- INDEX -

SR NUMBER TOPIC PAGE NUMBER

1. Cover Page 1
2. Index 2
3. Theory 3-7
4. Numerical 8
5. Journal 9 - 10
6. Ledger 11 - 18
7. Trial Balance 19
8. Web Bibliography 20
9. Acknowledgement 20
 - THEORY -

Accounting :

Accounting is the systematic process of reporting, recording and analysing

financial transactions of an individual, organisation or a business. It is an art as
well as a science that we use to interpret, classify and summarise financial
information. It is extremely useful for companies and organisations as it helps
determine the financial balance.
In case of a business, it helps the proprietor to study the financial performance of
the business. It helps them examine the results of their dealings in the form of
profits, losses, productivity, sales, etc.

According to BusinessDictionary.com :
“Accounting is a systematic process of identifying, recording, measuring,
classifying, verifying, summarising, interpreting and communicating financial
information.”

“Accounting is often referred to as the language of business as well.”

People often confuse the terms ‘Accounting’ and ‘Accountancy’. Although they
might sound similar, there is a difference between the two.

❖ Accounting involves the entire process of identifying, recording,

classifying, summarising, analysing, interpreting and communicating
financial events and transactions is an effective way.
❖ Accountancy on the other hand, is the systematic knowledge of accounting.
It is the process where one gets to know about the process and various
aspects of accounting.

Bookkeeping is the art of recording and classifying business transactions and

events in a Ledger. It is a part of Accounting.
Types of Accounting :

Some types of Accounting are as follows :

1. Cost Accounting 5. Forensic Accounting
2. Financial Accounting 6. Governmental Accounting
3. Management Accounting 7. International Accounting
4. Tax Accounting 8. Auditing

Systems of Accounting :
There are two systems of Accounting :
1. Single Entry System : The system is restricted to very small businesses due
to its simple nature. It is used in those organisations where the number of
transactions are very small for a given day. However, there are
disadvantages of this system. In the system, proper financial reporting and
analysis is not possible as the data entered is of an incomplete nature.
Errors can occur easily and theft cannot be detected as well.
2. Double Entry System : This system is a detailed process of bookkeeping
and often utilised by large businesses. The system is much more useful and
provides a complete record of all transactions. Financial statements can be
created efficiently and errors can also be detected easily. However, the
system is expensive, time consuming and often confusing.
Basic Accounting Terms :
These basic terms of Accounting are necessary as it helps one to understand
specific meanings of accounting.
1. Event - In Accounting, an ‘event’ is an occurrence that results in a
transaction which is reported by an accounting entity and brings about a
change in the financial position of the entity. It must have a monetary
effect to be recorded in the books of accounts.
2. Transaction - It is a financial event that is recorded in the books of account
by an entity. A transaction has a monetary effect on the financial
statements and brings change in the financial position of that entity.
3. Vouchers - They are documents used by a company’s accounts payable
department. It consists of support documents for an invoice. They are
mostly the backup documents such as the bills owed to vendors and
suppliers by the company.
4. Capital - It is the amount the proprietor invests into his or her business so
that the profits and claims from the business can be increased. Capital is
also known as the ‘owner’s equity’.
5. Assets - They are properties are resources with an economic value and are
owned or controlled by an individual, corporation or a country. They are
usually expected to provide one with future benefit.
6. Liabilities - It is something that an individual or a firm owes to someone. It
is usually a certain sum of money. They are settled over time along with the
transfer of some economic benefits.
7. Trade Debtor - It is a person or entity who owes an amount to an enterprise
against credit sale of services and goods rendered.
8. Trade Creditor - It is the person or entity to whom an amount is owed
against credit purchase of services and goods.
9. Purchases - It involves the buying or acquisition of goods and services in
exchange for a price or payment of some kind. They include both cash and
credit payment.
10.Sales - It refers to the amount or volume of goods and services sold by an
enterprise during a particular period of time. It includes both cash and
credit sales.
 11. Stock - It is the tangible asset that an enterprise has for the purpose of
resale or for the purpose of using it to produce other goods which are for
sale.
12. Expense - It is the cost that the particular business faces in running their
operations. They include salaries, wages, rent, etc.
13. Revenue - It is the money that is generated from running business
operations and is calculated as the average sales price by the number of
units which are sold.
14. Income - It is the difference between the expenses and revenue incurred by
an enterprise for a given accounting period of time. It can also be called the
profit of the business.
15. Drawings - It is the goods, amount or services that a proprietor withdraws
from his or her business for personal consumption. It reduces the capital
for the owners.

Journal :

A detailed account where all the financial transactions of a particular business are
recorded is known as a Journal. Such recordings of the transactions in a journal
are used for future reconciliation of accounts along with the transfer of relevant
information to other official accounting records. A journal shows us the date of
the transactions, the accounts affected due to the transaction and the amount, all
recorded usually in a double entry bookkeeping system.

