1 2 3 OF ACCOUNTING

By. Prof. Naveen.N Chartered Accountant

NEED FOR INFORMATION

INFORMATION

NON QUANTITATIVE INFORMATION

QUANTITATIVE INFORMATION

ACCOUNTING INFORMATION

NON ACCOUNTING INFORMATION

OPERATING INFORMATION

FINANCIAL ACCOUNTING

MANAGEMENT ACCOUNTING

DEFINITION OF ACCOUNTING

THE process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.
-American Accounting Association Committee

ACCOUNTING HISTORICAL ANTECEDENTS

When humans began keeping accounting records in their head ? Symbols recording transactions 3200BC Sumerian civilisation in Mesopotamia kept records in clay tablets. 1400BC In Greece slaves used as scribes and auditors, it was assumed that statements from slaves who could be tortured would be more reliable that those from freemen 990BC Scribes in Babylonia and Egypt received formal accounting training in school. 521-486BC Persia under Darius had government scribes who performed surprise audits of accounts of the province 4AD In Byzantine empire, Constantine founded a public administration school in which accounting was taught. 642-814AD - Roman empire under Charlemagne continued examples of government accountants and auditors. In the 15th century, branches of the Medici Bank were required to submit annual balance sheets to the main office in Florence.

ACCOUNTING A LANGUAGE
ACCOUNTING LANGUAGE OF BUSINESS. COMPLICATION SIMILAR TO TASK OF LEARNING NEW LANGUAGE. WORDS USED IN A DIFFERENT SENSE IN ACCOUNTING THAN IN THEIR COLLOQUIAL MEANING (EG: NET WORTH). SOME ACCOUTING RULES ARE DEFINITE OTHERS ARE NOT.

ACCOUNTING NOT STATIC RULES SUBJECT TO CHANGE

BASIC CONCEPTS
1. Money measurement. Record is made only of information that can be expressed in monetary terms.
2. Entity. Accounts kept for entities, as distinguished from the persons who are associated with these entities. 3. Going concern. Entity will continue to operate for an indefinitely long period in the future. 4. Cost concept. The economic resources of an entity is ordinarily entered in the accounting records at the price paid to acquire it. 5. Dual aspect. Since all of the assets of a business are claimed by someone and since the total of these claims cannot exceed the amount of assets to be claimed it follows that ASSETS = LIABILITIES & EQUITIES

BASIC CONCEPTS
6. Accounting period. Accounting measures activities for a specified interval of time called accounting period. (Pacioli, first author of an accounting text, wrote in 1494: Books should be closed each year, especially in a partnership, because frequent accounting makes for long partnership.)
7. Conservatism. Recognition of revenues requires better evidence than does recognition of expenses.

8. Consistency. All the policies adopted for preparing financial statements should be consistently Followed by the entity.
9. Materiality. Insignificant events may be disregarded, but there must be full disclosure of all important information.

ACCOUNTING PROCESS
ACCOUNTING PROCESS

IDENTIFICATION OF THE ECONOMIC EVENTS

CLASSIFYING THE BUSINESS TRANSACTIONS

MEASUREMENT IN RUPEES

RECORDING THE BUSINESS TRANSACTIONS

ANALYSING AND INTERPRETING THE BUSINESS TRANSACTIONS

ACCOUNTING CYCLE
TRANSACTIONS

PREPARATION OF JOURNAL AND SUBSIDIARY BOOKS

LEDGER POSTINGS

EXTRACTING TRIAL BALANCE

PREPARING FINANCIAL STATEMENTS, TRADING AND PROFIT AND LOSS ACCOUNTS AND BALANCE SHEET

ACCOUNTING EQUATION

OWNERS CAPITAL + LIABILITIES

= ASSETS

FORMAL ACCOUNTING - DOUBLE ENTRY SYSTEM OF BOOK KEEPING

METHOD OF RECORDING TWO-FOLD EFFECTS OF EVERY TRANSACTION. BOTH DEBIT AND CREDIT ASPECT OF A TRANSACTION IS RECORDED. FORMAL ACCOUNTING USES A SET OF BOOKS AND LEDGERS TO RECORD TRANSACTIONS.

