What is Journalizing? What are the columns of a journal?

Journalizing is the process of recoding business transactions in the Journal in chronological order, as and
when the transactions take place. Journal is also known as Book of Original Entry or the Book of Prime
Entry.
Journal has following five columns:
-Date
-Particulars
-Ledger Folio
-Amount Debited
-Amount Credited

Explain Compound Journal Entry.

In day to day business, various similar transactions take place on the same day and every account is
either debited or credited. Thus instead of passing different entries, a compound entry can be passed,
which involves more than one debit or more than one credit or both. This makes the journal less bulky
and avoids duplication.

List the type of transactions entered in Journal proper.

The Journal proper is used to record following transactions:-Opening Entries : are the entries which are made at the starting of the financial year.
-Closing Entries : At the close of the accounting period balances from the various accounts are
transferred in order to balance the books of accounts. Thus, this process of transferring balances of the
trading and profit and loss account at the end of year is called closing the books and entries passed at
that time are called closing entries.
-Transfer Entries : are the entries which are passed in order to transfer one account to another account.
- Adjustment Entries : are passed at the end of an accounting period in order to modify the accounts.
-Rectification Entries : are passed to rectify the error detected the books through an entry in journal
proper.
-Entries for rare transactions : Journal proper is used for rare transactions.

-Entries for which there is no special journal : When the transactions cannot be recorded in the above
sub journals then the same are entered in the journal proper.
Examples of such transactions are: Distribution of goods as free sample, Goods destroyed by fire, etc

Explain Purchase day book.

Purchase Day book (Purchase Register)is the book of original entry in which all the transactions relating
to only credit purchase are recorded. Cash purchases do not find place in purchase day book as they are
recorded in Cash book. At the end of every month purchase day book is totalled. The total amount show
the total goods purchased on credit. The total of purchase book is debited to the purchase account and
the accounts of the suppliers of goods are credited with the amount standing against their names. Ruling
of purchase day book is different from a journal. There are five columns in a purchase day book: first
column records Date, second column records name of the supplier, quantity supplied, Rate at which
quantity supplied, description, etc. , third column records Invoice number, fourth column records Ledger
Folio, fifth column records total amount to the supplier.

What are control ledgers? What are the purposes of maintaining it?
In a business, sometimes it is not feasible to carry accounts of all the suppliers and customers in the main
ledger. In such cases apart from General or main ledger, the control ledgers are maintained. Control
ledgers records the individual accounts. In the end of the period, balance shown in the main ledger has to
tally with the balance in the individual ledger accounts maintained in the control ledger. Purposes of
maintaining control ledgers are:
- Sundry Debtors
- Sundry Creditors
- Advances to Staff

What is Trial Balance? What does an accurate Trial Balance suggest?

Trial Balance is a summary of all the balances of various ledger accounts and Cash/Book accounts of an
organisation at any given date. For the preparation of Trial Balance the entire Ledger accounts and Cash
book/Bank book are required to be balanced to get the closing balance. Assets and Expenses accounts
having debit balance are posted on debit side whereas Income and Liability accounts having credit
balance are posted on credit side of the Trial Balance.
An accurate Trial Balance is an evidence that all the transactions are recorded and posted in the General
Ledger account as per the accounting principles. It also ensures arithmetical accuracy of the process of
ledger posting.

What are the reasons which cause pass book of the bank and your bank book not tally?
* Cheques deposited into the bank but not yet collected
* Cheques issued but not yet presented for payment
* Bank charges
* Amount collected by bank on standing instructions of the concern.
* Amount paid by the bank on standing instructions of the concern.
* Interest debited by the bank
* Interest credited by the bank
* Direct payment by customers into the bank account
* Dishonour of cheques
* Clerical errors

