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ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207

Introduction
Basic Accounting
What is Accounting?

It is a systematic method of recording, analyzing and evaluating figurative information in


such a manner that the user of the information gets a fair and clear view regarding the
financial performance ogf the business.

BASIC ACCOUNTING FORMULA

Debit
ASSETS

CAPITAL

Credit

LIABILITIES
Credit

Debit

ASSETS = CAPITAL + LIABILITIES

FIXED ASSETS
ASSETS
Assets which have a long
life
bought
with
the
intention
to use
ISDC
ACCOUNTING
COLLEGE-9143342,
www.isdcedu.weebly.com
Resource
owned by
a business, which 8154724.
has a
them in the business and not
value
with the intention to simply sell
them

ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207

Premises
Land
Building
Fixture & Fittings
Motor Vehicles
Machinery
Debtors/Credit Customers
ASSETS
Cash inCURRENT
Hand
Cash at Bank
assets of an organization
ClosingThe
stock
are constantly changing
Prepaidthat
Expenses
Account
Receivable
their form and are circulating
from cash to goods and cash
again.
LIABILITIES
Which of the following statement
shows calculation of capital?
The borrowing or loan taken by the business.
A
Assets +
LONG TERM LIABILITIES
Capital = Liabilities
B
Liabilities
An=
amount
Capital
Assets owed that does not
have to be repaid within
the =
next
C
Capital
accounting
period (Usually liability
Assets
+ Liabilities
D
Capital =
for more than one year)
Assets Liabilities
CURRENT LIABILITIES
Which one of the following is a
Amount owed by a business to
liability?
other organizations and individuals
that should be paid within
onefor
A
Creditors
financial period. (Usually one year)
goods

6.
A firm
receives money from its debtors by cheque.
What is the effect on assets & liabilities?
Effects upon Assets
Liabilities
Reduce Bank
Debtors
Increase Bank
Debtors
Increase Cash
Loan
Increase Stock
Capital

7.
B
Motor
correct figure:
Vehicles
CAPITAL
=Cash at bank
ASSETS
LIABILITIES
C
The investment contributed by the
Brain
Storm to an organization Machinery
to enable it to
D proprietors
function. The amount of the value of assets
7850
Circle
correct option
for every given question and evaluate your knowledge
ofthe
a business
less liabilities.
Liability can be defined as:

8200

Effects upon

Reduce
Decrease
Increase
Decrease

Identify the

Assets
Liabilities
Capital
1250
6600
2800
11000
1150
1120
6540
1120

9550
A
Cash
balance
5420
B
Loan from J
owners
C
Buildings
8.
A sole trader
D
Customers
ISDC ACCOUNTING
COLLEGE-9143342,
8154724. www.isdcedu.weebly.com
has premises 25000, bank 1500, stock
22500 and sundry creditors 5000. What is
the capital?
Which of the following is not an asset?

ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207

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JOURNAL ENTRIES
Basic Accounting
Left Hand side of (T) a/c
increase in Asset
Decrease in Liabilities
Decrease in Capital

DEBIT

CREDIT

Right Hand side of (T) a/c


Decrease in Asset
Increase in Liabilities
Increase in Capital

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ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207


Step (1)

Indentify the items from the

Step (2)

Check which items are increasing

Step (3)

Using the concept of debit & credit,

transaction.

or decreasing.

Journalize the transaction.

EXERCISE 2.1
Prepare journal entries for the month ended 31 December 2008 in the books of G Powell to
record the following transaction:
Dec

Started business with 2500 in the bank.

Dec

Bought office furniture by cheque150

Dec

bought machinery 750 on credit from

Dec

Bought a van paying by cheque 600

planers Ltd.

Dec
8
Sold some of the office furniture-not
suitable for the firm- for 60 on credit to J walker.
Dec

10

Paid the amount owing to planers Ltd

Dec

21

Received the amount due from J Walker

Dec

23

Bought more machinery by cheque 280.

750 by cheque.

60 in cash

EXERCISE 2.2

Prepare journal entries for the month ended 30 june 2008 in the books of C Williams to
record the following transaction:

June

Started business with 2000 in cash.

June

Paid 1800 of the opening cash into a

June

Bought office furniture on credit from

bank account for the business.

Betta Built Ltd for 120.

