Accounting For Entrepreneurs

ACCOUNTING FOR
ENTREPRENEURS
by :
DR. T.K. JAIN
AFTERSCHO☺OL
centre for social entrepreneurship
sivakamu veterinary hospital road
bikaner 334001 rajasthan, india
FOR – PGPSE PARTICIPANTS
mobile : 91+9414430763
5 DECEMBER 09 www.afterschool.tk 1
Purchases book was
undercast by Rs. 100 what to
do ?
Rectifying entry :
debit the purchase ledger with 100 with
narration :
(short totaling of purchase day book)
Cash paid to Pankhuri, Rs. 500
was debited to Pawan as Rs.
5,000.
PANKHURI DR. 500

SUSPENSE DR. 4500
TO PAWAN CREDIT 5000
Purchase of furniture Rs. 3,000
was recorded in Purchases
Book.
FURNITURE DR. 3000

PURCHASE CREDIT 3000
Whitewashing charges Rs. 500
were debited to Buildings
Account.
REPAIRS & MAINTENANCE (WHITE

WASHING) : DR. 500
BUILDING A/C CREDIT 500
Credit sale of Rs. 1,500 to P
was correctly recorded but
not posted to P’s Account.
P A/C DR.
TO SUSPENSE ACCOUNT
Sales Book for February 2007 was found
overcast by Rs.100.
SALES DR. 100

TO SUSPENSE 100
Carriage amounting to Rs. 125
paid in respect of new
machinery purchased on
29th March was debited to
carriage inwards account.
Machinery dr. 125
carriage inward credit 125
Goods invoiced at Rs. 130
were returned by Neelam
Stores but by mistake an
entry was passed in Returns
Outwards Book.
Error was only in return outwards book so
entry :
Sales return dr.
To purchase return account. 130
The opening balance of
furniture and fittings account
for 2009-10 was written as
Rs. 6,700 instead of Rs.
7,600. The firm depreciates
furniture and fittings @ 10%
p.a. on written down value
basis.
Solution
As it is related to present year, following corrections can be done :
Furniture dr. (7600-6700) = 900
to suspense
(error in balance carry forward)
Furniture Dr. 90
To Depreciation ac 90
(difference of depreciation to be charged and charged)
P & L account 760
to Depreciation ac 760 (total depreciation transferred to P & L
account)
A sale of goods of the value of
Rs. 2,500 to Pankaj has
been wrongly debited to
Rahul Borar & Co.
Pankaj Dr. 2500

to Rahul Borar Credit 2500
A payment of Rs. 250 made to
Pawan Vijay for cash purchase
of goods from him stands
debited to his account.
The mistake is only in the account of Pawan Vijay account. (there is
no error in purchase account or in cash)
So entry :
suspense a/c dr.
To Pawan Vijay Credit 250
if there is error in purchase also :
the entry : purchase dr. To pawan vijay credit
A payment of Rs. 3,000 in respect of
salary has been posted twice to
salaries account.
Suspense dr.
To salary credit 3000
The total of the discount column on the
debit side of the cash book for the
month of March has been added short
by Rs. 200.
Discount a/c debit 200

to suspense 200
Rs. 400 relating to purchase of office
stationery has been wrongly debited to
the personal account of the proprietor.
Office stationery ac dr. 400

to drawings a/c 400
A credit purchase of Rs. 750 from Vivek
Borar stands wrongly credited to Rahul
Borar
Rahul Borar Dr. 750

to Vivek Borar Cr. 750
Rs. 2,500 received from the insurance
company in full payment of claim for loss of
stock in transit was deposited by the
proprietor into his private bank account and
was not recorded in the business books.
Drawings ac/ dr.

