3 - Recording of Transaction I

1
Chapter 3- Recording of Transaction I

Previous questions
2022 Imp
1. The book in which all accounts are maintained is known as (1)
(a) Journal (b) Ledger (c) Cash book (d) Sales book
Ans. (b) Ledger
2. From the following details, prepare the account of Royal Traders and balance it : (3)
2021 January 5 Sold goods to Royal Stores ₹10,000
10 Received goods returned by Royal Stores ₹1,000
17 Received cash from Royal stores ₹ 5,000
Ans.
Date Particulars Amount Date Particulars Amount
5-1-21 Sales 10,000 10-1-21 sales return 1,000
17-1-21 Cash 5,000
17-1-21 Balance c/d 4,000
10,000 10,000
3. Prepare accounting equation on the basis of the following : (5)

(a) Anil started business with cash ₹ 1, 00,000
(b) Purchased goods on credit ₹ 20,000
(c) Sold goods costing `₹8,000 to Udayan for ₹12,000
(d) Received commission ₹ 6,000
(e) Paid salary ₹ 5,000
Ans
Assets = Liabilities + Capital

Transaction Cash + Stock + Debtors = Creditors + Capital
Started business with cash 100000 100000
Purchased goods on credit +20000 +20000
New Equation 1,00,000 + 20000 = 20000 + 1,00,000
Sold goods (costing Rs.8,000) -8,000 - 12,000 +4,000
to Udayan for Rs.12,000
New equation 1,00,000 + 12,000 + 12,000 = 20,000 + 1,04,000
Received Commission +6,000 + 6,000
New equation 1,06,000 + 12,000 + 12,000 = 20,000 + 1,10,000
Paid Salary -5000 -5000
New equation 1,01,000 + 12,000 +12,000 = 20,000 + 1,05,000
125000 = 125000
2022 June
4. The process of recording transactions in journal is called as (1)
(a) Posting (b) Balancing (c) Journalising (d) Totalling
Ans. (c) Journalising
5. Show the effect of following transaction on the accounting equation: (3)
(a) Business started with cash 50,000
(b) Purchased goods for cash 20,000
(c) Purchased furniture 25,000
Recording of Transaction I previous question and answers prepared by Jaison James HSST (Jr) SMHSS Koodathai
2
Ans.
TRANSACTIONS ASSET = LIABILITIES + CAPITAL
CASH + STOCK +FURNITURE = CAPITAL
1)Started business with cash 50000 = 50000
2)Purchased goods for cash -20000 + 20000
NEW EQUATION 30000 + 20000 = 50000
3)Purchased furniture -25000 + 25000
NEW EQUATION 5000 + 20000 + 25000 = 50000
50000 = 50000
6. Fill in the blanks in the following journal (5)

JOURNAL
Date Particulars LF Debit Credit
01.3.2022 Purchase a/c Dr 10000
To…………………….. a/c 10000
(Purchased goods from Hari)
05.3.2022 ……………………… a/c Dr 3000
To. Purchase a/c 3000
(Took goods for personal use)
10.3.2022 Furniture a/c Dr 6000
To. Bank a/c 6000
(…………………………………….)
15.3.2022 2200
Binu a/c Dr
2200
To. …………………….. a/c
(Goods returned to Binu)
20.3.2022 6000
Cash a/c……… Dr
6000
To. Sabu a/c
(……………………………………..)
JOURNAL IN THE BOOKS OF .

01.3.2022 Purchase a/c…………………..Dr 10000
To. Hari a/c 10000
(Purchased goods from Hari)
05.3.2022 Drawings a/c……………………..Dr 3000
To. Purchase a/c 3000
(Took goods for personal use)
10.3.2022 Furniture a/c ……………..Dr 6000
To. Bank a/c 6000
(Bought furniture & paid by cheque)
15.3.2022 2200
Binu a/c ……………...Dr
2200
To. Purchase return a/c
(Goods returned to Binu)
20.3.2022 6000
Cash a/c……… Dr
6000
To. Sabu a/c
(Received cash from sabu)
3
2021 Imp
7. Write one suitable business transaction each for the following which satisfies the given
criteria.
(a) Increase in one asset causes a decrease in another asset.
(b) Increase in an expense causes a decrease in an asset. (3)
Ans. a. Furniture purchased for cash. b. Rent Paid.
8. Complete the Journal Entry for the following : (4)
2020 Rachana A/c Dr. 80,000
April 1 To …………. 80000
(Sold goods on Credit to Rachana)
…………. A/c. Dr. 1,000
2 To Cash 1000
(Purchase stationery for Cash)
Furniture A/c. Dr. 15,000
5 To …………. A/c. 15000
(furniture purchased and paid by cheque)
7 …………. A/c. Dr. 7,000
To Cash 7000
(Cash withdrawn for personal use)
Ans.
April. 1. Rachana A/c. Dr.

