Date Particular L/F Debit Credit

Cash A/c Dr. 2,50,000

Apr 1 Building A/c Dr. 1,00,000
2017 To capital A/c 3,50,000
(Being Capital invested in business)

Bank A/c Dr. 2,40,000

Apr 1 To Cash A/c 2,40,000
2017 (Being cash deposited in bank)

Bank A/c Dr. 3,00,000

To bank loan A/c 3,00,000
Apr 1 (Being Loan taken from HDFC bank)
2017

Computer A/c Dr. 4,00,000

Apr 1 To bank A/c 4,00,000
2017 (Being computer purchasing paying ₹1,00,000 from own
resources and the balance out of was taken from bank)

Apr 1 Electricity board A/c Dr. 1000

2017 BSNL A/c Dr. 1,00,000
To bank A/c 1,01,000
(Being security deposits with electricity board and
BSNL)

Furniture and fixtures A/c Dr. 25,000

Apr 1 To bank A/c 25,000
2017 (Being café furnished)

Advertisement A/c Dr. 4500

Apr 1 To bank A/c 4500
2017 (Being cheque issued for advertisement)
 Date Particular L/F Debit Credit

Bank A/c Dr. 4,98,000

Mar 31 To Revenue from fees and sales 4,98,000
2018 (Being total revenue received i.e ₹2,80,000,
1,20,000, 18,000)

Purchase A/c Dr. 55,000

Mar 31 To Bank A/c 55,000
2018 (Being Computer stationery purchased)

Telephone charges A/c Dr. 34,000

Mar 31 Petty expenses A/c Dr. 12,000
2018 Entertainment expenses A/c Dr. 10,000
Miscellaneous expenses A/c Dr. 10,000
Wages A/c Dr. 6000
To Bank A/c
72,000
(Being various expenses paid)

Drawings A/c Dr. 72,000

Mar 31 To Bank 72,000
2018 (Being amount withdraw for personal use)

Interest on bank loan A/c Dr. 30,000

Mar 31 To bank loan A/c 30,000
2018 (Being Interest on bank loan due)

Bank loan A/c Dr. 1,30,000

Mar 31 To Bank A/c 1,30,000
2018 (Being first installment of bank loan paid)
 Date Particular L/F Debit Credit

Mar 31 Depreciation A/c Dr. 1,07,500

2018 To Computer A/c 1,00,000
To Furniture A/c 2500
To Building A/c 5000
(Being depreciation charged)

Mar 31 Electricity charges A/c Dr. 1,24,000

2018 To Electricity charges payable 1,24,000
(Being electricity charges payable)

ledger
The ledger is the chief book of accounts, and it is the book in which all the business transactions would
ultimately find their place under their under in a duly classified manner.

Rules of posting :-
1. All the transaction relating to one account should be entered at one place.
2. The word “To” is used at the before the accounts which appear on the debit side of an account.
Similarly, the word “By” is used before the accounts which appear on the credit side of an account.
3. If an account is debited in journal entry, the posting in the ledger should also be made on the debit side
of such an account.

Similar account which has been posted on the debit side of an account should also be posted on
the credit side of an account
 Contents
 Introduction
 Transaction
 Journal
 Ledger
 Trial Balance
 Trading and Profit and Loss Account
 Balance Sheet
 Conclusion
 Reference
 Introduction

About Financial Accounting :-

Financial accounting is the field of accounting concerned with the summary, analysis, and reporting of
financial transactions pertaining to a business. This involves the preparation of financial statement available
for public consumption. Stockholders, suppliers, banks, employees, government agencies, business owners,
and other stake holders are examples of people interested in receiving such information for decision making
purposes.
Financial accountancy is governed by both local and international accounting standards. Generally
Accepted Accounting Principles (GAAP) is the standard framework of guidelines for financial accounting
used in any given jurisdiction. It includes the standards, conventions and rules that accounts follow in
recording and summarizing and in the preparation of financial statements.

