Professional Documents
Culture Documents
Accounting Cycle
1. Source
Document
5. Financial
2. Journal
Statement
4. Trial
3. Ledger
Balance
1) Source Documents
Source documents are documents, such as cash slips, invoices, etc. that form the source of, and serve as proof
for, a transaction.
2) Journals
Journal entries are that first basic entry of debit and credit for each transaction, chronological (date-order)
records of transactions entered into by a business.
3) Ledger (T-Accounts)
The ledger is a grouping of the accounts of a business. The accounts are in the shape of a "T" and thus are
often referred to as T-accounts.
5) Financial Statements
The financial statements are the key reports of a business. As mentioned, they are prepared from the
information in the trial balance above.
The purpose of the financial statements is to show the reader the financial position, financial performance and
cash flows of a business.
1. Real Accounts: Accounts relating to properties and assets which are owned by the business concern.
Real accounts include tangible and intangible accounts. For example, Land, Building, Goodwill,
Purchases, etc.
2. Nominal Accounts: These accounts do not have any existence, form or shape. They relate to incomes
and expenses and gains and losses of a business concern. For example, Salary Account, Dividend
Account, etc.
3. Personal Accounts: The accounts which relate to persons. Personal accounts include the following.
3.1 Natural Persons: Accounts which relate to individuals. For example, Mohan’s A/c, Shyam’s A/c
etc.
3.2 Artificial persons: Accounts which relate to a group of persons or firms or institutions. For
example, HMT Ltd., Indian Overseas Bank, Life Insurance Corporation of India, Cosmopolitan
club etc
Date Particulars
05 November 2021 Computer Purchased paid by cheque Rs. 50,000.
06 November 2021 Goods sold for Cash Rs. 7,00,000.
10 November 2021 Goods purchased from Dinesh & company Rs. 12,50,000 at 20% trade discount.
12 November 2021 Goods Sold to Mohit & Brother Rs.20,00,000 at 40% trade discount.
Date Particulars
19 November 2021 Goods purchased from Dinesh & company Rs. 10,00,000 at 20% trade discount.
20 November 2021 Goods sold for Cash Rs. 5,00,000.
21 November 2021 Goods Sold to Mohit & Brother Rs.10,00,000 at 20% trade discount.
24 November 2021 Insurance premium paid Rs. 20,000 by cheque.