Hartron Skill Centre-28Rohtak

Diploma In Computer Aided Accounting

(Accounting Exam Notes)
 Fundamental & Advanced Accounting Questions and Answers

Q1. What Is Accounting?

Accounting is the process of recording financial transactions pertaining to a business.
The accounting process includes summarizing, analysing and reporting these
transactions to oversight agencies, regulators and tax collection entities. The financial
statements used in accounting are to concise summary of financial transactions over an
accounting period, summarizing a company's operations,
financial position and cash flows.
Accounting is one of the key functions for almost any business. It may be handled by a
bookkeeper or an accountant at a small firm, or by sizable finance departments with
dozens of employees at larger companies. The reports generated by various streams of
accounting, such as cost accounting and managerial accounting, are invaluable in
helping management make informed business decisions.
Q2. How many types of Accounts, Explain with Example?
Classification of Accounts in Accounting

• Personal Account
• Real Account
o Tangible Real Account
o Intangible Real Account
• Nominal Account
A) Personal Account
These accounts types are related to persons. These persons may be natural persons like
Raj’s account, Rajesh’s account, Ramesh’s account, Suresh’s account, etc. These
persons can also be artificial persons like partnership firms, companies, bodies
corporate, an association of persons, etc.
For example – Rajesh and Suresh trading Co., Charitable trusts, XYZ Bank Ltd, C
company Ltd, etc.
For example – In the case of Salary, when it is payable to employees, it is known how
much amount is payable to each of the employee. But collectively it is called as ‘Salary
payable A/c’.
Golden Rule for this Account
Debit the receiver & Credit the Giver.
For Example – Goods sold to Suresh. In this transaction, Suresh is a personal account as
being a natural person. His account will be debited in the entry as the receiver.
B) Real Accounts
These account types are related to assets or properties. They are further classified as
Tangible real account and Intangible real accounts.
Tangible Real Accounts
 These include assets that have a physical existence and can be touched. For example –
Building A/c, cash A/c, stationery A/c, inventory A/c, etc.
Intangible Real Accounts
These assets do not have any physical existence and cannot be touched. However, these
can be measured in terms of money and have value. For Example – Goodwill, Patent,
Copyright, Trademark, etc.
Golden Real Account Rules
Debit what comes into the business, Credit what goes out of business.
For Example – Furniture purchased by an entity in cash. Debit furniture A/c and credit
cash A/c.
C) Nominal Account
These accounts types are related to income or gains and expenses or losses. For
example: – Rent A/c, commission received A/c, salary A/c, wages A/c, conveyance A/c,
etc.
Golden Rules for Nominal Accounts
Debit all the expenses and losses of the business, Credit the incomes and gains of
business.
For Example – Salary paid to employees of the entity. Salary A/c will be debited when
the expenses are incurred. Whereas, when an entity receives any interest, discount, etc
these are credited whenever these are received by the entity.

There are some other accounts in accounting as well:

•Cash Account – This account is used for keeping the records of payments done
by cash, withdrawals, and deposits.
• Income Account – Purpose of this account is to keep the record of the income
sources of business.
• Expense Account – This account tracks the expenditure of the business.
• Liabilities – If there is any debt or loan then that amount comes under liabilities.
• Equities – If there is an investment of the account owner or common stocks,
retained earnings then these will fall under equities.
Q3. Explain the function of accounting?
The functions of accounting include the systemic tracking, storing, recording,
analysing, summarising and reporting of a company's financial transactions. Through
the functions of the accounting department, the company can maintain a fiscal history
that they can make accessible for audits. They can also use it to prepare reports, create
budgets, reduce costs, increase profits, avail growth opportunities, assess future
expenditure requirements and make financial predictions.
The basic functions of accounting in a company may include the following:

• Keeping financial records: Accounting helps businesses maintain an accurate and

up-to-date record of the day-to-day financial transactions of the company, such as
supply purchases, product sales, receipts and payments.

Hartron Skill Centre-28 Rohtak, SCF-185, Huda Complex Near ZAD Global School-Ph. 7419488930,7404288876
 • Monitoring financial transactions: Accountants may track multiple financial
transactions related to payments due to the company to ensure it receives the
revenue and remains profitable.
• Making bill payments: Accounting involves checking invoices to ensure the
legitimacy of the charges, setting payment dates and paying the bills that the
company owes to various vendors and suppliers.
• Paying employee salaries: Companies can use accounting to make payroll payments
from company funds, manage employee benefits and issue employee work-
related bonuses.
• Keeping digital records: Accounting may involve creating, maintaining and
updating digital accounting systems to store and calculate the company's financial
data.
• Writing financial reports: Accounting involves repairing detailed quarterly and
annual financial reports about the company's assets, profits and losses for internal
and external stakeholders.
• Maintaining fiscal history: Accountants assist with creating, documenting and
storing the fiscal history of the company's transactions and making it available for
audits and assessments.
• Achieving business goals: An accountant can analyse financial data to formulate and
implement comprehensive financial policies and strategies to advance the
company's business goals.
• Preparing budgets: The accounts department may reference the company's
financial data to prepare the overall company budget, the department budgets and
the project budgets.
• Making financial projections: Accounting involves analysing the company's
available financial resources, expected revenues and business goals and using this
information to predict future business expansion and growth.

Q4. Distinction Between Bool-Keeping And Accounting?

What is Bookkeeping-Bookkeeping is the process of systematic recording and
classification of financial transactions of an organisation. Bookkeeping is said to be the
basis of accounting, whereas accounting forms a part of the broader scope in finance.
The most important focus of bookkeeping is to maintain an accurate record of all the
monetary transactions of a business. Companies use this information to take major
investment decisions. The bookkeeper maintains bookkeeping records. Accurate
bookkeeping is critical for business as it gives a piece of reliable information on the
performance of a company.
Bookkeeping process consists of the following steps:
1. Identifying a financial transaction
2. Recording a financial transaction
3. Preparing a ledger account
4. Preparing trial balance

What is Accounting-Accounting is the systematic process of recording, measuring and

communicating information about the financial transaction taking place in a business.
Hartron Skill Centre-28 Rohtak, SCF-185, Huda Complex Near ZAD Global School-Ph. 7419488930,7404288876
 Accounting helps in determining the financial position of a firm and present the same to
stakeholders. It helps a business in the short- and long-term decision making and also
conveys the credibility of a company to the market. It is also known as the language of
business. The purpose of accounting is to provide a clear view of financial statements to
its users, which includes investors, creditors, employees, and government.

Q5. Explain The Objective Of Accounting?

Objectives of Accounting
Recording business transactions systematically− It is necessary to maintain
systematic records of every business transaction, as it is beyond human capacities to
remember such large number of transactions. Skipping the record of any one of the
transactions may lead to erroneous and faulty results.
Determining profit earned or loss incurred− In order to determine the net result at the
end of an accounting period, we need to calculate profit or loss. For this purpose trading
and profit and loss account are prepared. It gives information regarding how much of
goods have been purchased and sold, expenses incurred and amount earned during a
year.
Ascertaining financial position of the firm− Ascertaining profit earned or loss
incurred is not enough; proprietor also interested in knowing the financial position of
his/her firm, i.e. the value of the assets, amount of liabilities owed, net increase or
decrease in his/her capital. This purpose is served by preparing the balance sheet that
facilitates in ascertaining the true financial position of the business.
Assisting management− Systematic accounting helps the management in effective
decision making, efficient control on cash management policies, preparing budget and
forecasting, etc.
Assessing the progress of the business− Accounting helps in assessing the progress of
business from year to year, as accounting facilitates the comparison both inter-firm as
well as intra-firm.
Detecting and preventing frauds and errors− It is necessary to detect and prevent
fraud and errors, mismanagement and wastage of the finance. Systematic recording
helps in the easy detection and rectification of frauds, errors and inefficiencies, if any.
Communicating accounting information to various users− The important step in the
accounting process is to communicate financial and accounting information to various
users including both internal and external users like owners, management, government,
labour, tax authorities, etc. This assists the users to understand and interpret the
accounting data in a meaningful and appropriate manner without any ambiguity.

Q6. Who Are The Internal And External User Of Accounting?

Internal Users-Accounting supplies managers and owners with significant
financial data that is useful for decision making. This type of accounting in generally
referred to as managerial accounting. Some of the ways internal users
employ accounting information include the following:

Hartron Skill Centre-28 Rohtak, SCF-185, Huda Complex Near ZAD Global School-Ph. 7419488930,7404288876
 Assessing how management has discharged its responsibility for protecting and
managing the company’s resources Shaping decisions about when to borrow or invest
company resources Shaping decisions about expansion or downsizing
External Users
Typically called financial accounting, the record of a business’ financial history for use
by external entities is used for many purposes. The external users of accounting
information fall into six groups; each has different interests in the company and wants
answers to unique questions. The groups and some of their possible questions are:
• Owners and prospective owners. Has the company earned satisfactory income on its
total investment? Should an investment be made in this company? Should the
present investment be increased, decreased, or retained at the same level? Can the
company install costly pollution control equipment and still be profitable?
• Creditors and lenders. Should a loan be granted to the company? Will the company
be able to pay its debts as they become due?
• Employees and their unions. Does the company have the ability to pay increased
wages? Is the company financially able to provide long-term employment for its
workforce?
• Customers. Does the company offer useful products at fair prices? Will the
company survive long enough to honor its product warranties?
• Governmental units. Is the company, such as a local public utility, charging a fair
rate for its services?
• General public. Is the company providing useful products and gainful employment
for citizens without causing serious environmental problems?
Q7. Explain The Advantage And Disadvantages Of Accounting?

Advantages of Accounting
Disadvantages of Accounting
• Maintenance of business records
• Preparation of financial statements • Expresses Accounting information in
• Comparison of results terms of money
• Decision making • Accounting information is based on
• Evidence in legal matters estimates
• Provides information to related parties • Accounting information may be biased
• Recording of Fixed assets at the original
• Helps in taxation matters
cost
• Valuation of business
• Manipulation of Accounts
• Replacement of memory
• Money as a measurement unit changes in
value

Q8. Explain The Debit & Credit , Debtor And Creditor?

Debits--A debit is an accounting entry that either increases an asset or expense account,
or decreases a liability or equity account. It is positioned to the left in an accounting
entry.

Hartron Skill Centre-28 Rohtak, SCF-185, Huda Complex Near ZAD Global School-Ph. 7419488930,7404288876
 Credits--A credit is an accounting entry that either increases a liability or equity account,
or decreases an asset or expense account. It is positioned to the right in an accounting
entry.
Whenever an accounting transaction is created, at least two accounts are always impacted,
with a debit entry being recorded against one account and a credit entry being recorded
against the other account. There is no upper limit to the number of accounts involved in
a transaction - but the minimum is no less than two accounts. The totals of the debits and
credits for any transaction must always equal each other, so that an accounting transaction
is always said to be "in balance." If a transaction were not in balance, then it would not
be possible to create financial statements. Thus, the use of debits and credits in a two-
column transaction recording format is the most essential of all controls over accounting
accuracy.
Debtors--are the opposite of creditors. Essentially, it’s a term that refers to individuals,
people, or entities that owe money to another entity because they were supplied with
goods/services or borrowed money from an institution. Generally, debtors owe a lump
sum (the debt), which is split up into monthly repayments over a predetermined period
until the debt is finally paid off. Furthermore, debtors may need to pay interest on the
original value of the loan.
Creditors-- are individuals, people, or other entities (i.e., organisation, government body,
etc.) that are owed money because they have provided goods or services or loaned
money to another entity. Generally speaking, you can expect to deal with two types of
creditors: loan creditors and trade creditors. Loan creditors include banks, building
societies, and other financial institutions, whereas trade creditors are essentially
suppliers that haven’t yet been paid for the goods/services they supplied.
Q9. Explain In Detail – Assets, Capital, Liability, Drawing, Bad Debts, Income
And Expenses.

Assets are the economic resources belonging to a business. Assets could be money
in a cash register or bank account, or items such as property, fixtures and furniture,
equipment, motor vehicles, and stock or goods for resale. An important asset in
businesses which sell goods or services on credit is money owed to the enterprise by
customers. This asset is known as debtors.

Capital is the value of the investment in the business by the owner(s). It is that part of
the business that belongs to the owner; hence it is often described as the owner’s
interest.

Liabilities are the debts owed by the firm. The main types of liabilities are creditors
(money owed by the business to suppliers of goods and services), bank overdrafts and
bank loans.

Bad debt is a type of account receivable for an organisation that has become
uncollectible from the customer due to the customer’s inability to pay the amount of
money taken on credit from the organisation. The reasons that debtors are unable to
repay can vary from the individual or organisation going bankrupt or having severe

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 financial problems, or it can be due to unwillingness of the debtor to pay the debt. Bad
debts are recorded in the financial statements as a provision for credit losses.

Revenue -The revenue number is the income a company generates before any expenses
are taken out. Therefore, when a company has "top-line growth," the company is
experiencing an increase in gross sales or revenue.

Both revenue and net income are useful in determining the financial strength of a
company, but they are not interchangeable. Revenue only indicates how effective a
company is at generating sales and revenue and does not take into consideration
operating efficiencies which could have a dramatic impact on the bottom line.

Income--isoften considered a synonym for revenue since both terms refer to positive cash
flow; however, in a financial context, the term income almost always refers to the
bottom line or net income since it represents the total amount of earnings remaining
after accounting for all expenses and additional income. Net income appears on a
company's income statement and is an important measure of the profitability
of a company.

Q10. What Is Cash Basis And Accrual Basis Of Accounting?

Cash Basis Method-The key advantage of the cash method is its simplicity—it
only accounts for cash paid or received. Tracking the cash flow of a company is also
easier. It's beneficial to sole proprietorships and small businesses because, most likely, it
won't require added staff (and the related expenses) to use.
However, the cash basis method might overstate the health of a company that is cash-
rich. That's because it doesn't record accounts payables that might exceed the cash on
the books and the company's current revenue stream. As a result, an investor might
conclude the company is making a profit when, in reality, the company might be facing
financial difficulties. The cash basis method is not acceptable under GAAP.
Accrual Method-The accrual method records accounts receivables and payables
and, as a result, can provide a more accurate picture of the profitability of a
company, particularly in the long term.
For example, a company might have sales in the current quarter that wouldn't be
recorded under the cash method. The related revenue is expected in the following
quarter. An investor might think the company is unprofitable when, in reality, the
company is doing well. The accrual method doesn't track cash flow. A company might
look profitable in the long term but actually have a challenging, major cash shortage in
the short term.

Q11. Difference Between Cash Purchase And Credit Purchase?

Cash Purchase- It’s easy to assume that a cash transaction is simply when a
customer pays for goods or services in cash. After all, it’s right there in the name!
Unfortunately, it’s not quite that straightforward. In accounting, a cash transaction is
any business transaction that involves some form of exchange of money at the moment
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 of the sale. In accounting, the word cash simply means that the transaction has been
settled immediately. So it doesn’t have to be a payment involving actual paper currency.
A cash transaction can be in cash, but it can also be a payment made via a credit card, a
cheque, or even a bank transfer. All of those payment types indicate an immediate
settlement of the transaction and are considered cash transactions.

