Accounting

NEED FOR INFORMATION

INFORMATION

QUANTITATIVE
INFORMATION

NON QUANTITATIVE
INFORMATION

ACCOUNTING
INFORMATION

OPERATING
INFORMATION

FINANCIAL
ACCOUNTING

NON ACCOUNTING
INFORMATION

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.
10. 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

DECREASE OR DEDUCTION
ON THE CREDIT SIDE

" + " ON LEFT HAND 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

INCREASE OR ADDITIONS
ON THE CREDIT SIDE

- " ON LEFT HAND 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

DECREASE OR DEDUCTION
ON THE CREDIT SIDE

" + " ON LEFT HAND 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

INCREASE OR ADDITIONS
ON THE CREDIT SIDE

- " ON LEFT HAND SIDE

" + " ON RIGHT HAND SIDE

GREEN COMPANY

GREEN COMPANY Transaction 1

RAMASWAMY STARTED BUSINESS WITH CASH RS 1,00,000
Dr
Cr
Capital

Dr
Cr

CASH (ASSET)
Rs 1,00,000

RAMASWAMY CAPITAL (EQUITY AND LIABILITY)

Cash
1,00,000

Rs

GREEN COMPANY Transaction 2

GREEN COMPANY RAISED BANK LOAN OF RS 50,000
Dr
Cr
Capital
Bank loan
50,000
Dr

CASH (ASSET)
1,00,000

BANK LOAN (EQUITY AND LIABILITY)

Cash
50,000

Cr

GREEN COMPANY Transaction 3

GREEN COMPANY BOUGHT A BUILDING FOR RS 25,000 AND PAID IN CASH.
Dr
Cr

CASH (ASSET)

Capital
Bank loan
50,000

1,00,000 Building
25,000

Dr
Cr

BUILDING (ASSET)

Cash
25,000

GREEN COMPANY Transaction 4

GREEN COMPANY BOUGHT STOCK OF SUGAR FOR RS 10,000
Dr
Cr
Capital
Bank loan
50,000
Dr
Cr
Cash
10,000

CASH (ASSET)
1,00,000 Building
25,000
Stock
10,000
STOCK (ASSET)

GREEN COMPANY Transaction 5

GREEN COMPANY SOLD THE ENTIRE STOCK OF SUGAR FOR RS 12,000
Dr
Cr
Capital
Bank loan
50,000
Sales
Dr
12,000
Cr
Cash
10,000
Dr
Cr
Stock
10,000
Dr

CASH (ASSET)
1,00,000 Building
25,000
Stock
10,000
STOCK (ASSET)
Cost of goods sold
COST OF GOODS SOLD (EXPENSE)

SALES (INCOME)

Cr
Cash
12,000

10,000

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
Cr
Capital
Loan
Dr
Cr

Dr

CASH (ASSET)
Rs 50,000
Rs 75,000
RAMASWAMY CAPITAL (EQUITY AND LIABILITY)
Cash
50,000
MRS RAMASWAMY LOAN(EQUITY AND LIABILITY)
Cash
75,000

Rs
Cr
Rs

YELLOW COMPANY Transaction 2

YELLOW COMPANY BOUGHT A BUILDING FOR RS 10,000 AND PAID IN CASH.
Dr
Cr

CASH (ASSET)

Capital
Loan

50,000 Furniture
75,000

Dr
Cr
Cash
10,000

FURNITURE(ASSET)

10,000

YELLOW COMPANY Transaction 3

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

Dr
Cr

STOCK(ASSET)
50,000

CREDITORS (LIABILITY)
Stock

50,000

YELLOW COMPANY Transaction 4

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

Dr
Cr
Creditors
Dr
Cr
Sales
60,000
Dr
Cr
Stock
50,000
Dr
Cr

STOCK(ASSET)
50,000 Cost of goods sold

50,000

DEBTORS (ASSET)

COST OF GOODS SOLD (EXPENSE)

SALES (INCOME)
Debtors

60,000

YELLOW COMPANY Transaction 5

YELLOW COMPANY RECEIVED FROM CEMENT PURCHASER RS 60,000
Dr
Cr

CASH (ASSET)

Capital
Loan
Debtor
60,000
Dr
Cr

50,000 Furniture
75,000

Sales
60,000

DEBTORS (ASSET)
Cash
60,000

10,000

YELLOW COMPANY Transaction 6

YELLOW COMPANY PAID RS 50,000 TO SUPPLIER
Dr
Cr

CASH (ASSET)