Accounting for Sole Proprietorship Business :-

The accounting for a sole proprietorship does not require a separate set of accounting records, since the
owner is considered to be inseparable from the business. Nonetheless, one should maintain records for
business activities, in order to judge whether these operations are generating a profit.
A sole trader tends to generate smaller amounts of revenue and incur lower level of expenses than more
complex types of organizations. Consequently, it can makes sense to start off with the most minimal
accounting record keeping that is based on the cash flow into and bank accounts. This is considered a single
entry accounting system, since it can not be used to produce a balance sheet, only in income statement.
 Transaction
Mr. Rama decided to commence a computer business in a building which was constructed at a cost of
₹1,00,000 and contribute a further sum of ₹2,50,000. He wanted to start with 10 computers. He went on to
HDFC bank and put up his proposal and managed to get a loan to the extend of his 75% of the cost of the
computers ₹4,00,000 with printers. It was agreed that the loan will be repaid in three annual installments as
follows :-

 At the end of first year = Rs. 1,00,000 + 30,000 interest

 At the end of the 2nd year = Rs. 1,00,000 + 20,000 interest
 At the end of the 3rd year = Rs. 1,00,000 + 10,000 interest
He started business on 1st april 2017. On the same date he deposited ₹2,40,000 in bank. He gave 1,00,000 to
computer company as 25% of the value of computers purchased and ₹3,00,000 out of bank loan availed. He
deposited ₹1000 for the electrical connection with the with the electricity board and also deposited of
₹1,00,000 with BSNL for the telephone internet connection. He got the computer café furnished by paying
₹25,000 and also spent ₹4520 in getting pamphlets printed and distributed.
All payment were to be made by cheques and all the receipts were in cash to be deposited in the bank on
the same day. At the end of the year, their results showed that following :-
 Revenue from fees received from students of computer class. = ₹2,80,000
 Revenue on account of internet facility. = ₹1,20,000
 Revenue from sale of computer stationery. = ₹98,000
 Purchase of computer stationery like floppy disk, CD etc. = ₹55,000
 Telephone Charges. = ₹34,000
 Petty expenses. = ₹12,000
 Entertainment Expenses. = ₹10,000
 Miscellaneous Expenses. = ₹10,000
 Wages paid to servant. = ₹6000

He withdrew ₹6000 by cheque by each month for his personal expenses. He paid the bank loan regularly.
 Journal
Journal is a book of original entry in which the transaction are recorded first of all as and when they take
place. Transactions are originally recorded in a chronological order according to the principle of double
entry system.

Features of Journal :-
 A Journal records both debit and credit aspects of a transaction according to the
double entry system of book keeping.
 Each entry in a journal is followed by a brief explanation of the transaction which is
called “Narration”.
 A single entry is capable of recording more than one transaction involving more than
two accounts, such an entry is called compound entry.
 It provides a basis for posting into ledger.
 It maintains a identity of each transaction by keeping a complete record of beach
transaction at one place on a permanent basis.
 Trading and P/L
account
In order to ascertain the profit or loss of a business, a business concern has to prepare an account called
“Profit and Loss Account”. The profit and loss account is, usually divided into two sections, viz. (1)
Trading Account, (2) Profit And Loss Account. These two accounts may be shown as one account called
“Trading and Profit and Loss account”. However, the common practice is to show them as one account,
but under two section viz. (1) Trading Account section and, (2) Profit and Loss Account section.

Trading Account is prepared for calculating gross profit or gross loss arising or incurred as a result
of trading activities of a business.

Profit and Loss is an account into which all gains and losses are collected in order to ascertain the
excess of gains over losses or losses over gains.
 Balance sheet

A Balance Sheet is a statement at a particular date showing on one side the trader property and possessions
and on the other hand the liabilities. Its classified summary of accounts balances remaining open in the
ledger after the nominal accounts relating to incomes and expenses have been closed by transferring either
to the trading account and profit and loss account. This statement is prepared to know the financial status of
the business concern.

Features Of Balance Sheet :-

 A Balance Sheet is a part of final accounts. This is the reason that Trading and P/L account and the
balance sheet are called final account. However Balance Sheet is a statement not an account having
assets and liabilities side that is why it is also Position Statement.
 Balance is prepared on particular date and not on a fixed period.
 It shows the financial position of the business according to the going concern concept.
 The total of the two sides of Balance Sheet must be equal. If the totals are not equal, there will be an
error somewhere.
 Conclusion

According to professor W.H Ripatric, a project is a whole hearted , purposeful activity proceeding in a
social environment.
A project from the point of view of students can be purposeful learning activity
including practical problems, planned and carried out in a real life manner to achieve specific goals. In
other word project work refers to a successful compilation of a study.
This project work has been helpful in studying the meaning, techniques and objectives of financial
statement in a better manner.
Analysis of financial statement is the process of understanding the risk and profitability of a business
concern through analysis of reported financial information. This project may be helpful in understanding
the objectives of financial statement as follows :-
1) Judging the earning capacity or profitability
2) Judging the managerial efficiency
3) Making forecasts and preparing budgets
4) Understandable
5) Intra-form comparison
 reference

