NCERT Solutions for Commerce Accountancy Class 11 Recording of Transactions-I

Short Question Answers

Q1: State the three fundamental steps in the accounting process.
Ans: The three fundamental steps in the process of accounting are:

1. Collection of data – The first step is to collect evidence of financial transactions for the accounting period, such as invoices, receipts and vouchers.
2. Processing of data – After transactions are identified, they are recorded in the books of original entry (journal), posted to the appropriate ledger accounts and summarised through a trial balance.
3. Reporting – Once accounts are tallied, financial statements such as the profit and loss account and the balance sheet are prepared and provided to users. At the end of one accounting cycle, closing balances become the opening balances for the next cycle.

Q2: Why is the evidence provided by source documents important to accounting?
Ans: Source documents are important because they are the primary evidence of transactions. They are relied upon for the following reasons:

• They confirm that a transaction actually occurred.
• They provide admissible evidence if a dispute requires legal proof.
• They contain essential particulars of a transaction, such as date, amount, parties and description.
• They act as a control and verification tool during auditing.

Q3: Should a transaction be first recorded in the journal or ledger? Why?
Ans: All transactions should be recorded in the journal first and then posted to the ledger. The journal (also called the day book or book of original entry) records transactions in chronological order and contains full details such as date, particulars and amounts taken from source documents. Posting to individual ledger accounts follows journalisation so that each account shows its cumulative effects.

Q4: Are debits or credits listed first in journal entries? Are debits or credits indented?
Ans: In journal entries the debit entry is written first and the credit entry is written below it and indented to the right. Thus debit amounts appear before credit amounts in the journal format.

Q5: Why are some accounting systems called double accounting systems?
Ans: Such systems are called the double-entry accounting system because every transaction affects at least two accounts — one account is debited and another is credited — so that total debits always equal total credits. This dual aspect ensures that the accounting equation (Assets = Liabilities + Capital) remains in balance. The alternative is the single-entry system, where transactions are recorded only once and do not give a complete picture.

Q6: Give a specimen of an account.
Ans: 

Q7: Why are the rules of debit and credit the same for both liability and capital?
Ans: Under the business entity concept, the business is distinct from its owner. The owner's investment (capital) is a claim on the business, similar to other liabilities: it represents an obligation of the business to the owner. Thus, both capital and other liabilities increase on the credit side and decrease on the debit side. For example, when the owner invests cash, the business's cash (asset) increases and the capital (liability/claim) is credited. When the owner withdraws funds or the business makes a loss, capital decreases and is debited.

Q8: What is the purpose of posting J.F. numbers in the journal at the time entries are posted to the accounts?
Ans: Journal Folio (J.F.) numbers are posted as cross-references. The J.F. in the ledger shows the page or reference number of the journal where the original entry is recorded. This permits easy tracing and verification of transactions between the ledger and the journal.

Q9: What entry (debit or credit) would you make to:
(a) increase revenue
(b) decrease in expense,
(c) record drawings
(d) record the fresh capital introduced by the owner.
Ans:
(a) Increase in revenue: Credit — revenues and gains are credited because they increase capital.
(b) Decrease in expense: Credit — a decrease in an expense account is recorded by crediting the expense (the normal balance of an expense is debit).
(c) Record drawings: Debit — drawings reduce owner's capital and are therefore debited.
(d) Record fresh capital introduced: Credit — fresh capital increases the owner's claim and is recorded on the credit side.

Q10: If a transaction has the effect of decreasing an asset, is the decrease recorded as a debit or as a credit? If the transaction has the effect of decreasing a liability, is the decrease recorded as a debit or as a credit?
Ans: A decrease in an asset is recorded as a credit, because assets normally have debit balances and a reduction is shown on the credit side (for example, sale of an asset). A decrease in a liability is recorded as a debit, since liabilities normally have credit balances and a reduction is entered on the debit side (for example, payment to creditors).

Long Question Answers

Q1: Describe the events recorded in an accounting system and the importance of source documents in those systems.
Ans: A business undertakes many monetary transactions daily that cannot be remembered reliably. Accounting records these transactions so that they can be measured, summarised and reported. Only monetary events are recorded, and each recorded transaction is supported by a source document. Examples of transactions and their documents include:

• Credit sale — invoice
• Purchase — bill/invoice
• Cash sale — cash memo
• Bank deposit — pay-in slip
• Payments through bank — cheque
• Purchase return / sales return — debit note / credit note

The importance of source documents is:

• They confirm that a transaction has occurred.
• They provide valid evidence in legal or audit situations.
• They record essential details such as date, amount and parties.
• They act as control evidence for auditing and internal checks.

