Basic Accounting Assignment

Topics: Generally Accepted Accounting Principles, Balance sheet, Accounts receivable Pages: 7 (814 words) Published: April 28, 2012
1- Explain the collecting, recording, classifying, summarizing, analyzing and reporting process of accounting.

- Collecting:-
Data obtained from various sources with the help of appropriate measures is called collection of data.

- Recording:-
Arranging the data into its chronological form is called recording of data.

- Classifying:-
Division of data according to nature of events is called classification of data. - Ledger is used for classifying transactions
- Posting is the process of transferring transactions from journal to ledger.

- Summarizing:-
This involves presenting the classified data in a manner which is understandable and useful to the management and other interested parties. Follow statements are prepared:- - Income statement

- Balance Sheet
- Cash flow statement

- Analyzing:-
The comparison of data in a business is called analyzing of data. For example, analyzing of present data with past data, or actual data with projected data.

- Reporting:-
Forwarding the results to financial users like chairman, directors, managers etc. is called reporting of data.

2- Discuss in detail the nature of accounts i.e. assets, expenses, liabilities, revenues and capital by giving examples.

- Assets:-
The resources of a business are called assets. They are of two types:- - Fixed Assets: Land, Building, Equipment, Vehicle etc.
- Current Assets: Cash, cash at bank, A/c receivable, debtors, prepaid expenses.

- Expenses:-
The amount spent in a business with a view to gain profit in the future is called expense. Examples are rent expenses, salaries expenses, advertisement expenses etc.

- Liabilities:-
The financial responsibilities of the business for which it is liable are called liabilities. They are divided into two types:- - Fixed Liabilities (Bank Loan, Bonds Payable, Mortgage Payable.) - Current Liabilities (Notes Payable, Unearned Income, Creditors.)

- Capital:-
The amount of money invested by the owner in the business is called capital.

- Revenue:-
The incomes and the profits earned in the business through selling are called revenues. For example, Sales, Service revenue, Interest, commission earned.

- Drawings:-
The amount of money taken away by the proprietor for personal benefits is called Drawings.

3- Describe the accounting rule of debit and credit for accounts like assets, expenses, liabilities, revenues and capital.

- Assets
- Increase in Asset is debit.
- Decrease in Asset is credit.

- Liabilities
- Increase in liabilities is credit.
- Decrease in liabilities is debit.

- Revenues
- Increase in revenues is credit.
- Decrease in revenues is debit.

- Expenses
- Increase in expense is debit.
- Decrease in expense is credit.

- Capital
- Increase in capital is credit.
- Decrease in capital is debit.

4- Select any twenty categories from the above and identify a transaction that will have the required effect on the business.

1- Purchased Goods on credit 25,000.
2- Gave services for cash 5,000.
3- Brought cash in business 65,000.
4- Adjusting entry of out standing salaries 9000.
5- Wages wrongly debited to Sales 400.
6- Salaries wrongly debited to Drawings 600.
7- Paid to accounts payable in cash 1500.
8- Goods returned by customer worth 650.
9- Withdrew cash for personal use 550.
10- Payment to accounts payable wrongly debited to rent a/c 3000. 13- Received cash from accounts receivable 3000.
14- Building purchased wrongly debited to Wages a/c 165,000. 15- Rent paid wrongly debited to advertising expense a/c 1000. 16- Paid charity in cash 2000.
17- Issued note payable to creditor worth 3500.
18- Loan taken wrongly credited to service income 3500.
20- Commission received was...
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