Introduction To Accounting: Pg. 1 Compiled By: Abdul Ahad Butt

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INTRODUCTION TO ACCOUNTING
CHPATER-1
ACCOUNTING THEORY
Basic Definition of Accounting Terms
pg. 1 Compiled by : Abdul Ahad Butt

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Definitions: Accounting
Purpose of accounting is to record Business transaction
Accounting is the process of recording financial transactions about to a business. ...
The financial statements used in accounting are a concise summary of financial
transactions over an accounting period, summarizing a company's operations, financial
position and cash flows.
Transactions
A transaction is a business event that has a monetary impact on an entity's financial

statements, and is recorded as an entry in its accounting records.
Example:
Purchase Transaction:
Cash Purchase, Credit Purchase
Sales Transaction:
Cash Sales, Credit Sales
Definitions: Business
Business is an economic system where goods and services are exchanged for one another or
for money.
Business Transaction
A business transaction is an event involving an interchange of goods, money or services
between two or more parties with financial recording
Elements of financial statements:
 Assets (Resource of business from which future benefits are expected)
An asset is defined as:

 a resource controlled by the entity;
 as a result of past events; and
 From which future economic benefits are expected to flow to the entity.
Example: Land, building, Machinery, vehicles, furniture, cash in hand, cash at bank,
computer, mobile, closing inventory/Stock
 Liabilities (Present obligation settlement of which results into outflow of resources
(Cash)
A liability is defined as:
 a present obligation of an entity
 arising from past events

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 The settlement of which is expected to result in an outflow of resources that embody
economic benefits.
Example: Loan from Bank

 Equity [Total Assets – Total liabilities] =Net Assets
Equity is the residual interest in equity after the value of all its liabilities has been deducted
from the value of all its assets. Equity comprises of amount invested by owners into business
plus undrawn profits.
Example: investment from owner
 Incomes (Earnings of business from business activities)
Financial performance is measured by profit or loss. Profit is measured as income less

expenses. Income includes both revenue and gains.
 Revenue is income arising in the course of the ordinary activities of the entity. It
includes sales revenue, fee, rental income and income from interest.
 Gains include gains on the disposal of non-current assets.
Example: sale income, rent income, fee income, interest income, commission income
 Expenses (Amount for which benefit has been obtained)
Expenses include both routine business expenses and losses.
 Expenses arising in the normal course of activities, such as the cost of sales and other
operating costs, including depreciation of non-current assets.
 Losses include for example, the loss on disposal of a non-current asset, and losses
arising from damage due to fire or flooding
Example: Salaries, Utility bills, Interest expenses, commission expenses, Rent payable
 Drawings
Amount taken by the owner from business for his personal use
The purpose of financial accounting

Financial accounting is a term that describes:
 maintaining a system of accounting records for business transactions and other items
of a financial nature; and
 reporting the financial position and the financial performance of an entity in a set of
financial statements.
The term entity is used to describe any type of organization. Business entities include
companies, business partnerships and the businesses of ‘sole traders’

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The business entity concept
Financial reports are constructed as if the business entity is separate from its owners. In
other words, the business entity and its owners are different. This is known as the business
entity concept.
In other words, personal incomes and expenses of owner are not considered while
calculating profit of business.
This concept has legal ‘reality’ in the case of companies. A company by law is a legal
person, separate from its owners (the shareholders). However, the concept is also applied to
sole traders and partnerships.

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ANALYSIS OF TRANSACTION
Transactions
A transaction is a business event that has a monetary impact on an entity's financial

statements, and is recorded as an entry in its accounting records.
Example:
Purchase and Sales Transaction
Purchase Transaction:
Cash Purchase, Credit Purchase
Sales Transaction:
Cash Sales, Credit Sales

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Question:1.
Show the increase/decrease in accounting heads in each of the following transactions.
Sept
1. Mr. Abbas started the business by Rs.30,000 in cash.

