CHAPTER INTRODUCTION TO ACCOUNT

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6. Bookkeeping, in business, is the recording of financial transactions, and is part of
the process of accounting.[1] Transactions include purchases, sales, receipts and
payments by an individual or organization. The accountant creates reports from the
recorded financial transactions recorded by the bookkeeper and files forms with
government agencies. There are some common methods of bookkeeping such as
the single-entry bookkeeping system and the double-entry bookkeeping system. But
while these systems may be seen as "real" bookkeeping, any process that involves
the recording of financial transactions is a bookkeeping process.
Bookkeeping is usually performed by a bookkeeper. A bookkeeper (or book-keeper),
also known as an accounting clerk or accounting technician, is a person who records
the day-to-day financial transactions of an organization. A bookkeeper is usually
responsible for writing the "daybooks". The daybooks consist of purchases, sales,
receipts, and payments. The bookkeeper is responsible for ensuring all transactions
are recorded in the correct day book, suppliers ledger, customer ledger and general
ledger.
The bookkeeper brings the books to the trial balance stage. An accountant may
prepare the income statement and balance sheet using the trial balance and ledgers
prepared by the bookkeeper.
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12. Classification of Accounts
• Personal Accounts
– Natural persons
– Artificial persons
– Representative personal accounts
• Real Accounts
– Tangible Real A/c
– Intangible Real A/c
• Nominal Accounts
– Incomes & Gains
– Expenses & Losses
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13. Personal Account
 Definition & Examples of accounts:-
 Personal Account: Personal accounts are accounts relating to
persons or organisations with whom the business has transactions.
E.g Customer, Supplier, Money lenders etc.
Real Accounts
• Real Accounts: Real accounts refer to accounts in which property and
possession are recorded.
E.g Land, Building, Plant & Machinery, Vehicle Cash, Bank etc.
Nominal Accounts
 Nominal Accounts: Nominal accounts are revenue, expenses, gains,
and losses.
E.g. Wages, Salary, Discount etc .
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14. Recording of Transactions:
 Rule for Personal
Accounts:
 Debit the Receiver
 Credit the Giver
 Rule for Real Accounts:
 Debit what Comes in
 Credit what goes out
 Rule for Nominal
Accounts:
 Debit all expenses & Losses
 Credit all incomes & gains. 14Prepared by SADASIVAM RANI

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22. The Accounting Cycle
Journalize
transactions.
Post entries to
the ledger
accounts.
Prepare trial
balance.
Prepare financial
statements.
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23. Single Entry System
Under this system both the aspects of
transaction are not recorded.
Only Personal accounts & cash book
are opened.
Under this system balance sheet is not
prepared.
This system is therefore not
considered as an authentic one.
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24. Double Entry Accounting System
Based on principle of duel aspect of each
transaction.
For correct presentation both of them
should be recorded.
Requires maintenance of records of assets,
liabilities, revenues and expenditure.
Impact of each transaction can be seen or
measured.
Total assets are equal to total equities.
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25. Primary Books of Accounts
Before preparation of Financial Statements we have to prepare
following primary books of accounts:
 Cash book
 Bank book ( incl. Bank Reconciliation Statement)
 Journal book
 Ledger
 Trial Balance
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26. Journal Entries
• Refresher on…
• Debits
• Credits
• Accounts
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27. Debits & Credits
• Debits are the left of the T account.
• Debits do not mean increase.
• Debits are not “good” or “bad”.
• Credits are the right of the T account.
• Credits do not mean decrease.
• Credits are not “good” or “bad”.
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28. GENERAL JOURNAL Page 123
Date Description
Post.
Ref. Debit Credit
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
1998
Jan 1 Cash 1,000,000
Li, Capital 1,000,000
Owner invested cash in the business.
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29. Posting Journal Entries to the
Ledger Accounts
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
1998
Jan 1 Cash 10,00,000
li, Capital 10,00,000
Owner invested cash in the business.
General Ledger
Cash
Date Debit Credit Balance
1998
Jan 1 1,000,000 1,000,000
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30. Posting Journal Entries to the
Ledger Accounts
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
1998
Jan 1 Cash 1,000,000
LI, Capital 1,000,000
Owner invested cash in the business.
General Ledger
li, Capital
Date Debit Credit Balance
1998
Jan 1 1,000,000 1,000,000
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31. Trial Balance
• In order to know if the account has recorded
all the transactions correctly
– We must know if debits = credits
• Trial Balance
– A list of the ledger account balances. (T-Accounts)
– The total of the debit balances should equal the
total of the credit balances.
– Balance indicates mathematical accuracy
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32. Trial Balance
Cash
$25000
$300
$3500
$2,100
BALANCE:
$26,300
BALANCED!!
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53. Abbreviations used in bookkeeping
A/C – Account
Acc – Account
A/R – Accounts receivable
A/P – Accounts payable
B/S – Balance sheet
c/d – Carried down
b/d – Brought down
c/f – Carried forward
b/f – Brought forward
Dr – Debit
Cr – Credit
G/L – General ledger; (or N/L – nominal ledger)
P&L – Profit and loss; (or I/S – income statement)
TB – Trial Balance
GST – Goods and services tax
VAT – Value added tax
TDS – Tax deducted at source
EBT – Earnings before tax
EAT – Earnings after tax
PAT – Profit after tax
PBT – Profit before tax
Depr – Depreciation 53Prepared by SADASIVAM RANI

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