Accounting process

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  • Liability, Equity – source of fund so it is credited, Assets – Uses of fund so debited Expenses – Decreases equity so it debited. Income – Increases equity so it credited
  • General ledger is a principle book of accounts. Collectively individual accounts in a record known as ledger. It is the classification of all the transactions in a journal. It can be called as a summary device because the summarised picture of business transactions recorded in the journal. It’s simplest form is shaped like ‘T’ and called as T account. It gives the cumulative effect of the business transactions in separate accounts.
  • Posting is the process of transferring debits and credits from the journal and other books of original entry to their respective accounts in the ledger. The aim of posting is to make a classified and summarised business transactions in appropriate accounts.
  • Separate transactions should be opened in the ledger for posting the different transactions recorded in the books of original entry. All transactions pertaining to one account should be posted in the same account Debit aspects and credit aspects should be posted on the debit side and the credit side of the account respectively.
  • Balancing of an account implies a process of ascertaining the net balance of an account after considering and comparing the total of both sides. The balance is put on the side which is smaller.
  • Trail balance is a statement of debit/credit balance is extracted from ledger account on a particular date. It shows the arithmetical accuracy. It is the basic for the preparation of final accounts.

Transcript

  • 1. Sreejith S FIMS June 1, 2011 Sreejith S FIMS August 2008
  • 2. Introduction
    • Recording in Journal
    • Ledger posting & balancing
    • Trial balance preparation
    • Final Accounts
    June 1, 2011 Sreejith S FIMS August 2008
  • 3. Fundamental Accounting Principle (equation)
    • Assets = Liabilities + Capital
    June 1, 2011 Sreejith S FIMS August 2008 Assets Resources of Business Results of Past Events Future Economic Benefits
  • 4. Fundamental Accounting Principle (equation)
    • Assets = Liabilities + Capital
    June 1, 2011 Sreejith S FIMS August 2008 Liabilities Present Obligation Result of past events Settlement in Future
  • 5. Fundamental Accounting Principle (equation)
    • Assets = Liabilities + Capital
    June 1, 2011 Sreejith S FIMS August 2008 Capital Owner’s Contribution Internal Liability Profit is the reward
  • 6. Double Entry System
    • Every transactions have two aspects
    • Benefits & Sacrifice
    • Debit & Credit –Accounting
    June 1, 2011 Sreejith S FIMS August 2008
  • 7. Fundamental Accounting Principle (equation)
    • Assets = Liabilities + Capital
    June 1, 2011 Sreejith S FIMS August 2008 Increase in Assets and Increase in Liability/Capital Increase in one Asset and Decrease in other Asset Decrease in Assets And Decrease in Liability Decrease in One Liability and Increase in other Liability
  • 8. Fundamental Accounting Principle (equation)
    • Assets = Liabilities + Capital
    June 1, 2011 Sreejith S FIMS August 2008 Increase –Debit Decrease - Credit Increase – Credit Decrease - Debit
  • 9.
    • Income
    • Increase in Economic benefit during the accounting period in the form of in flows
    • Income - Credit
    June 1, 2011 Sreejith S FIMS August 2008 Expenses Decrease in Benefits During the accounting Period in the form of Outflow Expenses - Debit
  • 10.
    • Debit – Credit Rule
    • Credit represents the sources of financing
    • Debit represents the uses of financing
    June 1, 2011 Sreejith S FIMS August 2008
  • 11. June 1, 2011 Sreejith S FIMS August 2008 Asset Liabilities/Capital Debit Credit Increase Decrease Debit Credit Decrease Increase Debit Credit Expenses/ losses Incomes/ Gains
  • 12. Journal
    • All business transactions are firstly recorded
    • Chronological order
    • Recording transactions in a Journal is Known as Journalisation
    • Double Entry System
    • Each Transactions in a journal known as Journal Entry
    June 1, 2011 Sreejith S FIMS August 2008
  • 13. June 1, 2011 Sreejith S FIMS August 2008 Journal June 1 : Commenced capital for the business Rs 1200000 Date Particulars LF Debit Amount Credit Amount June 1 Cash a/c Dr To Capital a/c (being business started with Rs 1200000) 1200000 1200000
