Questions and Answers
What was the amount of cash purchases of goods on August 2?
What date was cash received from M/s. Akbar Khan & Sons?
The total amount of cash paid to Tuhin & Sons was 1,50,000.
True
How much was the total goods returned by Ahmed Bros?
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What amount was accepted as a bill drawn by M/s. ABC for supplies?
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In the cash book, the opening balance was __________.
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Match the following transactions with their amounts:
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What is a secondary book?
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What is the total amount of sales recorded on August 10?
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What is a General Ledger?
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August 7 was the date a bill was accepted from which entity?
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What is the purpose of Debtors Ledger?
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What do control accounts in the General Ledger summarize?
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A _______________ will have separate accounts for each supplier.
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One important feature of control accounts in the General Ledger is that _________________.
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The summary of balances of creditors ledger should tally with the balance shown by _______________ in the General Ledger.
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Which of the following transactions would not be recorded in the General Ledger? (Select one)
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What is the suffix 'c/d' used for in accounting?
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What does a debit balance indicate?
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What is the purpose of the Cash Book?
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What is the total amount in the Capital Account on January 31, 2004?
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The Drawings Account on January 31, 2004 shows a total of Rs 800.
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What was recorded as To Capital in the Cash A/c?
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The total amount of Cash A/c on January 31, 2004 was _____ Rs.
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Match the following accounts with their totals:
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How much was recorded as cash received from Anil & Co?
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What was the total cash sales amount on July 2, 2004?
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Goods returned to M/s ABC on July 18 amounted to Rs 40,000.
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The amount paid as rent on July 25, 2004 was _____ Rs.
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Which account had a transaction of goods returned by M/s XYZ on July 16?
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At the end of the accounting period, the accounts in the General Ledger can be left open.
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The summation of balances in individual accounts of the debtor's ledger is equal to the balance in the total debtor's account.
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As a rule, the opening balance in any account starts with the suffix ‘b/d’ and the closing balance with the suffix ‘c/d’.
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If the total of the debit side of an account is greater than the credit side, the difference is put on the credit side and the same is called credit balance.
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What are the different types of ledgers?
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Explain the concept of closing or balancing an account.
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What are the two control accounts maintained in the General Ledger?
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What is a ledger?
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What does the suffix 'c/d' indicate?
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Which of the following accounts is maintained in the General Ledger?
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Study Notes
Unit 3: Secondary Books
- Secondary books, also known as ledgers, record transactions that have already been noted in primary books to facilitate easier classification and information retrieval.
- The main purpose of secondary books is to generate meaningful, organized information as raw transaction data is often unclassified and cumbersome to analyze manually.
- A cash book records debit and credit entries, functioning both as a subsidiary book and a ledger account.
Types of Secondary Books
- General Ledger: The primary secondary book that accounts for all entries from the primary books.
- Debtors Ledger: Contains separate accounts for each customer, detailing transactions like sales on credit, payments received, and remaining balances.
- Creditors Ledger: Similar to the Debtors Ledger, but covers suppliers and includes transactions such as credit purchases and payments made.
- Control accounts in the General Ledger (Sundry Debtors Account and Sundry Creditors Account) summarize entries from the subsidiary ledgers, ensuring accuracy by tallying balances at any given time.
Posting Techniques in the Ledger
- Each account in a General Ledger has a debit (Dr) and credit (Cr) side, with specific terminology used to indicate the source of the transaction.
- At the end of an accounting period, accounts "close," involving the addition of a balancing figure to reflect remaining account balances, indicated by "c/d" (carried down) or "b/d" (brought down).
- The mechanism of balancing determines whether an account has a credit balance (if credit side > debit side) or a debit balance (if debit side > credit side).
Example Transactions and Their Posting
- Various transactions are recorded in the ledger with examples provided, demonstrating typical entries involving cash transactions, sales, purchases, and adjustments (like discounts).
- The Cash Book incorporates all cash entries and functions as a primary recorder for cash transactions, typically requiring direct reference for cash balance inquiries.
Key Illustrative Transactions
- Purchase and sales figures are provided to illustrate how credit terms impact the entries made on various ledgers, emphasizing the significance of tracking transactions over time.
- Each transaction involves registering details such as date, particulars, journal folio number (JF), and amount in both cash and ledger accounts.
- Goods returned and discounts also feature in the transactions, reflecting their influence on final balances.
These notes summarize the essential components of secondary books in financial accounting, detailing their functions, classification, posting techniques, and illustrative examples to aid comprehension of the principles involved.
Cash Book Summary
- Opening cash balance at the beginning of August: ₹1,05,000.
- Cash received from Kakkar & Sons on August 25: ₹2,65,000.
- Cash paid to Mankad Bros on August 29: ₹1,67,000.
