Financial Accounting : The process of preparing financial statements is known as financial Accounting.

Financial Statements;
1 Statement of Financial Position
2 Statement of Profit and loss and other comprehensive income
3 Statement of changes in Equity
4 Statement of Cash flows
5 Notes to the accounts/Financial statements

Accounting Cycle
1 Jounalizing The process of recording transaction into Journal.
2 Ledger Preparation
3 Trial Balance
Unadjusted Trial Balance
Adjusting Entries
Adjusted Trial Balance/Pre-closing Trial balance
4 Closing Entries
5 Post Closing Trial Balance
6 Preparation of Financial Statements

Rules for Debit and Credit Increase Decrease ALCER

1 Assets Dr. Cr.
2 Expenses Dr. Cr.
3 Capital Cr. Dr.
4 Revenue/Income Cr. Dr.
5 Liabilities Cr. Dr.

Assets Liabilities Expenses Capital Revenue/INCOME

Bank Trade payableSalaries Exp Sales Income
Cash on hand Taxes PayablesWages Exp Rental Income
Land Accounts Payable
Utilities Commission Income
Building Bills payable Transportataion Dividend income
Furniture and Fixtures Loan Rent Interest Income
Plant Debentures Freight in
Machinery Notes PayableFreight out
Vehicles Bank OD Admin Exp
Equipments Other PayableDepriciation exp
Copy rights Courier Exp
Goodwill Mis exp
Software
Inventory

Example#01 Mr. Abdullah Started a Trading business , details of the transactions thereof
are as follows Rs Charity
1-Jan Cash invested by owner 390,000 Loss
2-Jan Mr. Abdullah Opened a Bank account for Businesss & Deposited Cash 195,000 Theft
3-Jan Mr. Abdullah Purchased Goods for resale on Cash 91,000 Samples
4-Jan Cheq Paid for Furniture & Fixtures 19,500
5-Jan cheq Paid for Office Equipments 39,000
6-Jan Cash Sales 52,000
7-Jan Wages paid in cash 6,500
8-Jan Paid cheq for -
Utilities 1300
Mis. Expenses 2600
8-Jan Paid for Salaries 7,800
9-Jan Paid cheq for Office Rent 9,100

Mr. Abdullah
General Journal Page 01
For The Month Of Jan 20X1
Date Particulars Ref Debit Credit
1-Jan -22 Cash 390,000 Journal Entry 390,000.00
Capital 390,000 Simple Journal Entry (195,000)
(To record investment by Owner) Chart of Accounts (91,000)
2-Jan -22 Bank 195,000 1 Cash 52,000
Cash 195,000 2 Capital (6,500)
(To record Opening of Bank Account) 3 Bank (7,800)
3-Jan -22 Purchases 91,000 4 Purchases
Cash 91,000 5 Furniture & Fixture 141,700.00
(To record Cash Purchases) 6 Office Equipment
4-Jan -22 Furniture & Fixture 19,500 7 Wages EXP
Bank 19,500 8 Sales
(To record Chq paid for Furniture & Fixtures) 9 Utilities EXP
5-Jan -22 Office Equipment 39,000 10 Mis. Expenses
Bank 39,000 11 Salaries EXP
(To record Chq paid for Office Equipment) 12 Office Rent EXP
6-Jan -22 Cash 52,000
Sales 52,000
(To record Cash Sales)
7-Jan -22 Wages EXP 6,500
Cash 6,500
(To record wages paid)
8-Jan -22 Utilities EXP 1,300 Compound Jourenal Entry
Mis. Expenses 2,600
Bank 3,900
(To record chq paid for Office supplies)
9-Jan -22 Salaries EXP 7,800
Cash 7,800
(To record Salaries paid)
10-Jan -22 Office Rent EXP 9,100
Bank 9,100
(To record Chq paid for office rent)

Example#02
Mr. A. Rehman Strarted an Electronic items shop , where products as well Services are supplied to
Customers.

