BUSINESS ACCOUNTING INTERNAL ASSIGNMENT

Page 1 of 8

SESSION: 2022-27
FIRST INTERNAL ASSIGNMENT
BUSINESS ACCOUNTING
SUBMITTED BY: MANANNYA BHANDARI
PRN: 22010126115
ROLL NO.: 115
DIVISION B (BBA LLB)
SUBMITTED TO: PROF. DAVINDER KAUR SOHI
(Assistant Professor-Business Accounting,
SLS, Pune)
Manannya Bhandari
PRN: 22010126115
 BUSINESS ACCOUNTING INTERNAL ASSIGNMENT
Page 2 of 8

Q1. Section A: Give the correct answers and B -Explain it by giving suitable examples.

1. The Double entry is based on dual aspect concept.

Reason: According to dual aspect concept, every transaction entered into by an
enterprise has two aspects, a debit and a credit of equal amount. For every debit there
is an equal amount of credit.
Example: If Aarav invests ₹400000 in a business, then the business has an asset of
₹400000 (cash) while it has a liability towards Aarav of ₹400000 (capital of Aarav).

2. Conservatism Principle or Prudence Principle follows play safe.

Reason: Conservatism works on the principle, “Do not anticipate the profits, but
provide for all losses and expenses.” This principle takes into consideration all expected
losses but not expected profits.
Example: Making the provision for doubtful debts.

3. Solvent is a person whose assets are more than liabilities.

Reason: Solvent is a person or a company who has enough money to pay all their debts.
Example: If I own a property of ₹10,00,000 (asset) and I take a loan of ₹8,00,000
(liability), then I am solvent because my assets are more than my liabilities and I will
be able to pay back the loan I had taken.

4. Amount invested by proprietor is called capital, amount withdrawn by the proprietor

from the business for personal use is called drawings.
Reason: Capital may be in the form of money or any assets having a monetary value.
Drawings reduces the investment of the owners.
Example: Rahul invests ₹50,000 in his business then this amount is called capital, but
when he withdraws ₹25,000 from his business to buy a TV for his house, that amount
will be called drawings.
5. Bookkeeping is a science & art.
Reason: Bookkeeping is a science because it is a body of knowledge based on certain
principles and concepts. Bookkeeping is an art because it involves some theories and
concepts and requires skills and creative judgement.
Example: To make an entry in the ledger you should follow certain principles and rules
like that of dual entry (science) but to write that entry in the credit or debit side requires
your understanding of the theory and concepts and using your creative judgement (art).

6. Expenditure incurred on purchase of fixed asset is called capital expenditure,

deferred revenue expenditure which is not exhausted within one year.
Reason: Capital expenditure is the expenditure incurred on buying assets like land,
machinery or property which do not get exhausted within one year. This is also called
long term expenditure because it gives benefits that are enduring in nature.

Expenditure whose benefits is likely to accrue in more than one accounting year
refers to Deferred Revenue Expenditure.

Manannya Bhandari
PRN: 22010126115
 BUSINESS ACCOUNTING INTERNAL ASSIGNMENT
Page 3 of 8

Example: Purchasing a machinery for ₹3,00,000 is capital expenditure, because it

facilitates manufacturing of goods.
Heavy advertisement expenditure incurred on introducing a new product in the
Market. (Prepaid Expense).

7. Different Branches of Accounting financial, management & cost.

Reason:

Branches of
Accounting

Financial Accounting Management Accounting Cost Accounting

Deals with recording

Deals with maintenence Deals with providing costs with the
of books of accounts to neccessary information objective of
determine financial to the management for ascertaining, reducing
position of the business discharging their and controlling costs.
functions.

Example: Financial Accounting: If the investor wants to know the profits earned by
the company in that financial year.
Management Accounting: If the management wants to know the funds
involved in providing a certain service.
Cost Accounting: If the management wants to know the cost incurred in
making a certain product.

8. Assets = Capital + Liabilities.

Reason: The accounting equation shows on a company’s balance sheet that a
company’s total assets are equal to the sum of the company’s liabilities and capital.
Assets represent valuable resources controlled by the company. Capital represents the
input of the owner and the shareholders. Liabilities represent the obligations of the
company.
Example: I made an investment of ₹3,00,000 for my business (Capital) and borrowed
₹7,00,000 from the bank (liabilities) to purchase a piece of land, so now my total assets
are:
₹10,00,000 (Assets)= ₹3,00,000 (Capital) + ₹7,00,000 (Liabilities)

9. Classification of Accounts on both approaches.

Reason: Accounts are classified based on two approaches:
 Traditional Approach
 Modern Approach

Manannya Bhandari
PRN: 22010126115
 BUSINESS ACCOUNTING INTERNAL ASSIGNMENT
Page 4 of 8

Classification of
Accounts

Traditional Modern
Approach Approach

In Traditional Approach, accounts are classified as:

 Personal: Accounts that are used to record transactions relating to individual
persons, firms, companies, or other organizations. They are of 3 types:
a. Natural Personal Account
b. Artificial Personal Account
c. Representative Personal Account
 Impersonal: Impersonal accounts are those that do not relate to persons. They
are two types:
a. Real accounts: (or permanent accounts)
b. Nominal accounts: (or temporary accounts)

