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ABRIVIATIONS /SHORTAININGS IN ACCOUNTING OR ACCOUNTACY

1. ACCOUNT – A/C.
2. BILLS PAYABLE – B/P.
3. BILLS RECIVABLE –B/R.
4. BALANCE SHEET – B/S.
5. BROUGHT DOWN –B/D.
6. CARRIED DOWN –C/D.
7. BALANCE BROUGHT DOWN – BAL B/D.
8. BALANCE CARRIED DOWN –BAL C/D.
9. BANK OVERDRAFF – BOD.
10.CARRIED FORWARD –C/F.
11. OUT STANDING – O/S.
12.JOURNAL FOLIO –J/F.
13.LEDGER FOLIO –L/F.
14.DEBIT –Dr.
15.DEBTOR - Dr.
16.CREDIT –Cr..
17.CREDITOR –Cr..
18.PROFIT AND LOSS –P&L.
19.PROFIT AND LOSS ACCOUNT – P&L A/C.
20.DEPRICIATION – Dep.
21.APPRICIATION – App.
22.RESERVE FOR DOUBTFUL DEBTS – RDO.
23.PROVOSION FOR DOUBTFUL DEBTS – PDO.
24.BANK RECAMLICULIATION STAMENT –BRS.
25.SAVINGS BANK ACCOUNT –SB A/C.

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Unit 01
INDRODUCTION TO ACCOUNTING

*BOOK KEEPING: it is a art as well as science ,recording all the financial

transaction systematically in a set of books .

*Book keeping involve preparation of journal (subsidiary book) and ledger.

METHODS /TYPES BOOK KEEPING :-

There are two methods of book keeping they are as follows:-

1.single entry system.
2. double entry system.

*ACCOUNTINGS:- it is a systematic process of a collecting ,classifying,

recording, summarizing and presenting financial transaction .

FUNCTIONS OF ACCOUNTING :-

There are 05 functions of accounting they are as follows.

1. Collecting.
2. Classify.
3. Recording.
4. Summarizing.
5. Presenting.

*Accounting wider term including book keeping also.

*ACCOUNTACY:- it is an art as well as science which provides theory,

concepts, rules-regulation , and methods of accounting.

*Accountancy is a more wider term includes both book keeping and

accounting.

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  Book keeping is a body description.
 Accounting is a process.
 Accountancy is a profession.

DIFFERENCE BETWEEN BOOK KEEPING AND

ACCOUNTING
The following are difference between book keeping and accounting.

BOOK KEEPING ACCOUNTING

1.it is a an art as well as science
recording all the financial
transaction systematically in a
set of book.
2.it is a primary work.
3.book keeping is depends on
accounting.
4.book keeping scope is narrow.
1.it is a systematical process of
collecting ,classifying, recording,
summarizing and presenting of
financial transaction.
2.it is a secondary work.
3.accounting depends on book
keeping.
4.accounting scope is wide.

DIFFERENCE BETWEEN ACCOUNTING AND

ACCOUNTANCY

ACCOUNTING ACCOUNTANCY

1.it is a systematic process 1.it is a art as well as

of collecting, classifying,
recording, summarizing
and presenting of financial
transaction.
2.accounting depends on
accountancy.
3.accounting is a process.
4.it is followed theory,
concepts ,rule-regulation,
science which provides
theory, concepts ,rule-
regulation, and methods of
accounting.
2.accountancy depends on
accounting.
3.accountancy is a
profession.
4.it is formulate theory,
concepts ,rule-regulation,

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and methods of and methods of accounting.
accountancy .
5.accounting scope is 5.Accountancy scope is
narrow. wide.

*ORIGIN OF ACCOUNTING/HISTORY OF
ACCOUNTING*

Accounting system was born before centuries. The people be by Lonia,

Grece, and Rome were maintaining records of govt .
The modern system of book keeping (double entry system)
introduced by Locas pocialy of Italy 1494.Locas pacioly wrote a book called
‘SUMMA’ .it is contain rule regulations and principals of double entry
system .
Accounting system well developed in india during the
period ‘mourya samraj’ .that time in the book of ‘arthashashtra’ a written by
‘koutilya’in 18th century ‘arthshashtra’ book is contain rule-regulation of
double entry system.

