and the valuation of the opening as well as the closing
stock of materials is made on the basis of cost price or market price whichever is less.

vi. Realization Concept

There remain many outstanding expenses and accrued incomes in the business
in the regular course of dealing. Outstanding expenses refer to the expenses made
but not yet paid and accrued income means the income though gained, not received
yet. These expenses and incomes though not paid and received, at the very moment,
are recorded in the books of account under this concept. Similarly, when expenses
are paid and incomes are received in advance, they should not be treated as expenses
and incomes before the expiry of the period and thus recorded as advance payment
and receipt.

vii. Matching Concept

Book-keeping is intended to the ascertainment of profit/loss for a certain
period, for which the total of income and expenditure should be ascertained
separately in the form of statement or account. The difference between the total of
incomes and expenses is the profit or loss. Thus, the two totals should be matched
with the balancing figure. If the income is excess over the expenditure, it is net profit,
but if the expenditure is excess over the income, it is net loss.

viii. Dual Concept

This concept recognizes the two-side effects of every transaction in the book
of both the parties involved. If one or some accounts are debited and some others

Book-keeping 167

are credited with the same total effect, an amount is recorded in the debit side of
one account and the same on the credit side of other account. Ultimately, the total
of the assets of a business becomes equal to the total of its capital plus liabilities. By
equation:

Assets = Capital+ Liabilities.

Points to Remember

i. Business entity concept ii. Going concern concept iii. Money measurement concept

iv. Accounting period concept v. Cost concept vi. Realization concept

vii. Matching concept viii. Dual concept

7. Types of Book-keeping Systems

Book-keeping is used by many individuals and organizations from the ancient
times. The modern concept of book-keeping is the recent origin and before this, the
traditional system of book-keeping was in use. Thus, book-keeping system is studied
under two type, viz. (i) single entry book-keeping system and (ii) double entry book-
keeping system.

7.1 Single Entry Book-keeping System

It is the traditional system of keeping books of account. Every business
transaction has its double aspects, i.e. debit and credit, for both the parties involved,
but it does not recognize the two-side effects of the transactions. It considers only
the personal i.e. the debtors and creditors and some sort of cash summaries in the
books of account. Other real and nominal accounts are completely ignored by this
system. Since, the transactions are posted in personal and cash accounts but not
in other impersonal accounts, it is called single entry system of book-keeping. As
such, single entry system of book-keeping may be defined as the system of keeping
books of account, which does not recognize the two-fold aspects of every transaction.
Since, it does not record the transactions other than the personal account and a cash
summary, it is an incomplete system.

According to Kohler, “Single entry system is a system of book-keeping in which, as a rule,
the records of only cash and personal accounts are maintained. It is always incomplete double
entry system varying with circumstances.”

Key Point It is an incomplete and unscientific system of book-keeping
which does not follow the rules of double effects and does not
accept the basic principles of accounting.

The merits and demerits of the single entry systems of book-keeping are discussed
below.

168 Aakar’s Office Practice and Accountancy - 9

Merits of Single Entry System

i. It is simple to use because only the personal accounts and a cash summary are
prepared under this system.

ii. It is less costly in the sense that only a limited number of books are maintained
by a few number of persons.

iii. It is useful for every small and sole proprietorship type of firms.
iv. It saves time to maintain the record.

Demerits of Single Entry System

i. It is incomplete, unsystematic and unscientific system and thus necessary
information cannot be supplied.

ii. It cannot check the errors and the books of account may lead to the wrong result.

iii. It cannot ascertain the true state of affairs of a firm or company.

iv. It cannot control different types of frauds, leakage, misuse and misappropriation
of assets as well as other resources.

v. It cannot make a factual evaluation of projects, neither can assess the tax
liabilities in true sense.

7.2 Double Entry Book-keeping System

It is already mentioned that every financial

transaction shows its double effect one in the

debit side of one account and the next in the credit

side of another account. This double effect, in

every business transaction, cannot be recognized

by the single entry book-keeping system. Thus,

it was felt necessary to develop the double entry

book-keeping system to satisfy the needs of

organizations in course of time. It is completely

systematic and scientific and thus keeps the Father of Accounting

records of the transactions by considering both

the aspects. So the double entry book-keeping system may be defined as the system of

keeping books of account which recognizes the two-fold aspects of every transaction.

It is based on the double entry principles that for every debit there is corresponding

credit, i.e. one aspect is debited with a certain value and the other is credited with

the same value. Double Entry Book-keeping system was propounded by an Italian

businessman Luca De Bourga Pacioli in 1494 AD. He published his book named

‘Summa De Arithmetica’ mentioning the recording system of transactions.

According to Lewis and Gillespie, “The specific technique which reflects the concept of
duality is known as double entry book-keeping.”

Likewise, Juneja, Chawla and Saksena, “Double entry system is the system under which
each transaction is regarded to have two fold aspects and both the aspects are recorded to
obtain complete record of dealings.”

Book-keeping 169

Key Point It is the scientific, complete and systematic system of accounting
based on dual concept.

The double entry system is illustrated in respect to the following transactions.

1. Furniture purchased for Rs. 10, 000. in cash. This transaction shows the two-
side effects, i.e. on the furniture and cash.

Furniture A/c is debited with Rs. 10, 000 and the cash A/c is credited with the
same amount.

The entry is:

Furniture A/c Dr 10,000.

To Cash A/c 10, 000.

(Being furniture purchased)

While posting the above entries in the concerned accounts. It is made as:

i) Furniture A/c

To Cash A/c 10,000.

ii) Cash A/c
By Furniture A/c 10,000

2. Sold goods for cash Rs. 20,000.

Journal Entry:
Cash A/c Dr. 20,000

To Sales A/c 20,000

(Being goods sold on cash)

Ledger Posting:

(i) Cash A/c ii) Sales A/c

To Sales A/c 20,000 By Cash A/c 20,000


Note: The term book-keeping generally refers to the double entry book-keeping system
and thus the importance, merits, objectives etc. of double entry book-keeping also
refers to the book-keeping system, in general.

170 Aakar’s Office Practice and Accountancy - 9

7.3 Objectives and Importance of Double Entry Book-keeping System

Double entry book-keeping system is the systematic and scientific system and
completely based on the double entry principles. It is introduced to overcome the
limitations of the traditional system of book-keeping, i.e. the single entry system.
There are some important objectives of the double entry book-keeping system, which
are mentioned below:

i. To ascertain the profit or loss resulted from the business operation.
ii. To measure the financial position of a concern by making the appropriate

valuation of the assets, capital and liabilities.
iii. To know the exact amount of the debtors and creditors of a firm for a certain

duration.
iv. To see the capital structures and the management of assets for analyzing the

economic soundness of a firm or company, i.e. short term liquidity and long
term solvency, etc.
v. To determine the tax liability i.e. sales tax, VAT, income tax, etc. by ascertaining
the total sales and net income of the year.
vi. To establish an efficient financial administration for the control of all types of
resources from leakage, misuse, misappropriation, etc. by keeping complete
records of all the transactions.
vii. To facilitate the auditing of the books of account.
viii. To submit, as evidence, in the courts, if necessary, because the audited financial
statements are the authentic and legal financial documents.