Credit Purchase- If a cash transaction means the immediate settlement of

payment, it makes sense that a credit transaction is when settlement occurs on a later
date. That’s the simple explanation, but, of course, it can be a little more complicated
than that. A good example of this is when a manufacturer provides goods to a
wholesaler. The wholesaler may not have to pay for those goods immediately and can
instead have some form of credit period. So a sale is made, but no settlement has
occurred. So a credit transaction recognises that there is income due, which means there
is a monetary impact on the manufacturer and the wholesaler alike — this is a credit
transaction.

Q12. Define Revenue And Expenses?

Revenues− Revenues refer to the amount received from day-to-day activities of
the business, like sale proceeds of goods and rendering services to the customers. Rent
received, commission received, royalties and interest received are considered as
revenue, as they are regular in nature and concerned with day to day activities. It is
shown in the credit side of the profit and loss account or trading account.

Expenses− Expenses refer to those costs that are incurred to earn revenue for the
business. It is incurred for maintaining profitability of the business. It indicates the
amount spent to meet short-term needs of the business. It is shown in the debit side of
the profit and loss account or trading account. For example, wages, rent paid, salaries
paid, outstanding wages, etc.

Q13. Explain The First And Last Step Of Accounting?

Accounting starts with
-identifying a transaction
-then recording in Journal
-then classifying in the ledger
-then summarising in final accounts
-then interpretation through Ratio analysis
-then finally communicating the information to the users of the financial statement.
So, the first step is identifying and the last step is communicating the information.

The last step in the accounting cycle is to make closing entries by finalizing expenses,
revenues and temporary accounts at the end of the accounting period. This involves
closing out temporary accounts, such as expenses and revenue, and transferring the net
income to permanent accounts like retained earnings.

Hartron Skill Centre-28 Rohtak, SCF-185, Huda Complex Near ZAD Global School-Ph. 7419488930,7404288876
 Q14. Explain The Accounting Equation In Details?
The accounting equation is the basic element of the balance sheet and the primary
principle of accounting. It helps the company to prepare a balance sheet and see if the
entire enterprise’s asset is equal to its liabilities and stockholder equity. It is the base of
the double-entry accounting system.
In this format, the formula more clearly shows how the assets controlled by the business
have been funded. That is, through investment from the owners (capital) or by amounts
owed to creditors (liabilities). You may also notice two other interesting points regarding
the formula being laid out in this way:
Capital = Assets – Liabilities
Assets = Capital + Liabilities
Liabilities=Assets-Capital

Q15. Explain The Opening And Closing Stock In Accounting?

Opening stock is the balance of all goods lying with an entity on the starting date
of its accounting period. It is brought forward from the close of the preceding accounting
period i.e., the opening stock of the current period would be the closing stock of the
previous period.
Closing stock is the balance of all goods lying with an entity on the closing date of
the accounting period. Like opening stock, closing stock too can comprise of three
components – raw material, WIP and finished goods. At the close of accounting year,
entities assess the total stock available on hand and value the same as closing stock for
their accounting purposes. This closing stock goes to reduce the amount of COGS.
Entities, generally, also do a physical stock taking to match the quantity as per books and
the quantity that is physically available in store rooms.

Q16. Distinguish Between Cash Discount And Trade Discount?

Basis of
Trade Discount Cash Discount
Comparison
This discount is offered by the seller to the
It is the type of discount that is offered
buyer on the invoice amount at the time of
Meaning by the seller to the buyer as a reduction
making payment within the stipulated
in the price of the product
time
Purpose of
To ensure prompt payment for the items
offering To ensure bulk sales of the product
purchased
discount
Not shown in any books of accounting,
It is properly recorded in the books of
Accounting reduction adjusted with final price and
both buyer and seller. Recorded in profit
treatment the discounted price is added to record
and loss statement as an expense
books
When discount
At the time the purchase is made It is allowed at the time of payment
is allowed
Allowed on Only transactions involving cash payment
Both cash and credit transactions
transactions are allowed.

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 Q17. Distinguish Between Voucher And Invoice?

Basis for
Voucher Invoice
Comparison
Vouchers are a detailed statement in An invoice is a non-negotiable instrument
Meaning writing which forms the basis for that the seller prepares at the time of credit
passing accounting entries sale and sends it to the customer.
What is it? Documentary evidence Type of source document
They support entry shown in the books
Use Used to prepare vouchers.
of accounts.
Preparation
Second First
sequence
Focuses on which account to be debited and
Contains Complete details of the transactions
credited.
A voucher refers to a written document, that acts as evidence for the transaction
carried out. These contain a serial number and are in printed/digital form. They are
prepared in different colours, for distinguishing them from one another. On the generation
of invoice, or receipt of the bill, the entries are first made in vouchers. After that, on the
basis of these vouchers recording in journal or subsidiary books is performed.

Q18. What Do You Mean By Accounting Concepts?

Accounting concepts are the basic rules, assumptions, and conditions that define
the parameters and constraints within which accounting operates. In other words,
accounting concepts are generally accepted accounting principles, which form the
fundamental basis of consistently preparing the universal form of financial statements.
The main objective is to achieve uniformity and consistency in preparing and
maintaining financial statements. It acts as the underlying principle that assists
accountants in preparing and maintaining business records.

Q19. What Is Double Entry System Or Dual Concepts?

Double-entry accounting refers to the method of bookkeeping which helps a
company to maintain its account and keep it balanced which shows the true picture of the
finances of the company. Double-entry refers to the use of an accounting asset which is a
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 summation of liabilities and equity. The credits of an account should be equal to keep an
equation in perfect balance. Accountants make use of the credit and debit entries so that
they can record the transactions of all the accounts.
All these credits and debits are shown in the Balance Sheet. Types of Accounts All
the day to day finally activities are recorded and measured by the accounting and
bookkeeping process. An event between two economic entities like between customer
and business, or vendor and business-like known as a transaction. To record this event
we use accounting and bookkeeping.
Q20. Explain The Process Of Accounting?
#1 – Identify the Transaction
Identifying the business transaction is the initial step in the process of accounting.
The business entity has to identify financial and monetary transactions. Therefore, only
those transactions that are monetary are recorded.
#2 – Recording of the Transactions in the Journal
After identifying the transactions, the second step of the accounting process is to
create the Journal entry for every accounting transaction. The point of recording
transactions is based on the policy followed by the entity for accounting, i.e. accrual basis
or cash basis of accounting.
#3 – Posting in the Ledger
After recording the transaction in the Journal, the individual accounts are then
posted in the general ledger. t helps the owner/accountant know each account’s balance
individually.
#4 – Unadjusted Trial Balance
The company’s trial balance is prepared to check whether the debits are equal to
the credits or not. The trial balance’s main purpose is to identify any errors made during
the above process.
#5 – Adjusting Journal Entries
When the accrual basis of accounting is followed, some of the entries are to be
made at the end of the accounting year, such as entries of expenses that may have been
incurred but are not booked in the Journal and entries of some income that may be earned
by the business but are not yet recorded in the books.
#6 – Adjusted Trial Balance
After all the adjusting entries are made, again, a trial balance is to be prepared
before preparing the financial statements to check that all the credits are equal to the debits
after the adjustment entries are made.
#7 – Preparation of Financial Statements
After all the above steps are completed, the financial statements of the company
are prepared to know the actual financial position, the profitability position, and the cash
flow position of the business.
#8 – Closing Entries
Finally, the accounting cycle ends with this step. These entries transfer the
temporary account balances to a permanent account. The temporary accounts are the
accounts whose balances end in a single accounting year, such as sales, purchases,
expenses, etc. These balances are first transferred to the income statement and then to the
permanent account, i.e., the profit/loss is transferred to the retained earnings account. It
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 should be cleared that only temporary accounts are closed, not the permanent ones
(accounts that are balance sheet accounts such as fixed assets, debtors, inventory, etc.)

Q21. What Are Accounting Standard, Explain Any Two?

Accounting standards are a set of procedures and measures that inform how
businesses conduct their accounting activities. They contain best practices for recording,
measuring and disclosing financial transactions. They apply to all parts of a company's
activities, including revenue, expenses, noncash expenses, assets, liabilities, equity and
reporting. The primary purpose of accounting standards is to provide accurate financial
information that banks, government agencies and investors can use when interacting with
private companies.
GAAP-GAAP stands for generally accepted accounting principles and is the
primary set of accounting standards that public and private organizations use within the
U.S. GAAP compliance is mandatory for all publicly traded companies. These standards
help create clarity in financial reporting and allow for comparison between the financial
situations of different companies.
IFRS-IFRS stands for international financial reporting standards and is the primary
set of accounting standards that international companies use. They aim to provide
consistency in accounting and reporting processes throughout a variety of countries. The
IFRS Foundation publishes 17 standards that apply to different aspects of accounting
Q22. What Are Source Documents Of Accountancy, Name Any Two Source
Documents?
Every time a business is involved in a financial transaction, a paper trail is
generated. This paper trail is referred to in accounting as source documents. Whether
checks are written to be paid out, sales are made to generate receipts, billing invoices are
sent by suppliers, or work hours are recorded on an employee’s timesheet – all the
respective documents are source documents
Common Types of Source Documents
In its simplest form, a source document generally contains the following
information:
The date of the transaction
The total amount of the transaction
A description of the transaction
One or more authorizing signatures
The most common documents are:
Checks
Invoices
Receipts
Credit memos
Employee time cards
Deposit slips
Purchase orders
Q23. Explain The Books Of Original Entries?

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 1. Daily transactions are recorded in the books of original entry which reduces chances
of any omission.
2. The books of original entry records details as well as summary of transactions, which
helps in tracing any error in recording.
3. Transactions are recorded in a chronological order which helps in categorising the
transactions into separate ledgers.
The following are some of the types of books of original entry.
1. Purchase Journal: Purchase journal is used for recording all credit purchases done by
the business. It is also known as the Purchase Day book or the invoice book. It records all
the credit purchase transactions of the core products of the business.
2. Sales Journal: Sales journal is used for recording all the sales done on credit by the
business. It is also known as Sales Daybook or Sales Journal. The credit sales transactions
are recorded for only those goods that belong to the core business operations of the
company.
3. Cash Journal: Cash journal is also known as a cash book which records all the cash
transactions such as payments and receipts of the business. Cash book serves the purpose
of a ledger as well as a journal as payments and receipt entries are recorded on credit side
and debit side, respectively.
4. General Journal: The general journal is for recording all those transactions that are not
recorded in the cash book as well as the special journals. Or in other words, the general
journal is a journal which records all the non-specialised entries of the business as there
is no specific journal for such entries. The examples of such entries can be opening
entries, closing entries, rectification entries, transfer entries, entries related to purchase or
sale of fixed assets.

Q24. Difference Between Outstanding And Prepaid Expenses?

Outstanding expenses are the expenses which have fallen due at the end of the
accounting period but which has not been paid. Its a liability for the company and will be
shown under the Current liabilities and provisions. Outstanding expenses are those
expenses which are still to be paid these are the expenses which are treated as liabilities
(Current Liability) and add to the concerned expenditure in Profit and Loss Account.
Prepaid expenses are the expenses which paid during the year before its due. The money
is paid out but its not due at the end of the period. Its an asset and will be shown under
current Assets in the Balance sheet Prepaid expenses are those expenses which have been
paid in advance for the next financial year, these are the expenses which are treated as
Assets (Current Assets) and deducted from the concerned expenses in the current
financial year.

Q25. Difference Between VAT And CST?

As a manufacturer or trader, you may be wondering what the difference is between
Value Added Tax (VAT) and Central Sales Tax (CST), and when to charge which tax.
The answer is, in fact, pretty simple. Simply put, VAT is to be levied on intra-state trade
while CST is to be levied on inter-state trade. In most other respects, both are the same,
being types of indirect taxations that govern the tax liability of manufacturers and dealers

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 in India. However, let us dig deeper into their differences to better understand both
concepts.
Value Added Tax:
Value-added tax or VAT is an indirect tax levied at various stages of production. Prior to
this, sales tax was charged at a flat rate on every sale. However, this led to double taxation
or what is otherwise known as a cascading effect. When a manufacturer buys raw
materials, he pays sales tax on the purchase. But when he processes it and sells it to the
customer, the customer again pays the same rate of taxes when in reality tax on raw
materials has already been paid and only the value added by the manufacturer in terms of
converting the raw materials into finished product must be taxed. So the government came
up with a credit system.
Every time you make a purchase and pay VAT, that amount of VAT is credited to your
VAT account. And when you sell the product and collect VAT from the customer, the
amount is debited from your VAT account. Then the amount of VAT collected from the
consumer and the amount of VAT paid to the vendor are set off against each other. If the
VAT collected is higher than VAT paid, then the difference is to be paid to the
government.
If the VAT paid is higher than the VAT collected then the business can apply for a refund
or a rebate. Typically, all goods fall within four or more schedules, which have a VAT
rate of anywhere from 1% to 15%. Dealers or manufacturers must apply for a VAT
registration the moment their turnover hits Rs. 5 lakh per year (this amount also differs
from one state to the next).
Central Sales Tax:
CST, or Central Sales Tax, is an indirect tax levied on interstate sales. Unlike VAT, CST
is not levied at every stage of production, and not even on the sale of the goods if they are
sold in the same state. Only when a manufacturer decides to take the goods to another
state does CST need to be levied. You can apply for a CST Registration at a cost of just
Rs. 25 when applying for a VAT Registration.
Applicability
VAT: VAT is applicable on imported goods as well as those manufactured within the
country. While the rate may differ from one type of item to the next, the rate will be the
same whether imported or domestically produced. CST: As with VAT, CST is also levied
on both imported goods as well as those produced within the country at the same rate.

Q26. What Is Compound And Journal Entry?

A compound journal entry is an accounting entry in which there is more than one
debit, more than one credit, or more than one of both debits and credits. It is essentially a
combination of several simple journal entries; they are combined for either of the
following reasons.
Depreciation for multiple classes of fixed assets
Accruals for multiple supplier deliveries at month-end for which no invoices have yet
been received Accruals for the unpaid wages of multiple employees at month-end
Single Accounting Event

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 All of the debits and credits relate to a single accounting event. Examples of accounting
events that frequently involve compound journal entries are:
• Record all payments and deductions related to a payroll
• Record the account receivable and sales taxes related to a customer invoice
• Record multiple line items in a supplier invoice that relate to different expenses
• Record all bank deductions related to a bank reconciliation
Example of a Compound Entry
An example of a compound journal entry is a payroll entry, where there is a debit to
salaries expense, another debit to payroll taxes expense, and credits to cash and a variety
of deduction accounts.

Q27. Difference Between Cash A/C And Cash Book?