Q2: Describe how debits and credits are used to analyse transactions.
Ans: 

Under the dual aspect (double-entry) concept, every transaction has two effects — a debit and a credit — of equal amount. Analysing a transaction involves identifying which accounts are affected and whether each is debited or credited. For example, if goods are sold for cash of Rs. 500, the cash account (asset) is debited and the sales account (revenue) is credited.

Accounts are classified into three types and each has its rule:

• Personal accounts (accounts of persons): Debit the receiver, credit the giver. Example: Bank A/c, Supplier A/c.
• Real accounts (accounts of assets): Debit what comes in, credit what goes out. Example: Furniture A/c, Machinery A/c.
• Nominal accounts (accounts of expenses, incomes, gains and losses): Debit all expenses and losses, credit all incomes and gains. Example: Salary A/c, Interest earned A/c.

Q3: Describe how accounts are used to record information about the effects of transactions.
Ans: The journal entry gives a clear picture of particular transactions but it is difficult to asses information about any particular account when there is a chain of transactions related to it. Hence in such a case, the ledger accounts become important as they maintain systematic accounts in tabular format which helps the user to determine the details of the transaction for the particular account. This can be better understood with an example.
01.01.17- Credit Sale is made to Ram for Rs.10000
05.01.17- Goods worth Rs.2000 is returned from Ram
08.01.17- Cheque received Rs.5000 on account from Ram
10.01.17- Cash received Rs.1000 on account from Ram
Now this is posted in the Journal on various dates. A clear picture can be seen only when the entries are posted in the ledger account of Ram. The balance amount receivable from Ram is clearly shown in the ledger below.

Q4: What is a journal? Give a specimen of a journal showing at least five entries.
Ans: The word journal comes from the French word jour (day). A journal records day-to-day transactions in chronological order and is therefore called the daybook or book of original entry. Its columns typically include date, particulars, LF (ledger folio), debit and credit. The journal gives full particulars of each transaction, which are then posted into the respective ledger accounts.
The format of the journal is shown below:

Date: The date of the transaction in which the transaction has occurred so that the journal could be made and maintained in the chronological manner from the source document.
Particulars: The accounts which have to be debited/ credited.
LF: Ledger Folio– It is the reference to the Ledger Page for the particular account.
Debit: The amount which has to be debited is recorded here.
Credit: The amount which has to be credited is recorded here.
Example:
Journalise the below-mentioned transactions in the books of Geeta:

Q5: Differentiate between source documents and vouchers.
Ans: 

Q6: The accounting equation remains intact under all circumstances. Justify the statement with the help of an example.
Ans: The double-entry accounting system states that or every debit there is an equal amount of credit. However, there is unlikely to be the equality of the total assets with the total claims of the business and the accounting equation will persist to be Assets = Liabilities+ Capital. Hence this equation will remain intact under all the circumstances. The examples for the same are as follows:

a. Mr A started a business with cash Rs.100000
Assets = Liabilities+ Capital
Cash increases by 100000
And Capital 100000 
100000 = 0+100000

b. Purchased goods on credit for Rs.30000
Assets (Inventory) =30000
Creditors = 30000
Assets = Liabilities +Capital
30000= 30000+0

Q7: Explain the double entry mechanism with an illustrative example.
Ans: In the double-entry system, every transaction has two sides — one debit and one credit — of equal amount. The system ensures that totals remain balanced. The three golden rules are:

1. Personal account — Debit the receiver, credit the giver.

2. Real account — Debit what comes in, credit what goes out.

3. Nominal account — Debit expenses and losses; credit incomes and gains.

Example: Mr Shyam commenced business with Cash Rs. 200000 and building Rs.150000.
Analysis: In the above transaction Cash comes in Rs. 200000 and building comes in Rs. 150000. On the other hand liability to be paid to the proprietor i.e. Capital increase is Rs. 350000.
Journal Entry in the books of Shyam

Numerical Questions

Q1: Prepare accounting equation on the basis of the following:
(a) Harsha started business with cash Rs 2,00,000
(b) Purchased goods from Naman for cash Rs 40,000
(c) Sold goods to Bhanu costing Rs 10,000 for Rs 12,000
(d) Bought furniture on credit Rs 7,000
Ans: The accounting equation is given by:
Assets = Capital + Liabilities

Accounting Equation Calculation:

Q2: Prepare accounting equation from the following:
(a) Kunal started business with ₹2,50,000 cash
(b) He purchased furniture for ₹35,000 cash
(c) He paid commission ₹2,000
(d) He purchases goods on credit ₹40,000
(e) He sold goods (costing ₹ 26,000) for cash ₹20,000
Ans:

