ACCOUNTING - PROCESS by Pankaj Goel

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ACCOUNTING: PROCESS
MARKS:2-5 MARKS
CA PANAKJ GOEL :9811860116
CONCEPT1:THE ACCOUNTING PROCESS
Transaction Source Recording

–Car documents-
Purchased BILL
Reporting:Reports-
Financial Statements Trial balance posting
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RECORDING TRADING
(JOURNAL) CLASSIFYING
(LEDGER) TRIAL BALANCE &PROFIT&LOSS
PRIMARY/ (SUMMARISING) ACCOUNT &
PRINCIPAL BALANCE SHEET
ORIGINAL
CONCEPT 2: DEBIT AND CREDIT
Scale or Balance
Luca Pacioli
Developer of
Double-Entry
Accounting,
Receive Give
c1494 DEBIT CREDIT

Account Title
Left Side Right Side

(Debre) ( Credere)
Journal
Date PARTICULARS LF Debit Credit

(L.F. Stands for Ledger Folio)
Transaction Titles of Affected

Date Accounts
GENERAL JOURNAL Page 1

Date Description LF Debit Credit
2001
Dec. 1 Cash A/C DR 30,000
CAPITAL 30,000
for/BEING CAPITAL INTRODUCED
Transaction explanation: amount of debits

NARRATION and credits
CONCEPT4:POSTING STATION
“Ledgers”
Ledger records all transactions relating to a particular account head, indicating the
transactions that have been taken place in respect of a given account head.
Ledger
______________Account
Dr. Cr.
Date Particulars JOURN Amount Date Particulars JOUR Amount
AL
Folio
(Rs) NAL (Rs)
Folio

CONCEPT 5:SUMMARYSTATION
WHAT IS TRIAL BALANCE?
Trial Balance is a list of accounts showing balances of the

ledger accounts, i.e. debit balances and credit balances.
CONCEPT 6:ACCOUNTING EQUATION

Owners’
Assets = Liabilities + Equity
Capital RESERVES
The
Accounting
Equation Revenue - Expenses
A = L + OE = Net
Income

EXAMPLE- AE
CASE – BUSINESS VENTURE OF RAM&CO.
1.Ram starts business with Rs. 20,000 as Capital.
(Increase in Asset and Increase in capital)
The equation stands as follows:
Assets = Liabilities + Capital
Rs. 20,000 = 0 + Rs. 20,000
2. The business purchases furniture for Rs. 500 in cash.
(Increase in Asset and Decrease in assets)
Cash + Furniture
Old Balance: 20,000 + 0 = 0 + 20,000
New Transaction: -500 + 500 = 0 +0
New Balance: 19,500 + 500 = 0 + 20,000


-Contd.-
3. The business purchases goods for Rs. 1,000,for cash.
(Increase in Asset and decrease in asset) :
Cash + Furniture + Stock
Old Balance: 19,500 + 500 + 0 = 0 + 20,000
New Transaction:-1,000 + 0 + 1,000 = 0 + 0
New Balance: 18,500 + 500 + 1,000 = 0 + 20,000
4. The business purchases goods for Rs. 2,000 on credit.
(Increase in Asset and Increase in Liability)
Cash + Furniture + Stock
Old Balance: 18,500 + 500 + 1,000 = 0 + 20,000
New Transaction: 0 +
0 + 2,000 = 2,000 +0
New Balance: 18,500 + 500 + 3,000 = 2,000 + 20,000
CONCEPT 7:RULES OF ACCOUNTING
DEBIT THE RECIVER AND

PERSONAL ACCOUNTS
CREDIT THE GIVER
DEBIT WHAT COMES IN REAL

TRADITIONAL
AND CREDIT WHAT GOES
RULE/GOLDEN ACCOUNT
OUT
DEBT ALL LOSSES AND

CREDIT ALL GAINS AND NOMINAL
INCOME

MODERN RULES OF DEBIT AND CREDIT
1. Increases in 2. Increases in 3. Increases in

assets are debits; liabilities are credits; owner's capital are
decreases are decreases are credits; decreases
credits. debits. are debits.
5. Increases in
4. Increases in
revenues or
expenses are
incomes are
debits; decreases
credits; decreases
are credits.
are debits.
Assets
DR CR
Liabilities
DR CR
Owners’
Equity
DR CR

DEBIT-CREDIT RULES . . .
Account Inc. Dec.