A cash book and a cash account differ in a few ways. A cash book is a separate
ledger in which cash transactions are recorded, whereas a cash account is an account
within a general ledger. A cash book serves the purpose of both the journal and ledger,
whereas a cash account is structured like a ledger. Details or narration about the source
or use of funds are required in a cash book but not in a cash account.
• A cash book is a subsidiary of the general ledger in which all cash transactions
during a period are recorded.
• The cash book is recorded in chronological order, and the balance is updated and
verified on a continuous basis.
• Larger organizations usually divide the cash book into two parts: the cash
disbursement journal and the cash receipts journal.
• A cash book differs from a cash account in that it is a separate ledger in which cash
transactions are recorded, whereas a cash account is an account within a general
ledger.
• There are three common types of cash books: single column, double column, and
triple column.

Q28. What Is Petty Cash Book And Subsidiary Book?

The petty cash book is a recordation of petty cash expenditures, sorted by date.
In most cases, the petty cash book is an actual ledger book, rather than a computer
record. Thus, the book is part of a manual record-keeping system. The petty cash
book has declined in importance, as companies are gradually eliminating all use of petty
cash, in favor of using company credit cards.
Accounting for Petty Cash

There are two primary types of entries in the petty cash book, which are a debit to
record cash received by the petty cash clerk (usually in a single block of cash at
infrequent intervals), and a large number of credits to reflect cash withdrawals from the
petty cash fund. These credits can be for such transactions as payments for meals,
flowers, office supplies, stamps, and so forth

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 SUBSIDIARY BOOKS:- We had discussed earlier that it is practically difficult to
record all the transactions in only one book of prime entry. For convenience, the Journal
is divided into a number of Subsidiary Books. These are
1. Cash Book: To record receipts and payments of cash, including receipts into and
payments out of the bank.
2. Purchases Book: To record credit purchases of goods dealt in by the firm. All credit
purchases of goods are recorded in this book.
3. Sales Book: To record the credit sales of goods dealt in by the firm.
4. Purchases Return Book: To record the return of goods previously purchased on credit
5. Sales Return Book: To record the return of credit sales made by customers.
6. Journal Proper: To record the transactions which cannot be recorded in any of the
books mentioned above.
Advantages of Subsidiary Books: - The use of subsidiary books has the following
advantages:
(i)Division of Work: Since in the place of one Journal, subsidiary books are also
maintained, accounting work can be divided among a number of persons.
(ii) Specialization and Efficiency: When the same work is handled by a
particular person for a considerable time, he acquires expertise in it and becomes
efficient in handling it. Thus, accounting is done more efficiently.
(iii) Saving of Time: Various accounting processes can be undertaken
simultaneously because of the use of number of books. Thus, it leads to saving of
time.
(iv) Availability of Information: Since a separate book is maintained for each
class of transactions, information relating to each class is available at one place.
(v) Facility in Checking: In case, the Trial Balance does not agree, locating
the error or errors is facilitated by the existence of separate books. Since the number
of transactions is less in each subsidiary book as compared to only one Journal, it
is easy to locate the errors.
(vi) Responsibility: Division of work results in assigning a particular job to a
particular person. If an error is committed in recording, responsibility can be easily
fixed.

Q29. What Are Final Accounts, Explain The Part Of Final Accounts?
Final Accounts Meaning
Final accounts are those accounts that are prepared by a joint stock
company at the end of a fiscal year. The purpose of creating final
accounts is to provide a clear picture of the financial position of the
organization to its management, owners, or any other users of such
accounting information.
Final account preparation involves preparing a set of accounts and
statements at the end of an accounting year. The final account consists
of the following accounts:
1. Trading and Profit and Loss Account
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 2. Balance Sheet
3. Profit and Loss Appropriation account
Objectives of Final Account preparation
Final accounts are prepared with the following objectives:
1. To determine profit or loss incurred by a company in a given
financial period
2. To determine the financial position of the company
3. To act as a source of information to convey the users of accounting
information (owners, creditors, investors and other stakeholders)
about the solvency of the company.
There are generally three types of final accounts and they are:
1. Trading account
2. Profit and loss account
3. Balance sheet
Different stages of final account of a company are:
1. Prepare trial balance
2. Adjusting the trial balance
3. Preparing adjusted trial balance
4. Prepare financial statements
5. Closing the books
Q30. Distinguish Between Journal And Ledger?
The Journal is a subsidiary day book, where monetary transactions are recorded for
the first time, whenever they arise. In this, the transactions are regularly recorded
in an orderly manner, so that they can be referred in future. It highlights the two
accounts which are affected by the occurrence of the transaction, one of which is
debited and the other is credited with an equal amount

Basis for
Journal Ledger
Comparison
The book in which all the transactions are The book which enables to transfer all
Meaning recorded, as and when they arise is the transactions into separate accounts is
known as Journal. known as Ledger.
What is it? It is a subsidiary book. It is a principal book.
Also known as Book of original entry. Book of second entry.
Record Chronological record Analytical record
The process of transferring entries from
The process of recording transactions into
Process the journal to ledger is known as
Journal is known as Journalizing.
Posting.
How transactions
Sequentially Account-wise
are recorded?
Debit and Credit Columns Sides
Narration Must Not necessary.
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 Basis for
Journal Ledger
Comparison
Balancing Need not to be balanced. Must be balanced.

Q31. What Is Bank Reconciliation Statement?

Meaning-Bank Reconciliation Statement is a record book of the transactions of a
bank account. This statement helps the account holders to check and keep track of
their funds and update the transaction record that they have made. Bank
Reconciliation statement is also known as bank passbook. The balance mentioned
in the bank passbook of the statement must tally with the balance mentioned in the
cash book. In the statement, all the deposit will be shown in the credit column and
withdrawals will be shown in the debit column. However, if the withdrawal
exceeds deposit it will show a debit balance (overdraft).
Importance of Bank Reconciliation Statement
Generally while making a comparison between the company’s cash book
and bank balance, the balance does not tally. Therefore, it is important
to determine the cause for the difference and display them in the bank
reconciliation statement and then tally the two balances. The bank
reconciliation statement helps in explaining the differences in the
amount between the company’s cash book and bank balance. The cash
book and the bank passbook differences are caused by:
The difference in timing recording the transactions: The difference in
timing can be caused by many factors which are:
1. Bank-issued cheque but not yet deposited for payment
2. Paid cheque in the bank but yet not cleared
3. Bank made direct debit from the customer’s side
4. Cheque/ amount deposited directly to the bank account
5. Dividends and Interest collected by the bank
6. Bank made direct payment from the customer’s side
7. Cheques deposited/bills discounted dishonored

Q32. Write A Short Note A) On E-Governance B) On Digital Finance Services?

What is e-GOVERNANCE
E-governance, meaning ‘electronic governance’ is using information and
communication technologies (ICTs) (such as Wide Area Networks, the Internet,
and mobile computing) at various levels of the government and the public sector
and beyond, for the purpose of enhancing governance. The application of ICT to
transform the efficiency, effectiveness, transparency and accountability of
exchange of information and transaction:
1. between Governments,
2. between Government agencies,
3. between Government and Citizens, and
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 4. between Government and businesses
Government Process Re-engineering using IT to simplify and make the
government processes more efficient is critical for transformation to
make the delivery of government services more effective across various
government domains and therefore needs to be implemented by all
Ministries/ Departments.
Digital Finance Services
The spread of the internet and the availability of affordable smartphones
have made it easy for many to use various digital services. People can
obtain a lot of information from the internet. It is possible to
communicate with people across the world at an affordable price.
Technology enables people to get entertainment inside their homes
without having to go anywhere. But the main benefit of digitalization
comes from digital financial services. One need not go anywhere to
make a financial transaction. All one needs is a smartphone and reliable
internet services.
All financial transactions done using a digital device are called digital
financial services. There is a range of such services offered by banks and
other institutions. The most common service that has become highly
popular is shopping. It is possible to buy stuff using your mobile phone
and a service provider app. Probably the earliest digital instruments were
cards and ATMs. Credit and debit cards facilitate payment for various
purposes. ATMs are used for the withdrawal of money from bank
accounts. Recently they have also been upgraded to accept cash deposits
into a bank account.

Q33. What Do You Mean By The Term ‘Company’ Explain The Kinds Of
Company?
A company is a legal entity formed by a group of individuals to engage in and
operate a business—commercial or industrial—enterprise. A company may be
organized in various ways for tax and financial liability purposes depending on the
corporate law of its jurisdiction.
• A company is a legal entity formed by a group of individuals to engage
in and operate a business enterprise in a commercial or industrial
capacity.
• A company's business line depends on its structure, which can range
from a partnership to a proprietorship, or even a corporation.
• Companies may be either public or private; the former issues equity to
shareholders on an exchange, while the latter is privately-owned and not
regulated.
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 • A company is generally organized to earn a profit from business
activities.
• Companies are an important contributor to the health of an economy as
they employ individuals and attract disposable income to spur growth.
Types of Companies
In the United States, tax law as administered by the Internal Revenue
Service (IRS) and individual states dictates how companies are
classified.1 Examples of company types in the U.S. include the
following:
• Partnerships are formal arrangements in which two or more parties
cooperate to manage and operate a business.
• Corporations are legal entities that are separate and distinct from their
owners and provide the same rights and responsibilities as a person
• Associations are vague and often misunderstood legal entities based on
any group of individuals who join together for business, social, or other
purposes as a continuing entity. (This may or may not be taxable
depending on structure and purpose.)2
• Funds are businesses engaged in the investing of pooled capital of
investors.
• Trusts are fiduciary arrangements in which a third party holds assets on
behalf of beneficiaries.

Q34. Define the following terms-Trial Balance, Partnership Deed, Equity Shares?
(1). Trial Balance- A trial balance is a bookkeeping worksheet in which the
balances of all ledgers are compiled into debit and credit account column totals that are
equal. A company prepares a trial balance periodically, usually at the end of every
reporting period. The general purpose of producing a trial balance is to ensure that the
entries in a company’s bookkeeping system are mathematically correct.
• A trial balance is a worksheet with two columns, one for debits and one for
credits, that ensures a company’s bookkeeping is mathematically correct.
• The debits and credits include all business transactions for a company over
a certain period, including the sum of such accounts as assets, expenses,
liabilities, and revenues.
• Debits and credits of a trial balance must tally to ensure that there are no
mathematical errors, but there could still be mistakes or errors in the
accounting systems.
(2). Partnership Deed- Partnership deed is a partnership agreement between
the partners of the firm which outlines the terms and conditions of the
partnership between the partners. The purpose of a partnership deed is to

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 provide clear understanding of the roles of each partner, which ensures smooth
running of the operations of the firm.
The Partnership comes into the limelight when:
• There is an outcome of agreement among the partners.
• The agreement can be either in written or oral form.
(3). Equity Share- An equity share, normally known as ordinary share is a part
ownership where each member is a fractional owner and initiates the maximum
entrepreneurial liability related to a trading concern. These types of shareholders in any
organization possess the right to vote.
• Authorized Share Capital- This amount is the highest amount an
organization can issue. This amount can be changed time as per the
company’s recommendation and with the help of few formalities.
• Issued Share Capital- This is the approved capital which an organization
gives to the investors.
• Subscribed Share Capital- This is a portion of the issued capital which an
investor accepts and agrees upon.
• Paid Up Capital- This is a section of the subscribed capital, that the
investors give. Paid-up capital is the money that an organization really
invests in the company’s operation.
• Right Share- These are those type of share that an organization issue to
their existing stockholders. This type of share is issued by the company to
preserve the proprietary rights of old investors.
• Bonus Share- When a business split the stock to its stockholders in the
dividend form, we call it a bonus share.
• Sweat Equity Share- This type of share is allocated only to the outstanding
workers or executives of an organization for their excellent work on
providing intellectual property rights to an organization.

Q35. What Is Meant By Cash Flow Statements?

A cash flow statement is a financial statement that shows how cash entered and
exited a company during an accounting period. Cash coming in and out of a business is
referred to as cash flows, and accountants use these statements to record, track, and
report these transactions.
Cash Flow Statement Components
A statement of cash flows displays incoming and outgoing money from three
types of activities: operating, investing, and financing.
Operating Activities
Cash flows from operating activities include money spent or generated by
selling products, goods, or services. Line items in this section may include:

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 Depreciation and amortization: how much an asset loses value over the course of
its lifetime
Changes in working capital: transactions that affect current assets or liabilities
Accounts receivable: money owed to the company by clients and customers
Accounts payable: money the company owes to clients and customers
Inventory: sellable products or goods
Investing Activities
Investing activities include changes to long-term assets, such as real estate,
and changes in capital expenditures (CapExp).
Line items for this section include:
PP&E purchases: plant, property, and equipment (PP&E) purchases, such as
warehouse space, office equipment, or production plants
Proceeds from PP&E sales: money generated from selling PP&E
Purchase of marketable securities: buying stocks or bonds
Proceeds from sale of marketable securities: money generated from selling
stocks or bonds
Business acquisition proceeds: money made or spent as part of acquiring
another business or part of the company being acquired
Financing Activities
Cash flows from financing activities involve any money spent or generated
from issuing debt, paying dividends to shareholders, and repaying long-term
loans. Line items in the financing activities section include:
Dividend payments: Revenue or earnings redistributed to shareholders as cash or
stock reinvestments
Repurchase of common stock: Buying back previously issued public shares
Proceeds from issuing debt: Money made by selling debt to investors
Repayments of long-term debt: Money spent to repay loans

Q36. What Is Partnership? What Are Its Chief Characteristics? Explain

A partnership is a form of business which enables two or more persons to co-own
an organization, and they agree to share the profits and losses of the company. Each
member of such a business is called a Partner, and collectively they are known as a
partnership firm. In a partnership, every owner contributes something to the welfare of
the firm. These can be in the form of ideas, property, money and sometimes a
combination of all these. Owners of a Partnership share profits and losses in proportion
to their respective investments. Partnership businesses in India are regulated by Section
4 of the Indian Parliament Act of 1932.
Characteristic of a Partnership Firm A-few distinct characteristics of
partnerships are mentioned below:
Agreement- Partners, who decide to start this business, have to make a formal mutual
contract between them. This agreement is usually written following the norms of
government act.
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 Number of Partners- According to section 11 of Indian Parliament Act 1932, the
maximum number would be 10 for a banking Partnership business. Furthermore, this
number rises to 20 for other Partnership businesses.
Share of Profit- One of the primary features of Partnership is to make and share the
profit among the partners as per agreed ratios. However, the income will be distributed
equally if there’s no clause mentioned in the agreement about the same.
Liabilities- In general partnerships, all the partners are subjected to liabilities. It means
all of them are collectively responsible for recovering all debts of the firm, even if they
have to liquidate their personal assets.
Non-Transferability of Interest- By any means, a partner cannot shift his/her interest
from existing firm to others. There is a strict restriction upon inclusion and retirement of
the partners. Even a minor change in the ownership of a business has to make with the
consent of the other members involved in Partnership.
Types of Partnership General Partnership- In this Partnership, the partners equally
participate in the day-to-day activities and decision-making prospects of a firm. At the
same time, they are equally responsible for all profits, liabilities and debts of the
company. If one partner is found guilty for any discrepancy in business, the others will
be held accountable for the same.
Limited Partnership- A Limited Partnership includes one or more than one partners
whose liabilities are limited. A limited partner usually takes his/her share of profit
without involving in daily managerial activities and decision making. Because of the
limited liabilities, they don’t have to bear the loss incurred upon business.
Limited Liability Partnership- In LLP, liabilities on partners are limited. They are not
responsible for any legal and financial crisis of a firm. An LLP partner is somewhat
similar to a Limited partner although they are not the same. Partnership at Will- Such
Partnership solely depends on the will of a partner. He/she can break the bond anytime
they wish. This type of Partnership is usually created for lawful business which usually
lasts for an indefinite time
Q37. What Is TDS? When TDS Should Be Deducted?
TDS is basically a part of income tax. It has to be deducted by a person for
certain payments made by them. In this article, we will discuss in detail the TDS
provisions under the Income Tax Act.
TDS or Tax Deducted at Source is income tax reduced from the money paid
at the time of making specified payments such as rent, commission,
professional fees, salary, interest etc. by the persons making such payments.
Usually, the person receiving income is liable to pay income tax. But the
government with the help of Tax Deducted at Source provisions makes sure
that income tax is deducted in advance from the payments being made by
you. The recipient of income receives the net amount (after reducing TDS).
The recipient will add the gross amount to his income and the amount of
TDS is adjusted against his final tax liability. The recipient takes credit for
the amount already deducted and paid on his behalf.

