2. Sr. No. Description Page No.
1. Introduction to Accounting 3
2. Basic Accounting Terms 8
3. Generally Accepted Accounting Principles (GAAP)
and Basic Accounting Concepts
13
4. Introduction to Journal, Ledger and Trial Balance 20
5. Case Study
Journalising the transactions
Posting into Ledgers
Preparation of Trial Balance
22
6. Bar Diagram and Pie Chart showing Expenses 35
7. Conclusion 36
8. Bibliography 38
INDEX
-Ashish
03-Jan-21 2ashish
3. Introduction to Accounting
-Ashish
Definitionof Accounting:
“Accounting is the art of recording, classifying and summarising in
a significant manner and in terms of money, transactions and
events which are, in part at least, of a financial character, and
interpreting the results thereof.”
-American Institute of Certified Public Accountants
Attributes(Characteristics)of Accounting:
•Identification of Financial Transactions and Events
•Measuring the Identified Transactions and Events
•Recording
•Classifying
•Summarising
•Analysis and Interpretation
•Communicating
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4. Objectivesof Accounting:
•Maintaining Accounting Records
•Determining Profit or Loss
•Determining Financial Position
•Facilitating Management
•Providing Accounting Information to Users
Usersof Accounting Information:
•Internal Users
•Owners
•Management
•External Users
•Employees and Trade Unions
•Banks and Financial Institutions
•Investors and Potential Investors
•Creditors
•Government and its Authorities
•Researchers
•Consumers
•Public Ashish
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5. • It is concerned with recording financial transactions and
events, summarising and interpreting them and
communicating the results to users.
• It ascertains profit earned or loss suffered during a period and
the financial position on the date when the accounting period
ends.
Financial Accounting
• It ascertains the cost of products manufactured or services
rendered and helps the management in decision making
and exercising controls.
• It is most commonly used in the manufacturing industry,
an industry that has a lot of resources and costs to manage.
Cost Accounting
• It is concerned with generating accounting information relating
to funds, costs, profits, etc., as it enables the management in
decision-making.
• It includes budgeting and forecasting, cost analysis, financial
analysis, reviewing past business decisions and more.
Ashish
Management Accounting
Branches of Accounting:
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6. Accounting Cycle:
The accounting cycle is a collective process of identifying,
analyzing, and recording the accounting events of a
company. It is a standard process that begins when a
transaction occurs and ends with its inclusion in the
financial statements and then communicating.
Ashish
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7. Recording in Journal
1. Cash Book
2. Purchases Book
3. Sales Book
4. Purchases Return
Book
5. Sales Return Book
6. Bills Payable Book
7. Bills Receivable Book
8. Journal Proper
Financial Transactions
and Events
Classifying (Posting into
Ledger)
Summarising
Trial Balance
Trading and Profit
and Loss Account
Balance Sheet
Analysis and
Interpretation
Communicating
to the Users
FlowchartshowingAccountingProcess
Ashish
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9. Relationship between Assets, Liabilities and Capital
Assets- An asset is a resource having a monetary/economic value
possessed by an entity, which is capable to generate some future
economic benefit. Assets are generally brought in business to benefit from
them and to increase the value of a business. Some of the examples are
furniture, machinery, debtors, cash, investments, etc.
Assets can be classified as:
•Fixed Assets- Assets owned by an entity which are not meant for
resale. These assets help in increasing the earning capacity of the business.
They can be further classified into-
•Tangible Fixed Assets- The assets that have physical existence i.e
they can be seen or touched are tangible fixed assets. Examples are land,
machinery, building, etc.
•Intangible Fixed Assets- The assets that do not have any physical
existence i.e they cannot be seen or touched are intangible fixed assets.
Examples are goodwill, trademarks, patents, etc. Ashish
03-Jan-21 9ashish
10. •Current Assets- Assets owned by an entity which are
meant for resale. They are held by the entity for a short-
term to sell and convert into cash.
Examples are debtors, bills receivable, unsold goods, etc.
•Liquid Assets- The part of current assets that can be
converted into cash within a short period of time.
Examples are cash in hand, bank balance, fixed deposits,
etc.
•Wasting Assets- The assets that have limited life and
decrease in value overtime due to consumption.
Examples are natural resources like coal, petroleum, etc.
