2nd Semester Accounting Dec2014

Financial Accounting-II
Page-1-
Mashal University
Accounting-II
Source person: Kamran Khan
M.Com, B.Com
Lecturer at Mashal University
Mashal University, Shar-e-new Park, Kabul
Lecturer: Mr. Kamran Khan
MU
M.Com (Accounting), B.Com
Mashal University
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CHAPTER NO: 01
SPECIAL JOURNALS
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Special Journal or Sub-Division of Journal

When the business is small or the number of transactions are less, all the
transactions are recorded in one journal called General Journal but when the
business becomes large or the number of transactions are more it is not
possible to record all of them in one journal, so this situation several books
are used for the recording of the business transactions, this division of
journal is called as special journal or sub-division of journal. Here separate
book is used for similar transactions.
Purposes and Advantages of the special journal

The main purpose of the special journal is to divide the work load among
various officials when it becomes impossible for one person to record all such
transactions. This division gives the following advantages.
Division of work is done

Efficiency of the staff and skill of the staff is improved
It is easy to check the record of similar nature
Posting in ledger becomes easy
Record of vouchers and documents can be easily maintained
Special Journals
Special journals are used by the business according to its size and needs.
However, a business may use the following special journals.
a. Special journals for purchase and sale of merchandise
Purchases Journal
Purchases Returns and Allowances Journal
Sales Journal
Sales Returns and Journal
b. Special journals for cash transactions
Cash receipts Journal
Cash payment Journal
Petty cash book/ Journal
Note: special journals for cash transactions will be discussed in a separate
chapter.
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1. Purchases Journal
In this book all the purchases of merchandise are recorded. It is also called as
Invoice Inward Journal. From this journal entries are posted in Accounts
Payable Ledger and General Ledger.
It should be remembered that only credit purchases are recorded in
purchases journal. Cash purchases are not recorded here; they are recorded
in cash payment journal.
Format and example of Purchases Journal
Example:
Brevet Company received the following invoices for the month of January,
2011.
Jan 1st Merchandise purchased from Asad Company $30000 vide Invoice
No.010
Jan 10th Invoice No. 0034 received from 3-D computers company for $35000
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Page-5Jan 15thPurchased merchandise worth $15000 from Betalian Company
Invoice No.0111
Jan 25th Purchased merchandise from Ahmad Company $10000 for cash.
Brevet Company
Purchases Journal
Date
Accounts Credited
Jan 01
10
15
Accounts Payable-Asad Company

Accounts Payable-3-D Company
Accounts Payable-Betalian Company
Inv.No Ref.
.
010
0034
0111
Amount
30000
35000
15000
Note: Transaction of 25th January is not recorded in the purchases

Journal because it is cash transaction. It is recorded in the cash
payments journal.
2. Sales Journal
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Page-6In this book all the sales of merchandise are recorded. It is also called as
Invoice Outward Journal. From this journal entries are posted in Accounts
Receivable Ledger and General Ledger. It should be remembered that only
credit sales are recorded in sales journal. Cash sales are not recorded here;
they are recorded in cash Receipt journal.
Format and example of Sales Journal
Example:
Comsat Company had the following transactions for the month of January,
2011.
Jan 1st Merchandise sold to Akram Company $20000 vide Invoice No.A-10
Jan 10th sold merchandise to Baram Company Invoice No. B-012 for $25000
Jan 24th Sold merchandise to Ramz Company $10000 for cash.
Jan 30th sold merchandise for $350 on Maliam Company on account invoice
No M-123.
Date
Jan 01
10
30
Comsat Company
Sales Journal
Accounts Debited
Inv.No.
Accounts
Receivable-Akram A-10
Company
B-012
Accounts
Receivable
-Baram M-123
Company
Accounts Receivable -Maliam
Company
Ref.
Amount
20000
25000
3500
Note: Transaction of 24th January is not recorded in the sales Journal

because it is cash transaction. It is recorded in the cash receipts
journal.
3. Purchases Return & Allowances Journal
When merchandise is purchased is recorded in the purchases journal, but
when the merchandise is defective or not according to the buyers
requirement, they are returned to the seller called purchase return. Such
purchases returns are recorded in a book called purchases return &
Allowances Journal. Sometimes the seller may grant an allowance and the
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Page-7merchandise are not returned to the seller. This allowance is also recorded in
the purchases return & allowances journal.
Format and example of Purchases Return & Allowances Journal
Example:
February 1st Merchandise value $250 returned to Asad Company Inv.No.011.
5th Returned merchandise worth $300 returned to 3-D Company Inv.No.0035.
10th Betalian Company gave an allowance of $500 as the merchandise
purchased was defective.
Brevet Company
Purchases Return & Allowances Journal
Date
Accounts Debited
Feb. 01
5
10
Accounts Payable-Asad Company

Accounts Payable-3-D Company
Accounts Payable-Betalian Company
Inv.No Ref.
.
011
0035
_
Amount
250
300
500
4. Sales Return & Allowances Journal

When merchandise is sold is recorded in the sales journal, but when the
merchandise is defective or not according to the buyers requirement, they
are returned to the seller called sales return. Such sales returns are recorded
in a book called sales return & Allowances Journal. Sometimes the seller may
grant an allowance and the merchandise are not returned to the seller. This
allowance is also recorded in the sales return & allowances journal.
Format and example of Sales Return & Allowances Journal
Example:
February 1st Merchandise value $700 returned by Akram Company
A-11
Inv.No.
5th Returned merchandise worth $630 returned by Baram Company Inv.No. B013
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Page-810th Maliam Company gave an allowance of $150 for the defective
merchandise M-124
Comsat Company
Sales Return & Allowances Journal
Date
Accounts Credited
Inv.No Ref.
.
Receivable-Akram A-11
B-013
Receivable
-Baram M-124
Amount
Feb. 01
5
10
Accounts
Company
Accounts
Company
Accounts
Company
700
630
150
Receivable
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-Maliam
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Chapter No: 01
Special Journal
Chapter End
Exercises
Exerciser No. 01
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Page-10The following transactions were completed by 3- Stars Company
during January 2011.
1st Purchased merchandise from Khan Company for $900invoice no KC-1
2nd Purchased merchandise from Bren Bore Company $2400. Invoice No.
BBC-1
3rd Sold merchandise to X-Smith $1500 invoice no. XS-1
4th Purchased goods from Y-John & John for $4500 invoice no YJ-1
5th Sold merchandise to X-Smith $3400 invoice no. XS-2
6th Sales return by X-Smith $500 credit note no. XS-1
7th Returned merchandise to Bren Bore Company $300 being defective debit
note no BB-1
8th Merchandise were sold on Amjad $ 19000 on account invoice no Am-12011
9th Amjad received an allowance for $200 for damaged merchandise credit
note no Am-1-2011
10th Merchandise returned to Y-John & John for $500 debit note no YJ-1
Required: Record the above transactions into

a. Purchases Journal b. Purchases Return and Allowances Journal c.
Sales Journal d. Sales Return and Allowances Journal
Exerciser No. 02
1. Purchased merchandise from Jan for $1300 invoice no-1
2. Sold merchandise to Karim $2100 invoice no 01
3. Purchased merchandise from Naseem for cash $ 28999
4. Purchased merchandise from Naseem for $3500 invoice no 001
5. Sold merchandise to Kamal for $3590 invoice no 0001
6. Sold merchandise to Qamar for $56792 invoice no 0012
7. Returned merchandise to Jan $300 debit note no 1
8. Returned merchandise by Naseem $300 credit note no 1
9. Allowance given to Qamar for defective merchandise $92 credit note
no 2