What steps would you take to locate the errors in case Trial Balance disagrees?
In case Trial Balance disagrees, following steps should be taken to locate the errors:
-Totalling of all the subsidiary books and trial balance should be checked carefully.
-Opening balances of all the accounts are properly brought down in the current years books of account.
-Ledger accounts have been properly balanced and the balances of ledger accounts have been correctly
shown in the trial balance.
-To locate some errors the difference in the trial balance in halved.
-Another way is dividing the difference in the trial balance by 9.
-If the difference gets divisible without leaving any reminder that indicates the transposition of the
amounts.
-To locate certain other errors, current year trial balance can be compared with the trial balance of the
previous year.
Capital structure

What is capital structure? What are the principles of capital structure management?
Explain following principles of cost structure management: a.) Cost Principle b.) Risk Principle c.) Control
Principle d.) Flexibility Principle e.) Timing Principle
What are the internal factors affecting capital structure?

Marginal costing

What is Marginal Costing? What are its features? What are the basic assumptions made by Marginal
Costing?
How is the concept of marginal costing practically applied?
What are the limitations of Marginal Costing?
What is Cost Volume-Profit relationship?
Basics financial accounting

Explain the following: a) Business Entity Concept b) Dual Aspect Concept c) Going Concern Concept
d)Accounting Period Concept e)Cost Concept f)Money Measurement Concept g)Marketing
Concept.................

What are the various streams of accounting?

There are three streams of accounting:
1) Financial Accounting: is the process in which business transactions are recorded systematically in
the various books of accounts maintained by the organization in order to prepare financial statements.
Theses financial statements are basically of two types: First is Profitability Statement or Profit and Loss
Account and second is Balance Sheet.
2) Cost Accounting: is the process of classifying and recording of expenditure incurred during the
operations of the organization in a systematic way, in order to ascertain the cost of a cost center with the
intention to control the cost.
3) Management Accounting: is the process of analysis, interpretation and presentation of accounting
information collected with the help of financial accounting and cost accounting, in order to assist
management in the process of decision making, creation of policy and day to day operation of an
organization. Thus, it is clear from the above that the management accounting is based on financial
accounting and cost accounting.

Explain Financial Accounting. What are its characteristic features?

Financial Accounting is the process in which business transactions are recorded systematically in the
various books of accounts maintained by the organization in order to prepare financial statements. These
financial statements are basically of two types: First is Profitability Statement or Profit and Loss Account
and second is Balance Sheet.
Following are the characteristics features of Financial Accounting:
1) Monetary Transactions:
In financial accounting only transactions in monetary terms are considered. Transactions not expressed in
monetary terms do not find any place in financial accounting, howsoever important they may be from
business point of view.

2) Historical Nature:
Financial accounting considers only those transactions which are of historical nature i.e the transaction
which have already taken place. No futuristic transactions find any place in financial accounting,
howsoever important they may be from business point of view.
3) Legal Requirement:
Financial accounting is a legal requirement. It is necessary to maintain the financial accounting and
prepare financial statements there from. It is also obligatory to get these financial statements audited.
4) External Use:
Financial accounting is for those people who are not part of decision making process regarding the
organization like investors, customers, suppliers, financial institutions etc. Thus, it is for external use.
5) Disclosure of Financial Status:
It discloses the financial status and financial performance of the business as a whole.
6) Interim Reports:
Financial statements which are based on financial accounting are interim reports and cannot be the final
ones.
7) Financial Accounting Process:
The process of financial accounting gets affected due to the different accounting policies followed by the
accountants. These accounting policies differ mainly in two areas: Valuation of inventory and Calculation
of depreciation.

Explain Cost Accounting. What are the objectives of doing it?

Cost Accounting is the process of classifying and recording of expenditure incurred during the operations
of the organization in a systematic way, in order to ascertain the cost of a cost center with the intention to
control the cost.
Following are the basic three objectives of Cost Accounting:
1) Ascertainment of Cost and Profitability
2) Cost Control
3) Presentation of information for managerial decision making.

What are the characteristic features of cost accounting?

Following are the characteristic features of Cost Accounting:
1) Cost accounting views the whole organization from the individual component of the organization like a
job, a process etc.
2) Cost accounting aims at ascertaining the profitability of individual components of the organization.

