Accounting mechanics

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  • Need to give eg increase and decrease in liability and assets
  • Accounting mechanics

    1. 1. AccountingAccounting ProcessProcess
    2. 2.  Identification of duel aspectIdentification of duel aspect How can a transaction have two aspects ?How can a transaction have two aspects ? 1.1. Mr. Lal started a small business withMr. Lal started a small business with Rs. 2 lakhs.Rs. 2 lakhs. Assets = LiabilityAssets = Liability Accounting ProcessAccounting Process Liability Assets Capital 2,00,000 Cash 200,000
    3. 3. 2. Mr. Lal took a loan from the bank2. Mr. Lal took a loan from the bank Rs.1 lacRs.1 lac Accounting ProcessAccounting Process Liability Assets Capital 2,00,000 Cash 3,00,000 Loan 1,00,000 -------- -------- 3,00,000 3,00,000 ======== ======== Owners equity + outsiders’ Claim = Assets
    4. 4. 3. Out of the available cash he purchased a3. Out of the available cash he purchased a Small Machine for Rs. 75,000Small Machine for Rs. 75,000 Accounting ProcessAccounting Process Liability Assets (source ) (application) Capital 2,00,000 Machine 75,000 Cash 2,25,000 Loan 1,00,000 -------- -------- 3,00,000 3,00,000 ======== ======== Owners equity + outsiders’ Claim = Assets Source = Application
    5. 5. 4. Mr. Lal bought furniture from M/s Lakdiwala on4. Mr. Lal bought furniture from M/s Lakdiwala on credit .credit . Assets ) (application) 2,00,000 Machine 75,000 1,00,000 Furniture 25,000 r 25,000 Cash 2,25,000 -------- -------- 3,25,000 3,25,000 ======== ======== Owners equity + outsiders’ Claim = Assets
    6. 6. 5. Mr. Lal Withdrew Rs. 10,000 from the business5. Mr. Lal Withdrew Rs. 10,000 from the business for his personal use.for his personal use. Assets ) (application) 2,00,000 Machine 75,000 1,00,000 Furniture 25,000 25,000 Cash 2,25,000 -------- -------- 3,25,000 3,25,000 ======== ======== Assets ) (application) 1,90,000 Machine 75,000 1,00,000 Furniture 25,000 r 25,000 Cash 2,15,000 -------- -------- 3,15,000 3,15,000 ======== ======== Owners equity + outsiders’ Claim = Assets
    7. 7. 6. Assume business entered a few sales and6. Assume business entered a few sales and purchase transactions on cash and made a profit ofpurchase transactions on cash and made a profit of Rs. 50,000/-Rs. 50,000/- Assets ) (application) 2,40,000 Machine 75,000 1,00,000 Furniture 25,000 r 25,000 Cash 2,65,000 -------- -------- 3,65,000 3,65,000 ======== ======== Owners equity + outsiders’ Claim = Assets
    8. 8. AccountingAccounting ProcessProcess Identification of duel aspectIdentification of duel aspect Source = ApplicationSource = Application Owners equity+ out side liability= AssetsOwners equity+ out side liability= Assets Total liability = total assetsTotal liability = total assets
    9. 9. Liability , Revenue & profitLiability , Revenue & profit Cr=sourceCr=source Dr= UseDr= Use Assets expenses & lossesAssets expenses & losses Dr = useDr = use Cr=sourceCr=source Accounting ProcessAccounting Process
    10. 10. Assigning meaning to the accountAssigning meaning to the account  Debit ( debited )Debit ( debited )  Credit (credited)Credit (credited) Accounting ProcessAccounting Process Total Assets of the firm Increased & total liability of the firm decreased Total Assets of the firm decreased & total liability of the firm increased
    11. 11.  Type of accountType of account  Rule of Debit and CreditRule of Debit and Credit  Recording of transactionsRecording of transactions Accounting ProcessAccounting Process
    12. 12. Financial accountingFinancial accounting Principle: double entry systemPrinciple: double entry system Cash transactions Cash book Credit transactions Journal Ledger Trial balance Balance sheetProfit and loss account
    13. 13. QuizQuiz --22
    14. 14. Write journal entries in the books ofWrite journal entries in the books of Mr. AjayMr. Ajay 1/1/071/1/07. He started business with Rs. 2 lacs. He started business with Rs. 2 lacs 2/1/072/1/07. Deposited Rs. 10,000 with bank to. Deposited Rs. 10,000 with bank to start an account with bank.start an account with bank. 3/1/073/1/07. Paid for furniture & fittings. Paid for furniture & fittings Rs.25000/-Rs.25000/-
    15. 15. 4/1/074/1/07 Purchased goods worth Rs. 10,000Purchased goods worth Rs. 10,000 5/1/07 Sold Goods worth Rs. 8,000/-5/1/07 Sold Goods worth Rs. 8,000/- 6/1/07 Purchased goods from Sam & co for6/1/07 Purchased goods from Sam & co for Rs. 40,000Rs. 40,000 7/1/07 Sold goods to Ramesh & company7/1/07 Sold goods to Ramesh & company Rs. 50,000/-Rs. 50,000/-
    16. 16. 8/1/078/1/07 Paid wages Rs. 700Paid wages Rs. 700 9/1/079/1/07 Paid Rs. 10000 to Sam & coPaid Rs. 10000 to Sam & co 10/1/0710/1/07 Purchased stationery item forPurchased stationery item for Rs. 1000Rs. 1000

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