1 What do you mean by business? Explain
various parties who assist in the flow of goods from producer to consumers.
Answer: The term ‘Business’
can be defined as production of goods and services that are involved in flow of
goods from the point of consumption or final use with a view to earn profit.
So we can say that any
activity carried with profit motive is business.
The various types of business activities are as
follows:
1) Sole proprietorship
2) Partnership
3) Company
The manufacturer produces goods for the consumer.
Sometimes there may not be anybody between the two, but often the manufacturer
may take the help of middlemen like the wholesalers and retailers to distribute
the goods to the consumers.
There exist other parties or things without which
goods cannot be transferred to consumer, such as;
Warehousing:
Storage is indispensable in
these days of mass production. The goods should be stored carefully from the
time these are produced till the time they are sold.
Insurance:
The goods may be destroyed while
in production process or in transit due to accidents, or in due to fire or
theft etc. Insurance companies may cover these losses.
Advertising:
Advertising is an effective aid
in selling the goods. The producer through advertisement communicates all
information about his goods, to the prospective consumers and creates in them a
strong desire to buy the product.
Banking:
Now-a-days we cannot think of business without
banks. To start the business or to run it smoothly we require money. Banks
supply money. Banks also provide many services required for the business.
So, in conclusion we can say that this things act as
a medium in the flow of goods.
What
do you understand by ‘Double Entry System’? How is it different from ‘Single
Entry System’? Discuss.
Answer:
The Double entry system of accounting or
book keeping means that every business transaction will involve two accounts (or
more). For example, when a company
borrows money from its bank, the company’s Cash account will increase and its
liability account Loans payable will increase.
It
is the fundamental concept underlying present day book keeping and accounting.
Double entry account is based on the fact that every financial transaction has
equal and opposite effects in at least two different accounts. It is used to
satisfy the equation Assets= Liabilities + Equity, in which each entry is
recorded to maintain the relationship.
In
double entry system, transactions are recorded in terms of debits and credits.
The
main difference between single entry and double entry system of accounting are:
- Under single entry system, only one balance sheet is prepared which contains assets and liabilities. But, under Double entry system, the balance sheet is split up into two parts.
- Under single entry system, the purpose of preparing accounts is to show the financial position of a firm at a particular date, whereas, under double entry system, the purpose is to show the amount of capital received and the application of the same in fixed assets.
- In case of single entry system only one aspect of transaction is recorded, whereas in case of double entry system both the aspect of the transactions is recorded.
- In case single entry, errors are hard to identify.
- But in case of double entry system of accounting errors are easy to locate.
- Single entry system of accounting known as incomplete type of recording, whereas double entry known as complete type of recording.
- Under single entry, only personal and cash account are considered. But in case of double entry Personal, Real and Nominal all are considered.
- Single entry is preferable for small enterprises, where double entry accounting is preferable for big enterprises.
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What are the advantages of maintaining a Petty Cash Book? Explain.Answer: Advantages of maintaining Petty Cash Book:1. Petty cash book maintains records of all petty payments systematically.2. Petty cash book supplies information regarding petty payments made on different heads more easily and quickly.3. Petty cash book makes possible for making comparison of the petty expenses between two periods and helps in controlling such petty expenses more effectively.4. Petty cash reduces the burden of head cashier as he is not required to handle petty transactions. Hence, the head cashier will have enough time to manage and control major cash transactions more effectively.5. Petty cash book helps in making the main cash book more informative, clean and clear by including only major transactions.6. Petty cash book helps in making the records of cash transactions up-to-date because of division of labor in recording cash transactions.7. Petty cash book saves time because each payment under particular head is not posted into the ledger separately. The posting is made with the periodical total at a time.