3) It is meant for those people who are part of the decision making process of the organization. Thus, it is
only for internal use.
4) It is not a legal requirement. It is not compulsory to maintain cost accounting records.
5) In Cost Accounting, data is immediately available which facilitates in decision making process.
6) Cost Accounting considers each and every transaction, whether related to past or future which will
have an impact on the business.

Define Management Accounting. What are its objectives?

Management Accounting is the process of analysis, interpretation and presentation of accounting
information collected with the help of financial accounting and cost accounting, in order to assist
management in the process of decision making, creation of policy and day to day operation of an
organization. Thus, it is clear from the above that the management accounting is based on financial
accounting and cost accounting.
Following are the objectives of Management Accounting:
1) Measuring performance: Management accounting measures two types of performance. First is
employee performance and the second is efficiency measurement. The actual performance is measured
with the standardized performance and a report of deviation from the standard performance is reported to
the management for the effective decision making and also to indicate the effectiveness of the methods in
use. Both types of performance management are used to make corrective actions in order to improve
performance.
2) Assess Risk: The aim of management accounting is to assess risk in order to maximize risk.
3) Allocation of Resources: is an important objective of Management Accounting.
4) Presentation of various financial statements to the Management.

What are the limitations of Management Accounting?

Limitations of Management Accounting:
1) Management Accounting is based on financial and cost accounting, in which historical data is used to
make future decisions. Thus, strength and weakness of the managerial decisions are based on the
strength and weakness of the accounting records.
2) Management Accounting is useful only to those people who are in the decision making process.
3) Tools and techniques used in management accounting only provide information and not ready made
decision. Thus, it is only a supplementary service.
4) In Management Accounting, decision is based on the managers institution as management try to avoid

lengthy courses of scientific decision making.

5) Personal prejudices and bias affect the decisions as the interpretation of financial information is based
on personal judgment of the interpreter..

What is the scope of Management accounting?

Following is the scope of Management Accounting:
1) Financial Accounting
2) Cost Accounting
3) Revaluation accounting
4) Control Accounting
5) Marginal Costing
6) Budgetary Control
7) Financial Planning and
8) Break Even Analysis
9) Decision accounting:
10) Reporting
11) Taxation
12) Audit

What are the various techniques used to discharge the function of

management accounting?
Following are the technique used to discharge the function of management accounting:
1) Marginal Costing
2) Budgetary Control
3) Standard Costing
4) Uniform Costing

Compare Financial Accounting and Cost Accounting.

1) Financial Accounting protects the interests of the outsiders dealing with the organization e.g
shareholders, creditors etc. Whereas reports of Cost Accounting is used for the internal purpose by the
management to enable the same in discharging various functions in a proper manner.
2) Maintenance of Financial Accounting records and preparation of financial statements is a legal
requirement whereas Cost Accounting is not a legal requirement.
3) Financial Accounting is concerned about the calculation of profits and state of affairs of the
organization as whole whereas Cost accounting deals in cost ascertainment and calculation of profitability
of the individual products, departments etc.

4) Financial Accounting considers only transactions of historical financial nature whereas Cost Accounting
considers not only historical data but also future events.
5) Financial Accounting reports are prepared in the standard formats in accordance with GAAP whereas
Cost accounting information is reported in whatever form management wants

Compare Financial Accounting and Management Accounting

1) Financial Accounting reports are used by outside parties such as creditors, shareholders, tax
authorities etc. whereas Management Accounting reports are used by managers inside the organization
for planning, directing, controlling and taking decisions.
2) In Financial Accounting, only historical financial transactions are considered and do not consider non
financial transactions whereas in Managerial Accounting emphasis is on decisions affecting the future,
thus it may consider future data as well s non financial factors.
3) Maintenance of financial accounting records and preparation of financial statements is a legal
requirement whereas Management Accounting is not at all legal requirement. Moreover, these systems
have their own reporting formats.
4) In Financial Accounting, precision of information is required whereas in Management Accounting
timeliness of information is required.
5) In Financial Accounting, only summarized data is prepared for the entire organization whereas in
Management Accounting detailed reports are prepared about products, departments, employees and
customer.
6) Preparation of Financial Accounting is based of Generally Accepted Accounting Principles whereas
Management Accounting does not follow such principles to prepare reports.
7) Financial reports generated by the Financial Accounting are required to be accurate whereas accuracy
is not the prerequisite of management accounting.

