The document provides an overview of basic accounting concepts. It defines accounting and discusses key accounting principles like the business entity concept, money measurement concept, and dual aspect concept. It also covers accounting conventions like going concern and consistency. The document outlines the different components of accounting like accounting events, rules, and preparation of financial statements. It includes an example of a simple case study and financial statements.
ACCOUNTING CONCEPTS AND PRACTISE FULL EXPLAINED VVVVVVVVIMP.pptxChikkandlapalliVenka
This document provides an overview and agenda for a basic accounting level II course. It begins with defining accounting as recording, classifying, and summarizing financial transactions for preparing financial statements. The rest of the document outlines the topics to be covered, including accounting concepts, conventions, events, rules, financial statement preparation, and a case study. Sample financial statements are also provided.
This document provides an overview and agenda for a basic accounting level 2 course. It begins by defining accounting as the art of recording, classifying, and summarizing financial transactions for the purpose of preparing financial statements. It then outlines the topics that will be covered, including accounting concepts, events, rules, and financial statement preparation. An example financial statement for a company called Vision Enterprises is also provided.
The document provides an overview of basic accounting concepts. It defines accounting as recording, classifying, and summarizing financial transactions for preparing financial statements. It then discusses key accounting concepts like the business entity concept, money measurement concept, dual aspect concept, and accounting period. It also covers accounting conventions like going concern and consistency. The document aims to explain the fundamental principles and assumptions of accounting.
The document provides an overview of basic accounting concepts, including:
- Accounting is the process of recording, classifying, and summarizing financial transactions to prepare financial statements.
- Key accounting concepts include business entity, money measurement, dual aspect, cost, accounting period, conservatism, realization, and matching.
- Accounting conventions include going concern, consistency, and accrual.
- The document also discusses classifying accounting events as capital, revenue, or deferred revenue expenditures.
The document discusses key accounting concepts and terms related to bases of accounting, types of accounts, and elements of financial statements. It explains the differences between cash basis and accrual basis of accounting and covers topics like assets, liabilities, income, expenses, revenue, capital, and deferred revenue expenditure. Accounting standards and their role in maintaining uniformity is also summarized.
This document provides an overview of basic accounting level II. It discusses what accounting is, how to best learn accounting, the difference between accounting and finance, key accounting concepts and conventions, accounting events, rules of accounting, how to prepare financial statements, and provides a simple case study. The key topics covered include defining accounting as recording, classifying and summarizing financial transactions for preparing financial statements, emphasizing understanding concepts over rote learning of rules, and explaining common accounting concepts like business entity, money measurement, and accounting conventions like going concern and consistency.
Finance is the language of business. To make effective business decisions, you have to understand and speak the terms in which business is measured. Top management decides on the basis of numbers. So, do you have a choice but to make the effort to start talking numbers confidently. This FREE eguide helps you take the first steps to financial intelligence.
The document provides an overview of Chapter 1 of an accounting fundamentals course. It includes:
1) An agenda that outlines the key topics to be covered in the chapter, including understanding accounting concepts and golden rules, preparing financial statements, maintaining subsidiary books, and depreciation.
2) Descriptions of the meaning and phases of the accounting cycle, accounting terminology, concepts, and the double entry system.
3) Explanations of personal, real, and nominal accounts and the golden rules for debiting and crediting each type.
4) Examples of journal entries, posting journal entries to ledgers, and the preparation and format of a trial balance.
5) An overview of key
ACCOUNTING CONCEPTS AND PRACTISE FULL EXPLAINED VVVVVVVVIMP.pptxChikkandlapalliVenka
This document provides an overview and agenda for a basic accounting level II course. It begins with defining accounting as recording, classifying, and summarizing financial transactions for preparing financial statements. The rest of the document outlines the topics to be covered, including accounting concepts, conventions, events, rules, financial statement preparation, and a case study. Sample financial statements are also provided.
This document provides an overview and agenda for a basic accounting level 2 course. It begins by defining accounting as the art of recording, classifying, and summarizing financial transactions for the purpose of preparing financial statements. It then outlines the topics that will be covered, including accounting concepts, events, rules, and financial statement preparation. An example financial statement for a company called Vision Enterprises is also provided.
The document provides an overview of basic accounting concepts. It defines accounting as recording, classifying, and summarizing financial transactions for preparing financial statements. It then discusses key accounting concepts like the business entity concept, money measurement concept, dual aspect concept, and accounting period. It also covers accounting conventions like going concern and consistency. The document aims to explain the fundamental principles and assumptions of accounting.
The document provides an overview of basic accounting concepts, including:
- Accounting is the process of recording, classifying, and summarizing financial transactions to prepare financial statements.
- Key accounting concepts include business entity, money measurement, dual aspect, cost, accounting period, conservatism, realization, and matching.
- Accounting conventions include going concern, consistency, and accrual.
- The document also discusses classifying accounting events as capital, revenue, or deferred revenue expenditures.
The document discusses key accounting concepts and terms related to bases of accounting, types of accounts, and elements of financial statements. It explains the differences between cash basis and accrual basis of accounting and covers topics like assets, liabilities, income, expenses, revenue, capital, and deferred revenue expenditure. Accounting standards and their role in maintaining uniformity is also summarized.
This document provides an overview of basic accounting level II. It discusses what accounting is, how to best learn accounting, the difference between accounting and finance, key accounting concepts and conventions, accounting events, rules of accounting, how to prepare financial statements, and provides a simple case study. The key topics covered include defining accounting as recording, classifying and summarizing financial transactions for preparing financial statements, emphasizing understanding concepts over rote learning of rules, and explaining common accounting concepts like business entity, money measurement, and accounting conventions like going concern and consistency.
Finance is the language of business. To make effective business decisions, you have to understand and speak the terms in which business is measured. Top management decides on the basis of numbers. So, do you have a choice but to make the effort to start talking numbers confidently. This FREE eguide helps you take the first steps to financial intelligence.
The document provides an overview of Chapter 1 of an accounting fundamentals course. It includes:
1) An agenda that outlines the key topics to be covered in the chapter, including understanding accounting concepts and golden rules, preparing financial statements, maintaining subsidiary books, and depreciation.
2) Descriptions of the meaning and phases of the accounting cycle, accounting terminology, concepts, and the double entry system.
3) Explanations of personal, real, and nominal accounts and the golden rules for debiting and crediting each type.
4) Examples of journal entries, posting journal entries to ledgers, and the preparation and format of a trial balance.
5) An overview of key
just made your self ...................................................................................................................................................................................................................................s...........................................................................................................................................................................................s.........................................
1) The document discusses key accounting concepts and principles including the business entity concept, money measurement concept, going concern concept, accounting period concept, cost concept, and dual aspect/revenue realization concepts.
2) It explains how these concepts form the basis for recording business transactions and preparing financial statements according to standard accounting practices.
3) Specific examples are provided to illustrate how each concept is applied, such as showing capital investment as a liability to the owner, expensing fixed assets over their useful life, and recognizing revenue only when realized through cash receipt or a receivable.