7.4 Differences between Double Entry and Single Entry Book- keeping System

Bases of difference Single entry system Double entry system
i. Duality principle It recognizes the two- fold
ii. Scope It does not recognize the aspect of every transaction.
two-fold aspect of every
iii. Trial balance transaction. It has a large and wider scope
iv. Net profits/loss for all the organizational
It has a very limited scope sectors for all types of
for small scale business business transactions.
organizations and enters
only the personal and cash A trial balance is prepared
transactions. under this system to check
the arithmetical accuracy of
A trial balance cannot be the books of account.
prepared and thus the The true net profit or loss can
arithmetical accuracy cannot be ascertained by preparing
be checked. the income statement or
profit and loss account.
Because of an incomplete
information, the true net
profit/loss cannot be
ascertained.

Book-keeping 171

It cannot provide accurate and True financial position of

complete information for the a business can be easily

v. Financial position preparation of balance sheet. ascertained by preparing the
Thus, the financial position balance sheet.

cannot be ascertained under

this system.

vi. Authenticity The books of account are Since, the books of
neither complete nor can account are audited by the
be audited systematically recognized auditor, these
under this system. So, it is not are duly authentic.
authentic.

It is incomplete and It is completely scientific and

unscientific and thus not systematic system of keeping

trusted by creditors, bankers, books of account. Thus, it

vii. Reliability tax authority and other is trusted by tax authority,

financial analysts for the creditors, banker and other

reliability of the financial financial analysts for the

statements. reliability of the results.

8. Terminologies of Book-keeping

There are many terms frequently used in book-keeping and accounting. Some
of them are briefly discussed below:

i. Financial/business transactions

The transactions, which show, at least, a financial character, i.e. the involvement
of money or money’s worth, are known as the financial or business transactions.
Purchase of goods, sales of goods, purchase of assets, raising of capital, borrowing
loan, payment of expenses, receiving income are the examples of the financial
transaction. The transaction may occur in terms of cash and credit. Cash paid and
cash received are the examples of cash transactions likewise credit sales and credit
purchase of goods are some examples of credit transactions.

ii. Assets

Any physical objects (tangible) or rights (intangible) owned by an organization
or firm having an economic value are termed as assets. The followings are the
examples of assets.

Assets = Liabilities + Capital

Cash Bills receivable Good will
Land and building
Accrued income Bank Stock

Debtors Plant and machinery

Furniture and fixtures Vehicles and equipments

172 Aakar’s Office Practice and Accountancy - 9

iii. Capital

The investment of cash or kind in the business by the proprietor/owner is
known as capital. The following are the examples of capital. It is a kind of permanent
liability to the business enterprise.

Capital = Assets - Liabilities

iv. Liability

The claim or series of claims against the firm or company are liabilities.
Liabilities are the obligations of a firm and are of short term as well as long term
nature. The following are the examples of liability.

Liabilities = Assets - Capital

Creditors Advance receipts Bank overdraft
Bills payable
Outstanding expenses Loan

v. Accountant

The person who performs accounting job is known as an accountant.

vi. Accounting

Accounting is the act of recording classification and summarizing the business
transactions.

vii. Account

An account is the financial detail or statement of certain subject, such as cash
account, goods account, furniture account, etc. It is denoted as A/c in short form.

viii. Accountancy

The profession of accounting is called accountancy. It is also a branch of
knowledge which deals with accounting activities.

ix. Drawing

The withdrawal of cash or goods from the business by the proprietor or owner
for his household purpose is known as drawing. It reduces the capital in extent of the
withdrawn amount and thus is deductible from capital in the balance sheet or treated
as asset.

x. Revenue

Revenue is the inflow of assets by selling goods or services to others. Revenues
are the incomes of the business. The following are the examples of income or revenue
of an organization.

Sales proceeds Commission received Interest received
Dividend received Discount received Bad debt recovered, etc.

Book-keeping 173

xi. Expenses

An expense is the cost of providing goods or services to others. It is the money
spent on earning revenues. There are various types of expenses. The following are
some of the examples of expenses.

Purchase Carriage on purchases

Purchasing expenses Shipping, or railway freight

xii. Purchase

Purchase refers to the acquiring of raw materials, semi-raw materials and
finished products for regular production and sales activities. For example, if a
furniture centre buys some pieces of furniture items, this is termed as purchase;
otherwise if the same is bought by a school or college, it is known as furniture asset.
A purchase may be made in cash or credit.

xiii. Sales

Sales refer to the transfer of the goods or services along with their ownership
to them who demand the goods or services and pay or agree to pay, a certain value
or price. The sales of any asset do not mean sales. It is also made in cash or credit.

xiv. Stock

Stock is the unused or unsold quantity of raw materials, semi-raw materials or
finished goods. There are generally two types of such stocks, viz. opening stock and
closing stock. The stock which is determined at the close of the fiscal year is known as
closing stock and the same for the beginning of the coming year is known as opening
stock.

xv. Cash

It refers to a certain amount of money remained in hand, at any time. It is the
most liquid asset.

xvi. Bank

It refers to the amount of money with a bank. It may be kept in current A/c,
saving bank A/c and fixed deposit A/c. It is also a liquid asset because it can be
immediately changed into cash within a short period. As the institution, bank is a
financial institution, which deals with the monetary transactions.

xvii. Bank overdraft

It is the act of withdrawn amount from the bank by its client in excess of his/
her deposit. It is thus, a short term liability of the firm or company in the sense that it
should be re-paid to the bankers within a short period of time i.e. within 90 days.

174 Aakar’s Office Practice and Accountancy - 9

xviii. Cheque

Cheque is an instrument, which is used in withdrawing cash from the bank. It
is an order made by the account holder called drawer or depositor to his/her banker
or drawee to pay a certain sum of money on demand.

xix. Depreciation

A fixed asset is purchased by a firm or company comparatively in higher
prices and for longer period. The firm or company makes the scientific estimation of
the economic life of such an asset and its value is written-off during its life period.
The value of such fixed assets declines gradually by wear and tear, continuous use
and by other reasons. As such, depreciation is a gradual reduction in the original
value/ price of a fixed asset due to wear and tear, effluxtion of time, continuous use,
obsolescence, etc. It is a non-cash expense for an organization. It is charged in Dr.
side of profit and loss A/c, as expense.

xx. Debtors and creditors

The person or firm who owes something to the firm or company in monetary
value is called a debtor. In a debtor, debt is a short term asset. Similarly, the firm or
company to whom the firm owes something to pay in monetary value is called a
creditor. A creditor is a short term liability. For example, if Ram purchases goods of
Rs. 15000 from Shyam on credit, Ram becomes Shyam’s debtor and Shyam becomes
Ram’s creditor until the debt is paid/received.

xxi. Loan and Interest

The sum borrowed from a bank or other persons under some terms and
conditions is a loan. Loan is also termed as borrowed capital to a firm or company.
Similarly, interest is a certain charge payable to the loan giver, mostly on annual
basis until the loan is repaid. The loan is liability and the interest is an expense.

xxii. Profit and Loss

The income and expenses are completely recorded in the books of account
during a certain period. The excess of income over expenses is net profit and the
excess of expenses over income is net loss.

