The document discusses various accounting concepts like journal, ledger, trial balance and subsidiary books. It provides definitions and explanations of these concepts along with examples. The key points are: 1. A journal records transactions with debit and credit entries. The ledger organizes journal entries into individual accounts to track balances. 2. A trial balance lists account balances to check the equality of total debits and credits, assisting with error detection and financial statement preparation. 3. Subsidiary books record specific transaction types like purchases, sales, returns to track details, while the journal and ledger summarize activity.

1. Accounts Session
Orientation Day - 2

2. Journal
 The word journal is derived from the French word “Jour” meaning ‘day’. Journal
therefore means daily record business transactions. The ruling of the journal is
such that any business transaction can be analyzed under the heads of debit and
credit.
 A journal or book of original entry is the place where journal entries are
recorded before they are posted to the ledger accounts. A journal is a record of all
the transactions a company has recorded.
 A journal entry is the act of keeping or making records of any transactions either
Economic or non-economic. Transactions are listed in an accounting journal that
shows a company's debit and credit balances. The journal entry can consist of
several recordings, each of which is either a debit or a credit. The total of the debits
must equal the total of the credits, or the journal entry is considered unbalanced.

3.  Types of Accounts
i) Personalaccounts-arethoseaccountswhicharemaintainedinthenamesofpersonswhoareinvolvedinthe
dealingsofthe business.
ii) Impersonalaccounts: are thoseaccounts whicharenotpersonal accounts.They canbecategorizedinto real
accountsandnominal accounts.
 Real Accounts: Real accounts are accounts maintained by the company which consists of the
assets of the business. In this case, the assets of the business can be either purchased for use or the
assets goods meant for use
 Nominal Accounts: Nominal accounts are accounts which relates to the items which relates to the
result of the activities of the business. In nominal accounts expenses and losses incurred or incomes
and gains earned are recorded.

4. Transaction analysis for Journal entries:
 Any business transaction must be analyzed through the following steps to write the
correct journal entry:
a) The accounts affected by the transaction have to be identified.
b) The identified accounts should be classified according the types of accounted which they
come under. The types of accounts are mainly personal, real or nominal accounted.
c) The accounts which are to be debited and credited should be deciding keeping the “Golden
rules of accounting” in mind.

5. 1. Rules of Debit and Credit

1) Under the English system
a. Personal Account rule
 “Debit the Receiver
 Credit the Giver”
a. Real Account rule
 “Debit what comes in
 Credit what goes out”
a. Nominal Account rule
 “Debit all expenses and loss
 Credit all incomes and gains”

6. Credit increase in Liability”
•Revenue Income: The amount of revenue income leads to an increase in the
Owners’ equity.
“Debit decrease in Incomes and Gains Credit increase in Incomes and Gains”
•Revenue Expenses: The amount of revenue expense leads to decrease in the
owners’ equity.
“Debit increase in expenses and losses Credit decrease in expenses and losses”
•Assets: In case of an increase of assets of a company, assets will be debited.
Whereas, in case of decrease in the assets, it will be credited.
“Debit increase in an asset Credit decrease in an asset”
•Under the American System
•Capital: If capital increases, it is credited, whereas, when it is reduced, it is
debited. “Debit Decrease in Capital
Credit Increase in Capital”
•Outsider’s Liability: If the liabilities increase, external accounts are credited. On
the other hand, if the liabilities decrease, external liabilities will be debited.
“Debit decrease in Liability

7. 1. Compound Journal Entry

 A compound journal entry is one that affects three or more accounts. In
other words, it’s an entry that debits or credits at least three accounts in
the general ledger.
 Business Transactions majorly will affect two accounts in the ledger. Take
the purchase of inventory for example. If the merchandise is paid for on
account, the inventory account is debited and the account payable account
is credited. Only two accounts are affected in this transaction.

8. Date Particulars L.F Debit(Rs) Credit(Rs)
1.Opening Entry
An opening entry is the initial entry used to record the transactions occurring at the
start of an organization. The contents of the opening entry typically include the initial
funding for the firm, as well as any initial debts incurred and assets acquired.
Proforma of a journal.