The document provides 9 practical finance tips for entrepreneurs to confidently discuss finances with their CFO, including understanding key financial statements like the income statement, balance sheet, and cash flow statement; the differences between accounting and finance, revenues and expenses; as well as budgets, depreciation, and the differences between profits and cash. It aims to demystify financial concepts in a straightforward way for business owners.
Accounting involves recording, classifying, and summarizing financial transactions and events in terms of money. It has the objectives of providing information for decision-making, external reporting, and statutory compliance. Some key principles of accounting include the business entity assumption, cost principle, dual aspect concept, and matching principle. Accounting follows conventions like conservatism, consistency, and full disclosure. Financial statements are prepared according to generally accepted accounting principles using either a single-entry or double-entry bookkeeping system.
Here are the journal entries for the given transactions:
June 1 Capital A/c Dr. 60,000
To Shankar (proprietor) A/c 60,000
(Being capital introduced by proprietor)
June 2 Bank A/c Dr. 30,000
To Capital A/c 30,000
(Being amount deposited in bank from capital)
June 4 Kamal A/c Dr. 10,000
To Purchases A/c 10,000
(Being goods purchased from Kamal on credit)
June 6 Shiram A/c Dr. 4,920
Discount A/c Dr. 80
To Bank A/c 5,000
This document provides an overview of financial accounting and taxation concepts. It discusses the characteristics of businesses and different types of businesses. It then defines accounting and bookkeeping, and explains the different types of accounts used in accounting. The document outlines the main branches of accounting including financial, cost, and management accounting. It also describes the accounting entry systems of single and double entry. Finally, it provides explanations of key taxation concepts such as VAT, TDS, service tax, and CST that are handled in accounting software like Tally.
This document provides an overview of basic accounting concepts and principles discussed in Chapter 1. It defines accounting as the process of recording, classifying, summarizing, and communicating the results of financial transactions. The three main purposes of accounting are to interpret financial activities, measure financial results, and communicate information to decision-makers. Accounting information is needed by both internal management and external investors, creditors, and other stakeholders. Financial statements, the balance sheet, income statement, statement of owner's equity, and statement of cash flows, are the primary reports used to communicate accounting information.
The document contains definitions and explanations of various accounting terms:
1. Intangible assets are assets that cannot be seen or touched, such as goodwill, patent rights, and trademarks.
2. Contra entries refer to transfers between cash and bank accounts within a cashbook.
3. Working capital is calculated as current assets minus current liabilities and refers to capital available for day-to-day business operations.
4. Ratio analysis simplifies financial statements and allows for comparison within and between firms to aid planning.
This document provides an overview of accounting concepts and principles. It defines accounting as the language of business that measures and communicates financial information. Accounting fulfills the need for managers and investors to understand a business's performance and financial position through financial statements. The document outlines key accounting concepts like the business entity, money measurement, and cost concepts. It also describes accounting conventions like consistency, disclosure, and conservation. Finally, it discusses the accounting cycle and classification of accounts into personal, real, and nominal categories with rules for debit and credit entries.
Accounting involves recording, classifying, and summarizing financial transactions and events. The objectives of accounting include maintaining business records, ascertaining profit/loss, determining financial position, and providing information to internal and external users. The fundamental accounting equation shows that assets equal liabilities plus capital. Key accounting concepts include money measurement, entity, going concern, cost, dual aspect, periodicity, prudence, and realization. Accounting conventions include matching revenues and expenses, consistency, and materiality.
Financial statements are used by companies to communicate financial information to outsiders. The three main financial statements are the income statement, balance sheet, and statement of cash flows. They summarize key financial information like revenues, expenses, assets, liabilities, and cash flows in a standardized format that allows for analysis and comparison. Together, the three statements provide a comprehensive overview of a company's financial performance and position.
Generally Accepted Accounting Principles And Sample Test...Kristen Stacey
This document provides a sample test with multiple choice questions on accounting principles and concepts such as the primary objective of businesses, accounting for liabilities and expenses, accounting for the sale of products, and the classification of assets and liabilities. It also includes short answer questions testing understanding of concepts like retained earnings, calculating net income or loss based on changes in assets and liabilities, and the rules and principles that guide accounting. The document is intended to help students prepare for an exam on generally accepted accounting principles.
If you are new to accounting for small business owners, you must know the three forms of accounting reports - balance sheets, income statements, and cash flows.
This document provides information on managing cash flow for a business. It discusses the key activities of a business - production, marketing, and accounting. It emphasizes the importance of understanding flows of activity through an organization. This includes communication, sales, treasury, production, quality control, public relations, and executive functions. The document stresses establishing systems to free up an entrepreneur's time and empower others. It defines important financial statements and ratios used to analyze a business's performance and cash flow. Accounting software and bookkeepers are addressed. The purpose of accounting is to improve profits and manage cash flow through coordination of production, marketing, and accounting. Cash flow management involves accelerating cash inflows and slowing outflows.
Any business whether small or big needs bookkeeping to keep track of the progress of the business. In this document, you will learn what bookkeeping is all about. https://make-money-with-sam.com/bookkeeping-101-for-small-businesses/
Accounting involves recording financial transactions and events in terms of money. It provides tools to track assets, liabilities, profits and cash flows through financial statements. Accounting serves various stakeholders and specialized fields. Private accounting works within a business, while public accounting has multiple clients. Accounting records transactions using debits and credits in accordance with standards to communicate financial information.
This document provides an introduction to basic accounting concepts. It begins by defining key terms like assets, liabilities, capital, and accounting periods. It then explains important accounting principles and financial statements, including accrual accounting, accounts receivable/payable, and the balance sheet, income statement, and statement of cash flows. The overall purpose is to familiarize readers with fundamental accounting vocabulary and practices.
This document discusses accounting concepts and procedures. It defines accounting as recording, analyzing, interpreting, reporting, and communicating financial transactions. It discusses the key steps in accounting such as identification, collection, recording, classifying, analysis, and interpretation of financial data. The document also outlines the objectives and uses of accounting information for internal and external users like owners, managers, investors, lenders, suppliers and governments. It explains traditional accounting practices and concepts like the double-entry system and how accounting provides complete records, determines profits and losses, and reports financial position.
Act Academy provides Industrial training in PHP, .Net, graphic designing, web designing and many more. Also provides diploma courses in CAD designing, Financial accounting with 100% job assurances.
STREETONOMICS: Exploring the Uncharted Territories of Informal Markets throug...sameer shah
Delve into the world of STREETONOMICS, where a team of 7 enthusiasts embarks on a journey to understand unorganized markets. By engaging with a coffee street vendor and crafting questionnaires, this project uncovers valuable insights into consumer behavior and market dynamics in informal settings."
just made your self ...................................................................................................................................................................................................................................s...........................................................................................................................................................................................s.........................................
1) The document discusses key accounting concepts and principles including the business entity concept, money measurement concept, going concern concept, accounting period concept, cost concept, and dual aspect/revenue realization concepts.
2) It explains how these concepts form the basis for recording business transactions and preparing financial statements according to standard accounting practices.
3) Specific examples are provided to illustrate how each concept is applied, such as showing capital investment as a liability to the owner, expensing fixed assets over their useful life, and recognizing revenue only when realized through cash receipt or a receivable.