OBJECTIVES/ADVANTAGE/NEED FOR ACCOUNTING

The following are objectives or advantages or need for accounting.

1. To know the net profit or net loss of the business.

2. To know the financial position of the business.
3. To know amount receivable and amount payable.
4. To know the all incomes or gains and expenses or loss.
5. To preparation of future plan.
6. To comparative study of previous year and current year.

BASIC TERMS OF ACCOUNTING:-

The following are important basic terms of accounting.

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 1.ACCOUNT:- it is a statement, containing , debits and credits of
business of transaction.

*TYPES OF ACCOUNT:-
There are five types of account they or as follows:-

1.capital account.
2.liabilites account.
3.assests account.
4.income/gain account.
5.expenses/loss account.

FORMATE OR SPECIAMAN OF ACCOUNTS:-

Dr. ACCOUNT Cr.
DATE PARTICULARS J/F AMOUNT DATE PARTICULARS J/F AMOUNT

2.DEBTOR:- debtor is a person who gets goods on credit and money as

loan.
*debtor is treated as assets for accounting purpose.

3.CREDITOR:-creditor is a person ,who gives goods on credit and money as

loan.
*creditor is treated as liabilities for accounting purpose.

4.FINACIAL TRANSACTION:-is an activity ,transferring goods from one

person to another person with cash or without cash.
*financial transaction are classified into two types they are as
follows.
1.cash transaction.
2.credit transaction.
5.GOODS:-goods includes product articles and compound and
commodities.
EX:-books, pens, paper, tooth paste, chair, vehicles, soap, cloth,
etc……..

6.PURCHASE:- purchase means purchased goods for cash or on credit

*purchase is treated as expenses for accounting purpose.

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7.SALES:- sales means sold goods for cash or without cash.
*sales is treated as income for accounting purpose.

8.PURCHASE RETURN:- purchase return means purchased goods return to

supplier due to damages, overcharge, and different goods.
*purchase return is treated as gain for accounting
purpose.

9.SALES RETURN:-sales return means sold goods return to from consumer

due to damages ,overcharge and different goods.
*sales return is treated as loss for accounting purpose.

10.ASSETS:-assets are properties or resources of business.

*assets are classified into two types they are as follows:-
1.fixed assets. 3.tangible assets.
2.curent assets. 4.intangible assets.

EX:- *FIXED ASSETS *CURRENT ASSETS.

1.Land and building. 1.stock

2.Machinery . 2.bills receivable.
3.Furniture and fixture. 3.debtors.
4.Moter van 4.outstanding incomes
5.Vehicles. 5.prepaid expenses.
6.Premises. 6.cash in hand.
7.Investment. 7.cash at bank.
*INTANGIBLE ASSETS.
1. Good will.
2. Copy right.
3. Know hoe.
4. Patient.
5. License.

11.LIABILITIES:- liabilities are debts of the business.

Ex:-
 Capital.

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  Creditors.
 Bills payable.
 Bank loan.
 Bank overdraft (BOD)
 Debentures.
 Advance received.
 Out standing expenses.
 Post-paid expenses.

12.CAPITAL:- capital is the amount invested by the owner to his business.

*capital is treated as 1st liabilities of the business.

13.DRAWINGS:- drawings means ,amount of cash or any goods withdrawn

by the owner for his personal use.

14.ACCOUNTING CYCLE:- accounting cycle is nothing but during

Twelve month period, containing sum accounting process like
identification of financial transactions preparation of journal/subsidiary
book, preparation of ledger ,preparation of trail balance, and finally
preparation of financial statement.

Identification of
financial statement

Journal/subsidiary
Financial statement
book

Trail balance ledger

Firstly ,all financial transactions are recorded into journal /subsidiary book
,then posting to ledger then take out to trail balance and finally prepaid
financial statements (trading account, profit & loss account, balance sheet).

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15.STOCK:- stock means unsold goods.

