FINANCIAL ACCOUNTING

INSTRUCTOR
Dr. Varun Dawar
 LEDGER

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 COMPREHENSIVE EXAMPLE
On 1st March, Tony started his business in the name of Tony Retails. The following
transactions are reported for the month of March:
March 1 Started business by depositing INR 75,000 in bank in the name of the business
March 2 Paid rent by cheque INR 10,000.
March 3 Purchased delivery van on credit for INR 30,000 from MotorCorp.
March 4 Bought goods on credit from Suresh of INR 80,000
March 4 Paid transport expenses INR 2,000 in cash.
March 5 Paid in part for delivery van to Motocorp purchased on 3rd March by cheque INR
25,000.
March 6 Cash sales of INR 32,000
March 7 Paid wages of INR 8,000 in cash
March 10 Bought goods on cash worth INR 21,000
March 14 Sold goods on credit to Shah of INR 70,000
March 22 Sold goods, received payment by cheque INR 35,000
March 23 Paid for advertisement by cheque INR 6,000.
March 25 Received cheque from Shah of INR 50,000
March 28 Paid by cheque to Suresh for goods purchased of INR 40,000
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 COMPREHENSIVE EXAMPLE
Debit Credit Amount Amount
1 Bank 75,000
To Capital A/C 75,000

2 Rent 10,000
To Bank 10,000

3 Delivery Van 30,000

To Motocorp 30,000

4 Purchases 80,000
To Suresh 80,000

5 Transport Expenses 2,000

To Cash 2,000

6 Motocorp 25,000
To Bank 25,000

7 Cash 32,000
To Sales 32,000

8 Wages 8000
To Cash 8000

9 Purchases 21,000
To Cash 21,000

10 Shah 70,000
To Sales 70,000

Debit Credit Amount Amount

11 Bank 35,000
To Sales 35,000

12 Advertisement Expenses 6,000

To Bank 6,000

13 Bank 50,000
To Shah 50,000

14 Suresh 40,000
To Bank 40,000

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 LEDGER

79000 Dr BANK ACCOUNT

Dr Cr
Date Particulars Amount Date Particulars Amount
1st March Capital 75,000 Rent 10,000
Sales 35000 Motocorp 25,000
Shah 50000 Advertisement expenses 6,000
Suresh 40,000
31-Mar-17 balance c/d 79,000
160,000 160,000

75000 Cr CAPITAL ACCOUNT

Dr Cr
Date Particulars Amount Date Particulars Amount
Balance c/d 75,000 Bank 75,000
75,000 75,000

1000 Dr CASH ACCOUNT

Dr Cr
Date Particulars Amount Date Particulars Amount
Sales 32,000 Transport Expenses 2,000
Wages 8,000
Purchases 21,000
balance c/d 1,000
32,000 32,000
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 LEDGER
101000 Dr PURCHASES ACCOUNT
Dr Cr
Date Particulars Amount Date Particulars Amount
Suresh 80000
Cash 21,000 31-Mar-17 Balance c/d 101,000
101,000 101,000

40000 Cr SURESH ACCOUNT

Dr Cr
Date Particulars Amount Date Particulars Amount
Bank 40000 Purchases 80000

31-Mar-17 Balance c/d 40,000

80,000 80,000

Shah ACCOUNT
20000 Dr Dr Cr
Date Particulars Amount Date Particulars Amount
Sales 70,000 Bank 50,000
31-Mar-17 Balance c/d 20,000
70,000 70,000

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 LEDGER
Sales ACCOUNT
137000 cr Dr Cr
Date Particulars Amount Date Particulars Amount
31-Mar-17 balance c/d 137000 Cash 32,000
Shah 70,000
Bank 35,000

137,000 137,000

MOTOCORP ACCOUNT
5000 cr Dr Cr
Date Particulars Amount Date Particulars Amount
Bank 25,000 Motorvan 30,000
balance c/d 5000

