Chapter recording-of-transactions-i: Recording of Transactions - I Case Study Questions | accountancy Class 11 CBSE

Chapter recording-of-transactions-i: Recording of Transactions - I Case Study Questions | accountancy Class 11 CBSE | ByteNotes.in

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Case Set 1

Case Analysis

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Ramesh started a business by investing ₹3,00,000 in cash. He opened a bank account and deposited ₹2,50,000. He then purchased furniture worth ₹40,000 by issuing a cheque. Subsequently, he bought goods worth ₹60,000 on credit from Suresh Traders. He also sold goods costing ₹20,000 to Ravi for ₹28,000 on credit. At each stage, Ramesh's accountant recorded the transactions using source documents like cash memos and invoices, prepared accounting vouchers, and made journal entries. Ramesh wants to ensure that at every stage the accounting equation holds true and that each transaction is properly journalised and posted to the ledger accounts.

Question 1: What is the accounting equation, and how does it hold after Ramesh's initial investment of ₹3,00,000 in cash?

The accounting equation is A = L + C, where A = Assets, L = Liabilities, and C = Capital.
After the initial investment: Assets (Cash ₹3,00,000) = Liabilities (₹0) + Capital (₹3,00,000), so the equation is balanced.

Question 2: How does the purchase of furniture worth ₹40,000 by cheque affect the accounting equation?

Bank (asset) decreases by ₹40,000 and Furniture (asset) increases by ₹40,000.
The total assets remain unchanged, so the accounting equation stays balanced: one asset replaces another.

Question 3: Show the journal entries for (a) credit purchase of goods from Suresh Traders ₹60,000 and (b) credit sale of goods costing ₹20,000 to Ravi for ₹28,000, and explain the effect on the accounting equation.

(a) Purchases A/c Dr. ₹60,000 / To Suresh Traders A/c ₹60,000 — Expenses (Purchases) increase and Liabilities (Creditor) increase.
(b) Ravi A/c Dr. ₹28,000 / To Sales A/c ₹28,000 — Assets (Debtor) increase by ₹28,000 and Revenue increases; simultaneously Stock (asset) decreases by ₹20,000 and Capital increases by profit ₹8,000.
Net effect: Equation remains balanced as every debit has a corresponding credit of equal amount.

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Case Set 2

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Priya runs a small retail shop. On 1st April she commenced business with cash ₹1,50,000. She purchased goods for cash ₹30,000 and also bought goods worth ₹50,000 on credit from Anita. She sold goods costing ₹20,000 for ₹26,000 in cash. She paid salary of ₹5,000 and rent of ₹3,000 in cash. Her accountant prepares accounting vouchers for every transaction. The vouchers contain the date, name of accounts to be debited and credited, amount, narration, and the signature of the authorised person. Priya's accountant also ensures that all vouchers are serially numbered and kept in a separate file for audit purposes.

Question 1: What is a source document and why is it important in accounting?

A source document is a document that provides evidence of a business transaction, such as cash memo, invoice, pay-in-slip, cheque, salary slip, etc.
It forms the basis of recording transactions in books of account and provides authenticity and legal evidence for the entries made.

Question 2: What are the essential elements that must be present in an accounting voucher?

An accounting voucher must contain: name of the firm, date of transaction, serial number, name of account(s) to be debited/credited, amount in figures, narration, and signatures of the preparer and authorised person.
It must be written on good quality paper and the date of transaction (not date of recording) must be mentioned.

Question 3: Prepare accounting equation showing the effect of Priya's transactions on assets, liabilities, and capital.

Start: Cash ₹1,50,000 = Capital ₹1,50,000.
After purchases (cash ₹30,000 and credit ₹50,000): Cash ₹1,20,000 + Goods ₹80,000 = Creditor ₹50,000 + Capital ₹1,50,000.
After cash sales (cost ₹20,000 for ₹26,000): Cash ₹1,46,000 + Goods ₹60,000 = Creditor ₹50,000 + Capital ₹1,56,000.
After salary ₹5,000 and rent ₹3,000: Cash ₹1,38,000 + Goods ₹60,000 = Creditor ₹50,000 + Capital ₹1,48,000.

