MODULE 2- FRAMEWORK OF ACCOUNTING

Two marks questions

1. What are compound journal entries? Give an example
A compound journal entry is an accounting entry in which there is more than one debit, more
than one credit, or more than one of both debits and credits. It is essentially a combination of
several simple journal entries.
e.g. paid Rs.490 to Ram in full settlement of his account of Rs.500
Ram’s A/c ….Dr 500
To cash A/c 490
To discount Received a/c 10

2. What is an opening entry? Give one example

A journal entry by means of which the balance of various assets, liabilities and capital appearing
in in the balance sheet of previous accounting period are brought forward in the books of current
accounting period is known as opening entry

3. State three advantages of Journal

1. It is a chronological record in the sense that it records the transaction in order in which
they occur
2. Each entry in the journal carries narration which gives a brief explanation of transaction
3. Both the aspects of transactions (debit and credit) are recorded in the journal. Since the
amount recorded in both debit column and credit amount column must be equal, the
possibility of committing error is reduced and detection of errors if any committed
becomes easy

4. State two limitations of Journal

1. The system of recording all transaction in journal requires
A) writing down the name of the account as many times as the transaction occur.
B) An individualposting of EA account debited and credited
and hence involves the repeatative journalising and posting work
2. It does not provide information on prompt basis
3. it is not facilitate installation of internal check system since the journal can be handled by
only one person
4. It becomes bulky and voluminous

5. Is the journal a book of original entry?

A journal is called a book of original entry because all the business transactions are entered first
in this book

6. What do you mean by posting?

It is the process of transferring the transaction recorded in the books of original entry in the
concerned accounts opened in the ledger. It may be done daily weekly e for monthly according to
the convenience of the business

7. What is trial balance?

It is the statement which shows either the balance or the total amounts of debit items and credit
items of all accounts in the lecture and cash and Bank balances.it may be noted that the trial
 balance is a statement and not an account and is prepared on particular date not for particular
period

8. State the two objectives of Trial Balance

To ascertain the arithmetical accuracy of ledger accounts
To help in locating errors
to facilitate the preparation of financial statements

9. What do you mean by subsidiary books?

It refers to the journals meant for specific transaction of similar nature it is also known as special
journals or day books

10. What are the two methods of preparing a trial balance?

Balance method total amount method
Balance method: under this method the balance of all the accounts are incorporated in trial
balance
Total amount method: under this method the total amount of debit items and credit items in
each ledger accounts are incorporated in trial balance

11. What do you mean by journal proper? Give any two examples of entries to be recorded in this
book.
It is the residuary book in which those transactions are recorded which cannot be recorded in
other subsidiary books such as cash book purchase book sales book purchase returns book sales
returns book bills receivable book and bills payable book
the various examples of transaction entered in journal proper is given below
 And opening entry is passed in journal for bringing the balances of various assets
liabilities and capital appearing in balance sheet of previous accounting year, in current
accounting period books
 The closing entries are passed in the journal for closing the nominal accounts by
transferring them to trading and profit and loss account
 Transfer entries are passed in the journal for transferring the amount from one account
to another account

12. What types of transactions are recorded in the sales book and the purchases book?
Sales book: the entries related to credit sale of goods are recorded in sales book
Purchase book: the entries related to credit purchase of goods

13. Explain the meaning of double-entry system.

It refers to 2 system of accounting under which both the aspects debit or credit of every
transaction are recorded in the accounts involved.

14. What is accounting process?

15. What is journal?
it is a book in which transactions are recorded in order in which they occur in chronological
order. It is also called as books of original entry

16. What is narration?

17. What is ledger?

It is a principal book which contains all the accounts to which the transactions are recorded in
the books of original entry are transferred. Is also called as books of final entry

18. What is balancing of ledger?

Balancing of an account is the difference between total debit and total credit appearing in books
of accounts. It signifies the net effect of all the transaction posted to that account during a given
period

19. Pass the journal entry for the purchase of goods worth Rs. 8,000 subject to 6% trade discount?
20. Mrs. Rajashree has cash Rs. 10,000, bank balance Rs. 8,000 and machinery Rs. 20,000 and bills
payable Rs. 9,000. Find out her capital.

21. What is debit note?

8 bit notice prepared by the purchaser and contains the date of return, name of the supplier to
whom the goods have been returned, details of the goods returned, reasons for returning the
goods. Is debit note is really numbered

22. What is meant by credit note?

It is prepared by the seller and contains date of return of goods, name of the customer who has
written the goods, vdetails of goods received back and the amount of such goods. Is credit note
is really numbered

23. What is an invoice?

24. Give the meaning of outward invoice?

25. What is a cash book?
It is the special journal which is used for recording all the cash receipts and cash payment

26. What is a contra entry?

It is is it is the entry of which debit and credit aspects are simultaneously recorded in the cash
book. For example cash deposited into Bank for cash withdrawal from the bank

27. Define are the important types of cash book?

There are four types of cash book
 Single column cash book
 Cash book with discount column
 Cash book with bank and discount column
 Petty cash book.