2. Business borrowed Rs.40,000 from his friend in cash.
3. Business purchased a van in cash of Rs.40,000.
4. Business purchased a market stall for Rs.5,000 in cash.
5. Business purchased some football shirts for Rs.18,000 on credit from AB & Company.
6. Business paid Rs.10,000 to AB & Company in cash.
7. Business sold 50% of shirts (cost=9,000) for Rs.12,000 in cash.
8. Business sold shirts costing 5,000 for Rs.9000 on credit to Ali & company.
9. Business repaid Rs.10,000 of loan in cash.
10. Business received Rs.8000 in cash from Ali & Company.
11. Abbas took Rs.4,000 in cash for his personal use.
Solution:
DATE ACCOUNTING INCREASE/DECREASE DEBIT /CREDIT

HEAD
Sept 1 Cash Debit
Capital Credit
Sept 2 Cash Debit
Loan Credit
Sept 3 Van Debit
Cash Credit
Sept 4 Market stall Debit
Cash Credit

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Sept 5 Shirts Debit
Creditor-AB & Credit

Company
Sept 6 Creditor Debit
Cash Credit
Sept 7 Cash Debit
Sale Credit
Sept 8 Debtor-Ali Debit
Shirts Credit
Sept 9 Loan Debit
Cash Credit
Sept 10 Cash Debit
Debtor-Ali & Credit

company
Sept 11 Drawings Debit
Cash Credit

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Question:2
Sept
1. Business paid to the creditor Rs. 700 in cash.

2. Bought fixture for Rs. 200 paying by cheque.
3. Bought goods on credit for Rs. 275 from Ahmed.
4. Proprietor introduced Rs. 500 cash into business.
5. Debtor paid business Rs.50 by cheque.
6. Waheed lends the business Rs. 200 in cash.
7. Repaid in cash a loan from bank Rs. 500.
8. Took Rs.500 cash and deposited it in bank.
9. Owner takes out Rs.100 cash for his personal use.
10. Sold goods on cash Rs.500.
Solution:

HEAD
Sept 1 Creditor Debit
Cash Credit
Sept 2 Fixture Debit
Bank Credit
Sept 3 Goods-purchases Debit
Creditor-Ahmed Credit
Sept 4 Cash Debit
Capital Credit

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Sept 5 Bank Debit
Debtor Credit
Sept 6 Cash Debit
Loan from Waheed Credit
Sept 7 Loan from bank Debit
Cash Credit
Sept 8 Bank Debit
Cash Credit
Cash Credit
Sept 10 Cash Debit
Sales Credit
Question:3
1. Started business with Rs.10,000 in bank.

2. Bought goods from Saeed on credit for 5,000.
3. Paid wages by cash for 200.
4. Owner withdrew goods for his personal use for 300.

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5. Sold goods on credit to Junaid for 5,000.
6. Cash received from Junaid 200.
7. Loan taken from friend in cash 10,000.
8. Deposited cash in bank 1,500.
9. Rent paid by cheque 2,500.
10. Rent received by subletting the building 3,500 in cash.
Solution:

HEAD
Sept 1 Bank Debit
Capital Credit
Sept 2 Purchases Debit
Creditor-Saeed Credit
Sept 3 Wages Debit
Cash Credit
Purchases Credit
Sept 5 Debtor-Junaid Debit
Sales Credit
Sept 6 Cash Debit

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Debtor -Junaid Credit
Sept 7 Cash Debit
Loan from friend Credit
Sept 8 Bank Debit
Cash Credit
Sept 9 Rent Debit
Bank Credit
Sept 10 Cash Debit
Rent income Credit
Question:4
Show the increase/decrease in accounting heads in each of the following transactions
Sep,1 Started business with cash Rs.1,000,000.
Sep,3 Received a loan of Rs.5,000,000 from Inzamam by cheque

Sep,4 Bought Machinery for cash Rs.60,000.
Sep,6 Bought office equipment on credit from Shehbaz Rs.550,000.
Sep,9 Took Rs.300,000 out of bank and put into the cash till.
Sep,18 Repaid part of Inzamam loan by cheque Rs.800,000.
Sep,22 Paid amount owing to Shehbaz Rs.550,000.
Sep,26 Repaid part of Inzamam loan by Cash Rs.100,000.
Sep,30 Bought office machinery from Sameer on credit Rs.500,000.

