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ACTIVITY ON ACCOUNTING CYCLE
Following transactions relate to the accounts of ABC Welfare Society. 1.^
STEP 1: OCCURRENCE OF TRANSACTION
1.^
Amount deposited by the directors in bank account of society Rs. 100,000 to start theoperations of society.
2.^
Received membership fee/income from members Rs. 50,000 in cash
3.^
Received Rs. 500,000 from donor as loan and deposited in bank
4.^
Disbursed credit to a client Rs. 10,000 from bank
5.^
Received donations income in cash Rs. 200,
6.^
Paid salary expense in cash Rs. 10,
7.^
Received interest income Rs. 100,000 in cash
8.^
Paid rent expense from bank Rs. 20,
9.^
Paid training expense from bank Rs. 10,
Short term loan taken Rs. 15,
2.^
STEP 2: RECORDING OF TRANSACTION
a.^
Study the transaction and select two accounts from the following chart of accounts trulyrepresenting the two aspects of transaction i.e. debit and credit.
Asset
Liabilities
Equity
10
Bank
20
Donor’s liability
30
Capital
11
Cash
21
Short term loan
31
Current year income/surplus
12
Loan portfolio/receivable
Revenues
expense
40
Membership fee
50
Salary expense
41
Donation income
51
Rent expense
42
Interest income
52
Training expense
b.^
Identify the nature of the account from the table given below
Nature
Debit
Credit
Assets
Increase
Decrease
Expense
Increase
Decrease
Liabilities
Decrease
Increase
Equity
Decrease
Increase
Revenue
Decrease
Increase
c.^
Decide about debit or credit after observing increase or decrease in particular account
STEP 3: POSTING IN LEDGER
Bank
Account No. 10
Date
Explanation
Debit
Credit
Balance
Capital
Donor’s liability
Loan portfolio
Bank
Bank
Short term loan
Cash
Account No. 11
Date
Explanation
Debit
Credit
Balance
Membershio fee
Donation income
Salary expense
Interest income
Loan portfolio/receivable
Account No. 12
Date
Explanation
Debit
Credit
Balance
Bank
Donor’s liability
Account No. 20
Date
Explanation
Debit
Credit
Balance
Bank
Short term loan
Account No. 21
Date
Explanation
Debit
Credit
Balance
Bank
Capital
Account No. 30
Date
Explanation
Debit
Credit
Balance
Bank
Membership fee
Account No. 40
Date
Explanation
Debit
Credit
Balance
Cash
Donation income
Account No. 41
Date
Explanation
Debit
Credit
Balance
Cash
Interest income
Account No. 42
Date
Explanation
Debit
Credit
Balance
Cash
Salary expense
Account No. 50
Date
Explanation
Debit
Credit
Balance
Cash
Rent expense
Account No. 51
Date
Explanation
Debit
Credit
Balance
Bank
Training expense
Account No. 52
Date
Explanation
Debit
Credit
Balance
Bank
STEP 5: ACCOUNTING ADJUSTMENTSSTEP 6: CLOSING ENTRIESSTEP 7: FINANCIAL STATEMENTSINCOME STATEMENT
ABC CompanyIncome statement
For the period ending 31
st^ December, 2007
Operating income
Rs.
Membership fee
50,
Interest income
100,
Total operating income
150,
Operating expenses Salary expense
10,
Rent expense
20,
Training expense
10,
Total operating expenses
40,
NET OPERATING PROFIT (LOSS)
110,
Non operational income Donations
200,
Total non operational income and expenses
200,
Non-operational expenses
0
Total Non-operational expenses
0
TOTAL CONSOLIDATED PROFIT (LOSS)
310,
ABC CompanyBalance sheet As on 31
st^ December, 2007
Assets
Rs.
Liabilities & Capital
Rs.
Bank
Donor’s liability
Cash
Short term loan
Loan portfolio
Capital
Current year profit
Total assets
Total liabilities & Equity
2.^
STEP 2: RECORDING OF TRANSACTION
a.^
Study the transaction and select two accounts from the following chart of accounts trulyrepresenting the two aspects of transaction i.e. debit and credit.
Asset
Liabilities
Equity
10
Bank
20
Donor’s liability
30
Capital
11
Cash
21
Short term loan
31
Current year income/surplus
12
Loan portfolio/receivable
Revenues
expense
40
Membership fee
50
Salary expense
41
Donation income
51
Rent expense
42
Interest income
52
Training expense
b.^
Identify the nature of the account from the table given below
Nature
Debit
Credit
Assets
Increase
Decrease
Expense
Increase
Decrease
Liabilities
Decrease
Increase
Equity
Decrease
Increase
Revenue
Decrease
Increase
c.^
Decide about debit or credit after observing increase or decrease in particular account
d.^
Enter the transaction in general journal
Journal
Date
Account Title and Explanation
Ref Num
Debit
Credit
Membership fee
Account No. 40
Date
Explanation
Debit
Credit
Balance
Donation income
Account No. 41
Date
Explanation
Debit
Credit
Balance
Interest income
Account No. 42
Date
Explanation
Debit
Credit
Balance
Salary expense
Account No. 50
Date
Explanation
Debit
Credit
Balance
Rent expense
Account No. 51
Date
Explanation
Debit
Credit
Balance
Training expense
Account No. 52
Date
Explanation
Debit
Credit
Balance
STEP 4: TRIAL BALANCE
Trial balance
Account Title
Account No.
Debit
Credit
Bank
Cash
Loan portfolio
Donor’s liability
Short term loan
Capital
Membership fee
Donations
Interest income
Salary expense
Rent expense
Training expense
Total
ABC CompanyBalance sheet As on 31
st^ December, 2007
Assets
Rs.
Liabilities & Capital
Rs.
