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ACCOUNTING MECHANISM<br />
Learning objectives:<br />To understand the Accounting mechanism<br />To understand the Double Entry system<br />To unders...
      Double Entry System <br />It recognizes that every transaction has a twofold effect.<br />The method of writing ever...
The Recording Process<br />The sequence of steps in recording transactions:<br />Transactions<br />Documentation<br />Jour...
ACCOUNTING MECHANISM<br />Recording<br /><ul><li>Journalizing</li></ul>2. Classifying<br /><ul><li>Ledger preparation</li>...
Preparation of Trial Balance
Preparation of Profit and Loss A/c
Preparation of Balance Sheet</li></ul>4. Interpreting the results.<br />
JOURNAL<br />The book of original entry.<br />Recording of entries in the journal is known as Journalising.<br />Large Fir...
SUBSIDIARY BOOKS<br />Cash Book:<br /><ul><li>Simple
Two column
Three column</li></ul>2. Purchase Book<br />3. Purchase returns Book<br />4. Sales Book<br />5. Sales returns book<br />6....
LEDGER<br />It is set of all accounts.<br />It contains a classified summery of all transactions recorded in journal.<br />
ACCOUNT - MEANING<br />An individual record of increases and decreases in an item that is likely to be of interest or impo...
Classification of Accounts<br />
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Accounting Mechanism

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Accounting Mechanism

  1. 1. ACCOUNTING MECHANISM<br />
  2. 2. Learning objectives:<br />To understand the Accounting mechanism<br />To understand the Double Entry system<br />To understand the meaning of account and classification of accounts<br />Conceptual frame work of Financial Accounting<br />To know how to prepare the Final Accounts.<br />
  3. 3. Double Entry System <br />It recognizes that every transaction has a twofold effect.<br />The method of writing every transaction in to two accounts, of these two accounts, one A/c is given ‘Debit’ while other one is given ‘Credit’ with an equal amount so that the Accounting Equation is always in balance.<br />On any date<br />Total Debits = Total Credits<br />
  4. 4. The Recording Process<br />The sequence of steps in recording transactions:<br />Transactions<br />Documentation<br />Journal<br />Financial<br />Statements<br />Trial<br />Balance<br />Ledger<br />
  5. 5. ACCOUNTING MECHANISM<br />Recording<br /><ul><li>Journalizing</li></ul>2. Classifying<br /><ul><li>Ledger preparation</li></ul>3. Summarizing<br /><ul><li>Balancing the ledger
  6. 6. Preparation of Trial Balance
  7. 7. Preparation of Profit and Loss A/c
  8. 8. Preparation of Balance Sheet</li></ul>4. Interpreting the results.<br />
  9. 9. JOURNAL<br />The book of original entry.<br />Recording of entries in the journal is known as Journalising.<br />Large Firms/Concerns maintain special journals also known as Subsidiary Books.<br />
  10. 10. SUBSIDIARY BOOKS<br />Cash Book:<br /><ul><li>Simple
  11. 11. Two column
  12. 12. Three column</li></ul>2. Purchase Book<br />3. Purchase returns Book<br />4. Sales Book<br />5. Sales returns book<br />6. Bills Receivable book<br />7. Bills Payable Book<br />8. Journal Proper<br />
  13. 13. LEDGER<br />It is set of all accounts.<br />It contains a classified summery of all transactions recorded in journal.<br />
  14. 14. ACCOUNT - MEANING<br />An individual record of increases and decreases in an item that is likely to be of interest or importance.<br />It is “T” shaped<br />Debit is left side of “T” account<br /> Credit is right side of “T” account<br />
  15. 15. Classification of Accounts<br />
  16. 16. Rules of Double Entry System<br />
  17. 17. Conceptual frame work of Financial Accounting<br />
  18. 18. TRIAL BALANCE<br />A statement of Debit and Credit totals or balances extracted from the various accounts in the Ledger.<br />Objectives:<br /><ul><li>To facilitate the preparation of Final Accounts.
  19. 19. To check the arithmetical accuracy of the books.</li></li></ul><li>CAPITAL AND REVENUE ITEMS<br />Capital Expenditure:<br />The benefit of which is not fully derived in one year but spread over several periods.<br />Eg: Acquisition of assets, additions to fixed assets<br />Revenue Expenditure:<br />The benefit of which is derived in the year in which the expenditure was incurred.<br />Eg: Raw material, Rent, wages and salaries.<br />
  20. 20. FINAL ACCOUNTS<br />Include preparation of:<br />Trading and Profit and Loss A/c<br />To know the operating performance of the business i.e.profitability.<br />Balance Sheet<br />To know the financial position of the firm on a particular date.<br />

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