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Solution:

HEAD
Sept 1 Cash Debit
Capital Credit
Sept 3 Bank Debit
Loan from Inzamam Credit
Sept 4 Machinery Debit
Cash Credit
Sept 6 Office Equipment Debit
Creditor -Shehbaz Credit
Sept 9 Cash Debit
Bank Credit
Sept 18 Loan from Inzamam Debit
Bank Credit
Sept 22 Creditor-Shehbaz Debit

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Bank Credit
Sept 26 Loan from Inzamam Debit
Cash Credit
Sept 30 Office Machinery Debit
Creditor -Sameer Credit

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JOURNAL, LEDGER
AND
TRIAL BALANCE

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Question:5
Pass journal entries in the books of Faraz and prepare ledger and Trail Balance
Oct,1 Started business with Rs.50,000 in the bank.
Oct,2 Purchased goods on credit from Salman Rs.22,500.
Oct,3 Purchased goods on credit from Haseeb Rs.6,250.
Oct,6 Sold goods for cash Rs.4,500.
Oct,7 We returned goods to Salman Rs.1,000.
Oct,9 Purchased goods on credit from Haseeb Rs.4,750.
Oct,11 Sold goods on Credit to Wasim Rs.9,750.
Oct,13 Sold goods for Cash Rs.5,250.
Oct,17 Took Rs.7,500 out of cash and paid into the bank.
Oct,20 Purchased machinery by cheque Rs.13,750.
Oct,23 Sold goods on credit to Muneeb Rs.5,500.
Oct,25 Wasim returned goods to us Rs.3,500.(Sale Return).
Oct,27 Muneeb Returned goods to us Rs.250.(Sale Return).
Oct,29 We returne goods top Haseeb Rs.750.(Purchase Return).
Oct,30 We paid Salman by cheque Rs.21,500.
Oct,31 Purchased machinery on Credit from Luqman Rs.6,750
Solution:5 Faraz
Date Accounting Head Debit Credit

Rs. Rs.
1-Oct Bank a/c 50,000
Capital a/c 50,000
2-Oct Purchase a/c 22,500
Creditor –salman a/c 22,500
Creditor- Haseeb a/c 6,250
6-Oct Cash a/c 4,500
Sale a/c 4,500
7-Oct Creditor –salman a/c 1,000
Purchase Return a/c 1,000
Creditor-Haseeb a/c 4,750
11-Oct Debtor-Wasim a/c 9,750
Sale a/c 9,750
13-Oct Cash a/c 5,250

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Sale a/c 5,250
17-Oct Bank a/c 7,500
Cash a/c 7,500
20-Oct Machinery a/c 13,750
Bank a/c 13,750
23-Oct Debtor-Muneeb a/c 5,500
Sale a/c 5,500
25-Oct Sales Return a/c 3,500
Debtor-Wasim a/c 3,500
27-Oct Sales Return a/c 250
Debtor –Muneeb a/c 250
29-Oct Creditor-Haseeb a/c 750
Purchases Return a/c 750
30-Oct Creditor- salman a/c 21,500
Bank a/c 21,500
31-Oct Machinery a/c 6,750
Creditor-luqman a/c 6,750
Ledger
Bank
Capital 50,000 Machine 13,750
Cash 7,500 Salman 21,500
c/d 22,250
Creditor Salman
Purchase Return 1,000 Purchases 22,500
Bank 21,500
Creditor Haseeb
Purchase Return 750 Purchases 6,250
Purchases 4,750

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c/d 10,250
Purchases
Salman 22,500
Haseeb 6,250
Haseeb 4,750 c/d 33,500
Capital
Bank 50,000
c/d 50,000
Purchase Return
Salman 1,000
Haseeb 750
c/d 1,750
1,750 1,750
Sales
Cash 4,500
Wasim 9,750
Cash 5,250
c/d 25,000 Muneeb 5,500

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Cash
Sales 4,500 Bank 7,500
Sales 5,250
c/d 2,250
9,750 9,750
Debtor-Wasim
Sales 9,750 Sale return 3,500
c/d 6,250
9,750 9,750
Machinery
Bank 13,750
Luqman 6,750
c/d 20,500
Creditor Luqman
Machinery 6,750
c/d 6,750
Sale Return
Wasim 3,500
Muneeb 250

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c/d 3,750
Debtor-Muneeb
Sales 5,500 Sale Return 250
c/d 5,250
Trial Balance
Debit Credit
Bank 22,250
Purchases 33,500
Creditor-Salman
Capital 50,000
Creditor-Haseeb 10,250
Cash 2,250
Sale 25,000
Purchase Return 1,750
Debtor-Wasim 6,250
Machinery 20,500
Debtor-Muneeb 5,250
Sale Return 3,750
Creditor-Luqman 6,750
93,750 93,750

