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Accounting Basics
Prepared for First Year MBA 
Overview
S No Particulars
01 Introduction to Accounting
02 Accounting Equation
03 Types of Transactions
04 Purchase and Sales
05 Types of Accounts
06 Golden Rules of Accounting
07 Journal ; Step by Step Procedure of Writing a Journal
08 Ledger ; Procedure for Posting a Ledger
09 Trail Balance along with illustration
10 Introduction to Trading account, P&L A/C and Balance Sheets
11 References
1. Introduction to Accounting
1.1 Definition
“The process of identifying, measuring and communicating economic information to
permit informed judgment and decision by users of the information”.
‐ American Accounting Association
1.2 Objectives of Accounting
i. to maintain accounting records.
ii. to calculate the result of operations.
iii. to ascertain the financial position.
iv. to communicate the information to users.
1. Introduction to Accounting
1.3 Debtors ‐ Definition
A company or individual who owes money. If the debt is in the form of a loan from a
financial institution, the debtor is referred to as a borrower. If the debt is in the form of
securities, such as bonds, the debtor is referred to as an issuer.
Debtors can be entities, companies or people of a legal nature that owe money to
someone else – such as your business for example.
1.4 Creditors ‐ Definition
A creditor is an individual or institution that lends money or services to another entity
under are payment agreement.
1. Introduction to Accounting
Who are creditors?
Let's look at a scenario with a real creditor, XYZ Bank, to whom
you go to for a loan. If you are approved and they lend you
money, XYZ Bank becomes your creditor.
Understanding
Relationship between 
Debtors and Creditors

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