- Salary paid to staff on August 30: ₹2,34,000.
- Furniture purchased from Ram Kumar & Sons on August 31 for ₹1,25,000, with a 15-day credit term.
- Total cash transactions for August: Dr ₹8,20,000 and Cr ₹8,20,000.
Secondary Books Overview
- Purchase Day Book: Total goods purchased during August amounted to ₹55,96,500.
- Sales Day Book: Total goods sold during August was ₹47,39,500.
- Return Outward Book: Goods returned by Tuhin & Sons amounted to ₹50,500.
- Return Inward Book: Goods returned by M/s Ahmed amounted to ₹45,000.
- Bills Receivable Book: Kiran Kumar & Sons' bill due for payment on September 11 for ₹10,75,000.
- Bills Payable Book: M/s ABC's bill due on October 10 for ₹25,70,000.
Journal Proper Entry
- August 31: Recorded furniture purchase in the Journal at ₹1,25,000.
General Ledger
- Purchase Account: Balance carried down as of August 31 was ₹57,21,500.
- Sales Account: Balance carried down as of August 31 was ₹49,64,500.
- Debtors Ledger: Total debtors recorded includes significant accounts like Kiran Kumar & Sons and Akbar Khan & Sons.
- Creditors Ledger: Total creditors include M/s ABC, M/s QRS, and M/s Tuhin & Sons.
Notable Accounts
- Furniture Account: Reflects the purchase of furniture from Ram Kumar & Sons, balancing to ₹1,25,000.
- Salary Account: Total of ₹2,34,000 paid out for staff salaries by the end of August.
- Stationery Account: ₹75,500 spent on stationery supplies recorded.
Important Definitions
- ‘b/d’ signifies 'brought down,' indicating the opening balance in accounts.
- ‘A/c’ represents ‘Account,’ used in financial documentation for clarity.
Record-Keeping Practices
- Due dates for bills factor in a three-day grace period; adjustments are made for public holidays as necessary.
- Both primary and secondary records are maintained to ensure comprehensive tracking of financial transactions within the business.
Summary
- Overall financial activity demonstrates robust transaction handling with significant purchases, sales, returns, and cash management, culminating in systematic entries across various financial records.### Secondary Books Overview
- Secondary books serve as a set of accounts tailored to organizational needs.
- These books are also known as ledgers, with the two primary types: General Ledger and Subsidiary Ledger.
- Subsidiary ledgers include the Debtors Ledger for individual customers and the Creditors Ledger for individual suppliers.
- Accounts in subsidiary ledgers need to be closed at each accounting period's end for accurate record-keeping.
Key Ledger Concepts
- Posting refers to the transfer of transaction details from journals to ledgers.
- Accounts serve as formal records documenting specific transactions.
- Sundry Debtors Account collects individual customer transactions into a summarized format in the General Ledger.
- Sundry Creditors Account summarizes transactions of individual suppliers similarly.
Balancing Accounts
- Account balancing involves totaling the higher side of an account and posting the difference to the opposite side as a balancing figure.
- The term 'c/d' indicates that an account's balance is carried down to the next period; 'b/d' signifies the brought down balance.
- A debit balance exists when total debits exceed total credits, while a credit balance is the result of greater credits than debits.
Ledger Types
- General Ledger contains all accounts essential for financial reporting.
- Debtors and Creditors Ledgers maintain separate accounts for customers and suppliers, reducing complexity in the General Ledger.
Control Accounts
- Control accounts in the General Ledger include Sundry Debtors and Sundry Creditors, summarizing the transactions from subsidiary ledgers for oversight and ease of reporting.
- These control accounts help ensure that individual account balances in debtor and creditor ledgers align with their respective totals.
Self-Assessment Questions
- True/False statements assess understanding of accounting principles and ledger functions, i.e., accounts must not remain open at the end of an accounting period, among others.
Example Transactions
- Illustrations of ledger postings include various transactions such as capital investments, purchases on credit, payments to suppliers, and sales, showcasing the flow of financial information.
Practical Applications
- Hands-on exercises involve recording transactions in ledgers, reinforcing theoretical understanding through practical implementation.
- Transactions cover a range of financial activities, including cash investments, purchases, sales, expenses, and withdrawals, demonstrating real-world financial management.
Glossary of Terms
- Important terminology includes:
- Posting: Recording transactions from journal to ledger.
- Ledger: A comprehensive record of transactions in secondary entries.
- Balancing: The process of closing accounts by equating debit and credit totals.
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Description
This quiz covers Unit 3 of the DCA2204 course on Principles of Financial Accounting and Management at Manipal University Jaipur. The focus is on secondary books of accounting and their importance in financial management. Test your knowledge and understanding of key concepts in this essential area of study.
