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chapter-3-BBA The-Recording-Process.pptx
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- 3. 3 Definitions • Book offirst entry Journal • Separate record showing increases and decreases in a specific assets or liability Account •A group of accounts for a business entity Ledger •List of account and their balances at a given time Trial balance
- 4. Analysis of Business transaction singleentry system Old system of accounting Single effect Accounting records are not kept strictly Only cash and person account maintain Profit not accurate Two system of accounting
- 5. Analysis of Business transaction Doubleentry system Modern system of accounting Double effect Proper book maintain 2 systems of accounting
- 6. Double entry conceptof accounting Based on a simple concept: each party in a business transaction will receive something and give something in return. * The two sides of a coin * Receive & Give * Left versus Right
- 7. 7 Transaction analysis Determine whichaccount is affected by the transaction. Determine whether the account increases or decreases. Determine whether the account should be debited or credited. Record the transaction using journal entry. Post the journal entries to the accounts in the ledger. Prepare an unadjusted trial balance at the end of the period.
- 8. 8 Transaction analysis No. ofaccount Nature of account Rules apply
- 9. Transaction Analysis A ‘T’-accountrepresents a ledger account and is a tool used to understand the effects of one or more transactions. T- Account
- 10. GAAP(General accounted acceptedpinciple) Assets Debit Credit INCRE ASE DECRE ASE + -
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- 16. Practice example Question 1 1.Rizwan commence his business with cash 50000. 2. Purchase goods for cash 15000 3. Purchase office furniture for cash 20000 4. Paid advertising expense 2000 5. Purchase goods from Adil 14000 6. Sold goods for cash 36000 7. Sold goods to Salman 27000 8. Received cash from salman 20000 9. Paid cash to Adil 10000 10.Paid salaries to salesman 10000
- 17. Practice example Question 2 1.Invested 100000 cash, building 75000 and furniture 25000. 2. Purchase goods for cash 44000 subject trade discount 10%. 3. Purchase goods from Ali 5000 4. Sold goods on account to Zain 8000. 5. Receive cash from Zain 7800, discount allowed 200 6. Paid Ali 4750, discount received 250 7. Goods taken away by the owner 350 8. Paid salaries 1000, Rent 600 and Repairing charges 400 9. Received commission 1500
- 18. Accounting cycle Recording journal cash book classifying ledger (posting) Summarizing trialbalance , PLs & B.S Analysis interpretatio n communicatio n to users
- 19. Journal Journal is abook name. Journal Jour French word Nal Day Book It is also called •Day book •Daily book •Book of original entry
- 20. 20 Journal entries Everytransaction would first be recorded in a journal The process of recording a transaction in the journal is called journalizing Journal Date Description L/F Debit Credit 1 2 3
- 21. 21 Journalizing steps 1. Recordthe date. 2. Record the title of the account debited in the Description column. 3. Enter the amount in the Debit column. 4. Record the title of the account credited in the Description column. 5. Enter the amount in the Credit column.
- 22. GAAP(General accounted acceptedpinciple) Assets Debit Credit INCRE ASE DECRE ASE + -
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- 28. Equity INCREASE DECREASE Additional Capital Revenues/Sales Expenses Withdrawal Owner’s Capital IN CR EA SE DE CR EA SE Debit Credit DebitCredit + + - - Sales Wage Exp DE CR EA SE IN CR EA SE
- 29. 1. Transactions areanalyzed and recorded in journal. Documents Journal 2. Transactions are posted from journal to ledger. Journal Ledger 3. Trial balance is prepared. Journal, Ledger, Trial Balance Trial Balance
- 30. Journal entries On July1, Mr. Ahmad started business with cash 40000 Journal Date Description L/F Debit Credit Jul 1 Cash 40000 Capital 40000 Being start business with cash.