LEDGER ( T-ACCOUNTS) ARE PREPARED FROM WHICH TRIAL BALANCES AND FINANCIAL STATEMENTS ARE DRAWN.

RULES OF DEBIT AND CREDIT

T - ACCOUNT DEBIT SIDE CREDIT SIDE

ASSET

INCREASE OR ADDITIONS ON THE DEBIT SIDE " + " ON LEFT HAND SIDE

DECREASE OR DEDUCTION ON THE CREDIT SIDE - " ON RIGHT HAND SIDE

RULES OF DEBIT AND CREDIT

T - ACCOUNT DEBIT SIDE CREDIT SIDE

LIABILITY (EXTERNAL) & CAPITAL(INTERNAL)

DECREASE OR DEDUCTION ON THE DEBIT SIDE - " ON LEFT HAND SIDE

INCREASE OR ADDITIONS ON THE CREDIT SIDE " + " ON RIGHT HAND SIDE

RULES OF DEBIT AND CREDIT

T - ACCOUNT DEBIT SIDE CREDIT SIDE

EXPENSES / LOSSES

INCREASE OR ADDITIONS ON THE DEBIT SIDE " + " ON LEFT HAND SIDE

DECREASE OR DEDUCTION ON THE CREDIT SIDE - " ON RIGHT HAND SIDE

RULES OF DEBIT AND CREDIT

T - ACCOUNT DEBIT SIDE CREDIT SIDE

REVENUES / GAINS

DECREASE OR DEDUCTION ON THE DEBIT SIDE - " ON LEFT HAND SIDE

INCREASE OR ADDITIONS ON THE CREDIT SIDE " + " ON RIGHT HAND SIDE

GREEN COMPANY

GREEN COMPANY Transaction 1

RAMASWAMY STARTED BUSINESS WITH CASH RS 1,00,000 Dr Capital CASH (ASSET) Rs 1,00,000 Cr

Dr

RAMASWAMY CAPITAL (EQUITY AND LIABILITY) Cash

Cr

Rs 1,00,000

GREEN COMPANY Transaction 2

GREEN COMPANY RAISED BANK LOAN OF RS 50,000 Dr Capital Bank loan CASH (ASSET) 1,00,000 50,000 Cr

Dr

BANK LOAN (EQUITY AND LIABILITY) Cash

Cr 50,000

GREEN COMPANY Transaction 3

GREEN COMPANY BOUGHT A BUILDING FOR RS 25,000 AND PAID IN CASH. Dr Capital Bank loan CASH (ASSET) 1,00,000 Building 50,000 Cr 25,000

Dr Cash

BUILDING (ASSET) 25,000

Cr

GREEN COMPANY Transaction 4

GREEN COMPANY BOUGHT STOCK OF SUGAR FOR RS 10,000 Dr Capital Bank loan CASH (ASSET) 1,00,000 Building 50,000 Stock Cr 25,000 10,000

Dr Cash

STOCK (ASSET) 10,000

Cr

GREEN COMPANY Transaction 5

GREEN COMPANY SOLD THE ENTIRE STOCK OF SUGAR FOR RS 12,000 Dr Capital Bank loan Sales Dr Cash Dr Stock CASH (ASSET) 1,00,000 Building 50,000 Stock 12,000 STOCK (ASSET) 10,000 Cost of goods sold COST OF GOODS SOLD (EXPENSE) 10,000 Cr 25,000 10,000

Cr 10,000 Cr

Dr

SALES (INCOME) Cash

Cr 12,000

GREEN COMPANY
RECOLLECT HOW MANY T ACCOUNTS HAVE WE PREPARED 1. 2. 3. 4. 5. 6. 7. CASH ACCOUNT (Asset) RAMASWAMY CAPITAL ACCOUNT (Liability) BANK LOAN ACCOUNT (Liability) BUILDING ACCOUNT (Asset) STOCK ACCOUNT (Asset) COST OF GOODS SOLD ACCOUNT (Expense) SALES ACCOUNT (Income)

