Professional Documents
Culture Documents
RA
ATNAM
M CO
OLLEG
GE
OF ARTS,
A
SCIIENCE & COMME
ERCE
BHA
ANDUP (W
W), Mum
mbai -400
0078
MASTER
R OF COM
MMERCE
E
Se
emester
r II
2015-2016
6
A proje
ect rep
port on
o
Fiinaliza
ation of
o par
rtnership fir
rm
Subm
mitted on partia
al fulfilm
ment
On requirem
r
ment for
r a boar
rd of
Deg
gree of master
m
of comme
erce
Su
ubmitted by:
MR. VISSHAL G. JA
ADHAV.
Pro
oject gu
uide:
Mr. rajiv misshra
N.E.S
S RA
ATNA
AM
CO
OLLE
EGE
OF AR
RTS, SC
CIENCE
E & COM
MMERC
CE
BHANDU
UP (W), Mu
umbai -4000078
CER
RTIFICATE
Projeect Guidee/Intern
nal Exam
miner
(M
Mr. RAJJIV MISH
HRA)
P
Principa
al
(Mrs. R
RINA SA
AHA)
Exterrnal Exaaminer
Date:
DECLARATION
ACKNOWLEDGEMENT
Example
Let's take a look at an example business transaction that we can
show the journalizing process. Assume Pizza Pizza, Inc. just bought
a new delivery car for $1,000 cash on January 1st.
First, the transaction must be analyzed to identify what accounts
were affected. Pizza Pizza, Inc. bought a new car, so the vehicle
account would have been affected and it paid cash for the car, so
the cash account would also have been affected.
Second, we must analyze how these accounts changed. The vehicle
account increased because we just added another vehicle to it and
the cash account decreased because we just paid cash for the
vehicle.
Third, we must record the transaction. Since both of these accounts
are asset accounts, they both have debit balances. We will debit the
vehicle account to increase it and credit the cash account to
decrease it. Here is what our example journal entry will look like in
the purchases journal.
2. SECONDARY BOOK (LEDGER ACCOUNT):
A journal, as we have studied, is a sequential record of
business transactions. It records all financial transactions of
business in a book in chronological order; however, it does not
record transactions relating to a particular subject, thing or persons
into one account. For example, if we want to know the total
purchase of business for a period of three months, we have to go
through all journals of three months, which is quite time consuming
business at the end of certain period. For example, if the ledger has
to determine the amount of cash balance at the end of certain
period. Then he has to prepare cash a/c and debit and credit of the
account are totaled. The difference between two sided (i.e. dr, and
cr.) is balance of the account. The process is called balance of ledger
accounts.
Balancing of account is done periodically i.e. monthly, quarterly,
semi-annually as per requirement. Normally, monthly balancing is
common in practice.
Debit side of an account greater than credit side
In this case, the debit of an account will be greater than
credit total. It is known as debit balance of an account. Here the
excess debit in the credit side of the account as by balance C/D and
closed the account in the beginning of next period. The balancing
figure is brought down as to balance b/d.
Credit side of an account greater than debit side
In this case, the credit total of an account is greater than
debit total. It is knows as credit balance of an account. Here excess
credit amount is entered in the debit side of account as " to balance
c/d' and closed the account. In the next period, the balancing figure
is brought down as "By balance b/d".
BALANCING OF DIFFERENT ACCOUNTS:
Balancing is done periodically, i.e., weekly, monthly,
quarterly, half yearly or yearly, depending on the requirements of
the business.
I. PERSONAL ACCOUNTS: These accounts are generally
balanced regularly to know the amounts due to the persons
(creditors) or due from the persons (debtors).
Journal of Amar
Particulars
L.F.
Debit
Credit
(Rs.)
25,000
2004
Mar 1
(Rs.)
Purchases a/c
Dr.
25,000
To Cash a/c
2
Cash a/c
Dr.
50,000
To sales a/c
50,000
3
Purchases a/c
Dr.
19,000
To gopi a/c
19,000
5
Robert a/c
Dr.
8,000
To sales a/c
8,000
7
Cash a/c
Dr.
To Robert a/c
9
Gopi a/c
Dr.
5,000
To cash a/c
5,000
20
Furniture a/c
Dr.