Q3: Mohit has the following transactions, prepare accounting equation:
(a) Business started with cash - Rs. 1,75,000 
(b) Purchased goods from Rohit - Rs. 50,000 
(c) Sales goods on credit to Manish (Costing Rs 17,500) - Rs.20,000
(d) Purchased furniture for office use  - Rs.10,000 
(e) Cash paid to Rohit in full settlement  - Rs.48,500 
(f) Cash received from Manish  - Rs.20,000 
(g) Rent paid  - Rs.1,000 
(h) Cash withdrew for personal use  - Rs.3,000
Ans:

Q4: Rohit has the following transactions :
(a) Commenced business with cash - ₹1,50,000
(b) Purchased machinery on credit - ₹ 40,000
(c) Purchased goods for cash - ₹ 20,000
(d) Purchased car for personal use - ₹ 80,000
(e) Paid to creditors in full settlement - ₹ 38,000
(f) Sold goods for cash costing ₹ 5,000 - ₹ 4,500
(g) Paid rent - ₹ 1,000
(h) Commission received in advance - ₹ 2,000
Prepare the Accounting Equation to show the effect of the above transactions on the assets, liabilities and capital.
Ans:

Q5: Use accounting equation to show the effect of the following transactions of M/s Royal Traders:
(a) Started business with cash - ₹1,20,000
(b) Purchased goods for cash - ₹ 10,000
(c) Rent received - ₹ 5,000
(d) Salary outstanding - ₹ 2,000
(e) Prepaid Insurance  - ₹ 1,000
(f) Received interest - ₹ 700(g) Sold goods for cash (Costing  ₹ 5,000) - ₹ 7,000
(h) Goods destroyed by fire - ₹ 500
Ans:

Q6: Show the accounting equation on the basis of the following transaction: 
(a) Udit started business with: 
(i) Cash - ₹ 5,00,000
(ii) Goods -  ₹ 1,00,000 
(b) Purchased building for cash -  ₹ 2, 00,000 
(c) Purchased goods from Himani -  ₹ 50,000 
(d) Sold goods to Ashu (Cost ₹ 25,000) -  ₹ 36, 000 
(e) Paid insurance premium -  ₹ 3,000 
(f) Rent outstanding -  ₹ 5,000 
(g) Depreciation on building -  ₹ 8,000 
(h) Cash withdrawn for personal use -  ₹ 20,000 
(i) Rent received in advance -  ₹ 5,000 
(j) Cash paid to himani on account -  ₹ 20,000 
(k) Cash received from Ashu -  ₹ 30,000
Ans:

Q7: Show the effect of the following transactions on Assets, Liabilities and Capital through accounting equation:
(a) Started business with cash ₹ 1,20,000
(b) Rent received ₹ 10,000
(c) Invested in shares ₹ 50,000
(d) Received dividend ₹ 5,000
(e) Purchase goods on credit from Ragani ₹ 35,000
(f) Paid cash for household Expenses ₹ 7,000
(g) Sold goods for cash (costing ₹10,000) ₹ 14,000
(h) Cash paid to Ragani ₹ 35,000
(i) Deposited into  bank ₹ 20,000
Ans:

Q8: Show the effect of following transaction on the accounting equation: 
(a) Manoj started business with 
(i) Cash ₹ 2,30,000 
(ii) Goods ₹ 1,00,000 
(iii) Building ₹ 2,00,000
(b) He purchased goods for cash ₹ 50,000 
(c) He sold goods (costing ₹20,000) ₹ 35,000 
(d) He purchased goods from Rahul ₹ 55,000 
(e) He sold goods to Varun (Costing ₹ 52,000) ₹ 60,000 
(f) He paid cash to Rahul in full settlement ₹ 53,000 
(g) Salary paid by him ₹ 20,000 
(h) Received cash from Varun in full settlement ₹ 59,000 
(i) Rent outstanding ₹ 3,000 
(j) Prepaid Insurance ₹ 2,000 
(k) Commission received by him ₹ 13, 000 
(l) Amount withdrawn by him for personal use ₹ 20,000 
(m) Depreciation charge on building ₹ 10,000 
(n) Fresh capital invested ₹ 50,000 
(o) Purchased goods from Rakhi ₹ 10,000
Ans:

