The document provides an introduction to accounting, including its objectives and systems. It discusses the key concepts of double-entry accounting such as journal entries, ledger accounts, and the accounting equation. It also includes an example journal for business transactions with the corresponding ledger accounts and trial balance. Accounting is defined as the process of systematically recording and reporting financial transactions to determine profits and financial position. The double-entry system requires equal debits and credits and ensures accuracy through the balance of accounts.

1. INTRODUCTION OF
ACCOUNTING
SUBMITTED TO:
DR. SUNIL VERMA
SUBMITTED BY:
NENCY PARIHAR
MBA (HA)

2. ACCOUNTING
It is a business language, twenty-three centuries
ago Chanakya introduced the accounting concepts
in “Arthashatra.”
In a business activity there is a lot of “give & take"
exist which is known as Transaction.
It is necessary to record all the transactions very
systematically & scientifically so that the financial
relationship of business, properly understood.
It helps us to analyze the past performance and to
plan for the future actions.

3. OBJECTIVES OF ACCONTING
To keep systematic records
To ascertain profitability
To ascertain the financial position of the business
To assist in decision making
To fulfill compilance of Law

4. ACCONTING
INFORMATION SYSTEM
It is the system that identifies, records, summarized and
communicates the various transactions of a business.
It provides:- Relevance, Cost-Benefit, Reliability,
Comparability and Timeliness
It helps stakeholders to make better business decision.
It communicates the information that owners, managers can
evaluate a business financial performance effectively.

5. CHARTS OF ACCOUNT
The various accounts that a company uses to capture business
activity are:
ASSETS:- The property of any kind which provides
recurring benefits to the business along with its owner-
ship.
Example: Cash, Furniture, Stock etc.
LIABILITIES:- It is the debts and obligations of the
business
Example: Loan, Notes Payable etc.
EQUITY:- It is used when referring to an ownership
interest in business.
Example: Common Stock, Retained Earnings

6. ACCONTING EQUATION
ASSETS= LIABILITIES + EQUITY
TRANSACTION 1: Honda issues 5000 shares of common
stock to investor for Rs 20000.so assets will increase and
equity will increase.
TRANSACTION 2: Honda purchases a machine of Rs
10000.cash will decrease and equipment's will be added.
TRANSACTION 3:-Honda sold their goods and earns 5000
cash.

7. ASSETS = LIABILITY + EQUITY
Cash amount receivable supplies equipment's = Account Payable Unearned
reserves Notes payable+ Common Stock Retained Earnings
1# 20000 = + 2000
2# -10000 +10000 =
3#5000
+5000
Total-15000 +10000=20000
+5000
25000 = 25000

8. There are two types of accounting system which are as
follows:
Single Entry System
Double Entry System
ACCOUNTING SYSTEM

9. DOUBLE ENTRY SYSTEM
It is a scientific system of accounts followed by all over
the world.
It was developed by “Luco Paciloi” of Italy in 1494.
In these, every entry has its dual aspects of debit and
credit.

10. SUCCESSIVE PROCESSES
OF DOUBLE ENTRY
SYSTEM
Journal
Ledger
Trail Balance
Final Account

11. ADVANTAGES OF
DOUBLE ENTRY SYSTEM
The profit & loss account can be separated easily by
taking together all the accounts, relating income, revenue
& expenses.
Financial position of the business can be assessed.
Deflects can be detected easily.
Statics are easily available so thus management can
efficient and appropriate easily.
For each debit there must be a corresponding credit of an
equal amount, thus posses accuracy of books.

12. DIADVANATAGES OF
DOUBLE ENTRY SYSTEM
Each transaction is recorded in two stages(Journal &
Ledger) and two sides debit & credit. Thus, increase no.
of size of books and creates complications.
It requires expert knowledge to keep accounts under this
system.
As it is complex, thus greater possibility of committing
errors.
It involves time, labour & money.

13. JOURNAL
The book of Original Entry.
The word journal has been derived from the French word "Jour"
Jour means day. So, journal means daily.
Transactions are recorded daily in journal and hence it has
named so. As soon as a transaction takes place its debit and
credit aspects are analyzed and first of all recorded
chronologically (in the order of their occurrence) in a book
together with its short description. This book is known as
journal.
Thus we see that the most important function of journal is to
show the relationship between the two accounts connected with a
transaction. This facilitates writing of ledger. Since transactions
are first of all recorded in journal, so it is called book of original
entry or prime entry or primary entry or preliminary entry, or
first entry.

14. ENTRY
Recording a transaction in the appropriate place of the concerned
book of account is called entry. Entry may be of the following two
types:
Journal Entry: Recording a transaction in a journal is called
journal entry or journalizing.
•Ledger Entry: Recording a transaction from journal to the
concerned account in the ledger is called ledger entry. It is also
known as ledger posting.