Capital
Loan
Debtor

50,000 Furniture
75,000 Creditor
60,000 50,000

Dr
Cr
Cash
50,000

10,000

CREDITORS (LIABILITY)
Stock

50,000

YELLOW COMPANY Transaction 7

YELLOW COMPANY REPAID LOAN RS 25,000
Dr
Cr
Capital
Loan
Debtor
Dr
Cash
25,000

CASH (ASSET)
50,000 Furniture
75,000 Creditor
60,000 50,000
Loan
25,000
MRS RAMASWAMY LOAN(EQUITY AND LIABILITY)
Cash
75,000

10,000

Cr
Rs

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
DATE
1.9.XX

1. CASH A/C
PARTICULARS

J.F

To Capital

DATE

PARTICULARS

J.F

AMOUNT (RS)

10,000

DR
DATE

AMOUNT(RS)

CR

2. CAPITAL A/C
PARTICULARS

J.F

AMOUNT(RS)

DATE
1.9.XX

CR
PARTICULARS

By Cash

J.F

AMOUNT (RS)
10,000

IN THE BOOKS OF WOODCRAFT COMPANY

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

DR
DATE
1.9.XX

1. CASH A/C
PARTICULARS

J.F

To Capital

DR
DATE
4.9.XX

AMOUNT(RS)

DATE

10,000

4.9.XX

CR
PARTICULARS

J.F

By Rent advance

2,000

3. RENT IN ADVANCE A/C

PARTICULARS
To Cash

J.F

AMOUNT(RS)
2,000

Capital account (2) opened earlier continues.

DATE

PARTICULARS

AMOUNT (RS)

CR
J.F

AMOUNT (RS)

IN THE BOOKS OF WOODCRAFT COMPANY

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

DR
DATE
1.9.XX

1. CASH A/C
PARTICULARS

J.F

To Capital

DR
DATE
5.9.XX

CR

AMOUNT(RS)

DATE

PARTICULARS

J.F

10,000

4.9.XX

By Rent advance

2,000

5.9.XX

By Equipment

1,200

4. EQUIPMENT A/C
PARTICULARS
To Cash

J.F

AMOUNT(RS)

DATE

PARTICULARS

AMOUNT (RS)

CR
J.F

1,200

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

AMOUNT (RS)

IN THE BOOKS OF WOODCRAFT COMPANY

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

DR
DATE
7.9.XX

5. SUPPLIES A/C
PARTICULARS

J.F

To Creditors

DATE

PARTICULARS

J.F

AMOUNT (RS)

700

DR
DATE

AMOUNT(RS)

CR

6. CREDITORS A/C
PARTICULARS

J.F

AMOUNT(RS)

DATE
7.9.XX

PARTICULARS
By Supplies

CR
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
DATE

1. CASH A/C
PARTICULARS

J.F

AMOUNT(RS)

DATE

CR
PARTICULARS

J.F

AMOUNT (RS)

1.9.XX

To Capital

10,000

4.9.XX

By Rent advance

2,000

10.9.XX

To Revenue

8,600

5.9.XX

By Equipment

1,200

DR
DATE

7. REVENUE FROM SERVICE A/C

PARTICULARS

J.F

AMOUNT(RS)

DATE
10.9.XX

PARTICULARS
By Cash

CR
J.F

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
DATE

1. CASH A/C
PARTICULARS

J.F

AMOUNT(RS)

DATE

CR
PARTICULARS

J.F

AMOUNT (RS)

1.9.XX

To Capital

10,000

4.9.XX

By Rent advance

2,000

10.9.XX

To Revenue

8,600

5.9.XX

By Equipment

1,200

14.9.XX

By Advertisement

1,400

DR
DATE
14.9.XX

8. ADVERTISEMENT A/C
PARTICULARS
To Cash

J.F

AMOUNT(RS)

DATE

PARTICULARS

CR
J.F

AMOUNT (RS)

1,400

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. CASH A/C
PARTICULARS

J.F

AMOUNT(RS)

DATE

CR
PARTICULARS

J.F

AMOUNT (RS)