1-M ay Investment by Owner

Cash 1,200,000
Bank 1,500,000
Building 3,000,000
2-M ay Purchased Furniture & Fixtures 80,000
3-M ay Purchased goods for sale from Nahid Electronics 1,000,000
4-M ay Sold goods to Nadir Electronics 700,000
5-M ay Returned inappropriate items to Nahid Electronics 50,000
6-M ay Returns from Nadir Electronics 60,000
7-M ay Owner took Oven for personal use 15,000
8-M ay School fees was paid from business bank account 20,000
9-M ay Items given as charity 17,000
10-M ay Paid Chq for Delivery Van for business use 300,000
11-M ay Goods Lost by fire 5,000
12-M ay Goods Stolen from godown 3,000
13-M ay Goods given as Samples 2,500

Cash
Bank

Mr. A. Rehman
General Journal
For The Month Of May 20X1
Date Particulars Ref Debit Credit Chart of Accounts
1-M ay Cash 1,200,000 1 Cash
Bank 1,500,000 2 Bank Contra-Account :
Building 3,000,000 3 Building An Account that off-sets another account is known as
Capital 5,700,000 4 Capital contra-account.
(To record investment by Owner) 5 Furniture & Fixtures
2-M ay Furniture & Fixtures 80,000 6 Purchases Account Contra account
Cash 80,000 7 A/P-Nahid Electronics 1 Purchases Purchases Returns/Returns Outward
(To record Furniture & Fixtures) 8 A/R-Nadir Electronics 2 Sales Sales Retuns/Returns inwards
3-M ay Purchases 1,000,000 9 Sales 3 Capital Drawings
A/P-Nahid Electronics 1,000,000 10 Purchases Returns
(To record credit Purchases) 11 Sales returns
4-M ay A/R-Nadir Electronics 700,000 12 Drawings
Sales 700,000 13 #REF!
(To record Credit Sales) 14 Van
5-M ay A/P-Nahid Electronics 50,000 15 Fire Loss
Purchases Returns 50,000 16 Theft Loss
(To record Purchases returns) 17 Samples Expense
6-M ay Sales returns 60,000 18 #REF!
A/R-Nadir Electronics 60,000 19 #REF!
(To record Sales Returns)
7-M ay Drawings 15,000
Purchases 15,000
(To record drawings)
8-M ay Drawings 20,000
Bank 20,000
(To record drawings)
9-M ay Charity Exp 17,000
Purchases 17,000
(To record Charity Expense)
10-M ay Van 300,000
Bank 300,000
(To record Purchase of Delivery Van)
11-M ay Fire Loss 5,000
Purchases 5,000
(To record Fire loss)
12-M ay Theft Loss 3,000
Purchases 3,000
(To record theft loss)
13-M ay Samples Expense 2,500
Purchases 2,500
(To record Samples Expense)

Example#03
Mr. Saad started a Electronics trading business details of the same are as follows

1-M ar Investment by Owner

Cash 600,000
Bank 750,000
Building 1,500,000
2-M ar Purchased Furniture & Fixtures 40,000
3-M ar Purchased goods for sale from Mr. Karim 500,000
4-M ar Sold goods to Mr. Ahsan 350,000
5-M ar Returned inappropriate items to Mr. Karim 25,000
6-M ar Returns from Mr. Ahsan 30,000
7-M ar Owner took Oven for personal use 7,500
8-M ar School fees was paid from business bank account 10,000
9-M ar Items given as charity 8,500
10-M ar Paid Chq for Delivery Van for business use 150,000
11-M ar Goods Lost by fire 2,500
12-M ar Goods Stolen from godown 1,500
13-M ay Goods given as Samples 1,250

