Question
Distinguish between debtors and creditors; profit and gain.
✓
Answer
Difference between Debtors and Creditors is given below.
Difference between Profit and Gain is given below.
Profit: The excess of revenues of a period over its related expenses during an accounting year is profit. Profit increases the investment of the owners.
Gain: A profit that arises from events or transactions which are incidental to business such as sale of fixed assets, winning a court case, appreciation in the value of an asset.
| Debtors | Creditors | |
| 1 | Debtors avail credit facility as they borrow. | Creditors extend credit as they act as lenders. |
| 2 | It is a current asset for the business. | It is a current libility for the business. |
| 3 | Debtors are a result of credit sales by the business. | Creditors are a result of credit purchases by the business. |
| 4 | Discount is allowed to debtors. | Discount is received from creditors. |
| 5 | Total amount to be received (total debtors) is also known as Sales Ledger Control. | Total amount to be paid (total creditors) are also known as purchase ledger control. |
| 6 | Collectively they form company’s accounts receivables. | Collectively they form company’s accounts payables. |
| 7 | Also known as Trade Debtors or Trade Receivables. | Also known as Trade Creditors or Trade Payables. |
| 8 | A provision for doubtful debtful debts is created for debtors. | No such provision or reserve is created. |
Profit: The excess of revenues of a period over its related expenses during an accounting year is profit. Profit increases the investment of the owners.
Gain: A profit that arises from events or transactions which are incidental to business such as sale of fixed assets, winning a court case, appreciation in the value of an asset.
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From the following particulars, prepare a Bank Reconciliation Statement of Sh. Yadav on 31st December 2014:-
Balance as per Pass Book on 31st December, 2014 is ₹ 11,000. Cheques for ₹ 6,200 were issued during the month of December but of these cheques for ₹ 900 were presented in the month of January, 2015 and one cheque for ₹ 500 was not presented for payment. Cheque and cash amounting to ₹ 5,700 were deposited in bank during December but credit was given for ₹ 4,700 only. A customer had deposited ₹ 850 into the bank directly. The bank has credited the merchant for ₹ 150 as interest and has debited him for ₹ 30 as bank charges, for which there are no corresponding entries in Cash Book.
Balance as per Pass Book on 31st December, 2014 is ₹ 11,000. Cheques for ₹ 6,200 were issued during the month of December but of these cheques for ₹ 900 were presented in the month of January, 2015 and one cheque for ₹ 500 was not presented for payment. Cheque and cash amounting to ₹ 5,700 were deposited in bank during December but credit was given for ₹ 4,700 only. A customer had deposited ₹ 850 into the bank directly. The bank has credited the merchant for ₹ 150 as interest and has debited him for ₹ 30 as bank charges, for which there are no corresponding entries in Cash Book.
Rectify the following errors:
- Bought Radio for ₹ 1,000 for the proprietor was debited to General Expenses A/c.
- Bought goods from Mohan ₹ 2,000 was passed through the Sales Book, however, the account of Mohan was credited correctly.
- Wages due ₹ 1,500 has not been taken into account.
- Goods Returned by Kamal ₹ 240 has been debited to his account ₹ 420.
The following are the balances extracted from the books of Amit. Prepare a Trial Balance as on 31st March, 2023:
| ₹ |
| ₹ |
Cash | 2,000 | Sundry Creditors | 40,000 |
Capital | 80,000 | Investment | 8,000 |
Purchases | 85,000 | Plant and Machinery | 15,000 |
Sales | 1,08,400 | Building | 20,000 |
Purchases Return | 6,000 | Furniture | 6,000 |
Sales Return | 4,000 | Electricity | 700 |
Transportation | 1,800 | Postage | 400 |
Discount Allowed | 500 | Drawings | 8,000 |
Printing | 5,000 | Salaries | 6,000 |
Sundry Debtors | 70,000 | Travelling Expenses | 2,000 |
Input CGST A/c | 2,500 | Output CGST A/c | 1,500 |
Input SGST A/c | 2,500 | Output SGST A/c | 1,500 |
Input IGST A/c | 4,000 | Output IGST A/c | 6,000 |
Distinguish between Revenue Reserves and Capital Reserves.
How does a Cash Book serve 'Dual Purpose?
In the following Machinery Account, determine the missing values, if depreciation is to be charged @ 10% p.a. per Diminishing Balance Method. On 1st October, 2018, a part of the machinery valued in the books of the firm at ₹ 16,000 on 1st July, 2016 was sold for ₹ 10,000.
Mr. Goel maintains two bank accounts. Prepare his columnar cash book from the following particulars:
→2023 |
| ₹ |
May 1 | Cash in hand | 34,000 |
| Balance with PNB Bank | 75,200 |
| Balance with SBI Bank | 1,20,000 |
May 3 | Cash drawn from SBI for office use | 25,000 |
May 8 | Sold goods to Pradhan for ₹ 80,000 and received from him ₹ 20,000 in cash and a cheque for the balance. The cheque is deposited in PNB on the $9^{\text {th }}$ and the bank credited the amount on the $15^{\text {th }}$ and debited ₹ 25 as its collection charges. |
|
May 12 | Purchased goods for ₹ 40,000 at 20% trade discount. 25% of the amount is paid in cash and issued a cheque on SBI for the balance amount. |
|
May 20 | Paid Wages ₹ 36,000 and Salary ₹ 4,000 . |
|
May 22 | A cheque for ₹ 50,000 is drawn on SBI and it is deposited in PNB. |
|
May 23 | Purchased land for ₹ 3,20,000 and a cheque is issued on PNB. |
|
May 24 | A cheque for ₹ 10,000 which was received from Mukesh and was deposited in SBI on $25^{\text {th }}$ April is dishonoured and the bank debited ₹ 100 as bank charges on this cheque. The amount of dishonoured cheque and bank charges is received from Mukesh in cash on the $25^{\text {th }}$. |
|
May 26 | Deposited cash ₹ 30,000 in PNB. |
|
May 28 | Sold old typewriter for ₹ 2,000 and old newspapers for ₹ 200 in cash. |
|
May 30 | Interest charged by PNB Bank ₹ 400 . |
|
May 31 | Bank charges by SBI Bank ₹ 180 and PNB Bank ₹ 340 . |
|
Show the Accounting Equation for the following transactions:
| S.no | ₹ | |
| (i) | Gopinath started business with cash | 25,000 |
| (ii) | Purchased goods from Shyam | 10,000 |
| (iii) | Sold goods to Sohan costing ₹ 1,800 | 1,500 |
| (iv) | Gopinath withdrew from business | 5,000 |
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.
Record the following transactions in a bank column cash book for December 2016:
|
|
|
₹
|
|
01
|
Started business with cash
|
80,000
|
|
04
|
Deposited in bank
|
50,000
|
|
10
|
Received cash from Rahul
|
1,000
|
|
15
|
Bought goods for cash
|
8,000
|
|
22
|
Bought goods by cheque
|
10,000
|
|
25
|
Paid to Shyam by cash
|
20,000
|
|
30
|
Drew from Bank for office use
|
2,000
|
|
31
|
Rent paid by cheque
|
1,000
|