•Fictitious Assets- Assets which have no tangible
existence, but are represented as actual cash expenditure
i.e they come into existence by an accounting entry.
Example- advertisement suspense Ashish
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11. Liabilities- Liabilities mean the amount which the entity owes to outsiders or the
proprietor.
Liabilities can be categorised into:
•Internal Liabilities- The liability of an entity towards owners is termed as an internal
liability.
Example of an internal liability is capital.
•External Liabilities- The liability of an entity towards outsiders is termed as an external
liability. These arise from credit transactions or loans taken.
Examples are creditors, bills payable, bank overdraft, etc.
These can be further classified into-
•Long-Term orNon-Current Liabilities: Long-term liabilities, or non-
current liabilities, are liabilities that are due beyond a year or the normal operation period
of the company.
Examples are long term loans, public deposits, etc.
•Current Liabilities: All liabilities of the business that are to be settled in cash within the
fiscal year or the operating cycle of a given firm are referred to as current liabilities.
Examples are short-term loans, bills payable, etc.
Contingent Liabilities- Contingent liabilities are liabilities that may be incurred
by an entity depending on the outcome of an uncertain future Ashish
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12. •event. It crystallises upon happening of an event and thus may or
may not be payable.
Example- a legal case against the enterprise for compensation. If the
court ruling is against the enterprise, it becomes payable and if it is in
favour of the enterprise, it is not payable.
Capital- Capital is the amount invested by the owner. It is also
known as owner’s equity which increases by profit and decreases by
loss. It is shown as a liability towards the owner because for the
purpose of accounting, the owner and the entity are distinct.
Capital can be expressed as –: Capital=Assets-Liabilities
Accounting Equation- The accounting equation represents the
relationship between the assets, liabilities, and owner's equity of a
business. It is the foundation for the double-entry bookkeeping
system. It shows that the assets and liabilities of a firm are equal.
Assets = Liabilities + Capital Ashish
03-Jan-21 12ashish
13. Generally Accepted Accounting Principles
(GAAP) and Basic Accounting Concepts
GAAP is a set of rules, concepts and guidelines for the
preparation of financial statements. GAAP are a
combination of accounting standards and commonly
accepted practices for recording of transactions and
reporting of accounting information. It is supported and
implemented by the accounting bodies like Institute of
Chartered Accountants of India (ICAI).
Ashish
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14. The accounting principles or concepts are:
• Going Concern Concept
• Accrual Concept
• Consistency Concept
• Accounting (Business) Entity Concept
• Money measurement Concept
• Accounting period (or Periodicity) Concept
• Complete or Full disclosure Concept
• Revenue recognition (Realisation) Concept
• Verifiable Objective (Evidence) Concept
• Matching Concept or Matching Principle
• Historical Cost Concept
• Dual Aspect Concept
• Materiality Concept
• Conservatism (Prudence) Concept
•Timeliness
Going Concern Concept, Accrual Concept and Consistency
Concept are the fundamental accounting concepts. Ashish
03-Jan-21 14ashish
15. •Going Concern Concept- The going concern concept is the
assumption that a business will continue to exist in the near
future and the transactions will be recorded in the books of
accounts without any intention to close the business.
Continuation of an entity as a going concern is presumed as the
basis for financial reporting unless and until the entity's
liquidation becomes imminent. Preparation of financial
statements under this presumption is commonly referred to as
the going concern basis of accounting. On the basis of this
concept, fixed assets are recorded and depreciated in a
systematic manner over their estimated useful life without
reference to their market value.
Example of the going concern assumption is the prepayment
and accrual of expenses. Companies prepay and accrue
expenses because they believe that they will
continue operations in future. Ashish
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16. •Accrual Concept- In accounting, the accrual method is recording
financial events right when they happen, rather than when the payment is
made or received. This method works for both income and expenses.
Accrual concept is the most fundamental principle of accounting which
requires recording revenues when they are earned and not when they are
received in cash, and recording expenses when they are incurred and not
when they are paid.
Compared to cash accounting, accrual accounting portrays a more
accurate statement of the company’s health as it includes both accounts
receivable and accounts payable. It provides a more accurate depiction of
a company’s financial activity. Since the income and debt are precisely
outlined, this allows the business to manage the patterns of their financial
activities.
