Book-keeping and Accountancy: From Journal to Final Accounts
Book-keeping and Accountancy in the BIEAP Intermediate Commerce course tests whether you can move from a source document to a posted ledger, a tallied trial balance and a set of final accounts, and then apply the same double-entry logic to depreciation, bills of exchange, partnership and company accounts.
Core rules
- The accounting equation is Assets = Liabilities + Capital; every transaction preserves it.
- Debit increases assets and expenses; credit increases liabilities, capital and income.
- The cycle is journal → ledger → trial balance → trading account → profit and loss account → balance sheet.
- Follow accrual, matching, going concern and consistency. Adjust outstanding expenses, prepaid expenses, accrued income, income received in advance, depreciation and closing stock before final accounts.
Worked example
Machinery is bought on 1 April for ₹1,20,000. Depreciation is 10% per annum on the straight-line method. After three years it is sold for ₹70,000. Annual depreciation = 10% × ₹1,20,000 = ₹12,000. Book value after three years = ₹1,20,000 − ₹36,000 = ₹84,000. Loss on sale = ₹84,000 − ₹70,000 = ₹14,000. The sale entry is: Bank A/c Dr ₹70,000; Loss on Sale of Machinery A/c Dr ₹14,000; To Machinery A/c ₹84,000. The reasoning is that the asset must leave the books at its book value, the cash received is recorded, and the difference is a revenue loss.
Traps that cost marks
Treating capital expenditure as revenue expenditure; charging depreciation on the written-down value when the question says straight-line; ignoring outstanding or prepaid items; treating drawings as an expense; and assuming a tallied trial balance proves there are no errors-errors of principle and compensating errors still leave it balanced. In bank reconciliation, cheques issued but not yet presented are added to the cash book balance, not deducted.