Professional Documents
Culture Documents
By
$treet 20
Introduction
What is accounting ?
Language of business
Means to communicate financial information
A way to convey information about a
business to users.
Branches of Accounting
Financial Accounting
Cost Accounting
Managerial Accounting
Tax Accounting
Accounting Equation
Assets = Liabilities + Owners Equity
The equation should always be in balance. This
equation is used to create a :Balance Sheet
Double Entry Book-Keeping
A transaction has to be recorded in at least
two accounts
Eg. Purchase equipment for Rs. 10000 cash ?
Cash
Unearned
Revenue
Received
Accrued
Revenue
Deferred
Expense
Accrued
Expense
Goods/Ser
vice
Provided
Paid
Received
Example
Asset/Liabi
lity
Magazine
Subscription
Liability
Goods sold
on credit
Asset
Prepaid
Rent
Asset
Labour
Wages
Liability
DEBIT/CREDIT RULE-1
Assets = Liabilities + Owners Equity
Assets
Debit
Liabilities/Owners
Equity
Credit
DEBIT/CREDIT RULE-2
Types of
Accounts
Meaning
Real
accounts
Accounts relate
to tangible or
intangible real
assets
Personal
accounts
Accounts relate
to a person or
an entity
Rams A/c,
Marutis A/c
Nominal
account
Accounts relate
to losses,
expenses, profit
and gains
Purchase A/c,
Sales A/c, Loss
A/c, Discount
Received A/c
Example
Land A/c,
Goodwill A/c
Debit/Credit Rule
Sample Case
Transactions
Transactions
Date
Details
Opening bank balance Rs. 91,000
Opening cash balance Rs. 1,20,000
Travel Advance Account Rs. 10,000
1-Jan-11 Sold goods worth Rs. 100,000 for cash with 10% discount.
3-Jan-11 Purchased goods worth Rs. 30,000 for cash
15-Jan-11 Incurred office expenses of Rs. 50,000.
Paid staff salary of Rs. 100,000 for the month which is net
16-Jan-11 of tax deducted at source (TDS) of Rs. 30,000.
17-Jan-11 Deposited TDS of Rs. 30,000 with tax authorities.
Purchased an equipment of Rs. 5,00,000 from M/s. ABC
3-Feb-11 and paid by check
Borrowed Rs. 10,00,000 from bank. The money is
4-Feb-11 deposited in the business bank account
Purchased computer for Rs. 50,000 and payment made by
5-Feb-11 check.
Transactions
(Contd.)
Transactions (Contd.)
Date
Details
21-Feb-11 Purchased goods on credit Rs. 25,00,000.
1-Mar-11 Sold goods on credit Rs.40,00,000.
One old customer who owned Rs. 20,000 could pay only
3-Mar-11 Rs. 15,000 in full settlement of his dues.
Brought ten personal computers for Rs. 3,00,000 and the
5-Mar-11 amount is paid by check.
Paid annual maintenance charges (AMC) for the
15-Mar-11 computers Rs. 6,000.
21-Mar-11 Paid staff welfare expenses of Rs. 5,000 by check
23-Mar-11 Received check of Rs. 38,00,000 from customers.
27-Mar-11 Paid suppliers by check Rs. 22,00,000.
30-Mar-11 Paid advance income tax of Rs. 10,00,000 by check.
Settled travel bills of sales manager of Rs. 15,000 and
31-Mar-11 adjusted travel advance of Rs. 10,000.
Journal
Entries
Journal Entries
Date
Transaction
Dr.
Cr.
Amount Amount
90,000
To Sales Account
(Sale of goods at 10% discount)
3-Jan-11 Purchase Account
90,000
30,000
To Cash Account
(Purchase of goods)
15-Jan-11 Office Expenses Account
To Cash Account
(Being office expenses incurred)
16-Jan-11 Salary Account
30,000
50,000
50,000
130,000
Journal
Entries
Journal Entries
Date Transaction
17-Jan-11 TDS Account
To Cash Account
(Deposited TDS with tax
authorities)
3-Feb-11 Equipment Account
To Bank Account
(Equipment purchased)
4-Feb-11 Bank Account
Dr.
Cr.
Amount Amount
30,000
30,000
500,000
500,000
1,000,000
To Loan Account
(Loan taken from Bank)
5-Feb-11 Computer Account
1,000,000
50,000
Journal
Entries
Journal Entries
Date Transaction
21-Feb-11 Purchase Account
To Creditors Account
(Goods purchased on credit)
1-Mar-11 Debtors Account
Dr.
Cr.
Amount Amount
2,500,000
2,500,000
4,000,000
To Sales Account
(Goods sold on credit)
3-Mar-11 Cash Account
Discount Allowed Account
To Debtors Account
(Realised Rs. 15,000 from a
customer in full settlement of his
4,000,000
15,000
5,000
20,000
Journal
Entries
Journal Entries
Date
Transaction
Dr.