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Question:6
Pass journal entries in the books of Arsalan and prepare ledger and Trail Balance.
Mar,1 Started business with Rs.30,000 in bank.
Mar,3 Purchased goods of Rs.1,625 on credit from Zohaib.
Mar,4 Purchased fixture and Fitting of Rs.2,250 paying by cheque.
Mar,6 Sold goods for Rs.4,125 on cash.
Mar,8 Purchased goods on credit Rs.1,710 from Wahid.
Mar,11 Paid rent by cash Rs.125.
Mar,14 Purchased stationary of Rs.405 paying in cash.
Mar,17 Goods returned to Zohaib Rs.345. (Purchase Return).
Mar,22 Let off part of the premises receiving rent by cheque Rs.75(Rental Income)
Mar,24 Sold goods on credit to Asad Rs.1,155
Mar,27 Purchased a motor van by cheque Rs.4,500.
Mar,29 Paid monthly wages by Cash Rs.2,925.
Mar,31 Proprietor took cash Rs. 660 For himself.
Solution:6 Arsalan

Rs. Rs.
1-March Bank a/c 30,000
Capital a/c 30,000
3-March Purchases a/c 1,625
Creditor –Zohaib 1,625
4-March Fixture & Fitting a/c 2,250
Bank a/c 2,250
6-March Cash a/c 4,125
Sale a/c 4,125
8-March Purchase a/c 1,710
Creditor a/c 1,710
11-March Rent a/c 125
Cash a/c 125
14-March Stationary a/c 405
Cash a/c 405
17-March Creditor a/c 345
Purchase return a/c 345
22-March Bank a/c 75
Rent income a/c 75
24-March Debtor –Asad a/c 1,155
Sale a/c 1,155
27-March Van a/c 4,500
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Bank a/c 4,500
29-March Wages a/c 2,925
Cash a/c 2,925
31-March Drawings a/c 600
Cash a/c 600
Ledger
Bank
Capital 30,000 Fixture 2,250
Rent 75 Motor van 4,500
c/d 23,325
Capital
Bank 30,000
c/d 30,000
Purchases
Zohaib 1,625
Wahid 1,710
c/d 3,335
Creditor-Zohaib
Purchase Return 345 Purchases 1,625
c/d 1,280

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Creditor Wahid
Purchases 1,710
c/d 1,710
Fixture
Bank 2,250
c/d 2,250
Cash
Sale 4,125 Rent 125
Stationary 405
Wages 2,925
Drawings 660
c/d 10
Sales
Cash 4,125
Asad 1,155
c/d 5,280

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Rent
Cash 125
c/d 125
Stationary
Cash 405
c/d 405
Purchase Return
Zohaib 345
c/d 345
Rent Income
Bank 75
c/d 75

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Debtor Asad
Sale 1,155
c/d 1,155
Drawings
Cash 660
c/d 660
Wages
Cash 2,925
c/d 2,925
Motor Van
Bank 4,500
c/d 4,500
Trial Balance
Debit Credit
Bank 23,325
Capital 30,000

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Purchases 3,335
Creditor - Zohaib 1,280
Fixture 2,250
Cash 10
Sale 5,280
Creditor-Wahid 1,710
Rent 125
Stationary 405
Purchase Return 345
Rent Income 75
Debtor - Asad 1,155
Wages 2,925
Drawings 660
Motor Van 4500
38,690 38,690
Question:7
Pass journal entries in the books of Toor and prepare ledger and Trail Balance
Jun,1 Started business with cash Rs.135,000.
Jun,2 Bought goods on credit from Ahmed Rs.26,640.
Jun,3 Paid rent by Cash Rs.2,520.
Jun,4 Paid Rs.90,000 of cash into the bank.
Jun,6 Sold goods on credit to Elahi for Rs.4,860.
Jun,8 Bought stationary Rs,1,350 paying by cheque.
Jun,10 Cash sale Rs.4,410.
Jun,14 Goods returned by us to Ahmed Rs.1,530. (Purchase Return)
Jun,16 Sold goods on Credit to Masood Rs.2,610.
Jun,19 Paid for repairs of the building by cash Rs.1,620.
Jun,21 Elahi Returned goods to us worth Rs.1,260 (Sales return).