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ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207


June

Bought a van paying by cheque 950

June

12

Bought works machinery from Evans &

June

18

Returned faulty office furniture costing

June

25

Sold some of the works machinery for 75

June

28

Paid amount owing to Betta Built Ltd 58

June

30

Took 100 out of the bank for personal

June

30

J Smith lent us 500 giving us the money

Sons on credit 560

62 to Betta Built Ltd.

cash

by cheque.

use.

by cheque.

EXERCISE 2.3
Prepare journal entries for the month ended 30 June 2008 in the books of C Walsh to record
the following transaction:

June

Started business with 5000

June

Bought van of 5000 paying by cheque

June

Bought office fixtures 400 on credit from

June

Bought van on credit from Super Motors

June

12

Took 100 out of the bank and put it into

June

15

Bought office fixtures paying by cash 80.

June

19

Paid Super Motors a cheque for 800

June

21

A loan of 1000 cash is received from J

Young Ltd.

800

the cash till.

Jarvis.

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ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207


June

25

Paid 800 of the cash in hand into the

June

30

Bought more office fixtures paying by

bank account

cheque 300.

EXERCISE 2.4
Prepare journal entries for the month ended 30 March 2008 in the books of Jason Jarvis to
record the following transaction:

March

Started business with 1000 cash.

March

Received a loan of 5000 from M Chow by

cheque, a bank account


being opened and the cheque paid into it.
March

Bought machinery for cash 60.

March

Bought display equipment on credit from

March

Took 300 out of the bank and put it into

March

15

Repaid part of Chows loan by cash 100.

March

17

Paid amount owing to Betterview

March

24

Repaid part of Chows loan by cheque

March

31

Bought additional machinery, this time on

Betterview Machines 550

the cash till.

Machines 550 by cheque.

800.

credit from D Smith for 500

EXERCISE 2.5
Prepare journal entries for the month ended 31 July 2008 in the books of Allen Border to
record the following transactions:
July

Started business with 10000 cheque and

July

Bought land & building for 4000 by

8000 cash.

cheque.
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ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207


July

Bought office furniture of 1800 on credit

July

Took 200 out of the bank and put it into

July

12

Paid amount owing 800 to Aristrocrat Ltd

July

15

Kumar lent us 500- giving us the money

July

18

Bought van on credit from ABC Ltd by

July

23

Paid amount owing 1000 to Aristocrat by

July

25

Paid 500 of the cash in hand into the

July

28

Bought more office fixtures paying by

from Aristocrat Ltd.

the cash till.

by cash.

by cheque.

cash.
`
cheque.

bank account.

cheque 200.

Brain Storm
CIRCLE THE CORRECT OPTION FOR EVERY GIVEN QUESTION AND EVALUATE YOUR
KNOWLEDGE

ISDC ACCOUNTING COLLEGE-9143342, 8154724. www.isdcedu.weebly.com

ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207

Increase in assets will:


Credit the account
Debit the account
Will not be recorded
None of the above
For general administration purposes,
the school bought a computer and
made the payment by cheque. The
entry to record the transaction by:
Computer debited & Bank credited
Bank debited & Computer credited
Cash debited & Bank credited
Computer debited & Cash credited
Which one of the entries shows that a
cheque was Received by the firm from
a Roger?
Roger debited & Smith credited
Cash debited & Roger credited
Roger debited & Bank credited
Bank debited & Roger credited

6.

Increase in liabilities will:


A)
Credit the account
B)
Debit the account
C)
Will not be recorded
D)
None of the above

7.

Mr. Brown bring his private


motor car into the business,
the entry would be:
A)
Capital debited & Cash
credited
B)
Capital debited & Motor Car
Credited
C)
Motor Car debited & Cash
credited
D)
Motor car debited & Capital
credited
8.

Ben withdraws cash out the


business for personal use. The
entries would be:

Which of the following statement is


true?
When liabilities increases, are debited
When assets increase, are credited
When assets increase, liabilities are
debited
When assets increase, are debited
Which of the statement is a possible
double entry?
Bank debited & Bank credited
Vehicle debited & Bank credited
Both of the above.
None of the above.

A) Cash debited & Capital credited


B) Ben debited & cash credited
C) Drawings debited & Capital
credited
D) Drawings debited & Cash
credited
9.