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Case Set

Case Set 3

Case Analysis

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Sohan, a trader, maintains proper books of accounts. He records all transactions first in the journal and then posts them to the ledger. On 1st June he started business with ₹2,00,000 cash. He opened a bank account with ₹1,60,000. He purchased office furniture by cheque ₹25,000. He bought goods from Mohan for ₹40,000 on credit. He sold goods costing ₹15,000 to Rohit for ₹20,000 in cash. Sohan understands that the journal is the book of original entry and every transaction must follow the double entry system where total debits must equal total credits. His accountant uses T-accounts to analyse the effect on each account.

Question 1: What is the journal and why is it called the 'Book of Original Entry'?

The journal is the basic book in which transactions are recorded for the first time in chronological order.
It is called the Book of Original Entry because transactions are first entered here before being transferred (posted) to the ledger.

Question 2: What is the difference between a simple journal entry and a compound journal entry? Give one example from Sohan's transactions.

A simple journal entry involves only two accounts — one debit and one credit (e.g., purchase of furniture by cheque: Furniture A/c Dr. / To Bank A/c).
A compound journal entry involves more than two accounts, e.g., if Sohan paid part cash and the rest on credit for goods — Purchases A/c Dr. / To Cash A/c and To Mohan A/c.

Question 3: Record journal entries for the following Sohan's transactions: (a) Opened bank account ₹1,60,000 (b) Purchased furniture by cheque ₹25,000 (c) Bought goods from Mohan ₹40,000 on credit (d) Sold goods (cost ₹15,000) to Rohit for ₹20,000 cash.

(a) Bank A/c Dr. ₹1,60,000 / To Cash A/c ₹1,60,000 — Bank increases, Cash decreases.
(b) Furniture A/c Dr. ₹25,000 / To Bank A/c ₹25,000 — Asset exchange.
(c) Purchases A/c Dr. ₹40,000 / To Mohan A/c ₹40,000 — Expense increases, Liability increases.
(d) Cash A/c Dr. ₹20,000 / To Sales A/c ₹20,000 — Asset increases, Revenue increases; Stock decreases by ₹15,000 and Capital increases by profit ₹5,000.

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Case Set 4

Case Analysis

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M/s Saroj Mart commenced business on 1st April 2023 with cash ₹1,50,000. The proprietor opened a bank account with SBI by depositing ₹35,000. Goods were purchased from Manisha on credit for ₹36,000. Stationery was purchased for cash ₹2,200. Goods were sold to Priya for ₹16,000 on credit and a cheque of ₹16,000 was subsequently received from Priya and deposited in bank. Insurance was paid by cheque ₹6,000. Rent of ₹2,000 was paid in cash. Salaries of ₹12,000 were paid in cash. The accountant of Saroj Mart follows the double entry system strictly and records narrations for every journal entry.

Question 1: What is narration in a journal entry and what is its purpose?

Narration is a brief description of the transaction written below the journal entry, explaining the reason or nature of the transaction.
Its purpose is to provide a clear understanding of the transaction and serve as a reference for future verification of entries.

Question 2: Journalise the receipt of cheque from Priya (₹16,000) and its deposit into bank on the same day.

Bank A/c Dr. ₹16,000 / To Priya A/c ₹16,000.
This reduces the debtor (Priya) and increases the bank balance; it is a simple journal entry involving one debit and one credit.

Question 3: Prepare journal entries for (a) payment of insurance by cheque ₹6,000, (b) rent paid ₹2,000 cash, and (c) salaries paid ₹12,000 cash, and state the type of account and rule applied in each case.