*stock may be classified into two types they are follows.

1.OPENING STOCK:-it is treated as expenses for accounting purpose.

2.CLOSEING STOCK:- it is treated as assets for accounting purpose.

16.ENTITY:-entity is a unit of the business or department of the business.

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UNIT -03
Recording of business transaction

ACCOUNT:- it is statement ,containing all debts an credits of business

transaction .

CLASSIFICATION OF ACCOUNTS :-
account may be classified as follows .
ACCOUNTS

on the basis of England system. On the basis American system .

* personal account. * assets account.
* real account. * liabilities account.
*nominal account. * capital account.

*expenses/loss account.

*income /gain account.

1.personal accounts :- personal accounts are accounts which are related to

persons representative of persons and organization or institute of business.

EXAMPLE:- anand a/c, bharati a/c, chandru a/c , darshan a/c, debtors
a/c, creditors a/c, capital a/c , drawings a/c , vijay a/c , iob a/c, society
a/c, srp pu collage a/c,

2.real accounts :- real accounts are accounts ,which are related to assets
of the business.

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EXAMPLE:- cash a/c , machinery a/c , furniture a/c, investment a/c , loose
tools a/c , computers a/c , land and building a/c,

3.nominal accounts:- nominal accounts are accounts which are related to

income or gains and expenses or loss of business.

EXAMPLE :- salary a/c, wage a/c , rent a/c , interest a/c , discount a/c,
commission a/c, painting a/c, stationary a/c, advertisement a/c, cartage
a/c, sample a/c , sale a/c , purchase a/c , sale return a/c , purchase
return a/c,

RULES OF DEBITS AND CREDITS UNDER ENGLAND SYSTEM

OR
GOLDEN RULES OF ACCOUNTANCY

1. PERSONAL ACCOUNT.

debit credit

the receiver the giver

2.REAL ACCOUNT.

debit credit

what comes in what goes out

3.NOMINAL ACCOUNT.

Debit credit

Expenses or loss income or gain

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 RULES OF DEBITS AND CREDITS UNDER ENGLAND SYSTEM

OR

GOLDEN RULES OF ACCOUNTANCY

01) ASSESTS A/C

EXPENSES / LOSS A/C

Debit credit

increase decrease

02) LIABILITIES A/C

CAPITAL A/C

INCOME/GAIN A/C

Debit credit

Decrease increase

Exercise

01) Classify the following into personal A/C, real A/C, nominal A/C.
a) Machinery A/C =real A/C
b) Rent A/C= nominal A/C
c) Capital A/C= personal A/C
d) Out standing rent A/C = personal A/C
e) Salary A/C = nominal A/C
f) Pre-paid salary A/C = personal A/C
g) Land & building A/C = real A/C
h) Infosyis company A/C = personal A/C
i) Premises A/C = real A/C
j) Lavanya & sisters company A/C = personal A/C

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 k) cash A/C = real A/C
l) bank A/C= personal A/C

HOME WORK

a)classify the following into personal A/C, real A/C, nominal A/C,
1) debtors A/C
2) furniture A/C
3) commission A/C
4) discount A/C
5) computers A/C
6) discount A/C
7) arathi limited A/C
8) out standing salary A/C
9) pre-paid rent A/C
10) IOB A/C

b) classify the following into personal A/C,real A/C,& nominal A/C

i. shrinath A/C
ii. building A/C
iii. creditors A/C
iv. sharadha vidyamandhir A/C
v. rent payable A/C
vi. salary prepaid A/C
vii. cash A/C
viii. furniture A/C
ix. sales return A/C
x. debtors A/C
xi. chandan hospital A/C
xii. commission payable A/C

01) analysis of transaction

01) rashmi commenced business with cash 5,00,000.
DR. CR.
Cash A/C capital A/C
real A/C personal A/C
cash comes in rashmi is giver
cash A/C debited capital A/C debited

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 02) cash deposited into bank 30,000

DR CR
Bank A/C Cash A/C
Personal A/C Real A/C
Bank is a receiver Cash goes out
Bank A/C debited Cash A/C credited