The document provides 9 practical finance tips for entrepreneurs to confidently discuss finances with their CFO, including understanding key financial statements like the income statement, balance sheet, and cash flow statement; the differences between accounting and finance, revenues and expenses; as well as budgets, depreciation, and the differences between profits and cash. It aims to demystify financial concepts in a straightforward way for business owners.
Accounting involves recording, classifying, and summarizing financial transactions and events in terms of money. It has the objectives of providing information for decision-making, external reporting, and statutory compliance. Some key principles of accounting include the business entity assumption, cost principle, dual aspect concept, and matching principle. Accounting follows conventions like conservatism, consistency, and full disclosure. Financial statements are prepared according to generally accepted accounting principles using either a single-entry or double-entry bookkeeping system.
Here are the journal entries for the given transactions:
June 1 Capital A/c Dr. 60,000
To Shankar (proprietor) A/c 60,000
(Being capital introduced by proprietor)
June 2 Bank A/c Dr. 30,000
To Capital A/c 30,000
(Being amount deposited in bank from capital)
June 4 Kamal A/c Dr. 10,000
To Purchases A/c 10,000
(Being goods purchased from Kamal on credit)
June 6 Shiram A/c Dr. 4,920
Discount A/c Dr. 80
To Bank A/c 5,000
This document provides an overview of financial accounting and taxation concepts. It discusses the characteristics of businesses and different types of businesses. It then defines accounting and bookkeeping, and explains the different types of accounts used in accounting. The document outlines the main branches of accounting including financial, cost, and management accounting. It also describes the accounting entry systems of single and double entry. Finally, it provides explanations of key taxation concepts such as VAT, TDS, service tax, and CST that are handled in accounting software like Tally.
This document provides an overview of basic accounting concepts and principles discussed in Chapter 1. It defines accounting as the process of recording, classifying, summarizing, and communicating the results of financial transactions. The three main purposes of accounting are to interpret financial activities, measure financial results, and communicate information to decision-makers. Accounting information is needed by both internal management and external investors, creditors, and other stakeholders. Financial statements, the balance sheet, income statement, statement of owner's equity, and statement of cash flows, are the primary reports used to communicate accounting information.
The document contains definitions and explanations of various accounting terms:
1. Intangible assets are assets that cannot be seen or touched, such as goodwill, patent rights, and trademarks.
2. Contra entries refer to transfers between cash and bank accounts within a cashbook.
3. Working capital is calculated as current assets minus current liabilities and refers to capital available for day-to-day business operations.
4. Ratio analysis simplifies financial statements and allows for comparison within and between firms to aid planning.
This document provides an overview of accounting concepts and principles. It defines accounting as the language of business that measures and communicates financial information. Accounting fulfills the need for managers and investors to understand a business's performance and financial position through financial statements. The document outlines key accounting concepts like the business entity, money measurement, and cost concepts. It also describes accounting conventions like consistency, disclosure, and conservation. Finally, it discusses the accounting cycle and classification of accounts into personal, real, and nominal categories with rules for debit and credit entries.
Accounting involves recording, classifying, and summarizing financial transactions and events. The objectives of accounting include maintaining business records, ascertaining profit/loss, determining financial position, and providing information to internal and external users. The fundamental accounting equation shows that assets equal liabilities plus capital. Key accounting concepts include money measurement, entity, going concern, cost, dual aspect, periodicity, prudence, and realization. Accounting conventions include matching revenues and expenses, consistency, and materiality.
Financial statements are used by companies to communicate financial information to outsiders. The three main financial statements are the income statement, balance sheet, and statement of cash flows. They summarize key financial information like revenues, expenses, assets, liabilities, and cash flows in a standardized format that allows for analysis and comparison. Together, the three statements provide a comprehensive overview of a company's financial performance and position.
Generally Accepted Accounting Principles And Sample Test...Kristen Stacey
This document provides a sample test with multiple choice questions on accounting principles and concepts such as the primary objective of businesses, accounting for liabilities and expenses, accounting for the sale of products, and the classification of assets and liabilities. It also includes short answer questions testing understanding of concepts like retained earnings, calculating net income or loss based on changes in assets and liabilities, and the rules and principles that guide accounting. The document is intended to help students prepare for an exam on generally accepted accounting principles.
If you are new to accounting for small business owners, you must know the three forms of accounting reports - balance sheets, income statements, and cash flows.
This document provides information on managing cash flow for a business. It discusses the key activities of a business - production, marketing, and accounting. It emphasizes the importance of understanding flows of activity through an organization. This includes communication, sales, treasury, production, quality control, public relations, and executive functions. The document stresses establishing systems to free up an entrepreneur's time and empower others. It defines important financial statements and ratios used to analyze a business's performance and cash flow. Accounting software and bookkeepers are addressed. The purpose of accounting is to improve profits and manage cash flow through coordination of production, marketing, and accounting. Cash flow management involves accelerating cash inflows and slowing outflows.
Any business whether small or big needs bookkeeping to keep track of the progress of the business. In this document, you will learn what bookkeeping is all about. https://make-money-with-sam.com/bookkeeping-101-for-small-businesses/
Accounting involves recording financial transactions and events in terms of money. It provides tools to track assets, liabilities, profits and cash flows through financial statements. Accounting serves various stakeholders and specialized fields. Private accounting works within a business, while public accounting has multiple clients. Accounting records transactions using debits and credits in accordance with standards to communicate financial information.
This document provides an introduction to basic accounting concepts. It begins by defining key terms like assets, liabilities, capital, and accounting periods. It then explains important accounting principles and financial statements, including accrual accounting, accounts receivable/payable, and the balance sheet, income statement, and statement of cash flows. The overall purpose is to familiarize readers with fundamental accounting vocabulary and practices.
This document discusses accounting concepts and procedures. It defines accounting as recording, analyzing, interpreting, reporting, and communicating financial transactions. It discusses the key steps in accounting such as identification, collection, recording, classifying, analysis, and interpretation of financial data. The document also outlines the objectives and uses of accounting information for internal and external users like owners, managers, investors, lenders, suppliers and governments. It explains traditional accounting practices and concepts like the double-entry system and how accounting provides complete records, determines profits and losses, and reports financial position.
Act Academy provides Industrial training in PHP, .Net, graphic designing, web designing and many more. Also provides diploma courses in CAD designing, Financial accounting with 100% job assurances.
STREETONOMICS: Exploring the Uncharted Territories of Informal Markets throug...sameer shah
Delve into the world of STREETONOMICS, where a team of 7 enthusiasts embarks on a journey to understand unorganized markets. By engaging with a coffee street vendor and crafting questionnaires, this project uncovers valuable insights into consumer behavior and market dynamics in informal settings."
Understanding how timely GST payments influence a lender's decision to approve loans, this topic explores the correlation between GST compliance and creditworthiness. It highlights how consistent GST payments can enhance a business's financial credibility, potentially leading to higher chances of loan approval.
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
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Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
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How Does CRISIL Evaluate Lenders in India for Credit RatingsShaheen Kumar
CRISIL evaluates lenders in India by analyzing financial performance, loan portfolio quality, risk management practices, capital adequacy, market position, and adherence to regulatory requirements. This comprehensive assessment ensures a thorough evaluation of creditworthiness and financial strength. Each criterion is meticulously examined to provide credible and reliable ratings.