YELLOW COMPANY

YELLOW COMPANY Transaction 1

RAMASWAMY STARTED BUSINESS WITH CASH RS 50,000 AND AVAILED LOAN OF RS 75,000 Dr Capital Loan Dr CASH (ASSET) Rs 50,000 Rs 75,000 RAMASWAMY CAPITAL (EQUITY AND LIABILITY) Cash Cr Rs 50,000 Cr

Dr

MRS RAMASWAMY LOAN(EQUITY AND LIABILITY) Cash

Cr Rs 75,000

YELLOW COMPANY Transaction 2

YELLOW COMPANY BOUGHT A BUILDING FOR RS 10,000 AND PAID IN CASH. Dr Capital Loan CASH (ASSET) 50,000 75,000 Furniture Cr 10,000

Dr Cash

FURNITURE(ASSET) 10,000

Cr

YELLOW COMPANY Transaction 3

YELLOW COMPANY BOUGHT RS 50,000 WORTH OF CEMENT ON CREDIT. Dr Creditors STOCK(ASSET) 50,000 Cr

Dr

CREDITORS (LIABILITY) Stock

Cr 50,000

YELLOW COMPANY Transaction 4

YELLOW COMPANY SOLD ENTIRE STOCK OF CEMENT FOR RS 60,000 ON CREDIT.

Dr Creditors Dr Sales

STOCK(ASSET) 50,000 Cost of goods sold DEBTORS (ASSET) 60,000

Cr 50,000 Cr

Dr Stock

COST OF GOODS SOLD (EXPENSE) 50,000

Cr

Dr

SALES (INCOME) Debtors

Cr 60,000

YELLOW COMPANY Transaction 5

YELLOW COMPANY RECEIVED FROM CEMENT PURCHASER RS 60,000 Dr Capital Loan Debtor Dr Sales CASH (ASSET) 50,000 Furniture 75,000 60,000 DEBTORS (ASSET) 60,000 Cash Cr 10,000

Cr 60,000

YELLOW COMPANY Transaction 6

YELLOW COMPANY PAID RS 50,000 TO SUPPLIER Dr Capital Loan Debtor CASH (ASSET) 50,000 75,000 60,000 Furniture Creditor Cr 10,000 50,000

Dr

CREDITORS (LIABILITY)

Cr

Cash

50,000 Stock

50,000

YELLOW COMPANY Transaction 7

YELLOW COMPANY REPAID LOAN RS 25,000 Dr Capital Loan Debtor CASH (ASSET) 50,000 75,000 60,000 Furniture Creditor Loan Cr 10,000 50,000 25,000

Dr Cash

MRS RAMASWAMY LOAN(EQUITY AND LIABILITY) 25,000 Cash

Cr Rs 75,000

GREEN COMPANY
RECOLLECT HOW MANY T ACCOUNTS HAVE WE PREPARED 1. CASH ACCOUNT (Asset) 2. RAMASWAMY CAPITAL ACCOUNT (Liability) 3. MRS RAMASWAMY LOAN ACCOUNT (Liability) 4. FURNITURE ACCOUNT(Asset) 5. STOCK ACCOUNT (Asset) 6. CREDITOR ACCOUNT (Liability) 7. DEBTOR ACCOUNT (Asset) 8. COST OF GOODS SOLD ACCOUNT (Expense) 9. SALES ACCOUNT (Income)

IN THE BOOKS OF WOODCRAFT COMPANY

IN THE BOOKS OF WOODCRAFT COMPANY

1. Sept 1, Began business by investing cash Rs 10,000 in companys share capital.

DR

1. CASH A/C

CR

DATE
1.9.XX

PARTICULARS
To Capital

J.F

AMOUNT(RS)
10,000

DATE

PARTICULARS

J.F

AMOUNT (RS)

DR DATE PARTICULARS J.F

2. CAPITAL A/C AMOUNT(RS) DATE 1.9.XX PARTICULARS By Cash J.F 10,000

CR AMOUNT (RS)

