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Introduction To Accounting, Journal, Ledger, Trial Balance
Introduction To Accounting, Journal, Ledger, Trial Balance
Comparative study.
Sale of business.
Creditors:-
Drawings:-
It is the amount of money or the value of goods
which the proprietor takes for his domestic or personal use.
Revenue:-
It means the amount which, as a result of
operations, is added to the capital. “Revenue is an inflow of
assets which results in an increase in owner’s equity. E.g.
sale of goods, rent income.
Expense:-
It is the amount spent in order to produce and sell the
goods and services which produce the revenue. “Expenses is
the cost of the use of things or services for the purpose of
generating revenue”. E.g. payment of salary, wages, rent,
etc.
Income:-
It is the profit earned during a period of time. In
other words, the difference between revenue and expense is
called income.
Gross Profit:-
Gross profit is the difference between sales
revenue or the proceeds of goods sold and services rendered
over its direct cost.
Net Profit:-
Net Profit is the profit made after allowing for all
expenses. In case, expenses are more than revenue, it is Net
Loss.
Gain:-
Credit Transaction:-
Turn over:-
It means total trading income from cash sales and
credit sales.
Voucher:-
Any written document in support of a business
transaction is called a voucher. It is an objective evidence in
support of a transaction.
Basis of Accounting
a) Cash Basis
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
• Accounting concepts
1. Entity
2. money measurement The business is assumed to
have a continuing and
3. Going-concern indefinite life. The
4. Cost business IS NOT on the
verge of extinction.
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
• Accounting concepts
1. Entity
2. money measurement
Accountants compute the
3. Going-concern value of an asset by
4. Cost reference to its
acquisition cost, AND NOT
5. realization by reference to its
6. Accruals expected future benefits.
7. Matching
8. Periodicity
9. Consistency
10. conservatism
• Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost Any change in the value of
an asset may only be
5. réalisation recognized at the moment
6. Accruals the firm REALIZES it, or
disposes of that asset.
7. Matching
8. Periodicity
9. Consistency
10. conservatism
SFAC #1: Accrual
accounting attempts to
• Accounting concepts record the financial
1. Entity effects on an enterprise
of transactions and other
2. money measurement events and circumstances
3. Going-concern The
thatrecognition
have cash of an
expense (or revenue)
consequences for the and
4. Cost the related in
enterprise liability
the periods
(or asset)
in which results from
these
5. realization
an accounting EVENT,
transactions, and
etc… occur
6. Accruals is not necessarily
rather than only in the
signaled by a cash
periods when cash is
7. Matching transaction.
received or paid.
8. Periodicity
9. Consistency
10. conservatism
• Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
Expenses and
Revenues should be
expenses
5. realization recognizedfrom
in the
resulting thesame
same
6. Accruals accounting period
transactions during
(or events,
which the firm etc…)
circumstances, has
7. Matching recognized the associated
should be recognized
8. Periodicity revenues.
simultaneously.
9. Consistency
10. conservatism
• Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching Accounting reports must be
8. Periodicity prepared for fixed, and
relatively short, periods
9. Consistency of time.
10. conservatism
• Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching
8. Periodicity Like transactions should
be treated the same way in
9. Consistency consecutive periods.
10. conservatism
• Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
(1) The accountant should
5. realization not anticipate profit, and
should provide for all
6. Accruals
possible losses;
7. Matching (2) Faced with several
methods of valuing an
8. Periodicity asset, the accountant
9. Consistency should choose that which
leads to the lesser value.
10. Conservatisme
Business Transactions:-
1) Personal Account:-
Nominal Account
Credit Incomes & Gains
Advantages of Double Entry System
a) Recording:-
b) Classifying:-
Journal
Date Particular LF Debit Credit
Rs Rs [Cr]
[Dr]
Year Name of account to be
Month debited.
Date To, Name of account to
be credited.
[Narration]
L.F:-
It stands for Ledger Folio which means page of the
ledger. This column is used to record the page numbers on
which the various accounts appear in the ledger.
Trade Discount:-
Credit
nDecrease in asset accounts
t Decrease in expense accounts
nIncrease in liability accounts
i Increase in equity accounts
t Increase in revenue accounts
LEDGER
The two sides of the trial balance will not tally if a mistakes
has taken place in the following.
a) Posting
b) Totaling
c) Balancing.
Nature of Balances:
i) All assets accounts & also dues from persons will show
debit balances.
a) Check the cash balance in the cash book against the actual
cash in hand.
1) Errors of omission: