#1.

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."

#2. 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

#3. 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.

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

#4. Explain the process of recording transactions in the Books of accounts?

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.

#5. 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.

#6. 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

Stationary. 2,000

Trading And Profit & Loss A/c

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

Purchase 3,00,000 Closing Stock 50,000

Gross Profit (Bal. Fig.) 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 (Bal. Fig) 28,000

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

Plant. 5,00,000

Machinery. 3,00,000

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