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 Any person making specified payments mentioned under the Income Tax Act is
required to deduct TDS at the time of making such specified payment. But no TDS has
to be deducted if the person making the payment is an individual or HUF whose books
are not required to be audited.
Q38. Meaning Of Capital Receipts And Revenue Receipts, And Their Related
Items?
Capital receipts are given when a company makes an asset. Revenue receipts are
given to you every year as a tax statement. Capital and revenue receipts are two
different ways of categorizing the cash a business receives.
• Capital receipts are amounts from sales of long-term investments or assets, such as
land and buildings which are not part of the normal trading activities
• Capital receipts are payments for bigger items of expenditure, whereas revenue
receipts are for day-to-day expenditure
• Revenue receipts are amounts from sales of normal trading activities or asset sales
that will be replaced in the near future
• The revenue receipts are the receipts of money because of the sale of goods, rendering
services, etc., and do not require the Government to spend money
• These receipts consist of revenue from taxes (such as sales tax, excise tax, service tax,
customs duties, etc.), other non-tax revenue (such as interest receipts, revenue from
public enterprises, etc.), and grants and loans given by other Governments and
institutions

Q39. What Do You Mean By The Term Of ‘Share’? Discuss The Types Of Shares?
In the past few months, the share market has made headlines every morning.
Investing in shares has emerged as the most popular way of generating long term wealth
and fulfilling your financial goals. In fact, FY21 witnessed a whopping increase of 142
lac retail investors in India itself. Today, stocks or equities account for 12.9% of the
total investments in India. As an investor, one needs to understand the basics of what
the share market comprises and how it works.
What Is the Meaning Of Share?
A share represents a unit of equity ownership in a company. Shareholders are entitled to
any profits that the company may earn in the form of dividends. They are also the
bearers of any losses that the company may face. In simple words, if you are a
shareholder of a company, you hold a percentage of ownership of the issuing company
in proportion to the shares you have bought.
Shares can be further categorized into two types. These are:
1. Equity shares
2. Preference shares
They vary based on their profitability, voting rights and treatment in the event of
liquidation.
Equity Shares Meaning
These are also known as ordinary shares and comprise the bulk of the shares being
issued by a particular company. Equity shares are transferable and are traded actively by

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 investors in stock markets. As an equity shareholder, you are not only entitled to voting
rights on company issues but also have the right to receive dividends.
These dividends, however, are not fixed. Equity shareholders also partake in any losses
faced by the company, limited to the amount they had invested. Equity shares can be
further divided based on:
o Share capital
o Definition
o Returns
Classification Of Equity Shares based on Share Capital
Here is a look at the classification of equity shares based on share capital:
Authorized Share Capital: Every company, in its Memorandum of Associations,
requires to prescribe the maximum amount of capital that can be raised by issuing
equity shares. The limit, however, can be increased by paying additional fees and after
the completion of certain legal procedures.
Issued Share Capital: This implies the specified portion of the company’s capital,
which has been offered to investors through the issuance of equity shares. For example,
if the nominal value of one stock is Rs 200 and the company issues 20,000 equity
shares, the issued share capital will be Rs 40 lakh.
Subscribed Share Capital: The portion of the issued capital, which has been
subscribed by investors is known as subscribed share capital.
Paid-Up Capital: The amount of money paid by investors for holding the company’s
stocks is known as paid-up capital. As investors pay the entire amount at once,
subscribed and paid-up capital refer to the same amount.
Classification Of Equity Shares based on Definition
Here is a look at the equity share classification based on the definition:
Bonus Shares: Bonus share definition implies those additional stocks which are
issued to existing shareholders free-of-cost, or as a bonus.
Rights Shares: Right shares meaning is that a company can provide new shares to its
existing shareholders - at a particular price and within a specific period - before being
offered for trading in stock markets.
Sweat Equity Shares: If as an employee of the company, you have made a
significant contribution, the company can reward you by issuing sweat equity shares.
Voting And Non-Voting Shares: Although the majority of shares carry voting
rights, the company can make an exception and issue differential or zero voting rights to
shareholders.
Classification Of Equity Shares based on Returns
Based on returns, here is a look at the types of shares:
Dividend Shares: A company can choose to pay dividends in the form of issuing
new shares, on a pro-rata basis.
Growth Shares: These types of shares are associated with companies that have
extraordinary growth rates. While such companies might not provide dividends, the
value of their stocks increases rapidly, thereby providing capital gains to investors.

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 Value Shares: These types of shares are traded in stock markets at prices lower than
their intrinsic value. Investors can expect the prices to appreciate over some time, thus
providing them with a better share price.
Preference Shares
Preferential shareholders receive preference in receiving profits of a
company as compared to ordinary shareholders. Also, in the event of
liquidation of a particular company, the preferential shareholders are paid off
before ordinary shareholders. Here are the different types of shares in this
category:
Cumulative And Non-Cumulative Preference Shares: In the case of
cumulative preference shares, if a particular company doesn’t declare an annual
dividend, the benefit is carried forward to the next financial year. Non-cumulative
preference shares don't provide for receiving outstanding dividends benefits.
Participating/Non-Participating Preference Share: Participating preference
shares allow shareholders to receive surplus profits, after payment of dividends by the
company. This is over and above the receipt of dividends. Non-participating preference
shares carry no such benefits, apart from the regular receipt of dividends.
Convertible/Non-Convertible Preference Shares: Convertible preference
shares can be converted into equity shares, after meeting the requisite stipulations by the
company’s Article of Association (AoA), while non-convertible preference shares carry
no such benefits.
Redeemable/Irredeemable Preference Share: A company can repurchase or
claim redeemable preference share at a fixed price and time. These types of shares are
sans any maturity date. Irredeemable preference shares, on the other hand, have no such
conditions.

Q40. What Is Partnership Deed?

Partnership Deed
A partnership is a kind of business where a formal agreement between two or
more people is made. They agree to be co-owners, distribute responsibilities
for running an organization and share the income or losses that the business
generates. These features of partnerships are documented in a document
which is known as partnership deed.
What is a Partnership Deed?
Partnership deed is a partnership agreement between the partners of the firm which
outlines the terms and conditions of the partnership between the partners. The purpose
of a partnership deed is to provide clear understanding of the roles of each partner,
which ensures smooth running of the operations of the firm.
The Partnership comes into the limelight when:
• There is an outcome of agreement among the partners.
• The agreement can be either in written or oral form.

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 • The Partnership Act does not demand that the agreement has to be in
writing. Wherever it is in the form of writing, the document, which
comprises terms of the agreement is called ‘Partnership Deed.’
• It usually comprises the attributes about all the characteristics influencing
the association between the partners counting the aim of trade, the
contribution of capital by each partner, the ratio in which the gains and
losses will be divided by the partners and privilege and entitlement of
partners to interest on loan, interest on capital, etc.
Registration of Partnership Deed:
All the rights and responsibilities of each member are recorded in a
document known as a Partnership Deed. This deed can be oral or written;
however, an oral agreement is of no use when the firm has to deal with tax.
A few essential characteristics of a partnership deed are:
o The name of the firm.
o Name and addresses of the partners.
o Nature of the business.
o The term or duration of the partnership.
o The amount of capital to be contributed by each partner.
o The drawings that can be made by each partner.
o The interest to be allowed on capital and charged on drawings.
o Rights of partners.
o Duties of partners.
o Remuneration to partners.
o The method used for calculating goodwill.
o Profit and loss sharing ratio
Partnership Deed Contents
While making a partnership deed, all the provisions and the legal points of
the partnership deed are included. This deed also includes basic guidelines
for future projects and can be used as evidence at times of conflict or legal
procedures. For a general partnership deed, the below mentioned information
should be included.
o Name of the firm as determined by all partners.
o Name and details of all the partners of the firm.
o The date on which business commenced.
o Firm’s existence duration.
o Amount of capital contributed by each partner.
o Profit sharing ratio between the partners.
o Duties, obligations and power of each partner of the firm.
o The salary and commission if applicable that is payable to partners.
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 o The process of admission or retirement of a partner.
o The method used for calculating goodwill.
o The procedure that must be followed in cases of dispute arising
between partners.
o Procedure for cases where a partner becomes insolvent.
o Procedure for settlement of accounts in the event of dissolution of a
firm.
Importance of partnership deed
A few important advantages of a well-drafted deed are listed:
o It controls and monitors the rights, responsibilities and liabilities of all
the partners
o Avoids dispute between the partners.
o Avoids confusion on profit and loss distribution ratio among the
partners.
o Individual partner’s responsibilities are mentioned clearly.
o Partnership deed also defines a remuneration or salary of the partners
and working partners. However, interest is paid to each partner who
has invested capital in the business.

Q41. What Is Income Tax? What Income’s Exempt Under Section 10

What Is Income Tax?
The term “income tax” refers to a type of tax governments impose on income businesses
and individuals within their jurisdiction generate. By law, taxpayers must file an
income tax return annually to determine their tax obligations.
Income taxes are a source of revenue for governments. They are used to fund
public services, pay government obligations, and provide goods for citizens.
In addition to the federal government, many states and local jurisdictions
also levy income taxes.
Key Takeaways
o Income tax is a type of tax governments impose on income generated
by businesses and individuals within their jurisdiction.
o Income tax is used to fund public services, pay government
obligations, and provide goods for citizens.
o The federal government and many states, as well as local jurisdictions,
levy their own income taxes.
o Personal income tax is a type of income tax levied on an individual’s
wages, salaries, and other types of income.
o Business income taxes apply to corporations, partnerships, small
businesses, and the self-employed.

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 While calculating the tax liability of an individual, there are certain income
sources that do not form a part of the total income. Section 10 of the Income
Tax Act 1961 includes all those exemptions that a taxpayer can get while
paying income tax.
(Here is a list of exempted income under Section 10)
Section 10 (13A) of Income Tax Act
Section 10 (13A) of the Income Tax Act covers House Rent Allowance (HRA). The
part of your salary that you receive for covering house rent and accommodation
expenses is exempted from taxation.
However, there are a few exceptions that are included in Section 10 (13A) Rule 2A.
The exemption is allowed for least of the following amounts:
• Actual HRA received
• 50% of [basic salary + DA] for those living in Delhi, Mumbai, Chennai, Kolkata
or 40% of [basic salary + DA] for those living in other cities
• Actual rent paid (-) 10% of basic salary + DA
Section 10 (5) of Income Tax Act
Section 10 (5), or leave travel allowance exemption, is applicable for individual
taxpayers. The LTA exemption applies only to the domestic travel expenses, such as
airfare, train or bus fare, incurred by the employee. Other expenses, such as
transportation within the destination, sightseeing, hotels, and food, are not covered.
Additionally, the exemption is limited to LTA provided in your CTC by the employer.
For example, if an employee is given LTA of Rs 30,000 and incurs travel expenses of
Rs 20,000, only the amount actually spent on travel would be exempt from taxes and the
remaining Rs 10,000 would be included as taxable income
Section 10 (26) of Income Tax Act
If you are a member of a Scheduled Tribe in Tripura, Nagaland, Mizoram,
Manipur, and Arunachal Pradesh, you are eligible for tax exemptions under
Section 10 (26) Of the Income Tax Act.
Section 10 (14) (I) of Income Tax Act
This section provides you exemptions for expenses incurred due to your
employer’s business. It includes travelling, conveyance, research allowance
and more.
Section 10 (11) of Income Tax Act
Under this section, you receive exemptions for the interest you receive from
a provident fund upon resignation or retirement. Moreover, it also includes
any payment that you make from a Sukanya Samriddhi Account.
Section 10 (34) of Income Tax Act
This section includes exemptions from the dividends that you receive from
investing in an Indian company. However, this exception is only limited to
an amount of Rs.10,000, exceeding which you have to pay tax.
Section 10 (26AAA) of Income Tax Act
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 If you are a Sikkimese individual earning either in Sikkim or earning through
dividends or interest on securities, this part of your income comes under tax
exemption under Section 10 (26AAA).
Section 10 (38) of Income Tax Act
When you get long-term capital gains by selling equity shares of an equity-
oriented mutual fund, it is exempted from Income Tax calculation. However,
the Securities Transaction Tax must be paid.
Section 10 (23C) of Income Tax Act
Educational or medical institutions whose aggregate annual receipts do not
exceed Rs.5 crore are eligible for exemption under this section.
Section 10 (37) of Income Tax Act
This section provides exemptions for capital gains due to the compulsory
acquisition of urban agricultural land.
Section 10 (10A) of Income Tax Act
If you are a Government employee, under this section, you receive tax
exemption on the money you get from accumulated pensions.
Section 10 (10D) Of Income Tax Act
Under this section, you get an exemption for the income you receive from a
life insurance policy or bonus.
Section 10 (35) Of Income Tax Act
Any income that you gain from the sale of specified mutual fund units.
GPF Exemption in Income Tax Section 10
A GPF amount of Rs.2.5 lakh is exempted from taxation under Section 10
(11) and Section 10 (12) of the Income Tax Act.
Internet allowance exemption under Section 10
Under Section 10 (14), the internet allowance provided by your employer is
exempted from taxation.
Food allowance exemption under Section 10
Section 10 (14) also includes a tax exemption of Rs.26,400 in a year for food
allowance provided by your employer assuming two meals a day and 22
working days in a month.
What Is The Maximum Exemption Under Section 10?
Section 10 of the Income Tax Act maximum limit is of Rs.2.50 lakhs for
people below 60 years of age and Rs.3 lakhs for individuals above 60 below 80 years
and Rs 5 lakhs for people aged 80 years or more. The higher limit of Rs 3 & 5 lakhs is
available only for those citizens who are Resident in India.

