Name: - SHIVAM CHANDRAKANT CHOKSI

Roll Number: - 2314100177

BBA [Semester-2]

Financial Accounting

(DBB1202)
 SET-I

1. Journalize the following transactions in the books of JL ltd for the month of Jan
2023:
1. Started business with cash Rs.1,00,000
2. Sold goods to R Rs.2,000
3. Bought office furniture Rs.30,000
4. Paid cash to M Rs.2,000
5. Salary Paid Rs.10,000
6. Rent received Rs.3,000
7. Purchased goods from H for cash Rs.9,000
8. Goods returned by R Rs.200
9. Interest on capital paid to owner Rs.800
10. Returned goods to H Rs.300
Journal Entry in the books of JL ltd.
For the month of January
Date Particular L.F Dr.(₹) Cr.(₹)
1) Cash A/c 100000
To Capital A/c 100000
(Being business initiated with cash)
2) R’s A/c 2000
To Sales A/c 2000
(Being goods sold to R)
3) Furniture A/c 30000
To Cash A/c 30000
(Being furniture purchased)
4) M’s A/c 2000
To Cash A/c 2000
(Being cash paid to M)
5) Salary A/c 10000
To Cash A/c 10000
(Being salary paid)
6) Cash A/c 3000
To Rent A/c 3000
(Being rent received)
7) Purchase A/c 9000
To Cash A/c 9000
(Being goods purchased from H for cash)
8) Sales Return A/c 200
To R’s A/c 200
(Being goods returned from R)
9) Interest on capital A/c 800
To Capital A/c 800
(Being interest received)
10) Cash A/c 300
To Purchase A/c 300
(Being cash received from H for goods 157300 157300
returned)
2. Elaborate the following accounting concepts:
a. Money measurement concept
b. Cost concept
c. Dual aspect concept
d. Accrual concept

The Accounting concepts are elaborated in brief herein-below:

a. Money measurement concept:

Explanation: The concept of monetary measurement in accounting means that transac
tions and events that can only be expressed in financial terms are recorded. This conc
ept means that accounting can only capture and report business activities that have an
impact on the financial position of the organization.
Importance: Because the collection of measured values
is restricted, financial information is complete and comparable. This concept simplifi
es complex business situations into meaningful results, thus promoting clarity and str
ucture in financial reporting.
b. Cost Concept:
Explanation: The value proposition suggests that assets should be recorded on the bo
oks at their historical cost (cash or cash equivalents paid or the fair value of other pur
chased assets). This concept means that an asset is initially valued at its purchase pric
e and then adjusted for depreciation or impairment.
Importance: The concept of cost provides a reliable basis for valuing assets and supp
orts the objectivity and accuracy of financial information. It ensures that financial stat
ements reflect the economic performance of the business by capturing the actual reso
urces sacrificed to acquire assets.
c. Dual Aspect Concept:
Explanation: Double-Ended Concept is the basis of double-
entry accounting, which states that every transaction has two sides (debit and credit)
and all debits must equal the total score. This concept reflects the idea that all financi
al transactions involve giving and receiving something of value.
Importance: Do double accounting to ensure balance (Assets = Liabilities + Equity) r
emains. It promotes accuracy, accountability and the preparation of reliable financial
information by providing an effective and comprehensive approach to financial repor
ting.
d. Accrual Concept:
Explanation: The effective concept recognizes revenues and expenses as they are rec
eived or incurred, regardless of when the cash is received or paid. This strategy is to
make the impact of expenses incurred in revenue on financial performance more evid
ent by increasing revenue.
Importance: Improves the accuracy of financial reporting by aligning income, income
and expenses with the period to which they relate. It provides a true picture of an org
anization's financial health and performance, allowing users to make decisions based
on the best view of the market.
 The bottom line:
Combining accounting elements creates a simple system that guides recording, report
ing and interpreting financial transactions. The concept of financial measurement em
phasizes the value of events, the concept of value ensures the reliability of assets, the
concept of duality necessitates systematic recording and enables the owner of the inc
ome to improve the products and financial information of the enterprise. Together, th
ese strategies help increase the reliability, consistency and relevance of financial info
rmation, encouraging transparency and informed decision-making by stakeholders.

