Course Code: PCO- 01
Assignment Code: PCO-01/TMA/2018
1. What are the various forms of business organization? Explain.
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 organizations are as follows:
1) Sole proprietorship
2) Partnership
3) Company
These are explained in brief as follows:-
SOLE PROPRIETORSHIP:
The sole proprietorship is a form of business that is owned, managed and controlled by an individual. He has to arrange capital for the business and he alone is responsible for its management. He is therefore, entitled to the profits and has to bear the loss of business. This type of business organization is also called single ownership or single proprietorship. If the business primarily consists of trade, the organization is a sole trading organization. Small factories and shops are often found to be sole proprietorship organizations.
Features of Sole Proprietorship:
The important features of a sole-proprietary organization include the following:
(I) Individual Initiative: One person is the owner in sole proprietary forms of organization.
(ii) Risk Bearing: The proprietor is the sole beneficiary of profits in this form organization. If there is a loss he alone has to bear it. Thus the risks of business are borne by the proprietor himself.
(iii) Management and control: Management and control of this type of organization is the responsibility of the sole proprietor. He may, however, employ a manager or other people for the purpose.
PARTNERSHIP
Partnership is an association of persons who agree to combine their financial resources and managerial abilities to run a business and share profits in an agreed ratio. Since the resources of a sole proprietor to finance, and his capacity to manage a growing business are limited, he feels the need for a partnership firm. Partnership business, therefore, usually grows out of the need for expansion of business with more capital, better supervision and control, division of work and spreading of risks.
Features of Partnership:
The features of partnership are as follows:
(i) Existence of an agreement: Partnership is formed on the basis of an agreement between two or more persons to carry on business. The terms and conditions of partnership are laid down in a document known as Partnership Deed.
(ii) Engagement in business: A partnership can be formed only on the basis of a business activity. Its business may include any trade, industry or profession. Thus, a partnership can engage in any occupation – production and/or distribution of goods and services with a view to earning profits.
(iii) Sharing of profits and losses: In a partnership firm, partners are entitled to share in the profits and are also to bear the losses, if any.
COMPANY
A company is defined as a voluntary association of persons having separate legal existence, perpetual succession and a common seal. As per the definition, there must be a group of persons who voluntarily agree to form a company. Once formed the company becomes a separate legal entity with a distinct name of its own. Its existence is not affected by change of members. It must have a seal to be imprinted on documents whenever required. The capital of a company consists of transferable shares, and members have limited liability.
Features of a Company:
The following are the chief characteristics of the company form of organization:
(i) Registered body: A company comes into existence only after its registration. For that purpose, necessary legal formalities have to be completed as prescribed under the
Companies Act.
(ii) Distinct legal entity: A company is regarded as a legal entity separate from its members. Thus a company can carry on business in its own name, enter into contracts, sue, and be sued.
(iii) Artificial person: A company is the creation of law and has a distinct entity. It is therefore, regarded as an artificial person. The business is run in the name of the company. But because it is an artificial person, its functions are performed by the elected representatives of members, known as directors.
Q2. What do you understand by principle of ‘Double Entry’? Give the rules of debit and credit with suitable examples.
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.
CONTACT 9612831908(WhaTsaPP) 
CONTACT 9612831908(Whatsapp)
In the books of………………………………………
Journal Entries Dr. Cr.
Date
|
Particulars
|
L/F
|
Amount(₹.)
|
Amount(₹.)
|
May-1
May-2
May-5
May-8
May-9
May-11
May-12
May-17
May-21
May-23
|
Purchase A/c Dr.
To Cash A/c
(Being goods purchased for cash for ₹ 10,000)
CONTACT 9612831908(whatsapp)
CONTACT 9612831908(whatsapp)
CONTACT 9612831908(whatsapp)
|
10,000
6,55,000
50,000
10,000
15,000
5,000
2,000
5,000
10,000
2,000
|
10,000
6,55,000
50,000
10,000
15,000
5,000
2,000
5,000
10,000
2,000
|
Q5. Explain how Bank Reconciliation Statement is prepared with an adjusted balance of cash book?