03)interest received 1,000

DR CR
Cash A/C Interest A/C
Real A/C Nominal A/C
Cash comes in Interest is an incomes / gain
Cash A/C debited Interest A/C credited

04) cash paid to supreme 50,000

DR CR
Supreme A/C Cash A/C
personal A/C real A/C
supreme is receiver cash goes out
supreme A/C debited cash A/C credited

JOURNAL

* Journal :- journal is a book of origin entry , containing day to day

transaction in chronological order of date

*features of journal
The following are special features of journal
01) journal is consists day to day transaction
02) journal is a book of origin entry / first entry
03) in journal all transaction recorded in chronological order of date
04) it is prepared from financial transactions
05) it is helps to preparation of ledger

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 **
*format or specimen of journal .

Date particular L/F Debit Credit

 journalizing :- it is a systematic process of recording of financial

transaction in journal

 journal entry :- when financial transaction is recorded in journal that

is become journal entry

 narration :- narration is a opinion about accountant on financial

transaction

THE TWELVE MARKS QUESTION THERE IN PU BOARD QUESTION

BANK

01] journalise the following transaction of anant traders

2017 jan – 01 started business with cash Rs. 80,000

Jan - 03 cash purchases Rs. 25,000

Jan - 05 goods destroyed by fire Rs 3,000

Jan – 10 sold goods for cash (costing Rs 6,000 ) Rs 9,000

Jan – 12 prepaid insurance Rs 2,000

Jan -15 sold goods to ashu Rs (cost Rs 7,000) Rs 9,000

Jan – 18 cash received from ashu Rs 6,000

Jan – 21 invested in share of tata co. ltd Rs 5,000

Jan-23 paid cash for household expenses Rs 8,000

Jan – 25 bought computer for office use Rs 10,000

Jan – 28 commission received in advance Rs 7,000

ans:-

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DATE PARTICULARS L/ Dr. Cr.
F
1-1-17 Cash A/C Dr…… 80,000 -----
To capital A/C ------ 80,000
(being business started with cash )
3-1-17 Purchase A/C Dr….. 25,000 ------
To cash A/C ------- 25,000
( being purchase goods for cash )
5 -1-17 Cash A/C Dr….. 20,000 ------
To sale A/C ------ 20,000
( being sold goods for cash )
8-1-17 Fire A/C Dr…… 3,000 ------
To stock A/C ------ 3,000
( being destroyed goods by fire )
10-1-17 Cash A/C Dr….. 9,000 ------
To sale A/C ------ 9,000
( being goods sold for cash )
12-1-17 Prepaid A/C Dr….. 2,000 -------
To cash A/C -------- 2,000
(being prepaid insurance in cash )
15-1-17 ashu A/C Dr…. 9,000 ------
to sale A/C -------- 9,000
( being goods sold to ashu )
18-1-17 Cash A/C Dr….. 6,000 -------
To ashu A/C -------- 6,000
( being received cash from ashu )
21-1-17 Sales A/C Dr…. 5,000 -------
To cash A/C ------- 5,000
( being invested in shares of tata
co.ltd in cash )
23-1-17 Drawing A/C Dr….. 8,000 --------
To cash A/C ------ 8,000
( being cash paid household
expenses )
25-1-17 Computers A/C Dr….. 10,000 --------
To cash A/C ------- 10,000
(being purchase computer for office
use)
28-1-17 cash A/C Dr…. 7,000 -------
to commission A/C -------- 7,000
( being received commission in
advance )
TOTAL 1,84,000 1,84,000

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 Accounting equation
*accounting equation is one if the most important concept of accounting /
accountancy .there are as 3 types of accounting equation . there are as
follows.

01) capital = assets - liabilities

02) assets = capital + liabilities

03) liabilities = assets - capital

Problems :-

01) write accounting equation find out missing items .

Sl Assets Liabilities Capital
no.
01 2,00,000 ? 90,000
02 ? 90,000 75,000
03 3,00,000 1,40,000 ?

