Q.1. Define Journal. What are the steps of journalizing? Ans.

The journal: A journal makes several contributions to recording process: 1 discloses in one place the complete effect of a transaction 2 provides a chronological record of transactions 3 helps to prevent or locate errors as debit and credit amounts for each entry can be compared

Journalizing: Entering transaction data in the journal is known as journalizing. Separate journal entries are made for each transaction. A complete entry consists of 1 the date of the transaction 2 the accounts and amounts to be debited and credited 3 a brief explanation of transaction.

Q.2. What is account? What are the components of an account? Ans. The account: An account is an individual accounting record of increases and decreases in a specific asset, liability, or owners equity items. There are separate accounts for the items we used in transactions such as cash, salaries expense, accounts payable etc.

The components of an account: The simplest form an account consists of 1. The title of the account 2. a left or debit side 3. A right or credit side The alignment of these parts resembles the letter T = T account Title of Account Left or debit side Debit balance Right or credit side Credit balance

Q.3. Define debit & credit. Mention the debit & credit procedure. Ans. Debits and credits: Debit indicates left and Credit indicates right Recording $ on the left side of an account is debiting the account Recording $ on the right side is crediting the account If the total of debit amounts is bigger than credits, the account has a debit balance If the total of credit amounts is bigger than debits, the account has a credit balance

Debiting an account: Cash Debits 15,000 Example: The owner makes an initial investment of $15,000 to start the business. Cash is debited as the owners Capital is credited. Crediting an account: Cash Debits Credits 7,000 Example: Monthly rent of $7,000 is paid. Cash is credited as Rent Expense is debited. Q.6. Mention the journalizing process. Ans. Technique of journalizing: Credits

The date of the transaction is entered into the date column. GENERAL JOURNAL J1

Date Account Titles and Explanation 2005 Sept. Cash 1 R. Neal, Capital (Invested cash in business) 1 Computer Equipment Cash (Purchased equipment for cash)

Ref.

Debit 15,000

Credit

15,000 7,000 7,000

The debit account title is entered at the extreme left margin of the Account Titles and Explanation column. The credit account title is indented on the next line. GENERAL JOURNAL Date 2005 Sept. Cash 1 R. Neal, Capital (Invested cash in business) 1 Computer Equipment Cash (Purchased equipment for cash) J1 Account Titles and Explanation Ref. Debit 15,000 15,000 7,000 7,000 Credit

Q.7. What is accounting? Who are the users of accounting information? Ans. Accounting: Accounting is an information system that Identifies Records Communicates the economic events of an organization to interested users Users of accounting: The information that a user of financial information needs depends upon the kinds of decisions the user makes. There are two broad groups of users of financial information: internal users and external users. Q. 8. Explain income statement & balance sheet. Ans. Income statement: The income statement reports the success or profitability of the companys operations over a specific period of time. For example, Softbyte Inc.s income statement is dated For the Month Ended September 30, 2011. It is prepared from the data appearing in the revenue and expense columns of Illustration 1-10 (page 20). The heading of the statement identifies the company, the type of statement, and the time period covered by the statement. Who Uses Accounting Data: The information that a user of financial information needs depends upon the kinds of decisions the user makes. There are two broad groups of users of financial information: internal users and external users.