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Jun,26 Paid Ahmed by cheque Rs.25,110.
Jun,27 Cash purchases Rs.11,250.
Jun,28 Bought a vehicle by paying through cheque Rs.35,550.
Jun,29 Paid motor expenses in cash Rs.1,350.
Jun,30 Bought fixtures of Rs.10,800 on credit from Usama.
Solution:7 Toor

Rs. Rs.
1-Jun Cash a/c 135,000
Capital a/c 135,000
2-Jun Purchases a/c 26,640
Creditor a/c –ahmed 26,640
3-Jun Rent a/c 2,520
Cash a/c 2,520
4-Jun Bank a/c 90,000
Cash a/c 90,000
6-Jun Debtor a/c-Elahi 4,860
Sale a/c 4,860
8-Jun Stationary a/c 1,350
Bank a/c 1,350
10-Jun Cash a/c 4,410
Sales a/c 4,410
14-Jun Creditor -Ahmed 1,530
Purchase Return a/c 1,530
16-Jun Debtor-Masood a/c 2,610
Sale a/c 2,610
19-Jun Repair of building a/c 1,620
Cash a/c 1,620
21-Jun Sale Return a/c 1,260
Debtor Elahi a/c 1,260
26-Jun Creditor- Ahmed a/c 25,110
Bank a/c 25,110
27-Jun Purchases a/c 11,250
Cash a/c 11,250
28-Jun Vehicle a/c 35,550
Bank a/c 35,550
29-Jun Motor Expense a/c 1,350
Cash a/c 1,350
30-Jun Fixture and Fitting a/c 10,800
Creditor -Usama 10,800

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Ledger
Cash
Capital 135,000 Rent 2,520
Sales 4,410 Bank 90,000
Repair 1,620
Purchase 11,250
Motor expense 1,350
c/d 32,670
Creditor-Ahmad
Purchase return 1,530 Purchases 26,640
Bank 25,110
Capital
Cash 135,000
c/d 135,000
Purchases
Creditor-Ahmad 26,640
Cash 11,250 c/d 37,890

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Bank
Cash 90,000 Stationary 1,350
Creditor Ahmad 25,110
Motor van 35,550
c/d 27,990
Sales
Elahi 4,860
Cash 4,410
Masood 2,610
c/d 11,880
Debtor-Elahi
Sales 4,860 Sale return 1,260
c/d 3,600
Rent expense
Cash 2,520
c/d 2,520

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Stationary
Bank 1,350
c/d 1,350
Purchase Returns
Creditor Ahmed 1530
c/d 1530
Debtor Masood
Sales 2,610
c/d 2,610
Repairs
Cash 1,620
c/d 1,620
Sale Returns
Elahi 1,260
c/d 1,260
Motor Vehicle
Bank 35,550
c/d 35,550

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Motor Expense
Cash 1,350
c/d 1,350
Creditor Usama
Fixture 10,800
c/d 10,800
Fixture
Creditor Usama 10,800
c/d 10,800

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Trial balance
Debit Credit
Cash 32,670
Capital 135,000
Purchase 37,890
Rent expense 2,520
Bank 27,992
Debtor-Elahi 3,600
Sale 11,880
Stationary 1,350
Purchase-Return 1,530
Debtor-Masood 2,610
Repair 1,620
Sale-return 1,260
Motor vehicle 35,550
Motor expense 1,350
Fixture 10,800
Creditor Usama 10,800
159,210 159,210

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ICAP QUESTION BANK
Question:8. MAY TRANSACTIONS

The following transactions in May 2013 are those of a new business entity, Home Oak Garden
Traders (Assume all receipts and payments are by cheque)
May 2013
Date
Required
(a) Use T accounts to show how these transactions should be recorded in the main ledger
accounts of the entity. The accounting system maintains separate accounts for each individual
payable and receivable in the main ledger.
(b) Prepare a trial balance as at 31 May 2013.
Solution:8 (a) Accounts in the main ledger
Capital
31 Balance c/f 2,500,000 1 Bank 2,500,000

2,500,000 2,500,000
Cash at bank
1 Capital 2,500,000 6 Rent 120,000
9 The Office
Company 430,000 12 D Gibson 250,000
10 Texas Chain 12 The Bushes
Stores 1,500,000 Company 540,000
15 Advertising 230,000
31 Rent 180,000
31 Balance c/f 3,110,000