Traditional
Approach

Personal
Impersonal

Natural Artificial Representative

Personal Personal Personal
Account Account Account
Nominal
Real Account
Account

In Modern Approach, accounts are classified as:

 Asset Account: Assets are resources owned by a person or company.
 Liability Account: Liabilities are any debts owed by a person or company.
 Capital Account: The money that the owner puts into the business is referred to
as capital or owner’s equity.
 Revenue Account: Revenue Accounts reflect the business’s income and, as a
result, have credit balances.
 Expense Account: In accounting, expenses are the funds or charges incurred by
a company to earn revenue. When a corporation sells commodities, for example,
the associated cost is what it pays to and sell those things are considered as
expense. For example, transportation expense, advertisement expense, route
expenses.

Manannya Bhandari
PRN: 22010126115
 BUSINESS ACCOUNTING INTERNAL ASSIGNMENT
Page 5 of 8

Modern
Approach

Asset Liability Capital Revenue Expense

Account Account Account Account Account
Example: Sold goods for cash
Traditional Approach Modern Approach

Sold goods for cash Nominal Account Revenue Account

(Credit- Income and gains) (Credit- Income and gains)

Q2. From the following table, Analysis the transactions by applying rules of Debit and

Credit.

S. Transactions Two aspects Accounts Categories Rules Account Account

N involved applied to be to be
o. debited credited
1. Computer of Rs. 1.Loss 1.Loss by Loss by Compute
10,000 is stolen. due to theft A/c theft A/c. -r A/c.
theft 2.Comput-
2.Computer
er A/c
what
goes out
Traditional Loss by Loss by
Approach theft A/c- theft A/c-
Nominal A/c Debit all
Computer losses
A/c- Real Compute
A/c r A/c-
Credit
what goes
out
Modern Loss by Loss by
Approach theft A/c- theft A/c-
Expense A/c Increase
Computer in loss
A/c- Asset Compute
A/c r A/c-

Manannya Bhandari
PRN: 22010126115
 BUSINESS ACCOUNTING INTERNAL ASSIGNMENT
Page 6 of 8

Decrease
in asset
2. Sold goods to 1.Ram 1.Sales Ram A/c. Sales
Ram on credit Receiver A/c. A/c.
Rs. 40,000 2.Goods 2.Ram’s
sold
A/c.
Traditional Sales- Sales-
Approach Nominal A/cCredit all
Ram- income
Personal A/c
Ram-
Debit the
Receiver
Modern Sales- Sales-
Approach Revenue Decrease
A/c. in asset
Ram- Asset Ram-
A/c Increase
in Debtor
3. Paid Interest on 1.Interest 1. Interest Interest on Cash A/c
loan Rs.10,000 paid on loan loan A/c
2.Cash A/c
paid
2.Cash A/c
Traditional Interest on Interest
Approach loan- on loan-
Nominal A/c Debit all
Cash- Real expenses
A/c Cash-
Credit
what goes
out
Modern Interest on Interest
Approach loan- on loan-
Expense Increase
A/c. in expense
Cash- Asset Cash-
A/c Decrease
in asset
4. Purchased 1.Machinery 1.Machine Machinery Cash A/c
Machinery for comes in ry A/c A/c
Rs. 50,000 in 2.Cash 2.Cash
goes out
cash from A/c.
Prakash Stores.

Manannya Bhandari
PRN: 22010126115
 BUSINESS ACCOUNTING INTERNAL ASSIGNMENT
Page 7 of 8

Traditional Machinery Machiner

Approach A/c- Realy A/c-
A/c Debit
Cash A/c- what
Real A/c comes in
Cash A/c-
Credit
what goes
out
Modern Machinery Machiner
Approach A/c- Asset y A/c-
A/c Increase
Cash- Asset in asset
A/c Cash A/c-
Decrease
in asset
5. Withdrew cash 1.Cash 1.Cash A/c Cash A/c Bank A/c
from bank for comes in 2.Bank
office use Rs. 2.Bank A/c
goes out
20,000.
Traditional Cash A/c- Cash A/c-
Approach Real A/c Debit
Bank A/c- what
Personal A/c
comes in
Bank A/c-
Credit the
giver
Modern Cash A/c- Cash A/c-
Approach Asset A/c Increase
Bank A/c- in asset
Asset A/c Bank A/c-
Decrease
in asset
6. Wages due but 1.Wages is an 1.Wages Wages A/c Wages
not paid Rs. expense A/c Payable
5,000 2.Wages 2.Wages A/c
unpaid
payable
A/c
Traditional Wages A/c- Wages
Approach Nominal A/c A/c- Debit
Wages all
Payable expenses

Manannya Bhandari
PRN: 22010126115
 BUSINESS ACCOUNTING INTERNAL ASSIGNMENT
Page 8 of 8

A/c- Wages
Personal A/c Payable
A/c-
Credit the
giver
Modern Wages A/c- Wages
Approach Expense A/c A/c-
Wages Increase
Payable- in expense
Liability A/c Wages
Payable
A/c-
Increase
in
liabilities

Total Marks: 15
________________________________

Manannya Bhandari
PRN: 22010126115