IN THE BOOKS OF WOODCRAFT COMPANY

2. Sept 4, Paid two months rent in advance for a shop Rs 2,000.

DR

1. CASH A/C

CR

DATE
1.9.XX

PARTICULARS
To Capital

J.F

AMOUNT(RS)
10,000

DATE
4.9.XX

PARTICULARS
By Rent advance

J.F

AMOUNT (RS)
2,000

DR DATE 4.9.XX PARTICULARS To Cash J.F

3. RENT IN ADVANCE A/C AMOUNT(RS) 2,000 DATE PARTICULARS J.F

CR AMOUNT (RS)

Capital account (2) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

3. Sept 5, Bought equipment for cash Rs 1,200.

DR

1. CASH A/C

CR

DATE
1.9.XX

PARTICULARS
To Capital

J.F

AMOUNT(RS)
10,000

DATE
4.9.XX 5.9.XX

PARTICULARS
By Rent advance By Equipment

J.F

AMOUNT (RS)
2,000 1,200

DR DATE 5.9.XX PARTICULARS To Cash J.F

4. EQUIPMENT A/C AMOUNT(RS) 1,200 DATE PARTICULARS J.F

CR AMOUNT (RS)

Capital account (2), Rent in advance account (3) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

4. Sept 7, Bought supplies on credit, Rs 700

DR

5. SUPPLIES A/C

CR

DATE
7.9.XX

PARTICULARS
To Creditors

J.F

AMOUNT(RS)
700

DATE

PARTICULARS

J.F

AMOUNT (RS)

DR

6. CREDITORS A/C

CR

DATE

PARTICULARS

J.F

AMOUNT(RS)

DATE
7.9.XX

PARTICULARS
By Supplies

J.F

AMOUNT (RS)
700

Capital account (2) , Rent in advance account (3), Cash account (1), Equipment account (4) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

5. Sept 10, Received payment for remodeling a kitchen Rs 8,600

DR

1. CASH A/C

CR

DATE
1.9.XX 10.9.XX

PARTICULARS
To Capital To Revenue

J.F

AMOUNT(RS)
10,000 8,600

DATE
4.9.XX 5.9.XX

PARTICULARS
By Rent advance By Equipment

J.F

AMOUNT (RS)
2,000 1,200

DR DATE PARTICULARS J.F

7. REVENUE FROM SERVICE A/C AMOUNT(RS) DATE 10.9.XX PARTICULARS By Cash J.F

CR AMOUNT (RS) 8,600

Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account (5), Creditors account (6) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

6. Sept 14, Paid for advertisement that appeared in local newspaper Rs 1,400.

DR

1. CASH A/C

CR

DATE
1.9.XX 10.9.XX

PARTICULARS
To Capital To Revenue

J.F

AMOUNT(RS)
10,000 8,600

DATE
4.9.XX 5.9.XX 14.9.XX

PARTICULARS
By Rent advance By Equipment By Advertisement

J.F

AMOUNT (RS)
2,000 1,200 1,400 CR

DR DATE 14.9.XX PARTICULARS To Cash J.F

8. ADVERTISEMENT A/C AMOUNT(RS) 1,400 DATE PARTICULARS J.F

AMOUNT (RS)

Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account (5), Creditors account (6), Revenue account (7) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

7. Sept 17, Received payment for furnishing office room Rs 11,200

DR DATE 1.9.XX 10.9.XX 17.9.XX DR PARTICULARS To Capital To Revenue To Revenue J.F 1. CASH A/C AMOUNT(RS) 10,000 8,600 11,200 DATE 4.9.XX 5.9.XX 14.9.XX PARTICULARS By Rent advance By Equipment By Advertisement J.F CR AMOUNT (RS) 2,000 1,200 1,400 CR

7. REVENUE FROM SERVICE A/C

DATE

PARTICULARS

J.F

AMOUNT(RS)

DATE
10.9.XX 17.9.XX

PARTICULARS
By Cash By Cash

J.F

AMOUNT (RS)
8,600 11,200

Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account (5), Creditors account (6), Advertisement account (8) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

8. Sept 23, Billed customers for work done other than on cash terms Rs 13,100
DR DATE PARTICULARS J.F 7. REVENUE FROM SERVICE A/C AMOUNT(RS) DATE PARTICULARS J.F CR AMOUNT (RS)