30,000 30,000

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 LEDGER

TRIAL BALANCE

ACCOUNTS DEBIT CREDIT

BANK 79,000
CASH 1,000
PURCHASES 101,000
Suresh 40,000
Shah 20,000
Motocorp 5,000
CAPITAL 75,000
SALES 137,000
Advertisement expenses 6,000
Wages 8,000
Rent 10000
Delivery Van 30000
Transport Expenses 2000

TOTAL 257,000 257,000

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 COMPREHENSIVE QUESTION
❑ For each of the transactions given below, make journal entries and post the
transactions to ledger accounts:
✓ 1 June-2016: Taluk started a business with INR 80,000 deposited in a
separate bank account meant for business.
✓ 10-June-2016: Purchased shop furniture for INR 15,000; paid by cheque.
✓ 15 June-2016: Cash withdrawn from bank account INR 25,000.
✓ 25-Sep-2016: Bought goods for cash of INR 10,000.
✓ 18-Dec-2016: Purchased stock of goods for INR 35,000 on credit from Ravi.
✓ 1-Jan-2017: Goods sold for cash INR 14,000.
✓ 2-Feb-2017: Returned goods to Ravi worth INR 10,000.
✓ 15 Feb-2017: Goods sold on credit to Ricky INR 22,000
✓ 27-Feb-2017: Paid Ravi INR 12,000 by cheque
✓ 2-March-2017: Goods that were sold to Ricky returned to the extent of INR
7,000

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 COMPREHENSIVE QUESTION
Debit Credit Amount Amount
1 Bank 80,000
To Capital A/C 80,000

2 Furniture 15,000
To Bank Account 15,000

3 Cash 25,000
To Bank Account 25,000

4 Purchases 10,000
To Cash 10,000

5 Purchases 35,000
To Ravi 35,000

6 Cash 14,000
To Sales 14,000

7 Ravi 10,000
To Purchase Returns 10,000

8 Ricky 22,000
To Sales 22,000

9 Ravi 12,000
To Bank Account 12,000

10 Sales Return 7,000

10 To Ricky 7,000
 LEDGER

BANK ACCOUNT
Dr Cr
Date Particulars Amount Date Particulars Amount
01-Jun-16 Capital 80,000 10-Jun-16 Furniture 15,000
15-Jun-16 Cash 25,000
27-Feb-17 Ravi 12,000
31-Mar-17 Balance c/d 28,000
80,000 80,000

FURNITURE ACCOUNT
Dr Cr
Date Particulars Amount Date Particulars Amount
10-Jun-16 Bank 15,000 31-Mar-17 Balance c/d 15,000
15,000 15,000

CAPITAL ACCOUNT
Dr Cr
Date Particulars Amount Date Particulars Amount
31-Mar-17 Balance c/d 80,000 01-Jun-16 Bank 80,000
80,000 80,000

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 LEDGER

CASH ACCOUNT
Dr Cr
Date Particulars Amount Date Particulars Amount
15-Jun-16 Bank 25,000 25-Sep-16 Purchases 10,000
01-Jan-17 Sales 14,000 31-Mar-17 Balance c/d 29,000

39,000 39,000

PURCHASES ACCOUNT
Dr Cr
Date Particulars Amount Date Particulars Amount
25-Sep-16 Cash 10000
18-Dec-16 Ravi 35,000 31-Mar-17 Balance c/d 45,000
35,000 45,000

PURCHASE RETURN ACCOUNT

Dr Cr
Date Particulars Amount Date Particulars Amount
31-Mar-17 Balance c/d 10,000 02-Feb-17 Ravi 10,000
10,000 10,000

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 LEDGER
RAVI ACCOUNT
Dr Cr
Date Particulars Amount Date Particulars Amount
02-Feb-17 Purchase Return 10000
27-Feb-17 Bank 12000 18-Dec-16 Purchases 35,000
31-Mar-17 Balance c/d 13,000
35,000 35,000

SALES ACCOUNT
Dr Cr
Date Particulars Amount Date Particulars Amount
1-Jan-17 Cash 14000
31-Mar-17 Balance c/d 36,000 15-Feb-17 Ricky 22000