As for Accounting purposes, the journal is a digital (or physical) record kept as a
book or data in an accounting software. On the occurrence of a business
transaction, the bookkeeper enters the financial transaction in the form of a
journal entry. If a particular transaction affects more than one account, that is
also recorded in detail in the journal entry. The journals are mostly reviewed as a
part of an audit process, along with a general ledger.
Ledger :

A ledger is the representation of the record keeping system for a particular

company’s financial data. They include the debit and credit account records
which are validated by a trial balance. A ledger provides the record of every
financial transaction taking place in an accounting year for a company and also
holds account information used to prepare the financial statements of the
company. In a ledger, each transaction is segregated based on type into the
respective accounts for assets, liabilities, capital, revenue and expenses.

A ledger serves as the basis for accountants to store and organise basic financial
data so that the business’s financial statements can be prepared.

Trial Balance :

A bookkeeping worksheet where the balances of all the ledgers are brought
together into debit and credit account columns is known as a Trial Balance. It is
to be noted that the sum totals of the debit column and credit column must be
equal. A Trial Balance is usually prepared by a firm at the end of the recording
period. The main objective behind preparing a trial balance is so that the entries
in the bookkeeping system of a company are correct.
A trial balance is considered as the first step to audit procedures as it helps
auditors to ensure that there are no errors mathematically in the bookkeeping
system before they move on to a more complex analysis.
 - NUMERICAL -
Transactions :
1. On 1st January, Manish started a rubber business by investing Rs 50,000
2. On 3rd January, Manish purchased furniture worth Rs 6,000 from Taj
Furnitures.
3. On 5th January, Manish purchased goods for sale worth Rs 4,500 at a
discount of Rs 500
4. On 6th January, Manish paid Rs 2,100 for the installation of Assets.
5. On 7th January, Manish returned purchased goods worth Rs 500
6. On 9th January, Pankaj returned goods to Manish worth Rs 1,000
7. On 11th January, Manish sold goods worth Rs 7,000 to Pankaj in cash at a
discount of Rs 1,000
8. On 12th January, Manish withdrew Rs 1,500 from his business.
9. On 13th January, Manish purchased goods on credit worth Rs 3,000 from
Delhite Limited.
10.On 16th January, Manish lost goods worth Rs 1000 due to flood.
11. On 17th January, Cheque of Rs 3,000 received from Gopal was
dishonoured by the Bank.
12. On 18th January, Manish received commission of Rs 10,000 in advance.
13. On 20th January, Manish distributed goods as sample worth Rs 900
14. On 21th January, Mr. Ghosh became insolvent and his debt of Rs 1,100
written off as Bad Debt.
15. On 24th January, Manish distributed good worth Rs 1,200 in Charity
16. On 25th January, the Bank levied bank charges of Rs 600 for making a
Bank Draft.
17. On 27th January, Manish paid Rent Rs 2,500 in advance for the month of
February.
18.On 29th January, 10% depreciation was charged on furniture.
19. On 30th January, electricity bill of Rs 1,000 is due for payment.
20. On 31st January, Manish accrued Rs 5,000 as income.
 JOURNAL

DATE PARTICULAR LF DEBIT CREDIT

AMOUNT AMOUNT

01-01-23 Cash Account Dr 50,000

To Capital Account 50,000
(Being Manish invested into his rubber business)

03-01-23 Furniture Account Dr 6,000

To Cash Account 6,000
(Being furniture brought to invest in the rubber
business)

05-01-23 Purchase Account Dr 5,o00

To Cash Account 4,500
To Discount Account 500
(Being goods purchased for sale at a discounted price)

06-01-23 Installation of Assets Account Dr 2,100

To Cash Account 2,100
(Being expenses that incurred on installation of assets)

07-01-23 Purchase Account Dr 500

To Purchase Return Account 500
(Being returned the goods which were purchased for
sale)

09-01-23 Pankaj Account Dr 1,000

To Purchase Account 1,000
(Being Pankaj returned the purchased goods back to
Manish)

11-01-23 Cash Account Dr 7,000

Discount Account Dr 1,000
To Sales Account 8,000
(Being sold goods at a discounted price)

12-01-23 Drawings Account Dr 1,500

To Cash Account 1,500
(Being withdrew money from business)

13-01-23 Purchase Account Dr 3,000

To Delhite Limited Account 3,000
(Being purchased goods from Delhite Limited on credit)
16-01-23 Goods lost in flood Account Dr 1,000
To Purchase Account 1,000
(Being some goods lost because of the floods)

17-01-23 Gopal Account Dr 3,000

To Bank Account 3,000
(Being Cheque received from Gopal was dishonoured by
Bank)