To Sales
2. Stationary A/c. Dr.
To Cash .
5. Furniture A/c. Dr.
To Bank
7. Drawings A/c. Dr.
To Cash .
9. Journalise the following transactions in the books of Minta Fashions for the month of
May, 2020.
2021 ` May 1 Commenced business with cash 2,00,000
" 1 Cash deposited into bank 1,50,000
" 8 Purchased machinery 23,500
" 11 Purchased goods from Star Traders 34,000
" 16 Goods returned to Star Trades 1,250
" 28 Cash Sales 21,000
" 31 Salary paid 12,000
" 31 Rent paid by cheque 5,000
4
Ans.
Date Particular LF Debit Credit

1.5.2021 Cash a/c. Dr 2,00,000
To Capital a/c. 2,00,000
(Business starts)
1.5.2021 Bank A/c Dr. 1,50,000
To Cash A/c 1,50,000
( Cash deposited into bank)
8.5.2021 23,500
Machinery A/c Dr. 23,500
To Cash A/c.
11.5.2021 ( Machinery purchased) 34,000
Purchase A/c 34,000
Dr.
16.5.2021 To Star Traders 1,250
(Purchased goods from Star) 1,250
Star trader‟s A/c
Dr.
28.5.2021 To Purchase Returns 21,000
A/c. ( Goods return) 21,000
Cash A/c. Dr.
31.5.2021 To Sales A/c. 12,000
(Cash sales) 12,000
Salary A/c. Dr.
31.5.2021 To Cash 5,000
(Salary paid) 5,000
Rent A/c. Dr.
To Bank
( Rent paid by cheque)
2021 March
10. Complete the table as per the hint. (2)
(a) Asset increase Debit
(b) Income increases ………
(c) Expenses increases ………
Ans.
(a) Asset increase Debit
(b) Income increases Credit
(c) Expenses increases Debit
11. What does the following journal entry mean ? ` `
(a) Drawings A/c Dr. 2,000
To Cash A/c 2,000
(b) Bank A/c Dr. 5,000
To Babu‟s A/c 5,000
(c) Cash A/c Dr. 10,000
To Sales A/c 10,000
Ans. a) Cash withdrawn for personal use Rs. 2000

b) Babu, a debtor deposited cash into the bank account Rs.5000
c) Cash Sales Rs. 10000
12. Write 4 difference between „Journal‟ and „Ledger‟. (4)
5
Ans.
Journal Ledger
Journal is the book of original entry Ledger is the book of final entry
All transactions are recorded first All transactions are recorded finally in
in the journal ledger
Transactions are recorded in a Transactions are recorded in an
chronological order analytical manner
Source document form the basis for Entries in the journal form the basis
writing transaction in journal for writing ledger
Balancing is not done in ledger All ledger accounts are balanced
The process of recording entries in The process of recording entries in
journal is called journalising ledger is called posting
There is no uniformity in the There is a uniformity in the keeping of
keeping of various books of journal ledger
13. Prepare a journal for the following transactions : `
01-01-2021 Business started with cash 1,00,000
03-01-2021 Deposited into bank 50,000
05-01-2021 Purchased goods 20,000
08-01-2021 Wages paid 2,000
10-01-2021 Commission received 5,000
15-01-2021 Furniture purchased 10,000
20-01-2021 Withdrew cash from bank of private use 4,000
30-01-2021 Sold goods for cash 40,000 (8)
Ans. Journal
01-01-21 Cash A/c Dr 100000
To Capital A/c 100000
(Started business with cash)
03-01-21 Bank A/c Dr 50000
To Cash A/c 50000
(Cash deposited into bank)
05-01-21 20,000
Purchase A/c Dr 20,000
To Cash A/c
(Cash purchases)
08-01-21 Wages A/c Dr 2,000
To Cash A/c 2,000
(Wages paid)
10-01-21 5,000
Cash A/c Dr
5,000
To Commission received A/c
(Commission received)
15-01-21 10,000
Furniture A/c Dr 10,000
To Cash A/c
20-01-21 (Furniture purchased for cash) 4,000
Drawings A/c Dr 4,000
To Bank A/c
(Withdrew cash from bank for
31-01-21 personal use) 40,000
40,000
Cash A/c Dr
To Sales A/c
(Cash sales)
6
Total 231000 231000