Profit = Income - Expenses, if +ve

Loss = Income - Expenses, if -ve

xxiii. Commission and Discount

Commission is a kind of reward offered by the business to his agent or by a
consignor to his consignee for performing his works. A discount is a kind of rebate
offered by a seller to the buyer on the sales of goods or a creditor to his debtor on
the payment of cash before the due date. Both the commission and discount may be
incomes or expenses as the nature of the transactions or they may be gains or losses

Book-keeping 175

The discount can be given in two ways:

a. Trade Discount
The discount which is given while purchasing and selling goods is called trade
discount.

b. Cash Discount
The discount which is given at the time of payment of credit amount is called
cash discount.

c. Insolvent
A firm/company, which is not financially capable of meeting its debt from its
own business resources is considered as insolvent. Only, the court of law can declare
a firm or company as insolvent. An insolvent businessman cannot conduct a business
in his name.

xxv. Value Added Tax (VAT)

Value added tax is the tax levied on value

added on the price of the product at each stage of

production, and/or distribution activities. Value

added is the difference between sales value and

purchase value or the conversion cost plus profit.

Conversion cost means the expenses on rent,

depreciation, maintenance, insurance, salary, etc. It is

imposed on the goods at import (buying), production

and selling stages. For example, when certain goods

where VAT is applicable purchased by a wholesaler

for Rs. 1,00,000 are sold to a retailer for Rs.1,25,000;

the value added tax at whole-selling stage is imposed VAT Bill

on the value added tax and profit i.e. on Rs. 25,000

at a given rate. The current rate of VAT is 13%. It is implemented to simplify and

systematize the sales tax and minimize the chance of cheating.

Example:

A factory produced a bicycle in Rs. 4000/- and sold by getting 20% profit. It is
sold by the producer through wholesaler and retailer to the consumer. Calculation
process of VAT is as follows:

Stages of sales Cost price (Value) Selling Price VAT (13%) Selling price
Profit added without VAT
Producer 4000 5424
Wholesaler 4800 800 4800 624 6503.8
Retailer 5760 7810.56
Consumer 960 5760 748.8

1152 6912 898.56

Rs. 7810.56 (Finally consumer should pay for a bicycle)

176 Aakar’s Office Practice and Accountancy - 9

Glossary

Retention : preservation

Ascertainment : find out

Prediction : forecast

Auditor : examiner/ who checks the account

Accrued income : income earned but not received

Outstanding expenses : payable expenses

Prepaid expenses : paid in advance before getting goods or services

Advance income : income received in advance before providing goods or

services

Dividend : amount of profit given to shareholder

Exercise

A. Answer the following questions in one sentence.

1. Define book-keeping.
2. What is accounting?
3. What is meant by business entity concept?
4. What is meant by accounting period concept?
5. What is revenue concept?
6. What is single entry book-keeping system?
7. Define drawing.
8. What is bank overdraft?
9. Write the formula of capital.
10. How are profit and loss calculated?
11. Write any two differences between debtors and creditors.
12. What is single entry of book-keeping?
13. Who is the father of accounting?
14. What is VAT?

B. Give short answers to the following questions.

15. What is book-keeping? Explain any ten objectives of it.
16. Explain the importance of book-keeping.
17. Write any five differences between book-keeping and accounting.

Book-keeping 177

18. What is discount? Describe its types.
19. Define double entry system of Book-keeping. Illustrate with examples.
20. What are the objectives/importance of double entry book-keeping

system?
21. Distinguish between double entry and single entry book-keeping

systems.
22. Mention any four limitations of Book-keeping and accounting.
23. Describe the types of accounting.

C. Give long answers to the following questions.

24. What are the basic principles/concepts of book-keeping?
25. What is single entry book keeping system? Mention its advantages and

disadvantages.

Pr oject Work
a. Observe the accounting system which are applied by your school.
b. Collect the merits and demerits of accounting system which is

followed by your school.
c. Observe and make a list of assets of your school in details.

S.N. Assets Quantities Rate (Rs.) Total Amount

1. Bench 400 1400 56,000

2. Table 20 5000 1,00,000

3.

4.

5.

6

7

8

178 Aakar’s Office Practice and Accountancy - 9

Unit 9 The Journal

CDC Syllabus 10 Periods

9.1 Journal: Introduction, Objectives
and Use

Rules of debit and credit
First rule (based an accounts

involved)
Second rule (based on

accounting equation)

Personal Account Debit: The Receiver ObjeLcetiarvneisng After studying this unit, students will
Real Account Credit: The Giver be able to :
Debit: What comes in
Nominal Account Credit: What goes out know the meaning, importance and
Debit: Expenses or Loss objectives of journal,
Credit: Incomes or Gain
know the methods and types of
journal,

know the rules of debit and credit,
do the practical problems of journal.

BTohoek-Jokeuerpnainlg 179

1. Introduction

When transactions occur, they should be, first of all, recorded in the primary
books. The primary books are termed as original books. The entry made on the
original books is known as journal entry. It shows the double effect of each transaction
with the same values in both sides, i.e. in debit and credit sides. The word ‘Journal’
is derived from French word ‘Jour’ which means a daily, long book or day book.
Journal entries are made in a certain format by showing the debit and credit headings
with their respective amounts in order of dates. As such, a journal may be defined
as a chronological record of the business transactions showing the accounts to be
debited and credited along with the amounts in the respective columns. The journal
book is also called the memory book or memorandum book because it recalls the
transactions in the future when required. The book in which the entries are made is
called a journal book and the act of entering the transactions in the journal book is
called journalising.

Accounting to L.C. Cropper, “A journal is a book employed to classify or sort out
transactions in a form convenient for their subsequent entry in the ledger.”

In conclusion, journal is the original/initial/primary entry of all financial transactions
in chronological order which are recorded systematically under double entry book
keeping concept. It is the way of identifying the debit and credit account heads.

Key Point Journal is the primary record of the business transaction in
chronological order showing the accounts to be debited and
credited along with their amounts.

2. Importance and Advantages of Journal

Even though a journal is just a memory book of the business transactions, it has
a number of advantages and importance. The common importance and advantages
of journal are mentioned below.

i. All the transactions are entered in the journal book; thus, it acts as the proof of
the occurrence of the transactions.

ii. The date of the transactions can be easily identified.
iii. Easy identification of the accounts debited and credited along with their

amounts which facilitates the checking of arithmetical accuracy.
iv. Base for preparing the ledger accounts.
v. Journal avoids the chance of omitting the record of transactions.
vi. It is prepared with the help of supporting documents to provide legal evidence

of all transactions.

180 Aakar’s Office Practice and Accountancy - 9

3. Objectives of a Journal

The objectives of journal are mentioned below.

i. To identify the transactions date.
ii. To support for making ledger.
iii. To support the transaction by the narration.
iv. To give information about posting of transactions.
v. To solve the disputes and misunderstanding.

4. Steps / Methods of Journalizing

The act of recording transactions in Journal is called ‘Journalizing’ and the
record of a transaction in journal is called ‘Journal entry’. Before journalizing a
transaction, following steps must be followed.

a. Read the transaction.
b. Identify the accounts involved.
c. Identify the nature or type of accounts affected like Personal Account, Real

Account, Nominal Account.
d. Determine the rules of debit and credit.
e. Apply the rules and pass the journal entry in chronological order.
f. Don’t forget to write narration for the journal and account in concerned

columns. Underline the narration at last.
g. Write the L.F. (Ledger Folio) and amount in debit side and credit side.