18-01-23 Cash Account Dr 10,000

To Pre Received Commission Account 10,000
(Being received commission in advance)

20-01-23 Advertisement Account Dr 900

To Purchase Account 900
(Being distributed goods as sample)

21-01-23 Bad Debt Account Dr 1,100

To Mr. Ghosh Account 1,100
(Being outstanding amount not received from Mr.
Ghosh is written off as Bad Debt)

24-01-23 Charity Account Dr 1,200

To Cash Account 1,200
(Being distributed goods in charity)

25-01-23 Bank Charges Account Dr 600

To Bank Account 600
(Being Bank levied bank charges for making a Bank
Draft)

27-01-23 Prepaid Rent Account Dr 2,500

To Cash Account 2,500
(Being paid rent in advance for next month)

29-01-23 Depreciation Account Dr 600

To Furniture Account 600
(Being Depreciation charged on furniture)

30-01-23 Electricity Bill Account Dr 1,000

To Outstanding Electricity Bill Account 1,000
(Being Electricity Bill due of payment)

31-01-23 Accrued Income Account Dr 5,000

To Income Account 5,000
(Being received accrued income)
 LEDGER
Dr Cash Account Cr
Date Particular JF Amount Date Particular JF Amount

01-01-23 To Capital Account 50,000 03-01-23 By Furniture Account 6,000

11-01-23 To Sales Account 7,000 05-01-23 By Purchase Account 4,500

18-01-23 To Pre Received 10,000 07-01–23 By Installation of Assets 2,100

Commission Account Account

12-01-23 By Drawings Account 1,500

24-01-23 By Charity Account 1,200

27-01-23 By Prepaid Rent 2,500

Account

31-01-23 By Balance c/f 49,200

67,000 67,000

01-02-23 By Balance b/f 49,200

Dr Capital Account Cr
Date Particular JF Amount Date Particular JF Amount

31-01-23 By Balance c/f 50,000 01-01-23 By Cash Account 50,000

50,000 50,000

01-02-23 By Balance b/f 50,000

 Dr Furniture Account Cr
Date Particular JF Amount Date Particular JF Amount

03-01-23 To Cash Account 6,000 29-01-23 By Depreciation 600

Account

31-01-23 By Balance c/f 5,400

6,000 6,000

01-02-23 By Balance b/f 5,400

Dr Purchase Account Cr
Date Particular JF Amount Date Particular JF Amount

05-01-23 To Cash Account 4,500 09-01-23 By Pankaj Account 1,000

05-01-23 To Discount Account 500 16-01-23 By goods lost in flood 1,000

Account

07-01-23 To Purchase Return 500 20-01-23 By Advertisment 900

Account Account

13-01-23 To Delhite Limited 3,000 31-01-23 By Balance c/f 5,600

Account

8,500 8,500

01-02-23 By Balance b/f 5,600

Dr Discount Account Cr
Date Particular JF Amount Date Particular JF Amount

11-01-23 To Sales Account 1,000 05-01-23 By Purchase Account 500

31-01-23 By Balance c/f 500

1,000 1,000

01-02-23 By Balance b/f 500

 Dr Installation of Assets Account Cr
Date Particular JF Amount Date Particular JF Amount

07-01-23 To Cash Account 2,100 31-01-23 By Balance c/f 2,100

2,100 2,100

01-02-23 By Balance b/f 2,100

Dr Purchase Return Account Cr

Date Particular JF Amount Date Particular JF Amount

31-03-23 By Balance c/f 500 07-01-23 By Purchase Account 500

500 500

01-02-23 By Balance b/f 500

Dr Pankaj Account Cr
Date Particular JF Amount Date Particular JF Amount

09-01-23 To Purchase Account 1,000 31-01-23 By Balance c/f 1,000

1,000 1,000

01-02-23 By Balance b/f 1,000

 Dr Sales Account Cr
Date Particular JF Amount Date Particular JF Amount

31-01-23 By Balance c/f 8,000 11-01-23 By Cash Account 7,000

11-01-23 By Discount Account 1,000

8,000 8,000

01-02-23 By Balance b/f 8,000

Dr Drawings Account Cr
Date Particular JF Amount Date Particular JF Amount

12-01-23 To Cash Account 1,500 31-01-23 By Balance c/f 1,500

1,500 1,500

01-02-23 By Balance b/f 1,500

Dr Delhite Limited Account Cr

Date Particular JF Amount Date Particular JF Amount

31-01-23 By Balance c/f 3,000 13-01-23 By Purchase Account 3,000

3,000 3,000

01-02-23 By Balance b/f 3,000

Dr Goods Lost in Flood Account Cr
Date Particular JF Amount Date Particular JF Amount