Example if the accrual concept is if M/s RSM & Co. Sells goods to M/s VS &
Co. On 27th February, 2020 for Rs.15,000 on credit for 2 months, the sale
should be recorded on 27th February, 2020 although the amount will be
received on 27th April, 2020. This is done because the revenue has been
earned, although the amount has not been received. Ashish
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17. •Consistency Concept- The consistency principle states that accounting
practices once adopted should be applied consistently year after year. In other
words, businesses should not use a certain accounting method one year, and a
different accounting method the next year. This however does not mean that
business are required to stick with the same accounting method forever, they
are allowed to change their method, but this change will need to be
accounted for. In cases where you might need to change the accounting
method or principles that you use in your business for a valid reason, then the
effects of this change need to be clearly disclosed in your company’s financial
statements. The sole purpose of the consistency principle, or consistency
concept, is to ensure that transactions or events are recorded in the same
way, from one accounting year to the next which helps in better
understanding of accounting information and makes it comparable with that
of the previous years.
Example of consistency concept is charging depreciation on a purchased fixed
asset by straight line method for 1 year and by written down value method for
the next year. The use of 2 different methods of charging depreciation affects
the book value of the asset and also the profit.
Ashish
03-Jan-21 17ashish
18. •Accounting (Business) Entity Concept- Business is an accounting
entity and transactions are recorded in the books of account from the view point
of business. This means that the transactions associated with a business must be
separately recorded from those of its owners. This is why capital is shown as a
liability from the firm’s point of view. This concept is essential to know the
financial position and performance of a business.
•Money measurement Concept- Transactions and events are recorded
in the books of accounts in money terms. It means that a business should only
record an accounting transaction if it can be expressed in terms of money
because money is the common measuring unit for recording and reporting the
transactions. Transactions and events that cannot be measured in terms of
money are not recorded, ex:-quality of staff.
•Accounting period (or Periodicity) Concept- Life of the business
is broken into smaller periods usually a period of 12 months. This means that an
entity consistently reports its results and cash flows. These time periods are kept
the same over time, for the sake of comparability. Many of the users like the
management require accounting information at regular intervals to take
decisions at the appropriate time.
Ashish
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19. •Complete or Full disclosure Concept- Financial statements
should give complete and full disclosure of all material items in an
understandable manner. This requires a business to report all necessary
information about their financial statements and other relevant
information to any persons who are accustomed to reading this
information. This ensures that the users of the financial information of a
business are not misled by any lack of information.
•Revenue recognition (Realisation) Concept- Revenue is
recognised when it is earned, whether received or not. The revenue
recognition principle states that companies should record their revenues
when they are recognised or earned (regardless of when the cash is
actually received).
•Verifiable Objective (Evidence) Concept- Transactions are
recorded in the books of account on the basis of evidences. Thus, free
from personal bias. This principle requires that each recorded business
transactions in the books of accounts should be objective i.e., it should
have an adequate evidence to support it. Ex:-invoices.
Ashish
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20. •MatchingConcept or Matching Principle- If revenue is recognised, all related
expenses should also be accounted, whether paid or not. This principle states that the related
revenues and expenses must be matched in the same period. It means that expenses are
recorded (matched) with the income that is generated from those expenses. All amounts
received or paid during the current year but relating to the next year, should be excluded
from the current year’s revenues and costs.
• Historical Cost Concept- Transactions are recorded at the cost incurred. Under
the historical cost concept, business transactions are recorded in the accounting books at the
transaction price, i.e., their actual cost at the time the transaction took place. An important
advantage of historical cost concept is that the records kept on the basis of it are considered
consistent, comparable, verifiable and reliable.
•Dual Aspect Concept- A transaction has two aspects, i.e., debit and credit of
equal amount. The dual aspect concept indicates that each transaction made by a business
impacts the business in two different aspects which are equal and opposite in nature. For
every debit, there is a credit of equal amount. This concept forms the basis of double-entry
accounting and is used by all accounting frameworks for generating accurate and
reliable financial statements.
Example-Mohan started business with Rs 5,00,000. This will have the following effects on the
business: It will increase the assets of the business by Rs 5,00,000. (Cash increases) Also,
liability of the business towards the owner increases by Rs. 5,00,000. (capital increases) Ashish
03-Jan-21 20ashish
21. •Materiality Concept- The materiality concept of accounting states
that all material items must be properly reported in financial
statements. An item is considered material if its inclusion or omission
significantly impacts the decision of the users of financial statements.
