An accounting transaction is any economic event that affects a company's financial records. There are two types of transactions: external between the company and an outside party, and internal within the company. The key accounting records are accounts, the chart of accounts, accounting equations, journals, ledgers, and trial balances. Accounts accumulate balances for specific items like cash, assets, or equity. The chart of accounts lists all accounts. Accounting equations show the relationship between assets, liabilities, and equity. Journals record transactions in chronological order. Ledgers compile account information. Trial balances check that total debits equal total credits.

1. PRESENTED BY
VIKAS RAO
ACCOUNTING
TRANSACTION

2. ACCOUNTING TRANSACTION
 Any economic events that affects company’s assets,
liabilities or equity at the time of the event. For ex.
The purchase of the equipments, the consumption of
supplies in operations, issuance of debt of stock.
 Accounting transactions are of two types—
1) External transactions
2) Internal transactions
 External transactions are those transactions which
takes place between the company and the external
party while internal transactions are those which
takes place inside the company.

3. ACCOUNT
 Account is an accounting record that accumulates
the activity of a specific item and yields the items’
balance.
 For ex.: a company’s cash account is increased and
decreased as cash is received and paid which shows
the amount of cash held at any point of the time.

4. CHART OF ACCOUNT
Assets
Account
receivable
Supplies Equipments
Cash

5. CHART OF ACCOUNT
Liabilities
Account
payable
Unearned
reserves
Notes
payable

6. CHART OF ACCOUNT
Equity
Common
stock
Retained
Earnings

7. ACCOUNTING EQUATIONS
 ASSETS = LIABILITIES + EQUITY

8. FOR EXAMPLE
 After incorporating, Circle Films issues 3,000 shares
of common stock to investors for Rs. 15,000 cash.
Assets Liabilities Equity
Cash Common stock
Prior 0
balance
0 0
#1 +15,000 0 +15,000
New 15,000
balance
15,000
15,000 o 15,000

9. FOR EXAMPLE
 The firm purchases a video camera for Rs.9,000 and
memory card for Rs. 1,000.
Assets Liabilities Equity
Cash Supplies Equipment Common stock
Prior 15,000 0 0
balance
15,000
#2 -10,000 +1,000 +9,000
New 5,000 1,000 9,000
balance
15,000
15,000 15,000

10. DOUBLE ENTRY SYSTEM
 Every transaction consist of at least two changes in
the financial position at the same time and both the
changes must be recorded in the book of accounts.
 Locus Pacioli , an Italian wrote a first book on double
entry system in 1494.
 The fundamental principle of double entry system
lies in the analyzing the two changes involved in
business transactions and properly recording of both
the changes in the books of accounts.

11. DOUBLE ENTRY SYSTEM
 The double entry system is succeeded by the
following processes-
-Journal
-Ledger
-Trial balance
-Final accounts

12. ADVANTAGES
 This method records both the aspects of each and
every transactions and it is possible to keep complete
account.
 Under this system profit and loss account can be
prepared easily by taking together all the accounts
and thereby the result of the business can be
ascertained.
 Under this system mistakes and deflections can be
detected.

13. DISADVANTAGES
 Under this system each transaction is recorded in
books in two stages (journal and ledger) and two
sides (debit and credit). This results in increase of
number and size of books of accounts and creation of
complications.
 It involves time, labor and money. So it is not
possible for small concerns to keep accounts under
this system.
 As the system is complex, there is greater possibility
of committing errors and mistakes.

14. JOURNAL
 It has been derived from the French word jour which
means day and journal means daily.
 Transactions are recorded daily in the journal in
chronologically ordered way i.e. in the order of their
occurrence in a book with a short description called
narration.
 Narration is the short description of each
transaction. The subject matter of the transaction
can be ascertained through narration and it can be
said that A journal entry is incomplete without
narration.

