*(google Answer) Finance account

2mark
1.State the meaning of subsidiary book
The subsidiary books are the books of original entry in which transactions are
first recorded and then posted to the ledger accounts.

2.define Petty cash book

Petty cash book is a book used in accounting for recording small and repetitive
transactions that are of little value

3.what is journal in accounting

A journal is a detailed account that records all the financial transactions of a
business, to be used for the future reconciling of accounts and the transfer of
information to other official accounting records, such as the general ledger.

4.Give the meaning of ledger

A ledger in accounting refers to a book that contains different accounts where
records of transactions pertaining to a specific account is stored

5.write the meaning of straight line method. in accounting

Straight line basis is a method of calculating depreciation and amortization, the
process of expensing an asset over a longer period of time than when it was
purchased.

6.Give the formula to find out the amount of

depreciation under straight line method of
depreciation.
The formula to calculate annual depreciation using the straight-line method is
(cost – salvage value) / useful life

7.Write the meaning of stock reserve.

Defined Stock Reserve means quantities of materiel immediately available and
located appropriately for supply within agreed timescales.

8.What do you mean by dependent branch?

Dependent branches are those which do not maintain separate books of account and
wholly depend on Head Office.

9.Define Single entry.

A single entry system of accounting is a form of bookkeeping in which each of a
company's financial transactions are recorded as a single entry in a log.

10.What is Conversion method?

The conversion method is the process of converting a business's accounting from
single-entry to double-entry.

11.What is balance sheet?

A balance sheet is a financial statement that contains details of a company's
assets or liabilities at a specific point in time.

12.What is Profit and Loss account?

A profit and loss account shows a company's revenue and expenses over a particular
period of time, typically either one month or consolidated months over a year
13.What is the need for preparing final accounts?

The purpose of creating final accounts is to provide a clear picture of the

financial position of the organisation to its management, owners, or any other
users of such accounting information

14.Define Single entry system

A single entry system of bookkeeping is where the transactions of the business
affect only one account, i.e. only one account's value will decrease or increase
based on the transaction amount

15.Write about conversion method.

The conversion method is the process of converting a business's accounting from
single-entry to double-entry

16.Define Departmental Accounting.

Department accounting or departmental accounting is a system of financial
accounting which is used in the organizations whose all works are done through
their different departments or departmental stores.

17.State the meaning of direct expenses

Direct expenses means all expenses directly connected with the manufacture,
purchase of goods, and bringing them to the point of sale

18.Write the meaning of Depreciation.

Depreciation represents the estimated reduction in value of a fixed assets within a
fiscal year.

19.What do you mean by Written down value

method?
Written-down value is the value of an asset after accounting for depreciation or
amortization.

20.What are the different types of accounts?

The 5 Types of Accounts in Financial Accounting
Assets.
Liabilities.
Equity.
Income (Revenue)

21.State the rules of accounting.

Debit the receiver and credit the giver. ...
Debit what comes in and credit what goes out. ...
Debit expenses and losses, credit income and gains.

22.What do you mean by stock reserve?

Defined Stock Reserve means quantities of materiel immediately available and

located appropriately for supply within agreed timescales.

23.Define the term dependent branch

Dependent branches are those which do not maintain separate books of account and
wholly depend on Head Office.
24.What is the need for final accounts?
The purpose of creating final accounts is to provide a clear picture of the
financial position of the organisation to its management, owners, or any other
users of such accounting information

25.What is statement of affairs method?

Statement of Affairs is a statement of assets and liabilities prepared to ascertain
the amount of change in the capital.

5mark
1.What are the functions of accounting?
Functions of Accounting
There are many branches of accounting that are crucial for different areas of
operations and serve different purposes. Let us now understand accounting functions
in detail:

1. Financial Management
With accounting, management and external regulatory bodies can assess the financial
situation of a company. Financial documents help gain an in-depth look at assets,
liabilities, the share of equity, revenue, profit, and loss. Businesses can remain
compliant with legal and tax regulations. Overall, it helps maintain transparency
in the system.

By tracking the business expenditure compared to the income, financial experts can
keep a tab on business revenue and costs. Through financial accounting, businesses
can ensure making and receiving timely payments. This prevents any payment pending
past the due date which makes the business more trustworthy to deal with.

Apart from understanding the financials of the business, companies use financial
analysis for the purpose of performance analysis. Through financial statement
analysis, one can identify liabilities and assets in the structure. They can also
analyze the loopholes in the system so that they can have better financial
management. Businesses can also analyze ways to streamline and optimize production
processes.

2. Cost Management
It involves the analysis of business expenses to prevent wasteful purchasing
practices and cost reduction to improve revenue. It helps organizations in taking
actions to reduce costs and expenses to boost profitability. Cost accounting also
monitors ordering raw materials so that they are not over-purchased, about to
expire, or perish.

This prevents the waste of capital on unnecessary raw materials. Cost accountants
prepare reports to determine the profitability of every product so that management
can maximize their profits. Data presented through cost accounting is used for
decision-making and management planning. Overall, companies can plan their budget
and set up budgetary controls based on the information provided by cost accounting.
3. Making Business Decisions
This is primarily for management’s internal purposes so they can make important
business decisions. Using meaningful information, businesses can use the data for
short-term and long-term business planning. Management accounting provides
statistical and accounting data. Based on this data, companies can forecast and
plan strategies for the future. It also helps them understand the most useful
resource for the company.

