JAIPUR NATIONAL UNIVERSITY, JAIPUR

School of Distance Education & Learning

Internal Assignment No. 1
Bachelor of Business Administration (BBA)- (Retalling)

Paper Code: BBA 101

Paper Title: Fundamentals of Accounting

Last date of submission: Max. Marks: 15

Note : Question No. 1 is of short answer type and is compulsory for all the students. It carries 5 Marks.
(Word limits 50-100)

Q. 1. Answer all the questions:

(i) What do you mean by accounting?
(ii) Distinguish between Profit and Loss Account and trading a/c.
(iii) What do you mean by incomplete records?
(iv) What do you mean by forfeited of share? Explain with example.
(v) Explain any one method of depreciation .

Note: Answer any two questions. Each question carries 5 marks (Word limits 500)
Q. 2. What do you mean by accounting? Who are the users of accounting? Explain its scope.
Q. 3. Define debenture. Explain the various types of debentures.
Q. 4. Journalise the following transactions in the books of M/s Sohan & sons:
2008 Rs.
Jan., 01 Goods purchase for cash 1,200
Jan., 02 Purchase good from Ram 1,500
Jan., 04 Goods sold to Laxman 1,000
Jan., 05 Furniture purchase for cash 800
Jan., 07 Charge interest on capital 2,500
Jan., 11 Goods return from Laxman 200
Jan., 12 Goods return to Ram 500
Jan., 14 Withdrew from bank for private use 6,000
Jan., 16 Give in charity: Cash 100
Goods 200
Jan., 19 Salaries paid by cheque 4,000
Jan., 21 Goods sold to Sachin on 10% trade discount and 8% Cash discount 1,000
Jan., 23 Laxman become insolvent and could pay only 75 paise in a rupee
Jan., 26 Proprietor took goods for his personal use 2,000
Jan., 29 Postage Rs. 200 and Rent Rs. 1000 Paid
Jan., 31 Received Rs. 4,000 from insurance company
Answer to the all Question No-1

i) What do you mean by accounting?

Answer:Accounting operates within a broad socioeconomic environment, a

nd so, the knowledge required of the accountant cannot be sharply compart
mentalized. It is therefore, difficult to discuss one area without relating to ot
her areas of knowledge. The broad objects of Accounting may be briefly sta
ted follows:

1.To maintain the cash accounts through the Cash Book and to find out the
Cash balance on any particular day.

2. To maintain various other Journals for recording day-to day non

cash transactions.

ii) Distinguish between Profit and Loss Account and trading a/c.

Answer: Distinguish between profit and loss account and trading account
given below:

Basis Trading Account Profit and Loss Account

1.Stage of It is the first stage of final It is the second stage of
Final accounts. the final accounts.
Account
2.Nature The gross profit or gross loss The profit and loss account
are ascertained from the is prepared to ascertain the
trading account. net profit or net loss of the

3.Relation Trading account is a part of
profit and loss account.
4.Transfer of The balance of the trading
Balance Account is transferred to the
Profit and Loss Account.
5.Item Items shown in the Trading
Account are Purchases, Sales, expenses related to sales,
Stock, Direct expenses etc.
business.
Profit and Loss Account is
the main account.
The Balance of the Profit
and Loss Account is
transferred to the Capital
Account of the proprietor.
Items like indirect
distribution, administration,
finance etc. are shown in
the profit and loss Account.

iii) What do you mean by incomplete records?

Answer:
Accounts from incomplete records is the system in which we convert single
entry system into double entry system. As per accounting rules, single entr
y system can only show incomplete records because accountant (who follo
ws this single entry system) do not records the expenses and revenue. He j
ust record total cash and credit. It means, it is very difficult to know the profi
t or loss of such business because we cannot make profit and loss accounti
n single entry system. For converting incomplete records into complete rec
ords with double entry system, we need current years profit or loss.

iv) What do you mean by forfeited of share? Explain with example.

Answer: A forfeited share is a share in a company that the owner loses
(forfeits) by failing to meet the purchase requirements. Requirements may
include paying any allotment or call money owed, or avoiding selling or
transferring shares during a restricted period. When a share is forfeited, the
shareholder no longer owes any remaining balance, surrenders any
potential capital gain on the shares and the shares become the property of
the issuing company. The issuing company can re-issue forfeited shares at
par, a premium or a discount as determined by the board of directors.

v) Explain any one method of depreciation.

Straight-line Depreciation
The simplest and most commonly used method, straight-line depreciation is
calculated by taking the purchase or acquisition price of an asset,
subtracting the salvage value (value at which it can be sold once the
company no longer needs it) and dividing by the total productive years for
which the asset can reasonably be expected to benefit the company (or its
useful life).

Example: For $2 million, Company ABC purchased a machine that will

have an estimated useful life of five years. The company also estimates
that in five years, the company will be able to sell it for $200,000 for scrap
parts.

Q. 2. What do you mean by accounting? Who are the users of accounting?

Explain its scope.