Ans:-

Capital = assets – capital

= 2,00,000 – 90,000
= 1,10,000

Assets = capital + liabilities

=90,000+ 75,000

=1,65,000

Liabilities = assets – capital

=3,00,000 – 1,40,000

=1,60,000

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 H.W

A) write the accounting equation and find out missing figures

Sl.no capital assets Liabilities

A ? 2,00,000 90,000
B 90,000 ? 75,000
C 1,40,000 3,00,000 ?

B)write the accounting equation and find out missing figures.

Sl.no assets liabilities Capital

01 10,00,000 60,000 ?
02 9,00,000 ? 40,000
03 ? 42,0000 6,56,000

Accounting voucher
 it is a document ,contain information about transaction .

 accounting voucher may be classified as follows :-

01) debit voucher
02) credit voucher
03) cash voucher
04) journal voucher
05) transaction voucher

format of debit voucher

Debit voucher
Name of the firm/business
Voucher no: date:
Credit A/C:
Amount:
Debits account
Slno. code Name of accounts amount naration

Authorized by: prepaid by:

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 Format of credit voucher
Credit voucher
Name of the firm/business
Voucher no :
Credit A/C:
Amount :
Debits voucher
Sl.no code name of the accounts amount narration

Authorized by : prepaid by :

 all types of voucher are documentary evidence for transaction voucher

must be free served in any case till the audit of accounts .

ledger
ledger is a book final entry , containing all personal accounts
,real accounts & nominal accounts if business .

features

the following are special features of ledger

1) It is a book if final entry

2) It is containing all personal accounts , real accounts, & nominal
accounts of the business
3) It is pre paid from journal
4) It is helps to preparation of trail balance .

Formate of ledger
J J
Date particular /
Amount Date Particular /
Amount
F F

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 Difference between journal & ledger
The following are different between journal and ledger

journal
1) It is a book of original entry
2) It is a book of first entry
3) It is a prepaid from financial
transaction
4) It is helps preparation of
ledger
5) In journal narration should be
written
Ledger
1)it is the book of final entry
2)It is a book of lost entry
3)it is a prepaid from journal
4)it is helps to preparation of trail
balance
5)In ledger narration should not be
written

Problem 01

Journalize the following transaction and post them to ledger

1-04-2018: commenced business with cash 1,00,000

5-04-2018 : cash deposited into bank 20,000

9-04-2018 : goods purchased from mithila 10,000

21-04-2018 : sold goods to mitti on credit 15,000

30-04-2018 : paid salary to worker 10,000

Date Particular j/ Dr. Cr.

f
1-4-18 Cash A/C Dr…. 1,00,00
To capital A/C 0
[ being business commenced with cash 1,00,000
] _______
5-4-18 Bank A/C Dr…. 20,000
To cash A/C ________
[ being deposited cash into bank ] 20,000
9-4-18 Purchase A/C Dr….. 10,000 _________
To mithila A/C
[ being purchased goods from mithila ] _______ 10,000
21-4-18 Metti A/C Dr…. 15,000
To sales A/C
[being sold goods to metti on credit ] ________ 15,000

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30-4-18 Salary A/C Dr…… 10,000
To cash A/C
[ being salary paid to worker ] ________ 10,000
Total 1,55,000 1,55,000

Posting ledger ……..

Dr…. cash A/C Cr..

Date particular j/f Amount Date Particular j/f Amount
1-4-18 Capital A/C 1,00,000 5-4-18 Bank A/C 20,000
30-4-18 Salary A/C 10,000

Dr…. Capital A/C Cr….

Date particular j/f Amount Date Particular j/f Amount
1-4-18 Cash A/c 1,00,000

Dr…. Bank A/C Cr….

Date particular j/f Amount Date Particular j/f Amount
5-4-18 Cash A/C 20,000

Dr…. purchase A/C Cr….

Date particular j/f Amount Date Particular j/f Amount
9-4-18 Mithila A/c 10,000

Dr…. Capital A/C Cr….

Date particular j/f Amount Date Particular j/f Amount
1-4-18 Cash A/c 1,00,000

Continuing……. .

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