Assignment Subject: Financial Accounting & Analysis

ANSWER 1:
INTRODUCTION:
Journal Entry: A journal entry records a business transaction in the accounting system for an organisation.
Journal entry is first step of accounting process. Every journal entry impacts at least two accounts, while one is
debited and other account is credited (which is knowns as double entry bookkeeping).

SOLUTION:
Transactions Journal Entry Analyzation
1. Introduced Rs. The business has received
500,000 via a Bank A/c Dr. 5,00,000 the cheque of Rs. 500,000
cheque by the and deposited in the bank; it
To Capital A/c 5,00,000
owner as the Initial is an asset to the business.
capital in the The business owns this
business. amount to owner, the
(Being cheque deposited into the bank
proprietor; and therefore it
towards capital by the owner) represents the capital of the
business. Capital (liability)
of Rs. 500,000 is equal to
assets (Bank balance) of Rs.
500,000).
2. Purchased goods Purchases A/c Dr 40,000 Purchase goods on credit
on credit from Ms.
To Ms. Ritu A/c 40,000 increases goods (an asset) of
Ritu at Rs. 40,000. Rs. 40,000 and
simultaneously increase
(Being goods purchased on credit creditor (a liability) of Rs.
40,000. The sum of Capital
from Ms. Ritu)
& liabilities is now Rs.
540,000 matched by assets of
Rs. 540,000.
3. Paid Rs 10,000 as Salary A/c Dr 10,000 Payment of Salaries of Rs.
salary to the 10,000/- decreases assets
To Bank A/c 10,000
employees (Bank balance) by Rs.
10,000 and decreases capital
(Being salary paid to the employees by Rs. 10,000. After this
transaction, the liabilities
from the bank)
are Rs. 40,000, capital is Rs.
490,000 and assets are Rs.
Rs. 530,000.
4. Invested Rs. Fixed Deposit A/c Dr. 200,000 Rs. 200,000 invested in
200,000 in a fixed Fixed deposit leads to
To Bank A/c 200,000
deposit account increase in one assets (Fixed
deposit account) and reduce
another assets (bank A/c) by
(Being fixed deposit created)
Rs. 200,000. Accounting
equation remains the same
as after transaction 3.
 5. Paid school fees Drawings A/c Dr 25,000 Payment of kid’s school
of the kid Rs fees is a private expense,
To Bank A/c 25,000
25,000 from the which leads to drawing of
business’s bank capital from the business,
account (Being drawings made for paying which will decrease assets,
fee to kid’s school fees) & Capital by Rs. 25,000.
After this transaction,
liabilities are Rs. 40,000,
capital is Rs. 465,000 and
assets are Rs. Rs. 505,000.

ANSWER 2
Five accounting terms:

1. Debit: A debit is an accounting entry that records an increase either in an asset or expense
account or a decrease in either a liability or equity account. A Debit entry is made on the
left side of an account. For instance, an Entity paid rent in cash. In this transaction, the
rent account (expense account) would be debited, and the cash account would be
credited.
2. Credit: A credit is an accounting entry that records an increase either in an equity,
liability, or income account or a decrease in either assets or expense accounts. A Credit
entry is made on the right side of an account. For instance, an Entity paid to a creditor via
UPI. In this transaction, the creditor account would be debited, and the bank account
would be credited.
3. Revenue: Revenue is the amount of income generated from the sale of goods or services,
or both, in the ordinary course of business. It is a key indicator of an entity's financial
health. Assessing the entity’s revenue helps to determine how well the entity is
performing by comparing it with previous years.
4. Liability: A business raises financial resources from both its owners and outside parties.
A liability is a financial obligation that is payable to another person or entity. Liabilities
are settled by transferring money, goods, or services. Liabilities are two types, i.e.,
Current liability and non-current liability. Liability creates negative future cash for the
entity.
5. Assets: Assets are economic resources owned and controlled by an enterprise as a result
of the past event from which future economic benefits are expected to flow to an
enterprise. Assets are classified into six categories i.e., current assets, non-current assets,
tangible assets, intangible assets, operating assets, and non-operating assets.

ANSWER 3a
Introduction:

Total Purchases: Purchase is the cost of buying of goods or assets, by paying a

predetermined price of them. It may be in cash or credit.

Credit Purchase: When a business buys goods or assets without paying a predetermined
price for them, this due amount would be paid in the future.
Payment to Creditor: Payment to creditor means payment of buying of goods or assets
which was purchased on credit basis.

Given information in the question:

Amount in Lakhs

cost of goods sold 580

opening stock 40

closing stock 70

creditors at the beginning of the year 60

creditors at the end of the year 100

cash purchases 45

Original cost of equipment sold 400

Gain on the equipment sold 50

Accumulated depreciation on the 80

equipment

Solution: (below figures are in lakhs)

1. Total Purchase = Cost of goods sold + Closing Stock - Opening Stock

Total Purchase = 580 + 70 - 40
Total Purchase = 610

2. Credit Purchase: Total Purchase - Cash Purchase

Credit Purchase: 610 - 45
Credit Purchase: 565
 3. Payment to creditor: Creditors at the beginning of the year + Credit purchase - Creditors at
the end of the year
Payment to creditor: 60 + 565 - 100
Payment to creditor: 525

ANSWER 3b
Introduction:

Net book Value: It is the value at which an organization records an asset in the books of
accounts. Net book value is calculated as original cost of an asset, minus any accumulated
depreciation.

Accumulated depreciation: Accumulated depreciation is the total depreciation cost of an

asset that has been incurred since the asset was acquired and made available.

Given information in the question:

Amount in Lakhs

cost of goods sold 580

opening stock 40

closing stock 70

creditors at the beginning of the year 60

creditors at the end of the year 100

cash purchases 45

Original cost of equipment sold 400

Gain on the equipment sold 50

Accumulated depreciation on the equipment 80

Formula:
Net Book Value = Original Purchases Cost – Accumulated Depreciation
Cash Proceeds from Sale of Equipment = (Original Cost of the Equipment – Accumulated
Depreciation) + Gain on Sale of the Equipment

Solution: (below figures are in lakhs)

1. Net Book Value = Original Purchases Cost – Accumulated Depreciation
Net Book Value = 400 – 80
Net Book Value = 320

2. Cash Proceeds from Sale of Equipment = (Original Cost of the Equipment –

Accumulated Depreciation) + Gain on Sale of the Equipment
Cash Proceeds from Sale of Equipment = (400 – 80) + 50
Cash Proceeds from Sale of Equipment = 320 + 50
Cash Proceeds from Sale of Equipment = 370

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