Accounts

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cycle of accounts

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Accounts

  1. 1.
  2. 2. Accounting<br />Definition<br />Objectives of accounting<br />Is accounting necessary?<br />
  3. 3. Accounting Systems<br />Cash system<br />Single entry system (Imperfect accounting)<br />Double entry system<br />
  4. 4. Golden Rules<br />Traditional Rules<br />Modern Rules<br />
  5. 5. Traditional Rules of Accounts<br />
  6. 6. Modern Rules of Accounts<br />
  7. 7. Accounting concepts<br />Are the assumptions underlying the preparation of financial statements<br />
  8. 8. Accounting Concepts<br />Business Entity: Business is different from businessman.<br />Monetary Measurement : Accounting process records only those activities that can be expressed in monetary terms.<br />
  9. 9. Going Concern : It is assumed that the business entity for which accounts are being prepared is solvent and viable, and will continue to be in business in the foreseeable future.<br />Dual Aspect: Every transaction in accounting have two aspects viz. giving and receiving.<br />
  10. 10. Dual Aspect (Example)<br />Goods purchased on credit from Mr. A<br />Goods (received)<br />Mr. A (creditor)<br />Sold goods to Mr. B on credit<br />Goods (sold)<br />Mr. B (debtor)<br />
  11. 11. Accrual<br />Accrual concept is something that becomes due,especially an amount of<br />Money, that is yet to be paid or received at the end of accounting period.<br />Example .Salaries of 10000 for a month of december 96 paid in jan 97.<br />
  12. 12. Periodicity<br />Financial transactions are maintained on a periodic basis.<br /> The liabilities ,assets and capital are measured at a given point of time. Which is done atleast once on an annual basis.<br /> To do this, income needs to be measured during the intermittent period. <br />Example. Janaury 1 to december 31<br />
  13. 13. Matching<br /><ul><li>EXPENSES ARE MATCHED WITH REVENUES , FOR A PARTICULAR PERIOD ,IN ORDER </li></ul>TO DETERMINE PROFIT OR LOSS OF THE GIVEN PERIOD.<br /><ul><li> IF REVENUE EXCEEDS EXPENSE IT IS CALLED PROFIT OR INCOME, AND IF EXPENSE</li></ul> EXCEEDS REVENUE IT BECOMES LOSS.<br />
  14. 14. Realisation<br />THE CONCEPT STATES THAT ,AS TO WHEN REVENUE SHOULD BE RECORDED IN THE BOOKS OF ACCOUNTS.<br />REVENUE IS SAID TO BE REALISED WHEN CASH HAS BEEN RECEIVED OR RIGHT TO RECEIVE CASH HAS BEEN ESTABLISHED ON THE SALE OF GOODS OR SERVICES.<br />EXAMPLE. REKHA SOLD GOODS FOR RS 50,000 FOR CASH IN 1996 AND THE GOODS HAVE BEEN DELIEVERED IN THE SAME YEAR.<br />
  15. 15. Conservatism<br />
  16. 16. Consistency<br />
  17. 17.
  18. 18. JournalIs a book in which the transactions are recorded in the order in which they occur<br />
  19. 19. Subsidiary Journals<br />Purchase Book<br />Sales Book<br />Purchase Return Book<br />Sales Return Book<br />Cash Book<br />Journal Proper<br />
  20. 20. Purchase Book<br />Each bill amount is individually posted to the credit of the Supplier’s account and the total amount is posted to the debit of the Purchases account<br />
  21. 21. Sales bookEach invoice is individually posted to the debit of the customer’s account and the total amount is posted to the credit of the sales account<br />
  22. 22. Purchase Return Book<br />Each Debit note is individually posted to the debit of the Supplier’s account and the total amount is posted to the credit of the purchase return account.<br />
  23. 23. Sales Return Book<br />Each Credit note is individually posted to the Credit of the customer’s account and the total amount is posted to the debit of the sales return account.<br />
  24. 24. Journal Proper<br />It is a residuary book, in which all those transactions which cannot be recorded in any other subsidiary books, are recorded like depreciation , discounts allowed and received <br />
  25. 25. Ledger PostingThe process of transferring the transactions recorded in the Journal to the respective accounts is called ‘Ledger Posting’<br />
  26. 26. Balancing<br />Difference between the total debit & total credit.<br />Steps involved <br /> 1) Make debit & credit total<br /> 2) If debit side total exceeds credit side total then it called “Debit balance”.<br /> 3) If credit side total exceeds debit side total then it called “Credit balance”.<br />
  27. 27. Trial Balance<br />Is a statement which shows the balance of total amounts of debit items & credit items of all the accounts in the ledger & cash & bank balance.<br />---------------------------------------------------------------------<br />All accounts of expenses, losses and assets have <br /> debit balances<br />All accounts of incomes, profits and liabilities <br /> have credit balances<br />
  28. 28. Trading Account<br />After preparation of trial balance<br />Matching concept<br />Balancing figure is gross profit/loss<br />
  29. 29. Profit and Loss A/c.<br />Income Statement<br />Specific period of time<br />Balancing figure is Net profit/loss<br />Useful for investors<br />Two Formats<br />
  30. 30. Balance sheet<br />It is a statement <br />Balance sheet is an accounting statement which shows the financial position of all assets and liabilities of the business as on particular date.<br />Two sides <br />Assets<br />Liabilities<br />
  31. 31. Marshalling of Assets and Liabilities<br />Marshalling refers to the order in which the various assets and liabilities are shown in the balance sheet.<br />The assets and liabilities can be shown either in the order of liquidity or in the order of permanency.<br />
  32. 32. Format of Balance sheet in order of liquidity<br />
  33. 33. Balance sheet in the order of permanence<br />
  34. 34. Adjustment<br />Additional information provided after completion of trial balance for preparation of final accounts.<br />Effects<br />Items in the trial balance have only one effect<br />For every adjustment item , double effects are given in the final accounts. <br />

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