•Conservatism (Prudence) Concept- Account all expected
expenses and losses but do not account for expected gains and
incomes. This concept can be described using the phrase “do not
anticipate a profit, but provide for all possible losses”. Under this
concept, all probable losses are recorded when they are discovered,
while gains can only be registered when they are fully realized. This
ensures that financial statements do not paint a better picture than
what actually is.
•Timeliness- Preparing and presenting financial statements within
reasonable time is important. Accounting information should be
provided to the users at accurate time because the information not
provided on time loses its importance.
Ashish
03-Jan-21 21ashish
22. Journal- Journal is the primary book in which financial transactions are first
recorded in a chronological order, i.e., in the sequence they are entered into.
Features of a Journal-
•It is a record of transactions in a chronological order.
•It is a book of original entry in which transactions are first recorded and then
posted or transferred into the Ledger.
•T records both the debit and credit aspects of a transaction using double entry
system of book keeping.
• It is a record which shows complete details of a transaction in one entry.
Sub-Division of Journal- Journal is sub-divided into Books of Original Entry as
there are number of transactions in a large-sized business firm. It is sub-divided
into:
•Cash Book
•Purchases Book
•Sales Book
•Purchases Return Book
•Sales Return Book
•Journal Proper
These books are also known as Subsidiary Books or Special Journals or the Books of
Original Entry. Ashish
03-Jan-21 22ashish
23. Cash Book: It is used to record all cash receipts and payments. It is a
book of original entry in which transactions relating only to cash receipts
and payments are recorded in detail. When cash is received it is entered
on the debit or left hand side. Similarly, when cash is paid out the same
is recorded on the credit or right hand side of the cash book.
Purchases Book: It is used to record all credit purchases as cash
purchases will be entered in the cash book. The entries are recorded on
the basis of invoices from the suppliers.
Sales Book: It is used to record all credit sales.
Purchases Returns Book: It is used to record all goods returned to
the sellers of goods that were purchased on credit.
Sales Returns Book: It is used to record all goods returned by the
purchaser that had been sold on credit.
Journal Proper: It is used for recording those transactions which are
not recorded in any of the other subsidiary books. Ashish
03-Jan-21 23ashish
24. Ledger-A Ledger is known as the Book of Final Entry as all the
transactions recorded in Book of Original Entry (Journal) are posted into it.
It is “a book which contains, in a summarised and classified form, a
permanent record of all transactions.” It is also known as the Principle
Book of account as Trial Balance is drawn from it and then financial
statements are prepared.
Rules of posting into Ledger-
•All the transactions relating to an account should be entered at one
place.
•The word To is used before the accounts which appear on the debit side
and the word By is used before the accounts which appear on the credit
side.
•If an account is debited in journal entry, the posting in ledger should also
be made on the debit side of such an account.
•If an account is credited in journal entry, the posting in ledger should also
be made on the credit side of such an account. Ashish
03-Jan-21 24ashish
25. Trial Balance-
A Trial Balance is a statement, prepared with the debit and
credit balances of the Ledger accounts to test the
arithmetical accuracy of the books.
Features of Trial Balance-
•It helps in preparation of the financial statements.
•It can be prepared at any time of the accounting period.
•It verifies the arithmetical accuracy of the ledger
accounts but it is not a conclusive proof of accuracy as
some errors are not revealed.
•It is just a statement not an account. Ashish
03-Jan-21 25ashish
26. Case Study
Mr. Sunil Kapoor started his business of electronics under the name of Sunil Groups & Sons. On 1 April,
2019 he invested Rs.2,00,000 in cash and a cheque of Rs.3,00,000 from his past savings. His other
transactions during the year were as follows:
•13 April, 2019- Purchased from Ramesh, 2 televisions of Rs.10,000 each and paid the amount, also
purchased an oven for 30,000.
•20 April, 2019- Sold an oven of Rs.30,000 to Vijay for cash
•27 April, 2019- Goods of Rs.10,000 returned to Ramesh
•19 May, 2019- Purchased from Vikram, 4 washing machines for Rs.15,000 each
•23 May, 2019- Sold a television of Rs.10,000 to Amit and a washing machine of Rs.15,000 to Suresh
•5 August, 2019- Paid electricity bill Rs.20,000
•9 September, 2019- Purchased machinery of Rs.1,00,000 against cheque
•29 September, 2019- Deposited 25,000 into bank
•3 October, 2019- Paid cash Rs.50,000 to Vikram
•24 October, 2019- Goods costing Rs.3000 given as samples
•7 November, 2019- Amit is declared as insolvent, received only 40 paise in a rupee.