5. Specimen of a Journal

Journal Entries of ...

Date Particulars L.F. Dr. Amt. (Rs) Cr. Amt. (Rs)
(1) (2) (3) (4) (5)

All the transactions are recorded in this format chronologically. The Five columns of
journal are explained below:

i. The first column is provided to record the date of the transactions.

ii. The second for mentioning the accounts to be debited and credited along with
a brief explanation of the entries so made is called narration.

iii. The ledger folio (page) number is mentioned in the third column, if any.

iv. The fourth and fifth columns are provided for the respective debit and credit
amounts of the accounts so debited and credited.

The Journal 181

6. Rules of Debit and Credit

Every business transaction is debited with its total value in one place and
credited with the same value in other place. There are certain rules/ principles for
debit and credit entry of the transactions. These rules/principles may be studied
under the two approaches, viz. (i) accounts classification approach and (ii) accounting
equation approach. Both these approaches are discussed below.

i. Accounts classification approach

Under this approach, the accounts affected by the transactions are classified
into three different accounts. The meaning, examples and the rules of all the three
accounts are discussed below.

a. Personal Account:
Personal account is related with an individual, firm and institution. When the
credit transaction takes place, the rule of personal account should be used. The rules
for debit and credit are;

Debit - the receiver and Credit - the giver


e.g. Goods purchased from Lalpratap, Chitwan Rs. 15,000.
Purchase A/c Dr. 15000
To Lalpratap’s A/c 15000
(Being goods purchased from Lal Pratap)
The two effects of this transactions are: purchase/goods and Lalpratap. Goods consist
the real account and Lalpratap consists the personal account. According to the rules
of personal account, Dr. is receiver and Cr. is giver. Here, Lalpratap is credited as he
is the giver of the goods. Likewise, the purchase account is debited as the goods have
come into the business.

b. Real Account
Real account is related with assets and properties or things, the rule of real
account should be used. The rules for debit and credit are;

Debit - what comes in and Credit - what goes out

Machinery purchased in cash Rs. 20,000.
Machinery A/c Dr. 20,000 (debit what comes in)
To Cash A/c 20,000 (credit what goes out)
(Being machinery purchased)

182 Aakar’s Office Practice and Accountancy - 9

In this example, the two effects are machinery A/c and cash A/c. Machinery is
debited as the machinery has come into the business and cash is credited as the cash
has gone out from the business.

c. Nominal Account
Nominal account is related to income, expenses, profit and loss, the rule of
nominal account should be used. The rules for debit and credit are;

Debit - expenses or losses and Credit - incomes and gains

Paid salary Rs. 20,000
Salary A/c Dr. 20,000 (debit the expenses)
To Cash A/c 20,000 (credit what goes out)
(Being salary paid)
In this example, the two effects are salary and cash A/c. Salary is debited as the
expenses of the firm and cash is credited as the cash has gone out from the business.

Types of Account Examples Rules/Principle of debit
and Credit
a) Personal A/c Ram, Sita, Harihar, ABC
Co., XYZ Institute, PQR Dr. the receiver
(related with Academy, Megha Bank
person, firm, Ltd. etc. Cr. the giver
organization when
credit transaction Cash, furniture, land Dr. What comes in
occurred) and building, computer, Cr. What goes out
machinery, etc.
b) Real A/c
Salary, rent, allowance, Dr. Expenses & Losses
(related with assets
and properties or budget release, revolving Cr. Incomes & gains
things) fund release, commission,

c) Nominal A/c discount, wages, etc.

(Income, exp.,
profit, loss)

The following transactions show the application of the above mentioned principles.
Illustration - 1

Journalise the following transactions with the detailed analysis of the classified
accounts:

2075-5-1 Hari Bahadur started business with Rs. 1,00,000.
2075-5-3 He deposited into bank Rs. 70,000.

The Journal 183

2075-5-3 Purchased goods of Rs. 10,000.
2075-5-6 Purchased from Narayan Rs. 50,000.
2075-5-10 Paid for stationery Rs. 5,000.
2075-5-12 Sold goods for Rs. 75,000.
2075-5-15 Sold to Basanta Stores for Rs. 60,000.
2075-5-22 Paid to Narayan on account.
2075-5-27 Furniture purchased for Rs 8,000.
2075-5-28 Salary and rent paid by cheques Rs. 20,000 and Rs.7,000 respectively.
2075-5-30 Withdrawn for personal use from bank Rs. 3,000 and for office use Rs.

10,000.
Solution:

Journal Entries of Hari Bahadur

Date Headings Types of Rules or Journal entry
2075-5-1 affected account principles
2075-5-3 Cash Real
2075-5-3 Capital Personal Dr. what comes in Cash A/c Dr.
Bank Personal
2075-5-6 Cash Real Cr. the giver To Capital A/c
2075-5-10 Purchase Real
2075-5-12 (goods) Real Dr. the receiver Bank A/c Dr.
Cash
2075-5-15 Purchase Real Cr. what goes out To Cash A/c
2075-5-22 (goods) Personal
2075-5-27 Narayan Dr. what comes in Purchase A/c Dr.
Stationery Real
Cash Real Cr. what goes out To Cash A/c
Cash Real
Sales (goods) Nominal/ Dr. what comes in Purchase A/c Dr.
Real
Basanta Stores Personal Cr. the giver To Narayan’s
Sales (goods) Nominal/
Real A/c
Narayan Personal
Cash Real Dr. what comes in Stationery A/c Dr.
Furniture Real
Cash Real Cr. what goes out To Cash A/c

Dr. what comes in Cash A/c Dr.
Cr. income & gain To Sales A/c

Dr. the receiver Basanta Stores’s
Cr. income & gain A/c Dr.

To Sales A/c

Dr. the receiver Narayan’s A/c Dr.

Cr. what goes out To Cash A/c

Dr. what comes in Furniture A/c Dr.

Cr. what goes out To Cash A/c

184 Aakar’s Office Practice and Accountancy - 9

Salary Nominal Dr. expenses & Salary A/c Dr.
Rent Nominal losses Rent A/c Dr
2075-5-28 Bank Personal Dr. expenses &
losses To Bank A/c
Drawing Personal Cr. the giver
2075-5-30 Cash Real
Personal Dr. the receiver Drawing A/c Dr.
Bank
Dr. what comes in Cash A/c Dr.

Cr. the giver To Bank A/c

Note: Purchase of goods and sales of goods are commonly termed as purchase and
sales respectively or they can also be treated as goods. When they are regarded as
goods, under the real account principle- ‘Dr. what comes in and Cr. what goes out’
should be applied. And when they are taken as purchase and sales, nominal account
principle- ‘Dr. expenses and losses and Cr. incomes and gains’ should be applied,
purchase as expense and sales as income. If in a question, the name of person or
organization is given, the transaction is considered as a credit transaction. But in a
question, the name of person or organization and cash is given, then it is considered
as cash transaction.

ii. Accounting Equation Approach

This is the modern approach of debiting and crediting the accounts of the
financial transactions. In the equation of assets and liabilities, the rule of debit and
credit is made. It is also known as second rule of debit and credit. The following is
the accounting equation and its principle for debit and credit.

