Professional Documents
Culture Documents
What is Accounting
Why should managers and other decisionmakers know accounting? Accounting is the language of business Accounting provides information for making decisions
Science
Art
Identifying
Recording
Classifying
Summarizing
Reporting
Customers
Investors
Suppliers
Accounting Data
Creditors
Employees
Prospective Acquirer
Government
Modifying Principles
Accounting Equation
Liabilities
Capital
Assets
Posting in Ledgers
Preparation of Final Accounts (Manufacturing a/c, Trading a/c, P&L a/c and Balance Sheet )
Journal - Format
DATE PARTICULARS L.F. AMOUNT DEBIT CREDIT
Real
Types of Accounts Nominal Personal
Real Accounts
Nominal Accounts
Personal Accounts
Debit all expenses and losses Credit all revenues and profits
Special Books
Cash Book
Purchases Book Purchases Return Books Sales Book Sales Return Book
Posting in Ledgers
A ledger is a collection of all the accounts debited or credited in the general journal and various special books
Ledger - Format
ACCOUNT NAME DR. DATE PARTICULARS J.F. AMOUNT DATE PARTICULARS CR. J.F. AMOUNT
It is a statement showing the balances, or total of debits and credits, of all the accounts in the ledger with a view to verifying the equality of debits and credits posted to the ledger accounts
To ascertain arithmetical accuracy of the ledger accounts. To help in locating errors. To help in preparation of final accounts.
Trial Balance is not the conclusive proof of accuracy of accounts. There are errors which might not be disclosed even when trial balance matches.
For Manufacturers
For Traders
Trading A/c
P&L A/c
Trading A/c
P&L A/c
Statement of Income
Prepared by manufacturing firms Manufac Reveals the Cost of goods manufactured turing Balance is transferred to Trading A/c A/c All direct expenses and incomes are recorded Reveals the Gross Profit/Loss Trading Balance is transferred to P&L A/c A/c All indirect expenses and incomes are recorded Reveals the Net Profit/Loss P&L A/c Balance is transferred to Balance Sheet
Trading Account
Debit Side Main Items
Opening Stock Net Purchases Direct Expenses Wages Carriage Inward Royalty Octroi Excise Duty, Import Duty, Dock Charges etc. Gross Profit (Balancing Fig.)
Closing Stock
Goods supplied on sales or return basis Gross Loss (Balancing Fig.)
P&L Account
Debit Side Main Items
Gross Loss transferred from Trading A/c Office Expenses (e.g. salaries, lighting, rent etc.) Selling and Distribution Expenses (e.g. carriage outward, advertisement etc.) Miscellaneous Expenses (e.g. depreciation, bank charges etc.) Net Profit (Balancing Fig.)
Gross Profit transferred from Trading A/c Indirect Incomes (e.g. rent received, dividend received, profit on sale of assets etc.) Net Loss (Balancing Fig.)
Balance Sheet
It is a statement of assets and liabilities of a business enterprise at a given date i.e. Statement of Financial Position It is prepared at the end of the accounting period
Balance Sheet
Liabilities
Assets
Capital
Fixed Assets
Goodwill Building Land Plant & Machinery Furniture & Fixtures etc.
Current Liabilities
Advance Income Sundry Creditors Outstanding Expenses. Bills Payable Bank Overdraft etc.
Closing Stock Accrued Income Prepaid Expenses Sundry Debtors Bills Receivable Cash etc.
Outstanding Expenses Prepaid Expenses Accrued Income Advance Income Depreciation Provision for Bad and Doubtful Debts Provision for Discount on Debtors Provision for Discount on Creditors Interest on Capital Interest on Drawings Managers Commission
Interim Dividend Final Dividend Proposed Final Dividend for the Current Year. Unclaimed Dividend Interest or Dividend Received and TDS Interest on Debentures Paid and TDS Calls in Arrears Forfeited Shares Account Share Premium Account Discount on Issue of Debentures