BOOKS :-

Juneja, Arora, Chawla and Sahoo: 2017: Double Entry Book Keeping:
1.2 – 2.66
Sahoo, Swain, Jain : 2017 : Fundamental of Accounting : 1.00 – 2.80

WEBSITES :-

 www.wikipedia.org
 www.accindia.co.in
 www.slideshare.net
 www.investopedia.com
 Cash A/c
Date Particular J/F Amount Date Particular J/F Amount
1-4-2017 To capital A/c 2,50,000 1-4-2017 By bank A/c 2,40,000
By balance c/d 10,000
2,50,000 2,50,000

1-4-2018 To balance b/d 10,000

Building A/c
Date Particular J/F Amount Date Particular J/F Amount
1-4-2017 To capital A/c 1,00,000 31-3- By depreciation A/c 5000
2017 By balance c/d 95,000
1,00,000 1,00,000

1-4-2018 To balance b/d 95,000

Capital A/c
Date Particular J/F Amount Date Particular J/F Amount
31-3- To balance c/d 3,50,000 1-4-2017 By building A/c 1,00,000
2018 By cash A/c 2,50,000
3,50,000 3,50,000
By balance b/d 3,50,000

Bank Loan A/c

Date Particular J/F Amount Date Particular J/F Amount
31-3- To capital A/c 1,30,000 1-4-2017 By bank A/c 3,00,000
2018 To balance c/d 2,00,000 By int. on bank loan 30,000
3,30,000 3,30,000

1-4-2018 By balance b/d 2,00,000

Date particular J/F Amount Date particular J/F Amount

1-4-2017 To cash A/c 2,40,000 1-4-2017 By computer A/c 4,00,000
To bank loan A/c 3,00,000 31-3- By electricity board
To revenue from fees 2018 A/c 1000
and sales A/c 4,98,000 By BSNL A/c 1,00,000
By furniture and
fixtures A/c 25,000

By advertisement A/c 4500

By purchase A/c 55,000

By telephone
expenses A/c 34,000

By petty expenses
12,000
A/c
By entertainment
10,000
expenses A/c
By miscellaneous
10,000
expenses A/c
6000
By wages A/c
72,000
By drawings A/c
1,30,000
By bank loan A/c
1,78,500
By balance c/d

10,38,000
1-4-2018 10,38,000
To balance b/d 1,78,500

Bank A/c
 Date particular J/F Amount Date particular J/F Amount
1-4-2017 To bank A/c 4,00,000 31-3- By depreciation A/c 1,00,000
2018 By balance c/d 3,00,000
4,00,000 4,00,000

1-4-2018 To balance b/d 3,00,000

Computer A/c

Date particular J/F Amount Date particular J/F Amount

1-4-2017 To bank A/c 1000 31-3- By balance c/d 1000
2018
1000 1000

1-4-2018 To balance b/d 1000

Electricity Board A/c

BSNL A/c
Date particular J/F Amount Date particular J/F Amount
1-4-2017 To bank A/c 1,00,000 31-3- By balance c/d 1,00,000
2018
1,00,000 1,00,000

1-4-2018 To balance b/d 1,00,000

Furniture and Fixtures

Date particular J/F Amount Date particular J/F Amount
1-4-2017 To bank A/c 25,000 31-3- By depreciation A/c 2500
2018 By balance c/d 22,500
25,000 25,000

1-4-2018 To balance b/d 22,500

Date Particular J/F Amount Date Particular J/F Amount

1-4-2017 To bank A/c 4500 31-3- By Profit and Loss 4500
2018 A/c

Advertisement A/c

Date Particular J/F Amount Date Particular J/F Amount

31-3- To Trading A/c 4,98,000 31-3- By bank A/c 4,98,000
2018 2018

Revenue from Fee And Sales

Purchase A/c
Date particular J/F Amount Date particular J/F Amount

31-3- To bank A/c 55,000 31-3- By Trading A/c 55,000

2018 2018

Telephone Charges A/c

Date particular J/F Amount Date particular J/F Amount

31-3- To bank A/c 34,000 31-3- By Profit and Loss 34,000

2018 2018 A/c

Petty Expenses A/c

Date particular J/F Amount Date particular J/F Amount

31-3- To bank A/c 12,000 31-3- By Profit and Loss 12,000

2018 2018 A/c

Entertainment Expenses A/c

Date particular J/F Amount Date particular J/F Amount

31-3- To bank A/c 10,000 31-3- By Profit and Loss 10,000

2018 2018 A/c

Date particular J/F Amount Date particular J/F Amount

31-3- To bank A/c 10,000 31-3- By Profit and Loss 10,000
2018 2018 A/c

Miscellaneous Expenses A/c

Wages A/c
Date Particular J/F Amount Date Particular J/F Amount
31-3- To bank A/c 6000 31-3- By Trading A/c 6000
2018 2018