To insuranc claim ac credit 2500
Goods purchased for Rs. 2,000 were
included in stock, but the invoice was not
entered in the books for the period under
review.
Purchase Ac debit 2000

to cash / creditor credit 2000
(on entry of invoice)
(we assume that stock is taken up separately as
physical stock taking – so it will not tally, if we
dont add this in purchase account)
Salary Rs. 100,000 paid to a Ajay has
been debited to his personal account.
Salary Ac debit 100000

to Ajay Credit 100000
Indicate the subsidiary book in which
following transactions will be recorded
Credit sales of goods in trade.
Credit purchase of furniture in office
Sales day book,

Journal (becuase it is not regular purchase)
Distinguish between journal and
ledger.
In journal we make entries of day to day

transactions (all the transactions), These entries
are later posted in ledgers – which is
containing record for each entity separately.
Thus journal is put chronologically – all the
entities together, each ledger is different for
each party – so it is easier to know about status
of each entity.
Describe the imprest system.
It is a system of petty cash book – where some

small amount is kept for day to day
expenditure and when the money is spent,
entry is made in petty cash book.
There are many day to day expenses – like
stationary, postage etc. For these petty cash
book is maintained. Float (some small amount)
is given to petty cahier to spend and record.
Received cheque for Rs. 12,500 in respect of
sales for realising which the National Bank
charged Rs. 20 and credited the balance.
Journalise it
Bank ac dr. 12480

Bank charges dr. 20
To sales a/c credit 12500
Out of cash sales of Rs. 1,32,650 a sum of Rs.
1,00,000 was deposited in the National Bank.
Journalise it
Cash ac/ dr. 132650

to sales credit 132650
Bank ac/ dr. 100000

To cash 100000
Comment : When three column-
cash book is maintained, no bank
account appears in the ledger.
When cash book is maintained, it performs the

role of journal + ledger – thus there is no need
to maintain ledger of bank as it is containing
all the transaction in the form of a ledger also.
Comment : Cash discount is
allowed to encourage early
payment.
There are two types of discounts – cash and

trade. Cash discount is for early payment – as
if you are selling on credit – you generally dont
give cash discount. Trade discount is to
increase business volume. Thus cash discount
helps you in speedier collections.
COMMENT Contra items in
columnar cash book require no
posting in the ledger. :
Example : Bank ac dr. And cash ac/ credit,
this is contra entry – as both the aspects of
transactions are settled down in cash book only
– one in debit side (bank) and one in credit side
(cash), here no entry in any ledger is required –
as we are not maintaining separate ledgers of
bank and cash - and cash book serves the
purpose of these entries.
COMMENT Cash book is a
subsidiary book as well as a part
of the main book (i.e. Ledger). :
All the cash transactions are recorded for the

first time in cash book – so it is subsidiary
book. It is also main book – because no
separate ledger is maintained for cash (real
account) and so cash book is also cash ledger.
What do you understand by non-trading or
non-profit concerns (NPO)? What are the
chief characteristics of their accounts?
These organisations give services. Non-trading

companies earn profit. They prepare P & L
account. Non- profit organisations dont work
for profit – so treat profit as surplus and
prepare income and expenditure account. They
are registered in society registration act / trust
act/ sec. 25 of company act. NPO /NGO /VO
prepare income and expenditure account
Dr. Pawan finds that out of fees received of Rs.
1,37,400, included a sum of Rs. 400 pertaining to
December, 2007 but received in January, 2008.
On 31st December, 2007 Dr. Pawan finds that
Rs. 140 are due from a patient for medicine for
four days. Stock of medicine on 1st January,
2007 was valued at Rs. 13,000 and the same is
valued at Rs. 10,200 on 31st December, 2007. A
sum of Rs. 1,000 is found due to a chemist for
medicines supplied by him in December, 2007.
Furniture and Equipment is valued at Rs.
2,10,000 after providing a depreciation of Rs.
20,000 for the year 2007. On 31st December,
cash in hand and at bank amounted Rs. 39,800.
Income and expenditure account
Income : 137400
less difference in value of stock :
(13000 – 10200) = 2800
net income : 134600
STATEMENT OF AFFAIRS
Assets :
furniture : 210000
cash : 39800
debtors 1140
stock 10200
total : 261140
liabilities :
capital : 261140
Distinguish between Receipts and
Payments Account and Income
and Expenditure Account.
These are maintained in non-profit organisations. Receipt
and payment account shows receipts and payments on
cash basis (when actually received or paid), but Income
and expenditure account follows mercantile system (when
something is due / acrued, it is recorded – whether
actually received / paid or not). Thus it is more like P & L
account. R & P account is a real account, but I & E
account is a nominal account.
What steps will you take to
prepare Income and
Expenditure Account on the
basis of Receipts and Payments
Account?
Exclude capital receipts and payments
excluse opening and closing balance
income and expenditure are recorded on
mercantile basis – so adjust them by finding
out their acruels
Comment : Receipts and Payments
Account is summary of Cash Book.
True : as it is containing only cash transactions