Exerciser No. 03
1. Sold merchandise on account to Mr. Tariq for $2000 invoice no-1
2. Purchased merchandise from Rizvi for $7000 subject to 10 trade
discount invoice no-1
3. Sold merchandise to Akmal $4000 invoice no-01
4. Purchased merchandise from Idrees $12500 invoice no-ID1
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Page-115. Mr. Tariq returned merchandise $500 credit note no 1
6. Returned defective merchandise to Rizvi $1300 debit note no 1
7. Purchased merchandise from Naseem $9000 invoice no-N1
8. Sold merchandise to Mr. Barakatt for $15500 invoice no-B001
9. Returned inferior merchandise to Naseem $4500 debit note no 2
10.
Granted an allowance of $50 to Mr. Akmal credit note no 2

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CHAPTER NO: 02
CASH BOOK
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Page-13Introduction
In this chapter we shall learn how to record cash receipts and cash payments
transactions in to the cash book.
Recording of cash transactions
Small businesses settle the receipts and payments through cash; while large
businesses settle the receipts and payments through checks. There are two
methods of recording cash transactions.
1. Cash Book, it is maintained by small businesses
2. Cash Journals, this is maintained by large businesses
Cash Book
In small businesses the volume of cash transactions is small; only one person
is enough to record the receipts and payments of cash. In such situation only
one book is used for recording of cash receipts and payments. This book is
called as Cash Book. Every page of cash book is divided into two sections.
The left hand side for recording the receipts and the right hand side for
payments of cash.
A business concern may use any one of the following cash book.
1. Single Column Cash Book
This is the simplest form of cash book. It is also known as Simple Cash
Book and used by those businesses that neither have any bank account nor
allows or receives any discount. It is used by very small businesses.
Specimen and example of recording in single column
Jan 1st. Cash in hand $ 15000
06. Purchased merchandise for cash $ 2000
10. Received cash from Smith Company $3000
18. Paid cash to Glaxo Company $1000
20. Cash sales $4000
25. Paid salary $ 100
30. Paid cash for rent $50
30. Purchased Furniture $1500
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Cash Book
Date
Jan 1st
10
20
Vr.N
o
Descriptio
n
Balance
A/R-Smith
Co.
Sales
Re
f
Total
Amou
nt
15000
3000
4000
22000
Date
Jan
06
18
25
30
30
Vr.N
o
Description
Re
f
Purchases
A/P-Glaxo Co.
Salary
Rent
Furniture
Balance
Total
Amoun
t
2000
1000
100
50
1500
17350
22000
2. Two Column Cash Book

A cash book which contain two columns one for cash and the other for
discount. It is used by those organizations which receives allowed discount
as custom of trade. Discount allowed is recorded on the debit side and
discount received is recorded on the credit side.
Specimen and example of recording in Two column Cash Book
Jan 1st Cash in hand $2000.
02. Received cash $1500 from Asad Company, discount allowed $100.
05. Cash sales $1000.
10. Paid kamal $485, discount received $15.
15. Purchased merchandise for cash $300.
20. Received from Amjad company cash less 5% discount in $2000.
25. Paid Hanif Company $450.
27. Bought furniture for cash $150.
29. Paid salary $700.
30. Received cash from sale $1500.
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Receipts
Payment
Dat
e
Jan
1
2
5
20
30
Vr.N
o
Descriptio
n
Two Column Cash Book

Re
f
Amou
nt
Balance
A/R-Asad
Co.
Sales
A/R-Amjad
Co.
Sales
2000
1500
1000
1900
1500
Total
7900
Di
scnt
10
0
10
0
20
0
Dat
e
10
15
25
27
30
Vr.
No
Descriptio
n
Re Amou
f
nt
A/P-Kamal
Purchases
A/P-Hani
Furniture
Salary
485
300
450
150
700
Balance
5815
Total
7900
3. Three Column Cash Book

In todays business world every business organization keeps a bank account.
Three column cash book is a cash book in which there are three columns for
cash, bank and discount. The cash deposited into the bank is recorded on the
receipts side of the cash book. Any cash payment from the bank account is
recorded on the payments side. At the end of the month the cash book is
balanced.
In three column cash some transactions are recorded on the both sides of the
cash book. Such entries which are passed and are recorded on the both sides
of the cash book are called as contra entries.
Specimen and example of recording in Three column Cash Book
On 1st March 2010 Stravo Company had cash $10000 and balance at bank
$18900.
02. Purchased computers for cash $3000.
03. Cash Sales $1200.
4. Deposited cash into bank $300.
05. Received check from Hamza $ 3500 and deposited into the bank
account, Discount $ 200.
06. Paid check for merchandise purchased $ 550.
07. Received check from Kamal & Bro. $ 770.
08. Paid cash for supplies $450.
09. Paid salary by check $ 2550.
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Discnt
15
15
Page-1610. Deposited check received from kamal.
Receipts
Payments
Date
1/1/201
0
3/1/201
0
4/1/201
0
5/1/201
0
7/1/201
0
10/1/20
10
V.
N
o.
Descript Re
ion
f.
Balance
Sales
cash
A/RHamza
A/RKamal
Three Column Cash Book
Cas
h
Ban
k
100
00
120
0
Dis
ct
189
00
300
350
0
200
770
cash
770
Date
2/1/201
0
4/1/201
0
6/1/201
0
8/1/201
0
9/1/201
0
10/1/20
10
V.
N
o.
Descript Re
ion
f.
Compute
rs
300
0
Bank
Purchase
s
300
Supplies
450
Bank
Total
234
70
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200
Total
Ban
k
Dis
ct.
550
255
0
Salary
Balance
119
70
Cas
h
770
745
0
119
70
203
70
234
70
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Chapter No.02
Cash Book
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Chapter End
Exercises
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Page-19Single-Column Cash Book Exercises
Requirement: Record the following transactions into Single-Column
Cash Book
Exercise No. 01 See Dee has the given transactions for February,
2011
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
Started business with cash $50000.

Purchased merchandise from Jan for cash $1300.
Purchased machinery for cash $ 28999.
Paid rent for one month $2000.
Purchased office equipment for $3000.
Cash taken by the owner $3900.
Bought office furniture for cash $690.
Paid for tea and food expenses $1450.
Given cash as charity $10.
Paid cash on account $5900.
Received cash from commission $1250.
Exercise No. 02Opening balance of cash $17800. The following

transactions were completed.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
Sold merchandise to Mr. Tariq for cash $2000 .

Purchased merchandise from Rizvi for cash $7000.
Paid cash for computers purchased $1200.
Sold merchandise to Akmalfor cash $4000.
Purchased merchandise from Idreesfor cash $12500.
Received cash from an accounts receivable $5600.
Paid salary for the month $5000.
Received commission for $13200.
Paid telephone bill $120.
Paid cash to an account payable $2300.
Exercise No. 03
1.
2.
3.
4.
5.
6.
7.
Cash on hand $ 23500.