Accounting Equation

Assets + Expenses = Capital + Revenue + Liabilities

Particulars Debit Credit
1. Assets, expenses and losses increase decrease
2. Capital, liabilities, revenue & gain decrease increase

or

Dr. = Increase in assets, expenses, losses and decrease in capital, income and
liabilities.

Cr. = Decrease in assets, expenses, losses and increase in capital and income and
liabilities.

The Journal 185

Illustration - 2
Solution of illustration 1. on the basis of accounting equation.

Journal Entries of Hari Bahadur

Date Headings Types of Rule/principle Journal entry
2075-5-1 affected heading
2075-5-3 Increase in asset Dr. Cash A/c Dr.
2075-5-3 Cash Asset Increase in capital Cr. To Capital A/c Dr.
Capital Capital Dr.
2075-5-6 Decrease in asset Cr. Bank A/c
Cash Assets Increase in asset Dr. To Cash A/c
2075-5-10 Bank Assets
2075-5-12 Increase in expense Dr. Purchase A/c
2075-5-15 Purchase (goods) Expenses Decrease in asset Cr. To Cash A/c
2075-5-22 Cash (assets)
2075-5-27 Asset Increase of expense Dr. Purchase A/c Dr.
2075-5-28 Purchase (goods)
Narayan Expenses Increase in liability Cr. To Narayan’s A/c
(assets)
Stationery Liability Increase in asset/exp. Dr. Stationery A/c Dr.
Cash
Asset/exp. Decrease in Asset Cr. To Cash A/c
Sales (goods) Asset
Cash Increase in income Cr. Cash A/c Dr
Income (assets)
Sales (goods) Asset Increase in asset Dr. To Sales A/c
Basanta Stores
Income (assets) Increase in income Cr. Basanta Stores’s A/c Dr.
Cash Asset
Narayan Increase in asset Dr. To Sales A/c
Asset
Furniture Liability Decrease in asset Cr. Narayan’s A/c Dr.
Cash Decrease in liabilities Dr. To Cash
Assets
Salary Assets Increase in assets Dr. Furniture A/c Dr.
Rent Decrease in assets Cr. To Cash
Bank Expense Dr
Expense Increase in expense Dr. Salary A/c Dr
Assets Increase in expense Dr. Rent A/c
Decrease in assets Cr.
To Bank A/c

2075-5-30 Drawing Assets Increase in assets Dr. Drawing A/c Dr.
Cash Assets Increase in assets Dr. Cash A/c Dr.
Bank Assets Decrease in assets Cr.
To Bank A/c

7. Types of a Journal Entry

The systematically recorded of financial transactions in journal book is called
journal entry. Every organization performs a number of financial transactions to
achieve the organizational goals in a day. According to the nature of transactions,
there are two types of journal entry. They are:

186 Aakar’s Office Practice and Accountancy - 9

i. Simple journal entries

Some transactions give effect to just two accounts where there’s a single account
in each side, i.e. one account is debited with a certain monetary value and another
is credited with the same value, such an entry is known as simple journal entry. The
following illustration may help to understand the simple entries.

Illustration - 3
Journalise the following transactions:

On 2075/6/1, business commenced with Rs 1,00,000.
On 2075/6/2, machinery purchased of Rs. 60,000.
On 2075/6/3, cash purchase of goods worth Rs. 25,000.
On 2075/6/4, sold goods to Hari of Rs 75,000.
On 2075/6/5, stationery purchased for Rs. 10,000.
On 2075/6/8, cash sales made for Rs. 20,000.
On 2075/6/9, commission received Rs. 5,200.
On 2075/6/10, loan taken from Megha Bank Ltd. Rs. 200,000.
On 2075/6/11, commission paid Rs. 1,500.

Journal entries of ....

Date Particulars L.F. Dr. Amt. (Rs. Cr. Amt. (Rs.)
2075/6/1
Cash A/c Dr. 1,00,000
2075/6/2 To Capital A/c
1,00,000
(Being business started)
60,000
Machinery A/c Dr.
To Cash A/c 60,000

(Being machinery purchased for business)

2075/6/3 Purchase A/c Dr. 25,000 25,000
2075/6/4 To Cash A/c 75,000 75,000
2075/6/5 10,000 10,000
2075/6/8 (Being goods purchased) 20,000 20,000

Hari’s A/c Dr
To Sales A/c

(Being goods sold on credit)

Stationery A/c Dr
To Cash A/c

(Being stationery purchased)

Cash A/c Dr
To Sales A/c

(Being goods sold for cash)

The Journal 187

2075/6/9 Cash A/c Dr 2,500
2075/6/10 To Commission received A/c
2075/6/11 2,500
(Being commission received)
2,00,000
Cash A/c Dr.
To Megha Bank Ltd. A/c 2,00,000

(Being loan taken from Megha Bank Ltd.) 1,500

Commission A/c Dr. 1,500
To Cash A/c
4,94,000 4,94,000
(Being commission paid)

Total

ii. Compound journal entries

Some transactions give effect to more than two accounts i.e. headings. In such
a case, there may be more than one heading in debit side or in credit side or in both
sides for the equal effect in total of debit and credit each. Such entries are known as
compound entries.

For example:

Ram commenced business with cash Rs. 50,000 and furniture of Rs. 20,000. The effect
is on cash, furniture and capital account.

Date Particulars L.F. Dr. Amt, Cr. Amt. (Rs)
70,000
Cash A/c Dr 50,000
Furniture A/c Dr. 20,000
To Capital A/c
(Being business commenced with cash
and furniture)

The following are the other examples of compound entries:

Illustration - 4 Ram and Shyam commenced business in partnership with cash
On 2075/6/1, Rs. 1,00,000 and 1,50,000 respectively.

On 2075/6/2, purchased goods of Rs 2,00,000 from Sundar Stores and partial
payment of Rs, 1,50,000 is made.
On 2075/6/3,
received Rs. 49,500 from Krishna, a previous debtor, in the full
On 2075/6/4, settlement of his owing of Rs. 50,000.
On 2075/6/5,
interest and dividend received Rs. 2,000 and Rs. 5,000 respectively.

paid to Sunder Stores Rs 48,000 for their full settlement.

188 Aakar’s Office Practice and Accountancy - 9

Solution: Journal entries of ....
Date
Particulars L.F. Dr. Amt. (Rs.) Cr. Amt. (Rs.)
2075/6/1 2,50,000 1,00,000
Cash A/c Dr. 1,50,000
2075/6/2 To Ram’s Capital A/c 200,000
To Shyam’s Capital A/c 1,50,000
2075/6/3 49,500 50,000
(Being business commenced in 500
2075/6/4 partnership by Ram and Shyam) 50,000
7,000
2075/6/5 Purchase A/c Dr. 2,000
50,000 5,000
To Cash A/c
2,000
To Sundar Stores’s A/c 48,000

(Being purchased from Sundar Stores

and partial payment has been made)

Cash A/c Dr.
Discount A/c Dr.