1.9.XX

To Capital

10,000

4.9.XX

By Rent advance

2,000

10.9.XX

To Revenue

8,600

5.9.XX

By Equipment

1,200

17.9.XX

To Revenue

11,200

14.9.XX

By Advertisement

1,400

DR
DATE

7. REVENUE FROM SERVICE A/C

PARTICULARS

J.F

AMOUNT(RS)

DATE

PARTICULARS

CR
J.F

AMOUNT (RS)

10.9.XX

By Cash

8,600

17.9.XX

By Cash

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

7. REVENUE FROM SERVICE A/C

PARTICULARS

J.F

AMOUNT(RS)

DR
DATE
23.9.XX

DATE

PARTICULARS

CR
J.F

10.9.XX

By Cash

8,600

17.9.XX

By Cash

11,200

23.9.XX

By Debtors

13,100

9. DEBTORS A/C
PARTICULARS
To Revenue

J.F

AMOUNT(RS)

AMOUNT (RS)

DATE

PARTICULARS

CR
J.F

AMOUNT (RS)

13,100

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. CASH A/C
PARTICULARS

J.F

AMOUNT(RS)

DATE

CR
PARTICULARS

J.F

AMOUNT (RS)

1.9.XX

To Capital

10,000

4.9.XX

By Rent advance

2,000

10.9.XX

To Revenue

8,600

5.9.XX

By Equipment

1,200

17.9.XX

To Revenue

11,200

14.9.XX

By Advertisement

1,400

25.9.XX

By Wages

1,500

DR
DATE
25.9.XX

10. WAGES A/C

PARTICULARS
To Cash

J.F

AMOUNT(RS)

DATE

CR
PARTICULARS

J.F

AMOUNT (RS)

1,500

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. CASH A/C
PARTICULARS

J.F

AMOUNT(RS)

DATE

CR
PARTICULARS

J.F

AMOUNT (RS)

1.9.XX

To Capital

10,000

4.9.XX

By Rent advance

2,000

10.9.XX

To Revenue

8,600

5.9.XX

By Equipment

1,200

17.9.XX

To Revenue

11,200

14.9.XX

By Advertisement

1,400

25.9.XX

By Wages

1,500

28.9.XX

By Electricity

DR
DATE
28.9.XX

240

11. ELECTRICITY CHARGES A/C

PARTICULARS
To Cash

J.F

AMOUNT(RS)

DATE

PARTICULARS

CR
J.F

AMOUNT (RS)

240

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. CASH A/C
PARTICULARS

J.F

AMOUNT(RS)

DATE

CR
PARTICULARS

J.F

AMOUNT (RS)

1.9.XX

To Capital

10,000

4.9.XX

By Rent advance

2,000

10.9.XX

To Revenue

8,600

5.9.XX

By Equipment

1,200

17.9.XX

To Revenue

11,200

14.9.XX

By Advertisement

1,400

29.9.XX

To Debtors

4,800

25.9.XX

By Wages

1,500

28.9.XX

By Electricity

DR
DATE
23.9.XX

240

9. DEBTORS A/C
PARTICULARS
To Revenue

J.F

AMOUNT(RS)

DATE

13,100

29.9.XX

PARTICULARS
By Cash

CR
J.F

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. CASH A/C
PARTICULARS

J.F

AMOUNT(RS)

DATE

CR
PARTICULARS

J.F

AMOUNT (RS)

1.9.XX

To Capital

10,000

4.9.XX

By Rent advance

2,000

10.9.XX

To Revenue

8,600

5.9.XX

By Equipment

1,200

17.9.XX

To Revenue

11,200

14.9.XX

By Advertisement

1,400

29.9.XX

To Debtors

4,800

25.9.XX

By Wages

1,500

28.9.XX

By Electricity

240

30.9.XX

By Dividend

2,500

DR
DATE
30.9.XX

12. DIVIDEND A/C

PARTICULARS
To Cash

J.F

AMOUNT(RS)

DATE

PARTICULARS

CR
J.F

AMOUNT (RS)

2,500

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. CASH A/C
PARTICULARS

J.F

CR

AMOUNT(RS)

DATE

PARTICULARS

J.F

AMOUNT (RS)

