(a) Discuss in detail the importance of Accounting.

OR

(b) Sumathi has a hotel. The following transactions took place in her business. Journalise them.

| January | | ₹ |
| --- | --- | --- |
| 1 | Started business with cash | 3,00,000 |
| 2 | Purchased goods from Rajiv on credi

Question

(a) Discuss in detail the importance of Accounting.

OR

(b) Sumathi has a hotel. The following transactions took place in her business. Journalise them.

| January | | ₹ |
| --- | --- | --- |
| 1 | Started business with cash | 3,00,000 |
| 2 | Purchased goods from Rajiv on credit | 1,00,000 |
| 3 | Cash deposited with the Bank | 2,00,000 |
| 20 | Borrowed loan from Bank | 1,00,000 |
| 22 | Withdrew from Bank for personal use | 800 |
| 23 | Amount paid to Rajiv in full settlement through NEFT | 99,000 |
| 25 | Paid Club bill of the Proprietor by cheque | 200 |
| 26 | Paid electricity bill of the Proprietor's house through debit card | 2,000 |
| 31 | Lunch provided free of cost to a charity | 1,000 |
| 31 | Bank levied charges for Locker rent | 1,000 |

Accepted Answer

>

> [!TLDR]
> (a) Accounting matters for records, profit/position, decisions, tax, legal evidence and control; (b) full journal of Sumathi's ten transactions (owner's personal payments = drawings).
>
> ## (a) Importance of Accounting
>
> 1. **Systematic records:** it replaces human memory by keeping complete, permanent records of all business transactions.
> 2. **Ascertaining profit or loss:** the Trading and Profit & Loss account shows how much the business earned or lost.
> 3. **Ascertaining financial position:** the Balance Sheet shows the assets, liabilities and capital on a given date.
> 4. **Aid to decision-making and management control:** reliable data helps in planning, budgeting and controlling operations.
> 5. **Legal evidence:** properly kept books are accepted as evidence in courts and settle disputes.
> 6. **Assessment of tax:** accurate accounts help correctly compute and support GST/income-tax liability.
> 7. **Comparison and performance evaluation:** results of different years/firms can be compared.
> 8. **Detection and prevention of errors and frauds:** systematic recording makes errors and frauds easier to trace.
>
> ## (b) Journal of Sumathi (Hotel)
>
> | Date | Particulars | L.F. | Dr ₹ | Cr ₹ |
> | --- | --- | --- | --- | --- |
> | Jan 1 | Cash A/c Dr | | 3,00,000 | |
> | |   To Capital A/c | | | 3,00,000 |
> | | *(Started business with cash)* | | | |
> | Jan 2 | Purchases A/c Dr | | 1,00,000 | |
> | |   To Rajiv A/c | | | 1,00,000 |
> | | *(Goods purchased from Rajiv on credit)* | | | |
> | Jan 3 | Bank A/c Dr | | 2,00,000 | |
> | |   To Cash A/c | | | 2,00,000 |
> | | *(Cash deposited into bank)* | | | |
> | Jan 20 | Bank A/c Dr | | 1,00,000 | |
> | |   To Bank Loan A/c | | | 1,00,000 |
> | | *(Loan borrowed from bank)* | | | |
> | Jan 22 | Drawings A/c Dr | | 800 | |
> | |   To Bank A/c | | | 800 |
> | | *(Withdrew from bank for personal use)* | | | |
> | Jan 23 | Rajiv A/c Dr | | 1,00,000 |

January		₹
1	Started business with cash	3,00,000
2	Purchased goods from Rajiv on credit	1,00,000
3	Cash deposited with the Bank	2,00,000
20	Borrowed loan from Bank	1,00,000
22	Withdrew from Bank for personal use	800
23	Amount paid to Rajiv in full settlement through NEFT	99,000
25	Paid Club bill of the Proprietor by cheque	200
26	Paid electricity bill of the Proprietor's house through debit card	2,000
31	Lunch provided free of cost to a charity	1,000
31	Bank levied charges for Locker rent	1,000

Date	Particulars	Dr ₹	Cr ₹
Jan 1	Cash A/c Dr	3,00,000
	To Capital A/c		3,00,000
	(Started business with cash)
Jan 2	Purchases A/c Dr	1,00,000
	To Rajiv A/c		1,00,000
	(Goods purchased from Rajiv on credit)
Jan 3	Bank A/c Dr	2,00,000
	To Cash A/c		2,00,000
	(Cash deposited into bank)
Jan 20	Bank A/c Dr	1,00,000
	To Bank Loan A/c		1,00,000
	(Loan borrowed from bank)
Jan 22	Drawings A/c Dr	800
	To Bank A/c		800
	(Withdrew from bank for personal use)
Jan 23	Rajiv A/c Dr	1,00,000
	To Bank A/c		99,000
	To Discount received A/c		1,000
	(Paid Rajiv by NEFT in full settlement; discount ₹1,000)
Jan 25	Drawings A/c Dr	200
	To Bank A/c		200
	(Proprietor's club bill paid by cheque)
Jan 26	Drawings A/c Dr	2,000

(a) Importance of Accounting

(b) Journal of Sumathi (Hotel)

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