2020 IMP
14. Journal and ledger are two major components of the double entry system of accounting.
Write any three differences between these books of accounts. (3)
Ans. Any Three. Difference between journal and ledger
Journal Ledger
2020 March
15. Give journal entries for the following transactions :
(a) Sold goods to Midhun ₹18,000.
(b) Paid Rent ₹ 10,000.
(c) Withdrew cash from business for personal use ₹ 4000 (3)
Ans. (a) Midhun a/c Dr 18000
To saes a/c 18000
(Sold goods to Midhun)
(b) Rent a/c Dr 10000
To cash a/c 10000
(rent paid)
(c) Drawings a/c Dr 4000
To cash a/c 4000
(Withdraw cash for personal use)
2019 Imp
16. Write the accounting equation and find out the missing figure (3)
Asset Liability Capital
1 80000 50000 ?
2 ? 45000 15000
3 60000 ? 35000
Ans. Asset= capital + Liabilities
1-30000, 2- 60000, 3- 25000
17. A furniture merchant used 2 chairs for his office use, which was credited in
(a) Purchases account
(b) Furniture account
(c) Office furniture account
(d) Drawings account (1)
Ans. (a) Purchases account
18. Journalise the following transactions:
i. Insurance Paid by cheque ₹ 2,000
7
ii. Goods costing ₹2,500 gave to charity

iii. Withdrew cash from bank for office use ₹ 1'500
iv. Goods returned to Nirmal ₹6,000 (4)
Ans. i.Insurance a/c Dr 2000

To Bank a/c 2000
ii.Charity a/c Dr 2500
To purchase a/c 2500
iii. Cash a/c Dr 1500
To Bank a/c 1500
iv. Nirmal a/c Dr 6000
To Purchase return a/c 6000
2019 March
19. Complete the following as per hint given (2)
Transaction Effect on Business
a) Purchased goods for cash  Increase in asset
 Decrease in asset
b) Bought furniture on credit  ………..?..........
 ………..?..........
c) Bank loan repaid  ………..?..........
 ……….?............
Ans. B) Increase asset, Increase Liability
c) Decrease liability, decrease asset
20. Akhil has the following transactions
a) Started busi9ness with cash Rs. 500000
b) Purchased goods on credit Rs. 40000
c) Sold goods costing Rs. 27000on credit for Rs. 30000
d) Bank loan received Rs. 80000
Prove the accounting equation. (A= L+C) (3)
Ans.
Accounting Equation Asset = Liabilities + capital

Transaction Asset Liabilities + Capital
Cash + stock + Debtors Creditors + Loan + capital
a) Started business 500000 500000
b) Purchased goods 40000 40000
New equation 500000 + 40000 40000 + 500000
c) Sold goods - 27000 + 30000 +3000
New equation 500000 + 13000 +30000 40000 + 503000
d) Bank loan +80000 + 80000
New equation 580000 +13000 + 30000 40000 + 80000 + 503000
623000 623000
2018 March
21. Fill in the blank.
……….... A/c Dr.
To Thomas & Co. A/c
(Purchased Machinery from Thomas & Co.) (1)
a) Purchase b) Cash c) Machinery d) Goods
Ans. C) Machinery
8
22. Prepare Minerva Traders A/c from the following information for the month of December
2017 (4)
2017 Dec 1 purchased goods from Minerva Traders Rs. 50,000.
Dec 5 paid Rs. 40,000 to Minerva Traders.
Dec 10 sold goods to Minerva Traders Rs. 70,000.
Dec 15 purchased Furniture from Minerva Traders Rs. 26,000
Dec 20 purchased Machinery from Minerva Traders Rs. 75,000.
Dec 25 paid Rs. 1, 00,000 to Minerva Traders.
Ans.
2018 IMP
23. Show the effect of following transactions on Asset' Liabilities and Capital based on
accounting equation (3)
a) Started business with cash Rs. 1, 50000
b) Rent received RS. 5'000'
c) Purchased goods on credit from Rema Rs. 2000
d) Paid cash for household expenses Rs. 4000
e) Sold good's for cash (cost 10,000) Rs.13, 000
f) Deposited into bank Rs.25'000'
Ans.
Asset = Capital + Liabilities