(a) Insurance Premium A/c Dr. ₹6,000 / To Bank A/c ₹6,000 — Expense account debited (increase in expense), Asset account credited (decrease in bank).
(b) Rent A/c Dr. ₹2,000 / To Cash A/c ₹2,000 — Expense account debited (increase in expense), Asset account credited (decrease in cash).
(c) Salaries A/c Dr. ₹12,000 / To Cash A/c ₹12,000 — Expense account debited (increase in expense), Asset account credited (decrease in cash).

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Case Set 5

Case Analysis

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A business entity's accountant is explaining the concept of ledger to a new trainee. He explains that the ledger is the principal book of entry and contains all accounts. After journal entries are made, they are posted to the ledger. Each account in the ledger has two sides — the debit (left) side and the credit (right) side. The difference between the two sides is called the balance. For example, if a customer's account has total debits of ₹40,000 (goods sold) and total credits of ₹25,000 (payments received), the debit balance of ₹15,000 represents the amount still receivable. The accountant also explains that the Ledger Folio (L.F.) number is filled in the journal at the time of posting, and the journal folio number is filled in the ledger account.

Question 1: What is the ledger and what is its role in the accounting process?

The ledger is the principal book of entry that contains all accounts to which entries are transferred from the books of original entry.
It enables the determination of the ultimate position (balance) of each account at the end of an accounting period.

Question 2: What is posting and what is the significance of the Ledger Folio (L.F.) column in the journal?

Posting is the process of transferring entries from the books of original entry (journal) to the respective accounts in the ledger.
The L.F. column records the page number of the ledger where the relevant account appears; it is filled at the time of posting, not while making the journal entry, to establish a cross-reference between the journal and ledger.

Question 3: Distinguish between the journal and the ledger on the basis of (a) nature, (b) purpose, and (c) sequence of use.

(a) Nature: Journal is the book of original entry where transactions are recorded first in chronological order; Ledger is the principal book containing individual accounts.
(b) Purpose: Journal records every transaction in a narrative form with debit and credit; Ledger summarises all transactions for each account showing its balance.
(c) Sequence: Journal is written first (journalising) and then entries are transferred to the ledger (posting), making the journal the precursor to the ledger.

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Chapter sections

Chapter recording-of-transactions-i: Recording of Transactions - I | Case Study Questions

Passage

Question 1: What is the accounting equation, and how does it hold after Ramesh's initial investment of ₹3,00,000 in cash?

Question 2: How does the purchase of furniture worth ₹40,000 by cheque affect the accounting equation?

Question 3: Show the journal entries for (a) credit purchase of goods from Suresh Traders ₹60,000 and (b) credit sale of goods costing ₹20,000 to Ravi for ₹28,000, and explain the effect on the accounting equation.

Passage

Question 1: What is a source document and why is it important in accounting?

Question 2: What are the essential elements that must be present in an accounting voucher?

Question 3: Prepare accounting equation showing the effect of Priya's transactions on assets, liabilities, and capital.

Passage

Question 1: What is the journal and why is it called the 'Book of Original Entry'?

Question 2: What is the difference between a simple journal entry and a compound journal entry? Give one example from Sohan's transactions.

Question 3: Record journal entries for the following Sohan's transactions: (a) Opened bank account ₹1,60,000 (b) Purchased furniture by cheque ₹25,000 (c) Bought goods from Mohan ₹40,000 on credit (d) Sold goods (cost ₹15,000) to Rohit for ₹20,000 cash.

Passage

Question 1: What is narration in a journal entry and what is its purpose?

Question 2: Journalise the receipt of cheque from Priya (₹16,000) and its deposit into bank on the same day.

Question 3: Prepare journal entries for (a) payment of insurance by cheque ₹6,000, (b) rent paid ₹2,000 cash, and (c) salaries paid ₹12,000 cash, and state the type of account and rule applied in each case.

Passage

Question 1: What is the ledger and what is its role in the accounting process?

Question 2: What is posting and what is the significance of the Ledger Folio (L.F.) column in the journal?

Question 3: Distinguish between the journal and the ledger on the basis of (a) nature, (b) purpose, and (c) sequence of use.

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