Q9: Transactions of M/s Vipin Traders are given below.
Show the effects on Assets, Liabilities and Capital with the help of accounting Equation. 
(a) Business started with cash -  ₹ 1,25,000 
(b) Purchased goods for cash -  ₹ 50,000 
(c) Purchase furniture from R.K. Furniture -  ₹ 10,000 
(d) Sold goods to Parul Traders (Costing ₹ 7,000 vide bill no. 5674) - ₹9,000
(e) Paid cartage -  ₹ 100 
(f) Cash Paid to R.K. furniture in full settlement -  ₹ 9,700 
(g) Cash sales (costing ₹10,000) -  ₹ 12,000 
(h) Rent received -  ₹ 4,000 
(i) Cash withdrew for personal use -  ₹ 3,000 
Ans: 

Q10: Bobby opened a consulting firm and completed these transactions during November, 2017: 
(a) Invested ₹ 4,00,000 cash and office equipment with ₹ 1,50,000 in a business called Bobbie Consulting. 
(b) Purchased land and a small office building. The land was worth ₹ 1,50,000 and the building worth ₹ 3, 50,000. The purchase price was  paid with ₹ 2,00,000 cash and a long term note payable for ₹ 3,00,000.
(c) Purchased office supplies on credit for ₹ 12,000. 
(d) Bobbie transferred title of motor car to the business. The motor car was worth ₹ 90,000. 
(e) Purchased for ₹ 30,000 additional office equipment on credit. 
(f) Paid ₹ 75,00 salary to the office manager. 
(g) Provided services to a client and collected ₹ 30,000 
(h) Paid ₹ 4,000 for the month’s utilities. 
(i) Paid supplier created in transaction c. 
(j) Purchase new office equipment by paying ₹ 93,000 cash and trading in old equipment with a recorded cost of ₹ 7,000. 
(k) Completed services of a client for ₹ 26,000. This amount is to be paid within 30 days. 
(l) Received ₹ 19,000 payment from the client created in transaction k. 
(m) Bobby withdrew ₹ 20,000 from the business.
Analyse the above stated transactions and open the following T-accounts: Cash, client, office supplies, motor car, building, land, long term payables, capital, withdrawals, salary, expense and utilities expense.
Ans:
a) The transaction (a) increases assets by Rs 5,50,000 (cash Rs 4,00,000 and office equipment Rs 1,5,000) it will be debited and on the other hand it will increase the capital by Rs 5,50,000, so it will be credited in capital account.

b) Purchase of land and small office buildings are assets. On one hand, the purchase of these items will increase their individual accounts and this will increase the total amount of the assets in the business; so, both the accounts will be debited. On the other hand, payment in cash on the purchase of these assets will decrease the cash balance, so the cash account will be credited to the extent of the amount paid. After payment for the building in cash, the balance of the building account will be transferred to creditors for the building account. This will increase the amount of the creditors, which in turn will increase the total liabilities of the business. Long-term payables are regarded as loan to the business that will increase both cash balance (due to intake of loan) as well as liabilities of the business.
c) Here ‘office supplies’ is an expense. So, according to the golden rule, ‘All expenses are debited’, it will be debited on one hand while on the other hand, office supplies has been purchased on credit, so it will increase the liability, on account of which, supplier’s account will be credited.

d) Amount invested (motor car) by the proprietor in the business would increase both the capital and assets.
e) Purchase of additional equipment increases the assets; hence, offices equipment account will be debited.
Further as the office equipment was purchased on credit, it increases the amount of the creditors for office equipment and the creditors account will be credited.
f) Salary is an expense and as all the expenses are debited, so the payment of salary to the manager will be debited to the salary account. And on the other hand the payment of the salary in cash decreases the cash balance (Assets) so the cash account would be credited (as decrease in assets is credited).

g) Amount received or receivable from services rendered to the client is revenue for the business. All revenues are to be credited so client service account will be credited.
On the other hand, cash received in exchange of services would increase the cash balance. It would be debited to the cash account.
h) The ‘utilities’ has been treated as a revenue expense. All expenses are to be debited. Amount paid for utilities would be debited to Utilities account.
Utilities have been paid in cash so the cash account will be credited (as this decreases assets).

i) Payment to the supplier (creditors) will be debited. It results in the decrease in liabilities. Further as the payment has been made in cash, so it results in decrease in the cash balance (assets) and hence the cash account will be credited.

j) Purchase of the equipments will be debited in the Equipment Account (as there is increase in the assets). Also as the equipments of worth Rs. 1,00,000 and Rs. 93,000 have been purchased for cash and old equipments of worth Rs. 7,000 have been exchanged so the purchase of the equipments will be debited in the Office Equipment account and equipment of Rs. 7,000 will be credited in the same account.

k) Receipt from ‘Client services’ is revenue. All revenues are credited. The client services account will be credited and the client is considered as debtor, so the client account will be debited.
I) The client has been considered as Debtors. The amount received from the client will lead to the decrease in the debtor’s balance and the client account will be credited. Receipts from the client will increase the cash balance (asset), and hence the cash account will be debited.
m) The amount withdrawn by the proprietor is considered as ‘drawings’. According to the Business Entity Concept, drawings decrease the owner’s capital,) Thus the drawings account will be debited (as decrease in capital is debited). On the other hand, as drawings have been made in cash, decrease in cash means cash account will be credited with the amount of drawings.