Q42. Difference Between Gross Profit And Net Profit?

Gross profit and net profit of a firm are closely related to one another and help
business owners to prepare their annual income statement.
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 Both of these factors are indicative of a company’s financial health. Consequently,
prospective investors and business owners should be well-aware of the implications of
and differences between both these metrics to judge a company’s performance more
effectively.
What is Gross Profit?
The gross profit of a company can be described as the difference between the total revenue
and cost of goods sold (COGS). Revenue is the aggregate of money earned by a firm
within a specific financial period.
Notably, revenue is often listed as net sales if it is inclusive of discounts and refunds from
returned goods. On the other hand, COGS is the cost associated with the production and
manufacture of goods and includes these items.
In simple words, gross profit denotes a venture’s profit before its expenses are deducted
and happen to be an item under Trading Account. Notably, gross profit comes in handy
for determining the efficiency of a firm is using its raw material, labour and production
supplies. In other words, it is useful in emphasizing the firm’s efficiency pertaining to
production and pricing activities.
Gross profit does not, however, reflect how much a company will spend to pay off its
shareholders or reinvest in the business. Regardless, it is indispensable for calculating the
net profits of the company accurately.
Gross Profit Calculation
In order to find the gross profit of a company, one needs to compute its earnings before
deducting its expenses. The formula is expressed as –
Gross Profit = Revenue – Cost of Goods Sold
Referring to this example below can proffer valuable insight into the gross profit
calculation.
Suppose, Green Private Limited earned Rs.120000 in a financial year, and its cost
of goods sold amounted to Rs.40000. So, its gross profit would be
Gross profit = Revenue – COGS
= Rs. (120000 – 40000)
= Rs.80000
To understand the key difference between gross and net profit, let’s proceed to find out
the fundamentals of net profit in brief.
What is Net Profit?
It is the profit left after the COGS, operating expenses, interest and tax have been
subtracted from a company’s aggregate revenue. It is a component of Profit and Loss
Account and is also known as a ‘bottom line’ for its position in income statements.
Notably, the profit also includes additional income like interest on investments and sale
proceeds, wherein, the operating expenses include –
Net profit plays an essential role in determining a company’s profitability and is
extensively used to find out firms’ ability to convert sales into profits. Furthermore, net
profit helps owners to develop requisite business strategies and make adjustments to
improve their financial standing and profitability. Likewise, it allows creditors to gauge
the profitability of specific companies effectively.
Net Profit Calculation

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 To calculate the net profit of a firm, one needs to be aware of its gross profit because the
net profit formula is expressed as –
Net Profit = Gross profit – Expenses
The example below offers a more detailed idea about the same.
Assume that the company, JZ Private Limited accrued a gross profit of Rs.8000 in a
financial year and has accumulated expenses as follows –
Based on the information, the total expenses of the firm would be = Rs.5300 (summation
of all the expenses mentioned above)
As per the net profit formula,
Net Profit = Rs. (8000 – 5300)= Rs.2700

Q43. Briefly Explain The Types Of Vouchers With Their Short Cut Keys In Tally
Erp9 / Prime?
As a business owner, you have to continuously record transactions for the purpose of
accounting, inventory management and statutory compliance. In order to do this, different
vouchers such as receipt voucher in Tally, journal voucher in Tally, etc. are used.
A voucher is a document that is used by the accounting department on an organisation or
a business. Vouchers are used for the systematic compilation and collation of data in the
form of invoices, purchase order, certificates, along with other information required to
process the payment.
Different Types of Voucher in Tally with Examples
Vouchers can be majorly divided in two categories, inventory vouchers, and accounting
vouchers in Tally ERP 9. Under each category, there are numerous different types
vouchers in Tally ERP 9 that the accounting professionals use. Here is an extensive list
of some of the accounting voucher in Tally examples:
Accounting Vouchers in Tally Examples
Contra Voucher Sales Voucher
Journal Voucher Purchase Voucher
Credit Note Voucher Payment Voucher
Debit Note Voucher Receipt Voucher
There are numerous types of accounting voucher in Tally ERP 9 which help in executing
various important accounting tasks. Here, we have listed the accounting voucher in Tally
examples:
Sales Voucher in Tally
Sales voucher is one of the most used accounting vouchers in Tally. Users can create this
voucher in two different formats; as an invoice, or as a voucher. The invoice format
enables users to print a copy of invoices for customers. The voucher format can be used
to store transactional records electronically and it doesn’t need a paper copy for the
customer.
Purchase Voucher in Tally
Like sales vouchers, purchase voucher belongs to the accounting category and is available
in both invoice and voucher formats. Editing and modifying receipt entries in Tally are
easy, as its voucher format helps accountants to do so quickly. Moreover, Tally also helps
in converting a purchase voucher in the invoice format to the voucher format.
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 Payment Voucher in Tally
The payment voucher is another accounting voucher in Tally that helps create and print
cheques against the order. Once the payment voucher gets passed, the corresponding
cheque can be printed by clicking on ‘banking’ and then on ‘cheque printing’.
Receipt Voucher in Tally
When accountants make a receipt voucher in Tally, all the invoices which have pending
payments pop up as a reminder. As soon as the client makes the payment through any
mode, the receipt can be updated with the payment method details. In addition, all the
details of this receipt can be sent to the customer. Thus, receipt vouchers make payment
monitoring easy.
Contra Voucher in Tally
Contra vouchers are used to withdraw or deposit money in banks with the help of
instruments such as cheques/ATM/DD or e-transfer to another account through
NEFT/IMPS. With the help of contra vouchers in Tally, accountants can also generate
deposit slips for recordkeeping.
Tally also provides exact currency denominations to monitor and print the deposit slip
while also depositing the amount.
Journal Voucher in Tally
Unlike other vouchers, a journal voucher in Tally can come under the roof of both
accounting and inventory vouchers. There are multiple uses of a journal voucher in Tally
depending on the type of business it is being used for.
It can be found as an optional voucher in Tally to make sales and purchase by accountants.
Professionals can also use it for the adjustment or transferring of stock from one
warehouse to the other.
Credit Note Voucher in Tally
Credit note voucher in Tally has to be enabled manually. It is usually enabled by pressing
F11 and they manually configuring its features. Credit note can also be passed by
checking the original invoice. When a client is selected, Tally shows the transaction
invoice history that have been raised.
Debit Note Voucher in Tally
Debit note voucher is one of the most-used types of voucher in Tally ERP 9, that is used
for managing purchase returns. With the help of this, accountants can generate a debit
note for invoicing as well as a voucher. Like credit note voucher in Tally, debit note too
can easily be configured by pressing F11 and configuring it manually.

Q44. What Are Direct And Indirect Expenses?

Direct Expenses
Expenses refer to the cost incurred on something and when it comes to business,
the incurrence of expenses is a daily affair. These expenses may be related to production
or regular business operations. When the expenses are linked to the production of a
product, it is considered as a direct expense.
Direct Expenses refers to the expenditure different from direct material cost and direct
labor cost, which are spent on the production of product or provision of service.
Indirect Expenses

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 Indirect Expenses covers all those expenses which are not included in direct material,
direct wages and direct expenses. Basically, these are the costs which benefit the entire
firm as a whole and not just one department or segment of the business.
Basis for
Direct Expenses Indirect Expenses
Comparison
Any expenses other than direct Any expenses other than indirect material
material and direct wages, which are and indirect wages, which cannot be
Meaning
outrightly attributable to the product outrightly allocable to a specific cost
or service is called direct expenses. centre, is called indirect expenses.
Incurrence Production or purchase of goods Office and Administration
Allocation or Directly allocated to the particular
Directly apportioned on a suitable basis.
Apportionment cost unit.
Cost of goods It is included in the cost of goods
It is not included in the cost of goods sold.
sold sold.
Appears in Debit side of the trading account. Debit side of profit and loss account.
Treatment Forms part of prime cost. Treated as overheads.

Q45. What Do You Mean By The Term ‘Company’ Explain The Kinds Of
Company?
A company is a legal entity formed by a group of individuals to engage in and
operate a business—commercial or industrial—enterprise. A company may be
organized in various ways for tax and financial liability purposes depending on the
corporate law of its jurisdiction. They can also be distinguished between private and
public companies. Both have different ownership structures, regulations, and financial
reporting requirements.
• A company is a legal entity formed by a group of individuals to engage in and
operate a business enterprise in a commercial or industrial capacity.
• A company's business line depends on its structure, which can range from a
partnership to a proprietorship, or even a corporation.
• Companies may be either public or private; the former issues equity to shareholders
on an exchange, while the latter is privately-owned and not regulated.
• A company is generally organized to earn a profit from business activities.
• Companies are an important contributor to the health of an economy as they
employ individuals and attract disposable income to spur growth.
Q46. Write The Steps To Create, Delete And Restore The Company In Tally?
After the company creation in Tally, the given information of the company can
alter/ modify/ change as per requirement. Use the following steps to alter company in
Tally:
Step 1: Gateway of Tally → Press Alt+F3 → Alter
n the stock market, shares and debentures are familiar words when it comes to investment.
In business, debt and equity are the two significant methods by which they raise money
for the company’s expansion and growth.
Whenever a firm chooses equity to boost funds, the shares of the company are issued to
the public, and whoever buys shares gets an opportunity to be part of the company. The
second is debt a company receives a loan from the public and also agrees to pay the
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 interest regularly. There, the debenture is issued to the public and whoever buys it is
known as creditors.
Here, shares are defined as the share capital of an organization. It gives the shareholder
the right to hold a specified amount of the share capital of the firm. Similarly, a debenture
is a great financial tool that shows the debt of a business to the outside party/public and
gives a fixed interest rate. Today, most of the people invest in share or debenture intending
to get back better; therefore, it is essential to understand the two securities of investments.
Meaning of Debentures
A debenture is a debt tool used by a company that supports long term loans. Here, the
fund is a borrowed capital, which makes the holder of debenture a creditor of the business.
The debentures are both redeemable and unredeemable, freely transferable with a fixed
interest rate. It is unsecured and sustained only by the issuer’s credibility.
Unlike shareholders, the debenture holders who are the creditor of the company do not
hold any voting rights. The debentures are of following types:
• Secured Debentures
• Convertible Debentures
• Unsecured Debentures
• Registered Debentures
• Non-convertible Debentures
• Bearer Debentures
Meaning of Shares
A tiny part of a firm’s capital is identified as shares and is usually sold in the stock market
to raise funds for a business. The price at which the investor buys the share is known as
share price. The shareholders are qualified to receive the dividend as mentioned by an
organization because they are the owner of a portion of share iv the company.
The shares are transferrable/movable and are broadly categorized into two different
sections.
• Equity share
• Preference share
Q47. Difference Between Debenture And Share?
Whenever a firm chooses equity to boost funds, the shares of the company are
issued to the public, and whoever buys shares gets an opportunity to be part of the
company. The second is debt a company receives a loan from the public and also agrees
to pay the interest regularly. There, the debenture is issued to the public and whoever buys
it is known as creditors.
A debenture is a debt tool used by a company that supports long term loans. Here, the
fund is a borrowed capital, which makes the holder of debenture a creditor of the business.
The debentures are both redeemable and unredeemable, freely transferable with a fixed
interest rate. It is unsecured and sustained only by the issuer’s credibility.
Unlike shareholders, the debenture holders who are the creditor of the company do not
hold any voting rights. The debentures are of following types:
• Secured Debentures
• Convertible Debentures
• Unsecured Debentures
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 • Registered Debentures
• Non-convertible Debentures
• Bearer Debentures

Q48. Explain The Share Market And Its Working Organisation?

A share market is a platform where sellers and buyers jointly assemble to trade on
publicly listed shares. It assists companies in acquiring funds for advancement and
promotion.
There are two types of stock markets, Primary and Secondary markets. Please note that it
only trades shares while the stock market trades bonds, derivatives, and forex, and both
have distinct modus operandi as well. The topmost US stock exchanges comprise the
Nasdaq and New York Stock Exchange (NYSE).
Financial Instruments Traded in A Share Market
The stock market involves the trading of four crucial financial instruments:
#1 – Shares
Shares are portions of ownership in a business that offers earnings in dividends. It is
doubtlessly a principal element of share market basics for beginners. Moreover, the
owners of shares are called shareholders, and it has two vital categories, namely, Equity
and Preference shares.
#2 – Mutual Funds
These are financial vehicles that accumulate capital from numerous investors to invest in
securities like bonds, short-term debt, and stocks. There are four types of mutual funds:
bond funds, money market funds, target-date funds, and stock funds.
#3 – Bonds
Bonds are debt securities wherein the investor loans out the funds to the government or
firm (bond-issuer) for a fixed duration. The bond issuer pays the principal amount at the
maturity date and the predetermined interest amount throughout the bond period.
#4 – Derivatives
These are financial contracts between at least two parties that derive their value from the
performance of an underlying asset(s). It may incorporate bonds, stocks, currencies,
cryptocurrencies, commodities, market indexes, and interest rates.

Q49. Write a Short notes on GST?

GST is known as the Goods and Services Tax. It is an indirect tax which has
replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The
Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came
into effect on 1st July 2017.
In other words, Goods and Service Tax (GST) is levied on the supply of goods and
services. Goods and Services Tax Law in India is a comprehensive, multi-stage,
destination-based tax that is levied on every value addition. GST is a single domestic
indirect tax law for the entire country.
Before the Goods and Services Tax could be introduced, the structure of indirect tax levy
in India was as follows:

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 Under the GST regime, the tax is levied at every point of sale. In the case of intra-state
sales, Central GST and State GST are charged. All the inter-state sales are chargeable to
the Integrated GST.
Now, let us understand the definition of Goods and Service Tax, as mentioned above, in
detail.

Multi-stage
An item goes through multiple change-of-hands along its supply chain: Starting from
manufacture until the final sale to the consumer.
Let us consider the following stages:
• Purchase of raw materials
• Production or manufacture
• Warehousing of finished goods
• Selling to wholesalers
• Sale of the product to the retailers
• Selling to the end consumers

Q50. Explain The Financial Statement-Trading Profit & Loss A/C, Balance Sheet
And Cash Flow?
What is Profit & Loss statement (P&L statement)
Profit and Loss Account is a type of financial statement which reflects the outcome of
business activities during an accounting period (i.e. Profit or loss). Reported income and
expenses are directly related to an organization’s are considered to measure the
performance in terms of profit & loss.
Profit & loss a/c is popularly known as P&L A/c. It is also called as Profit and Loss
Statement or income and expense statement. No matter whether how you call profit &
loss statement, it reveals money spent or cost incurred in an organization’s effort to
generate revenue, representing the cost of doing business.
Accounting solutions to help you manage your business just the way you want.
Objective of Profit & Loss A/c
The very purpose of profit and loss account is to ascertain whether the business is making
profit or loss for a given period. In other words, Profit & Loss Account reveals money
spent or cost incurred in an organization’s effort to generate revenue, representing the
cost of doing business.
Profit and Loss A/c Statement
The profit and loss (P&L) statement is an extremely crucial financial statement that gives
a summary of the revenues, costs, and expenses incurred by a business during a specific
period, usually a fiscal quarter or year.
This component considers all the indirect expenses and incomes including the gross
profit/loss to arrive the net profit or loss.
Debit side of Profit and Loss Account
Items Description

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 Cost of
This term refers to the cost of goods sold. The goods could be manufactured and sold.
Sales

All expenses which are not directly related to the main business activity will be reflected in the P
& L component. The expenses covered here are mostly related to administrative, selling and
Other
distribution expenses. Examples are salary to office staff, salesmen commission, insurance, legal
Expenses
charges, audit fees, advertising, free samples, bad debts etc. It will also include items like loss on
sale of fixed assets, interest & provisions and accrued expenses as well.