16-01-23 To Purchase Account 1,000 31-01-23 By Balance c/f 1,000

1,000 1,ooo

01-02-23 By Balance b/f 1,000

 Dr Gopal Account Cr
Date Particular JF Amount Date Particular JF Amount

17-01-23 To Bank Account 3,000 31-01-23 By Balance c/f 3,000

3,ooo 3,000

01-02-23 By Balance b/f 3,000

Dr Bank Account Cr
Date Particular JF Amount Date Particular JF Amount

31-01-23 By Balance c/f 3,600 17-01-23 By Gopal Account 3,000

25-01-23 By Bank Charges 600

Account

3,600 3,600

01-02-23 By Balance b/f 3,600

Dr Pre Received Commission Account Cr

Date Particular JF Amount Date Particular JF Amount

31-01-23 By Balance c/f 10,000 18-01-23 By Cash Account 10,000

10,000 10,000

01-02-23 By Balance b/f 10,000

 Dr Advertisement Account Cr
Date Particular JF Amount Date Particular JF Amount

20-01-23 To Purchase Account 900 31-01-23 By Balance c/f 900

900 900

01-02-23 By Balance b/f 900

Dr Bad Debt Account Cr

Date Particular JF Amount Date Particular JF Amount

21-01-23 To Mr. Ghosh Account 1,100 31-01-23 By Balance c/f 1,100

1,100 1,100

01-02-23 By Balance b/f 1,100

Dr Mr. Ghosh Account Cr

Date Particular JF Amount Date Particular JF Amount

31-01-23 By Balance c/f 1,100 21-01-23 By Bad Debt Account 1,100

1,100 1,100

01-02-23 By Balance b/f 1,100

Dr Charity Account Cr
Date Particular JF Amount Date Particular JF Amount

24-01-23 To Cash Account 1,200 31-01-23 By Balance c/f 1,200

1,200 1,200

01-02-23 By Balance b/f 1,200

 Dr Bank Charges Account Cr
Date Particular JF Amount Date Particular JF Amount

25-01-23 To Bank Account 600 31-01-23 By Balance c/f 600

600 600

01-02-23 By Balance b/f 600

Dr Prepaid Rent Account Cr

Date Particular JF Amount Date Particular JF Amount

27-01-23 To Cash Account 2,500 31-01-23 By Balance c/f 2,500

2,500 2,500

01-02-23 By Balance b/f 2,500

Dr Depreciation Account Cr
Date Particular JF Amount Date Particular JF Amount

29-01-23 To Furniture Account 600 31-01-23 By Balance c/f 600

600 600

01-02-23 By Balance b/f 600

Dr Electricity Bill Account Cr

Date Particular JF Amount Date Particular JF Amount

30-01-23 To O/s Electricity Bill 1,000 31-01-23 By Balance c/f 1,000

Account

1,000 1,000

01-02-23 By Balance b/f 1,000

 Dr O/s Electricity Bill Account Cr
Date Particular JF Amount Date Particular JF Amount

31-01-23 By Balance c/f 1,000 30-01-23 By Electricity Bill 1,000

Account

1,000 1,000

01-02-23 By Balance b/f 1,000

Dr Accrued Income Account Cr

Date Particular JF Amount Date Particular JF Amount

31-01-23 To Income Account 5,000 31-01-23 By Balance c/f 5,000

5,000 5,000

01-02-23 By Balance b/f 5,000

Dr Income Account Cr
Date Particular JF Amount Date Particular JF Amount

31-01-23 By Balance c/f 5,000 31-01-23 By Accrued Income 5,000

Account

5,000 5,000

01-02-23 By Balance b/f 5,000

 TRIAL BALANCE
TYPES OF ACCOUNTS DEBIT BALANCE CREDIT BALANCE

Cash Account 49,200

Capital Account 50,000

Furniture Account 5,400

Purchase Account 5,600

Discount Account 500

Installation of Asset Account 2,100

Purchase Return Account 500

Pankaj Account 1,000

Sales Account 8,000

Drawings Account 1,500

Delhite Limited Account 3,000

Goods Lost in Flood Account 1,000

Gopal Account 3,000

Bank Account 3,600

Pre Received Commission Account 10,000

Advertisement Account 900

Bad Debt Account 1,100

Mr. Ghosh Account 1,100

Charity Account 1,200

Bank Charge Account 600

Prepaid Rent Account 2,500

Depreciation Account 600

Electricity Bill Account 1,000

O/s Electricity Bill Account 1,000

Accrued Income Account 5,000

Income Account 5,000

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16.T.S GREWAL’S
DOUBLE ENTRY BOOKKEEPING SYSTEM
ISC CLASS XI
SULTAN CHAND PUBLICATION 17-05-23 13:58