To Krishna’s A/c
(Being cash received from a previous
debtor for full settlement)

Cash A/c Dr.
To Interest A/c
To Dividend A/c

(Being amount received as interest and
dividend)

Sundar Stores’s A/c Dr.
To Discount A/c
To Cash A/c

(Being payment made to Sunder Stores
for their full settlement)

Illustrations - 5

Journalise the following transactions in the books of Panta and Sons Pvt. Ltd. for
the month of Bhadra, 2075.

1, Business commenced with Rs. 1,00,000.
5, Deposited into bank Rs. 70,000.
8, Purchased furniture of Rs. 15,000.
11, Machinery purchased and paid by cheque 25,000.
15, Stationery purchased for Rs. 5,000.
22, Withdrawn from bank Rs. 10,000.
28, Salary paid by cheque Rs. 20,000.
29, Commission received Rs. 5,000.
30, Rent paid to the landlord Rs. 18,000.

The Journal 189

Solution:
Journal entries Panta & Sons Pvt. Ltd., for the month of Bhadra, 2075

Date Particulars L.F. Dr. Amt. Cr. Amt.
075-5-1
075-5-5 Cash A/c Dr. 100,000/-
075-5-8 To Capital A/c 100,000/-
075-5-11 (Being business commenced)
70,000/-
075-5-15 Bank A/c Dr.
075-5-22 To Cash A/c 70,000/-
075-5-28 (Being cash deposited into bank)
075-5-29 15,000/-
075-5-30 Furniture A/c Dr.
To Cash A/c 15,000/-
(Being furniture purchased)
25,000/-
Machinery A/c Dr.
To Bank A/c 25,000/-
(Being machinery purchased and paid by
cheque) 5,000/-

Stationery A/c Dr. 5,000/-
To Cash A/c
(Being stationery purchased) 10,000/-

Cash A/c Dr. 10,000/-
To Bank A/c
(Being withdrawn from bank for office use) 20.000/-

Salary A/c Dr. 20.000/-
To Bank A/c
(Being salary paid through bank) 5,000/-

Cash A/c Dr. 5,000/-
To Commission received A/c
(Being commission received) 18,000/-

Rent A/c Dr. 18,000/-
To Cash A/c
(Being rent paid to the landlord) 2,68,000/- 2,68,000/-

Total

Illustrations - 6
Journalise the following transactions in the books of PQR Pvt. Ltd. for the month
of Bhadra, 2075:

7, Sold goods to Ram Nath of Rs. 100,000 allowing 10% trade discount.
8, Loss on goods due to fire Rs. 10,00.

190 Aakar’s Office Practice and Accountancy - 9

8, Depreciate furniture worth Rs. 2,00,000 by 10%.

10, Sample of goods of Rs. 2,000 distributed.

12, Goods purchased of Rs. 40,000 out of which Rs. 2,000 used for domestic
purpose.

13, Paid insurance premium Rs. 2,000.
13, Paid life insurance premium of promoter’s wife Rs. 5,000.
14, Commission received but has not been earned Rs. 20,000.
15. Furniture costing Rs. 5,000 sold for Rs. 4,000.
16, Rent paid in advance to house owner for three months @ Rs. 2,000.

17, Allow interest on capital Rs. 5,000.

18, Wages amount to Rs. 5,000 outstanding

19, Bad debts recovered Rs. 5,000.

20, Ramesh, a debtor who owes Rs. 20,000 became insolvent and only 50% of debt
received from him.

Journal Entries of PQR Pvt. Ltd.

For the month of Bhadra, 2075

Date Particulars L.F. Dr. Amt. Cr. Amt.
075-5-7 90,000/- 90,000/-
Ram Nath’s A/c Dr.
075-5-8 To sales A/c
075-5-8 (Being goods sold to Ram Nath allowing
075-5-10 10% trade discount)
075-5-12
Goods loss A/c Dr. 1,000/-
075-5-13 To purchase A/c
(Being goods loss due to fire) 20,000/- 1,000/-
20,000/-
Depreciation A/c Dr. 2,000/- 2,000/-
To furniture A/c
(Being depreciate furniture by 10%) 38,000/- 40,000/-
2,000/-
Advertisement A/c Dr.
To purchase A/c
(Being sample of goods distributed)

Purchase A/c Dr.
Drawing A/c Dr.
To cash A/c
(Being goods purchased and some used for
domestic purpose)

Insurance Premium A/c Dr. 2,000/-
To cash A/c
(Being insurance premium paid) 2,000/-

The Journal 191

075-5-13 Drawing A/c Dr. 5,000/-
To cash A/c
(Being life insurance paid) 5,000/-
20,000/-
075-5- 14 Cash A/c Dr. 20,000/-
To unearned commission A/c 5,000/-
(Being commission received but has not 6,000/-
been earned) 5,000/-
5,000/-
075-5-15 Cash A/c Dr. 4,000/- 5,000/-
Loss on sale of Furniture A/c Dr. 1,000/- 20,000/-
To furniture A/c
(Being sold furniture worth Rs. 5, 000 for
Rs. 4,000)

075-5-16 Prepaid rent A/c Dr. 6,000/-
To cash A/G
(Being rent paid in advance)

075-5-17 Interest on capital A/c Dr. 5,000/-
To capital A/c
(Being allowed interest on capital)

075-5-18 Wages A/c Dr. 5,000/-
To outstanding wages A/c
Being wages outstanding)

075-5-19 Cash A/c Dr. 5,000/-
To Bad debts A/c
(Being recovered bad debts)

075-5-20 Cash A/c Dr. 10,000/-
Bad debts A/c Dr. 10,000/-
To Ramesh’s A/c
(Being only 50% debt recovered from
Ramesh as he became insolvent)

Note: Life insurance is for personal use; So, it is treated as drawing.

Some important hints to the students:
i. In particular column, while recording credit account, leave some space from

your left and write To ....... A/c.
ii. Purchased goods for Rs. 20,000 means cash purchase.
iii. Purchased goods for cash Rs 20,000 means cash purchase.
iv. Purchased goods from Surya Stores Rs 20,000 means credit purchase.
v. Purchased goods from Surya Stores of Rs. 20,000 for cash, means cash purchase.
vi. No personal account is written in the transactions with cash purchase, sales

and nominal accounts.

192 Aakar’s Office Practice and Accountancy - 9

vii. While receiving cheque always Bank A/c is debited and while paying by
cheque, Bank A/c is credited.

viii. Withdrawn from office Rs. 15,000 means for private purpose.
Drawing A/c Dr. 15,000
To Cash A/c 15,000
ix. Withdrawn for office use Rs. 15,000 means withdrawn from bank.
Cash A/c Dr. 15,000
To Bank A/c 15,000
Or, Withdrawn from bank for office use Rs 15,000.
Cash A/c Dr. 15,000
To Bank A/c 15,000
x. Withdrawn from bank for private use Rs. 15000.
Drawing A/c Dr. 15000
To Bank 15000
xi. The installation charges or expenses made for erection of machine, etc. are

added in the cost.
xii. Payment in full settlement includes discount in general.
xiii. Don’t forget to draw two parallel lines under grand total.