Received cash from See Jee company $35000 less 10% discount.
Received payment from Gee T Company $2500 .
Paid for supplies $300.
Cash sales $6700.
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Page-208. Received interest from Jan & Jan $3400
9. Cash taken by the owner $150.
Tow-Column Cash Book Exercises

Requirement: Record the following transactions into TwoColumn Cash Book
Exercise No. 01Zahid and Wajid completed the following
transactions in the month of February, 2011.
1. Started business with cash $40000.
2. Purchased office equipment for $10000.
3. Received cash from an account receivable $2500 and discount allowed
$100.
4. Purchased merchandise for $20000.
5. Sold merchandise for cash $13000 and allowed trade discount $100.
6. Received cash from interest $1340.
7. Paid cash on rent $590.
8. Paid cash on account $1500 and 5% was discount.
9. Cash withdrawn by the owner $500.
10.
Paid salaries $5900.
11.
Received cash on sale of merchandise $5800.
12.
Utility bills were $380.
Exercise No.02 TT Company has the following transactions for

the month of April, 2011.
1. Received cash from See Jee company $35000 less 10%
discount.
2. Received payment from Gee T Company $4500 after deducting
5% discount.
3. Paid rent for one month $450.
4. Paid for supplies $300.
5. Cash sales for $6700.
6. Paid cash on account $5800 and 4% were the discount.
7. Received interest from Jan & Jan $3400.
8. Purchased shares of a corporation $580.
9. Sold shares for $670.
10.
Received cash before due date $12500 less 50 discounts.
Exercise No. 03 GeeCee Companys transactions are as follows.

1. Received cash from repair services $2400.
2. Received cash from Bashir Ahmad for $18000.
3. Purchased repair equipments for $1590 and trade discount were $10.
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Page-214. Repaired a motor car for $250 and received the amount in cash.
5. Paid wages to employees $1200.
6. Paid cash for food expenses $1400.
7. Paid rent for the month $600.
8. Repaired one motor cycle for $40 and the customer was charged.
9. Received commission for selling Z-Companys repair parts $3500.
10.
Paid utility bills $1000.
Three-Column Cash Book Exercises

Record the following transactions into Three-Column Cash
Book
Exercise-1
Jan 1st 2011 Opening balance of Cash $12000 and Bank $15000.
1. Purchased furniture for cash $2000.
2. Purchased machinery by check $3000.
4. Sold merchandise on cash $10000.
5. Received cash from Amanullah $3400 and discount allowed $100.
6. Received check from Janzaib $5000 and deposited the check into the
bank on the same date.
7. Cash sales $ 5600 and trade discount %5.
8. Paid salary $ 1000.
9. Paid cash on account $4000.
Exercise-2
1. Started business with cash $80000.
4. Received check from Qasim $2500 and discount allowed $50.
5. Sold merchandise for cash $6000.
6. Qasims check paid into the bank.
7. Withdrawn cash from bank for office use $6600.
8. Received cash from sales $12000.
9. Paid electricity bill $300.
10.
Paid salary by check $1000.
11.
Cash brought by the owner $4500.
12.
Loan taken from Azizi Bank $6000.
13.
Cash taken by the owner for personal expenses $1200.
14.
Paid cash on credit $ 9800 less 200 discounts.
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Page-2215.
Sold old furniture for cash $1300.
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Page-23-
Exercise-3
1.
2.
3.
4.
5.
6.
Cash in hand $15300 and balance at bank $20500.

Received from Kamal $5900 and discount allowed $100.
Paid salaries for the month of December $2000.
Purchased merchandise payment made by check $3200.
Paid Majid Khan by check $8000 discount received $50.
Withdrew from bank for office use $1000; paid rent for the month
$1200.
7. Cash deposited into bank $1500.
8. Cash sales $9560 and $40 was trade discount.
9. Purchased a motor car for business use for $4000.
10.
Paid wages $250.
11.
Received check from Jan $8900 and discount was $100.
12.
Sold old machinery parts $3500.
13.
Paid Jans check into bank.
Exercise-4
On 1st December, 2011 3-Stars Company cash book shows a balance of cash
$18900 and balance of Bank $35000. The following transactions were
completed.
1. Purchased office computers for cash $3400.
4. Paid salaries by check $5000.
6. Received cash from Azhar $8900 and 10% discount.
7. Purchased merchandise by check $6000.
8. Sold goods on cash for $12300and received a check for the amount,
which was lodged into the bank on the same day.
9. Sold old furniture for $6000, received 3000 in cash and for the balance
a check, which was deposited into the bank.
10.
Received a check from an accounts receivable for $880 less 400
discounts.
11.
Loan taken from a commercial bank for $13200 @10% monthly
interests.
12.
Loan given to a friend for $5000 @13% monthly interests.
13.
Fresh investment made by the owner for $15400
14.
Cash taken by owner for personal expenses $170.
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Exercise-5
March 1st 2011. Opening balance of cash $12000 and bank overdraft was
$2500.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Salaries paid to the staff $1500 by check.

Received from Ali $2800, discount was $200.
Cash paid into bank $6500.
Direct collection of cash into bank from Raza Company $10000.
Issued a check for $1000 for electricity bills.
Cash sales $5000.
Paid for salaries $1500.
Payment made from our bank account $3400.
Received cash from customers into bank account $13900 and discount
was $250.
10.
Purchased merchandise for cash $3000.
11.
Cash sales made for $9890.
Exercise-6
March 1st 2011. Opening balance of cash $12000 and bank overdraft was
$25000.
1. Salaries paid to the staff $3000 by check.
2. Paid rent by cash $200.
3. Received from Ali $2800, discount was $200.
4. Cash paid into bank $650.
5. Direct collection of cash into bank from Raza Company $10000.
6. Issued a check for $1000 for electricity bills.
7. Cash sales $5000 and the amount deposited into bank.
8. Paid a check for salaries $2500.
9. Direct payment made from our bank account $3400.
10.
Received cash from customers into bank account $1900 and
discount was $50.
11.
Purchased merchandise for cash $3000.
12.
Cash sales made for $9890.
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Page-25-
CHAPTER NO: 03
CASH JOURNALS
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Page-26Introduction
In large business concerns all the cash received is deposited into the bank on
that or on next day. Similarly all payments are made through checks. In such
business concerns separate cash books are maintained for deposits and
withdrawals of cash which are called cash journals.
It should be noted that for all small payments a petty cash fund is
maintained and all the small payments are made through that fund. A petty
cash book is maintained for the record.
The details of these cash journals are discussed as below:
1. Cash Receipt Journal (CRJ)
This is the cash journal where we record both the receipt of cash and checks.
This book has two sides, the debit side and the credit side. All the receipts of
cash and checks are recorded on the debit side and on the credit side there
are several columns for sale, accounts receivable and other items from
whom the cash has been received.
Specimen and example of recording in Cash Receipt Journal (CRJ)
The following transactions were completed by First Star Computers for the
month of October.
1st Cash received from the owner $25000.
02. Cash received from sale of merchandises $4500.
03. Received interest $1500.
04. Akname Computer Center paid its debt $3690.
05. Received cash from Saleem Computers $1580 and allowed discount $20.
07. Received cash from repair of computers $70.
08. Received cash from sale of old computer parts $835 and trade discount
was $15.
09. Cash received from customer to whom 10 computers were sold on credit
$7565 and cash
discount was allowed 10%.
10. Sold computers for cash $4980.
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Page-27-
Cash Receipt Journal (CRJ)