Abnormal All abnormal losses are charged against Profit & Loss Account. It includes stock destroyed by fire,
losses goods lost in transit etc.

Credit side of Profit and Loss Account

Items Description

Revenue These incomes arise in the ordinary course of business, which includes commission received,
Incomes discount received etc.

Other The business will generate incomes other than from its main activity. These are purely
Income incidental. It includes items like interest received, dividend received, etc,.

Structure of Profit and Loss Statement

The structure of profit and loss statement is divide into 2 broad categories, one is the debit
side and other is credit side as shown below:

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 The left side is called as “Dr” that represents all direct and indirect expenses and the right
side is called as “Cr” side that shows direct and indirect incomes from business
operations.
Balance Sheet Format

Q51. Difference Between Direct And Indirect Taxes In Indian Tax System?
Taxes are one of the biggest sources of income for the government. From your
salary, meals at a restaurant, watching a movie at the multiplex, driving your car on
roads, to simply purchasing a packet of biscuit from a general store, you pay many
different types of taxes in many different ways.
As a responsible citizen of the country, it is your duty to pay the taxes. But it is also
equally important to know the different types of taxes implemented in the country. All
the various taxations in India can be broadly classified into two categories- direct and
indirect tax. Let us have a detailed look at the meaning of these two types of taxes.
What is Direct tax?
In simple words, a direct tax is a tax that you directly pay to the authority imposing the
tax. For instance, income tax is imposed by the government, and you pay it directly to
the government. These taxes cannot be transferred to any other entity or person. There
are several acts which govern direct taxes.
In India, CBDT (Central Board of Direct Taxes) which is governed by the Department
of Revenue is responsible for the administration of direct taxes. The department is also
involved in planning and providing inputs to the government regarding the
implementation of direct taxes.
Common Types of Direct Taxes in India
1. Income Tax
The most common type of direct tax in India is income tax. It is imposed on the income
you earn in a financial year based on the income tax slabs of the IT department. The tax
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 is paid by individuals as well as businesses directly to the IT department. For individual
taxpayers, there are also several tax deductions available under various sections of the
IT Act.
2. Securities Transaction Tax
If you are involved in stock trading, each of your trade also has a small constituent
known as the securities transaction tax. Irrespective of whether you made money on the
trade or not, you will have to pay this tax. The broker collects this tax from you and
passes on to the securities exchange, which then pays it to the government.
3. Capital Gains Tax
Every time you make capital gains, you will be required to pay capital gains tax. This
capital gain could come from the sale of a property or from investments. Based on the
capital gains and the duration for which you held the investment, you will be required to
pay either LTCG (Long-Term Capital Gains) tax or STCG (Short-Term Capital Gains)
tax.
Benefits of Direct Taxes
Curbs Inflation-In case if there is monetary inflation, the government can increase
direct tax rates so that the goods and services demand can be reduced. As the demand
falls, it helps in condensing inflation.
Equitable-
Direct taxes are also known to be equitable as the progression principle is at its
foundation. People with lower income pay lower taxes, and people with higher income
pay higher taxes.
Reduces Inequalities-
The higher taxes collected from the rich are used by the government to launch newer
initiatives for the poor. The initiatives provide income sources to people with lower
income, helping them improve their living standards.
Disadvantages of Direct Taxes
Direct taxes also have some disadvantages such as
Considered a Burden-
As taxpayers are required to pay direct taxes like income tax in a single lump sum every
year, they are considered a burden. Moreover, even the documentation process is
generally complex and time-consuming.
Evasion is Possible-
While the government has made tax evasion very difficult now, there are still many
fraudulent practices through which individuals and businesses can avoid or pay lower
taxes than they should.
Restrains Investments-
Due to the imposition of direct taxes like securities transaction tax and capital gains tax,
a lot of people avoid investing. So, in a way, direct taxes restrain investments.
What is Indirect Tax?
While direct taxes are imposed on income and profits, indirect taxes are levied on goods
and services. A major difference between direct and indirect tax is the fact that while
direct tax is directly paid to the government, there is generally an intermediary for
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 collecting indirect taxes from the end-consumer. It is then the responsibility of the
intermediary to pass on the received tax to the government.
Unlike a direct tax, indirect taxes do not depend on the income of an individual. The tax
rate is the same for everyone. The CBIC (Central Board of Indirect Taxes and Customs)
is mostly responsible for handling indirect taxes in India. Just like CBDT, CBIC also
works under the Department of Revenue.
Common Types of Indirect Taxes in India
Some of the most important types of indirect tax in India are as follows-
1. Goods and Services Tax (GST)
GST subsumed as many as 17 different indirect taxes in India like Service Tax, Central
Excise, State VAT, and more. It is a single, comprehensive, indirect tax which is
imposed on all the goods and services as per the tax slabs laid by the GST council. One
of the biggest benefits of GST is that it mostly eliminated the cascading or tax-on-tax
effect of the previous tax regime.
2. Customs Duty
When you purchase something that needs to be imported from a foreign country, you
are required to pay customs duty on it. Irrespective of whether the product has come to
India by air, land, or sea, you will have to pay the customs duty on it. The goal of
imposing this indirect tax is to make sure that every product entering India is taxed.
3. Value Added Tax (VAT)
A VAT is a type of consumption tax imposed on products whenever its value increases
throughout the supply chain. It is imposed by the state government, which also decides
the VAT percentage on different goods. While GST has mostly eliminated VAT, it is
still imposed on some products such as items that contain alcohol.
Benefits of Indirect Tax
Some significant benefits of indirect taxes are listed below-
Poor Contributes Too-
It is essential for the country that every individual contributes towards its development.
As the poor are often exempt from paying direct taxes, the indirect taxes ensure that
even poor contribute towards nation-building.
Convenience-
Unlike direct taxes which are generally paid in a lump-sum, indirect taxes like GST are
paid in small amounts. When you purchase a product or service, a small amount of GST
is already included in the price, and this makes its payment more convenient for the
taxpayers.
The collection is Easy-
If you want to know what is the difference between direct and indirect tax, one of
the biggest of them is how they are paid. Unlike direct taxes, there are no documents or
complex procedures involved in paying indirect taxes. You are required to pay the tax
right when you purchase a product or service.

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 Q52. What Do You Mean By Ratio Analysis, Explain Any Four Types Of Ratios?
Ratio Analysis is done to analyze the Company’s financial and trend of the
company’s results over years where there are mainly five broad categories of ratios like
liquidity ratios, solvency ratios, profitability ratios, efficiency ratio, coverage ratio
which indicates the company’s performance and various examples of these ratios
include current ratio, return on equity, debt-equity ratio, dividend payout ratio, and the
price-earnings ratio.
Gross Profit Ratio Formula = Gross Profit/Net Sales*100.

Net Profit Ratio Formula = Net Profit/Net Sales*100

Operating Profit Ratio Formula = Ebit/Net sales*100

Debt Equity Ratio Formula = Total Debt/Shareholders Fund.

Where, total debt = long term + short term + other fixed payments shareholder funds =
equity share capital + reserves + preference share capital – fictitious assets.

Current Liquidity Ratio-Formula = Current Assets / Current Liabilities

Fixed asset turnover represents the efficiency of the company to generate revenue from
its assets. In simple terms, it is a return on the investment in fixed assets. Net Sales =
Gross Sales – Returns. Net Fixed Assets = Gross Fixed Assets –Accumulated
Depreciation.
Average Net Fixed Assets = (Opening Balance of Net Fixed Assets + Closing Balance
of Net Fixed Assets)/2.
Fixed Assets Turnover Ratio Formula = Net Sales / Average Fixed Assets

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 Q53. Explain Different Type Of Reports Produce In Tally?
Background: Reports help in decision making process. It can be used to study
the present situation of a business. In our previous blog we spoke about Automation -
The Future of E-commerce. Here’s a list of some of the important reports available in
Tally.
Reports are an essential part of every business be it a startup or an MNC. Reports
provide you an overview of the current situation of the business or a project. An
overview provides you with the support required to take a decision in the most accurate
way possible.
Tally provides a number of different reports which can be utilized by most businesses to
evaluate the efficiency of their various processes. Reports such as the Balance sheet,
Profit and loss etc. are some common business financial reports available in Tally.
Other than these there are many other reports in Tally that can be utilized to improve
your business efficiency.
Reports can help in critically analyzing performance to find out the cause of a good or
bad performance. This helps the business to take actions in improving or maintaining
the level of performance.
Few reports that are available in Tally
Outstanding report
Outstanding report in Tally. ERP 9, shows user the receivables which are pending with
customers. The user can check the report ledger-wise as well as bill-wise. The user can
see the ageing analysis on the basis of the due date on the bills. The ageing analysis
helps the user to take timely follow-ups for the payment and can clear his outstanding
receivables as soon as possible.
To check outstanding report in Tally, go to Gateway of Tally -> Display -> Statement
of Accounts -> Outstanding -> Ledger
Profit and Loss report
The Profit and loss report shows all the incomes as well as the expenses for a particular
time period. It displays whether the expenses are exceeding the incomes causing a loss
or the income is exceeding the expense causing a profit. Profit and loss report is also
available in Tally.
To check Profit & Loss report go to Gateway of Tally -> Profit and Loss.
Cash flow/ Fund flow report
Cash flow statement is a report that shows the inward and outward flow of cash in the
organization. It shows how the cash is spent and from where it is earned. Tally has this
made for you. You do not have to spend time creating this report.
To check the Cash flow report: Go to Gateway of Tally -> Display -> Cash/Funds
Flow -> Cash Flow
Ratio Analysis report
Ratio Analysis report is another performance based report that provides insights
regarding the financial health of the business. Tally provides a ratio analysis report that
can be viewed from
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 Gateway of Tally -> Ratio Analysis.
Balance Sheet
A balance sheet shows the assets and liabilities of the company. It helps to understand
the performance of the business. Tally.ERP 9 shows the balance sheet of the company.
To check Balance Sheet Gateway of Tally -> Display -> Final Accounts -> Balance
Sheet
Stock summary report
The stock summary report in Tally.ERP 9 provides a summary of the stock/inventory
available on a specified date. It shows the current availability of stock. This helps you to
check the available stock before hand and then plan accordingly. The quantity of stock
can be kept in level with the demand so as to avoid overstocking of inventory. This
report also helps to avoid wastage of inventory.
To check stock summary, Go to Gateway of Tally -> Stock Summary
Stock Ageing analysis report
The stock ageing analysis report in Tally helps the user to understand which of his/her
goods are fast moving and which of them are slow-moving. This helps the user to
develop strategies regarding procurement of raw materials or to decide whether to
liquidate the stock on the basis of its age or not.
To check Stock ageing Analysis report in Tally, Go to Gateway of Tally -> Display ->
Inventory Books -> Ageing Analysis -> Select the group.
GST reports
Tally provides various reports such as GSTR-1, GSTR-2, GSTR-3B related reports.
GSTR-1 report in Tally is same as the GSTR-1 form. This makes things easier for the
user at the time of return filing.
Reports show details of:
• All transactions in the GSTR-1
• Which transactions are not eligible for returns
• Non-participating transactions
• Tally serial number-wise details of values as mentioned in GSTR-1
If there are any mismatches or incomplete information, the user can correct it and then
include it in the return filing. Thus in this way, Tally ensures, that its users file accurate
returns.
To check the various reports under GST in Tally, Go to Gateway of Tally -> Display -
> Statutory Reports -> GST -> Select the report you would like to check.
E-way Bill reports
Tally can be used to generate e-way bills. Not just that tally also provides reports of
these e-way bills which is consolidated to provide valuable insights to the user.
Following are the various benefits this report provides:
• It shows all the transactions which have been considered for e-way bills
• It also shows all the transactions that need to be considered for e-way bills.
• Details of all the transactions for which e-way bills were generated

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 To check E-way Bill report: Gateway of Tally -> Display -> Statutory Reports ->
GST -> e-Way Bill -> e-Way Bill Report
• Other than these, there are many other reports that can be generated from Tally,
which can help the user to take quick and accurate decisions.
Q54. What Is The Advantage Of Purchase Book?
A purchase book is a book of original entries in which all credit purchases are
recorded. The purchase book records credit purchases of inventory and other items. The
purchase book is similar to the sales book, but instead of recording sales, it records
purchases.
• The purchase book is an important book of entry because it tracks credit
purchases. When inventory is purchased on credit, the terms of the purchase are
important to track. The purchase book allows The purchase book is a record of all
purchases made by a business. It is used to track the cost of goods purchased and
the supplier of those goods.
• The purchase book helps businesses keep track of their spending and ensures that
they are not overspending on inventory. It also helps businesses negotiate better
prices with suppliers.
• The purchase book can be used to track spending trends and identify areas where
cost savings can be made.
• A purchase book is important for managing cash flow and ensuring that bills are
paid on time.
• The purchase book is an important part of accounting and financial management.
It is used to track the cost of goods purchased and the supplier of those goods.
• The purchase book generates reports that can be used to monitor spending, assess
supplier performance, and make strategic purchasing decisions.
Q55. Define Partnership And Its Main Features?
A partnership is a formal arrangement by two or more parties to manage and
operate a business and share its profits.
There are several types of partnership arrangements. In particular, in a partnership
business, all partners share liabilities and profits equally, while in others, partners may
have limited liability. There also is the so-called "silent partner," in which one party is
not involved in the day-to-day operations of the business.
• A partnership is an arrangement between two or more people to oversee business
operations and share its profits and liabilities.
• In a general partnership company, all members share both profits and liabilities.
Types of Partnerships
• General Partnership • Limited Partnership
• Limited Liability Partnership • Taxes and Partnerships
Q56. What Is Tally? Mention What Type Of Ledger We Can Create In Tally?
Tally is an ERP accounting software package used for recording day to day
business data of a company.