9. ILLUSTRATION - 1
1. Journalise the following transactions:
a. Purchased goods for cash Rs.50,000/-
b. Paid wages Rs.300/-
c. Received Rs.10,000 from Kamal as loan @ 5% interest
d. Paid Lokesh,the manager his salary of Rs.5,000/-
e.Purchased furniture for cash Rs.13,000/-
f. Sold goods for cash Rs.6,000/-
g.Paid freight on machinery produced Rs.800/-
h.Sold goods to Jane for cash Rs.7,000/-
i. Received Rs.800 from Kamal
j. Sold goods to James on credit Rs.12,000/-
k.Paid rent to Krishnan,the landlord Rs.1,000/-
l. Paid salary of Rs.3,000/-.

10. Date Particulars L.F Debit Credit
a) Purchases Dr
To Cash A/c
(Being cash purchases of books)
A/c 50,000
50,000
b) Wages Dr
To Cash A/c
(Being payment of wages)
A/c 300
300
c) Cash Dr
To 5% loan A/c
(Being loan from Kamal for interest)
A/c 10,000
10,000
d) Salary Dr
To Cash A/c
(Being manager’s salary paid in cash)
A/c 5,000
5,000
e) Furniture Dr
To Cash A/c
(Being cash purchase of stationary)
A/c 13,000
13,000
f) Cash Dr
To Sales A/c
(Being cash sales made)
A/c 6,000
6,000
g) Freight Dr
To Cash A/c
(Being freight paid for goods)
A/c 800
800
h) Cash Dr
To Sales A/c
(Being cash sales to Jane)
A/c 7,000
7,000
i) CashA/c Dr
To Kamal’s A/c
(Being amount received from Kamal on account)
800
j) James Dr
To Sales A/c
(Being good sold on credit)
A/c 12,000
12,000
k) Rent Dr
To Cash A/c
(Being rent paid to Krishnan)
A/c 1,000
1,000
l) Salary Dr
To Cash A/c
(Being salary paid in cash)
A/c 3,000
3,000

11. Ledger
 ledger is a book containing accounts in which the classified and summarized information from the journals is posted as
debits and credits. It is also called the second book of entry.

1. Posting
 The term posting to the ledger refers to the process of analyzing the credits and debits appearing in journal entries, and
recording those transaction amounts in the proper accounts found in the company's general ledger.
1. LedgerAccounts

 To know the net effect of all the business transactions recorded in the ledger account, the accounts need to be
balanced. Thus, Balancing of Ledger Account means the balances of Debit and Credit side should be equal and this
involves following steps:
a) Firsttotalofboththesidesare taken.
b) Secondlydifferencebetweenthetotalsofboththesidesis calculated.
c) IfthedebitsideisinexcesstothecreditsidethenplacethedifferenceonthecreditsidebywritingByBalance
c/fd.
d) Ifthetotalofcreditsideisinexcesstothedebitside,placethedifferenceonthedebitsidebywritingToBalance
c/fd.
e) Afterplacingthedifferenceontheappropriateside,makesurethetotalsofboththesidesare equal.

12. 1. Advantages of Ledger
a. Preparation of Trial Balance:
 It is not possible to prepare a Trial Balance without ledgers. Because, a Trial Balance is prepared by taking up the ledger
accounts balance. Moreover, arithmetical accuracy is not possible.
a. Presenting Final Position:
 We know that final account can only be prepared from a Trial Balance (i.e., Trading Account, Profit and Loss Account and
Balance Sheet). Thus, if we do not get the ledger accounts balance from a Trial Balance, it is impossible for us to prepare final
accounts.
a. Application of Double Entry System:
 Double Entry System is completed only when we post the journals to different ledger accounts.
a. Determining Results of Each Account:
 The results of each account can be obtained from the ledger on the basis of Double Entry principles.
a. Maintaining ClassifiedAccounts IndirectAdvantages:
 The particulars of Classified accounts may be revealed after recording in ledger account properly.
a. Presenting Statistical Information:
 The ledger accounts with their respective balances are the sources of statistical information which are used by the
management while decision-making.
a. Collecting Information:
 The ledger may be called the collection or storeroom of various transactions.
a. Present Financial Position:
 The financial position of an enterprise (i.e., after preparing final account) can only be known if we maintain ledger account
properly.