Dat
e
Accounts
Credited
Ref.
Cash
Oct
1st
2
3
4
5
6
7
8
9
10
Owner Equity
Sales
Interest
A/R-Akname
Com.
A/R-Saleem
Com.
Sales
Computer
Repair
Sale of
Computers
A/RSales
Credi
t
Debit
Disco
unt
25000
4500
1500
Sales
Sund
ry
25000
4500
1500
3690
1580
1900
A/R
3690
20
1600
1900
70
70
835
6808.
5
4980
835
50863
.5
756.5
776.5
7565
4980
6400
17835
27405
2. Cash Payment Journal (CPJ)

In large business concerns all the payments are made through checks. These
payments are entered in a cash journal called Cash Payment Journal or Cash
Disbursement Journal. Here all the checks issued and paid are entered. These
checks are issued for making payments to creditors, payment for expenses,
cash purchases, purchase of assets etc.
Specimen and example of recording in Cash Payment Journal (CPJ)
Record the following transactions into cash payment journal
01
02
03
04
05
Paid cash for merchandise purchased $1000, check no 000123456

Paid cash to Abdu Rahman $1867, check no 000123789
Purchased stationery $550, check no 000123454
Paid Amjad Khan $9865, discount was 15 check no 000321456
Purchased merchandise for cash $1730, check no 000123258
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Page-2806 Paid rent for the month $850, check no 000128896
07 Cash paid to creditor $425, check no 007453456
08 Cash paid as salary $3560 and to owner $1000, check no 012365478
Cash Payment Journal

Dat
e
Accounts
Debited
Re
f.
Credi
t
Cash
Oct
1st
2
3
4
5
6
7
8
8
10
Purchases
A/P-Abdu
Rahman
Stationery
A/P-Amjad
Purchases
Rent
A/P
Salary
Drawing
Total
Disco
unt
1000
A/P
Sund
ry
1000
1867
550
9865 15
1730
850
425
3560
1000
2084
7
Debit
Purcha
ses
1867
550
9880
1730
850
425
3560
1000
15
2730
1217
2
5960
3. Petty Cash Book

In large businesses all the cash and checks are deposited into the bank and
all the large payments are made through bank. For small type of expenses
we cannot issue checks for which the payments are made on the spot. For
example, payment for travelling, entertainment, envelops, internet expenses
etc. For such payments we maintain a fund known as Petty Cash Fund and
a book in which the entries are recorded is called as Petty Cash Book.
Procedure of Petty Cash Fund
The following procedure is used for creating and using the petty cash fund.
MU
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Page-29a. An amount is fixed for petty cash expense, keeping in view of one
month cash requirements of the organization. This system is called
Imprest System.
b. A check is drawn for petty expenses and is recorded in the petty cash
book.
c. All the petty expenditures are recorded in the petty cash book.
d. At the end of the month the book is balanced and the fund is
reimbursed at the beginning of the next month.
Specimen and example of recording in Petty Cash Book

Jamal business maintained petty cash fund with an imprest system of Rs.
100, completed the following transactions during the month of June.
1. Paid
2. Paid
3. Paid
4. Paid
5. Paid
6. Paid
7. Paid
8. Paid
9. Paid
10.
11.
12.
13.
for postage charges $10.

for telegram $5.
for travelling $8.
for stationery $9.
for tips to peon $10.
for tea offered to a customer $15.
for postage $6.
for Motor fare $4.
for papers purchased $3.
Paid for postage charges $2.
Paid for printing $1.
Paid for taxi fare $2.
Paid $5 to owner.
Jamal business
Petty Cash Book
Date
1Jun11
2
3
4
Description
Tota
l
Postag
e
Received in
Fund=100
Postage
Telegram
Travelling
10
5
8
10
5
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Mashal University
Printi
ng
Statione
ry
Travelli
ng
Entertianm
ent
Miscellane
ous
Page-305 stationery
6 Tips to Peon
Tea for
7 Customer
8 Postage
9 Motor Fare
10 Papers
11 Printing pages
12 Texi Fare
13 Drawing
Total
Balance=
22
Received in
Fund= 78
100
9
10
15
6
4
3
1
2
5
78
9
10
15
6
4
3
1
2
21
13
14
15
5
15
CHAPTER NO: 03
CASH RECEIPT AND PAYMENT
JOURNALS
Chapter End Exercises
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Page-31-
Exercise No. 01
The following transactions were completed by Murry Repair
Services, during January 2011.
11.
Received cash from repair services $2400.
12.
Received cash from Bashir Ahmad for $18000.
13.
Purchased repair equipments for $1590 and trade discount were
$10.
14.
Repaired a motor car for $250 and received the amount in cash.
15.
Paid wages to employees $1200.
16.
Paid cash for food expenses $1400.
17.
Paid rent for the month $600.
18.
Repaired one motor cycle for $40 and the customer was charged.
19.
Received commission for selling Z-Companys repair parts $3500.
20.
Paid utility bills $1000.
Required: Record the above transactions into Cash Receipts Journal and
Cash Payment Journal
Exercise No. 02 See Dee has the given transactions for February,
2011
MU
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Page-3222.
23.
24.
25.
26.
27.
28.
29.
30.
31.
Purchased merchandise from Jan for cash $1300.

Purchased merchandise from Naseem for cash $ 28999
Purchased merchandise from Naseem for $3500 cash.
Purchased office equipments for $3000.
Cash taken by the owner $3900.
Bought office furniture for cash $690.
Paid for tea and food expenses $1450.
Given cash as charity $10.
Required: Record the above transactions into Cash Payment Journal

Exercise No. 03
Opening balance of cash $17800. The following transactions were
completed.
20.
21.
10%
22.
23.
24.
25.
26.
27.
28.
29.
Sold merchandise to Mr. Tariq for cash $2000 .

Purchased merchandise from Rizvi for cash $7000, subject to
trade discount.
Paid cash for computers purchased $1200.
Sold merchandise to Akmal $4000.
Purchased merchandise from Idrees $12500.
Received cash from an accounts receivable $5600.
Paid salary for the month $5000.
Received commission for $13200.
Paid telephone bill $120.
Paid cash to an account payable $2300.
Required: Record the above transactions into Cash Receipts Journal

and Cash Payment Journal
Exercise No. 04 Zahid and Wajid completed the following

transactions in the month of February, 2011.
13.
Started business with cash $40000 and deposited the cash into
Azizi Bank.
14.
Purchased office equipments for $10000.
15.
Purchased merchandise for $20000.
16.
Sold merchandise for cash $13000 and allowed trade discount
$100.
17.
Received cash from interest $1340.
18.
Paid cash on rent $590.
MU
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Page-3319.
20.
21.
22.
Cash withdrawn by the owner $500.