BONKMILLON Unleashes Its Bonkers Potential on Solana.pdfcoingabbar
Introducing BONKMILLON - The Most Bonkers Meme Coin Yet
Let's be real for a second – the world of meme coins can feel like a bit of a circus at times. Every other day, there's a new token promising to take you "to the moon" or offering some groundbreaking utility that'll change the game forever. But how many of them actually deliver on that hype?
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
2. 2
Agenda
What is Accounting
Mode of Learning Accounting
Accounting and Finance - Difference
Accounting Concepts / Conventions
Accounting Events
Rules of Accounting
Preparation of Financial Statements
A Simple Case Study
3. 3
Accounting is defined as the art of Recording,
Classifying and Summarizing transactions in
monetary terms (in Money terms) for the
preparation of Financial Statements
JOURNAL
PAYMENT
Vision Enterprises
Financial Statement
at December 31, 1997
Assets
Cash
Account Receivable
Land
Total Assets
Liability
Account Payable
Notes Payable
Total Liability
Stockholder’s Equity
Contributed Capital
Retained Earnings
Total Stockholder’s
Equity
$4,456
$5,714
$ 981
---------
$11,151
======
$3,830
$ 416
---------
$4,246
======
$2,365
$ 367
---------
$2,732
======
Vision Enterprises
Financial Statement
at December 31, 1997
Assets
Cash
Account Receivable
Land
Total Assets
Liability
Account Payable
Notes Payable
Total Liability
Stockholder’s Equity
Contributed Capital
Retained Earnings
Total Stockholder’s
Equity
$4,456
$5,714
$ 981
---------
$11,151
======
$3,830
$ 416
---------
$4,246
======
$2,365
$ 367
---------
$2,732
======
Vision Enterprises
Financial Statement
at December 31, 1997
Assets
Cash
Account Receivable
Land
Total Assets
Liability
Account Payable
Notes Payable
Total Liability
Stockholder’s Equity
Contributed Capital
Retained Earnings
Total Stockholder’s
Equity
$4,456
$5,714
$ 981
---------
$11,151
======
$3,830
$ 416
---------
$4,246
======
$2,365
$ 367
---------
$2,732
======
?
What is Accounting
4. 4
What is Accounting
Accounting is the art of recording, classifying and Summarizing
financial transactions in the Preparation of Financial Statements
Recording refers to creating Journal entry for every financial
transaction with Debit and Credit amounts.
Classifying refers to Classifying each of the Debit / Credit
Transaction to Capital or Revenue and Asset, Liability, Revenue or
Expense
Summarizing refers to Grouping the Transactions of Asset,
Liability, Revenue and Expenses and preparing the Financial
Statements (Trading, Profit and Loss Account and Balance Sheet)
In case of
• Trading, Manufacturing and Customer Service oriented
Organization, the sum of all income and expenses is referred to
as Profit and Loss account
• Social Service oriented Organization like Schools, Hospitals and
Government Organizations, Banks it is referred to as Income
and Expenditure account .
Note:- Trial Balance is not a Financial Statement. It is only a summary
of all Debit and Credit Transactions.
5. 5
Mode of Learning Accounting
Change your mindset that accounting means
only Debit and Credit
Do not blindly learn Accounting Rules and
apply the rules of Debit and Credit
The Best way to Learn Accounting is
Learn the Accounting Concepts
Understand the Accounting Conventions
Classify the Accounting Event
Apply the Accounting Rules
Record, Classify and Summarize the Journal
• You are Confused. Am I right?
Do not become panic and move forward, you will understand
6. 6
Mode of Learning Accounting
Learn Accounting Concepts
(Ten Fundamental Accounting Concepts)
Understand Accounting Conventions
(Three major conventions)
Classify the Accounting Events
(Capital, Revenue, Deferred Revenue Expenditure)
Apply the Accounting Rules
(Personal, Real and Nominal Rules)
Record the Transaction as a Journal
(Entering the Debit and Credit Side of Transaction)
Classify the Transaction
(Asset, Liability, Revenue or Expense)
Summarize the Transaction
(Prepare Trial Balance, Trading, P&L and Balance Sheet)
7. 7
Finance and Accounting - Difference
Finance Accounts
Procurement and Utilization of
Funds
Recording of an Accounting
Event
Leads to Investment Decisions Expressed in Monetary Terms
Financing Decisions Recording , Classifying and
Summarizing Transactions
Futuristic Preparation of Financial
Statements (Trading, Profit and
loss Account and Balance
Sheet)
Cost of Capital Historical
Cash Flow / Fund Flow Compliance with Statutory
Matters like companies Act,
Income Tax Act, Sales Tax Act
Etc.,
Project Appraisal
Ratio Analysis
8. 8
Accounting Concepts/Conventions
(US GAAP/UK GAAP/IFRS/SOX)
The Concepts and conventions of accounting are
developed by IASC (International Accounting Standards
Committee) which is in-charge of releasing International
Accounting Standards (IAS)
The IASC Decides the preferred Accounting practices
worldwide and encourages the worldwide acceptance
There are 41 International Accounting Standards
Now IFRS (International Financial Reporting Standards)
and SOX (Sarbanes Oxley) Act gain more importance
which came up from US GAAP and UK GAAP
9. 9
Difference between Concepts and Conventions
The Accounting Concepts / Principles evolved out of the
Practice and Procedures followed by different countries
and later on established by the International Statutory
Accounting Bodies like The Institute of Chartered
Accountants of India, The Institute of Chartered
Accountants of England and Wales etc to become an
Accounting Principle statutorily need to be followed
while preparing the Financial Statements. In nutshell this
has evolved out of standard Practice followed by several
countries while preparing the Trading, Profit and Loss
Account and Balance Sheet.
The Accounting Conventions / Practices are basically
assumptions and expected to be followed while
preparing the Financial Statements.
12. 12
Accounting Concepts
Business Entity Concept
Accounts can be kept only for Entities, which are different from the
persons who are associated with these entities
Ex. Sole Proprietary, Partnership firm, Company
This is one of the most Important and fundamental accounting
principle with which Double entry system of accounting has evolved.
Accounts need to be maintained separate from the Owners and
providers of capital. If you understand the simple logic, then you know
30% of Accounting. Just Recall Fundamentals of Accounting from
Oracle Perspective Level I Example of Siva, Oracle and Bank.
See Next Slide for More Examples. If you cannot understand this
Concept Please Do not Proceed Further and try to understand by
reading again Level I and Level II Material
13. 13
Types of Entities
Type of Organization Example
Sole Proprietary Siva & Co
Partnership Firm Ganesan Bros
Private Company Oracle India Pvt Ltd (A Private Company in which
shares are not traded in Stock Exchange and
members cannot exceed 50)
Public Company Hindustan Unilever Ltd (A Public Company in
which Shares are traded in Stock Exchange)
Closely Held Company Cadbury India Ltd (A Public Company in which
shares are not traded but shares are held by more
than 50 persons)
Trust Hutchinson Private Trust
Society Sembur Co-op Society
Association of Persons ICAI, ICWAI, ICSI, Rotary Club
Body of Individuals (one Man Corp) President of India, Governor of State
Any other Legal Entity (HUF) A Hindu Undivided Family Jointly holding the
Investment and Properties for the benefit of
Family members.