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 It is used to automate and integrate all your business operations, such as purchasing,
finance, sales, inventory, manufacturing.
A ledger in Tally is a record that maintains financial transactions relating to a certain
account. A ledger’s goal is to keep a thorough record of all financial transactions
associated with a particular account, such as a bank account, a customer or vendor
account, a sales or purchase account, or any other form of account.
1. Purchase/Sales Tally Ledger
Sales invoices, debit notes, and other source documents, such as credit sales, are kept in
the sales ledger. Purchase transactions are recorded in the purchase ledger. Both of these
ledgers are necessary for buying, selling, or creating goods. They are utilized in the
profit and loss (P/L) account and are under the category of revenue accounts.
2. Income and Expense Ledger
The income ledger includes all the ledger accounts that keep track of the money made
or owed concerning goods and services within a fiscal year. An expenditure ledger can
be made to record expenses. The sets of direct income, indirect income, direct expense,
and indirect expense can be applied to these ledgers. Therefore, if necessary, these
records can be included in the assessable value of excise.
3. Party Ledger
In the party ledger transactions involving supplies, receipts, payments, and other things
are recorded. Customers, distributors, and retailers are just a few examples of the
parties. The account name, closing balance, credited/debited amount, and other
information are all included in the party ledger.
4. Tax Ledger
The tax ledger is categorized into customs and tax groups and contains various tax
accounts such as sales, VAT, excise tax including business tax, and joint and several
liabilities. GST also falls under this ledger type in Tally.
5. Bank Account
Information on the bank that is connected to your business and used for payment
sending or receiving is contained in Bank Ledger. Bank name, Account no., IFSC code,
and address are all included in this data.
6. Current Liabilities and Assets
The current assets/fixed assets ledger contains the total amount that the company has to
pay in the future in the form of money or goods.
Ledger Creation in Tally
Ledger creation in tally is a straightforward process. Tally has two predefined ledgers
that are automatically created for you. These are the profit and loss account and the cash
in hand account. Tally does not allow you to create separate profit and loss accounts.
Additionally, you can create other cash accounts and other general ledger accounts
depending on your business needs.
1. Single Ledger Creation in Tally
For creating a single Tally ledger, users must follow the following steps:
Path: Gateway of Tally → Accounts Info → Ledgers → Single Ledger → Create
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 • Step 1: First, visit the “Gateway of Tally”.
• Step 2: Under “Gateway of Tally”, select “Accounts Info”.
• Step 3: Next, choose “Ledgers” under Accounts Info
• Step 4: In the “Single Ledger” sub-option, choose “Create”.
• Step 5: The “Ledger Creation” screen will be displayed. Then enter the name of
your general ledger. Names must not be duplicated and must be unique. You
can also enter an alias for the account if you prefer. Both names and aliases can
be used to access the ledger.
• Step 6: Choose the group name or category in “List of Groups” according to the
type of ledger account you want to create. Enter the required details.
• Step 7: Finally, select the “Yes” option under “Accept” for saving the configured
details.

Q57. What Is Loan? Explain The Type Of Loans?

A loan is a sum of money that one or more individuals or companies borrow from
banks or other financial institutions so as to financially manage planned or unplanned
events. In doing so, the borrower incurs a debt, which he has to pay back with interest
and within a given period of time.
Types of Loans
Secured Loan
A secured loan is one that is backed by some form of collateral. For instance, most
financial institutions require borrowers to present their title deeds or other documents
that show ownership of an asset, until they repay the loans in full.
Unsecured Loan- unsecured loan means that the borrower does not have to offer any
asset as collateral. With unsecured loans, the lenders are very thorough when assessing
the borrower’s financial status. This way, they will be able to estimate the recipient’s
capacity for repayment and decide whether to award the loan or not. Unsecured loans
include items such as credit card purchases, education loans, and personal loans.
Conventional Loans
The term is often used when applying for a mortgage. It refers to a loan that is not
insured by government agencies such as the Rural Housing Service (RHS).

Q58. What Are Communication Skills? Explain The Importance Of Effective

Communication Skills?
What is Communication Skill?
Communication skill does not have such a definition that can explain this term
completely. According to some people, communication skill is a type of skill by which
you can express your feelings or emotions more effectively.
On the other hand, some people say that it is a skill that shows how much attention you
can grab from other people by communicating with them. Both of these definitions are
quite the opposite, but still, they are trying to convey the same message. If you can
convey your feelings in a better way, then obviously, you will grab other people’s
attention. Communication is a vast term with a simple meaning.
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 It consists of many different scenarios like, You are talking with a friend, talking on a
phone, conveying messages with letters, giving a speech on stage, etc.
That’s why communication skills are very hard to explain with just a simple definition.
But, I hope you have got an idea about the meaning of communication skills with the
help of the above two definitions.
Types of Communication Skills
Communication skills can be divided into a lot of types, but mostly there are only 7
types that are much more important than other types.
• Verbal Communication • Active Listening
• Non-verbal Communication • Visual Communication
• Written Communication • Mass Communication
• Oral Communication • Presentation skills
Verbal Communication
It is the most basic type of communication skill.
Everyone uses this type to convey their message to other people; even you also use this
communication skill.
Verbal communication is known as the communication which we do with the help of
words. When we use language to convey our messages to other people, then it will be
known as verbal communication. Whether you are communicating by speaking or
writing, if you are using words, then it will be considered verbal communication.
As we said, speaking or writing words is considered as verbal communication, so we
can say it has two types -:
• Oral communication • Written communication
Some examples of Verbal communication -:
Face to face conversations.
Writing Letters.
Non-verbal Communication
As you can guess from the name, this communication skill is the opposite of verbal
communication. It means this is the type of communication skill in which we
communicate with other people without words. So, now you may wonder, if we are not
using words, then how can we communicate?
In non-verbal communication, we convey our message with the help of facial
expressions, eye contact, gestures or postures, etc.
By this, we can say that non-verbal communication is a type of communication in which
we communicate with other people with the help of expressions, gestures or postures.
This is a very important skill to learn; you should know how to express your feelings
without saying a word. But, this communication does not have that much use on its
own, like it is very tough to explain something complicated without words.
You can use this communication skill with verbal communication skills to give more
clarity to your thoughts. With the help of this, you will be able to express your feelings
or thoughts more easily.
If you are looking for non-verbal communication examples, then you can watch a
movie. In a movie, you will get many scenes where actors will convey their feelings to
the audience without saying a word.
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 This is the best example of non-verbal communication skills.
Written Communication
Written communication is one of the types of communication skills.
In this communication skill, we communicate with other people by writing words.
No matter which source we are using to write and send our message, it will be
considered as written communication. It has a lot of examples, like writing letters,
emails or sending messages.
All these are examples of written communication.
The best example of this communication is this blog.
I have written this blog and shared my thoughts and feelings through this.
Now, you come to read this, and you will get the thoughts that I want to share.
This is the best example to understand written communication.
Since we use words in this communication type, that’s why we can also say that it is
verbal communication.
Oral Communication
Oral communication means communication through the mouth.
It is the communication skill in which we communicate by speaking.
This is the most common way of communication.
Some examples of oral communication are face to face conversations, TV reporters,
Group talks. Stage speeches, etc. You can get many other examples of oral
communication in your surroundings.
This is one of the best communication skill types; this helps you to convey your feelings
in a much better way.
People mould their voices to express their emotions, like if they are angry, then they
will most probably shout, and if they are happy, then their voice tone will be changed.
Moreover, we can use technologies like telephones, radios, and telephones because of
oral communication, which are very important in this modern world.
Like written communication, we use words in this communication skill also, so it is also
a verbal communication skill.
Active Listening
Most of you probably will not agree with this, but active listening is also one of the
most important types of communication skills. As its name suggests, active listening is
listening to other people with full concentration. It is totally different from casually
hearing someone.
In this, you have to give full attention to the other person and have to understand their
thoughts and feelings. If you want to improve your communication skills, then you have
to achieve the skill of active listening.
With some practice, you can achieve this skill, but it will be tough work if you want to
master this.
But with practice and by giving some time to it, you can master this skill.
An example of active listening is a doctor listening to their patient’s problems; this is a
very good example of active listening.
Visual Communication
Visual communication is the type of communication skill in which we share our
thoughts or express our feelings with visual elements.
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 These visual elements can be anything, but they should express a message, thought or
feelings through them. Then it will be known as visual communication.
The best example of Visual communication is presentations in offices or college ppt
assignments. The featured image you saw at this blog’s beginning is also a good
example of visual communication. By that image, I shared my thoughts that I am
curious about the types of communication skills. And then, I started my blog about this,
which helped me grab your unconscious attention. Videos, GIf, stickers, and animations
are other good examples of visual communication skills examples.
Mass Communication
Mass communication is a communication skill in which we share information or
message to a larger audience.
A great example of mass communication is the newspaper.
Newspapers share information with a large audience with the help of written words.
Since it uses written words, then we can say newspapers are also a good example of
written communication. But that does not mean that every mass communication will be
a written communication as well. TV is also a great example of mass communication,
sharing information with a large audience.
But TV is not an example of written communication; it is an example of visual
communication.
Presentation skills
Presentation skill is another one of the most important types of communication skills.
It is a set of abilities essential to interact with people or audiences, clearly give your
message, engaging the people or audience in whatever you are presenting.
In today’s era, this is the most important skill to succeed in your job in both the private
and government sectors. It is the most demanding skill in the private sector because it is
required to convince customers and clients.
For example, management with great presentation skills can express the vision and
mission of the company to the employees.
From school to work, presentation skill is used, like, in schools, we used to make
presentations and assignment to explain our thought about a topic given by the teacher
and while working, we make presentations to explain different things to our clients or
the management.
How to Improve Communication Skills?
So now, you all know about the importance of communication skills.
And I know most of you are very curious about how to improve your communication
skills.
There are some points that I want to share with you that will surely help you to improve
your communication skills.
But before that, you have to understand that you can’t improve your skills in just one
day, it will be a long process, and you have to work on it step by step.
So, here are the points that I want to share with you on the importance of
communication skills:
• Listen more than talk: try to understand what the other person wants to say, only
after that give a reply.

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 • Control your emotion: if you are extremely happy, sad or angry, in those cases,
never say something without thinking twice.
• Think before speaking: it will help a lot to improve your communication skills.
• Verbal communication skills help convey your feelings, so try to improve your
non-verbal communication skills.
• Practice your communication skills by speaking in groups.
• Try to understand other people’s emotions; this is the most important and
difficult thing to master.
Importance of Communication Skills
You have read all the types of communication skills; then there might be a chance that
most of you are wondering why it is important.
Why do you have to read these types, and why do you have to improve these skills? If
you have the same questions.
Then here are some importance of communication skills -:
• It is very important to make good relationships with other people.
• With the help of good communication skills, you can convey your thoughts more properly.
• If you have good communication skills, then it will help you in interviews.
• It also helps you to boost your confidence.
• You can grab new opportunities if you have good communication skills.
Q59. Explain The Type Of Accounting And Non-Accounting Voucher In Tally?
A voucher is a supporting document for entries passed in accounting books. A
voucher is prepared when an invoice is received from the supplier and payment is done.
It serves as proof of the occurrence of a transaction and retains effective control over the
payables process.
Types of Accounting Vouchers in Tally
• Sales Vouchers • Contra Vouchers
• Purchase Vouchers • Journal Vouchers
• Payment Vouchers • Credit Note Token
• Receipt Vouchers • Debit Note Voucher
The Non Accounting/Unconventional
Vouchers are the special vouchers that are used to record provisional or non-accounting
transactions. Unconventional vouchers are mainly used to exclude unnecessary entries
or provisional entries from the books of accounts and make them available for what if
(future reports, projections, forecasts etc.) reports required at any given time.
• Memorandum Voucher • Post Dated Vouchers
• Optional Vouchers • Using Optional Vouchers in Scenario
• Reversing Journals Management
Types of Inventory Vouchers in Tally
• Physical Stock Verification Vouchers • Delivery Note Vouchers
• Material In and Out Vouchers • Receipt Note Vouchers
Q60. What Are Shares And Who Are Shareholders?
Shares are the units into which the absolute share capital of a firm is split into or divided
into. Therefore, the share is a fractional portion of the share capital and comprises the
ground of ownership interest in a company. The persons who contribute money through
shares are called shareholders.
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 The amount of authorised capital, together with the number of shares in which it is split
is mentioned in the Memorandum of Association but the divisions of shares in which
the enterprise’s capital is to be split along with their specific obligations and rights, are
recommended by the Articles of Association of the company. As per The Companies
Act, an enterprise can issue 2 types of shares:
• Preference shares
• Equity shares (also called ordinary shares)
What are Preference Shares?
Preference shares, more commonly known as preferred stock, are shares of an
enterprise’s stock with dividends that are paid out to the members before equity shares
dividends are circulated. If the enterprise enters insolvency, the members with preferred
stock are designated to be paid from company assets. Most of the preference shares
have a fixed dividend, while normally do not. Preferred stock shareholders do not
possess any voting rights, but equity shareholders typically do.
Features of Preference Shares:
• Preference shares are a long-term source of finance
• The dividend payable on preference shares (PS) is usually higher than the debenture
interest
• Preference shareholders (PSH) get a fixed rate of dividend regardless of the volume of profit
What are Equity Shares?
Equity shares were earlier called as ordinary shares. The shareholders of such shares are
the authentic owners of the enterprise. They possess voting right in the huddles of
holders of the enterprise. They have a command over the working of the enterprise.
Equity shareholders are given dividend only after paying it to the preference
shareholders.
Features of Equity Shares:
Equity share capital remains with the company. It is given back only when the
enterprise is closed
Equity shareholders possess voting rights and select the management of the enterprise

Most Asked Accounting Questions

1) What Do You Mean By Financial Accounting?
The term financial accounting is used for summarizing and gathering financial data plan
to arrange financial reports such as income statement, the balance sheet for the
organization's management lenders, suppliers and other stakeholders.
2) What Are Some Most Famous Accountings Software?
Following is a list of some most famous accounting software:
Tally, Free Agent, FreshBooks, Sage 50 cloud, Zoho Books etc.
3) What Are The Skills Required For An Accountant Job Role?
Following are some skills that are required to work as an accountant:
• Strong analytical skills
• Prepared work style
• Excellent at Mathematics
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 • Technology geek
4) How Many Types Of Business Transactions Are There In Accounting?
There are two types of business transaction happen in accounting:
• Revenue Transaction Capital Transaction
5) What Is TDS? And Where Is It Shown In The Balance Sheet?
TDS stands for Tax Deduction at Source. It is used to gather text from the company from
where the employee profits are generated.
TDS is shown on the assets part, right after the current head asset.
6) What Do You Understand By Real And Nominal Accounts? Explain Them With
Examples.
Real Account: A real account is an account of assets and liabilities. For example, land
account, building account, etc. are the example of a real account.
Nominal Account: A nominal account is an account of income and expenses. For
example, salary account, wages account, etc. are the example of nominal account.
7) Which Accounting Platforms Have You Worked On? Which Is Your Favourite
Accounting Platform?
I have worked with many accounting platforms such as QuickBooks, Microsoft Dynamic
GP, Tally, Free Agent, FreshBooks, Sage 50 cloud, Zoho Books etc. From these
accounting platforms, I liked the tally most.
8) What Is Working Capital In Accounting?
In accounting, working capital is calculated as current assets minus current liabilities used
in day-to-day trading.
9) What Do You Understand By Double-Entry Bookkeeping In Accounting? What Are
The Rules Associated With It?
Double-entry bookkeeping is a principle of accounting where every debit has a
corresponding credit. In simple words, we can say that the total debited amount is always
equal to the total credit amount. This principle specifies that when one account is debited,
then another account gets credited at the same time.
10) What Do You Understand By Tally Accounting?
Tally is accounting software used for accounting in small shops and businesses for
running routine accounting transactions.
11) What Do You Understand By Departmental Accounting?
Departmental accounting is a type of accounting in which a divided account is created for
departments. The departmental accounting is managed and shown separately in the
balance sheet.
12) What Are The Abbreviation Used For The Accounting Terms Credit And Debit?
The abbreviation term used for credit and debit are "cr" and "dr."
13) What Is The Difference Between Inactive And Dormant Accounts?
In accounting, inactive accounts are the type of accounts that have been closed and will
not be used further anymore. On the other hand, dormant accounts are those accounts that
are not efficient today but may be used in the future.
14) What Do You Do To Maintain Accounting Accuracy?