Paid salaries $5900.
Received cash on sale of merchandise $5800.
Utility bills were $380.

Exercise No. 05 Que Bee completed the following transactions in the

month of July, 2011.
10.
Received cash from See Jee company $35000 less 10% discount.
11.
Received payment from Gee T Company $4500 after deducting
5% discount.
12.
13.
Paid for supplies $300.
14.
Cash sales for $6700.
15.
Paid cash on account $5800 and 4% were the discount.
16.
Received interest from Jan & Jan $3400.
17.
Purchased shares of a corporation $580.
18.
Sold shares for $670.
19.
A check was received from Ahmad for $3900 and paid into the
bank on the next day $3800.

Exercise No. 06 Wajid Compnay uses petty cash fund under the
Imprest System by issuing a check of $100 on 1st December, 2011.
The following transactions were completed during the month.
December01, Paid for Pean for Tea $10.
December 05, Paid for postage $10.
December 10, Paid for carbon papers $9.
December 12, Paid cash for registration of Parcels $ 12.
December 15, Paid for Taxi fare $10.
December 17, Cash taken by the owner $4.
December 19, Given cash as charity $3.
MU
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Page-34December 21, Paid for electricity bills 15.
December 25, Paid for cartage $5.
December 30, Paid for gums papers $5.
Required: Record the above transactions into Petty Cash Journal
Exercise No.07 Shahid Compnay uses petty cash fund under the
Imprest System by issuing a check of $400 on 1st January, 2012. The
following transactions were completed during the month.
Jan 01. Paid for refreshment of customer $20.
Jan 05, Paid for postage stamps $ 37.
Jan 10, Paid for stationery $30.
Jan 15, Paid for travelling expenses $50.
Jan 18, Paid for electricity bill $50.
Jan 23, Paid for registered parcels $12.
Jan 25, paid advance to sweeper $15.
Jan 28, Paid for tea of staff $ 25.
Jan 31, Paid for invitation cards and envelops $ 25.
Exercise No.08 A Company has cash for petty cash fund $200 for the
month of February, 201. A Company maintains Imprest system for
petty cash fund.
Purchased typewriter ribbon and carbon paper $20.
Paid for rikshaw fee $15.
Paid for telegram $11.
Paid for cart hire $8.
Paid for tea to customer $10.
Paid for postage stamps $8
Paid for registration of parcel $6.
Paid for repair of typewriter $18.
Paid for cartage $5.
Advance to gatekeeper $15.
Cash given to the owner $12.
MU
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Page-35-
Chapter 04
Bank Reconciliation
Statement
Introduction to Bank Reconciliation Statement

A business organization having regular cash transactions with the business
want to know its cash balance at the end of a specific time period says a
month. When the balance as shown by the bank record is equal to the
MU
Mashal University
Page-36balance as shown by the depositors record, there will be no problem but in
most of the cases it is not equal. In order to make it equal and correct, a
statement is prepared that is called Bank Reconciliation Statement.
Bank Balance
The balance as shown by the depositors record is called as bank balance.
How to ascertain Bank Balance?
Bank balance as per cash is ascertained in the following manner.
a. In case of Cash Book: All the deposits in the bank are shown in the
bank column on the receipt side of cash book. Similarly all the
payments are shown in the bank column on the payment side of the
cash book.If the receipt side is heavier than the payment side it
represents balance as per cash book (Dr.) or a favorable balance.
Similarly if the payment side is heavier than the deposit side it
represents balance as per cash book (Cr.), unfavorable or bank
overdraft.
b. In case of Cash Journal: Total of the cash receipt journal is posted to the
Bank Account in the General Ledger and the total of the cash payment
journal is also posted. The debit balance represents the balance as per
cash book (Dr.) or a favorable balance. Similarly the credit balance
represents balance as per cash book (Cr.), unfavorable or bank
overdraft.
Pass Book
This is the copy of the depositors account in the bank ledger. All the deposits
are recorded on the credit side or deposits side and all the payments and
charges are recorded on the debit side or withdrawals side.
Bank Statement
A bank statement is a summary of the depositors record in the bank. It
contains the opening balance, if any, the deposits, withdrawals and bank
charges, if any. A bank usually sends bank summary to its customers after a
specific time period.
Types of balances:
a. Balance as per cash book (Dr.) b. Balance as per cash book (Cr.)
c. Balance as per pass book (Dr.) d. Balance as per pass book (Cr.)
MU
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Page-37Reasons of disagreement between the balance of cash book and
pass book
The following are the main reasons of disagreement between the balance of
cash book and pass book.
a. Un-presented checks
These are the check issued to the bank for
yet made from the bank. As the payment
such checks are not included in the banks
arise between the cash book and pass book
payment but the payment is not

is not yet made from the bank,
record due to which a difference
balance.
b. Un-collected or un-credited checks

These are the checks which have been sent to the bank for deposit but are
not deposited into the bank. As such checks are not shown in the banks
recorddue to which a difference arise between the cash book and pass book
balance.
c. Interest and bank service charges
Any interest or other service charges not recorded in the depositors cash
book arises a difference between the cash book and pass book balance.
d. Dishonored checks
Any check issued for deposit is immediately recorded in the cash book but
such checks are not accepted by the bank due to some reason (s), the
information of dishonor may not have been received by the customer, due to
which a difference arise between the cash book and pass book balance.
e. Interest credited by the bank not recorded in the cash book
Interest credited by the bank not recorded in the cash book arise a difference
between the cash book and pass book balance.
f. Standing orders
Any standing order regarding payment, if omitted by the depositor arise a
difference between the cash book and pass book balance.
g. Direct debit
A standing order for which the depositor changes payments date arise a
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Page-38h. Errors
To err is human. Any error on the part of the depositor or bank arise a
Methods of Preparing Bank Reconciliation Statement
Following are the methods of preparing bank reconciliation statement
a. Finding the adjusted balance b. Reconciliation of the balance
A. Finding the adjusted balance Method
1. In case of Balance as Per Cash Book (Dr.)
First record all the transactions in cash book that not have been recorded in
the Pass Book as well as the errors made in the cash book and checks
dishonored. Then record all the transactions in the Pass Book that not have
been recorded in the Cash Book and all the errors.
Now draw the Bank Reconciliation Statement format and follow the following
formula.
Balance as Per Cash Book (Dr.)
(+) Cr. Side of pass book
(-) Dr. Side of pass book----from the balance of the cash book.
It will be the adjusted balance of cash book. Now write the balance of pass
book. Assume it is
Balance as Per Pass Book (Cr.)
(+) Dr. Side of Cash book
(-) Cr. Side of Cash book ----from the balance of the pass book
It will be the adjusted balance of pass book.
2. In case of Balance as Per Cash Book (Cr.)
Draw the Bank Reconciliation Statement format and follow the following
formula.
Balance as Per Cash Book (Cr.)
(+) Dr. Side of pass book
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Page-39(-) Cr. Side of pass book ----from the balance of the cash book.
It will be the adjusted balance of cash book. Now write the balance of pass
book. Assume it is
Balance as Per Pass Book (Dr.)
(+) Cr. Side of Cash book
(-) Dr. Side of Cash book ----from the balance of the pass book
It will be the adjusted balance of pass book.
Example of Bank Reconciliation Statement
We have four types of balances. Examples on all the four are given as under.
a. Balance as per Cash Book (Dr.)/ b. Balance as Per Pass Book
(Cr.)
On January 31st, 2011, a trader has a balance of $4320 as shown by the cash
book (Dr.), while the pass book shows a balance of $4955 on the same date.
On reconciling the balances we find the following.
a. A check of $2000 issued to jamal has not been presented for payment
into the bank.
b. A check of $1500 deposited into the bank has not yet been credited by
the bank.
c. The bank has debited the amount of $80 as bank charges.
d. The bank has credited the amount of $215 as interest on deposit.
Required:PrepareBank Reconciliation Statement from the above
data.
Dr.Cash Book
Receipts
Deposits
b. 1500
d. 215
Cr.Dr.
Pass Book
Payments
a. 2000
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Cr.
Withdrawals
c. 80
Page-40-
Bank Reconciliation Statement

