Commerce

 Accounting equation is based on dual aspect concept. Every transaction has a two sided effect, that is each transaction is debited and credited. For instance, the owner of a business invests capital, to start the business, say,  Rs. 50,000. By this, the cash would come in , which is an asset , and is to be debited. On the other hand, the capital is a liability of Rs. 50,000 and it has to be credited.

 Wasting assets are the assets which only have a definite usefulness, until they can yield. or be productive. For example, the usefulness of an oil well, is finished, once the entire oil is extracted from it.

 The accountant is not in a position to locate the errors sometimes, and the Final Accounts ( Trading and Profit and Loss A/c and Balance Sheet)  are to be prepared, at the end of financial period in time. The final accounts can be prepared correctly, only when the Trial Balance tallies. Therefore the suspense account, is transferred to Trial Balance, so that the final accounts, are prepared on time. The errors are located later and the suspense account is removed.

There is no cash book with four columns. There can be maximum three columns in the cash book - ( cash, bank and discount columns ). 

 It would be posted in debit side of cash book only.The customer would make the entry when it is sent to bank for collection. But it would be credited in pass book only when it is collected by bank. Its amount is not yet collected by bank and so it would not be posted in pass book.

The trial balance also does not agree by one-side error.  For example, purchase book of December is undercasted by Rs. 250. Since this account is posted by the total of purchase book, there is no error in the accounts of the customers. Only the total of purchase account will be transferred incorrect in the debit side of trial balance, hence the total of debit side would be short by Rs. 250 then credit side of the trial balance. By two-sided errors the trial balance total agree. For example, debiting Mohan instead of Sohan, in this Mohan's account is compensated by Sohan's account and the trial balance would agree.

It would appear both in credit side of cash book and debited in pass book. As the cheque has been issued it would be posted in credit side of cash book by the customer. The cheque has been presented for payment so it would be debited in pass book.

 The relationship between a consignor and consignee is that of a principal and agent. The consignee is appointed by the consignor to sell the goods on his behalf, so he is the agent of the consignor. The ownership of the goods is not transferred to consignee. He receives commission on the goods sold. The consignor appoints a consignee because he cannot personally go and sell the goods at another place.

Balance Sheet is prepared from real and personal accounts. Real account is concerned with assets like furniture, machinery etc and in the Balance Sheet we show the assets. It is also prepared from personal accounts. In the liabilities side, we show the creditors which is the name of persons. In the assets side, we show the debtors which is also the name of persons ( personal accounts ). So, this option is correct. 

 A holder in due course is one, who acquires a bill of exchange in good faith, for value, and before date of maturity. The holder acquires a good title ,even if the title of the transferor, is defective. Suppose B acquires a bill of exchange from A by duping him. B then passes on the bill to C. C is a holder in due course, as he is not aware of what B did to get the bill. C is entitled to receive the payment , and A has no claim against C.

 It is a capital expenditure, since it is incurred to bring the second-hand machine to a working condition. The machinery is second-hand which means it is already used. We have purchased the machinery and we have to incur the expense on overhaul, so that we can continue to use it. So it is to be added to the cost of machinery. It is a capital expenditure.

 The accomodation bills are drawn for financial assistance without any consideration. So, the amount received from discounting of bill could be shared by drawer and drawee in a proportion as decided.

Nominal account is the account which is normally not balanced, but is closed by transferring to trading and profit and loss A/c. It is concerned with incomes and expenses. It is usually not required to take out their balances. We just have to transfer the total. For instance, if the total salary paid is Rs. 3,000/-. First it would be transferred to the Trial Balance then to the profit and loss account. 

 More than two accounts are affected in a compound journal entry. In a compound journal entry, there may be two or more accounts, to be credited and only one to be debited or vice-versa. For example,  the expenses paid on salary Rs 1,000 and postage Rs 200 a combined journal entry is passed, which is compound journal entry. Salary A/c and Postage A/c would be debited and Cash A/c would be credited

 This is a capital expenditure, since an asset is produced, by way of this tool.. The expense by which an asset is acquired, is a capital expenditure.

 As mentioned earlier only 1/3 of Rs 6,000 is remitted. Seeta would be debited by Rs 2,000. Cash sent is Rs 1,970 ( 1/ 3 X 5,910 ) ,Discount debited is Rs 30 ( 1/ 3 X 90 )  So this entry is correct.

 Operating Profit is also known as, earnings before interst and tax. It is the excess of gross profit over operating expenses. It means that all the expenses which are indirect ( office, administrative, selling and distribution ) are deducted from the gross profit. The operating pfofit is calculated. From this operating profit , we have to deduct interest payments and taxes, to calculate the net profit. So operating profit is also known as Earnings before Interest and Tax.    

 Suspense account can be used to rectify, only the one-sided error, not the two-sided error.By only-one sided errors, the Trial Balance does not tally. These errors are rectified by passing their double-entry, in the debit or credit side, of the suspense account. For example, the total of Purchase Book is undercasted by Rs 200. This is an one-sided error, as it is effecting only the purchase account. If a suspense account is opened, we would make the entry&#xA0

Goods sent for approval are sent to the customer. Secondly they are sent to the customer on the condition that if the customer does not like the goods, he can return the goods. Normally the time period is also specified within which the goods should be returned.

 It is a major disadvantage of accommodation bill. As accommodation bills are drawn in absence of any consideration, it is not a proof of debt. It is not easy to maintain a suit for recovery of the amount. In trade bills, legal action can be take easily, if the bill is dishonoured.

 Pro forma Invoice is prepared by the consignor, who sends the goods on consignment, for sale. The consignor prepares a statement in which the quantity, quality, price of goods is mentioned.It is prepared before sale of goods by the consignee.

Del credere commission is the additional commission received by consignee on his guarantee that he would realise the debts in full on the credit sales made by him. 

 It is an one-sided error. This is because only sales returns book or return inward book is affected by it. For example, if the total of return inwards book is Rs. 1,040 and it is written as Rs. 700 by mistake, only the return inwards book is affected by it. The Trial Balance would not tally.

 Depreciation is concerned with fixed assets like, machinery, furniture, plant, truck, car etc. Their values fall down with the use and passage of time.

 Packing expense on sales must be added to the operating cost as it is an indirect expense. It is the expense incurred for distribution of goods, which is an indirect expense. It is to be shown in the debit side, of the profit and loss account.