JKSSB FAA — Accountancy Notes

1. Introduction to Accounting & Financial Accounting

Accounting is the process of identifying, recording, classifying, summarizing, and interpreting financial transactions of a business, in terms of money.

Financial Accounting is that branch of accounting concerned with preparing financial statements (Trading A/c, P&L A/c, Balance Sheet) for external users like investors, creditors, and government.

Key Objectives

• To keep systematic records of transactions
• To ascertain profit or loss of the business
• To ascertain the financial position (assets & liabilities)
• To provide information to users for decision-making
• To ensure control and prevent fraud

Basic Terms

Branches of Accounting

• Financial Accounting
• Cost Accounting
• Management Accounting

2. Accounting Equation

The foundation of the Double Entry System:

Assets = Liabilities + Capital (Owner's Equity)

Also written as:

Capital = Assets − Liabilities

Logic

Every transaction affects at least two accounts, keeping the equation balanced at all times.

Example

Tip: Expenses reduce Capital; Income increases Capital.

3. Journal

The Journal is the book of original/prime entry where transactions are first recorded in chronological order, following the rule of Debit & Credit.

Golden Rules of Accounting

Format of Journal

Example Entries

1. Started business with cash ₹1,00,000

Cash A/c Dr. 1,00,000

To Capital A/c 1,00,000

2. Purchased furniture for cash ₹20,000

Furniture A/c Dr. 20,000

To Cash A/c 20,000

3. Paid salary ₹5,000

Salary A/c Dr. 5,000

To Cash A/c 5,000

4. PYQ (Previous Year Questions) — Practice Set

Q1. The Accounting Equation is based on which principle?

✅ Dual Aspect Concept

Q2. Financial Accounting mainly serves:

✅ External users (investors, creditors, govt.)

Q3. The book of original entry is called:

✅ Journal

Q4. In the equation Assets = Liabilities + Capital, if Assets = ₹80,000 and Liabilities = ₹30,000, Capital = ?

✅ ₹50,000

Q5. "Drawings" reduce which element of the accounting equation?

✅ Capital

Q6. Rule for Real Account is:

✅ Debit what comes in, Credit what goes out

Q7. Purchase of goods on credit affects:

✅ Assets (Stock ↑) and Liabilities (Creditors ↑)

5. MCQs — Quick Practice

1. Accounting is the language of:

a) Mathematics

b) Business ✅

c) Law

d) Economics

2. Which of these is a Nominal Account?

a) Cash A/c

b) Building A/c

c) Salary A/c ✅

d) Debtor A/c

3. The normal balance of a Liability account is:

a) Debit

b) Credit ✅

c) Zero

d) None

4. Which concept states that Assets = Liabilities + Capital?

a) Going Concern

b) Dual Aspect ✅

c) Accrual

d) Matching

5. Withdrawal of cash by owner for personal use is called:

a) Expense

b) Drawings ✅

c) Loss

d) Liability

6. NEW PATTERN JKSSB

Q1. Consider the statements:

• 1. Financial Accounting records only monetary transactions.
• 2. The Accounting Equation must always balance after every transaction.

Which is/are correct?

a) Only 1

b) Only 2

c) Both 1 and 2 ✅

d) Neither

Q2. Assertion (A): Journal is called the book of original entry.

Reason (R): All transactions are first recorded in the Journal before being posted to the Ledger.

a) Both A and R are true, R correctly explains A ✅

b) Both A and R are true, R does not explain A

c) A is true, R is false

d) A is false, R is true

Q3. Statements:

• 1. Capital increases with profit and additional investment.
• 2. Capital decreases with drawings and losses.