Cash stock Capital Liabilities
a) 150000 150000
150000 = 150000
b) 5000 5000
155000 155000
c) 2000 2000
155000 + 2000 = 155000 + 2000
d) -4000 -4000
151000 + 2000 = 151000 + 2000
153000 153000
Ignore transaction e& f
24. Give narration for the following journal entry (4)

a) Drawings A/c D r 5,000
To Purchases A/c 5'000
( …………………………………..)
b) Stock in Trade A/c Dr 10000
To Capital A/c 10000
(…………………………)
9
c) Rejitha's A/c Dr 20'000

To Bank 20000
( ... …………………………)
d) Sales A/c 60000
To Trading A/c 60000
(…………………. . .. )
Ans. a) Goods withdrawn for personal use
b) Introduced goods into business
c) Paid cheque to Rejitha
d) Sales a/c closed
25. Identify the debit and credit aspects from the Following transaction.
a) Insurance premium paid in advance'

b) Discount allowed to Mr.Anandu
c) Goods taken for Personal use'
d) Depreciation written off on Machinery
Ans. a) Insurance paid in advance a/c / insurance a/c - Debit
Cash a/c - Credit
Or
Insurance paid in advance a/c - Debit
Insurance a/c -Credit
b) Discount allowed a/c -Debit
Mr.Anandu a/c -Credit
c) Drawings a/c -Debit
Purchases a/c -Credit
d) Depreciation -Debit
Machinery -Credit
2017 IMP
26. Which one of the following transactions results a decrease in asset and capital? (1)
a) Purchased goods for cash.
b) Capital brought into the business.
c) Withdrew cash for personal use.
d) Loan taken from bank.
Ans. C) Withdrew cash for personal use.
27. From the given pairs find the correct one.
a) Debit - Increase in Assets
b) Debit - Increase in Revenue
c) Credit - Increase in Expenses
d) Credit - Decrease in Liability (1)
Ans. A) Debit - Increase in Assets
2017 March
28. Started business with cash 85000 and stock 15000

Sold goods for cash 10000
a) Prove that the accounting equation is satisfied in the above transactions.
b) Also pass the journal entries to record the above transactions. (4)
Ans. a
Asset = Equity
cash + stock = Liability +
Capital
i) 85000 + 15000 =0 + 100000
ii) +10000 -10000 =0 + 0
95000 +5000 = 100000
10
b. i Cash a/c Dr 85000

Stock a/c Dr 15000
To capital a/c 100000
Ii cash a/c Dr 10000
To sales a/c 10000
2016 IMP
29. Things or properties of value are called …………….. (1)
a) Asset,
b) liability,
c) capital,
d) revenue
Ans. Asset
30. Goods withdrawn by the proprietor for personal use are debited to………….
a) Capital account,
b) drawings account,
c) stock account,
d) purchase account (1)
Ans. b) Drawings account
2016 March
31. Which one of the following is INCORRECT? (1)
a) Assets = Liabilities + Capital
b) Liabilities = Assets - Capital
c) Capital = Assets - Liabilities
d) Liabilities = Assets + Capital
Ans. D) Liabilities = Assets + Capital
32. Arun sold goods on credit ₹ 1000 to Amal.
a) Who is the debtor in this transaction?
b) Write journal entry of this transaction. (2)
Ans. A) Amal.
b) Arun A/c Dr 1000
To Sales a/c 1000
or
Purchases a/c Dr 1000
To Amal a/c 1000
33. Journal and ledger are two important books maintained in accounting.
a) State any two differences between these books. (2)
b) Purchase office furniture for 500 by cheque. The account to be debited is ….. (1)
Ans. A)
Difference between journal and ledger
Journal Ledger
Any Two
11
B) Furniture a/c
2015 March
34. Given below are some journal entries.
a) Drawings A/c Dr. 1000
To Purchase A/c 1000
(….......?...............)
b) Cash A/c Dr. 1900
Discount Dr. 100
To Nimmi A/c 2000
(….......?............)
a) Give narration to these entries.
b) Explain the type of discount mentioned in the second journal entry. ( 2)
Ans. A) i. Goods withdrawn for personal use
ii. Cash received and discount allowed
B) Cash Discount
2015 IMP
35. A firm given you certain particulars relating to sivakumar.
Amount owed to Siva Kumar on 01-01-2014 - 4000