Amount
6,000
To Cash Account
(Paid annual maintenance charges
for computers)
21-Mar-11 Staff Welfare Expenses Account
6,000
200,000
To Bank Account
(Being staff welfare expenses
incurred)
23-Mar-11 Bank Account
To Debtors Account
Cr.
Amount
200,000
3,800,000
3,800,000
Journal
Entries
Journal Entries
Date
Transaction
Dr.
Amount
Cr.
Amount
1,000,000
1,000,000
15,000
10,000
To Cash Account
(Settled travel bill and adjusted
travel advance)
5,000
Ledger
Ledger Accounts
Accounts
Date
Particulars
Purchases Account
Debit Date
Particulars
Credit
11 Account
2,530,00
0
21-Feb- To creditors
2,500,00
11 account
0
Office
Expenses
Account
Date
Particulars
Debit Date
Particulars
2,530,00 31-Mar- By Profit and Loss
15-Jan11To cash Account 0 50,000
11 Account
Credit
2,530,00
0
50,000
Date
Particulars
16-Jan11To cash account
17-Jan11To TDS Account
50,000
Salary Account
Debit Date
Particulars
31-Mar- By Profit and Loss
100,000
11 Account
30,000
50,000
Credit
130,000
Ledger
Ledger Accounts
Accounts
Date
Particulars
16-Jan11To cash account
Date
Particulars
TDS Account
Debit Date
Particulars
17-Jan30,000
11By Salary Account
30,000
30,000
30,000
Sales Account
Debit Date
Particulars
Credit
Credit
4,000,00
0
90,000
Credit
4,090,00
0
5,000
5,000
Ledger
Ledger Accounts
Accounts
Date
Cash Account
Debit Date
Particulars
Particulars
Credit
To opening balance
1-Jan-11 b/d
120,000 3-Jan-11 By Purchases Account 30,000
15-Jan- By Office Expenses
1-Jan-11 To Sales A/c
90,000
11
A/c
50,000
3-Mar16-Jan11
To Debtors A/c
15,000
11
By Salary A/c
100,000
16-Jan
11
By TDS A/c
30,000
15-Mar- By Maintenance chgs
Bank Account
11
A/c
6,000
Date
Particulars
Debit 31-MarDate ByParticulars
Credit
Travelling
To opening balance
By Equipment
11
expenses
A/c
5,000
1-Jan-11 b/d
91,000 31-Mar 3-Feb-11 Account
500,000
11
By Balance C/d
4,000
1,000,00
By Computer
4-Feb-11 To Loan Account
0
50,000
225,000
5-Feb-11 Account
225,000
23-Mar3,800,00
By Computer
11
To Debtors Account 0
3-Mar-11 Account
300,000
Ledger
Ledger Accounts
Accounts
Date
Particulars
Debtors Account
Debit Date
Particulars
11
A/c
3-Mar
11
By Cash account
Date
Particulars
23-Mar
11
By bank account
31-MarCreditors Account
11
By Balance c/d
Debit Date
Particulars
Credit
5,000
15,000
3,800,00
0
180,000
Credit
4,000,00
4,000,00
27-Mar2,200,00 21-Feb2,500,00
0
0
11
To bank account 0
11
By Purchases Account 0
31-Mar11
To balance c/d
300,000
2,500,00
0
2,500,00
0
Ledger
Ledger Accounts
Accounts
Date
Particulars
Equipments Account
Debit Date
Particulars
Credit
500,000
500,000
500,000
200,000
200,000
200,000
Date
30-Mar11
To Bank A/c
1,000,00 31-Mar0
11
By balance c/d
Credit
Credit
1,000,00
0
Ledger
Ledger Accounts
Accounts
Date
Particulars
Date
Particulars
Particulars
10,000
Computers Account
Debit Date
Particulars
50,000
Credit
350,000
300,000
Loan Account
350,000
Debit Date
Particulars
350,000
Credit
1,000,00
0
4-Feb-11By Bank A/c
1,000,00
0
Trial
Trial Balance
Balance
Trial Balance 31 March, 2011
Debit
Credit
Cash
4,000
Bank
641,000
Debtors
180,000
Creditors
300,000
1,375,000
Equipments
500,000
Profit
Account
Profitand
and Loss
Loss Account
Date
31-Mar11
31-Mar11
31-Mar11
31-Mar11
Particulars
Debit
Date
Particulars
2,530,00 31-Mar0
11
By Sales A/c
To Purchases A/c
To Office Expenses
A/c
50,000
Credit
4,090,00
0
To Salaries A/c
130,000
To Discount Allowed
A/c
5,000
Balance Sheet
4,090,00
0
4,090,00
0
Balance
Sheet
Balance Sheet
Balance Sheet as at 31st March 2011
Liabilities
(Rs)
Assets
Creditors
Profit and Loss
Account
Loan Account
300,000 Cash
1,375,000 Bank
(Rs)
4,000
641,000
1,000,000 Debtors
Equipments
Computers
Advance Payment of
Tax
180,000
500,000
350,000
1,000,00
0
2,675,00
0
2,675,0
00