14. 14
Accounting Concepts
Business Entity Concept
Ex 1: You are running your own Textile Showroom as a Dealer in Cloth as a Sole
Proprietor/Individual Owner of the Business. The entire capital amount for the
Business is provided by you. In this case also for the purpose of accounting you
need to maintain Two set of books.
• One set of books for the purpose of Textile Business in which, Business
owes you equivalent to the Capital Provided (Capital + Profit earned) or
(Capital – Losses)
• In your own Books the amount of Capital invested will be shown as an
Investment in Business as an Asset. This need not be maintained as a
Normal Set of Books but required to know the Cash Inflow and Cash Outflow
from Income Tax Perspective.
Ex 2: You are working for Oracle Corporation and Oracle has a Bank Account
with Bank of America and You have Bank Account with Citi Bank and the salary
at end of every month is transferred from Bank of America to Citi Bank. How
many accounting Entities involved in this case?
• If your answer is 4, then you are right (You, Oracle Corp, Bank of America,
Citi Bank)
Ex 3: You run your own Business in Software Consulting and your Friend has
agreed to provide a Loan of 50000 USD which he goes and deposit directly into
your Bank account - How many accounting Entities involved in this case?
• If you say 3, You are right, it is only Three. (You, Your Friend and Bank)
15. 15
Accounting Concepts
Money Measurement Concept
Record should be made only of that information which can be
expressed in Monetary Terms (i.e.) Currency value (USD,GBP,INR)
Ex 1. Sole Proprietor had 40 Tables & Chairs. This cannot be
recorded unless a Value of Furniture is known in monetary value
Ex 2. Very Famous Indian Example – Rama Killed Ravana. Can
this be Accounted? – NO
Ex 3. My wife Loves me so much – Can this be accounted?
– A Big NO (Hahhah). This is Flaw in Financial Accounting as it
does not understand the human values
Ex 4. My Father in Law gave his Personal Property to start my
Business. Can this be Accounted – Yes (If the Value of the
Property is provided)
16. 16
Accounting Concepts
Money Measurement Concept
A Normal Doubt comes to your mind in the first and fourth
example in previous slide how to get the value. We should not be
taking the Purchase value, but we should take the Market value on
the date of transferring the assets to Business. This is an
exception to cost concept only in case of transfer to another
business
Ex 5: Siva started his software consulting Business with his own
Property (Cost Price 1 Million USD and Market Value 1.5 Million
USD) and Furniture's Cost price 50000 worth Market Value 30000
USD
- In this case, You can record Siva Capital (1530000) and Building
1500000 and Furniture 30000 as Assets
Liabilities Assets
Siva Capital 1530000 Building 1500000
Furniture 30000
Total 1530000 Total 1530000
17. 17
Accounting Concepts
Dual Aspect Concept
The Value of the Assets owned by the concern is equal to the claims on
the Assets
ASSETS = LIABILITIES + OWNER’S EQUITY
OWNER’S EQUITY = ASSETS – LIABILITIES
LIABILITIES = ASSETS – OWNER’S EQUITY
Ex: If Owners Equity is 600000 and Liabilities are 400000, then Total
Asset = 1000000
Asset Owner’s Equity + Liabilities
Liabilities Assets – Owner’s Equity
Owner’s Equity Assets - Liabilities
18. 18
Accounting Concepts
Cost Concept
Assets are always shown at their Cost and not at
their current Market Value
Ex 1. A Land Purchased for Rs.5 Lacs will be
recorded only at Rs.5 Lacs even though Market
value may be lower say Rs.4 Lacs or Higher Rs.6
Lacs than the Cost Price
Ex 2. You are acquiring a Business for a Million
USD and its value as per Books is 0.8 Million, then
the difference of 0.2 Million is termed as Goodwill
and you should records the assets and liabilities at
the price you have paid for the Business (i.e.) 1
Million
19. 19
Accounting Concepts
Accounting Period
Accounting measures activity for a specified interval of time, usually
a year
(e.g) Calendar Year (Jan’07-Dec’07)
Fiscal Year (Apr’07-Mar’08)
Choosing the Accounting period is the entities choice, but there are
legal rules like Companies Act and Income Tax Act which prescribes
the period in which the entity has to report to them.
Remember still Entities can have different accounting period for their
own Internal Management Reporting
A Company in India can have for Company Law Purpose (Jan-Dec)
Year and Income Tax Purpose (Apr-Mar) Year and for own internal
Reporting (Jul-Jun) Year
Note: The Entities cannot change their accounting period without
getting proper approval only in case of Companies Act and not
possible with Income Tax Authorities.
20. 20
Accounting Concepts
Conservatism
Anticipate no Profits but provide for all possible losses.
Accountants are by nature Conservative and also to protect the interest of
the Shareholders and Creditors it is required to provide for all losses.
Ex 1. A pharmaceutical Company going to Loose the case filed for Patent
Right filed for a medicine
Ex 2.Company is likely to Win a Major Legal Dispute or a Sales Contract.
Note: This rule should not be misinterpreted to provide anticipated reduction
in market price of a Product and Providing Losses
Ex 3: You are a Government Company and there is a possibility that
Government will withdraw the subsidy for Fertilizers in the forthcoming
budget, You cannot provide loss of subsidy as a loss now itself.
Ex 4: The Government is likely to increase the Price of petrol which is one of
the essential input for your business, then you cannot provide for losses.
Ex 5:There is a Fire in your in your Factory and Goods were lost and the
Goods are insured, then the claim you submitted can be booked to the
satisfaction of Insurance Company and Auditors.
21. 21
Accounting Concepts
Realization Concept
The Sales is considered to have taken place only when either the cash
is received or some third party becomes legally liable to pay the
amount. Revenues are recognized when they are earned or
realized. Realization is assumed to occur when the seller receives
cash or a claim to cash (receivable) in exchange for goods or services
Ex 1: A Sales invoice for Rs.1 Million
Credit Note for Rs.15000 received
Ex 2: For instance, if a company is awarded a contract to build an
office building the revenue from that project would not be recorded in
one lump sum but rather it would be divided over time according to the
work that is actually being done.
22. 22
Accounting Concepts
Matching Concept
When an Event affects both the revenues and expenses, the effect on
each should be recognized in the same accounting period
Ex 1: Generally Employees Salaries are paid for the previous month at
the beginning of the next month. But they have rendered their
services to produce goods and sold and Sales revenue is recognized
in previous month. So to match the cost with the revenue earned, we
need to make provision for Salaries in previous month itself. (i.e.)
March Salary paid in April, but a Salary Payable provision will be
made in March itself
EX 2: Insurance Premium paid for Jan- Dec whereas your accounting
period closes on March. In this case only three months premium need
to be treated as Expense and balance 9 months treated as advance
premium paid as an asset
23. 23
Accounting Concepts
Materiality concept
Insignificant events would not be recorded, if the
benefit of recording them does not signify the
cost
Ex: A calculator worth Rs.500 not recorded asset
rather than charged off as an Expense even
though the benefit is enduring in nature.