3. The clerk of a firm has incorrectly drafted the following Trial balance. Draft the
correct trial balance from the details:

S.no Particulars Dr Cr
1 Capital 60,000
2 Opening stock 5,000
3 Discount allowed 500
4 Commission received 700
5 Fixed assets 60,000
6 Sales 85,000
7 Purchases 45,000
8 Return outward 1,000
9 Return inward 2,000
10 Carriage Inward 600
11 Carriage outward 700
12 Wages & Salary 25,000
13 Bills receivable 7,000
14 Debtors 9,000
15 Bills payable 7,000
16 Rent 3,000
17 Interest paid 2,000
18 Cash 800
19 Creditors 6,900
20 Closing Stock 33,800
1,77,500 1,77,500
 In the books of X firm
Trial Balance
As on date
Sr. No. Particular Dr. Cr.
1. Capital 0 60000
2. Opening Stock 5000 0
3. Discount Allowed 500 0
4. Commission Received 0 700
5. Fixed Assets 60000 0
6. Sales 0 85000
7. Purchases 45000 0
8. Return Outward 0 1000
9. Return Inward 2000 0
10. Carriage Inward 600 0
11. Carriage Outward 700 0
12. Wages & Salary 25000 0
13. Bills Receivable 7000 0
14. Debtors 9000 0
15. Bills Payable 0 7000
16. Rent 3000 0
17. Interest Paid 2000 0
18. Cash 800 0
19. Creditors 0 6900
20. Closing Stock 0 0
160600 160600
 SET-II

4. Discuss the meaning, features, and advantages of a Bill of exchange. Highlight

the meaning and process of acceptance of a bill of exchange.

A bill of exchange is a negotiable instrument used in trade transactions, serving as a

written order from the drawer to the drawee (debtor) to pay the specified amount to
the payee (creditor) on a specified date. It involves three parties: the drawer who
issues the bill of exchange, the drawee who directs the payment, and the payee who
receives the payment.
Features:
1. Negotiability: A bill of exchange is negotiable, that is, it can be transferred from o
ne party to another by agreement. The Secretary may transfer the right to receive pay
ments to third parties, providing flexibility in business transactions.

2. Unconditional Instructions: The payment instructions contained in the bill of exch

ange are unconditional, meaning that the payment must be made according to the con
ditions specified in the bill of exchange. Any event or circumstance can make the prop
erty non-negotiable.

3. Written: The transfer must be in writing, a certified copy, or on paper. The writing
regarding business transactions is clear and accurate.

4. Three Parties: A bill of exchange has three main parties; issuer, arranger and credi
tor. The drawer initiates the bill, the sender is instructed to pay, and the cashier collect
s the money.

Advantages:
1. Credit Facilitation:
Exchange rates facilitate lending in the economy. Sellers may offer credit terms to
give buyers time to pay. This helps improve business relationships and business c
ontinuity.
2. Funds:
Banks can reduce transaction fees by providing funds just before the due date. Thi
s is a source of financing for businesses to meet their short-term revenue needs.
3. Records of Transactions:
The bill of lading serves as the legal document of a transaction, specifying the ter
ms of payment. This helps resolve disputes and provide evidence in case of legal i
ssues.
4. Trade Flexibility:
Exchange rates are flexible, allowing both parties to negotiate terms such as maturity
dates, payment methods and credit periods. This change can meet the different needs
of businesses in the sector.
 Acceptance of a Bill of Exchange: Meaning and Process
Definition:
Bill of exchange acceptance refers to the way the payer accepts the bill of exchange in
writing for confirmation of the obligations to pay the specified amount on maturity.
Acceptance transforms a bill of exchange into a legal document and indicates the
holder’s commitment to fulfil payment obligations.

Methods:
1. Presentation of documents:
The creditor presents his receipt to the creditor. This is usually done by sending the in
voice to the sender or presenting it by the bank.
2. Decision of the drawer:
The signatory examines the transfer and decides to accept or reject it. If the creditor ac
cepts, he or she usually writes "Acceptance" on the face of the invoice and adds the si
gnature and date.
3. Legal significance:
Acceptance transforms a bill of exchange into a negotiable instrument with legal effec
t. The legal payer must secure the order money by making payment on the agreed date
4. Return to Holder:
After acceptance, the instrument is returned to the holder, who now holds the legally r
ecognized and recognized instrument. The buyer can keep this until it is finished or ne
gotiate further if necessary.
In summary, exchange rates are an important tool in commercial transactions, credit, f
inancing and storage processes. Acceptance increases the legality of the bill of exchan
ge, including the payer's commitment to pay, and ensures the security of financial tran
sactions.