a) Only 1 is correct

b) Only 2 is correct

c) Both 1 and 2 are correct ✅

d) Both are incorrect

Q4. Consider the statements:
Financial Accounting records only monetary transactions.
The Accounting Equation must always balance after every transaction.
Which is/are correct?
a) Only 1

b) Only 2

c) Both 1 and 2 ✅

d) Neither
Q5. Consider the statements:
Every debit entry must have a corresponding credit entry of equal amount.
The Journal is posted into the Ledger, not the other way round.
Which is/are correct?
a) Only 1

b) Only 2

c) Both 1 and 2 ✅

d) Neither
Q6. Consider the statements regarding the Accounting Equation:
Purchase of an asset for cash does not change the total of assets.
Receipt of cash from a debtor increases total assets.
Which is/are correct?
a) Only 1 ✅

b) Only 2

c) Both 1 and 2

d) Neither
Explanation: Cash decreases, asset increases — total stays the same. Receiving cash from a debtor just converts one asset into another, so total assets don't change.
Q7. Consider the following statements about Drawings:
Drawings reduce both Cash (Asset) and Capital.
Drawings are treated as a business expense in the Trading Account.
Which is/are correct?
a) Only 1 ✅

b) Only 2

c) Both 1 and 2

d) Neither
Explanation: Drawings reduce owner's capital, not a business expense — never appear in Trading/P&L.

Q8. Consider the statements:
Accounting is both a science and an art.
Book-keeping and Accounting mean exactly the same thing.
Which is/are correct?
a) Only 1 ✅

b) Only 2

c) Both 1 and 2

d) Neither
Explanation: Book-keeping is only the recording function; Accounting includes recording, classifying, summarizing, and interpreting — so statement 2 is false.
Q9. Assertion (A): Financial Accounting is useful mainly to external stakeholders.
Reason (R): Financial statements are prepared following standardized formats meant for general-purpose reporting.
a) Both A and R are true, R correctly explains A ✅
b) Both A and R are true, R does not explain A
c) A is true, R is false
d) A is false, R is true
Q10. Statements:
A transaction must always involve an exchange of goods or services for money.
A transaction can be non-monetary, such as an event that doesn't involve cash.
a) Only 1 is correct
b) Only 2 is correct ✅
c) Both are correct
d) Both are incorrect
Explanation: Only transactions expressible in money are recorded in accounting — non-cash exchanges (like barter of goods valued in money) still count if measurable in monetary terms; statement 1 wrongly restricts it to money exchange only.
Journal
Q11. Consider the statements:
Journal entries are recorded in chronological order.
A Journal entry can have more than one debit and one credit account (compound entry).
Which is/are correct?
a) Only 1

b) Only 2

c) Both 1 and 2 ✅

d) Neither
Q12. Assertion (A): The rule "Debit what comes in, Credit what goes out" applies to Real Accounts.
Reason (R): Real Accounts represent assets of the business.
a) Both A and R are true, R correctly explains A ✅
b) Both A and R are true, R does not explain A
c) A is true, R is false
d) A is false, R is true
Q13. Statements:
Narration is compulsory after every Journal entry.
The Ledger Folio (L.F.) column is filled at the time of posting to the Ledger, not at the time of journalizing.
a) Only 1 is correct
b) Only 2 is correct ✅
c) Both are correct
d) Both are incorrect
Explanation: Narration is a good practice, not compulsory in every case (e.g., exams may allow skipping for very obvious entries), so statement 1 is treated as incorrect in the strict sense.
Accounting Equation
Q14. Consider the statements:
Every transaction affects at least two accounts.
The Accounting Equation can become temporarily unequal during a transaction.
Which is/are correct?
a) Only 1 ✅

b) Only 2

c) Both 1 and 2

d) Neither
Explanation: The equation always remains balanced — it's never "temporarily" unequal, even mid-recording.
Q15. Assertion (A): If a business takes a loan from a bank, both Assets and Liabilities increase.
Reason (R): Cash (an asset) increases, and the loan (a liability) also increases by the same amount.
a) Both A and R are true, R correctly explains A ✅
b) Both A and R are true, R does not explain A
c) A is true, R is false
d) A is false, R is true
Q16. Statements:
Payment of a creditor reduces both Assets and Liabilities equally.
Sale of goods at a profit increases Assets more than it reduces Stock.
a) Only 1 is correct
b) Only 2 is correct
c) Both 1 and 2 are correct ✅
d) Both are incorrect

Prepared for JKSSB FAA Exam — Accountancy & Book Keeping (30 Marks)