Q.Define Business Finance.

Showing the 12 most recent of 24 on this concept.

1. CBSE 2024Set ANNUAL2 marks
   Q.Write a short note on: Book-keeping

   ›Reveal solutionSolution

   Book-keeping is the systematic recording of day-to-day business transactions in the books of account; it covers identifying, recording and classifying transactions and is the first, routine stage of accounting.

   Book-keeping may be defined as the art and science of recording business transactions in a set of books in a systematic and orderly manner. It involves identifying financial transactions, recording them in the journal or subsidiary books, and posting them to the ledger. It is largely clerical and routine in nature and provides the data on which the later stages of accounting — summarising, analysing and interpreting — are carried out. This is a 2-mark term in the AP Intermediate 1st-year Commerce Paper-I.

   ✓Final answer

   Book-keeping is the art and science of recording business transactions in the books of account systematically and regularly; it covers identifying, recording and classifying transactions and is the first stage of accounting.

2. CBSE 2024Set ANNUAL2 marks
   Q.Write a short note on: Accounting cycle

   ›Reveal solutionSolution

   The accounting cycle is the full round of accounting steps repeated every accounting period: journalising transactions, posting to the ledger, balancing, preparing the Trial Balance and then the final accounts, after which the cycle begins again for the next period.

   The accounting cycle refers to the complete sequence of steps that are repeated in the same order in each accounting period. The main stages are: (1) recording transactions in the journal or subsidiary books (journalising), (2) posting them to the ledger accounts, (3) balancing the ledger accounts, (4) preparing the Trial Balance to check arithmetical accuracy, and (5) preparing the final accounts — the Trading and Profit & Loss Account and the Balance Sheet. When one period ends, the closing balances are carried forward and the cycle starts again. This is a 2-mark term in the AP Intermediate 1st-year Commerce Paper-I.

   ✓Final answer

   The accounting cycle is the repeating sequence: journal to ledger to balancing to Trial Balance to final accounts (Trading and P&L Account and Balance Sheet), which is repeated each accounting period.

3. CBSE 2024Set ANNUAL2 marks
   Q.Journalise the following transactions - 2014 April

   Date	Particulars	₹
   1	Dinesh started business	50,000
   2	Cash sales	10,000
   4	Purchases	15,000
   6	Sold Plant and Machinery	5,000

   ›Reveal solutionSolution

   Capital brought in increases cash and capital; cash sales increase cash and sales; purchases increase the purchases account and reduce cash; and the sale of plant and machinery increases cash and reduces the asset. Each entry below balances debit and credit.

   Journal (in the books of Dinesh) — April 2014

   Date	Particulars	L.F.	Dr (₹)	Cr (₹)
   Apr 1	Cash A/c  Dr		50,000
   	To Capital A/c			50,000
   	(Being business started with cash)
   Apr 2	Cash A/c  Dr		10,000
   	To Sales A/c			10,000
   	(Being goods sold for cash)
   Apr 4	Purchases A/c  Dr		15,000
   	To Cash A/c			15,000
   	(Being goods purchased for cash)
   Apr 6	Cash A/c  Dr		5,000
   	To Plant and Machinery A/c			5,000
   	(Being plant and machinery sold for cash)
   	Total		80,000	80,000

   (As no names of parties are given for the sales, purchases and sale of machinery, they are treated as cash transactions.)

   ✓Final answer

   Cash Dr / Capital 50,000; Cash Dr / Sales 10,000; Purchases Dr / Cash 15,000; Cash Dr / Plant and Machinery 5,000. Journal totals ₹80,000 on each side.

4. CBSE 2024Set ANNUAL2 marks
   Q.Write a short note on: Trade discount

   ›Reveal solutionSolution

   Trade discount is an allowance given on the list price of goods (often for bulk buying). It is deducted in the invoice itself and never recorded separately in the books — only the net amount (list price minus trade discount) is entered.

   Trade discount is a rebate or allowance given by a seller (manufacturer or wholesaler) to the buyer on the printed list or catalogue price of goods, generally to encourage bulk purchases or dealings with regular customers. It is calculated as a percentage of the list price and deducted in the invoice itself; therefore it does not appear in the ledger, and only the net invoice value is recorded in the books of account. (It differs from cash discount, which is allowed for prompt payment and is recorded in the books.) This is a 2-mark term in the AP Intermediate 1st-year Commerce Paper-I.

   ✓Final answer

   Trade discount is a deduction allowed on the list price of goods (usually for bulk buying); it is deducted in the invoice itself and is not recorded separately in the books — only the net amount is entered.