•18 November, 2019- Salaries payable to staff Rs.25,000
•24 December, 2019- Withdrew Rs.15,000 from bank for personal use
•2 January, 2020- Received commission Rs.10,000 by cheque, half of which is in advance
•19 January, 2020- Paid 19,500 to Ramesh in full settlement
•23 January, 2020- Out of rent paid this year, 2000 is for next month
•25 January, 2020- Received a cheque of Rs.15,000 from Suresh
•26 January, 2020- Interest due but not received Rs.4000
•27 January, 2020- Suresh’s cheque was dishonoured
•3 March, 2020-Charge 10% depreciation on machinery Ashish
03-Jan-21 26ashish
27. Sunil Groups & Sons
JOURNAL
Date Particulars L.F
Dr. Amount Cr. Amount
1.4.19 Cash a/c..............................................Dr
Bank a/c..............................................Dr
To Capital a/c
[Being started business]
2,00,000
3,00,000 5,00,000
13.4.19 Purchases a/c......................................Dr
To Cash a/c
To Ramesh a/c
[Being goods purchased]
50,000
20,000
30,000
20.4.19 Cash a/c...............................................Dr
To Sales a/c
[Being sold goods]
30,000
30,000
27.4.19 Ramesh a/c.........................................Dr
To Purchase Return a/c
[Being returned goods]
10,000
10,000
19.5.19 Purchases a/c.....................................Dr
To Vikram a/c
[Being purchased goods]
60,000
60,000
23.5.19 Amit a/c.............................................Dr
Suresh a/c..........................................Dr
To Sales a/c
[Being sold goods]
10,000
15,000 25,000
5.8.19 Electricity Bill a/c...............................Dr
To Cash a/c
[Being paid electricity bill]
20,000
20,000
9.9.19 Machinery a/c.....................................Dr
To Bank a/c
[Being purchased machinery]
1,00,000
1,00,000
29.9.19 Bank a/c...............................................Dr
To Cash a/c
[Being deposited into bank]
25,000
25,000
3.10.19 Vikram a/c...........................................Dr
To Cash a/c
[Being paid to Vikram]
50,000
50,000
24.10.19 Advertisement(samples) a/c...............Dr
To purchases a/c
[Being goods given as samples]
3000
3000 Ashish
03-Jan-21 27ashish
28. Date Particulars L.F Dr. Amount Cr. Amount
7.11.19 Cash a/c..............................................Dr
Bad Debts a/c....................................Dr
To Amit a/c
[Being insolvency of Amit]
4,000
6,000 10,000
18.11.19 Salaries a/c......................................Dr
To Outstanding salary a/c [Being salaries due to
staff]
25,000
25,000
24.12.19 Drawings a/c.......................................Dr
To Bank a/c
[Being withdrawn goods for personal use]
15,000
15,000
2.1.2020 Bank a/c.............................................Dr
To Commission Received a/c
[Being received commission]
Commission Received a/c..................Dr
To Commission Rec. in Advance a/c
[Being received commission in advance]
10,000
5000 10,000
5000
19.1.2020 Ramesh a/c.......................................Dr
To Cash a/c
To Discount Received a/c
[Being settled Ramesh’s a/c]
20,000
19,500
500
23.1.2020 Prepaid Rent a/c...............................Dr
To Rent a/c
[Being paid rent in advance]
2000
2000
25.1.2020 Bank a/c...............................Dr
To Suresh a/c
[Being received cheque from Suresh]
15,000
15,000
26.1.2020 Accrued Interest a/c...........................Dr
To Interest a/c
[Being interest due but not received]
4,000
4,000
27.1.2020 Suresh a/c..........................................Dr
To Bank a/c
[Being Suresh’s cheque dishonoured]
15,000
15,000
3.3.2020 Depreciation a/c.................................Dr
To Machinery a/c
[Being charged depreciation]
10,000
10,000 Ashish03-Jan-21 28ashish
29. Date Particulars
(Receipts)
L.F D/A
Rs.