7,000
To cash a/c
7,000
Explanation : There are six accounts involved: Cash, Purchases,
Sales, Furniture, Gopi & Robert, so six accounts are to be opened in
the ledger.
Ledger of Amar
Cash account
Date Particulars J.F. Amt. Date Particulars
2004
2004
Mar 5 To sales a/c
50,000 Mar By purchases
1
a/c
7 To Robert
6,000
9 By gopi a/c
a/c
20 By furniture
a/c
Purchases a/c
J.F.
Amt.
25,000
5,000
7,000
Date
Particulars
Date Particulars
2004
Mar To cash a/c
20
Date Particulars
2004 To cash a/c
Mar 9
J.F.
J.F.
Particulars
J.F.
Sales a/c
Amt. Date Particulars
J.F.
2004
Mar By cash a/c
2
5 By Robert a/c
Furniture a/c
Amt. Date Particulars
Amt.
Amt.
50,000
8,000
J.F.
Amt.
J.F.
Amt.
7,000
J.F.
Gopi a/c
Amt. Date Particulars
5,000 2004
Mar By purchases
3
a/c
Robert a/c
Amt. Date Particulars
2004
8,000 Mar By cash a/c
7
19,000
J.F.
Amt.
6,000
purchase of any assets. The term goods means all the commodities
and services in which the company deals in day to day activities.
The preparation of purchase day book involves the Date column,
Particulars column, Invoice number column, Ledger folio column,
inner amount column and Amount column.
Purchase book is prepared to record all the credit purchases
of an organization. Purchase book is not a purchase ledger.
Format:
Date
Particulars
Inward
L.F.
Amount
Invoice No.
2. Sales Day Book:
Sales day book is mainly used for recording credit sales of
goods and services in an organization. This will not record any cash
sales or assets sales. The ruling for the preparation of this book is
same as like Purchase day book. This involves the Date column,
Particulars column, Invoice number column, Ledger folio column,
inner amount column and Amount column.
The features of a sale book are same as a purchase book,
except for the fact that it records all the credit sales.
Format:
Date
Particulars
Outward
L.F.
Amount
Invoice No.
3. Purchase Returns Book:
This is maintained to record the transactions of goods
returned to the supplier when purchase on credit. The ruling of the
preparation of purchase return book or returns outward book
involves Date, Particulars, Debit note number, Ledger folio and
amount column.
Particulars
L.F.
Discount
Rs
Date
Particulars
L.F.
Discount Rs
C.B.F.
Stationery& Cartage
Printing
Loading Postag
e
L
.
F
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
Interest Received
Inward Freight Charges
Office Expenses
Outstanding Rent
Prepaid Insurance
Purchases
Rent
Repair & Renewals
Salary
Salary Payable
Sale
Staff Welfare Expenses
Stock
Sundry Creditors
Sundry Debtors
Total
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
XX
XX
Revenue has been earned, but it has not yet been recorded.
Format:
Particulars
Work in progress
(opening balance)
Raw material
consumed
Opening stock
Add: purchase
Less: closing stock
Factory wages
Factory overheads
Amt.
XX
XX
XX
XX
XX
XX
XX
Particulars
Sale of scrap
Amt.
XX
Work in progress
XX
Cost of production
(balancing figure)
XX
XX
2. TRADING ACCOUNT:
Trading Account and Profit and Loss Account are the two
important parts of income statements. Trading Account is the
first stage in the final account which is prepared to know the
trading results of gross profit or loss during a particular period.
In other words, it is a summary of the purchases, and sale of a
business or production cost of goods sold and the value of sales.
The difference between the elements establishes the gross profit
or loss which is then carried forward to the profit or loss account
for calculation of net profit or net loss. Accordingly, if the sales
revenue is higher than the cost of goods sold the difference is
known as 'Gross Profit,' Similarly, if the sales revenue is less than
the cost of goods sold the difference is known as 'Gross Loss.'
Specimen Proforma of Trading Account
The following Specimen Proforma of a Trading Account
which is widely used in practice:
Trading Account
For the year ended 31st..
Particulars
Amt. Particulars
Amt.