10.9.XX
17.9.XX 23.9.XX

By Cash
By Cash By Debtors

8,600
11,200 13,100

DR DATE 23.9.XX PARTICULARS To Revenue J.F

9. DEBTORS A/C AMOUNT(RS) 13,100 DATE PARTICULARS J.F

CR AMOUNT (RS)

Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account (5), Creditors account (6), Advertisement account (8) , Cash account (1) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

9. Sept 25, Paid wages to assistant Rs 1,500

DR DATE 1.9.XX 10.9.XX 17.9.XX PARTICULARS To Capital To Revenue To Revenue J.F 1. CASH A/C AMOUNT(RS) 10,000 8,600 11,200 DATE 4.9.XX 5.9.XX 14.9.XX 25.9.XX PARTICULARS By Rent advance By Equipment By Advertisement By Wages J.F CR AMOUNT (RS) 2,000 1,200 1,400 1,500

DR
DATE 25.9.XX PARTICULARS To Cash J.F

10. WAGES A/C

AMOUNT(RS) 1,500 DATE PARTICULARS J.F

CR
AMOUNT (RS)

Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account (5), Creditors account (6), Revenue account (7), Advertisement account (8) , Debtors account (9) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

10. Sept 28, Paid electricity charges Rs 240

DR DATE 1.9.XX 10.9.XX 17.9.XX PARTICULARS To Capital To Revenue To Revenue J.F 1. CASH A/C AMOUNT(RS) 10,000 8,600 11,200 DATE 4.9.XX 5.9.XX 14.9.XX 25.9.XX 28.9.XX DR DATE 28.9.XX PARTICULARS To Cash J.F PARTICULARS By Rent advance By Equipment By Advertisement By Wages By Electricity J.F CR AMOUNT (RS) 2,000 1,200 1,400 1,500 240 CR J.F AMOUNT (RS)

11. ELECTRICITY CHARGES A/C AMOUNT(RS) 240 DATE PARTICULARS

Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account (5), Creditors account (6), Revenue account (7), Advertisement account (8) , Debtors account (9), Wages account (10) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

11. Sept 29, Received from customers billed amount of Rs 4,800

DR DATE 1.9.XX 10.9.XX 17.9.XX 29.9.XX PARTICULARS To Capital To Revenue To Revenue To Debtors J.F 1. CASH A/C AMOUNT(RS) 10,000 8,600 11,200 4,800 DATE 4.9.XX 5.9.XX 14.9.XX 25.9.XX 28.9.XX PARTICULARS By Rent advance By Equipment By Advertisement By Wages By Electricity J.F CR AMOUNT (RS) 2,000 1,200 1,400 1,500 240

DR DATE 23.9.XX PARTICULARS To Revenue J.F

9. DEBTORS A/C AMOUNT(RS) 13,100 DATE 29.9.XX PARTICULARS By Cash J.F

CR AMOUNT (RS) 4,800

Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account (5), Creditors account (6), Revenue account (7), Advertisement account (8) , Wages account (10), Electricity account (11) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

12. Sept 30, Paid a dividend Rs 2,500

DR DATE 1.9.XX 10.9.XX 17.9.XX 29.9.XX PARTICULARS To Capital To Revenue To Revenue To Debtors J.F 1. CASH A/C AMOUNT(RS) 10,000 8,600 11,200 4,800 DATE 4.9.XX 5.9.XX 14.9.XX 25.9.XX 28.9.XX 30.9.XX PARTICULARS By Rent advance By Equipment By Advertisement By Wages By Electricity By Dividend J.F CR AMOUNT (RS) 2,000 1,200 1,400 1,500 240 2,500

DR DATE 30.9.XX PARTICULARS To Cash J.F

12. DIVIDEND A/C AMOUNT(RS) 2,500 DATE PARTICULARS J.F

CR AMOUNT (RS)

Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account (5), Creditors account (6), Revenue account (7), Advertisement account (8) , Wages account (10), Electricity account (11), Debtors account (9) opened earlier continues.