Balance as per cash book (Dr.)
(+) d. interest credited by the bank
4320
215
(-) c. interest charged by the bank
4535
80
Adjusted balance
Balance as per pass book (Cr.)
(+) b. cash paid for deposit
deposited by bank
not
yet
4455
4955
1500
6455
2000
(-) a. check issued for payment, but not yet

Adjusted balance
4455
c. Balance as per Cash Book (Cr.)/ d. Balance as Per Pass Book

(Dr.)
On January 31st, 2011, a trader has a balance of $3254 as shown by the cash
book (Cr.), while the pass book shows a debit balance of $3170 on the same
date. On reconciling the balances we find the following.
a. A check of $584issued to jamal has not been presented for payment
into the bank.
b. A check of $1085 deposited into the bank has not yet been credited by
the bank.
c. The bank has debited the amount of $15 as bank charges.
d. The bank has credited the amount of $600 as interest on deposit.
Required: Prepare Bank Reconciliation Statement from the above
data.
Dr.
Pass Book
Cash Book
Cr.
Receipts
Deposits
Cr.
Dr.
Payments
Withdrawals
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Page-41d. 1085
d. 600
a. 584
c. 15

Balance as per cash book (Cr.)
(+)c. interest charged by the bank
3254
15
(-)d. interest credited by the bank
3269
600
2669
Adjusted balance
Balance as per pass book (Dr.)
(+) b. cash paid for deposit
deposited by bank
not
yet
(-) a. check issued for payment, but not yet

Adjusted balance
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Mashal University
3170
584
3754
1085
2669
Page-42B. Reconciliation of the balance Method
In this method the balance of one book as well as reasons of difference is
given and the balance of the other book is to be finding out.
Procedure of Bank Reconciliation Statement
1. In case of Balance as Per Cash Book (Dr.)
First record all the transactions in cash book that not have been recorded in
the Pass Book as well as the errors made in the cash book and checks
dishonored. Then record all the transactions in the Pass Book that not have
been recorded in the Cash Book and all the errors.
Now draw the Bank Reconciliation Statement format and follow the following
formula.
Balance as Per Cash Book (Dr.)
(+) Cr. Side of pass book and cash book
(-) Dr. Side of pass book and cash book
It will give the balance as per Pass Book
Balance as Per Pass Book (Cr.)
(+) Dr. Side of Cash book and pass book
(-) Cr. Side of Cash book and pass book
It will give the balance as per cash book
1. In case of Balance as Per Cash Book (Cr.)
Draw the Bank Reconciliation Statement format and follow the following
formula.
Balance as Per Cash Book (Cr.)
(+) Dr. Side of pass book and cash book
(-) Cr. Side of pass book and cash book
It will give the balance as per pass book
Balance as Per Pass Book (Dr.)
(+) Cr. Side of Cash book and pass book
MU
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Page-43(-) Dr. Side of Cash book and pass book
It will give balance as per cash book
a. When balance as per Pass Book (Cr.) is given and Balance of
Cash Book is to find out.
Show the balance as per Cash Book from the following data.
1. Balance as per pass book (Cr.) $11500 on January 31, 2011.
2. Checks of $500 and $1700 deposited into the bank, not yet credited by
the bank.
3. Checks $400 and $950 issued for payment but the payment is not yet
made by the bank.
4. A check has been dishonored $450.
5. Bank charges were $50.
Dr.
Pass Book
Cash Book
Cr.
Receipts
Deposits
Cr.
Dr.
Payments
Withdrawals
2. 500
3. 4005. 501. 11500
1700 950
4 450
Check dishonored $450= - from cash book balance
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Page-44Balance as per Pass book (Cr.)
(+) 5 interest charged by the bank not recorded in 50
Cash Book
2200
2.Checks paid for deposited not collected by
the bank
450
(500+1700)
Check dishonored
11500
2700
4200
1350
(-) 3. Checks issued for payment but the payment is

not made
Balance as per Cash Book (Dr.)
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Mashal University
12850
Page-45b. When balance as per Cash Book (Dr.) is given and Balance of
Pass Book is to find out
A limited company has balance as per cash book $2500, it was not agree
with the balance of pass book due to the following reasons.
a. A check for $600 was not presented to the bank for payment.
b. A check of $2000 was not deposited into the bank.
c. Bank charges were $20.
d. Interest not recorded in the cash book $150.
e. Dividend received by the Bank not recorded in the cash book $400.
f. Commission debited in the bank statement not recorded in cash book
$300.
Prepare bank reconciliation statement.
Dr.
Pass Book
Cash Book
Cr.
Receipts
Deposits
Cr.
Dr.
Payments
Withdrawals
B 2000
d 150
A 600
c 20
F 300
e 400

Balance as per Cash book (Dr.)
(+) A Check issued but payment is not yet made by 600
the bank
150
D Interest not recorded in cash book
400
E Dividend not recorded in cash book
2500
1150
3650
2000
(-) b check paid into bank, not collected by the 20
bank
300
C bank charges not recorded in cash book
F commission charged by the bank
2320
Balance as per Pass Book (Cr.)
1330
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Page-46-
Chapter No.04
Bank Reconciliation
Statement
MU
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Page-47-

Method-I
Exercise No. 01
From the following particulars, prepare a bank reconciliation statement on
January 31, 2011.
Bank balance as per cash book ----------------Dr. $7500
Balance as per pass book .Cr. $8000
a) Checks issued but not yet presented for payment before January 31
$1000
b) Checks paid for deposit but not yet deposited into the bank $1500
c) Interest charged by the bank $500
d) Commission received by the bank $500
e) Payment made to creditor $1000, not yet made from the bank.
Exercise No. 02
Ahmad business had the following data for the month of February, 2011.
Balance as per cash book (Cr.) $6508. And Balance as per pass book (Dr.)
$6340.
a.
b.
c.
d.
Bank charges for all the above period was $30.