Answer:
Bank reconciliation statement is a statement which contains a complete and satisfactory explanation of the differences in balances as per the cash book and bank statement. The preparation of bank reconciliation statement is not a part of the double entry book keeping system. It is just a procedure to prove the cash book balance.
It should be noted that:
1. A bank reconciliation statement is to be prepared whenever a bank statement is received.
2. It is prepared on a stated day.
While preparing bank reconciliation statement, the following steps should be adopted:
Step_1: Identification of the balance with which bank reconciliation statement has to be prepared.
Step_2: Identification of the plus and minus balance.
Step_3: Determining the effect of the transaction.
Step_4: Considering the date of preparing the statement.
Step_5: Balancing the statement.
Q9. What do you mean by one sided errors? Hoe are these errors rectified? Explain with suitable examples.
Answer:
When an error is committed in the books of accounts, the same should be corrected to show true numbers in financial statements. If the error is immediately identified, it may be fixed by striking out the wrong entry and replacing it with a correct one. However, if the error is identified at a later stage, the correction should be made by passing a suitable journal entry; such entries used to fix an accounting error are called rectification entries.
For the purpose of rectification the errors are divided into two categories i.e. one-sided errors and two-sided errors.
One-sided errors: Certain errors affect only one side of an account either the debit side or credit side. Such errors are called ‘one – sided errors’. Examples of one-sided errors are:
i) Rs. 100 received from Deshmukh was posted to his account as Rs.10. It means Deshmukh’s Account has been credited with Rs. 10 instead of Rs. 100 and there is no mistake in the cash book. Thus, this error has affected only one side of an account.
ii) The Purchase book is overcast by Rs. 1000. This will affect his debit side of Purchase Account where the total of the purchase book is posted, and no other account is affected.
iii) The Purchase book is undercast by Rs. 1000. This will affect his debit side of Purchase Account where the total of the purchase book is posted, and no other account is affected.
iv) Rs.500 paid to Mohan, but it is recorded only Rs. 50 in his account.
v) Furniture purchased for Rs. 12,000 but it wrongly debited to purchase account.
Rectification of one-sided errors:
Generally errors are corrected by passing suitable journal entries. We know passing a journal entry means debiting one account and crediting another. But in the case of one-sided errors only one account is involved. So it cannot be corrected by passing journal entry. It is rectified by noting the correction on the appropriate side. Take the first example of one-sided error. Deshmukh’s account was credited short by Rs. 90. This will be corrected by an additional entry for Rs. 90 on the credit side of his account as follows:
Deshmukh’s Account
Dr. Cr.
By difference in amount received from him posted on
|
90
|
And in the second example of one-sided errors, the Purchase Account is debited in excess by Rs. 1,000. This will be corrected by crediting the Purchase Account with Rs. 1000 as follows:
Purchase Account
Dr. Cr.
By over casting of purchase book for the month of…
|
1000
|
FULL ASSIGNMENT @RS. 150/-
Particulars
|
Amount(₹.)
|
Amount(₹.)
|
Particulars
|
Amount(₹.)
|
Amount(₹.)
|
To, Opening stock
“ Purchases
Less: Return
“carriage
“ Wages & Salaries
To, Gross Loss b/d
“Trade Expenses
“ insurance
“CONTACT 9612831908(whatsapp)
|
3,75,000
10,000
|
36,000
3,65,000
12,400
52,600
|
By, Sales
Less: Return
“ Closing Stock
“ Gross Loss c/d
By Rent
Less: Advance
CONTACT 9612831908(whatsapp)
|
4,20,000
15,000
|
4,05,000
50,000
11,000
|
4,66,000
|
4,66,000
|
||||
11,000
2,200
|
|||||
56,900
|
56,900
|
