Accounting Terms and Concepts:

1. Goods:
Commodities in which the proprietor deals. They are always purchased for resale at a profit.
Eg: If a businessman buys a car for his business, it becomes an asset but if he is in the business of
selling cars then it becomes goods for him.
2. Transaction: Event due to which gives rise to an entry to be made in the books of accounts.
A transaction always has two sides. For Eg: For selling a pen there has to be a buyer who is ready to
buy and seller ready to sell. Buyer will buy the pen and will give money to the seller.
3. Profit:
Any amount earned by the business in excess of its cost/expenses is profit. So algebraically,
Profit = Revenue – expenses/cost.
4. Loss :
When the revenue earned by business is less than expenses or cost then there is a loss in the business.
Algebrically:
Loss= Revenue – expenses/cost( in this case expenses are more than revenue).
5. Assets: Property of any kind owned by the business which if put in use can generate benefits is
termed as assets.
6. Liability: Any amount due to the business is termed as Liability.

7. Debtors:
A person from whom amount is to be recovered(due).
8. Creditors:
A person to whom amount is to be paid.
9. Solvent:
A person who is in the position to pay off his liabilities by selling his assets
Algebrically it can be represented as follows: Solvent person =Assets>Liabilities.
10. Insolvent:
A person who is not in the position to pay off his liabilities by selling his assets
Algebrically it can be represented as follows: Solvent person =Assets<Liabilities.
11. Business Entity Concept:
For accounting purposes business is treated different from its owner. So business is a separate entity. It
avoids overlapping of proprietor and business transactions.
12. Money Measurement concept:
In accounting only those transactions are recorded that involve money. Non monetary transactions like
employee satisfaction are ignored.
13. Cost Concept:
An asset is recorded at price paid or sacrificed to buy that asset.
14. Consistency:
While preparing accounts there should be consistency i.e a company should not keep on changing the
policies with every changing year. If a company does that then it investors or readers starting doubting
the company.
15. Conservatism:
Policy of playing safe i.e all prospective losses should be taken into consideration while prospective
profits should not be accounted for. If a situation arises where there are two acceptable alternatives
for reporting an item, conservatism directs the accountant to choose the alternative that will result in
less net income and/or less asset amount.
16. Going concern:
This accounting principle assumes that a company will continue to exist long enough to carry out its
objectives and commitments and will not liquidate in the foreseeable future.
17. Full Disclosure Principle:
If certain information is important to an investor or lender using the financial statements, that
information should be disclosed within the statement or in the notes to the statement.
18. Matching Concept:
The matching principle requires that expenses be matched with revenues. For example, sales
commissions expense should be reported in the period when the sales were made (and not reported in
the period when the commissions were paid).
19. Realisation Concept:
It recognizes revenue only when it is earned. Generally, realization occurs when goods are sold or a
service is rendered. It recognizes revenues when the ownership is transferred to buyer.
Q1) Journalise the following transactions:
1. Purchased Machinery worth rs.10000 for cash.
2. Sold old furniture for rs.600 for cash.
3. Goods worth rs.600 burnt by fire.
4. Paid rs. 200 towards interest.
5. Received rs.5000 on account from shri wadekar.
6. Sold goods worth rs.15000 and half the amount received in cash.
7. Deposited rs.20000 into Dena bank.
8. Dinesh started business with cash rs.10000, furniture `15000 and computers worth `40000.
9. Paid three months rent in advance amounting to rs.15000.
10. Bought a new type writer worth`.15000 for cash.
Q2) Journalise the following transactions:
1. Shyam started Business with cash amounting to `25000.
2. He purchases goods on credit amounting to `7000
3. He purchased furniture for cash ` 5000
4. He deposited ` 2000 in a bank
5. He withdrew cash for personal ` 5000
6. He paid salary ` 5000
Q3) Following Information is given of S ltd.
Date: august,2011
1 Started Business with Cash `2,50,000, goods `1,00,000, Furniture `1,00,000. (Cash, Goods, Furniture
To capital)
2 Deposited into bank `1,00,000. ( Bank to Cash)
3. Placed an order with M for supply of goods at a list price of `1,00,000.
4. M supplied goods after deducting 10% TD. (Purchases 90000, To M’s A/c)
5. Purchased goods from L at LP of `1,00,000 less 10% TD. Cheque paid to him after getting 5% CD.
( Purchases 90000 , To Discount 4500, To Bank)
6. Goods sold to D at LP of `1, 00,000 less 10% TD. He paid half the amount.( (D’s A/c …. Dr. 45000,
Cash A/c…Dr.45000, To sales 90000)
7. Goods costing `80,000 sold to Y at a Profit of 20% on sales less 20% TD and 5% CD.
(Cash A/c… Dr. 76000, Discount 4000 To sales, 80000)
8 Goods taken away by proprietor for personal use ( CP `5000, SP `10000) ( Drawings A/c Dr… 5000 To
Purchases 5000)
9. D became insolvent and only 80 paise in a rupee were recovered from him. (Cash Bad debts to D)
10. Paid to M 98% of the amount due to him in full and final settlement of account.
12. Goods stolen worth `5000 ( Sales Price = ` 6000) ( Loss by theft , to purchases)
13. Paid LIP `2,000. ( Drawings to Cash)
14. Cash Embezzled by an employee `3000. (Loss by emb to cash)