Accounting is the systematic and comprehensive recording of financial

transactions pertaining to a business, and it also refers to the process of
summarizing, analyzing and reporting these transactions to oversight
agencies and tax collection entities. Accounting is one of the key functions
for almost any business; it may be handled by a bookkeeper and
accountant at small firms or by sizable finance departments with dozens of
employees at large companies.
User of Accounting: Financial accounting information is used for decision
making by external users, such as investors and creditors.
Managerial accounting information is used for decision making by
internal users, such as the management or operational managers.

Scope of Accounting: Accounting is the language of business. The main

objectives of Accounting are to safeguard the interests of the business, its
proprietors and others connected with the business transactions. This is
done by providing suitable information to the owners, creditors,
shareholders, Government, financial institutions and other related
agencies.

Q. 3. Define debenture. Explain the various types of debentures.

Answer: Debenture is a security issued or allotted to the investors under

the seal of the company, who become creditors of the company. Therefore,
a debenture may be defined as a document issued by the company as an
evidence of its debt.

Types of Debentures

The major types of debentures are as follow:-

1. Ordinary Debentures

It is the first type of debentures, which does not hold any security on
account. These debentures are standing in the similar point as any other
unsecured creditors and having no concern at the time of company winding
up.

2. Mortgage Debentures

These types of debentures are secured against the credit on the actual
property of the company. The holder of debenture has a lawful right to sell
the possessions and recover the credit if the company does not refund the
borrowed money at a particular period of time.

3. Redeemable Debentures

Redeemable debentures are refundable after a particular period of time. On

these debentures, actual interest is paid from time to time, but amount of
principal is refund after a predetermined period. These are issued on
redeemable basis, therefore company mostly refers to borrow amount on
redeemable debentures.

4. Irredeemable Debentures

These types of debentures are not refundable during the life time of the
issuing company. These are only to be paid either at the time of any failure
to pay on the part of the company or on the winding up of the company.

5. Registered Debentures
These types of debentures are issued in the name of specific person. The
name must show on the front side of the bond and also in the company
books.

6. Bearer Debentures

These does not show specific name of person on the bond. The holder of
said debenture is allowed to receive any interest fee on the payable dates.

7. Equipment trust Debentures

These debentures are issued to raise funds for the purchase of new
equipment of a business.

8. Convertible Debentures

It certain cases, the company allow the debentures holders to convert their
debentures for the Shares of the company. If the investor avails of this
provision, then he becomes the shareholder of the company.

Answer to the Question No-04

Journal in the books of M/s Sohan & Sons for the period from 1st to
31th January 2008.

V/R Amount Amount

Date Particulars L/F
No (Debit) (Credit)
Goods/Stock a/c Dr 1,200
- -
Jan-01 To Cash a/c Cr 1,200
- -
[Being the value of stock
 purchased for cash]
Goods/Stock a/c Dr 1,500
To Ram a/c Cr 1,500
- -
Jan-02 [Being the value of stock
- -
purchased from Mr. Ram on
credit ]
Laxman a/c Dr 1,000
To Goods/Stock a/c Cr 1,000
- -
Jan-04 [Being the value of stock
- -
sold to Mr. Laxman on
credit ]
Furniture a/c Dr 800
- Cash a/c Cr - 800
Jan-05
- [Being the furniture -
purchased for cash]
P & L Appropriation A/c Dr 2,500
-
Jan-07 To Partners' Capital A/c Cr 2,500
-
[Being Charged on Capital]
Goods/Stock a/c Dr 200
- To Laxman a/c Cr - 200
Jan-11
- [Being goods returned from -
Laxman]
Ram a/c Dr 500
- To Goods/Stock a/c Cr - 500
Jan-12
- [Being goods returned to -
Ram]
 Drawings a/c Dr 6,000
To Bank a/c Cr 6,000
- -
Jan-14 [Being the amount of
- -
withdrawn from bank
for personal use]
Charity a/c Dr 300
To cash a/c Cr 100
- -
Jan-16 To Purchases a/c Cr 200
- -
[Being give charity by cash
and goods]
Salary a/c Dr 4,000
- To cash a/c Cr - 4,000
Jan-19
- [Being salary paid by -
cheque]
Cash a/c Dr 828
Discount a/c Dr 72
- To Sales a/c Cr - 900
Jan-21
- [Being sold on 10% trade -
discount and 8% cash
discount}
Cash a/c Dr 600
Bad debt a/c Dr 200
- -
Jan-23 To Laxman a/c Cr 800
- -
[For cash received and bad
debts written off]
Jan-26 - Drawings a/c Dr - 2000
 - To Purchases a/c Cr - 2000
[For cash and goods taken
away for personal use]
Rent paid a/c Dr 1000
Postage a/c Dr 200
- -
Jan-29 To cash a/c Cr 1200
- -
[Being paid rend and
postage]
Accounts Receivable Dr 4000
- -
Jan-31 To Insurance 4000
- -
Compensation Cr