IN THE BOOKS OF WOODCRAFT COMPANY

Ascertaining the closing balance

DR DATE 1.9.XX 10.9.XX 17.9.XX 29.9.XX PARTICULARS To Capital To Revenue To Revenue To Debtors J.F 1. CASH A/C AMOUNT(RS) 10,000 8,600 11,200 4,800 DATE 4.9.XX 5.9.XX 14.9.XX 25.9.XX 28.9.XX 30.9.XX 30.9.XX 34,600 PARTICULARS By Rent advance By Equipment By Advertisement By Wages By Electricity By Dividend By Balance J.F CR AMOUNT (RS) 2,000 1,200 1,400 1,500 240 2,500 25,760 34,600

DR DATE PARTICULARS J.F

2. CAPITAL A/C AMOUNT(RS) DATE PARTICULARS J.F

CR AMOUNT (RS)

30.9.XX

To balance

10,000
10,000

1.9.XX

By Cash

10,000
10,000

IN THE BOOKS OF WOODCRAFT COMPANY

Ascertaining the closing balance

DR DATE 4.9.XX PARTICULARS To Cash J.F 3. RENT IN ADVANCE A/C AMOUNT(RS) 2,000 2,000 DR DATE 5.9.XX PARTICULARS To Cash J.F 4. EQUIPMENT A/C AMOUNT(RS) 1,200 1,200 DR DATE 7.9.XX PARTICULARS To Creditors J.F 5. SUPPLIES A/C AMOUNT(RS) 700 700 DR DATE 30.9.XX PARTICULARS To balance J.F 6. CREDITORS A/C AMOUNT(RS) 700 700 DATE 7.9.XX PARTICULARS By Supplies J.F DATE 30.9.XX PARTICULARS By Balance J.F DATE 30.9.XX PARTICULARS By Balance J.F DATE 30.9.XX PARTICULARS By Balance J.F CR AMOUNT (RS) 2,000 2,000 CR AMOUNT (RS) 1,200 1,200 CR AMOUNT (RS) 700 700 CR AMOUNT (RS) 700 700

IN THE BOOKS OF WOODCRAFT COMPANY

Ascertaining the closing balance

DR DATE 30.9.XX PARTICULARS To balance J.F 7. REVENUE FROM SERVICE A/C AMOUNT(RS) 32,900 DATE 10.9.XX 17.9.XX 23.9.XX 32,900 DR DATE 14.9.XX PARTICULARS To Cash J.F 8. ADVERTISEMENT A/C AMOUNT(RS) 1,400 1,400 DR 9. DEBTORS A/C DATE 30.9.XX PARTICULARS By Balance J.F PARTICULARS By Cash By Cash By Debtors J.F CR AMOUNT (RS) 8,600 11,200 13,100 32,900 CR AMOUNT (RS) 1,400 1,400 CR

DATE
23.9.XX

PARTICULARS
To Revenue

J.F

AMOUNT(RS)
13,100

DATE
29.9.XX 30.9.XX

PARTICULARS
By Cash By Balance

J.F

AMOUNT (RS)
4,800 8,300 13,100

13,100

IN THE BOOKS OF WOODCRAFT COMPANY

Ascertaining the closing balance

DR DATE 25.9.XX PARTICULARS To Cash J.F 10. WAGES A/C AMOUNT(RS) 1,500 1,500 DATE 30.9.XX PARTICULARS By Balance J.F CR AMOUNT (RS) 1,500 1,500

DR DATE 28.9.XX PARTICULARS To Cash J.F

11. ELECTRICITY CHARGES A/C AMOUNT(RS) 240 240 DATE 30.9.XX PARTICULARS By Balance J.F

CR AMOUNT (RS) 240 240

DR DATE 30.9.XX PARTICULARS To Cash J.F

12. DIVIDEND A/C AMOUNT(RS) 2,500 2,500 DATE 30.9.XX PARTICULARS By Balance J.F

CR AMOUNT (RS) 2,500 2,500

TRIAL BALANCE WOODCRAFT COMPANY PARTICULARS CASH CAPITAL DEBIT (RS.) 25,760 10,000 CREDIT (RS.)