Hartron Skill Centre-28 Rohtak, SCF-185, Huda Complex Near ZAD Global School-Ph. 7419488930,7404288876
 It is very important to maintain the accuracy of an organization's account as it can result
in a huge loss in the case of any error. There are various tools and resources that I have
worked on which can be used to limit the potential errors that may occur.
15) What Is The Difference Between "Accounts Payable (AP)" And "Accounts
Receivable (AR)"?
The following table specifies the differences between the "accounts payable (AP)" and
"accounts receivable (AR):
Accounts Payable Accounts Receivable
The term Accounts Payable specifies the amount a The term Accounts Receivable amount a
company owes because it has purchased goods or company has the right to receive because it has
services on credit from a vendor or supplier. sold goods or services on credit to the customer.
Accounts payable is a form of liability. Accounts receivable is a form of asset.
16) What Is The Difference Between A Trial Balance And A Balance Sheet In
Accounting?
The following table specifies the differences between a trial balance and a balance sheet
in accounting:
Trial Balance Balance Sheet
The trial balance is the list of all balances in A balance sheet is a statement that shows the assets,
a ledger account. liabilities, and equity of a company.
It is used to check the arithmetical accuracy It is used to detect its financial position on a specific
in recording and posting. date.
17) What Are Some Common Or Standards Errors In Accounting?
The common or standard errors in accounting are - errors of omission, errors of
commission, errors of principle, and compensating error.
18) What Do You Think About Accounting Standards? Are They Mandatory?
We have to follow Accounting Standards to create a precise and accurate financial report.
They play a significant role in preparing an excellent and precise financial report.
Accounting Standards are mandatory to ensure reliability and relevance in financial
reports.
19) What Is The Best Way To Estimate Bad Debts?
Following are some good ways to estimate bad debts:
• Aging analysis
• Percentage of outstanding accounts
• Percentage of credit sales
20) What Do You Understand By Deferred Tax Asset, And How Is The Value Created?
A deferred tax asset specifies that the tax amount has been paid or has been carried
forward but has still not been recognized in the income statement. The value is created
by taking the difference between the book income and the taxable income.
21) What Is The Equation For The Acid Test Ratio In Accounting?
The equation for the acid test ratio in accounting is:
Acid-test ratio= (Current assets- Inventory)/ Current Liabilities
22) What Is The Basic Accounting Equation?
There are three main aspects of accounting:
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 • Liabilities • Assets • Capital
So, we can write the equation in the following form:
Assets= Liabilities + Owners Equity (Capital)
Capital=Assets-Liabilities
Liabilities= Assets-Capital
23) What Are The Different Branches Of Accounting?
There are three different branches of accounting. They are:
• Cost Accounting
• Financial Accounting
• Management Accounting
24) What Is GST? Explain Something About It.
GST is an acronym that stands for Goods and Service Tax. This is an indirect tax other
than the income tax. The seller applies this tax. The seller charges it to the customer on
the value of the service or product they have sold to the customer sold, and then the seller
deposits the GST to the government.
25) What Do You Understand By Reconciliation Statement In Accounting?
In accounting, the bank reconciliation statement or BRS is a form that allows individuals
to compare their bank account records to that of the bank. This statement is prepared when
the passbook balance differs from the cashbook balance.
26) What Do You Understand By Fictitious Assets?
Fictitious assets are abstract assets or intangible assets. The benefit of these assets is
derived over a longer period. For example, goodwill, rights, deferred revenue
expenditure, miscellaneous expenses, preliminary expenses, etc., are examples of
fictitious assets.
27) What Is The Meaning Of Purchase Return In Accounting?
In accounting, the term purchase return specifies a transaction where the buyer of
merchandise, inventory or fixed assets returns these defective or unsatisfactory products
to the seller.

28) What Do You Understand By Retail Banking?

Retail banking is also known as consumer banking. It contains a retail client,
where specific customers use local branches of better commercial banks.
29) What Do You Understand By Trade Bills In Accounting?
In accounting, the trade bills are the bills that are generated against every
transaction. Trade bills are required in the documentation process for all
kinds of transactions.
30) What Is The Scrap Value In Accounting?
In accounting, the scrap value is the remaining value of an asset. Any asset
holds this value after its predictable lifetime.
31) What Are The Three Golden Rules Of Accounting?
There are three golden rules in accounting:
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 • Debit what comes in, credit what goes away.
• Debit the receiver, credit the giver.
• Debit all expenses and losses, credit all incomes and gains.
32) What Do You Understand By Premises In Accounting?
In accounting, premises are used to specify fixed assets obtainable on a
balance sheet.
33) What Is The Meaning Of Offset Accounting?
The offset accounting is canceling an accounting entry with an equal but
opposite entry. The offset accounting is used to decrease the net amount of
another account to create a net balance.
34) What Is The Meaning Of Fair Value Accounting?
In accounting, fair value accounting is a practice that a company uses. It is
used to show the value of all of its assets in terms of price on the balance
sheet on which that asset can be sold.
35) What Is The Meaning Of The Term Company's Payable Cycle?
The term company's payable cycle specifies a time required by the company
to pay all its account payables.
36) What Is The Meaning Of The Statement "Debit The Receiver, Credit The Giver"?
This statement is one of the three golden rules of accounting. This principle
is used in the case of personal accounts. If a person is giving any amount
either in cash or by cheque to an organization, it becomes an inflow, and thus
that person must be credited in the books of accounts. Therefore, when an
organization receives the money or cheque, it needs to credit the person
paying and debit the organization.
37) What Is ICAI In Accounting?
ICAI is an acronym that stands for the Institute of Chartered Accountants in
India. The Institute of Chartered Accountants of India is a statutory body
established by an Act of Parliament.
38) What Do You Understand By Executive Accounting?
Executive Accounting is a popular term in finance, advertising and public
relations businesses. This term is specifically designed for service-based
businesses.
39) What do you understand by bills receivable?
As the name suggests, bills receivable are the proceeds or payments that a
merchant or a company has to receive from its customers.
40) What Do You Understand By Balancing In Accounting?
Balancing means equating or balancing both the debit and credit sides of an
account.
41) What Is Marginal Cost In Accounting?

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 When a company increases its production, it increases the number of units
produced, and then the total cost of output is changed. That change in the
cost of an additional unit of output is called Marginal cost.
42) What Do You Understand By The Term Material Facts In Accounting?
In Accounting, material facts are documents such as vouchers, bills, debit
and credit notes, receipts, etc. They serve as the base of every account book.
43) What Are The Different Stages Of The Double Entry System?
There are following three different stages of the double-entry system:
•Recording transactions in the accounting systems.
• Preparing a trial balance in respective ledger accounts.
• Preparing final documents and closing the books of accounts.
44) What Are The Drawbacks Of The Double Entry System?
The Following are some disadvantages or drawback Double Entry System:

• In the Double Entry System, it is very difficult to find the errors,

especially when transactions are recorded in the books.
• If somehow you find an error, extensive clerical labor is required.
• It is impossible to disclose all the information of a transaction, which is
not properly recorded in the journal.
45) What Do You Understand By GAAP?
GAAP is an acronym that stands for Generally Accepted Accounting
Principles (GAAP). It is issued by the Institute of Chartered Accountants of
India (ICAI) and the Companies Act's provisions, 1956. It is a cluster of
accounting standards and common industry usage, and organizations use it
for the following reasons:
• To record their financial information properly.
• To summarize accounting records into financial statements.
• To disclose information whenever required.
46) What Are Some Examples Of Liability Accounts?
Following are some popular examples of liability accounts:
• Accounts Payable • Interest Payable
• Accrued Expenses • Lawsuits Payable
• Bonds Payable • Mortgage Loans Payable
• Customer Deposits • Notes Payable
• Income Taxes Payable • Salaries Payable
• Installment Loans Payable • Warranty Liability etc.
47) What Do You Understand By Compound Journal Entry?
The term compound journal entry is used just like other accounting entries.
The only difference is that it affects more than two account heads. The
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 compound journal entry has one debit, more than one credit, or more than
one of both debits and credits.
48) What Is Depreciation? What Are The Different Types Of Depreciation?
Depreciation is used to refer to the decreasing value of an asset that is in use.
There are mainly two types of depreciation used in accounting:
• Straight Line Method of depreciation
• Written Down Value Method of depreciation
49) What Are Some Examples Of Intangible Assets?
Following are some examples of intangible assets:
• Patents • Brand names
• Copyrights • Domain names
• Trademarks
50) How Does The Goodwill Increase?
We can increase the goodwill by acquiring another company as a subsidiary
and paying more than the fair value of its tangible and intangible assets.
51) What Do You Understand By Bad Debt Expense?
Bad debt expense is an asset account receivable of a company. It is
considered to be no collectible accounts expense or doubtful accounts
expense.
52) What Are The Revenue Recognition And Matching Principles In Accounting?
The Revenue Recognition and Matching Principles can be defined as follow:
Revenue Recognition Principle: The Revenue Recognition Principle is used
to specify that the revenue should be recognized and recorded when realized
and earned. It doesn't matter the fact when the amount has been paid.
Matching Principle: The Matching Principle is used to specify that the
companies have to report an expense on their income statement when the
related revenues are earned. It is associated with the buildup basis of
accounting.
53) What Are Some Different Accounting Concepts?
Following are the most popular accounting concepts:
•Accounting Period Concept • Going Concern Concept
• Business Entity Concept • Matching Concept
• Cost Concept • Money Measurement Concept
• Dual Aspect Concept
54) What Do You Understand By The Term Owner's Equity?
In accounting, the term owner's equity is used for the business owner's claim
against the business's assets. It is also called the business's capital and is
calculated by subtracting creditors' equity from the total equity.
55) What Things Are Included In The Owner's Equity?
The following two things are included in the Owner's equity:
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 • Capital (Common Stocks)
• Retained earnings (It specifies the balance at the beginning of the year,
profits for the current year, less dividend paid, capital contributed
during the year, if any).
56) What Do You Understand By A Debit Note Or A Debit Memorandum?
A debit note or a debit memorandum is a commercial document sent to a
buyer, formally requesting a credit note. The buyer sent the original
document to the party to whom the goods are being returned and keep the
duplicate copy for the official record.
57) What Do You Understand By A Credit Note In Accounting?
In accounting, a credit note is a receipt given to a buyer who has returned a
product by the seller/shop. The seller or shop sends this to specify that the
buyer's account is credited for the returned product.
58) What Do You Understand By Contingent Liabilities?
The contingent liabilities are potential obligations that may or may not
become an actual liability. As this liability is not sure, it may or may not be
incurred by an entity, according to the result of an uncertain future event.
For example, if a company's ex-employee sues it for gender discrimination for any
particular sum, the company has a contingent liability. If the company is found guilty, it
will have a liability, and if it is not found guilty, the company will not have an actual
liability.
61) What Is The Usage Of Accounting Standards?
The accounting standards are used to contribute high quality and accurate
reporting and ensure reliable financial statements.
62) What Is The Accounting Information System (AIS)?
AIS stands for Accounting Information System. It is a computer-based
method for tracking accounting activity and responsible for collecting,
storing, processing, organizing, and summarizing accounting data and
transactions.
• It is also used to cumulate financial transactions and essential financial
reports, which helps stakeholders in decision making.
• By using AIS, we can store and process financial data that later help in
the following tasks:
• It is used to measure financial performance.
• It can evaluate the company's finances and compare it with the previous
period to conclude.
• It also avoids any miss-handling of data.
• It can also be used to connect Information Technology with GAAP
principles.
64) What Is An MIS Report? Have You Prepared Any?
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 MIS is an acronym that stands for Management Information System. This
report is generated to identify the efficiency of any department of a
company. Yes, I have prepared several MIS reports for my previous
company.
65) What Do You Understand By The Departmental Accounting System?
The departmental accounting system is a type of accounting information
system that records all department's financial information and activities. This
financial information can be used to check the profitability and efficiency of
every department.
66) What Do You Understand By A Perpetual Inventory System?
The perpetual inventory system is a methodology that involves recording the
sale or purchase of inventory immediately using enterprise asset
management software and computerized point-of-sale systems.
67) What Happens To The Cash Collected From The Customers But Not Recorded As
Revenue?
The cash collected from the customers but not recorded as revenue goes into
"Deferred Revenue" on the balance sheet as a liability if no revenue has been
earned yet.
68) What Is The Meaning Of Negative Working Capital In Accounting?
When a company's current liabilities exceed its current assets, it is named
negative working capital. It is a common terminology in certain industries
like retail and restaurant businesses.
69) What Are The Major Constraints That Can Hamper Relevant And Reliable
Financial Statements?
The following are the major constraints that can hamper relevant and reliable
financial statements:
• Delay, which leads to irrelevant information.
• No balance between costs and benefits.
• No balance between the qualitative characteristics.
• No clarity in true and fair view presentation.
70) What Is VAT In Accounting?
VAT is an acronym that stands for Value Added Tax. It is a consumption tax
applied on a product whenever the value is added at each stage of the supply
chain, from production to the point of sale.
71) How Many Accounting Standards Are Published By ICAI?
There are 33 accounting standards published by ICAI. ICAI publishes these
accounting standards to implement the same policies and practices in every
country.
72) What Do You Understand By The Term CPA In Accounting?

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 The term CPA is an acronym that stands for Certified Public Accountant. To
become a CPA, you must have to do many other qualifications as well. It is a
qualification with a 150-hour requirement. It means that one should complete
150 credit hours at an accredited university.
73) What Is The Main Difference Between Public And Private Accounting?
The difference between public and private accounting:
Public accounting: Public accounting is a type of accounting done by one company for
another company.
Private accounting: Private accounting is done for your own company.
74) What Is The Dual Aspect Term In Accounting?
The dual aspect concept is used to specify that every transaction has two
sides. For example, when you buy something, you give the cash and get the
thing. Similarly, when you sell something, you lose the thing and get the
money. So this getting and losing are two aspects of every transaction and
are known as dual aspects.
75) What Is The Difference Between Consignor And Consignee In Accounting?
The consigner is the owner of the goods. You can say that he is the person
who delivers the goods to the consignee. The consignee is the person who
receives the goods.

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