15. The short explanation of each transaction is written under
each entry which is called narration. The subject matter of the
transaction can be ascertained through narration. Besides this,
if there be any mistake in determining debit or credit aspect
of a transaction, it can be easily detected from narration. "A
journal entry is not complete without narration".
NARRATION

16. CHARACTERISTIC OF
JOURNAL
 Journal is the first successful step of the double entry system. A
transaction is recorded first of all in the journal. So, journal is
called the book of original entry.
 •A transaction is recorded on the same day it takes place. So,
journal is also called a day book.
 •Transactions are recorded chronologically. So, journal is called
chronological book.
 •For each transaction the names of the two concerned accounts
indicating which is debited and which is credited, are clearly
written into consecutive lines. This makes ledger - posting easy.
That is why journal is called "assistant to ledger" or
"subsidiary book".
 •Narration is written below each entry.
 •The amount is written in the last two columns - debit amount in
debit column and credit amount in credit column .

17. Each transaction is recorded as soon as it takes place. So there is no
possibility of any transaction being omitted from the books of account.
Since the transactions are kept recorded in journal chronologically with
narration, it can be easily ascertained when and why a transaction has
taken place.
For each and every transaction which of the two concerned accounts
will be debited and which account credited, are clearly written in
journal. So, there is no possibility of committing any mistake in writing
the ledger.
Since all the details of transactions are recorded in journal, it is not
necessary to repeat them in ledger. As a result ledger is kept tidy and
brief.
Journal shows the complete story of a transaction in one entry.
Any mistake in ledger can be easily detected with the help of journal
ADVANTAGES OF JOURNAL

18. FORMAT OF JOURNAL
Date Particular L.F Amount(Dr.) Amount(Cr.)
Debited a/c……Dr XXX
A/c credited XXX
(NARRATION)
*L.F: Ledger Folio

19. ILLUSTRATION 1
Business transactions of Mr.A for the month of Jan.1997.
1st January, 1997 A started business with cash Rs.20,000/
 3rd January, 1997 Goods purchased for cash Rs.6,000/-
5th January, 1997 Goods purchased from S Rs.4,000/-
7th January,1997 Goods sold for cash Rs.2,000/-
10th January, 1997 Goods sold to B Rs.6,000/-
12th January, 1997 Cash paid to S Rs.2,000/-
17th January, 1997 Cash received from B Rs.4,000/-
23rd January, 1997 Paid wages Rs.100/-
25th January, 1997 Furniture purchased from R Rs.400/-
28th January, 1997 Paid for interest Rs.200/-
31st January, 1997 Paid salaries Rs.200/

20. JOURNAL ENTIRES

22. LEDGER
 The journal provides a complete listing of the daily transactions of a business.
But it does not provide information about a specific account in one place.
 To avoid this difficulty, the debit and credit of journalized transactions are
transferred to ledger accounts. Thus all the changes for a single account are
located in one place - in a ledger account. This makes it easy to determine the
current balance of any account.
 The book in which accounts are maintained is called ledger. Generally, one
account is opened on each page of this book, but if transactions relating to a
particular account are numerous, it may extend to more than one page. All
transactions relating to that account are recorded chronologically. From journal
each transaction is posted to at least two concerned accounts - debit side of one
account and credit side of another account.
 If there are two accounts involved in a journal entry, it will be posted to two
accounts in the ledger and if the journal entry consists of three accounts
(compound entry) it will be posted to three different accounts in the ledger. The
process of transferring information from journal to ledger accounts is known as
posting.

23. TYPES OF LEDGER
There are two forms of ledger accounts. These are:
Standard form
Self-balancing form

24. FORMAT OF LEDGER
Date Particular JR Amount Date Particular JR Amount
1 jan A/C Dr. XX 5 jan A/c Cr. XX

25. LEDGER OF ABOVE
ILLUSTRATIUON

29. Trial balance may be defined as an informal accounting schedule or
statement that lists the ledger account balances at a point in time
compares the total of debit balance with the total of credit balance.
• The fundamental principle of double entry system is that at any
stage, the total of debits must be equal to the total of credits. If
entries are recorded and posted correctly, the ledger will reflect
equal debits and credits, and the total credit balance will then be
equal to the total debit balances.
If the trial balance agrees we may reasonably assume that the books
are correct. On the other hand, if it does not agree, it indicates that
the books are not correct - there are mistakes somewhere.
The trial balance serves two main purposes. These are as under: – To
check the equality of debits and credits - an arithmetical or
mathematical test of accuracy. – To provide information for use in
preparing final accounts.
TRIAL BALANCE

30. TRIAL BALANCE OF ABOVE ILLUSTRATION
S.No. Particular Acc.No. Debit Credit
1 Capital A/c - 20000
2 Cash A/c 26000 8500
3 Purchase A/c 10000 -
4 Sales A/c - 8000
5 S A/c 2000 4000
6 B A/c 6000 4000
7 Wages A/c 100 -
8 Furniture A/c 400 -
9 Interest A/c 200 -
10 R A/c - 400
11 Salaries A/c 200 -
TOTAL 44900 44900