PREPAID RENT
EQUIPMENT SUPPLIES CREDITORS REVENUE ADVERTISEMENT DEBTORS WAGES ELECTRICITY DIVIDEND

2,000
1,200 700 700 32,900 1,400 8,300 1,500 240 2,500 43,600 43,600

VENUS MUSIC CORNER

VENUS MUSIC CORNER - PROFIT AND LOSS ACCOUNT

PARTICULARS
Revenues from services Expenses Salaries Electricity Advertisement Rent Profit for the year

RS

RS
12,660

5,600 410 130 300 6,440 6,220

VENUS MUSIC CORNER BALANCE SHEET PARTICULARS ASSETS CASH DEBTORS SUPPLIES EQUIPMENT LIABILITIES CREDITORS UNEARNED INCOME EQUITY VENUGOPAL CAPITAL Opening balance Add: Additions during the year Add: Profit 21,140 3,000 6,220 30,360 Less: Drawings 4,000 26,360 29,470 2,510 600 570 1,210 2,190 25,500 29,470

RELIANCE TENNIS LIMITED

IN THE BOOKS OF RELIANCE TENNIS LIMITED

Ascertaining the closing balance

DR DATE 01.03.12 01.03.12 PARTICULARS Balance Revenue J.F CASH A/C AMOUNT(RS) 5,000 3,600 DATE 02.03.12 03.03.12 PARTICULARS Salary Bank loan repaid J.F CR AMOUNT (RS) 2,500 2,000

12.03.12
26.03.12

Unearned revenue
Receivable

1,400
7,850

06.03.12
08.03.12 09.03.12 14.03.12 28.03.12 29.03.12 30.03.12 31.03.12

Supplies
Maintenance Advertisement Electricity Creditors Prepaid Insurance Dividend Balance c/d

700
900 300 650 440 830 1,100 8,430 17,850

17,850 01.04.12 Balance b/d 8,430

RELIANCE TENNIS LIMITED TRIAL BALANCE PARTICULARS Tennis court DEBIT (RS.) 20,000 CREDIT (RS.)

Accounts receivable
Cash Supplies

1,180
8,430 4,100

Unearned revenue
Bank loan payable Share capital

4,200
4,000 23,000

Dividends
Revenue from services Electricity expenses

3,200
19,740 1,480

Insurance expenses
Prepaid insurance Repairs & maintenance Salaries Advertisement

2,720
830 2,100 6,600 300 50,940 50,940

ANUPAMA SECURITIES LTD

ANUPAMA SECURITIES LTD Revenue Broking commission earned (24,630 + 910) Expenses Salaries expenses (6,400+340) 6,740 25,540

Electricity expenses Telephone expenses Rent expenses (4,400+400) Interest on loan (20,000 @ 15% for 4 months) Supplies (1,430- 680) Depreciation on computer PBT Less: Tax @ 50% PAT

720 910 4,800 1,000 750 3,600 18,520 7,020 3,510 3,510

VASAN VIDEO LIMITED

VASAN VIDEO LTD Capital Revenue Supplies Debtor Insurance Creditor Expenses Rent Advance rent Salary Unearned revenue Camera Salary payable Electricity 1,005 30,000 380 2,210 3,000 500 9,620 1,300 1,540 970 1,200 6,450 20,000 22,590

Telephone
Prepaid insurance Electricity charges payable Bank charges

450
1,200 95 880 51,695 51,695

JOURNAL
WORD JOURNAL HAS BEEN DERIVED FROM THE FRENCH WORD JOUR WHICH MEANS A DAY. THEREFORE JOURNAL MEANS DAILY RECORD. JOURNAL IS A BOOK IN WHICH DAY TO DAY TRANSACTIONS ARE RECORDED.

IN JOURNAL EACH TRANSACTION IS CLASSIFIED INTO DEBIT AND CREDIT ASPECT AND BOTH THE ASPECT ARE RECORDED TOGETHER WITH EXPLANATION FOR EACH ENTRY. THE PROCESS OR ACT OF RECORDING A TRANSACTION IN THE JOURNAL IS CALLED JOURNALISING. THE RECORD OF A TRANSACTION IN THE JOURNAL IS CALLED JOURNAL ENTRY.