Q11: Journalise the following transactions in the books of Himanshu:

Ans:

Q12: Enter the following Transactions in the Journal of Mudit :

Ans:

Q13: Journalise the following transactions:
Ans:

Q14: Jouranlise the following transactions in the books of Harpreet Bros.: 
(a) ₹1,000 due from Rohit are now bad debts. 
(b) Goods worth ₹2,000 were used by the proprietor. 
(c) Charge depreciation @ 10% p.a for two month on machine costing ₹30,000.
(d) Provide interest on capital of ₹ 1,50,000 at 6% p.a. for 9 months. 
(e) Rahul become insolvent, who owed is ₹ 2,000 a final dividend of 60 paise in a rupee is received from his estate.
Ans:

Q15: Prepare Journal from the transactions given below : 
(a) Cash paid for installation of machine ₹ 500 
(b) Goods given as charity -  ₹ 2,000
(c) Interest charge on capital @7% p.a. when total capital were-₹ 70,000 
(d) Received ₹1,200 of a bad debts written-off last year. 
(e) Goods destroyed by fire - ₹ 2,000 
(f) Rent outstanding - ₹ 1,000 
(g) Interest on drawings - ₹ 900 
(h) Sudhir Kumar who owed me ₹ 3,000 has failed to pay the amount. He pays me a compensation of 45 paise in a rupee. 
(i) Commission received in advance - ₹ 7,000
Ans:

Q16: Journalise the following transactions, post to the ledger:
Ans: 

Q17: Journalise the following transactions is the journal of M/s Goel Brothers and post them to the ledger.

Ans:

Q18: Give journal entries of M/s Mohit traders, Post them to the Ledger from the following transactions:

Ans:

Q19: Journalise the following transaction in the Books of the M/s Bhanu Traders and Post them into the Ledger.

Ans:
Note: For transaction on December 29, 2017, it has been assumed that the rent of Rs 3,000 is paid through cheque. If instead the rent would have been paid in cash, the cash account would have shown a credit (negative) balance and that is logically not correct.

Q20: Journalise the following transaction in the Book of M/s Beauti traders. Also post them in the ledger.

Ans:

Q21: Journalise the following transaction in the books of Sanjana and post them into the ledger:

Ans: 

Q22: Record journal entries for the following transactions in the books of Anudeep of Delhi:
(a) Bought goods ₹ 2,00,000 from Kanta of Delhi (CGST @ 9%, SGST @ 9%)
(b) Bought goods ₹ 1,00,000 for cash from Rajasthan (IGST @ 12%)
(c) Sold goods ₹ 1,50,000 to Sudhir of Punjab (IGST @ 18%)
(d) Paid for Railway Transport ₹ 10,000 (CGST @ 5%, SGST @ 5%)
(e) Sold goods ₹ 1,20,000 to Sidhu of Delhi (CGST @ 9%, SGST @ 9%)
(f) Bought Air-Condition for office use ₹ 60,000 (CGST @ 9%, SGST @ 9%)
(g) Sold goods ₹ 1,50,000 for cash to Sunil to Uttar Pradesh (IGST 18%)
(h) Bought Motor Cycle for business use ₹ 50,000 (CGST 14%, SGST @ 14%)
(i) Paid for Broadband services ₹ 4,000 (CGST @ 9%, SGST @ 0%)
(j) Bought goods ₹ 50,000 from Rajesh, Delhi (CGST @ 9%, SGST @ 9%)
Ans:

Working Note :

Q1: State the three fundamental steps in the accounting process.
Ans: The three fundamental steps in the process of accounting are:

1. Collection of data – The first step is to collect evidence of financial transactions for the accounting period, such as invoices, receipts and vouchers.
2. Processing of data – After transactions are identified, they are recorded in the books of original entry (journal), posted to the appropriate ledger accounts and summarised through a trial balance.
3. Reporting – Once accounts are tallied, financial statements such as the profit and loss account and the balance sheet are prepared and provided to users. At the end of one accounting cycle, closing balances become the opening balances for the next cycle.