10,000

4.9.XX

By Rent advance

2,000

1.9.XX

To Capital

10.9.XX

To Revenue

8,600

5.9.XX

By Equipment

1,200

17.9.XX

To Revenue

11,200

14.9.XX

By Advertisement

1,400

29.9.XX

To Debtors

4,800

25.9.XX

By Wages

1,500

28.9.XX

By Electricity

30.9.XX

By Dividend

2,500

30.9.XX

By Balance

25,760

240

34,600

DR
DATE
30.9.XX

34,600

2. CAPITAL A/C
PARTICULARS
To balance

J.F

AMOUNT(RS)

DATE

10,000

1.9.XX

10,000

CR
PARTICULARS

By Cash

J.F

AMOUNT (RS)
10,000
10,000

IN THE BOOKS OF WOODCRAFT COMPANY

Ascertaining the closing balance

DR
DATE
4.9.XX

3. RENT IN ADVANCE A/C

PARTICULARS

J.F

To Cash

AMOUNT(RS)
2,000

DATE
30.9.XX

PARTICULARS

CR
J.F

By Balance

2,000

2,000
DR
DATE
5.9.XX

2,000

4. EQUIPMENT A/C
PARTICULARS

J.F

To Cash

AMOUNT(RS)
1,200

DATE
30.9.XX

PARTICULARS

CR
J.F

By Balance

DATE
7.9.XX

1,200

5. SUPPLIES A/C
PARTICULARS

J.F

To Creditors

AMOUNT(RS)
700

DATE
30.9.XX

CR
PARTICULARS

J.F

By Balance

DATE
30.9.XX

700

6. CREDITORS A/C
PARTICULARS
To balance

J.F

AMOUNT(RS)

DATE

700

7.9.XX

700

AMOUNT (RS)
700

700
DR

AMOUNT (RS)
1,200

1,200
DR

AMOUNT (RS)

PARTICULARS
By Supplies

CR
J.F

AMOUNT (RS)
700
700

IN THE BOOKS OF WOODCRAFT COMPANY

Ascertaining the closing balance

DR
DATE
30.9.XX

7. REVENUE FROM SERVICE A/C

PARTICULARS

J.F

To balance

AMOUNT(RS)
32,900

DATE

PARTICULARS

CR
J.F

10.9.XX

By Cash

8,600

17.9.XX

By Cash

11,200

23.9.XX

By Debtors

13,100

32,900
DR
DATE
14.9.XX

32,900

8. ADVERTISEMENT A/C
PARTICULARS

J.F

To Cash

AMOUNT(RS)
1,400

DATE
30.9.XX

PARTICULARS

CR
J.F

By Balance

DATE
23.9.XX

1,400

9. DEBTORS A/C
PARTICULARS
To Revenue

J.F

AMOUNT(RS)
13,100
13,100

AMOUNT (RS)
1,400

1,400
DR

AMOUNT (RS)

DATE

PARTICULARS

CR
J.F

AMOUNT (RS)

29.9.XX

By Cash

4,800

30.9.XX

By Balance

8,300
13,100

IN THE BOOKS OF WOODCRAFT COMPANY

Ascertaining the closing balance

DR
DATE
25.9.XX

10. WAGES A/C

PARTICULARS

J.F

To Cash

AMOUNT(RS)
1,500

DATE
30.9.XX

CR
PARTICULARS

J.F

By Balance

1,500

1,500

DR
DATE
28.9.XX

1,500

11. ELECTRICITY CHARGES A/C

PARTICULARS

J.F

To Cash

AMOUNT(RS)
240

DATE
30.9.XX

PARTICULARS

CR
J.F

By Balance

DATE
30.9.XX

240

12. DIVIDEND A/C

PARTICULARS
To Cash

J.F

AMOUNT(RS)
2,500
2,500

AMOUNT (RS)
240

240

DR

AMOUNT (RS)

DATE
30.9.XX

PARTICULARS
By Balance

CR
J.F

AMOUNT (RS)
2,500
2,500

TRIAL BALANCE WOODCRAFT COMPANY

PARTICULARS
CASH

DEBIT (RS.)
25,760

CAPITAL

10,000

PREPAID RENT

2,000

EQUIPMENT

1,200

SUPPLIES

700

CREDITORS

700

REVENUE

32,900

ADVERTISEMENT

1,400

DEBTORS

8,300

WAGES

1,500

ELECTRICITY
DIVIDEND

CREDIT (RS.)