Cash
Rs.
Bank
Rs.
Date Particulars
(Payments)
L.F D/R
Rs.
Cash
Rs.
Bank
Rs.
1.4.19 To Capital a/c 2,00,000 3,00,000 13.4.19 By Purchases a/c 20,000
20.4.19 To Sales a/c 30,000 5.8.19 By Electricity Bill
a/c
20,000
29.9.19 To Cash a/c C 25,000 9.9.19 By Machinery a/c 1,00,000
7.11.19 To Amit a/c 4000 29.9.19 By Bank a/c C 25,000
2.1.2020 To Comm.Rec a/c 10,000 3.10.19 By Vikram a/c 50,000
25.1.202
0
To Suresh a/c 15,000 24.12.19 By Drawings a/c 15,000
19.1.2020 By Ramesh a/c 500 19,500
27.1.2020 By Suresh a/c 15,000
31.3.2020 By Balance c/fd 99,500 2,20,000
2,34,000 3,50,000 500 2,34,000 3,50,000
1.4.2020 To Balance b/fd 99,500 2,20,000 1.4.2020 By Balance b/fd 500
CASH BOOK
Ashish
03-Jan-21 29ashish
30. PURCHASES BOOK
Date
2020
Particulars Invoice
No.
L.F. Amount
Rs.
April 13 Ramesh
1 oven @ 30,000
30,000
May 19 Vikram
4 Washing Machines @ 15,000 each
60,000
March
31,2020
Purchases a/c
...Dr.
90,000
SALES BOOK
Date 2020 Particulars Invoice No. L.F. Details
Rs.
Amount
Rs.
May 23 Amit
1 televison @ 10,000
Suresh
1 Washing Machine @ 15,000
10,000
15,000
25,000
March 31,2020 Sales a/c
...Cr.
25,000
Ashish
03-Jan-21 30ashish
31. Purchase Return Book
Date
2020
Particulars Debit
Note No.
L.F. Amount
Rs.
April 27 Ramesh 10,000
March
31,2020
Purchase Return a/c ...Cr. 10,000
Ashish
03-Jan-21 31ashish
32. Ledger Accounts
Capital a/c
Date Particulars (Dr.) L.F. Amount Date Particulars
(Cr.)
L.F. Amount
1.4.19 By Cash a/c
By Bank a/c
2,00,000
3,00,000
31.3.2020 To Balance c/fd 5,00,000
5,00,000 5,00,000
1.4.202
0
By Balance b/fd 5,00,000
Ashish
03-Jan-21 32ashish
33. Cash a/c
Date Particulars (Dr.) L.F. Amount Date Particulars
(Cr.)
L.F. Amount
1.4.19 To Capital a/c 2,00,000 13.4.19 By Purchases a/c 20,000
20.4.19 To Sales a/c 30,000 5.8.19 By Electricity Bill ac 20,000
7.11.19 To Amit a/c 4000 29.9.19 By Bank a/c 25,000
3.10.19 By Vikram a/c 50,000
19.1.2020 By Ramesh a/c 19,500
31.3.2020 By Balancec/fd 99,500
2,34,000 2,34,000
1.4.2020 To Balance b/fd 99,500
Ashish03-Jan-21 33ashish
34. Bank a/c
Date Particulars (Dr.) L.F. Amount Date Particulars
(Cr.)
L.F. Amount
1.4.19 To Capital a/c 3,00,000 9.9.19 By Machinery
a/c
1,00,000
29.9.19 To Cash a/c 25,000 24.12.19 By Drawings
a/c
15,000
2.1.2020 To Commission
Received a/c
10,000 27.1.2020 By Suresh a/c 15,000
25.1.2020 To Suresh a/c 15,000
31.3.2020 By Balance
c/fd
2,20,000
3,50,000 3,50,000
1.4.2020 To Balance b/fd 2,20,000
Ashish
03-Jan-21 34ashish
35. Purchases a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
13.4.19 To Cash a/c
To Ramesh
a/c
20,000
30,000
24.10.19 By Advertisement
a/c
3000
19.5.19 To Vikram a/c 60,000
31.3.2020 By Balance c/fd 1,07,000
1,10,000 1,10,000
1.4.2020 To Balance
b/fd
1,07,000
Ashish
03-Jan-21 35ashish
36. Ramesh a/c
Date Particulars (Dr.) L.F Amount Date Particulars
(Cr.)