5. CBSE 2024Set ANNUAL2 marks
   Q.Record the opening entry from the following Particulars on 01st April, 2013 -

   Particulars	₹
   Cash in hand	5,000
   Machinery	20,000
   Stock	10,000
   Sundry Debtors	18,000
   Sundry Creditors	9,000
   Furniture	12,000
   Bills Payable	11,000

   ›Reveal solutionSolution

   In an opening entry, assets are debited and liabilities credited; the difference is the capital. Here total assets ₹65,000 − total liabilities ₹20,000 = Capital ₹45,000, and the entry balances at ₹65,000.

   Capital = Assets − Liabilities = 65,000 − 20,000 = ₹45,000.

   Opening Journal Entry as on 1 April 2013

   Date	Particulars	L.F.	Dr (₹)	Cr (₹)
   2013 Apr 1	Cash A/c  Dr		5,000
   	Machinery A/c  Dr		20,000
   	Stock A/c  Dr		10,000
   	Sundry Debtors A/c  Dr		18,000
   	Furniture A/c  Dr		12,000
   	To Sundry Creditors A/c			9,000
   	To Bills Payable A/c			11,000
   	To Capital A/c (balancing figure)			45,000
   	(Being the opening balances brought forward)
   	Total		65,000	65,000

   ✓Final answer

   Opening entry: Cash, Machinery, Stock, Sundry Debtors and Furniture debited (₹65,000); Sundry Creditors and Bills Payable credited (₹20,000); Capital credited ₹45,000. Both sides total ₹65,000.

6. CBSE 2024Set ANNUAL2 marks
   Q.From the following Balances, prepare Trial Balance as on 31.12.2013 -

   Particulars	₹
   Cash	20,000
   Sales	30,000
   Salaries	15,000
   Creditors	10,000
   Capital	60,000
   Purchases	40,000
   Debtors	25,000

   ›Reveal solutionSolution

   Cash, Salaries, Purchases and Debtors are debit balances (assets/expenses); Sales, Creditors and Capital are credit balances (income/liabilities/owner's capital). Debit total = Credit total = ₹1,00,000.

   Trial Balance as on 31 December 2013

   Particulars	L.F.	Debit (₹)	Credit (₹)
   Cash		20,000
   Purchases		40,000
   Salaries		15,000
   Debtors		25,000
   Sales			30,000
   Creditors			10,000
   Capital			60,000
   Total		1,00,000	1,00,000

   The agreement of both columns at ₹1,00,000 confirms the arithmetical accuracy of the ledger postings.

   ✓Final answer

   Debit column (Cash 20,000 + Purchases 40,000 + Salaries 15,000 + Debtors 25,000) = ₹1,00,000; Credit column (Sales 30,000 + Creditors 10,000 + Capital 60,000) = ₹1,00,000. The Trial Balance agrees.

7. CBSE 2024Set ANNUAL2 marks
   Q.Write a short note on: Revenue Income

   ›Reveal solutionSolution

   Revenue income is the recurring income earned through the ordinary activities of the business, such as sale of goods, commission, interest, rent or discount received; it is credited to the Trading or Profit & Loss Account and not to the Balance Sheet.

   Revenue income refers to income that arises in the normal and regular course of business and is recurring in nature. Examples are income from the sale of goods and services, commission received, interest received, rent received and discount received. Such income is matched against revenue expenditure of the same period and is shown in the Trading and Profit & Loss Account to find the profit or loss. (It is distinguished from capital income, which is non-recurring, such as the sale of a fixed asset.) This is a 2-mark term in the AP Intermediate 1st-year Commerce Paper-I.

   ✓Final answer

   Revenue income is the recurring income earned in the ordinary course of business (sale of goods, commission, interest, rent, discount received); it is taken to the Trading and Profit & Loss Account of the year in which it is earned.

8. CBSE 2024Set ANNUAL2 marks
   Q.Write a short note on: Bad Debts

   ›Reveal solutionSolution

   Bad debts are debts owed by credit customers that cannot be recovered and are written off as a loss; the Bad Debts Account is debited (and later transferred to the Profit & Loss Account) while the debtor's account is credited.

   When goods are sold on credit, the buyer becomes a debtor. If a debtor fails to pay the amount due — because of insolvency, dishonesty or any other reason — and the amount becomes irrecoverable, it is called a bad debt. It is a loss to the business: the Bad Debts Account is debited and the debtor's personal account is credited, and the bad debts are ultimately charged (debited) to the Profit & Loss Account, reducing the profit of the year. This is a 2-mark term in the AP Intermediate 1st-year Commerce Paper-I.

   ✓Final answer

   Bad debts are amounts due from credit customers that have become irrecoverable and are written off as a loss — debited to the Bad Debts/Profit & Loss Account and credited to the debtor's account.

9. CBSE 2023Set ANNUAL2 marks
   Q.Write a short note on: Book-Keeping.

   ›Reveal solutionSolution

   Book-keeping is the systematic recording of day-to-day financial transactions of a business in the books of account. It is the primary stage of accounting, limited to recording and classifying, and does not include the summarising and interpreting that accounting goes on to do.