JOURNAL FORMAT
DATE PARTICULARS L.F DEBIT (RS.) CREDIT (RS.)

FINANCIAL STATEMENTS
STAGES IN ACCOUNTING

1)Journal 2)Ledger 3)Trial Balance to verify the accuracy of ledger account balance 4)Preparation of financial statements

TYPES OF BUSINESS ESTABLISHMENTS

TYPES 1) TRADING CONCERNS 2) MANUFACTURING CONCERNS Trading concerns purchase finished goods from market and sell it at a profit. Such firm prepare 1) Trading account 2) Profit and loss account 3) Balance sheet Manufacturing concerns are those which purchase raw material and effect certain productive activities on it and convert the same into marketable goods and then sell it. Such concern while preparing final accounts prepare 1) Manufacturing account 2) Trading account 3) Profit and loss account 4) Balance sheet

TRADING & MANUFACTURING ACCOUNT

Particulars To To To To Opening stock Purchases Less Returns Direct expenses Gross profit c/d to profit and loss account TOTAL XXX TOTAL XXX Amount Particulars By Sales Less Returns By Closing stock By Gross Loss c/d to profit and loss account Amount

PROFIT AND LOSS ACCOUNT FORMAT

Particulars To To Gross loss c/d from Trading account Indirect expenses Amount Particulars By Gross profit c/d from trading account By Interest income Amount

To
To To

Interest expenses
Depreciation Net profit transferred to capital account TOTAL XXX

By Miscellaneous income
By Net loss transferred to capital account

TOTAL

XXX

BALANCE SHEET
LIABILITIES Amount ASSET Amount

CAPITAL

FIXED ASSETS

LIABILITIES

CURRENT ASSETS

TOTAL

XXX

TOTAL

XXX

DIFFERNCE TRADING AND P&L ACCOUNT

TRADING ACCOUNT PROFIT AND LOSS ACCOUNT

FIRST STAGE OF FINAL ACCOUNT

SECOND STAGE OF FINAL ACCOUNT

IT RECORDS SALES AND DIRECT COSTS

THIS ACCOUNT RECORDS GROSS PROFIT, INCOMES, INDIRECT COSTS AND LOSSES

IT DISCLOSES GROSS PROFIT OR GROSS LOSS

IT DISCLOSES NET PROFIT OR NET LOSS

DIFFERNCE BETWEEN GP AND NP

GROSS PROFIT NET PROFIT

It is the difference between sales and direct costs Gross profit is transferred to profit and loss account

It is the difference between gross profit and indirect expenses Net profit is transferred to capital account

Drawing of a owner does not depend on the gross profit

Drawings of the owner depends on the net profit

ENGLISH SYSTEM OF ACCOUNTING CLASSIFICATION OF ACCOUNTS

1) PERSONAL ACCOUNTS
2) REAL ACCOUNTS 3) NOMINAL ACCOUNTS

PERSONAL ACCOUNTS
ACCOUNTS OF PHYSICAL PERSONS EG., NAVEENS ACCOUNT ACCOUNTS OF LEGAL PERSONS EG., CANARA BANKS ACCOUNT REPRESENTATIVE PERSONAL ACCOUNTS EG., OUTSTANDING EXPENSES

REAL & NOMINAL ACCOUNTS

REAL ACCOUNTS REPRESENT THE PROPERTY OF THE BUSINESS. NOMINAL ACCOUNTS REPRESENT LOSSES OR EXPENSES OR INCOMES OR GAINS OF A BUSINESS.

MATCH THE FOLLOWING

A A B C RAMESH DENA BANK RENT 1 2 3 B REAL PERSONAL NOMINAL

D
E F

COMPUTER
LAND DISCOUNT

4
5 6

REAL
NOMINAL PERSONAL

CONCEPT OF DEBIT AND CREDIT

PERSONAL ACCOUNTS DEBIT THE RECEIVER CREDIT THE GIVER

REAL ACCOUNTS

DEBIT WHAT COMES IN CREDIT WHAT GOES OUT

NOMINAL ACCOUNTS

DEBIT ALL EXPENSES AND LOSSES CREDIT ALL INCOMES AND GAINS