15. ADVANTAGES
 Each transaction is recorded as soon as it takes place
so there is no chance of any transaction been
omitted.
 Journal shows the complete entry of the transaction
in one entry.
 Due to the journal there is no need of writing all the
details in the ledger as it is already written in the
ledger.
 Any mistake in the ledger can be easily detected by
the help of journal.

16. FORMAT OF THE JOURNAL
Date Particulars L.F. Amount Amount
Amount to be debited______Dr. XXX
Amount to be credited XXX
(Narration)

17. FOR EXAMPLE
Journalize the following transactions:
 Ram started his business with cash 20,000
 Purchased goods from Shyam for cash 5,000
 Bought furniture for cash 7,000
 Paid office rent 3,000

18. JOURNAL
Date Particulars L.F. Amount Amount
Cash A/C________Dr.
Capital A/C
(Being starting of business)
20,000
20,000
Purchase A/C________Dr.
Cash A/C
(Being purchase of goods)
5,000 5,000
Furniture A/C________Dr.
Cash A/C
(Being purchase of furniture)
7,000 7,000
Rent A/C___________Dr.
Cash A/C
(Being office rent paid)
3,000 3,000

19. LEDGER
 The journal is not able to provide us information
about a specific account in one place which causes a
great difficulty and to avoid this the journalized
transaction are transferred to ledger accounts.
 Ledger is the book in which accounts are managed.
Generally one account is opened one each page of
this book but if transactions are numerous it may
extend it numerous pages.
 The process of transferring information from journal
to the ledger is known as posting.

20. LEDGER
 Ledger is known as the destination of entries in
journal.
 The transactions cannot be recorded directly in the
ledger- they must be routed through journal.
 Ledger has two identical sides- left hand side (debit
side) and right hand side (credit side).
 Debit aspects are recorded on the debit side and
credit are recorded on the credit side.
 Generally the balance is drawn at the year end and
recorded on the lesser side to balance both sides.
This balance is called closing balance.

21. TYPES AND FORMS OF LEDGER
 These are of two types-
 Standard form
 Self-balancing form
 Format of ledger account-
Date Particulars J.R. Amt. Date Particulars J.R. Amt.
Cash A/C XXX Purchase
A/C
XXX

22. From the previous journal entry
 The ledger would be-
CASH A/C
Date Particulars J.R. Amt. Date Particulars J.R. Amt.
Capital A/C 20,000 Purchase A/C 5,000
Furniture A/C 7,000
Rent A/C 3,000
Balance c/d 5,000
Total 20,000 Total 20,000

23. LEDGER
CAPITAL A/C
 PURCHASE A/C
Date Particulars J.R. Amt. Date Particulars J.R
.
Amt.
Balance c/d 20,000 Cash A/C 20,000
Total 20,000 Total 20,000
Date Particulars J.R. Amt. Date Particulars J.R. Amt.
Cash A/C 5,000 Balance c/d 5,000
Total 5,000 Total 5,000

24. LEDGER
FURNITURE A/C
RENT A/C
Date Particulars J.R. Amt. Date Particulars J.R. Amt.
Cash A/C 7,000 Balance c/d 7,000
Total 7,000 Total 7,000
Date Particulars J.R. Amt. Date Particulars J.R. Amt.
Cash A/C 3,000 Balance c/d 3,000
Total 3,000 Total 3,000

25. TRIAL BALANCE
 Trial balance may be defined as the informal
accounting schedule that lists the ledger account
balances at a point in time compares the total of
debit balance with the total of credit balance.
 The trial balance serves two main purposes-
 To check the equality of debits and credits- an arithmetical or
mathematical test of accuracy.
 To provide information for use in the preparation of the final
accounts.

26. FROM THE PREVIOUS LEDGER ACCOUNT
 TRIAL BALANCE would be-
S.No. Account Name A/C No. Debit Credit
1 CASH A/C 5,000
2 CAPITAL A/C 20,000
3 PURCHASE A/C 5,000
4 FURNITURE A/C 7,000
5 RENT A/C 3,000
TOTAL 20,000 20,000