13. Date Particular J.R Amount Date Particulars J.R Amount
2018 2018
Jan.1 Capital A/C 100,000 Jan.2 Furniture A/C 20,000
Jan.5 Sales A/C 80,000 Jan.3 Purchases A/C 60,000
Jan.6 Salaries A/C 10,000
Balance c/d 90,000
Total 180,000 Total 180,000
Ledger
Cash Account

14. 1. Meaning and Importance of Trial balance

 A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization's general ledger accounts. (Often the accounts with zero balances
will not be listed.) The debit balance amounts are listed in a column with the heading "Debit balances" and the credit balance amounts are listed in another column with
the heading "Credit balances." The total of each of these two columns should be identical.
 Importance of Trial balance
a) CheckingArithmeticalAccuracy:
 This means that the trial balance is used to verify actual amount entered in correct side of current account while moving the figures from various ledger books like
purchase day book, sales day book, cash book, etc. Trial Balance aside from general ledger accounts is used for checking the accuracy of special purpose accounting
books.
a) Assistinpreparingfinancialstatements:
 Financial statements like Profit and Loss Account, Balance Sheet and Cash Flow Statement needs to be prepared at the end of every accounting year. The balances of all
the ledger accounts used to prepare financial statements are already available in the trial balance and hence, preparing and analyzing of financial statement becomes easier.
a) Assistinrectifyingerrors:
 Since the debit total of trial balance must equal to credit total of trial balance, this checks the arithmetical accuracy of ledger postings. If it is not balanced, it will make
accountant to find and rectify the error. After preparing the trial balance, accountants feel relieved when the trial balance debit totals and credit totals match.
a) Assisttinadjustments:
 Adjustment accounts like prepaid expenses, outstanding liabilities, closing stock, etc needs to be prepared during preparation of trial balance. This assists in making
adjustments only relevant to current accounting year. Businesses prepare adjustment accounts generally at the end of accounting year. However, there is no restriction to
open these adjustment accounts as they occur.
a) Assistincomparativeanalysis:
 The trial Balance helps to compare balances of the current year with past year balances along with peer analysis. This will help the business to take important decisions
concerning income, expenses, production costs, etc. It helps to recognize the trend in the business and take actions wherever necessary.
a) Assistinpreparationofauditreports:
 Trial Balance helps the auditors to locate the entries in the original books of accounts. Basically, audit trail is what auditors need to audit and this is what trial balance
provides. Auditors are then able to comment on preparation of financial statements in their audit report.
a) AssistInDecisionMakingRegardingBudget:
 As we have seen above trial balance helps in comparison of ledger balances with the past balances. Such comparison helps the management to create trend regarding
performance of the business. After analyzing the comparisons, financial budget can be prepared for the upcoming accounting periods to assist the management.

15. 1. Preparation of the Trial Balance
Following Steps are involved in the preparation of a Trial Balance:
 All Ledger Accounts are closed at the end of an accounting period.
 Ledger balances are posted into the trial balance.
 Trial Balance is cast and errors are identified.
 Suspense account is created to agree the trial balance totals temporarily until corrections are accounted for.
 Errors identified earlier are rectified by posting corrective entries.
 Any adjustments required at the period end not previously accounted for are incorporated into the trial balance.
Proforma of Trial Balance

16. ILLUSTRATION – 3:
Prepare a Trial Balance for Shining Brothers Pvt. Ltd. at March 31st, 2017?

18. Types of Subsidiary Books
1. Purchases Book
Purchase book is used for recording credit purchase of goods only. This will not record any cash
purchase or credit purchase of any assets.
2. Sales Book
Sales book is mainly used for recording credit sales of goods and services in an organization. This
will not record any cash sales or assets sales.
3. Purchase Returns Book
This is maintained to record the transactions of goods returned to the supplier when
purchase on credit.
4. Sales Return Book
This book is used to record the goods returned by the customer the goods sold on credit
5. Bill
s Receivable Book
It is used to record the transactions when the bills received from the customer for credit sales.
6. Bills Payable Book
This is used to record the acceptances given to the suppliers for credit purchase.
7. Cash Book (Simple Cash Book, Double Column Cash Book, Three Column Cash
Book and Petty Cash Book) and Journal proper