240
2,500
43,600

43,600

VENUS MUSIC CORNER

VENUS MUSIC CORNER - PROFIT AND LOSS ACCOUNT

PARTICULARS

RS

RS

Revenues from services

12,660

Expenses
Salaries

5,600

Electricity

410

Advertisement

130

Rent

300

Profit for the year

6,440
6,220

VENUS MUSIC CORNER BALANCE SHEET

PARTICULARS
ASSETS
CASH

570

DEBTORS

1,210

SUPPLIES

2,190

EQUIPMENT

25,500

29,470

LIABILITIES
CREDITORS

2,510

UNEARNED INCOME

600

EQUITY
VENUGOPAL CAPITAL
Opening balance

21,140

Add: Additions during the year

3,000

Add: Profit

6,220
30,360

Less: Drawings

4,000

26,360

29,470

RELIANCE TENNIS LIMITED

IN THE BOOKS OF RELIANCE TENNIS LIMITED

Ascertaining the closing balance

DR
DATE

CASH A/C
PARTICULARS

J.F

AMOUNT(RS)

DATE

CR
PARTICULARS

J.F

AMOUNT (RS)

01.03.12

Balance

5,000

02.03.12

Salary

2,500

01.03.12

Revenue

3,600

03.03.12

Bank loan repaid

2,000

12.03.12

Unearned revenue

1,400

06.03.12

Supplies

700

26.03.12

Receivable

7,850

08.03.12

Maintenance

900

09.03.12

Advertisement

300

14.03.12

Electricity

650

28.03.12

Creditors

440

29.03.12

Prepaid Insurance

830

30.03.12

Dividend

1,100

31.03.12

Balance c/d

8,430

17,850
01.04.12

Balance b/d

8,430

17,850

RELIANCE TENNIS LIMITED TRIAL BALANCE

PARTICULARS
Tennis court

DEBIT (RS.)

CREDIT (RS.)

20,000

Accounts receivable

1,180

Cash

8,430

Supplies

4,100

Unearned revenue

4,200

Bank loan payable

4,000

Share capital
Dividends

23,000
3,200

Revenue from services

19,740

Electricity expenses

1,480

Insurance expenses

2,720

Prepaid insurance

830

Repairs & maintenance

2,100

Salaries

6,600

Advertisement

300
50,940

50,940

ANUPAMA SECURITIES LTD

ANUPAMA SECURITIES LTD

Revenue
Broking commission earned (24,630 + 910)

25,540

Expenses
Salaries expenses (6,400+340)

6,740

Electricity expenses

720

Telephone expenses

910

Rent expenses (4,400+400)

4,800

Interest on loan (20,000 @ 15% for 4 months)

1,000

Supplies (1,430- 680)

Depreciation on computer

750
3,600

18,520

PBT

7,020

Less: Tax @ 50%

3,510

PAT

3,510

VASAN VIDEO LIMITED

VASAN VIDEO LTD

Capital

20,000

Revenue

22,590

Supplies
Debtor
Insurance

1,540
970
1,200

Creditor

6,450

Expenses

2,210

Rent

3,000

Advance rent
Salary

500
9,620

Unearned revenue
Camera

1,300
30,000

Salary payable

380

Electricity

1,005

Telephone

450

Prepaid insurance

1,200

Electricity charges payable

95

Bank charges

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

Amount

Particulars

To

Opening stock

By Sales Less Returns

To

Purchases Less Returns

By Closing stock

To

Direct expenses

By Gross Loss c/d to profit and

loss account

To

Gross profit c/d to profit

and loss account
TOTAL

XXX

TOTAL

Amount

XXX

PROFIT AND LOSS ACCOUNT FORMAT

Particulars

Amount

Particulars

To

Gross loss c/d from Trading

account

By Gross profit c/d from trading

account

To

Indirect expenses

By Interest income

To

Interest expenses

By Miscellaneous income

To

Depreciation

By Net loss transferred to capital

account

To

Net profit transferred to

capital account
TOTAL

XXX

TOTAL

Amount

XXX

BALANCE SHEET
LIABILITIES

Amount

ASSET

CAPITAL

FIXED ASSETS

LIABILITIES

CURRENT ASSETS

TOTAL

XXX

TOTAL

Amount

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

It is the difference between gross profit and

indirect expenses

Gross profit is transferred to profit and loss

account

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

RAMESH

REAL

DENA BANK

PERSONAL

RENT

NOMINAL

COMPUTER

REAL

LAND

NOMINAL

DISCOUNT

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