Checks issued but not presented for payment $1168.
Checks paid into the bank but not yet collected by the bank $2170.
Interest on Government shares collected by the bank $1200.
Instructions: You are required to prepare a Bank Reconciliation

Statement!
Exercise No. 03
MU
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Page-48The cash book of Three Stars Company showed a debit balance of $1470 and
the balance of pass book was credit $2443. The reasons of difference are as
under:
a. Dividend collected by the bank $50 has not been entered in cash book.
b. A check has been dishonored but no entry was made in the cash book
$220.
c. Bank charges $77 not recorded in the cash book.
d. Check paid into bank not recorded in the pass book $3120.
e. Check $4340 had been credited in the cash book but no entry existed
in the pass book.
Statement!
Exercise No. 04
On June 30th, 2011 the cash book of Khalil enterprises showed an overdraft of
$7600 while pass book showed a debit balance of $6700. The reasons of
differences are as under:
a.
b.
c.
d.
e.
Interest on overdraft not recorded in cash book $265.

Dividend collected by the bank $2450.
Checks paid in the bank but not cleared $2050.
Check issued but not yet cleared $1400.
A check received from a customer $635 was omitted to be paid into
bank.
Requirements: You are required to prepare a bank reconciliation

statement!
Exercise No. 05
From the following information prepare a bank reconciliation statement.
Balance as shown by Pass book Cr. $60.
a. Checks issued but not presented prior to August 31st $750.
b. Interest on overdraft for 6 months $235.
MU
Mashal University
Page-49Checks paid prior August 31st, not yet deposited into the bank $3250.
Bank charge debited in the pass book $65.
Interest and dividend collected by the bank $350.
A check received from a customer was omitted to paid into the bank
$220.
g. A customer has directly paid cash into our bank account $350 but not
recorded in cash book.
c.
d.
e.
f.
Balance as shown by the Cash Book was Dr. $2380.

Statement.
Exercise No. 06
Bank overdraft as per cash book $7832.
Bank overdraft as per pass book $8942.
a. Interest on overdraft was $610.
b. Checks issued but not presented for payment.
Ahmad Company $1000
Akmal Company $1500
c. Checks deposited but not yet collected by the bank.
Z & Z Company $2500
X &X Company $1300
d. Interest on investments collected by the bank $800.
Statement!
Exercise No. 07
A Company received the bank statement on September 31, 2011 showing a
credit balance of $10500 while the balance of cash book was $9155. The
reasons of differences are as under:
a. Checks amounting to $2750 were deposited into the bank but check
amounting to $750 has not been cleared upto September 31, 2011.
b. Checks amounting to $3500 were given to the creditors but checks
amounting to $1200 had not been presented for payment in the bank
September 31, 2011.
c. The bank had debited the account $35 for service charges.
d. The bank has received an amount directly from a customer $800.
e. Interest credited by the bank $130.
MU
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Page-50Instructions: You are required to prepare a Bank Reconciliation
Statement!
Exercise No. 08
Prepare bank reconciliation statement from the following particulars.
a. On 31st November, 2011, the bank account of Mr. Tariq showed an
overdraft of $750 while the cash book showed a balance of $855.
b. Check for $250 on 25th November of which $200 were presented and
paid by the bank.
c. A check of $25 was deposited but it was not credited in the bank
account.
d. A check entered in the cash book was omitted $10.
e. Direct deposit made by a customer $30.
f. Interest amounting to $60 credited by the bank not recorded in the
cash book.
Exercise No.09
The accountant of Dee See Company had the following data for the month of
December, 2011.
a.
b.
c.
d.
e.
f.
The bank overdraft as per cash book $3254.

The bank overdraft as per pass book $3170.
Bank charges were $15.
Checks issued but not yet cleared $584.
Checks paid for deposit not yet deposited into the bank $1085.
Interest on bonds collected by the bank $600.

Statement!
Method-II
Exercise No.01
TT Company had the following data for the month of January, 2011.
Balance as per cash book. $1280
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Page-51Bank charges..$10
Interest charged by the bank$20
Interest on bonds collected by the bank. $300
Statement!
Exercise No.02
Balance as per cash book. $1630
Checks paid into the bank not yet collected $430
Checks issued for payment but the payment is not yet made $510
Statement!
Exercise No.03
Balance as per cash book $3400.
a. Debit in respect of bank charges $32 and credit in respect of bank
interest $140 and dividend received by the bank not recorded by the
depositor.
b. A note receivable received by the bank $700 not recorded in the cash
book.
c. Checks for $700 issued but not yet cleared.
d. Checks for $800 not yet collected by the bank.
e. A check for $10 was shown as dishonored in the pass book.
Statement!
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Page-52-
Chapter No: 05
Adjustments in Financial
Statements
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Page-53Adjusting Entries
Entries made at the end of an accounting period to up-to-date the record are
called adjusting entries. At the end of an accounting period normally, we
pass the following adjusting entries.
1. Outstanding Expenses
The expense the benefit of which has been received but the payment is not
yet made.
Treatment:
a. Income statement: add with the expense
b. Balance sheet: show as a liability
Example:
At the end of December 31, 2011 salary amounting to $1000 is unpaid. And
salary paid in trail balance is $11000.
Income statement
Amount
Amou
nt
Amount
Operative
Expense:
Salary
+ outstanding
11000
salary
1000
1200
0
Balance sheet
Assets
Liabilities +
O.E
Outstanding
Salary
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$
1000
Page-54-
2. Prepaid Expense
Expense for which the payment is made in advance is called prepaid
expense.
Treatment:
a. Income statement: deduct from the expense
b. Balance sheet: show as an asset
Example:
Salary $1000 prepaid and salary in Trail Balance $13000
Income statement
Amount
Amou
nt
Amount
Operative
Expense:
Salary
13000
- Prepaid salary
1000
1200
0
Balance sheet
Assets
Prepaid Salary
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$
1000
Liabilities +
O.E
Page-55-
3. Accrued Revenue
Revenue earned but not yet received is called accrued revenue.
Treatment:
a. Income statement: add with the revenue
Example:
Rent $1000 earned but not yet received and in Trail Balance rent is $11000
Income statement
Amount
Amou
nt
Amount
Other Income:
Rent
11000
+Accrued Rent
1000
1200
0
Balance sheet
Assets
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Liabilities +
O.E
Page-56Accrued Rent
1000
4. Unearned Revenue
Revenue receive but not yet earned is called accrued revenue.
Treatment:
c. Income statement: deduct from the revenue
d. Balance sheet: show as a liability
Example:
Rent $1000 received but not yet earned and in Trail Balance rent is $13000
Income statement
Amount
Amou
nt
Other Income:
Rent
-unearned Rent
13000
1000
1200
0
Balance sheet
MU
Mashal University
Amount
Page-57-
Assets
Liabilities +
O.E
Unearned Rent
$
1000
5. Ending Inventory
The unsold goods at the end of an accounting period are called ending
inventory.
Treatment:
a. Income statement: deduct from the cost of goods available for sale
Example:
Inventory $1000 remand unsold.
Income statement
Amou
nt
cost of goods available for
sale
-closing inventory
MU
Mashal University
Amoun Amou
t
nt
15000
1000
14000
Page-58-
Balance sheet
Assets
Closing stock
100
0
Liabilities +
O.E
6. Depreciation
Decrease in the value of an asset or the process of allocating the value of an
asset over its expected life.
Treatment:
a. Income statement: show as an expense
b. Balance sheet: deduct from the value of the asset
Example:
Furniture in trail balance $40000 and $10000 is depreciation.
Income statement
Amou
nt
Operative Expense:
MU
Mashal University
Amoun Amou
t
nt
Page-59DepreciationFurniture
10000
Balance sheet
Assets
Furniture
-depreciation
400
00
100
00
39000
Liabilities +
O.E
CHAPTER NO: 05
MU
Mashal University
Page-60-
Adjustments in FINANCIAL
STATEMENTS
Exercise No. 01
Following is the trial balance; prepare Income statements and
Balance sheets.
Trial Balance
S.NO
Accounts
MU
Mashal University
Ref.
Dr.
Cr.
Page-611
2
3
4
5
6
7
8
9
10
11
12
13
14
Machinery
Cash
Furniture
Accounts receivable
Advertisement
Postal expense
Office supplies expense
Salaries
Rent
Equipments
Accounts payable
Notes payable
Sales
Owners equity
4400
120
340
240
172
140
226
500
122
300
Total
6560
1280
500
1970
6560
Adjustments for Exercise No. 01