36,000 36,000

SALES RETURN ACCOUNT

Dr Cr
Date Particulars Amount Date Particulars Amount
2-Mar-17 Ricky 7,000 31-Mar-17 Balance c/d 7,000
7,000 7,000

RICKY ACCOUNT
Dr Cr
Date Particulars Amount Date Particulars Amount
15-Feb-17 Sales 22000 2-Mar-17 Sales Return 7000
Balance c/d 15,000

13 22,000 22,000
 LEDGER
TRIAL BALANCE

ACCOUNTS DEBIT CREDIT

BANK 28,000
CASH 29,000
PURCHASES 45,000
RICKY 15,000
SALES RETURN 7,000
FURNITURE 15,000
CAPITAL 80,000
SALES 36,000
RAVI 13,000
PURCHASE RETURN 10,000

TOTAL 139,000 139,000

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 COMPREHENSIVE QUESTION
❑ On 1st March, Manu started his retail business in the name of Manu Retails. The following
transactions are reported for the month of March:
March 1 Started business by depositing INR 90,000 in bank in the name of the business
March 2 Withdrew cash from bank INR 5,000.
March 2 Paid rent by cheque INR 8,000.
March 3 Purchased office equipment on credit for INR 20,000 from Equipmart.
March 4 Bought goods on credit from Dinesh INR 50,000
March 5 Paid for office equipment to Equipmart purchased on 3rd March by cheque INR 15,000.
March 6 Cash sales done of INR 32,000
March 7 Paid wages INR 5,000 in cash
March 10 Purchased goods on cash INR 15,000
March 14 Sold goods on credit to Rahul INR 70,000
March 17 Bought goods on credit from Freddy INR 20,000
March 23 Paid for advertisement INR 6,000 through bank
March 25 Received cheques from Rahul of INR 40000
March 28 Paid by cheque to Dinesh INR 25,000

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 SOLUTION
De bit Cre dit Amount Amount
1 Bank 90,000
To Capital A/C 90,000

2 Cash 5,000
To Bank Account 5,000

3 Rent 8,000
To Bank Account 8,000

4 Equipment 20,000
To Equipmart 20,000

5 Purchases 50,000
To Dinesh 50,000

6 Equipmart 15,000
To Bank 15,000

7 Cash 32,000
To Sales 32,000

8 Wages 5,000
To Cash 5,000

9 Purchases 15,000
To Cash 15,000

10 Rahul 70,000
To Sales 70,000

11 Purchases 20,000
To Freddy 20,000

12 Advertisement 6,000
To Bank 6,000

13 Bank 40,000
To Rahul 40,000

14 Dinesh 25,000
To Bank 25,000
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 TRIAL BALANCE
TRIAL BALANCE

ACCOUNTS DEBIT CREDIT

BANK 71,000
CAPITAL 90,000
CASH 17,000
RENT 8,000
EQUIPMENT 20,000
EQUIPMART 5,000
PURCHASES 85,000
DINESH 25,000
SALES 1,02,000
WAGES 5,000
RAHUL 30,000
FREDDY 20,000
ADVERTISEMENT 6,000

TOTAL 2,42,000 2,42,000

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 ERROR TYPES

✓ Error of Principle- It refers to fundamental accounting principle be violated

while recording transaction. Example being:
✓ Capital Expenditure being treated as revenue expenditure

✓ Error of Omission – It refers to Financial Transaction not being recorded

fully or partially in the books of account by mistake

✓ Error of Commission- It refers to recording of Financial Transaction with the

wrong amount or in a wrong account

✓ Compensating Errors- It refers to error where effect of one transaction

nullifies the effect of another. For example XYZ company received INR 20,000
from Ravi and Paid INR 2,000 to Aakash. However, during entry INR 20,000
received from Ravi got credited as INR 2,000 and INR 2,000 paid to Aakash
got debited as 20,000.

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