Drawings A/c
Date Particular J/F Amount Date Particular J/F Amount
31-3- To bank A/c 72,000 31-3- By balance c/d 72,000
2018 2018
72,000 72,000

31-3- To balance b/d 72,000

2018

Interest on Bank Loan A/c

Date Particular J/F Amount Date Particular J/F Amount
31-3- To bank loan A/c 30,000 31-3- By Profit and Loss 30,000
2018 2018 A/c

Depreciation A/c
Date Particular J/F Amount Date Particular J/F Amount
31-3- To computer A/c 1,00,000 31-3- By Profit and Loss 1,07,500
2018 To furniture A/c 2500 2018 A/c
To building A/c 5000

1,07,500 1,07,500

Date Particular J/F Amount Date Particular J/F Amount

31-3- To outstanding 1,24,000 31-3- By Profit and Loss 1,24,000
2018 electricity charges A/c 2018 A/c
 Electricity Charges A/c

Electricity Payable A/c

Date Particular J/F Amount Date Particular J/F Amount
31-3- To balance c/d 1,24,000 31-3- By electric charges 1,24,000
2018 2018 A/c
1,24,000 1,24,000
By balance b/d 1,24,000

Trial Balance
The Trial Balance is a statement prepared with the help of ledger balance, at the end of the financial year
to find out whether debit total agrees with the credit total.

Characteristics of Trial Balance :-

 It is a list of balances of all ledger accounts and the cash book.
 It is just a statement not an account.
 It can be prepared at any time during the accounting period.
 It is prepared to check the arithmetical accuracy of the ledger account.
 It helps in preparation of the Final Account.
 It is to obtain the summary of the ledger account.
 Trial Balance
As on 31st March 2018

Particular Amount Particular Amount

Cash A/c 10,000 Capital A/c 3,50,000

Building A/c 95,000 Bank loan A/c 2,00,000
Bank A/c 1,78,500 Electricity payable A/c 1,24,000
Computer A/c 3,00,000 Revenue from fees and sales A/c 4,95,000
Electricity Board A/c 1000
BSNL A/c 1,00,000
Furniture and Fixture A/c 22,500
Advertisement A/c 4500
Purchase A/c 55,000
Telephone charges A/c 34,000
Petty expenses A/c 12,000
Entertainment exp. A/c 10,000
Miscellaneous exp. A/c 10,000
Wages A/c 6000
Drawings A/c 72,000
Interest on bank loan A/c 30,000
Depreciation A/c 1,07,500
Electricity charges A/c 1,24,000
11,72,000
11,72,000
 Trading and P/L A/c
For the year ended 31st march 2018

Particular Amount Particular Amount

To Purchase A/c 55,000 By Revenue from Fees and Sales

To Wages A/c 6000 A/c 4,98,000
To Gross Profit c/d 4,37,000

4,98,000 4,98,000

To Advertisement A/c 4500 By Gross Profit b/d 4,37,000

To Electricity A/c 1,24,000
To Telephone Charges A/c 34,000
To Petty Expenses A/c 12,000
To Entertainment Exp. A/c 10,000
To Int. on Bank Loan A/c 10,000
To Depreciation A/c 30,000
On Computer 1,00,000
On Building 5000
On Furniture and Fitting 2500
To Net Profit 1,05,000
4,37,000
4,37,000

Balance Sheet
 As On 31st March 2018
Liabilities Amount Assets Amount

Bank loan 2,00,000 Cash in hand 10,000

Electricity payable A/c 1,24,000 Cash at bank 1,78,500
BSNL (security deposit) 1,00,000
Capital 3,50,000 Electricity board (security deposit)
Less:- Computers 1000
Drawings 72,000 Building 3,00,000
Add :- Furniture and fixtures 95,000
Net Profit 1,05,000 3,83,000 22,500
7,07,000 7,07,000