a. Salary accrued $60
b. Advertisement paid in advance $22
c. Depreciation on furniture was $120
Exercise No. 02
For exercise no. 02, the following are the adjustments.
a. Merchandise inventory at the end of year $1000
b. Outstanding rent $190
c. Prepaid insurance $200
Trial Balance
S.NO
Accounts
MU
Mashal University
Ref.
Dr.
Cr.
Page-621
2
3
4
5
6
7
8
9
10
11
12
13
14
15
S.NO
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Purchases
Accounts receivable
Building
Rent
Insurance
Carriage in
Advertisement
Opening inventory
Office Salaries
Selling salaries
Cash in hand
Machinery
Owners equity
Accounts payable
Sales
6480
5490
2440
310
400
700
330
1500
1800
2400
3000
10000
Total
34850
34850
Dr.
Cr.
4338
Exercise No. 03
Accounts
Accounts payable
Wages
Notes receivable
Discount received
Discount allowed
Rent
Taxes
Sales
Machinery
Accounts receivable
Salaries
Advertisement
Cash
Purchases
General expense
Loan taken form bank
Notes payable
Owners equity
Drawings
Motor car
Total
MU
Mashal University
10000
7200
17650
Ref.
4683
361
130
260
380
1000
25360
5360
8175
1940
600
2860
10944
2560
1000
1520
10000
725
2500
42348
42348
Page-63-

a. Closing stock $5350
b. Depreciate machinery @10%
c. Rent paid in advance $100
d. Outstanding salaries $950
e. Interest on owners equity was @ 6%
Exercise No. 04
Trial Balance
S.NO
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Accounts
Cash
Building
Drawing
Furniture
Interest paid
Purchases
Rent
Opening stock
Salaries
Advertisements
Food expenses
Accounts receivable
Owners equity
Accounts payable
sales
Total
Ref.
Dr.
12500
40000
750
1000
500
30000
10000
4000
1000
100
600
7500
12950
20000
75000
107950

a.
b.
c.
d.
Closing stock $4500

Salaries outstanding $150
Prepaid food expense $100
Depreciation on building and furniture @5%
MU
Mashal University
Cr.
107950
Page-64-
Exercise No. 05
Trial Balance
S.NO
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Accounts
Cash
Accounts receivable
Notes receivable
Carriage
Supplies
Furniture
Equipment
Sales return
Wages
Insurance
General expenses
Purchases
Accounts payable
Bank overdraft
Owners equity
Sales
Purchases return
Rent received
Ref.
Total

a. Outstanding wages $100
b. Prepaid insurance $50
c. Rent receive but not yet earned $100
d. Depreciation on equipments $25
MU
Mashal University
Dr.
2125
3700
5500
2300
250
550
1500
875
2400
2650
375
24000
Cr.
3000
625
9350
32375
625
250
46225
46225
Page-65-
Exercise No. 06
Trial Balance
S.NO
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Accounts
Purchases
Accounts receivable
Audit fee
Cash in hand
Salaries
Carriage in
Supplies expense
Machinery
Rent
Sales return
Furniture
Sales
Accounts payable
Interest received
Purchases return
Owners equity
Total
Ref.
Dr.
7500
1500
150
200
380
220
450
1150
180
140
130
7400
700
100
500
3300
12000

a.
b.
c.
d.
e.
Interest earned but not yet received $250

Audit fee not yet paid and outstanding $50
Some interest of $10 received in advance
Depreciation on machinery @5%
Salary $20 paid in advance
MU
Mashal University
Cr.
12000

2nd Semester Accounting Dec2014

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Financial Accounting-II

Mashal University, Shar-e-new Park, Kabul

Lecturer: Mr. Kamran Khan

Lecturer: Mr. Kamran Khan

Special Journal or Sub-Division of Journal

Purposes and Advantages of the special journal

Division of work is done

Lecturer: Mr. Kamran Khan

Lecturer: Mr. Kamran Khan

Accounts Payable-Asad Company

Note: Transaction of 25th January is not recorded in the purchases

Lecturer: Mr. Kamran Khan

Note: Transaction of 24th January is not recorded in the sales Journal

Lecturer: Mr. Kamran Khan

Accounts Payable-Asad Company

4. Sales Return & Allowances Journal

Lecturer: Mr. Kamran Khan

Lecturer: Mr. Kamran Khan

Lecturer: Mr. Kamran Khan

Required: Record the above transactions into

Required: Record the above transactions into

Lecturer: Mr. Kamran Khan

Required: Record the above transactions into

Lecturer: Mr. Kamran Khan

Lecturer: Mr. Kamran Khan

Lecturer: Mr. Kamran Khan

2. Two Column Cash Book

Lecturer: Mr. Kamran Khan

Two Column Cash Book

3. Three Column Cash Book

Lecturer: Mr. Kamran Khan

Three Column Cash Book

Lecturer: Mr. Kamran Khan

Lecturer: Mr. Kamran Khan

Started business with cash $50000.

Exercise No. 02Opening balance of cash $17800. The following

Sold merchandise to Mr. Tariq for cash $2000 .

Cash on hand $ 23500.

Lecturer: Mr. Kamran Khan

Tow-Column Cash Book Exercises

Exercise No.02 TT Company has the following transactions for

Exercise No. 03 GeeCee Companys transactions are as follows.

Lecturer: Mr. Kamran Khan

Three-Column Cash Book Exercises

Lecturer: Mr. Kamran Khan

Sold old furniture for cash $1300.

Lecturer: Mr. Kamran Khan

Cash in hand $15300 and balance at bank $20500.

Lecturer: Mr. Kamran Khan

Salaries paid to the staff $1500 by check.

Lecturer: Mr. Kamran Khan

Lecturer: Mr. Kamran Khan

Lecturer: Mr. Kamran Khan

Cash Receipt Journal (CRJ)

2. Cash Payment Journal (CPJ)

Paid cash for merchandise purchased $1000, check no 000123456

Lecturer: Mr. Kamran Khan

Cash Payment Journal

3. Petty Cash Book

Lecturer: Mr. Kamran Khan

Specimen and example of recording in Petty Cash Book

for postage charges $10.

Lecturer: Mr. Kamran Khan