When journal entries are


recorded the purchase of
machine bought on credit?
A)
B)
C)
D)

10.

Dr.
Dr.
Dr.
Dr.

Creditors
Machinery
Creditors
Machinery

Cr.
Cr.
Cr.
Cr.

Machinery
Cash
Machinery
Creditors

Which of the statement is true


about journal entries:
A) Every transaction involves only

LEDGER ACCOUNT
Basic Accounting
Ledger Account is prepared for recording individual information of business transaction.

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ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207


Sold goods to Roger of 3000

Sold goods to Smith of 5000 Sold goods to Ales of 6000.


Roger account

Sales

300
0

Sales

Smith account

sales

500
0

Sales

account

Alex account

600
0

Roger
Smith
Alex

3000
5000
6000

How to close a ledger (T) account?


At the end of financial period all the ledger (T) account are closed either by balance c/d,
profit & loss or trading a/c. This is the balance ready to be transferred in preparation of
final account.
(X) ACCOUNT
Sales
Sales

Balance
b/d

1000
0
5000

1500
0
8600

Roger

3000

Rent
Purchase

1200
2000

Balance c/d

8600
1500
0

Types of Account
Sales, Purchase, Return inward, Return outward, Carriage inward &
Waterhouse expense
Incomes: Discount received, Bad debts recover, Rent receivable
Expenses: Discount allowed, Bad debts, Carriage outward, Heat & Light,
Rent, Postage & stationary, Insurance, Salaries & Other operating
expenses.
Fixed Assets: Land & Building, Premises, Office furniture, Machinery
Current Assets: Debtors, Bank, Cash, Prepaid expense, Stock
ISDC ACCOUNTING COLLEGE-9143342, 8154724. www.isdcedu.weebly.com

Closed by
Trading Account
Profit & Loss
account
Profit & Loss
account
Balance c/d
Balance c/d

ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207


Current Liabilities: Creditors, Bank OD, Unpaid expenses
Capital, Drawings, Loan, Debenture

Balance c/d
Balance c/d
STOCK

Basic Accounting
Stock, i.e. the products or supplies of a business on hand or in transit at any time. For
manufacturing business types of inventory are raw materials, work in progress and finished
goods. Ending stock treated as current assets in balance sheet

Sold Goods of 3000 to Mr Y

Debtors a/c

Mr X

Sales a/c

3000 debit

Mr Y

3000 credit

In case of goods sold for cash, bank or to credit customer, SALE ACCOUNT is prepared
Receive faulty Goods of 500 from
Mr Y

Mr X

Return Inward a/c

500 debit

Debtors a/c

500 credit

Mr Y

In case of goods returned from credit customer, RETURN INWARD/SALES RETURN


ACCOUNT is prepared

Purchase Goods of 4000 from Mr Z

Mr X

Purchase a/c
Creditors a/c

4000 debit

Mr Z

4000 credit

In case of goods purchased by cash, bank or from credit supplier, PURCHASE ACCOUNT is
prepared
Return faulty Goods of 600 to Mr Z

Mr X
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Mr Z

ISDC ACCOUNTING COLLEGE-75/76, Rahbar Tower, Ring Road, Mohammadpur, Dhaka-1207

Creditors a/c
Reurned Outward a/c

600 debit
600 credit

In case of goods returned to credit supplier, RETURN OUTWARD / PURCHASE RETURN


ACCOUNT is prepared

EXERCISE 4.1
In the book of Bob Marley the following transaction took place for the month
ended 30 January 2009:
1 Jan
2 Jan
9 Jan
11 Jan
12 Jan
13 Jan
14 Jan
19 Jan
20 Jan

Started business with 10000 cash and 20000 bank


Purchase goods of 1200 on credit from Ali Azmad.
Purchase a motor vehicle of 3000 on credit from Toyota Ltd.
Cash purchase 300.
Sold goods of 900 on credit to Muzama Co.
Receives some of the faulty goods of 100 from Muzama Co.
Cash Sales 500.
Paid Ali Azmad by cheque in full settlement of his account.
Purchase goods of 450 from Malina Ltd.

ISDC ACCOUNTING COLLEGE-9143342, 8154724. www.isdcedu.weebly.com

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