Ruchica’s father is the sole proprietor of ‘Friends Gifts’, a firm engaged in the sale of gift items. In the process of preparing financial statements, the accountant of the firm Mr. Goyal fell ill and had to proceed on leave. Ruchica’s father was urgently in need of the statements as these had to be submitted to the bank, in pursuance of a loan of Rs. 5 lakh applied for the expansion of the business of the firm. Ruchica who is studying Accounting in her school, volunteered to complete the work. On scrutinising the accounts, the banker found that the value of building bought a few years back for Rs. 7 lakh has been shown in the books at Rs. 20 lakh, which is its present market value. Similarly, as compared to the last year, the method of valuation of stock was changed, resulting in value of goods to be about 15 per cent higher. Also, the whole amount ofRuchica’s father is the sole proprietor of ‘Friends Gifts’, a firm engaged in the sale of gift items. In the process of preparing financial statements, the accountant of the firm Mr. Goyal fell ill and had to proceed on leave. Ruchica’s father was urgently in need of the statements as these had to be submitted to the bank, in pursuance of a loan of Rs. 5 lakh applied for the expansion of the business of the firm. Ruchica who is studying Accounting in her school, volunteered to complete the work. On scrutinising the accounts, the banker found that the value of building bought a few years back for Rs. 7 lakh has been shown in the books at Rs. 20 lakh, which is its present market value. Similarly, as compared to the last year, the method of valuation of stock was changed, resulting in value of goods to be about 15 per cent higher. Also, the whole amount of Rs. 70,000 spent on purchase of personal computer (expected life 5 years) during the year had been charged to the profits of the current year. The banker did not rely on the financial data provided by Ruchica. Advise Ruchica for the mistakes committed by her in the preparation of financial statements in the context of basic concepts in accounting.
Question 2
4 Points
What is a journal? Give a specimen of journal showing at least five entries.
Question 3
4 Points
Why is it important to adopt a consistent basis for the preparation of financial statements? Explain.
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Save and Rs. 70,000 spent on purchase of personal computer (expected life 5 years) during the year had been charged to the profits of the current year. The banker did not rely on the financial data provided by Ruchica. Advise Ruchica for the mistakes committed by her in the preparation of financial statements in the context of basic concepts in accounting.
Question 2
4 Points
What is a journal? Give a specimen of journal showing at least five entries.
Question 3
4 Points
Why is it important to adopt a consistent basis for the preparation of financial statements? Explain.
Additional content
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Answers
Answer:
correct answer is maths
1. Journal is the basic entry or the first step in accounting. Journal is done to record transactions of the entries that are taking place in the business or organization.
- A specimen of journal showing at least five entries are:-
Particulars Dr. Cr.
1. Capital A/C 120000
Cash A/C 120000
(Being Business started with cash)
2. Furniture A/C 7000
Cash A/C 7000
(Being Furniture purchased by Cash)
3. Purchase A/C 600
To Ramesh A/c 600
(Being goods bought from Rameshon credit )
4. Ranjit A/C 900
Sale A/C 900
(Being goods sold to Ranjit on credit)
5. Salaries A/C 5000
To Cash A/C 5000
(being salaries paid by cash)
2. It is very essential to adopt a consistent basis for the preparation of financial statements. A Business cannot be run without proper recording of thousands of transactions that take place every day without an accounting system. Therefore, the proper preparation of a book of accounts is important for the preparation of financial statements. The process of accounting is:-
Journal- ledger- trial balance- balance sheet.