  • 14.
    • Bank Loan Rs 800000
    • Purchased Land and Building Rs 600000
    • Transportation Exp Rs 5000
    • Purchased machinery Rs 400000 on Mortgage
    • Raw materials Purchased Rs 80000
    • Advertising Exp 23000
    • Stationary 2000
    • Commission received Rs 5000
    • Full & Final Settlement of Mortgage Rs 480000
    June 1, 2011 Sreejith S FIMS August 2008
  • 15. Make Journal Entries For the transactions June 1, 2011 Sreejith S FIMS August 2008 Jan 08 Transaction 1 Commenced Business 20000 2 Purchased goods on credit from Syam 15000 3 Purchased goods for cash 500 4 Paid Gopal an advance for goods 1000 5 Received advance from Murhy for Goods 1500 6 Purchased furniture 1000 7 Paid Wages 250 8 Received Commission 300 9 Goods Returned to syam 100 10 Goods Sold to Kamal 5000 11 Paid for postage and telegram 100 12 Goods Returned by Kamal 250 15 Paid for stationary 100 18 Paid into Bank 250 20 Goods Sold for cash 375 22 Bought goods for cash 500 25 Paid Salaries 350 28 Paid Rent 250 31 Drawings 500
  • 16. General Ledger
    • Principle book of accounts
    • Classifying all the items in Journal
    • Grouping of all accounts
    • It’s a summary device
    • “T” Account
    • It gives the cumulative effect
    June 1, 2011 Sreejith S FIMS August 2008
  • 17. Posting
    • Process of transferring
    • - Business transactions
    • - From books of original entry
    • - To the respective accounts in ledger
    • It aims to make a classified and summarised business transactions in appropriate accounts
    June 1, 2011 Sreejith S FIMS August 2008
  • 18. Rules - Posting
    • Separate accounts should opened
    • All the pertaining transactions should posted in the same account
    • Dual aspects should be posted on the respective side of accounts
    June 1, 2011 Sreejith S FIMS August 2008
  • 19. June 1, 2011 Sreejith S FIMS August 2008 Journal Ledger Cash a/c Capital A/c Dr Dr Cr Cr Date Particulars LF Debit Credit June 1 Cash a/c Dr To Capital a/c (being business started with Rs 1200000) 1200000 1200000 Date Particulars JF Amount Date Particulars JF Amount June 1 To Capital 1200000 Date Particulars JF Amount Date Particulars JF Amount June 1 By Cash 1200000
  • 20. Balancing of an Account June 1, 2011 Sreejith S FIMS August 2008 Ascertaining the net balance Considering the two balances Comparing the total of both sides Balance is put on the side which is smaller Balance is carried forwarded. Balance is termed as debit/credit balance
  • 21. June 1, 2011 Sreejith S FIMS August 2008 Cash a/c Cash a/c Date Particulars Amount Date Particulars Amount June 1 22 To capital a/c To bank a/c 200000 100000 June 12 17 27 By bank a/c By postage a/c By Stationary a/c 20000 200 800 Date Particulars Amount Date Particulars Amount June 1 22 July 1 To capital a/c To bank a/c To balance b/d 200000 100000 300000 279000 June 12 17 27 31 By bank a/c By postage a/c By Stationary a/c By balance c/d 20000 200 800 279000 300000
  • 22. Trial balance
    • Listing of all accounts & respective balance
    • A statement – Not an account
    • Prepared on a particular date
    • Shows the arithmetical accuracy
    • Debit/credit balance is extracted from ledger accounts on a particular Date
    June 1, 2011 Sreejith S FIMS August 2008
  • 23. Performa of Trial Balance June 1, 2011 Sreejith S FIMS August 2008 Trial Balance as on March Particulars Debit (Rs) Credit(Rs) Cash Capital Stock Purchase Sales Salary Loans and advances Total Xxxx Xxxx Xxxxx Xxxx Xxxx Xxxx Xxxx Xxxx Xxxxx
  • 24. June 1, 2011 Sreejith S FIMS August 2008
  • 25. June 1, 2011 Sreejith S FIMS August 2008 Jan 08 Transaction 1 Commenced Business 1500000 2 Paid into Bank 800000 3 Furniture (goods) 500000 4 Purchased furniture(goods) from Ratan 200000 5 Purchased furniture (office purpose) 100000 6 Sold to j Mitra 200000 7 Bought goods 180000 8 Return to Ratan 5000 9 Return fro j mitra 20000 10 Taxi fare 1000 11 Sold to Kabiraj goods costing Rs 50000 a @ 10% Discount 12 Received commission from J Das 1500 13 Paid to Ratan 100000 18 Send to Bank 20000 20 Received a cheque of Rs 42000 from Kabiraj for full and final settlement Transaction 21 Received a cheque from J Mitra 50000 22 Loan to Naren 15000 23 Received Interest 1000 24 Rent 2000