ASSIGNMENT

NAME : MANISH B. TIWARI

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 FINANCIAL ACCOUNTING

ASSIGNMENT

Q1. Which are the Golden Rules of Accounting ?

1) Real Account - "Debit what comes in - Credit what goes out."

2) Personal Account - "Debit the Receiver - Credit the giver."

3) Nominal Account - "Debit all Expenses And Losses - Credit all Incomes and Gain."

Q2. Identify the Following Accounts ?

Rajesh A/c. Fan A/c. Salaries A/c.

Meena A/c. Plant A/c. Motor Car Expenses A/c.

Pushpa A/c. Furniture A/c. Travelling Expenses A/c.

Pranay A/c. Machinery A/c. Printing Charges A/c.

Ashish A/c. Land A/c. Stationary Expenses A/c.

Personal Account Real Account Nominal Account

Rajesh A/c Fan A/c Salaries A/c

Meena A/c Plant A/c Motor Car Expenses A/c

Pushpa A/c Furniture A/c Travelling Expenses A/c

Pranay A/c Machinery A/c Printing Charges A/c

Ashish A/c Land A/c Stationary Expenses A/c

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Q3. Explain the Principles of GAAP ?

Generally Accepted Accounting Principles or GAAP is a defined set of rules and procedures that needs to be
followed in order to create financial statements, which are consistent with the industry standards.

GAAP helps in ensuring that financial reporting is transparent and uniform across industries. As financial
information is based on historical data, therefore in order to facilitate comparison between data from various
sources, GAAP must be followed.

GAAP is developed by the Financial Accounting Standards Board (FASB)

The following GAAP principles can be discussed:

Principle of Consistency: This principle ensures that the organizations use consistent standards while recording
the transactions.

Principle of Regularity: This principle states that all the accountants abide by the rules and regulations as per
GAAP.

Principle of Sincerity: This principle states that an accountant should provide an accurate depiction of the
financial situation of a business.

Principle of Permanence of Method: This principle states that consistent practices and procedures should be
followed for financial reporting purposes.

Principle of Prudence: This principle states that financial data should be reasonable, factual and should not be
based on any speculation.

Principle of Continuity: This principle states that the valuation of assets is based on the assumption that the
business will be continuing its operations in the future.

Principle of Materiality: This principle lays emphasis on the full disclosure of the true financial position of the
business.

Principle of Periodicity: This principle states that business entities should abide by the commonly accepted
accounting periods for financial reporting such as yearly, half-yearly, etc.

Principle of Non-compensation: This principle states that no business entities should expect compensation in
return for providing accurate information in financial reporting.

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Principle of Good Faith: This principle states that all the parties involved in financial reporting should be honest
in reporting the transactions.

Q4. Explain the process of recording transactions in the Books of accounts?

The process of recording transactions in the books of accounts is known as bookkeeping. It involves the
following steps:

Identify the transaction: The first step in recording a transaction is to identify the event or transaction that has
occurred. This may involve reviewing documents such as invoices, receipts, or bank statements.

Classify the transaction: The next step is to classify the transaction according to its nature. For example, is it a
sale, a purchase, a payment, or a receipt?

Record the transaction in the appropriate book: The transaction is then recorded in the appropriate book of
accounts, such as the cash book, the general ledger, or the sales journal.

Debits and credits: In double-entry bookkeeping, each transaction involves at least two accounts, and the
amounts recorded in these accounts are known as debits and credits. A debit is an entry on the left-hand side of
an account, and a credit is an entry on the right-hand side. The total of the debits and credits must always be
equal.

Posting: After the transaction has been recorded in the appropriate book, it must be posted to the general ledger.
The general ledger is a summary of all the transactions that have occurred in the business and contains a record
of all the accounts in the accounting system.

Reconciliation: It is important to periodically reconcile the balances in the general ledger with supporting
documents, such as bank statements, to ensure that the accounts are accurate and complete. This process is
known as reconciliation.

Preparation of financial statements: After the transactions have been recorded and reconciled, the financial
statements can be prepared. These may include the balance sheet, the income statement, and the statement of
cash flows.

Overall, the process of recording transactions in the books of accounts is an important part of the accounting
process and helps to provide accurate and reliable financial information that can be used to make informed
business decisions.

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Q5. Explain the Method of Preparation of Financial Statement ?

Cash Accounting

Cash accounting is an accounting method that is relatively simple and is commonly used by small businesses. In
cash accounting, transactions are only recorded when cash is spent or received.

In cash accounting, a sale is recorded when the payment is received and an expense is recorded only when a bill
is paid. The cash accounting method is, of course, the method most people use in managing their personal
finances and it is appropriate for businesses up to a certain size.

If a business generates more than $25 million in average annual gross receipts for the preceding three years,
however, it must use the accrual method, according to Internal Revenue Service rules.

Accrual Accounting

Accrual accounting is based on the matching principle, which is intended to match the timing of revenue and
expense recognition. By matching revenues with expenses, the accrual method gives a more accurate picture of
a company's true financial condition.

Under the accrual method, transactions are recorded when they are incurred rather than awaiting payment. This
means a purchase order is recorded as revenue even though the funds are not received immediately. The same
goes for expenses in that they are recorded even though no payment has been made.

Q6. From the following information Prepare Trading And Profit & Loss A/c.

Sales. 4,50,000

Purchase. 3,00,000

Opening Stock. 1,00,000

Closing Stock. 50,000

Salaries. 50,000

Motor Car Expenses. 5,000

Travelling Expenses. 7,000

Printing. 8,000

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Stationary. 2,000

Trading And Profit & Loss A/c

Particulars Amount (₹) Particulars Amount (₹)

Opening Stock 1,00,000 Sales 4,50,000

Purchase 3,00,000 Closing Stock 50,000

Gross Profit (c/d) 1,00,000

Total 5,00,000 Total 5,00,000

Salaries 50,000 Gross Profit 1,00,000

Motor Car Expenses 5,000

Travelling Expenses 7,000

Printing 8,000

Stationary 2,000

Net Profit (c/d) 28,000

Total 1,00,000 Total 1,00,000

Q7. From the following information of Rajpurohit Prepare a Balance Sheet.

Plant. 5,00,000

Machinery. 3,00,000

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Furniture. 2,00,000

Cash in hand. 50,000

Debtors. 1,00,000

Closing Stock. 5,00,000

Capital. 5,00,000

Bank loan. 6,00,000

Creditors. 50,000

Bills Payable. 50,000

Balance Sheet as on 31/03/2022

Liabilities Amount (₹) Assets Amount (₹)

Capital 5,00,000 Plant 5,00,000

Machinery 3,00,000

Bank Loan 6,00,000 Furniture 2,00,000

Creditors 50,000 Debtors 1,00,000

Bills Payable 50,000 Cash in Hand 50,000

Closing Stock 50,000

Total 1,20,000 Total 1,20,000