To Opening Stock
To Purchases
Less: Purchase Return
To Direct Expenses:
Carriage Inward
Wages
XX
XX
(X)
Freight
Custom Duty
Fuel And Power
Factory Expenses
Royalty On Production
Other Direct Expenses
To Gross Profit C/D
(Transferred To P&L
A/C)
XX
XX
XX
XX
XX
XX
XX
XX
XX
By Gross Sales
Less: Sales Return
Net Sales
By Closing Stock
By Gross Loss C/D
(Transferred To Freight
P&L A/C)
XX
XX
(X)
XX
XX
XX
XX
XX
XX
XX
Discount received
Dividend received
XX
XX
XX
XX
Legal charges
Audit fees
General expenses
To Selling Expenses:
Advertisement
XX
XX
XX
Income from
investment
Interest on debenture
Any other incomes
Discount Allowed
Commission Paid
Salesmen Salaries
Godown Rent
Carriage Outward
Agent Commission
Travelling Expenses
To Distribution
Expenses:
Depreciation on
Vehicle
Upkeep of Motor Van
Travellers' Salaries
Repairs and
Maintenance
To Non-Operating
Expenses:
Discount on Issue of
Shares
Preliminary Expenses
To net profit c/d
(Transferred to capital
a/c)
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
Particulars
To interest on capital:
A
XX
B
XX
To salary to partner
To
commission
to
partner
To reserve
To profit transferred to:
As capital A/c
XX
(or As current a/c)
Amt.
XX
XX
XX
XX
Particulars
By profit and loss A/c
(net profit subject to
appropriations)
By
interest
on
Drawings:
A
XX
B
XX
Cr.
Amt.
XX
XX
Bs capital A/c
XX
(or Bs current a/c)
XX
XX
XX
5. BALANCE SHEET:
According to AICPC (The American Institute of Certified
Public Accountants) defines Balance Sheet as a tabular Statement of
Summary of Balances (Debit and Credits) carried forward after an
actual and constructive closing of books of accounts and kept
according to principles of accounting. The purpose of preparing
balance sheet is to know the true and fair view of the status of the
business as a going concern during a particular period. The balance
sheet is on~ of the important statement which is used to owners or
investors to measure the financial soundness of the concern as a
whole. A statement is prepared to show the list of liabilities and
capital of credit balances of the business on the left hand side and
list of assets and other debit balances are recorded on the right
hand side is known as "Balance Sheet."
The Balance Sheet is also described as a statement showing
the sources of funds and application of capital or funds. In other
words, liability side shows the sources from where the funds for the
business were obtained and the assets side shows how the funds or
capital were utilized in the business. Accordingly, it describes that
all the assets owned by the concern and all the liabilities and claims
it owes to owners and outsiders.
Specimen Form of Balance Sheet:
Companies Act 1956 has prescribed a particular form for
showing assets and liabilities in the Balance Sheet for companies
registered under this Act. There is no prescribed form of Balance
Sheet for a sole trader and partnership firm. However, the assets
and liabilities can be arranged in the Balance Sheet into
a. In the Order of Liquidity
b. In the Order of Performance
(6) Livestock
(7) Leaseholds
(8) Long-term Investments
(9) Vehicles
(2) Current Assets or Floating Assets:
The assets of a business of a transitory nature which are used
for resale or conversion into a cash during the course of business
operation. In other words, those assets which are easily converted
into cash in normal course of business during the shorter period
say, less than one year are treated as current or floating assets.
Components of Current Assets
(1) Cash in hand
(2) Cash at Bank
(3) Inventories:
Stock of raw materials
Stock of work-in-progress
Stock of finished goods
(4) Sundry Debtors
(5) Bills Receivable
(6) Short-Term Marketable Securities
(7) Short-Term Investments
(8) Prepaid Expenses
(3) Fictitious Assets:
Fictitious Assets refer to any deferred charges. They are
really not assets. Preliminary expenses, Share issue expenses,
discount on issue of shares and debentures, and debit balance of
profit and loss account etc. are the important components of
fictitious assets.
(4) Contingent Assets:
It refers to a right to property which may come into
existence on the happening of some future event. For example, a
right to obtain for shares in another company on favourable terms,
a right to sue for infringement of patents and copy rights etc.
have
the
following
common
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