Question
'Business units last indefinitely.' Mention and explain the concept on which the statement is based.
✓
Answer
"Business units lasts indefinitely" implies that the business is based on the Going Concern Concept.
According to which, business is assumed to be continued for an indefinite period. As per this profit or loss of the business can only be ascertained when business is shut down. So owner of the business has to wait till the closure of his/her business to measure performance of its business. On the other hand, as per Accounting Period Concept the entire life of business is divided into smaller period of time (say one year) for measuring its performance. Therefore, accounting period principle is treated as a limitation of going concern concept. Or we can say that "Men may come and go but the business may go on and on"
Example: An oil and gas firm operating in Sudan is stopped by a Sudanese court from carrying out operations in Sudan. The firm is not a going concern in Sudan, because it has to shut down.
According to which, business is assumed to be continued for an indefinite period. As per this profit or loss of the business can only be ascertained when business is shut down. So owner of the business has to wait till the closure of his/her business to measure performance of its business. On the other hand, as per Accounting Period Concept the entire life of business is divided into smaller period of time (say one year) for measuring its performance. Therefore, accounting period principle is treated as a limitation of going concern concept. Or we can say that "Men may come and go but the business may go on and on"
Example: An oil and gas firm operating in Sudan is stopped by a Sudanese court from carrying out operations in Sudan. The firm is not a going concern in Sudan, because it has to shut down.
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Explain in brief the meaning of the following terms:
- Endorsement of a bill.
- Renewal of a bill.
- Dishonour of a Bill.
- Date of Maturity.
Name four errors which cannot be disclosed by preparing a Trial Balance.
Rectify the following errors:
- Goods purchased from Kunal for ₹ 8,000 and from Kapil of ₹ 9,000 recorded correctly in the Purchases Book. However, ₹ 9,000 was posted to Kunal and ₹ 8,000 to Kapil.
- Anil's Account was excess debited by ₹ 500 while Suraj's Account was short debited by ₹ 500.
- Parkar's Account was short credited by ₹ 700 while Manisha's Account was excess credited by ₹ 700.
- Goods sold to Roopak for ₹ 1,000 and to Sagar for ₹ 1,800 recorded correctly in the Sales Book. However, ₹ 1,800 was posted to Roopak and ₹ 1,000 to Sagar.
Journalise the following transactions:
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₹
|
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(a)
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Shyam became insolvent. A first and final compensation of 75 paise in a rupee was received from his official receiver. He owed a debt of
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50,000
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(b)
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Received cash for a bad debt written off last year
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25,000
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(c)
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Rent due to landlord
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40,000
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(d)
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Depreciation on office furniture
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5,000
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(e)
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Salaries due to staff
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50,000
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|
(f)
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Paid income tax
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1,50,000
|
|
(g)
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Received commission ₹ 25,000, half of which is in advance.
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Prepare a Bank Reconciliation Statement from the following particulars:-
On 31st December 2014, I had an overdraft of ₹ 750 as shown by my Pass Book. I had issued cheques amounting to ₹ 250 of which ₹ 200 worth only seem to have been presented for payment. Cheques amounting to ₹ 100 had been paid in by me on 30th December, but of these only ₹ 75 were credited in the Pass Book. I also find that a cheque for ₹ 10 which I had debited to bank account in my books has been omitted to be banked. There is a debit of ₹ 25 in my Pass Book for interest.
An entry of ₹ 30 of a payment by a customer direct into the bank appears in the Pass Book. My Pass Book also shows a credit of ₹ 60 to my account for interest on investments directly collected by my bankers.
On 31st December 2014, I had an overdraft of ₹ 750 as shown by my Pass Book. I had issued cheques amounting to ₹ 250 of which ₹ 200 worth only seem to have been presented for payment. Cheques amounting to ₹ 100 had been paid in by me on 30th December, but of these only ₹ 75 were credited in the Pass Book. I also find that a cheque for ₹ 10 which I had debited to bank account in my books has been omitted to be banked. There is a debit of ₹ 25 in my Pass Book for interest.
An entry of ₹ 30 of a payment by a customer direct into the bank appears in the Pass Book. My Pass Book also shows a credit of ₹ 60 to my account for interest on investments directly collected by my bankers.
In the following Bank Reconciliation Statement. determine the missing amounts:
State whether the balance of the following accounts should be placed in the debit (or) the credit columns of the Trial Balance:
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- Discount Allowed
- Bank Overdraft
- Sales
- Interest Paid
- Bad Debts
Journalise the following transactions:
|
|
|
₹
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|
(a)
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Shyam became insolvent. A first and final compensation of 75 paise in a rupee was received from his official receiver. He owed a debt of
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50,000
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(b)
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Received cash for a bad debt written off last year
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25,000
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(c)
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Rent due to landlord
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40,000
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(d)
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Depreciation on office furniture
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5,000
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(e)
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Salaries due to staff
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50,000
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(f)
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Paid income tax
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1,50,000
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(g)
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Received commission ₹ 25,000, half of which is in advance.
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The Trial Balance of M/s. Gupta & Sons shows a difference of ₹ $52,200$. To prepare the Final Account on $31^{st}$ March,$ 2019:$ this difference is placed in a Suspense Account. Afterwards the following errors were disclosed. Pass the necessary entries to rectify them and show the Suspense Account.
→- Purchases Book total had been undercasted by ₹ $20,000.$
- A cheque received from Vasudev for ₹ $7,800$ had been debited in the Cash Book but not posted in Vasudev’s Personal Account.
- Returns Outward Book had been overcasted by ₹ 10,000.
- Goods returned by Yash Pal worth ₹ 15,000 have been entered in Returns Outward Book. However, Yash Pal’s Account is correctly posted.
Rectify the following errors:
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- Credit purchases from Nayna ₹ 8,000 were recorded as ₹ 8,800.
- Goods returned to Priya ₹ 12,000 were recorded as ₹ 12,200.
- Goods returned from Rashi ₹ 10,000 were recorded as ₹ 11,000.