- 31. On July 5,Mr. Ahmad bought a piece of land for Rupees 200,000 by paying cash. Date Description PR Debit Credit Nov 5 Land 200,000 Cash 200,000 Purchased land for cash. Dr Cr Land Dr Cr Cash Jul 5 Land 200,000 Jul 5 Cash 200,000
- 32. July10, Mr. Ahmadpurchased goods on account for Rupees 13,500. Date Description l/F Debit Credit Jul10 Purchases 13,500 Accounts Payable 13,500 Purchased goods on account. Dr Cr Purchases Dr Cr A/C Payable Jul 10 A/C Pay 13,500 Jul 10 Supplies 13,500
- 33. July 30, Mr.Ahmad paid to creditors Rs.9,500. Date Description PR Debit Credit Jul 30 Accounts Payable 9,500 Cash 9,500 Paid creditors. Dr Cr A/C Payable Dr Cr Cash Jul 30 Cash 9,500 Jul 30 A/C Pay 9,500
- 34. July 30 Mr.Ahmad purchased a truck for Rs.64,500 paying Rs.18,000 cash and the remainder on account. Date Description Debit Credit Jul 30 Truck 64,500 Cash 18,000 Accounts Payable 46,500 Dr Cr Truck Dr Cr A/C Payable Jul 30 Cash 18,000 A/C Pay 46,500 Jul 30 Truck 18,000 Dr Cr Cash Jul 30 Truck 46,500
- 35. Aug 18, Mr.Ahmad received fees of Rs.27,500 from customers for services provided for the month of July 2011 Date Description PR Debit Credit Aug 18 Cash 27,500 Fees Earned 27,500 Received fees from customers. D r Cr Fees Earned D r Cr Cash Aug 18 Fees Earned 27,500 Aug 18 Cash 27,500
- 36. Aug 30 incurredthe following expenses: wages Rs.20,500; and rent Rs3,000 paid by cash. Date Description PR Debit Credit Aug 30 Wages account 20,500 cash account 20,500 Aug 30 Rent account 3,000 Cash account 3,000 D r Cr Wages Payable D r Cr Wages Exp Aug 30 Wages Pay 20,500 Aug 30 Wages Exp 20,500 D r Cr Cash D r Cr Rent Exp Aug 30 Cash 3,000 Aug 30 Rent Exp 3,000
- 37. Aug 30, Mr.Ahmad withdrew Rs2,000 cash for personal use. Aug 30 Drawing Account 2,000 Cash Account 2,000 Owner withdrew cash for personal use. D r Cr Cash D r Cr Dawing Aug 30 Cash 2,000 Aug 30 Wthdrwl 2,000
- 38. Problem No. 2 Introduce cash 148000 and building 20000 as capital. Purchase goods on account 100000 Purchase Motor vehicle from saleem auto 150000 Sold goods to Imran at list price trade discount 5% Rs. 5000. Paid travelling allowance 1000
- 39. Problem No. 3 Umer started business with cash 74000. Purchase goods 14000 from Amjad. Sold goods to Aslam 9000 Cash given to Amjad 13800 and received discount 200 Received cash from Aslam 8800 in full settlement.
- 40. Problem No. 4 Stared business with capital 300000 on 1st October 2015. Received goods on credit from Naveed 30000 on 5 October 2015 Goods returned to Naveed 1000. Withdrew cash 1000 for tuition fee by the owner. Building purchase for cash 120000
- 41. Problem No. 5 Qaiser started business with cash 20000 Goods purchased from Ansar 10000 Goods lost by accident 12000 Goods given away as charity 5000 Cash given away as charity 1000 charged depreciation on machinery1000
- 42. Problem No. 7 Started business with cash 60000 Deposit cash into bank 400000 Goods bought by cheque 150000 Purchased goods for cash 10000 and on credit 5000 from Ali. Sold goods for cash 12000 and on account 6000 to Aslam. Ali’s account settled by receiving 200 as discount Aslam’s account settled by allowing 200 as discount
- 43. Problem No. 8 Introduce cash as a capital 148000 Purchase furniture for cash 30000 Cash purchases 16000 Purchase goods on account from Noor Mills 4500 Goods returned to Noor Mills 500 Cash sales 9900 Paid to Noor Mills 3800 in full settlement. Sold Goods to Mobeen 1500 Lost by accident while goods in transit 75 Goods returned by Mobeen 125 Paid tuition fee for owner children 300 Allowed discount 50 to Mobeen and account full settled. Paid insurance premium 330
- 44. Ledger Ledger accountis a summary statement of all the transactions relating to a person, asset, liability, expense or income which has taken place during a given period of time and it shows their net effect. Ledger is known as principal book of accounts, book of final entry, or book of secondary entry.
- 45. Flow chart ofledger Transaction Ledger Journal Trial balance
- 46. Utility of ledger Completeinformation at a glance Arithmetical accuracy Result of business operations Accounting information
- 47. Format of ledger Date:Date is the transaction is recorded in this column. Particular: The account is debited or credited is recorded in this column. Journal folio: In this column, the page number of the journal from which the entry has been posted to ledger Amount: The amount of the transaction is recorded Date Detail J.F Amoun t Date Detail J.F Amount Name of ledger account Dr. cr.
- 48. Posting The process oftransferring the debit and credit items from the journal to ledger account is called posting.
- 49. Balancing of ledger Balancingis the difference between the total debits and the total credit of an account. When the posting is done, many accounts may have entries on their debit side as well as credit side. The net result of such debits and credits is an account is the balance. Balancing means the writing of the difference between of the two sides in the lighter (smaller total) side, so that the grand total of two sides become equal.
- 50. Significance of balancing Thereare three possibilities while balancing an account duing a given period. It may be a debit balance or credit balance or a nil balance depending upon the debit total and the credit total
- 51. Trial balance Atrial balance is a report that lists the balances of all general ledge account of a company at a certain point of time.
- 52. Objective of trialbalance To establish arithmetical accuracy of books To provide a base for preparation of financial statements. To summaries the ledger account.
- 53. Format of trialbalance Sr. No Ledger account L/F Debit Credit 1 Cash account Xxx 2 Salaries account xxx 3 Capital account Xxx 4 Bank loan account Xxx xxx xxx Trial Balance As on …………….
- 54. Format of trialbalance Sr. No Ledger account L/F Debit Credit 1 Cash account Xxx 2 Salaries account xxx 3 Capital account Xxx 4 Bank loan account Xxx xxx xxx Trial Balance As on …………….