This concept need to read in conjunction with
accounting events which signifies the transaction
into Capital, Revenue and deferred revenue
expenditure.
24. 24
Accounting Concepts
Objectivity Concept
An Evidence of the happening of the Transaction should support
every Transaction in the form of paper. External Evidence is
considered to be more authenticated proof than Internal Evidence.
This rule is more important from Audit perspective as Auditors
always consider and bound to get more external evidences than
internal Evidences.
Ex 1: Third Party Evidence (Credit Note from Supplier)
Ex 2: Auditors Collect Statements from Customer and Suppliers for
the amount showing as Outstanding from Customers and amounts
Payable to Suppliers.
Ex 3: The Sales Invoices alone is not considered as an objective
evidence unless it is not supported by Delivery challan and
acknowledgement of Goods Received by Customer.
25. 25
Accounting Conventions
Going Concern
Accounting Records , Events and Transactions on the
assumption that the entity will continue to operate for an
indefinitely Long period of time
Ex. An Entity will not be started with an intention to close
within the specified time period. Business is always not
started with an intention to close and it is expected to
continue forever.
26. 26
Accounting Conventions
Consistency
The Accounting Policies and methods followed by the
company should be the same every year
Ex 1. Period should not be changed frequently from Jan-
Dec to Apr-Mar
Ex 2. Inventory Valuation change from FIFO to LIFO or
Weighted Average not permitted frequently
Ex 3. Changing Depreciation Policy from Straight Line to
Reducing Balance Method frequently
Note: If any Company decides to change the policy, then
that Company has to report on the effect of Profit/Loss
due to the change for past 5 Years.
27. 27
Accounting Conventions
Accrual
In General it is assumed that Accounts are always
prepared based on Accrual basis. However there are
entities which follow Cash Basis of Accounting Also
Ex: Salary Payable to employees (March salary paid in
April), Interest Receivable on Investments (NSC
interest), Dividend Receivable on shares, Tax Payable to
Government (March sales Tax and Annual Income Tax)
The Company Law / Income Tax Act Prescribes all
Companies to follow Accrual Basis of Accounting except
for Professional Firms and Government Organizations
which are allowed to follow Cash Basis of Accounting.
28. 28
Classification of Accounting Event
Capital Item: Any expenditure that creates an asset, for
example:
Purchase of plant or machinery
Improvements to assets that increase their
usefulness or extend their effective useful life of the
asset
Expenditure incurred in transporting an asset to its
site and preparing it for use.
29. 29
Classification of Accounting Event
Revenue Item: An Income or Expenditure and the
benefit of which will be exhausted within a year (i.e.) The
Calendar Year or the Financial Year whichever is set up
for the Set of Books
Ex: Salary and wages, Printing and Stationery, Sales
Revenue, Interest Income, Salary Payable, Bonus
Payable, Tax Payable etc.,
In Simple terms this is an event which generates
revenue and the related cost to earn the revenue are
accounted as expense.
30. 30
Classification of Accounting Event
Deferred Revenue Expenditure: It is neither a Capital
nor Revenue and the benefit of which will be realized for
more than a year (Exceeding beyond the Calendar year
for the set of books) and does not result in creation of
an asset.
Ex 1: Advertisement Expenditure the benefit of which
is likely to be obtained over a period more than one
year (E.g.) PepsiCo Pays USD 2 Million to Sachin
Tendulkar for an Advertisement Contract for two
Years and benefit of which is expected to be for four
years
Ex 2: Royalty paid to the author of the book for five
years
31. 31
Rules of Accounting
Accounts
Personal Impersonal
Real Nominal
Debit the Receiver
Credit the Giver
Debit what comes in
Credit what goes out
Debit Expenses and Losses
Credit Revenue and Income
Ex: Sole Prop, Company
Ex: Cash, Bank, Building,Inv Ex: Sales, Power, Rent
32. 32
Application of Accounting Rule
Check whether is there a Money Transaction Involved?
Is that transaction affects your set of books?
Check whether does the transaction falls under which accounting
period.
Does the transaction involve a personal account (i.e.) Siva as a
Person or a Company or any other entity as mentioned in
Business entity concept
Is that person is receiver or giver in the transaction and
accordingly debit or credit the person account.
Does the transaction involves any Cash inflow or Cash outflow?
(i.e.) Cash or Bank involved
If there is no cash involvement then the choices are as follows
Both can be real ( Debit and credit both real accounts)
One real and one nominal (Either Debit/Credit for Real or Credit/ Debit
for Nominal accounts)
33. 33
Accounting Rule of Thumb
Nature of Transaction Increase Decrease
Asset Debit Credit
Liability Credit Debit
Revenue Credit Debit
Expense Debit Credit
Profit Credit Debit
Losses Debit Credit
34. 34
Combination of Rules
Dr Personal A/c
Cr Real A/c
Ex:Drawings or Advance to Employee,
Payment to Supplier
Dr Real A/c
Cr Personal A/c
Ex:Capital invested, Payment Received
from Customer
Dr Real A/c
Cr Nominal A/c
Ex: Interest Recd by Cash, Cash Sales
Dr Nominal A/c
Cr Real A/c
Ex: Rent Paid by Cash
Dr Personal A/c
Cr Nominal A/c
Ex: Interest Accrued on Investment,
Dividend accrued on Investment
Dr Nominal A/c
Cr Personal A/c
Ex: Hire Purchase Charges accrued, Interest
Payable, Salary Payable
Dr Real A/c
Cr Real A/c
Ex:Purchase of Inventory by Cash
Dr Real A/c
Cr Real A/c
Ex: Cash withdrawal or Deposit
35. 35
Combination of Accounting Rules
Combination Personal Real Nominal
Personal X
Real
Nominal X
Debit
Credit
36. 36
Combination of Accounting Rules
Both Debit and Credit cannot be Personal Accounts
EX 1: Siva paid Cash to Ajay. The Entry Cannot be
• Ajay A/c Dr
• Siva A/c Cr
The Correct entries are as follows. In Ajay set of Books
Cash A/c Dr 1000
Siva A/c Cr 1000
Ajay A/c Dr 1000
Cash A/c Cr 1000
In Siva set of Books
Similarly Both Debit and Credit cannot be Nominal Accounts
Note: Remember this important aspect and therefore You
will not commit any mistake in Debit and Credit
37. 37
Recording of Accounting Transactions
Recording of an Accounting event is known as Journal
entry
Recording is made in Primary and Secondary Books in
Manual Accounting system
Primary Books
General Ledger
Cash Book
Secondary Books
Purchase Register
Sales Register
Fixed Assets Register
Returns (Purchase return/Sales Return)
Journal Register
In Oracle ERP System GL is called Main Ledger and the
Transactions emanating from Modules are referred to as
Sub Ledger
38. 38
Recording of Accounting Transactions
First the transactions are entered as Journal
Then Second step is they are posted to individual account as ‘T’
Accounts – In Oracle or any other ERP system this happens
immediately when a transaction is created
Prior to ERP system except for Non cash charges, Journals are
directly posted in Primary and secondary ledger with supporting
Document reference Number (like Invoice Number), date, amount and
a cross reference ledger folio number (Page Number) of respective
Debit and Credit Entries in Ledger.