5. State the meaning of Depreciation. Also highlight the causes and need of
charging depreciation.

Depreciation is an accounting method that allocates the cost of an asset over its useful
life. It indicates the decrease in the financial value or utility of an asset due to factors s
uch as wear, tear, malfunction, or the passage of time. This classification is necessary
because assets such as machines, buildings or vehicles must contribute to the compan
y's activities for a limited period of time.

The purpose of depreciation is to match the value of the asset with the income it produ
ces over its useful life. By doing this, companies can ensure that their financial statem
ents reflect the true value of assets, making it easier to accurately calculate and plan fo
r property replacement. Amortization is necessary to maintain the accuracy and transp
arency of financial reporting, comply with business principles, and facilitate business
decisions.
 Depreciation Causes:
1. Wear and tear:
Regular use and exposure to the natural environment can cause physical damage such
as machinery and vehicles. .

2. Obsolescence:
Over time, technological advances can make an asset obsolete or less useful, causing i
ts value to decrease.

3. Expiry or Legal Rights:

Property rights that are not protected by law, such as patents or copyrights, lose value
as the rights expire.

4. Loss of Time:
The passage of time causes assets such as buildings and structures to decrease in value
and age.

5. Shortage:
Changes in labor demand or increased demand can cause a decrease in supply, leading
to a decline.

Need for Charging Depreciation:

1. Matching Principle: According to this principle, ensure that the expense (depreciat
ion) matches the income of the asset over its useful life.

2. True Profit Calculations:

Realize results by determining the cost of using assets to generate revenue and reduce
costs based on expenses.

3. Asset replacement planning: Help plan the timely replacement or replacement of

assets to maintain operational efficiency.

4. Asset Valuation: Ensure the value of assets is reflected on the balance sheet by sho
wing their market value as they age.

5. Standards compliance: Compliance with accounting standards to promote consist

ency and comparability of financial reporting across businesses.

6. Narrate the various types of debentures.

Debentures (bonds) are debt instruments issued by companies to raise money. They
represent a bond under which the issuing company agrees to repay the money and
interest to shareholders. Different types of contracts are available to meet different
needs and preferences of investors. The various types of debentures are mentioned in
brief herein-below:
1. Convertible Bonds:
Features: Convertible bonds allow their holders to convert debt into equity after a cert
ain period of time, giving them the opportunity to participate in company ownership.
Advantages: Interested investors looking for potential interest and investors interested
in the company turning into equity capital for long-term benefits.

2. Non-Convertible Bonds:
Features: Non-
convertible bonds do not have the option to be converted into equity. They provide the
main source of fixed income and growth.
Advantages: Attractive for investors looking for regular income without stock risk.

3. Secured Debentures:
Features: Covered bonds are backed by certain assets of the issuing company. In case
of default, bondholders have a claim on the assets.
Advantages: Appeals to reluctant investors as it provides an extra layer of security.

4. Unsecured Debentures:
Features: Unsecured or "naked" bonds are not backed by any collateral. It all depends
on the creditworthiness and reputation of the company in question.
Advantages: Generally offers higher interest rates, but involves higher risk due to lack
of collateral.

5. Redeemable Debentures:
Features: Callable bonds have a period of time to be completed and the issuing compa
ny will repurchase them at face value or premium when they mature.
Advantages: It allows companies to manage long-
term debts by offering clear repayment terms to investors.

6. Irredeemable Debentures:
Features: They are also called perpetual bonds and these have no expiration date. The
issuing company has no obligation to repay the principal.
Advantages: Provides permanent capital to the sender, but may provide higher interest
to cover the gap in repayment.

7. Zero Coupon Debentures:

Features:
Zero Coupon Bonds do not pay regular interest. Instead, they are issued at a discount t
o nominal value, with interest tied to the redemption price.
Advantages: Since bonds are generally redeemed at their nominal value, they are attra
ctive to investors seeking interest.
8. First Mortgage Debentures:
Features: Initial loan agreement will provide greater security to investors by guarantee
ing initial claims or loans for certain assets of the company.
Advantages: It is a safer investment option than a second mortgage or mortgage loan.

In short, different bond types suit investors' different risks, investment preferences and
financial goals. Investment firms offer different types of bonds depending on their ca
pital requirements, risk appetite and market conditions. Investors also choose bonds th
at suit their financial goals and risk profiles.