4. Taxation and Compliance

Tax accountants also take care of timely tax payments and even report them to
designated authorities. They maintain provisions for taxation so that they can
avoid any penalties as per the law. These professionals analyze fiscal matters, and
based on this analysis, they prepare, manage and submit tax statements and returns
for clients. They also prepare business income tax returns and audit statements.

5. Maintaining Transparency
One of the most important functions of accounting is to bring transparency to
financial structure. For this, various reporting standards, such as IFRS and GAAP,
are adopted by organizations. This ensures that financial statements across
different organizations are comparable and understandable globally.

Along with adopting reporting standards, organizations conduct internal and

external audits. Companies conduct internal audits to ensure that they are ready
for external audits. In internal audits, every process and document is analyzed to
ensure that the company complies with laws and guidelines. External audits are
conducted by external authorities to ensure that every regulation is being followed
by the organization.

Forensic accounting also plays a major role in ensuring that the company is legally
operating. Through this investigative branch of accounting, accountants ensure that
there are no financial frauds going on in the organization. It also helps in
detecting anomalies in the system for accurate financial reporting.

6. Risk Management
Another crucial function of accounting includes risk management. Companies use the
data collected through accounting to analyze areas of risk. They also analyze
resources that are not as useful as expected and investments that are not giving
expected returns. Based on the data and analysis, organizations can take steps for
risk mitigation. This will ensure that company is within the limit of its risk
tolerance

2.Distinguish between statement of affairs and

balance sheet.

Affairs
Balance Sheet
1. Shows the financial position of a company at a specific point in time
1. Shows the financial position of a company at a specific point in time
2. Includes both assets and liabilities
2. Includes both assets and liabilities
3. Emphasizes current assets and current liabilities
3. Emphasizes long-term assets and liabilities
4. Provides information on cash flow
4. Provides information on the liquidity of the company
5. May include a statement of income and expenses
5. Does not include a statement of income and expenses
6. May provide information on the company's operations and performance 6. Provides
information on the company's assets and liabilities
7. May be more comprehensive than a balance sheet
7. Focuses more on the company's net worth
8. May be prepared for a specific purpose such as a loan application
8. Is a standard financial statement that is prepared on a regular basis

3.What are the objectives of preparing the trial

balance?

The objectives of preparing a trial balance are:

1. To deduce the arithmetical accuracy of the ledger accounts.

2. To help in detecting errors.
3. To help in preparing the financial reports and statements. (profit and Loss
account and Balance Sheet).

1. To deduce the arithmetical accuracy of the ledger accounts:

As stated before, the reason behind making a trial balance is to make sure whether
all debits and credit are appropriately recorded in the record or not and that all
accounts have been effectively and correctly balanced. As a synopsis of the record,
it is a rundown of the accounts/records and their balances.

At the point when the aggregates of all the debit balances and credit balances in
the trial balance are equivalent, it is accepted that the posting and balancing of
accounts/records is numerically correct.

Nonetheless, the tallying of the trial balance is anything but a decisive

confirmation of the precision of the accounts and records. It only guarantees that
all debits and the relating credits have been appropriately recorded in the record.

2. To help in detecting errors:

At the point when a trial balance doesn’t tally (that is, the sum of debit and
credit sections are not equivalent), we realize that one error has occurred. The
mistakes may have occurred at one of these stages in the accounting procedure:

(1) totalling of subsidiary books,

(2) posting of journal entries in the record,
(3) computing account balances,
(4) conveying account balances to the trial balance, and
(5) totalling the trial balance sections.

It might be noticed that the accounting precision isn’t guaranteed regardless of

whether the sum of debit and credit are equivalent since certain errors don’t
influence equality of debit and credits.

For instance, the book-keeper may debit a right amount in a wrong record while
making the journal entry or in posting an entry to the record. This mistake would
make two accounts have wrong balances however the trial balance would tally.
Another mistake is to record an equivalent debit and credit of a wrong amount. This
mistake would give the two records incorrect balances however would not make
unequal debit and credits. Therefore, the fact that the trial balance has tallied
doesn’t infer that all entries in the books of unique record (journal, cash book,
and so forth.) have been recorded and posted accurately. In any case, equivalent
aggregates do propose that a few kinds of errors likely have not occured.

3. To help in preparing the financial reports and statements. (profit and Loss
account and Balance Sheet):
Trial balance is considered as the connecting link between bookkeeping records and
the preparation of financial statements and records. For setting up a financial
statement, one need not refer to the record. Actually, the accessibility of a
tallied trial balance is the initial step in the readiness of financial statements.
All income and expense ledgers showing up in the trial balance are moved to the
trading and profit and loss record and all liabilities, capital and assets accounts
are moved to the balance sheet.

4.What are the basic factors affecting the amount of

depreciation?
1. Historical cost - Historical cost of a depreciable asset implies the cost
incurred on its acquisition, installation, commissioning and for additions to or
improvements thereof which are of capital nature.

2. Expected useful life - Expected useful life of a depreciable asset implies

either the period over which a depreciable asset is expected to be used by the
enterprise or the number of production or similar units expected to be obtained
from the use of the asset by the enterprise.

3. Estimated residual value - Estimated residual value of a depreciable asset

implies the value expected to be realised on its sale or exchange on the expiry of
its useful life.

5.