Mr. Saad
General Journal
For The Month Of March 20X1
Date Particulars Ref Debit Credit
1-M ar Cash 600,000
Bank 750,000
Building 1,500,000
Capital 2,850,000
(To record investment by Owner)
2-M ar Furniture & Fixtures 40,000
Cash 40,000
(To record Furniture & Fixtures)
3-M ar Purchases 500,000
A/P-Mr. Karim 500,000
(To record credit Purchases)
4-M ar A/R-Mr.Ahsan 350,000
Sales 350,000
(To record Credit Sales)
5-M ar A/P-Mr. Karim 25,000
Purchases Returns 25,000
(To record Purchases returns)
6-M ar Sales returns 30,000
A/R-Mr.Ahsan 30,000
(To record Sales Returns)
7-M ar Drawings 7,500
Purchases 7,500
(To record drawings)
8-M ar Drawings 10,000
Bank 10,000
(To record drawings)
9-M ar Charity Exp 8,500
Purchases 8,500
(To record Charity Expense)
10-M ar Van 150,000
Bank 150,000
(To record Purchase of Delivery Van)
11-M ar Fire Loss 2,500
Purchases 2,500
(To record Fire loss)
12-M ar Theft Loss 1,500
Purchases 1,500
(To record theft loss)
13-M ar Samples Expense 1,250
Purchases 1,250
(To record Samples Expense)

Example#04
Mr. Inam Started business by investing

1-Jan Cash 700,000

Bank 800,000
3-Jan Purchased office Equipment 80,000
4-Jan Took bank loan for 5 years 500,000

Every Month following Cash Sales at mid of every month and Expenses at end of Every Month.

15th of
Every Sales 40,000
month
At end of
Salaries Expense 6,000
Month
At end of
Utilities Expenses 3,000
Month

Mr. Inam
General Journal
for the year ended 31 Dec 20x1
Date Particulars Ref Debit Credit Chart of Accounts
1-Jan Cash 700,000 1 Cash
Bank 800,000 2 Bank
Capital 1,500,000 3 Capital
(To record investment by Owner) 4 Office Equipment
3-Jan Office Equipment 80,000 5 Bank Loan
Cash 80,000 6 Sales
(To record Office Equipment Purchased) 7 Salaries Expense
4-Jan Bank 500,000 8 Utilities Expenses
Bank Loan 500,000
(To record Bank Loan)
15-Jan Cash 40,000 Nominal or Temporary Accounts
Sales 40,000 Monthly in k balances Carried down and Brought down hotay hain.
(To record Cash Sales) Ye wo Accounts hotay hain jo financial/fiscal year k end main
31-Jan Salaries Expense 6,000 close ho jate hain. In k balance next financial/fiscal year
Utilities Expenses 3,000 main Carry forward nhn hotay
Cash 9,000
(To record Salaries and Utilities Expense) Sare Revenue/Income accounts Nominal accounts hain
15-Feb Cash 40,000 Sare Expenses k accounts Nominal Accounts hain
Sales 40,000
(To record Cash Sales)
28-Feb Salaries Expense 6,000 Real Accounts
Utilities Expenses 3,000 Assest , Liabilities oar Capital k sare accounts real accounts hain.
Cash 9,000 In k balances next financial/fiscal year main carry forward hotay hain.
(To record Salaries and Utilities Expense)
15-M ar Cash 40,000
Sales 40,000
(To record Cash Sales)
31-M ar Salaries Expense 6,000
Utilities Expenses 3,000
Cash 9,000
(To record Salaries and Utilities Expense)
15-Apr Cash 40,000
Sales 40,000
(To record Cash Sales)
30-Apr Salaries Expense 6,000
Utilities Expenses 3,000
Cash 9,000
(To record Salaries and Utilities Expense)
15-M ay Cash 40,000
Sales 40,000
(To record Cash Sales)
31-M ay Salaries Expense 6,000
Utilities Expenses 3,000
Cash 9,000
(To record Salaries and Utilities Expense)
15-Ju n Cash 40,000
Sales 40,000
(To record Cash Sales)
30-Ju n Salaries Expense 6,000
Utilities Expenses 3,000
Cash 9,000
(To record Salaries and Utilities Expense)
15-Ju l Cash 40,000
Sales 40,000
(To record Cash Sales)
31-Ju l Salaries Expense 6,000
Utilities Expenses 3,000
Cash 9,000
(To record Salaries and Utilities Expense)
15-Au g Cash 40,000
Sales 40,000
(To record Cash Sales)
31-Au g Salaries Expense 6,000
Utilities Expenses 3,000
Cash 9,000
(To record Salaries and Utilities Expense)
15-Sep Cash 40,000
Sales 40,000
(To record Cash Sales)
30-Sep Salaries Expense 6,000
Utilities Expenses 3,000
Cash 9,000
(To record Salaries and Utilities Expense)
15-Oct Cash 40,000
Sales 40,000
(To record Cash Sales)
31-Oct Salaries Expense 6,000
Utilities Expenses 3,000
Cash 9,000
(To record Salaries and Utilities Expense)
15-N o v Cash 40,000
Sales 40,000
(To record Cash Sales)
30-N o v Salaries Expense 6,000
Utilities Expenses 3,000
Cash 9,000
(To record Salaries and Utilities Expense)
15-Dec Cash 40,000
Sales 40,000
(To record Cash Sales)
31-Dec Salaries Expense 6,000
Utilities Expenses 3,000
Cash 9,000
(To record Salaries and Utilities Expense)