Glossary : buying of goods for selling purpose
: sale of goods which is purchased for selling purpose
Purchase : any payable amount to others
Sales : date wise order
Liabilities : short explanation of transaction
Chronological : joint/ more than two effects in a transaction
Narration
Compound

Exercise

A. Answer the following questions in one sentence for each. 193

1. What is a journal?
2. What is meant by Journalizing?
3. What is personal account?
4. What are the rules of personal account?
5. What are the rules of real account?

The Journal

6. What is nominal A/c?
7. How are accounts debited and credited under nominal account?
8. What is meant by narration?

B. Give short answer to the following questions.

9. Write the advantages of a journal.
10. Write the objectives of a journal.
11. Write the specimen and rules of a journal.
12. Write the rules of debit and credit on the basis of account.
13. Write the rules of debit and credit on the basis of equation.
14. Explain the types of journal entries with examples.

NUMERICAL PROBLEMS

15. Journalise the following transactions for Baisakh, 2075 in the book of Ramesh &
Company, Bagbazar, Kathmandu.
1 , Commenced business with cash Rs. 20,000.
2, Deposited into bank Rs. 15,000.
3, Bought goods for cash Rs. 1,000.
4, Furniture purchased from ABC Furniture Rs. 1,500.
6, Purchased goods from Kailash & Co. Rs. 2,000.
8, Goods sold for cash Rs. 1,700.
10, Sold to Rajendra & Co. Rs. 2,500.
17, Purchased machinery of Rs. 1,300.
28, Salary paid by cheque Rs. 2,500.
29, Rent paid by cheque for the month of Baisakh Rs. 1,500.

16. Journalise the following transactions for the month of Bhadra, 2075.
l, Business established with cash investment of Rs. 10,50,000.
3, Deposited into bank Rs. 5.00,000.
4, Furniture purchased for Rs. 50,000.
6, Machineries purchased and paid by cheque Rs. 45,000.
7, Goods purchased from ABC Trading House of Rs. 150,000.
9, Stationery purchased for Rs. 15,000.
10, Paid for sundry expenses Rs. 30,000.
22, Cash sales made for Rs. 55,000.
25, Withdrawn cash from bank Rs.40,000.
30, Sold goods on credit to Sapkota Shopping Centre for Rs. 30,000.

194 Aakar’s Office Practice and Accountancy - 9

17. Journalise the following transactions in the book of Ram Babu.
2075-7-1, Ram Babu commenced business with Rs. 10,00,000.
2075-7-2, Deposited into bank Rs. 7,50,000.
2075-7-5, Purchased machines and paid by cheque Rs. 50,000.
2075-7-6, Cash purchase made for Rs. 25,000.
2075-7-8, Goods purchased from Laxman Babu Rs. 1,50,000.
2075-7-11, Purchased stationery for Rs 5,000.
2075-7-12, Cash sales made Rs. 50,000.
2075-7-14, Sold to Bhabilal Rs. 2,50,000.
2075-7-16, Deposited into bank Rs. 40,000.
2075-7-17, Payment made to Laxman Babu by cheque.
2075-7-19, Commission received Rs. 7,000.
2075-7-20, Loan taken from bank Rs. 60,000.
2075-7-22, Deposited into bank Rs. 50,000.
2075-7-23, Received from Mr. Bhabilal in full settlement of his debt Rs.2,45,000.
2075-7-25, Wage and salary paid by cheque Rs. 40,000 and Rs. 30,000
respectively.
2075-7-29, Rent paid to the landlord for the month Rs. 20,000.

18. Journalise the following transactions.
1-1-2075, Commenced business with Rs. 100,000.
3-1-2075, Deposited into bank Rs. 80,000.
5-1-2075, Machinery purchased and paid by cheque Rs. 30,000.
7-1-2075, Paid for stationery Rs. 2,000.

19. Journalize the following transactions of Sajan & Co., Kathmandu.
On 2075/02/01, Rajan started business with cash investment Rs. 100,000.
On 2075/02/03, goods Rs. 25,000 purchased from Rajan on credit.
On 2075/02/04, goods sold of Rs. 15,000 in cash.
On 2075/02/07, paid house rent Rs. 7,000.
On 2075/02/08, furniture of Rs. 13,000 purchased on credit from Ishwor
Furniture.
On 2075/02/10, electricity charge paid Rs. 1500.
On 2075/02/11, borrowing from Ram Sharma Rs. 80,000.
On 2075/02/15, paid wages Rs. 1,600 .
On 2075/02/18, paid Rs. 24,700 to Rajan in full settlement.

The Journal 195

20. Journalize the following transactions of Krishna Bakery Pvt. Ltd. Pokhara.
On 2075/03/01, Jeshan invested Rs. 2,50,000 and deposited at bank
Rs. 1,00,000 on the same day.
On 2075/03/04, machineries purchased in cash Rs. 23,000.
On 2075/03/05, goods purchased from Shyam Prasad on credit Rs. 15,000.
On 2075/03/06, goods sold to Dinesh in cash Rs. 14,000.
On 2075/03/07, goods bought on credit Rs. 12,000 from Ram.
On 2075/03/09, goods sold to Kabita Rai on credit Rs.12,000.
On 2075/03/10, goods sold to Karki on credit Rs. 13,000.
On 2075/03/18, goods bought from Kamal on credit Rs. 3,500.
On 2075/03//19, goods bought on credit Rs. 2,100 from Sher Bahadur.
On 2075/03/21, machine of Rs. 13,200 purchased from Hanuman.

21. Journalize the following transactions of Sunita Company, Chitwan.
On 2075/05/01, business started with cash Rs. 5,00,000 and furniture of
Rs. 1,00,000.
On 2075/05/11, bought office furniture of Rs. 5,000.
On 2075/05/12, building purchased of Rs. 1,00,000.
On 2075/05/13, paid carriage outward Rs. 2,000.
On 2075/05/15, cash deposited at bank Rs. 170,000.
On 2075/05/19, goods sold to Mahendra of Rs. 14,650 on credit.

22. Journalize the following transactions of Shayam & Sons Co.
On 2075/06/01, business starts with Rs. 1,00,000 by depositing Rs. 40,000 at
bank, goods of Rs. 10,000 and furniture of Rs.50,000.
On 2075/06/02, goods purchased from Ramita Rs. 51,000.
On 2075/06/04, goods returned to Ramita of Rs. 5,000.
On 2075/06/06, sold goods to Ram Sharma of Rs. 50,000 allowing Rs. 5,000
discount.
On 2075/06/08, theft of goods Rs. 3,000.
On 2075/06/09, depreciation on furniture was with Rs. 5,000.
On 2075/06/10, furniture purchased and paid by cheque of Rs. 29,000.
On 2075/06/15, some samples of goods of Rs. 1,000 distributed.
On 2075/06/16, Withdrawn goods for personal use Rs. 200.
On 2075/06/18, paid to Ramita Rs. 45,000 in full settlement.
On 2075/06/21, paid cash for stationery Rs. 1,000.
On 2075/06/22, goods purchased from Hari Rs. 27,000.
On 2075/06/25, paid cash for telephone charge Rs. 2,150.

196 Aakar’s Office Practice and Accountancy - 9

On 2075/06/29, paid to Hari by cheque Rs.26,500 and discount received Rs. 500.

On 2075/06/29, purchased machinery for Rs. 15,000 from Jafer and gave him
a cheque for the amount.