Assets Debit Credit
Liabilities Credit Debit
Owners’ Equity Credit Debit
Revenue Credit Debit
Expenses Debit Credit
ncrease
ebits
xpenses
CA PANAKJ GOEL :9811860116 ssets

INCREAS
CREDIT
iabilities
NCOME
APITAL
THE ACCOUNT AND THE DEBIT-CREDIT CONVENTION
Asset Liability Equity
Debit Credit Credit
Expense Revenue
Debit Credit

Normal balance in account

CONCEPT 8: SUBSIDIARY BOOKS

cash Purchase
Credit Purchase
Purchase
account=
cash +credit
purchase

Sales account=
cash +credit Sales

CONCEPT 9: TYPES OF ENTRIES
The picture can't be displayed.

clip_image01044.jpg

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CONCEPT10 : DEBIT NOTE AND CREDIT NOTE

CONCEPT11: TRADE DISCOUNT VS CASH DISCOUNT
clip_image01435.jpg

CONCEPT12: DEPOSIT OF CHEQUE


ACCOUNTING - PROCESS by Pankaj Goel

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CA PANAKJ GOEL :9811860116

CONCEPT1:THE ACCOUNTING PROCESS

Transaction Source Recording

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CA PANAKJ GOEL :9811860116

CONCEPT 2: DEBIT AND CREDIT

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Left Side Right Side

CA PANAKJ GOEL :9811860116

Date PARTICULARS LF Debit Credit

CA PANAKJ GOEL :9811860116

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(L.F. Stands for Ledger Folio)

Transaction Titles of Affected

GENERAL JOURNAL Page 1

Transaction explanation: amount of debits

CA PANAKJ GOEL :9811860116

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WHAT IS TRIAL BALANCE?

Trial Balance is a list of accounts showing balances of the

CA PANAKJ GOEL :9811860116

CONCEPT 6:ACCOUNTING EQUATION

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CA PANAKJ GOEL :9811860116

CASE – BUSINESS VENTURE OF RAM&CO.

1.Ram starts business with Rs. 20,000 as Capital.

(Increase in Asset and Increase in capital)

The equation stands as follows:

Assets = Liabilities + Capital

Rs. 20,000 = 0 + Rs. 20,000

2. The business purchases furniture for Rs. 500 in cash.

(Increase in Asset and Decrease in assets)

Assets = Liabilities + Capital

Old Balance: 20,000 + 0 = 0 + 20,000

New Transaction: -500 + 500 = 0 +0

New Balance: 19,500 + 500 = 0 + 20,000

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3. The business purchases goods for Rs. 1,000,for cash.

(Increase in Asset and decrease in asset) :

Assets = Liabilities + Capital

Cash + Furniture + Stock

Old Balance: 19,500 + 500 + 0 = 0 + 20,000

New Transaction:-1,000 + 0 + 1,000 = 0 + 0

New Balance: 18,500 + 500 + 1,000 = 0 + 20,000

4. The business purchases goods for Rs. 2,000 on credit.

(Increase in Asset and Increase in Liability)

Assets = Liabilities + Capital

Cash + Furniture + Stock

Old Balance: 18,500 + 500 + 1,000 = 0 + 20,000

New Balance: 18,500 + 500 + 3,000 = 2,000 + 20,000

CONCEPT 7:RULES OF ACCOUNTING

DEBIT THE RECIVER AND

DEBIT WHAT COMES IN REAL

DEBT ALL LOSSES AND

CA PANAKJ GOEL :9811860116

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MODERN RULES OF DEBIT AND CREDIT

1. Increases in 2. Increases in 3. Increases in

CA PANAKJ GOEL :9811860116

CA PANAKJ GOEL :9811860116

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