Compare Cost Accounting and Management Accounting

1) The scope of management accounting is broader than that of cost accounting.
2) Both the accounting streams are not a legal requirement.
3) Cost accounting provides only cost information for managerial use whereas management accounting
provides all types of accounting information i.e., cost accounting as well as financial accounting
information.
4) In Cost accounting, the main emphasis is on cost ascertainment and cost control whereas in
management accounting the main emphasis is on decision-making.
5) The various techniques used by cost accounting are standard costing, budgetary control, marginal
costing and cost-volume-profit analysis, uniform costing and inter-firm comparison, etc. whereas
management accounting also uses these techniques but also uses techniques like ratio analysis, funds

flow statement, statistical analysis etc.

6) Cost Accounting is a part of Management Accounting whereas Management accounting is an
extension of managerial aspects of cost accounting with the ultimate intention to protect the interests of
the business.

Explain Personal Accounts. List different accounts consisting personal

account.
Personal Accounts are the accounts of persons or organizations with whom the organization deals in
various capacities. Personal Accounts consist of following types of accounts:
-Accounts of Customers
-Accounts of Suppliers
-Accounts of Bank/Financial Institutions
-Capital Account

Explain Real Accounts. List different accounts consisting real accounts in

practical circumstances.
Real accounts are the accounts of assets which the company owns and accounts of liabilities which the
company owes. Real Account may also consist of some intangible assets. Real Accounts consist of
following types of accounts:
-Building Account
-Furniture Account
-Machinery Account
-Land Account
-Goodwill Account
-Patent Trade Marks Account

What are Nominal Accounts? List accounts consisting the Nominal Account.
Nominal Accounts are the accounts of Incomes, Expenses, Losses and Gains. Nominal Accounts consist
of the following types of accounts:
-Insurance Account
-Wages Account
-Interest Paid or Received Account
-Commission Paid or Received Account
-Telephone Expenses Account
-Salary Account

What is the principal of Double Entry system of accounting? What are the
advantages of Double Entry system of accounting?
The principal of Double Entry system of Accounting is Every debit has a corresponding credit hence the

total of all debits has to be equal to the total of all credits. In simple words, every business transaction
affects two accounts. If one account is debited then the other account will be credited with the similar
amount. For example: if the business purchases a machinery worth Rs. 500000, then machinery account
gets debited with amount Rs. 500000 as the business is receiving an asset for its operation, on the other
side cash account automatically gets credited with the same amount of Rs. 500000 as cash is going out
of the business.
Advantages of Double Entry system of Accounting:
-It considers both the aspects of business transaction
-Arithmetic accuracy of the accounting records can be checked and verified by preparing trial balance
-Correct results of the operations can be ascertained by preparing Final Accounts
-Correct valuation of assets and liabilities at any point of time by preparing Balance sheet
What are the rules of double entry book keeping for various types of accounts?
Following are the basic rules of double entry book keeping for various types of accounts:
-Personal Account : Debit the Receiver, Credit the Giver
-Real Account : Debit what comes in, Credit what goes out
-Nominal Account : Debit all the Expenses, Credit all the Incomes

What is Trial Balance? What does an accurate Trial Balance suggest?

Trial Balance is a summary of all the balances of various ledger accounts and Cash/Book accounts of an
organization at any given date. For the preparation of Trial Balance the entire Ledger accounts and Cash
book/Bank book are required to be balanced to get the closing balance. Assets and Expenses accounts
having debit balance are posted on debit side whereas Income and Liability accounts having credit
balance are posted on credit side of the Trial Balance.
An accurate Trial Balance is evidence that all the transactions are recorded and posted in the General
Ledger account as per the accounting principles. It also ensures arithmetical accuracy of the process of
ledger posting.