Q4) Journalize the following transactions and prepare necessary ledger Accounts.
1. Started business with cash Rs.25000
2. Bought goods for cash Rs.2000
3. Bought goods from A Rs.8000
4. Sold goods to B Rs.10000
5. Paid to A Rs.5000
6. Bought goods on cash from P 7000
7. Received from B in full settlement 9880
8. Returned goods to P worth Rs.200 (
9. Paid salaries Rs.1700
10. Commission received on sale of goods Rs. 1500
11. Deposited cash with Bank Rs.2000
12. Paid rent Rs.1000
13. Withdrawn for Personal use goods Rs.300 and Cash Rs.200
Q5) Journalize the Following Transactions, with Ledger Accounts and then post it to
trial balance.
Cash in Hand Rs. 18000, Bank Rs.125000, Goods, 20000, Furniture Rs.12000, Building Rs. 20000,
Debtors Samir: 12000, Mahesh 11000, Sudha 12000.
Credit Balances: Creditors: Rajesh 15000, Loan from Rishi 20000.
Following were further transactions:
Date:
1. Purchased Goods for cash worth Rs. 15000 for cash less 20% TD and 5 % CD.
4. Received Rs. 11980 from Samir and allowed him a 20Rs. Discount.
6. Purchased goods from Bharat Rs.15000.
8. Purchased plant from Mukesh Rs. 15000, paid Rs.100 for cartage for bringing
the plant to Factory and 200 for installation charges.
12 Sold goods to Rahim on credit for Rs. 1600.
15 Rahim became insolvent and could pay only 50paise in a rupee.
18 Sold goods to Ram for cash Rs. 11000.
20 Paid salaries to Ratan Rs. 3000.
21 Paid Rajesh Rs. 14800 in full settlement.
26 Interest received from Sudha Rs.200
28 Paid to rishi Interest on loan Rs.500
31 Sold goods for cash Rs. 2500
31 Withdrew goods from business for personal use Rs.200.

Q6) Journalize the Following Transactions with necessary Ledger Accounts in the books of Moon & Star
for the month of April, 2011.
Assets: Cash in hand Rs.500, Cash at bank Rs. 8,000, Stock of goods Rs. 4,000, Plant Rs. 20,000,
Furniture Rs. 5000, and Mars & co. Rs. 2,000, Venus & co. 3,000,
Liabilities: Loan from Elite & co. Rs. 10,000, Amount due to Brijesh 5,000.
1. Bought goods on credit from Shikha & co. 2,000.
2. Sold goods for cash to KK & co. 500.
3. Sold goods to Mars & co. on credit Rs. 1,000.
4. Received from Mars & co. in full settlement of amount due on January1 Rs.1,900.
5. Payment made to Brijesh & co. Rs.4950
6. Old furniture sold for cash Rs.350. ( Cash to sale of old furniture A/c)
7. Bought goods for cash Rs. 1,000. ( Purchases to Cash)
8. Received cheque from Venus & co. deposited in bank Rs.3,000.
9. Paid for repairs to machinery Rs. 200.
10. Bought goods from Mars & co. on credit Rs. 2,000.
11. Paid cartage on above goods Rs.100
12. Received cheque from Mars & co. and cheque deposited in bank Rs. 950.
13. Paid cheque to Brijesh & co. Rs.2,000
14. Bank intimates that cheque from Mars has been returned unpaid Rs. 950.
15. Sold goods for cash to Deol & co. Rs.2,000
16. Cash deposited into Bank Rs.1,000
17. Paid Municipal taxes for cash Rs. 100
18. Borrowed from Easy Investment & co. for erecting own premises Rs.20,000.
19. Paid for advertisement Rs. 500.
20. Sold old newspapers Rs.50.
21. Paid rent by cheque Rs.500
22. Paid salaries for the month Rs.500.
23. Drawn by Moon & Star for personal use Rs.500.

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