33
4,430,000 4,430,000
Purchases
2 The Bushes
Company 540,000
Flower City 870,000
D Gibson 250,000
Weedkill 760,000
Greenery 640,000
18 The Bushes
Company 430,000
Landscape 1,100,000 31 Balance c/f 4,590,000
4,590,000 4,590,000
Sales
4 The Office
Company 430,000
V Cork 640,000
Texas Chain
Stores 1,760,000
31 Balance c/f 3,500,000 21 Public Parks 670,000
3,500,000 3,500,000
Payables - Flower City
31 Balance c/f 870,000 2 Purchases 870,000

870,000 870,000
Payables -D Gibson
12 Cash at bank 250,000 2 Purchases 250,000
250,000 250,000
Payables – Weedkill
760,000 760,000
Payables - T Greenery
640,000 640,000
Payables - Landscape
31 Balance c/f 1,100,000 18 Purchases 1,100,000
1,100,000 1,100,000

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Receivables - The Office Company

4 Sales 430,000 9 Cash at bank 430,000
430,000 430,000
Receivables - V Cork
4 Sales 640,000 Balance c/f 640,000
640,000 640,000
Receivables - Texas Chain Stores
4 Sales 1,760,000 10 Cash at bank 1,500,000
Balance c/f 260,000
1,760,000 1,760,000
Receivables - Public Parks
21 Sales 670,000 Balance c/f 670,000
670,000 670,000
Advertising expenses
15 Bank 230,000 31 Balance c/f 230,000

230,000 230,000
(b) Trial Balance as at 31 May 2013
Debit Credit
Rs. Rs.
Capital 2,500,000
Bank 3,110,000
Purchases 4,590,000
Sales 3,500,000
Payables:
The Bushes Company 430,000
Flower City 870,000
Weedkill 760,000
T Greenery 640,000
Landscape 1,100,000
Receivables:
V Cork 640,000
Texas Chain Store 260,000
Public Parks 670,000
Rent 300,000
Advertising 230,000
9,800,000 9,800,000

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Question:9. LEE
Enter the following transactions in the main ledger accounts of Lee, and extract a trial
balance as at 31 March 2013.
Assume that all receipts and payments are by cheque unless told otherwise.
March 2013
Date
Solution:9 Capital
Date Rs. Date Rs.

Balance c/d 80,000 1 Bank 80,000
80,000 80,000
Bank
Date Rs. Date Rs.

1 Capital 80,000 6 Wages 1,400
24 Carton Leisure 9,500 12 Wages 1,400

30 Loan 6,000 17 KH Supplies 8,400
21 Beta Fittings 5,000
31 Motor van 40,000
Balance c/d 39,300
95,500 95,500

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Cash in hand
Date Rs. Date Rs.
5 Sales 8,700 9 Purchases 4,600
Balance c/d 4,100
8,700 8,700
Purchases
Date Rs. Date Rs.

2 KH Supplies 7,600
Hatts 2,700
Toby Traders 5,600
9 Cash in hand 4,600
10 KH Supplies 5,700
Toby Traders 9,800 31 Balance c/d 36,000
36,000 36,000
Payables - KH Supplies
Date Rs. Date Rs.

17 Bank 8,400 2 Purchases 7,600
27 Purchase returns 2,400 10 Purchases 5,700
31 Balance c/d 2,500
13,300 13,300
Payables - Hatts
Date Rs. Date Rs.

31 Balance c/d 2,700 2 Purchases 2,700
2,700 2,700
Balance b/d 2,700
Payables - Toby Traders

Date Rs. Date Rs.
18 Purchase returns 2,000 2 Purchases 5,600
31 Balance c/d 13,400 10 Credit Purchases 9,800
15,400 15.400
Payables - Beta Fittings

Date Rs. Date Rs.
21 Bank 5,000 15 Fixtures 5,000
5,000 5,000
Sales
Date Rs. Date Rs.
5 Cash in hand 8,700
7 Elliots 3,500

37
L. Lane 4,200
Carton Leisure 7,200
13 L. Lane 3,200
31 Balance c/d 29,100 Carton Leisure 2,300
29,100 29,100
Receivables - Elliots
Date Rs. Date Rs.
7 Sales 3,500 31 Balance c/d 3,500
3,500 3,500
Receivables - Carton Leisure

Date Rs. Date Rs.
7 Sales 7,200 24 Bank 9,500
13 Sales 2,300
9,500 9,500
Wages
Date Rs. Date Rs.
6 Bank 1,400
12 Bank 1,400 Balance c/d 2,800
2,800 2,800
Motor van
Date Rs. Rs.