– thus it is a summary of cash book only. It
shows opening and closing balance of cash and
also gives total of all heads for which we have
received or paid money.
Is Statement of Affairs as reliable as
Balance Sheet.
No – balance sheet is prepared from only

ledger balances, it is accurate- but statement of
affairs is generally prepared on the basis of half
information and some estimates, thus it is not
reliable. Those firms which have single entry
system or have incomplete accounts, prepare
statement of affairs.
Professional men do not
make credit for outstanding
income.
Generally professionals recognise income on

cash basis (not on mercantile basis), so when
income is received then only it is recognised.
Income and Expenditure
Account takes the place of
Profit and Loss Account in
non-trading concern
Yes - it is true – income and expenditure

account contains totals of all income and
exependiture and at the end of the year, we get
surplus or deficit. Thus it is similar to profit
and loss account.
How will you treat the following items in
the final accounts of a non-trading
concerns. 1 Subscriptions 2 Donations
Subscriptions received and donations received are

incomes and they are reported in income and expenditure
account. If you have received them in advance, show in
balance sheet also as liability, if something is due, you
may mention it in assets column of balance sheet. NGOs
generally publish magazines etc. For which they receive
subscriptions. They may also make some subscriptions /
donations – which will be shown in expenditure column.
What is the impact of the following on bank
reconciliation statement : Cheques deposited but
not yet credited by bank Rs. 3,610.
Cheques issued but not yet presented by payees for
payments in the bank Rs. 2,050.
When preparing bank reconciliation statement,

if you are starting with the Debit balance as per
your bank account then deduct Rs. 3610 (as
this amount has not yet been credited by bank)
and add 2050 (as this amount has not yet been
debited by bank) – to arrive at bank balance.
THANKS....
GIVE YOUR SUGGESTIONS AND JOIN
AFTERSCHOOOL NETWORK / START
AFTERSCHOOOL SOCIAL
ENTREPRENEURSHIP NETWORK IN
YOUR CITY
AFTERSCHOOOL@IN.COM
PGPSE – WORLD'S MOST
COMPREHENSIVE PROGRAMME IN
SOCIAL ENTREPRENEURSHIP

Accounting For Entrepreneurs

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Accounting For Entrepreneurs

Încărcat de

Drepturi de autor:

Formate disponibile

ACCOUNTING FOR

PANKHURI DR. 500

FURNITURE DR. 3000

REPAIRS & MAINTENANCE (WHITE

SALES DR. 100

Pankaj Dr. 2500

Discount a/c debit 200

Office stationery ac dr. 400

Rahul Borar Dr. 750

Drawings ac/ dr.

Purchase Ac debit 2000

Salary Ac debit 100000

Sales day book,

In journal we make entries of day to day

It is a system of petty cash book – where some

Bank ac dr. 12480

Cash ac/ dr. 132650

Bank ac/ dr. 100000

When cash book is maintained, it performs the

There are two types of discounts – cash and

All the cash transactions are recorded for the

These organisations give services. Non-trading

True : as it is containing only cash transactions

No – balance sheet is prepared from only

Generally professionals recognise income on

Yes - it is true – income and expenditure

Subscriptions received and donations received are

When preparing bank reconciliation statement,

S-ar putea să vă placă și