Example#05
Transaction data related to Asad Electronics as follows

1-Jan Asad's investment

Cash 1000
Bank 1500
2-Jan Paid cheque for Furniture 200
3-Jan Goods purchased from Mr.Karim 800
4-Jan Goods returned to Mr. Karim 50
5-Jan Sales to Mr. Asif 400
6-Jan Goods returned from Mr.Asif 30
7-Jan Wages paid 80
8-Jan Advance cash received for future sales 900

Required
1 Journalise the above transactions
2 Prepare Ledger accounts thereof.

Mr. Asad
General Journal
For the Month of Jan 20x1
Date Particulars Ref Debit Credit Chart of accounts
1-Jan Cash 1,000 1 Cash
Bank 1,500 2 Bank
Capital 2,500 3 Capital
(To record investment by Owner) 4 Furniture
2-Jan Furniture 200 5 Purchases
Bank 200 6 Purchases Returns
(To record Furniture Purchased) 7 A/P
3-Jan Purchases 800 8 A/R
A/P-Mr. Karim 800 9 Sales
(To record Credit Purchases) 10 Sales Returns
4-Jan A/P-Mr. Karim 50 11 Wages
Purchases Returns 50 12 Unearned Income
(To record Cash Sales)
5-Jan A/R-Mr. Asif 400
Sales 400
(To record credit Sales )
6-Jan Sales Returns 30
A/R-Mr. Asif 30
(To record Cash Sales)
7-Jan Wages Expenses 80
Cash 80
(To record Wages Expenses)
8-Jan Cash 900
Unearned Income 900
(To record unearned Income)

Example#06
Transaction data related to Sahil Traders as follows

1-Jan -22 Owner's investment

Cash 2000
Bank 3000
2-Jan -22 Paid cheque for Furniture 400
3-Jan -22 Goods purchased from Ms. Hina 1600
4-Jan -22 Goods returned to Ms. Hina 100
5-Jan -22 Sales to Ms. Ziba 800
6-Jan -22 Goods returned from Ms. Ziba 60
7-Jan -22 Wages paid 160
8-Jan -22 Advance cash received for future sales 1800
9-Jan -22 Goods taken by Owner for Personal use 300
10-Jan -22 Goods Destroyed by fire 100
11-Jan -22 School fees paid from Company Bank Accounts 150
12-Jan -22 Cheque received from Ms. Ziba after banking hours 300
13-Jan -22 Cheque paid to Ms. Hina 500
14-Jan -22 Chq received from Ms. Ziba deposited into bank 300
18-Jan -22 Chq of Ms.Ziba dishounered/bounced due to insufficient Balance
19-Jan -22 Advance chq paid against advertisment 400

Required
1 Journalise the above transactions
2 Prepare Ledger accounts thereof.
3 Trial Balance