What is Journalizing? What are the columns of a journal?

Journalizing is the process of recoding business transactions in the Journal in chronological order, as and
when the transactions take place. Journal is also known as Book of Original Entry or the Book of Prime
Entry.
Journal has following five columns:
-Date
-Particulars
-Ledger Folio
-Amount Debited
-Amount Credited

Explain Compound Journal Entry.

In day to day business, various similar transactions take place on the same day and every account is
either debited or credited. Thus instead of passing different entries, a compound entry can be passed,
which involves more than one debit or more than one credit or both. This makes the journal less bulky
and avoids duplication.

What are subsidiary books? Why are they maintained?

Subsidiary book is the sub division of Journal. These are known as books of prime entry or books of
original entry as all the transactions are recorded in their original form. In these books the details of the
transactions are recorded as they take place from day to day in a classified manner.
The important subsidiary books used are as following:-Cash Book : Used to record all the cash receipts and payments.
-Purchase Book : Used to record all the credit purchases.
-Sales Book : Used to record all the credit sales
-Purchase Return Book : Used to record all goods returned by business to the supplier
-Sales Return Book : Used to record all good returned by the customer to the business.
-Bills Receivable Book : Used to record all accepted bills received by business.
-Bills Payable Book : Used to record all bill accepted by us to our creditors.
-Journal Proper : Used to record those transactions for which there is no separate book.
These subsidiary books are maintained because it may be impossible to record each transaction into the
ledger as it occurs. And these books record the details of the transactions and therefore help the ledger to
become brief. Future reference and any desired analysis becomes easy as transactions of similar nature
are recorded together.

List the type of transactions entered in Journal proper.

The Journal proper is used to record following transactions:-Opening Entries : are the entries which are made at the starting of the financial year.
-Closing Entries : At the close of the accounting period balances from the various accounts are
transferred in order to balance the books of accounts. Thus, this process of transferring balances of the
trading and profit and loss account at the end of year is called closing the books and entries passed at
that time are called closing entries.
-Transfer Entries : are the entries which are passed in order to transfer one account to another account.
- Adjustment Entries: are passed at the end of an accounting period in order to modify the accounts.
-Rectification Entries: are passed to rectify the error detected the books through an entry in journal
proper.

-Entries for rare transactions: Journal proper is used for rare transactions.
-Entries for which there is no special journal: When the transactions cannot be recorded in the above
sub journals then the same are entered in the journal proper.
Examples of such transactions are: Distribution of goods as free sample, Goods destroyed by fire, etc

Define Cash book.

Cash book is a book of original entry in which all the transactions relating to cash receipts and payments
are recorded in chronological order. Cash receipt is entered on the debit side and cash payment is
recorded on credit side of the cash book. There are three types of cash book:
-Single Column Cash Book : This record only cash receipts and payments. It has only one money
column on debit and credit side. Cash received is entered on the debit side and cash payments are
entered on the credit side.
-Double/ Two Column Cash Book: This type of Cash book has two columns of cash and discount on
both the debit and credit side.
-Three Column Cash Book : This cash book has three columns of cash, bank and discount on both the
debit and credit side.
At the end of specified period the cash book is balanced. Excess of debit balance is posted on credit side
as By balance c/d to balance both the sides. From the start of the next period the balance on the credit
side is brought down on the debit side by To balance b/d

Define Purchase day book and its importance

Purchase Day book (Purchase Register)is the book of original entry in which all the transactions relating
to only credit purchase are recorded. Cash purchases do not find place in purchase day book as they are
recorded in Cash book. At the end of every month purchase day book is totalled. The total amount show
the total goods purchased on credit. The total of purchase book is debited to the purchase account and
the accounts of the suppliers of goods are credited with the amount standing against their names. Ruling
of purchase day book is different from a journal. There are five columns in a purchase day book: first
column records Date, second column records name of the supplier, quantity supplied, Rate at which
quantity supplied, description, etc. , third column records Invoice number, fourth column records Ledger
Folio, fifth column records total amount to the supplier