L.F. Amount
27.4.19 To Purchase
Return a/c
10,000 13.4.19 By Purchases a/c 30,000
19.1.2020 To Cash a/c
To Discount
Received a/c
19,500
500
30,000 30,000
Ashish
03-Jan-21 36ashish
37. Sales a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
20.4.19 By Cash a/c 30,000
23.5.19 By Amit a/c
By Suresh a/c
10,000
15,000
31.3.202
0
To Balance
c/fd
55,000
55,000 55,000
1.4.2020 By Balance b/fd 55,000
Ashish
03-Jan-21 37ashish
38. Purchase Return a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
27.4.19 By Ramesh a/c 10,000
31.3.2020 To Balance
c/fd
10,000
10,000 10,000
1.4.2020 By Balance b/fd 10,000
Ashish
03-Jan-21 38ashish
39. Vikram a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
3.10.19 To Cash a/c 50,000 19.5.19 By Purchases a/c 60,000
31.3.2020 To Balance
c/fd
10,000
60,000 60,000
1.4.2020 By Balance b/fd 10,000
Ashish
03-Jan-21 39ashish
40. Amit a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
23.5.19 To Sales a/c 10,000 7.11.19 By Cash a/c
By Bad Debts a/c
4000
6000
10,000 10,000
Ashish
03-Jan-21 40ashish
41. Suresh a/c
Date Particular
s (Dr.)
L.F. Amoun
t
Date Particulars
(Cr.)
L.F. Amount
23.5.19 To Sales
a/c
15,000 25.1.20
20
By Bank a/c 15,000
27.1.2020 To Bank
a/c
15,000
31.3.20
20
By Balance
c/fd
15,000
30,000 30,000
1.4.2020 To
Balance
b/fd
15,000
Ashish
03-Jan-21 41ashish
42. Electricity Bill a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
5.8.19 To Cash a/c 20,000
31.3.2020 By Balance c/fd 20,000
20,000 20,000
1.4.2020 To Balance
b/fd
20,000
Ashish
03-Jan-21 42ashish
43. Machinery a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
9.9.19 To Bank a/c 1,00,000 3.3.2020 By Depreciation
a/c
10,000
31.3.2020 By Balance c/fd 90,000
1,00,000 1,00,000
1.4.2020 To Balance
b/fd
90,000
Ashish
03-Jan-21 43ashish
44. Advertisement (Sample) a/c
Date Particulars (Dr.) L.F. Amount Date Particulars
(Cr.)
L.F. Amount
24.10.19 To Purchases a/c 3000
31.3.2020 By Balance c/fd 3000
3000 3000
1.4.2020 To Balance b/fd 3000
Ashish
03-Jan-21 44ashish
45. Bad Debts a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
7.11.19 To Amit a/c 6,000
31.3.2020 By Balance c/fd 6,000
6,000 6,000
1.4.2020 To Balance
b/fd
6,000
Ashish
03-Jan-21 45ashish
46. Salaries a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
18.11.19 To
Outstanding
Salaries a/c
25,000
31.3.2020 By Balance c/fd 25,000
25,000 25,000
1.4.2020 To Balance
b/fd
25,000
Ashish
03-Jan-21 46ashish
47. Outstanding Salaries a/c
Date Particulars (Dr.) L.F. Amount Date Particulars
(Cr.)