Journals are entered only for year end Provision Entries.
Then the balance from each T account is taken and which becomes a
Trial Balance with Sum of Debits and Sum of Credit which should be
equal.
Trial Balance forms the basis for preparation of Financial Statements
and in ERP systems including Oracle Applications Debit is shown as
Positive and Credit is shown as Negative
In ERP systems the chance of Trial Balance not matching or not
tallying issue is very minimal. In case of manual Accounting this will
happen most of the time and unless it is corrected and balanced, the
accountant should not proceed to prepare Financial Statements
39. 39
Preparation of Financial Statements
Preparation of Trial Balance
Balances Extracted from General Ledger
Sum of debit and credit balances = 0
Preparation of Trading, Profit & Loss Account or Income &
Expenditure Account and Balance sheet
Trial Balance is the base for preparing Financial
Statements
Adjustment entries are made in adjustment period and
passed as Journal Vouchers before making the financial
statements
Trading and Profit and Loss Account is Always for a
period say for an Year (Jan - Dec or Apr - Mar), Quarterly
for 3 months or Half yearly for 6 months
Balance Sheet is always as on Date (As on 31-12-2007 or
31-03-2008)
41. 41
Case Study
Siva started Business in dealer in Computer Spare parts and
Computer Stationery on 01-APR-2007 and following events occurred
in the month of April.
Siva invested USD 50000 Cash and USD 50000 worth of furniture
Siva purchased USD 75000 worth of goods on credit
Siva friend Ajay promised him to give a loan of USD 25000
Siva sold USD 50000 worth of good for USD 100000
Siva paid rent USD 2000 for two months
Siva paid Salary to Staff USD 5000
Siva incurred USD 5000 on interior decoration which will last for two
years.
Siva sold USD 10000 worth of goods on credit for USD 18000
Siva has a Bank account with Citi Bank which credited USD 5000
wrongly of John account
Purchased Vehicle for USD 25000 paid through Bank
Cash Deposited by Siva into Bank 50000 USD
43. 43
Accounting Terminologies
Before creating Accounting Transactions let us recall and learn few
accounting terminologies
ASSETS: Any property or Investment which can be convertible into cash
LIABILITIES: Amount Payable to providers of goods and Services
(Creditors) and Providers of Capital (Owners)
REVENUE: Amount earned out of the Sale Proceeds and the amount
earned on Investments
EXPENSES: Amount incurred or expended to earn the revenue
PROFIT: TOTAL REVENUE – TOTAL EXPENSES
LOSS: If the Total Expenses is more than Total Revenue it is termed as
Loss
FIXED ASSETS: Amount Invested in Long Term Assets which is not
intended to be sold within a Year (Ex. Machinery, Land)
CURRENT ASSETS: Amount invested in Short Term Assets which is
intended and rotated to earn Revenue (Ex. Inventory)
NOTE: The Fixed Asset and Current asset vary from Person to Person
Ex: For a Dealer in Refrigerator it is a Current asset which becomes Fixed
Asset for you when you buy.
CREDITORS: Person who provide Money or Goods on Credit to the
Business (Supplier)
DEBTORS: Goods or Money Provided / sold on Credit by the Business
(Customers)
44. 44
Accounting Terminologies
You should also understand the same accounting
terminology is referred or used by different people in
different context
Receivables also known as Trade Debtors, Debtors, Account
Receivables, Sundry Debtors, Trade Receivables, Amount
Receivables
Liability is also known as Trade Creditors, Account Payable,
Sundry Creditors, Amount Payable, Trade Liabilities, Creditors
Cost of Goods Sold: It varies with Company to Company the way
they do set up and use it. The Cost of Goods Sold comprise of
Material Cost, Resource Cost (Labor and Machinery) and
Overheads. There are few companies which will have only Material
Cost and will not add up Resource Cost and Overheads. You
Should talk to client and understand their requirement
• Let’s See Each of this in a Formula Model
46. 46
Accounting Calculations and Formula
Purchased Inventory
Reconciliation
Opening Purchased Inventory 100
(+) Add Purchases 2500
(-) Less Issued to Production 2000
(-) Less Purchase Return 125
Closing Purchased Inventory 475
Finished Goods (FG)
Reconciliation
Opening stock of FG 200
(+) Add Production 2000
(+) Sales Return 100
(-) Less Sales 1500
Closing FG Inventory 800
47. 47
Accounting Calculations and Formula
Cash Reconciliation
Opening Cash Balance 100
(+) Add Cash Receipts 2500
(Cash Sales, Cash Recd from
Receivables, Cash with drawl from
Bank)
(-) Less Cash Payments 2000
(Cash Purchases, Expenses paid
By Cash, Cash Deposited into Bank)
Closing Cash Balance 600
Bank Balance Reconciliation
Opening Balance of Bank 200
(+) Add Bank Receipts 2000
(Cash Deposits, Cheque Received
From Debtors, Interest Credited)
(-) Less Payments from Bank 1500
(Paid to Creditors by Cheque,
Expenses paid by cheque, Cash
With drawl from bank)
Closing Bank Balance 700
48. 48
Accounting Entries for the Case Study
Sl
No
Description Nature of Account Dr (in
USD)
Cr (in
USD)
1 Cash A/c Dr
Furniture A/c Dr
(Cash and Furniture Real
Tangible Asset. Hence
apply the Real Rule – Debit
What comes in)
To Siva Capital A/c
(Siva is a Person running
the business as a
Proprietor in this case.
Hence apply the Rule for
Personal – Credit the giver)
Real
Real
Personal
(Also using the Business Entity
Concept Siva being owner is
also treated as a Creditor for
the purpose of Business. If the
Business is wind up Business
has to pay back Siva)
50000
50000
100000
2 Inventory A/c Dr
(Real Tangible Asset)
To Creditors A/c
(Person be an Individual or
Company gives the goods
on Credit)
Real
Personal
75000
75000
49. 49
Accounting Entries for the Case Study
Sl
No
Description Nature of Account Dr (in
USD)
Cr (in
USD)
3 No Entry
(Mere Promise to give does
not tantamount to
Monetary Transaction)
No Entry
(Money Measurement Concept
– No Monetary transaction
involved )
4 Two Entries involved (One
for sale of goods and one
for reduction in inventory)
Cash / Bank A/c Dr
(Real – Debit what comes
in)
To Revenue (Sales) A/c
(Nominal Rule - Credit all
Income and Revenue)
Cost of Goods Sold A/c Dr
(Nominal – Debit
Expenses)
To Inventory A/c
(Reduction in Inventory)
Real A/c
Nominal A/c
Nominal A/c
Real A/c
100000
50000
100000
50000
50. 50
Accounting Entries for the Case Study
Sl
No
Description Nature of Account Dr (in
USD)
Cr (in
USD)
5 Rent A/c Dr
(Debit Expense – Nominal)
Rent Advance A/c Dr
(This is like Cash
Advanced to Landlord.