On 2075/06/30, purchased furniture from Nabin furniture of Rs. 13,000. He
allowed 10% trade discount.

On 2075/06/31, paid to Nabin furniture in full settlement a cheque for Rs. 11,550.

23. Journalise the following transactions. Bhadra, 2075

1, Established business with a bank balance of Rs. 400,000 and cash of Rs.
200,000.

2, Machinery purchased from Nepal Machineries of Rs. 50,000 and partly
paid Rs. 30,000 by cheque.

4, Stationery purchased of Rs. 12,000 out of which Rs. 2,000 worth of
stationery was used by the proprietor for domestic use.

8,. Purchased goods from Hira Lal and Sons of Rs. 10,000 in cash and
Rs. 15,000 on credit.

9, Paid for installation charges of the machinery purchased earlier Rs. 1,500.
10, Paid insurance premium of Rs. 1,700.
11, Paid life insurance premium Rs. 1,000 by cheque.
12, Paid wages for the construction of office building Rs. 13,000.
16, Furniture purchased for Rs. 40,000 and paid by cheque and transportation

charges of Rs. 1,000 paid in cash.
17, Commission received but has not been earned Rs. 3,000.
19, Loan given to Subhana Sharma Rs. 25,000 by cheque.
20, Furniture of Rs. 7,000 taken by the proprietor for his household use.
22, Purchased goods of Rs. 30,000 and paid for carriage Rs. 5,000.
23, Goods sold for Rs. 75,000 to Ram Udas and received Rs. 30,000 on account.
27, Purchased a Government Security of Rs. 60,000 at Rs. 57,000 by cheque.
28, Goods costing Rs. 10,000 sold for Rs. 15,000.
30, Rent paid in advance Rs. 3,000.

24. Journalise the following transactions in the books of Surendra Singh.

2075-2-1 He commenced business with Rs. 60,000 cash and goods worth
Rs. 20,000.
2075-2-2
2075-2-3 Purchased goods from Yadav Raj worth Rs. 12,000.

Sold goods to Krishna and Sons of Rs. 20,000.

2075-2-6 Paid for repairs Rs. 1,500.

2075-2-8 Cash received from Krishna and Sons Rs. 19,500 in full settlement
2075-2-9 of their accounts.

Withdrawn cash from bank for office use 2,500.

The Journal 197

2075-2-10 Purchased goods from Yadav Raj (subject to 10% trade discount) in
cash Rs. 10,000.

2075-2-11 Paid to Yadav Raj Rs. 11,800 discount received Rs. 200.
2075-2-14 Purchased postal stamps of Rs. 100.
2075-2-14 Paid salaries 15,000 and rent 10,000 by issuing two different cheques.

25. Pass journal entries for the following transactions of ABC company of 2076 Baisakh.

1, Commenced business with Rs. 1,50,000 cash and 4,50,000 bank balance.

3, Loan given to ABC & Co. Rs. 14,000 by cheque.

25, Income tax paid by cheque Rs. 15,000.

28, Wages paid for the construction of office building Rs. 13,000 by cheque.

30, Furniture worth Rs. 5,000 taken by Mr. Arjun Pradhan, the proprietor of
Pradhan and Co. for his private use.

31, Amrita, a previous debtor who owes Rs. 10,000 to us became insolvent,
only 60 paisa in a rupee could be realised from her.

31, Ramila, a previous debtor of Rs. 12,000 became insolvent, only 70% from
her debt could be realised.

31, Previously written off bad debts Rs. 3,000 is now being recovered.

26. Following are the journal entries passed by a student, are they correct? If not, what are
the correct entries?

Journal Entries of Ram sh & Co.

Date Particulars L.F. Amount Amount
(Dr.) (Cr.)
1/1/2075 Sita’s A/c Dr
To Purchase A/c 2000 2000
(Being goods purchased)

2 Rita’s A/c Dr 3000

To Sales A/c 3000

(Being goods sold to Rita for cash)

7 Hari’s A/c Dr 2,000
T o Cash A/c
(Being cash paid to Hari for Salary) 2,000

10 Capital A/c Dr 25,000
To Cash A/c
(Being cash paid into business by 25,000
owner)

14 Stationery A/c Dr 300
To Cash A/c 300
(Being stationery purchased by
bank)

198 Aakar’s Office Practice and Accountancy - 9

Unit 10 The Ledger

CDC Syllabus 10 Periods

10.1 Ledger: Introduction, Objectives,
Ledger Entry and Closing

ObjeLcetiarvneisng After studying this unit, students will
be able to :

write the meaning of ledger,
know the importance and objectives

of ledger,
write difference between ledger and

journal,
know the rules of posting,
know the balancing and closing the

ledger,
prepare different ledger accounts.

Dr. Cash A/c Cr.
Amount
Date Particulars J.F. Amount Date Particulars J.F. 70,000/-

074-5-1 To Capital A/c 100,000/- 074-5-5 By Bank A/c 15000/-
5000/-
074-5-22 To Bank A/c 10,000/- 074-5-8 By Furniture A/c 18,000/-
7000/-
074-5-29 To Commission A/c 5000/- 074-5-15 By Stationery A/c 115000/-

074-5-30 By Rent A/c

074-5-30 By Balance c/d

115000/-

074-6-1 To Balance b/d 7,000/-

The JLoeudrgnearl 199

1. Introduction

Journal shows the daily and periodical total of the debit and credit amounts
in respect to their entries. It cannot provide the information in a classified manner
as it is just a memorandum entry. The journal book cannot serve with the necessary
information required for the businessman for ascertaining the true position of his
firm’s affairs during a certain period. If the businessman wants to know the total
effect on purchase, sales, debtors, creditors, cash, bank, expenses, income, etc. at the
end of a fiscal year, he/she should scan the journal from the beginning to the end of
the year. It is impossible to collect thousands of transactions related with expenses,
incomes, debtors, creditors, cash, bank, etc. Thus, the businessman should prepare
the book on the classified accounts by posting them from the identical journals to
ascertain the final net effect of the separate headings of expenses, losses, incomes,
gains, assets, capital and liabilities.

According to J.R. Batliboi, “The ledger is the chief book of accounts, and it is in this book
that all the business transactions would ultimately find their place under their accounts in a
duly classified form.”

According to V.J. Vickery, “ledger is a book of account which contains in a suitably
classified form, the final and permanent record of trader’s transactions.”

Likewise, W. Pickles, “A ledger is the most important book of account and is the final
destination of the entries made in the subsidiary books.”

The ledger is an individual record in which similar transactions of particular person,
organization and things are recorded with the help of journal entries from journal
book. As such, a ledger may be defined as the classified accounts prepared under
each individual head of account by posting from the journal entries in order to
ascertain the final net effect on them separately.

The final net effect of the classified head of account is known as ledger balance and
such ledger balances determine the profit or loss of an entry during a certain period
and the financial position up to the date.

Key Point Ledger is the classified accounts prepared under each individual
head by posting the identical journal entries to ascertain the
final net effect of each head.

2. Objectives and Importance of Ledger

The following are the important objectives of a ledger:

i. To know the position of debtors and creditors of an entity up to a certain period.
ii. To know the total purchase and sales of a firm during a certain period.

200 Aakar’s Office Practice and Accountancy - 9