Sahil Traders
General Journal
For the Month of Jan 2021
Date Particulars Ref Debit Credit
1-Jan -22 Cash 2,000
Bank 3,000
Capital 5,000
(To record investment by Owner)
2-Jan -22 Furniture 400
Bank 400
(To record Furniture Purchased)
3-Jan -22 Purchases 1,600
A/P Ms. Hina 1,600
(To record Credit Purchases)
4-Jan -22 A/P Ms. Hina 100
Purchases Returns 100
(To record Purchases returns)
5-Jan -22 A/R-Ms. Ziba 800
Sales 800
(To record credit Sales )
6-Jan -22 Sales Returns 60
A/R-Ms. Ziba 60
(To record Sales returns)
7-Jan -22 Wages Expenses 160
Cash 160
(To record Wages Expenses)
8-Jan -22 Cash 1,800
Unearned Income 1,800
(To record unearned Income)
9-Jan -22 Drawings 300
Purchases 300
(To record drawings )
10-Jan -22 fire loss 100
Purchases 100
(To record fire loss)
11-Jan -22 Drawings 150
Bank 150
(To record drawings by owner)
12-Jan -22 Cash 300
A/R-Ms. Ziba 300
(To record receipt of chq agaisnt A/R)
13-Jan -22 A/P Ms. Hina 500
Bank 500
(To record chq paid agaist payable)
14-Jan -22 Bank 300
Cash 300
(To record deposit of chq)
18-Jan -22 A/R-Ms. Ziba 300
Bank 300
(To record Dishounered Chq)
19-Jan -22 Prepaid Advertisement 400
Bank 400
(To record advance Chq against advertisment)

Example
Accounts Receivable- Mr. A 200
Sales 200

Purchases 300
Accounts Payable-Mr. B 300

Bank 100
Accounts Receivable- Mr. A 100

Accounts Payable-Mr. B 150

Bank 150

Example#07
Ms. Ozita Started a Trading Business, details of the same are as follows

1-M ay Owner's Investment

Cash 1,000
Bank 1,000
2-M ay Cash Paid for production plant 40
3-M ay Goods Purchased for resale from Ms. Anum 400
4-M ay Goods Sold to Ms. Hina 700
5-M ay Cheque paid to Ms. Anum 200
6-M ay Cheque Received from Ms. Hina 500
7-M ay Salaries Paid in Cash 80
8-M ay Finance Cost paid in Cash 10
9-M ay Commission Income in cash 30

Required
1 Journalise
2 Ledger
3 Trial Balance
4 Statement of Profit and Loss
5 Statement of Financial Position

Ms. Ozita
General Journal
For the Month of May 20x1
Date Particulars Ref Debit Credit
1-M ay Cash 1,000
Bank 1,000
Capital 2,000
(To record investment by Owner)
2-M ay Plant 40
Cash 40
To record purchase plant
3-M ay Purchases 400
A/P Ms. Anum 400
(To record Credit Purchases)
4-M ay A/R Ms. Hina 700
Sales 700
(To record Credit Sales)
5-M ay A/P Ms. Anum 200
Bank 200
(To record cheque paid to Ms. anum )
6-M ay Bank 500
A/R Ms. Hina 500
(To record cheque recived from Ms Hina)
7-M ay Wages Expenses 80
Cash 80
(To record Wages Expenses)
8-M ay Finance Cost 10
Cash 10
(To record finance cost )
9-M ay Cash 30
Commission Income 30
(To record comission Income)

Example#08

Transactions details of Usama Electronics Pvt Ltd

1-Au g Investment by Mr. Usama

Cash 60,000
2-Au g Opened Bank Account with company name and Deposited 40,000
3-Au g Office Equipment Purchased and paid Chq 3,000
4-Au g Purchased Merchandise for sale from Mr. Ahsan
5-Au g Sold good to Mr. Kashif
6-Au g Returns to Mr. Ahsan
7-Au g Returns from Mr. Kashif
8-Au g Repair Expeses paid
9-Au g Cheque Received from Mr. Kashif

Cash discount
Credit discount
Cheque received after banking hours

A/R-MR. A 1000
SALES 1000
Cash 500
A/R-MR. A 500
Bank 500
Cash 500