31 Bank 40,000 Balance c/d 40,000
40,000 40,000
Fixtures and fittings

Rs. Rs.
Payables 5,000 Balance c/d 5,000
5,000 5,000
Purchase returns
Rs. Rs.
Toby Trader 2,000
Balance c/d 4,400 KH Supplies 2,400
4,400 4,400

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Lee: Trial balance at 31 March 2013
Debit Credit
Rs. Rs.
Capital 80,000
Bank 39,300
Cash 4,100
Purchases 36,000
Payables:
KH Supplies 2,500
Hatts 2,700
Toby Traders 13,400
Sales 29,100
Receivables:
Elliots 3,500
L. Lane 7,400
Wages 2,800
Motor van 40,000
Fixtures and fittings 5,000
Purchase returns 4,400
Loan 6,000
138,100 138,100
Note: When income is recorded
1-Sale income is recorded when risks and rewards of goods are transferred from seller to
buyer. Normally risks and rewards are transferred when the goods are delivered from seller to
buyer
2-Carriage inward is added to amount of purchase and Carriage outward is the

transportation cost related to sales

Introduction To Accounting: Pg. 1 Compiled By: Abdul Ahad Butt

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Introduction To Accounting: Pg. 1 Compiled By: Abdul Ahad Butt

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1

Basic Definition of Accounting Terms

pg. 1 Compiled by : Abdul Ahad Butt

A transaction is a business event that has a monetary impact on an entity's financial

Cash Purchase, Credit Purchase

Cash Sales, Credit Sales

Elements of financial statements:

 Assets (Resource of business from which future benefits are expected)

An asset is defined as:

 as a result of past events; and

 arising from past events

Example: Loan from Bank

Example: investment from owner

 Incomes (Earnings of business from business activities)

Financial performance is measured by profit or loss. Profit is measured as income less

 Gains include gains on the disposal of non-current assets.

The purpose of financial accounting

pg. 3 Compiled by : Abdul Ahad Butt

pg. 4 Compiled by : Abdul Ahad Butt

A transaction is a business event that has a monetary impact on an entity's financial

Purchase and Sales Transaction

Cash Purchase, Credit Purchase

Cash Sales, Credit Sales

pg. 5 Compiled by : Abdul Ahad Butt

Show the increase/decrease in accounting heads in each of the following transactions.

1. Mr. Abbas started the business by Rs.30,000 in cash.

DATE ACCOUNTING INCREASE/DECREASE DEBIT /CREDIT

Sept 1 Cash Debit

Sept 2 Cash Debit

Sept 3 Van Debit

Sept 4 Market stall Debit

pg. 6 Compiled by : Abdul Ahad Butt

Sept 5 Shirts Debit

Creditor-AB & Credit

Sept 6 Creditor Debit

Sept 7 Cash Debit

Sept 8 Debtor-Ali Debit

Sept 9 Loan Debit

Sept 10 Cash Debit

Debtor-Ali & Credit

Sept 11 Drawings Debit

pg. 7 Compiled by : Abdul Ahad Butt

1. Business paid to the creditor Rs. 700 in cash.

DATE ACCOUNTING INCREASE/DECREASE DEBIT /CREDIT

Sept 1 Creditor Debit

Sept 2 Fixture Debit

Sept 3 Goods-purchases Debit

Sept 4 Cash Debit

pg. 8 Compiled by : Abdul Ahad Butt

Sept 6 Cash Debit

Loan from Waheed Credit

Sept 7 Loan from bank Debit

Sept 8 Bank Debit

Sept 9 Drawings Debit

Sept 10 Cash Debit

1. Started business with Rs.10,000 in bank.

pg. 9 Compiled by : Abdul Ahad Butt

DATE ACCOUNTING INCREASE/DECREASE DEBIT /CREDIT

Sept 1 Bank Debit

Sept 2 Purchases Debit

Sept 3 Wages Debit

Sept 4 Drawings Debit

Sept 5 Debtor-Junaid Debit