Reducing balance method of depreciation is followed to have a uniform charge for depreciation and repairs and maintenance together.

(a) (i) Double entry system. Double entry system may be defined as that system which recognizes and records both the aspects of a transaction. Every transaction has two aspects and according to this system, both the aspects are recorded. This system was developed in the15th century in Italy by Luca Pacioli. It has proved to be systematic and has been found of great use for recording the financial affairs for all institutions requiring use of money. This system offers the under mentioned advantages: (a) By the use of this system, the accuracy of the accounting work can be established through the device of trial balance. (b) The profit earned or loss suffered during a period can be ascertained together with details. (c) The financial position of the firm or the institution concerned, can be ascertained at the end of each period, through preparation of the balance sheet. (d) The system permits accounts to be kept in as much detail as necessary and therefore, affords significant information for the purpose of control etc. (e) Result of one year may be compared with those of previous years and reasons for the change may be ascertained. It is because of these advantages that the double entry system has been used extensively in all countries. (ii) Importance of bank reconciliation to an industrial unit. Banks are essential to modern society, but for an industrial unit, it serves as a necessary instrument in the commercial world. Most of the transactions of the business are done through bank whether it is a receipt or payment. Rather, it is legally necessary to operate the transactions through bank after a certain limit. All the transactions, which have been operated through bank, if not verified properly, the industrial unit may not be sure about its liquidity position in the bank on a particular date. There may be some cheques which have been issued, but not presented for payment, as well as there may be some deposits which has been deposited in the bank, but not collected or credited so far. Some expenses might have been debited or bills might have been dishonoured. It is not known to the industrial unit in time, it may lead to wrong conclusions. The errors committed by bank may not be known without preparing bank reconciliation statement. Preparation of bank reconciliation statement prevents the chances of embezzlement. Hence, bank reconciliation statement is very important and is a necessity of an industrial unit as it plays a key role in the liquidity control of the industry. (iii) Bill of exchange and the various parties to it. A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money to or to the order of certain person or to the bearer of the instrument. When such an order is accepted by the drawee on the face of the order itself, it becomes a valid bill of exchange. There are three parties to a bill of exchange: (i) The drawer, who draws the bill, that is, the creditor to whom the money is owing; (ii) The drawee, the person to whom the bill is addressed or on whom it is drawn and who accepts the bill that is, the debtor; and (iii) The payee, the person who is to receive the payment. The drawer in many cases is also the payee. (iv) Features of Single Entry System. Single entry system is an inaccurate and unsystematic method of recording business transactions. Features of Single entry system are as follows: (i) It is an inaccurate, unscientific and unsystematic method of recording business transactions. (ii) There is generally no record of real and nominal accounts and, in most of the cases; a record is kept for cash transactions and personal accounts. (iii) Cash book mixes up business and personal transactions of the owners. (iv) There is no uniformity in maintaining the records and the system may differ from firm to firm depending on the requirements and convenience of each firm. (v) Profit under this system is only an estimate based on available information and therefore true and correct profits cannot be determined. The same is the case with the financial position in the absence of a proper balance sheet. (v) Advantages and Disadvantages of Right Issue. Advantages of Right Issue 1. Right issue enables the existing shareholders to maintain their proportional holding in the company and retain their financial and governance rights. It works as a deterrent to the management, which may like to issue shares to known persons with a view to have a better control over the company’s affairs. 2. In well-functioning capital markets, the right issue necessarily leads to dilution in the value of share. However, the existing shareholders are not affected by it because getting new shares at a discounted value from their cum-right value will compensate decrease in the value of shares. The cum-right value is maintained otherwise also, if the existing shareholders renounce their right in favour of a third party. 3. Right issue is a natural hedge against the issue expenses normally incurred by the company in relation to public issue. 4. Right issue has an image enhancement effect, as public and shareholders view it positively. 5. The chance of success of a right issue is better than that of a general public issue and is logistically much easier to handle. Disadvantages of Right Issue 1. The right issue invariably leads to dilution in the market value of the share of the company. 2. The attractive price of the right issue should be objectively assessed against its true worth to ensure that you get a bargained deal.