Hence it should be treated
as Personal -
Debit the Receiver)
To Cash A/c
(Real – Credit what goes
out)
Nominal A/c
Personal A/c
Real
1000
1000
2000
6 Salary A/c Dr
(Nominal – Debit Expense)
To Cash A/c
(Real – Credit what goes
out)
Nominal A/c
Real A/c
5000
5000
51. 51
Accounting Entries for the Case Study
Sl
No
Description Nature of Account Dr (in
USD)
Cr (in
USD)
7 Advertisement Exp A/c Dr
Advt Exp Adv A/c Dr
(This is like a Deferred
Revenue Expense needs to
be charged in two years.
50% need to be Current
Year Expense and Balance
50% is carried Forward and
treated as Expense in next
Year)
To Cash A/c
(Real – Credit what goes
out)
Nominal
Real
Real
2500
2500
5000
8 Receivables A/c Dr
To Revenue A/c
Cost of Goods Sold A/c Dr
To Inventory A/c
Real
Nominal
Nominal
Real
18000
10000
18000
10000
52. 52
Accounting Entries for the Case Study
Sl
No
Description Nature of Account Dr (in
USD)
Cr (in
USD)
9 No Entry
(This is a Mistake done by
Bank. Bank has to make
correction and in Siva’s
Book there is no
accounting entry required)
No Entry
10 Vehicles A/c Dr
(Real Tangible Asset
Debit what comes in)
To Bank A/c
(Real asset – Credit what
goes out)
Real
Real
25000
25000
11 Bank A/c Dr
(Real asset- Debit what
comes in
To Cash A/c
(Real Asset – Credit what
goes out)
Real
Real
50000
50000
53. 53
T Accounts
Dr USD Cr USD
To Bal 100000 By Cash 50000
By Furniture 50000
Total 100000 Total 100000
Dr USD Cr USD
To Siva Cap 50000 By Bal 50000
Total 50000 Total 50000
Siva Capital Account Furniture Account
Dr USD Cr USD
To Siva Cap 50000
To Sales 100000
By Rent 1000
By Rent Adv 1000
By Salary 5000
By Advt Adv 2500
By Advt exp 2500
By Bank 50000
By Balance 88000
Total 150000 Total 150000
Dr USD Cr USD
To Creditors 75000 By COGS 50000
By COGS 10000
By Bal 15000
Total 75000 Total 75000
Cash Account Inventory Account
54. 54
T Accounts
Dr USD Cr USD
To Bal 75000 By Invent 75000
Total 75000 Total 75000
Dr USD Cr USD
To Cash 1000 By Bal 1000
Total 1000 Total 1000
Creditors Account Rent Account
Dr USD Cr USD
To Cash 1000 By Bal 1000
Total 1000 Total 1000
Dr USD Cr USD
To Bal 118000 By Cash 100000
By Rece 18000
Total 118000 Total 118000
Rent Advance Account Revenue / Sales Account
Salary Account Advertisement Exp Account
Dr USD Cr USD
To Cash 5000 By Bal 5000
Total 5000 Total 5000
Dr USD Cr USD
To Cash 2500 By Bal 2500
Total 2500 Total 2500
55. 55
T Accounts
Dr USD Cr USD
To Cash 2500 By Bal 2500
Total 2500 Total 2500
Dr USD Cr USD
To sales 18000 By Bal 18000
Total 18000 Total 18000
Advt Exp Advance Account Receivables Account
Dr USD Cr USD
To Inventory 50000
To Inventory 10000
By Bal 60000
Total 60000 Total 60000
Dr USD Cr USD
To Bank 25000 By Bal 25000
Total 25000 Total 25000
Cost of Goods Sold Account Vehicle Account
Bank Account
Dr USD Cr USD
To Cash 50000 By Vehicle 25000
By Bal 25000
Total 50000 Total 50000
56. 56
Trial Balance
Debit USD Credit USD
Furniture (A) 50000
Cash (A) 88000
Bank (A) 25000
COGS (E) 60000
Salary (E) 5000
Rent (E) 1000
Rent Advance (A) 1000
Advertisement Exp (E) 2500
Advt Exp Advance (A) 2500
Inventory (A) 15000
Vehicle (A) 25000
Receivable (A) 18000
Siva Capital (L) 100000
Sales / Revenue (R) 118000
Creditors (L) 75000
Total 293000 Total 293000
Trial Balance for the Month of APRIL 2007
A – Asset, L – Liability, R – Revenue, E - Expense
57. 57
Profit and Loss Account For APR 2007
Expenses USD Revenue USD
COGS (E) 60000
Salary (E) 5000
Rent (E) 1000
Advertisement Exp (E) 2500
To Profit 49500
Sales / Revenue (R) 118000
Total 118000 Total 118000
58. 58
Balance Sheet as on 30-APR-2007
Liabilities USD Assets USD
Siva Capital 100000
Add Profit 49500
Siva Capital 149500
Creditors 75000
Furniture 50000
Vehicle 25000
Cash 88000
Bank 25000
Receivables 18000
Inventory 15000
Rent Advance 1000
Advt Exp Advance 2500
Total 224500 Total 224500
59. 59
Important Points to Remember
Accounting can be learnt only by Practice and not by reading
Try to learn by creating Journal entries with Examples
Cash Balance can never have negative balance at any point of time
Land will never Depreciate and it will have only Appreciation
Bank can have negative balance if you have Overdraft facility
The Bank which maintains your account will have exactly opposite
entries of what is shown in your Bank Account
In the above, Example the bank account in your Books and in Bank
Books will be as follows
Dr USD Cr USD
To Cash 50000 By Vehicle 25000
By Balance 25000
Total 50000 Total 50000
Dr USD Cr USD
To Vehicle 25000
To Balance 25000
By Cash 50000
Total 25000 Total 25000
Siva Books
Bank Account
Bank Books
Siva Account
60. 60
Case Study for Practice
Take your own Personal Account and try to create the following
On First of July 2007 You had a Cash balance of USD2500 which is
your Capital
On 3rd July You have received Salary of USD 12000
On 5th Paid Rent of USD 1200 by cheque
On 7th You purchased provision for house for 800 USD
On 10th You spent for outing through your credit card USD 500
On 15th You withdraw Cash USD 8000
On 20th You Invested in Fixed Deposit USD 5000 @5% Interest Per
annum
On 22nd you have given a Loan of USD 2000 to friend James
On 25th You spent for Car Repairs 500 USD
On 28th Your wife gave USD 200 to your Neighbor from her pocket
On 30th You Deposited Cash 1000 USD to your Bank Account
61. 61
How to Approach to Learn
I tried my best to teach Accounting in simple way. This
is only a beginning. You have to Practice a Lot to learn
The simple way to Learn Accounting is as follows
Do not go for advanced level books without understanding the
basics
Start with (+1) Accounting book in case of people in India and
Pre-University book in case of other Countries. Practice the
examples given in that book and exercises
This is more than sufficient for any non accounting candidate to
work on Oracle Applications
Never try to memorize the concepts and rules
Try to understand and apply the concepts and Rules
There are areas like Depreciation, Provision and Amortization
etc might not have been covered in this presentation. I do not
want you to go to advanced level without understanding the
basics. If you understand the Concepts and Rules then You can
handle all of them
Read and Practice Level I and II at least Three times