   Book-Keeping

   Book-keeping is the art and science of recording business transactions in a set of books in a systematic manner so that the financial information can be known at any time. According to R.N. Carter, 'Book-keeping is the science and art of correctly recording in the books of account all those business transactions that result in the transfer of money or money's worth.'

   Features:

   • It involves identifying and measuring financial transactions.

   • It involves recording them in the journal and classifying them in the ledger.

   • It is a routine and clerical function, done according to set rules.

   • It is the first stage of the accounting process; accounting (summarising, analysing and interpreting) begins where book-keeping ends.

   ✓Final answer

   Book-keeping is the systematic and regular recording of business transactions in the books of account. It covers identifying, measuring, recording and classifying financial transactions, and is the primary (first) stage of the accounting process.

10. CBSE 2023Set ANNUAL2 marks
    Q.Business entity concept of Accounting.

    ›Reveal solutionSolution

    Under the business entity concept, the business is regarded as a separate entity distinct from its owner(s). The books record only business transactions; the owner's personal affairs are excluded, capital is shown as a liability of the business to the owner, and drawings are deducted from capital.

    Business Entity Concept

    The business entity concept (also called the separate entity concept) assumes that a business has an existence separate and distinct from that of its owner. For accounting purposes, the business and the proprietor are treated as two different persons. Consequences of this concept:

    • Only the transactions of the business are recorded in its books, not the personal transactions of the owner.
    • The capital introduced by the owner is treated as a liability of the business towards the owner (the business 'owes' the capital back to him).
    • Any amount or goods withdrawn by the owner for personal use is treated as drawings and is deducted from capital.
    • This concept makes it possible to measure the true profit and financial position of the business itself.

    Though a sole trader and his business are legally one, this concept keeps their accounts separate so that the performance of the business can be judged correctly.

    ✓Final answer

    The business entity concept treats the business as a unit separate from its owner. Only business transactions are recorded; the owner's capital is shown as a liability of the business to him, and his personal withdrawals are treated as drawings and deducted from capital.

11. CBSE 2023Set ANNUAL2 marks
    Q.Journalise the following transactions:

    Date	Particulars	Amount (₹)
    01-01-2019	Started business with cash	20,000
    04-01-2019	Purchases	5,000
    15-01-2019	Sold goods to Mahesh	10,000
    20-01-2019	Rent paid	2,000

    ›Reveal solutionSolution

    Each transaction is recorded by debiting one account and crediting another as per the rules of accounts. Starting business brings in cash against capital; purchases and rent are paid in cash; goods sold to Mahesh on credit make Mahesh a debtor.

    Journal

    Date	Particulars	L.F.	Dr (Rs)	Cr (Rs)
    2019 Jan 1	Cash A/c ........ Dr		20,000
    	To Capital A/c			20,000
    	(Being business started with cash)
    Jan 4	Purchases A/c ........ Dr		5,000
    	To Cash A/c			5,000
    	(Being goods purchased for cash)
    Jan 15	Mahesh A/c ........ Dr		10,000
    	To Sales A/c			10,000
    	(Being goods sold to Mahesh on credit)
    Jan 20	Rent A/c ........ Dr		2,000
    	To Cash A/c			2,000
    	(Being rent paid in cash)
    	Total		37,000	37,000

    (Note: Purchases are assumed to be for cash, as no supplier's name is given; goods sold to Mahesh are on credit, as a name is given.)

    ✓Final answer

    (1) Cash A/c Dr 20,000 / To Capital A/c 20,000; (2) Purchases A/c Dr 5,000 / To Cash A/c 5,000; (3) Mahesh A/c Dr 10,000 / To Sales A/c 10,000; (4) Rent A/c Dr 2,000 / To Cash A/c 2,000. Both columns total Rs 37,000.

12. CBSE 2023Set ANNUAL2 marks
    Q.Write a short note on: Credit Note.

    ›Reveal solutionSolution

    A credit note is a source document made out by a seller to inform a customer that his account has been credited, usually because he has returned goods or was overcharged. It supports the entry in the Sales Returns (Returns Inward) Book.

    Credit Note

    A credit note is a statement prepared and sent by the seller to the buyer when the buyer returns goods to the seller, or when the buyer has been overcharged in an earlier invoice. It shows that the seller has credited the buyer's account with the amount of the goods returned or the overcharge, reducing the amount the buyer owes. Points to note:

    • It is usually printed in red ink.

    • It is the source document for recording sales returns (returns inward) in the seller's books.

    • The opposite document, prepared by the buyer when he returns goods, is a debit note.

    ✓Final answer

    A credit note is a document prepared by the seller and sent to the buyer, showing that the buyer's account has been credited for goods returned (or for an overcharge). It is the basis for recording sales returns in the seller's books and is the counterpart of a debit note.