L.F. Amount
18.11.19 By Salaries a/c 25,000
31.3.2020 To Balance c/fd 25,000
25,000 25,000
1.4.2020 By Balance b/fd 25,000
Ashish
03-Jan-21 47ashish
48. Drawings a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
24.12.19 To Bank a/c 15,000
31.3.2020 By Balance c/fd 15,000
15,000 15,000
1.4.2020 To Balance
b/fd
15,000
Ashish
03-Jan-21 48ashish
49. Commission Receiveda/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
2.1.2020 To Commission
Received in
Advance a/c
5000 2.1.2020 By Bank a/c 10,000
31.3.2020 To Balance c/fd 5,000
10,000 10,000
1.4.2020 By Balance b/fd 5,000
Ashish
03-Jan-21 49ashish
50. Commission Received in Advance a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
2.1.2020 By Commission
Received a/c
5,000
31.3.2020 To Balance c/fd 5,000
5,000 5,000
1.4.2020 By Balance b/fd 5,000
Ashish
03-Jan-21 50ashish
51. Discount Received a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
19.1.2020 By Ramesh a/c 500
31.3.2020 To Balance
c/fd
500
500 500
1.4.2020 By Balance b/fd 500
Ashish
03-Jan-21 51ashish
52. Prepaid Rent a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
23.1.2020 To Rent a/c 2,000
31.3.2020 By Balance c/fd 2,000
2,000 2,000
1.4.2020 To Balance
b/fd
2,000
Ashish
03-Jan-21 52ashish
53. Rent a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
23.1.2020 By Prepaid Rent
a/c
2000
31.3.2020 To Balance c/fd 2000
2000 2000
1.4.2020 By Balance b/fd 2000
Ashish
03-Jan-21 53ashish
54. Accrued Interest a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
26.1.2020 To Interest
a/c
4,000
31.3.2020 By Balance c/fd 4,000
4,000 4,000
1.4.2020 To Balance
b/fd
4,000
Ashish
03-Jan-21 54ashish
55. Interest a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
26.1.2020 By Accrued
Interest a/c
4000
31.3.2020 To Balance
c/fd
4000
4000 4000
1.4.2020 By Balance b/fd 4000
Ashish
03-Jan-21 55ashish
56. Depreciation a/c
Date Particulars
(Dr.)
L.F. Amount Date Particulars
(Cr.)
L.F. Amount
3.3.2020 To Machinery
a/c
10,000
31.3.2020 By Balance c/fd 10,000
10,000 10,000
1.4.2020 To Balance
b/fd
10,000
Ashish
03-Jan-21 56ashish
58. Bar Diagrams and Pie Chartsfor Expenses
0
20,000
40,000
60,000
80,000
100,000
120,000
Purchase of
Goods
Electricity Bill Purchase of
Machine
Samples Bad Debts Depreciation
Expenses
Ashish
03-Jan-21 58ashish
60. Conclusion
Accounting is both an art as well as science. It is an art as it records,
classifies and summarises the financial transactions which helps in
understanding the profitability and financial status of the
business. Accounting is also a science as it is structured knowledge
based on certain basic principles.
Advantages of Accounting-
•Financial Information about Business
•Assistance to Management
•Replaces Memory
•Facilitates Comparative Study
•Facilitates Settlement of Tax Liabilities
•Facilitates Loans
•Evidence in Court
•Assistance in the Event of Insolvency
•Helpful in Partnership Accounts
Ashish
03-Jan-21 60ashish
61. Limitations of Accounting-
•Accounting is not Fully Exact
•Accounting Information is not Realistic
•Accounting Ignores the Qualitative Elements
•Accounting Ignores the Effect of Price Level Changes
•Accounting May Lead to Window Dressing
Double Entry System of book keeping records both debit
and credit aspects of a transaction. It means for every debit,
there is a credit of equal amount and vice-versa. Thus, total
of debit balances will match the total of credit balances.
Journal, Ledger and Trial Balance are prepared on the basis
of double entry system only.
Journal is the Book of Original Entry wherein transactions
are first recorded.
Journalising is the process of recording a transaction in a
Journal. Ashish
03-Jan-21 61ashish
62. Advantages of Journal-
•It minimises the possibility of error as the amounts to
be debited or credited are written side by side and thus
can be compared.
•It provides an explanation of the transaction as
narration is given for every entry.
•It provides a chronological record of all transactions
as transactions are recorded in a chronological order.
Ledger is the Principle Book of account as all
accounting information can be collected from it.
Posting is the process of transfer of Journal entry to a
Ledger Account. Ashish
03-Jan-21 62ashish
63. Utility of Ledger-
•It provides complete information of a particular account
•It provides knowledge of income and expenses
•It forms the basis for preparation of Trial Balance
A Trial Balance is prepared after having posted the Journal
entries into the Ledger accounts and balancing them. If the total of
Debit Balance matches that of the Credit Balance, it means that both
the aspects of each transaction have been recorded in the Ledger.
Utilities of a Trial Balance-
•It proves the arithmetical accuracy of Books of Accounts
•Balance of any Ledger account can be easily known by referring to
Trial Balance
•It proves the fact that double entry system of recording the
transaction is followed
Ashish
03-Jan-21 63ashish
