Approaches to Book Keeping1. Accounting Equation Approach            g q         pp  •   Transaction is recorded in such w...
Formal process of Accounting1.   Identification of transactions2.   Preparation of vouchers3.3    Recording in Subsidiary ...
Account?  Acco nt?• An account is an aggregated description of                      gg g          p  all the transactions ...
Check d t diCh k understandingIdentify Real, Nominal & Personal accounts  Capital introduced             Drawings A/c  Cas...
Golden rules of Accounting• For personal accounts –  • Debit the Receiver & credit the Giver• For real accounts –  • Debit...
Golden rules under the      Equation Approach               Asset               A t               Liability               ...
Check your understandingWill you do debit or credit?     y1. Increase in Revenue2.2 Decrease in expenses3. Drawing4. Furth...
A Special Account: Goods• Too important to balance         p• This real account is broken into –  •   Sales Account – Nomi...
Trial Balance• An off-ledger statement• Lists all account balances• A debit balance represents: Asset or Expense• A credit...
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Fma4

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Fma4

  1. 1. Approaches to Book Keeping1. Accounting Equation Approach g q pp • Transaction is recorded in such way that equation is always maintained2. Traditional / Conventional Approach • Transaction is recorded in such way that accounts are debited & credited with same amount narain@fms.edu
  2. 2. Formal process of Accounting1. Identification of transactions2. Preparation of vouchers3.3 Recording in Subsidiary books: Journalising4. Posting to Ledger: Ledger posting5. Preparing Trial Balance6. Drawing GPFS g narain@fms.edu
  3. 3. Account? Acco nt?• An account is an aggregated description of gg g p all the transactions occurred in the accounting period related to a person, g p p property, revenue or expense.• Every account is a T-shaped and has two T shaped sides Debit and Credit.• Accounts are of three types – • Personal • R l Real narain@fms.edu • nominal
  4. 4. Check d t diCh k understandingIdentify Real, Nominal & Personal accounts Capital introduced Drawings A/c Cash received Interest paid Discount received Bank A/c Bank overdraft Bad debt written off Outstanding salaries Prepaid rent Purchases A/c Sales A/c Carriage inward Bad debt recovered Interest accrued A/c Goodwill Plant & Machinery narain@fms.edu Leasehold property
  5. 5. Golden rules of Accounting• For personal accounts – • Debit the Receiver & credit the Giver• For real accounts – • Debit what comes in & credit what goes out• For nominal accounts – • Debit all losses and expenses & credit all gains and incomes narain@fms.edu
  6. 6. Golden rules under the Equation Approach Asset A t Liability Li bilitIncrease (+) Debit CreditDecrease (-) Credit Debit narain@fms.edu
  7. 7. Check your understandingWill you do debit or credit? y1. Increase in Revenue2.2 Decrease in expenses3. Drawing4. Further capital introduction narain@fms.edu
  8. 8. A Special Account: Goods• Too important to balance p• This real account is broken into – • Sales Account – Nominal • Purchase Account – Nominal • Sales Return Account – Nominal • Purchase Account – Nominal • Closing Account – Real Acco nt narain@fms.edu
  9. 9. Trial Balance• An off-ledger statement• Lists all account balances• A debit balance represents: Asset or Expense• A credit balance represents: Liability or co e Income• Nominal accounts are not balanced • Rather transferred to P/L A/c via closing entries narain@fms.edu
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