Purchases from him during the year - 24000
Discount received from Siva Kumar - 1000
Cash paid to him. - 14000
a) Who is Siva kumar to the business (1)
b) Prepare Siva Kumar‟s account (2)
Ans. a) Creditor
b) Siva Kumar‟s account
Particulars Amount Particulars Amount
Cash 14000 Balance b/d 4000
Discount 1000 purchase 24000
Balance c/d 13000
28000 28000
2013 March
36. Accounts that normally have debit balances are___________

a) Assets, expenses, and revenues
b) Assets, expenses and owner's capital
c) Assets, Liabilities and Owner's Drawings
d) Assets Owners drawings and Expenses
(1)
Ans. d) Assets Owners drawings and Expenses
37. Unni purchased goods for Rs. 9,818 and the trader allowed a discount of Rs. 18
at the time of purchase.
a. Identify the type of discount.
b. Mention the other types of discounts available and differentiate them with
the one stated above.
(3)
Ans. a) Trade Discount b) Cash discount / Discount allowed
2013 IMP
38. Decrease in one asset with no change in equities will result in _________ in another asset.
a) Increase b) Decrease c) No change (1)
Ans. a) Increase
12
2012 March
39. Write the business transaction corresponding to the following entries:

a) Drawings a/c Dr. 500
. To Canara bank a/c 500
b) Advertisement a/c Dr. 200
. To purchase a/c 200 (2)
Ans. a) Withdraw from bank for personal use
b) Sample issued
40. Accounting equation forms the basis of the accounting process. Prove that the accounting
equation is satisfied in all following transactions
a) Mr. Suresh commenced business with cash Rs. 40,000
b) Purchased goods on credit Rs. 6,500
c) Paid rent Rs. 500
d) Sold goods costing Rs. 6,500 on credit for Rs. 8,000
(4)
Ans.
Asset = Equity
cash + stock + debtors = Creditors + Capital
a. 40000 40000
b. 6500 6500
40000 + 6500 6500 + 40000
C -500 -500
39500 + 6500 6500 + 39500
D -6500 8000 1500
39500 + 00 +8000 = 6500 + 41000
2012 IMP
41. Identify the debit and credit aspect of the following business transactions.
Goods taken by the owner for his personal use. (1)
Ans. Debit - Drawings. Credit - Purchase
2011 March
42. Shyam started business with Rs. 50,000 the value of the assets at the moment will be…(1)
Ans. 50000
2010 IMP
43. Which of the following equation is CORRECT?
(1)
a) Assets = Capital - Liabilities
b) Assets = Capital + Liabilities
c) Assets = Liabilities – Capital
d) Capital = Assets + Liabilities
Ans. Assets = Capital + Liabilities
44. Identify the debit and credit aspects in the following transaction.
a) Cash withdrawn from bank for office use
b) Cash withdrawn from bank for personal use
Ans: a) Cash , Bank b) Drawings , Bank
2009 March
45. Assets are always equal to capital plus………………
Ans. Liabilities
13
46. “Accounting equation forms the basis of the accounting process”, show the impact of the
following transactions of the accounting equation.
a. Started business with capital in the form of cash Rs. 200000, building Rs. 250000
b. Purchased machinery for Rs. 75000
c. Purchased goods on credit Rs. 85000
d. Loan from bank for Rs. 100000
Ans.
Asset = Equity
cash + building + Machinery+ stock = Capital +Creditors + Bank
Loan
a. 200000 250000 450000
b. -75000 75000
125000 +250000 + 75000 = 450000
C 85000 85000
125000 + 250000 + 75000 + 85000 = 450000 + 85000
D 100000 100000
225000 + 250000 +75000 + 85000 = 450000 + 85000 +100000
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1

Chapter 3- Recording of Transaction I

3. Prepare accounting equation on the basis of the following : (5)

Assets = Liabilities + Capital

6. Fill in the blanks in the following journal (5)

JOURNAL IN THE BOOKS OF .

April. 1. Rachana A/c. Dr.

Date Particular LF Debit Credit

Ans. a) Cash withdrawn for personal use Rs. 2000

Total 231000 231000

Ans. Any Three. Difference between journal and ledger

ii. Goods costing ₹2,500 gave to charity

Ans. i.Insurance a/c Dr 2000

Accounting Equation Asset = Liabilities + capital

Asset = Capital + Liabilities

Ignore transaction e& f

24. Give narration for the following journal entry (4)

c) Rejitha's A/c Dr 20'000

a) Insurance premium paid in advance'

28. Started business with cash 85000 and stock 15000

b. i Cash a/c Dr 85000

Amount owed to Siva Kumar on 01-01-2014 - 4000

36. Accounts that normally have debit balances are___________

39. Write the business transaction corresponding to the following entries:

Ans. Assets = Capital + Liabilities

Ans: a) Cash , Bank b) Drawings , Bank

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