BASIC RECORDS

Debit Represents Outflow of Resources

All those Who owe Money to Business Eg: Debtors

Credit Represents

Outflow of Rescources

,
Income Eg: Sales, Rent/ . Dividend/ Commission Recd.

All those to Whom business Owes money Eg: Creditors, Bank, OverDrafts, Partners Capital

Expenses Eg: Rent Salaries

Assets Eg: Land, Buildings, Machinery

Liabilties, Eg: Outstanding Liabilities for expenses, Taxes etc.,

TYPES OF ACCOUNTS,,
Accounts

Personal Accounts

Impersonal Accounts

Example : Individals, Farsms, Companies, Banks, Etc.,

Real Accounts

Nominal Accounts

Assets like Cash, land, buildings Plant and MachiNery, patents, Goodwill etc.

Relate to Expenses or Loses or Incomes or profits

A CONCEPTUAL FRAMEWORK OF FINANCIAL ACCOUNTING

Financial Accounting Double Entry System For Cash Transactions Cash Book Integrated into LEDGER Ledger Output: Trial Balance Profit & Loss Account/Income & Expenditure Profit or Loss Transferred to Balance Sheet Balance Sheet Assets and Liabilities For Credit Transactions Journal

Framework of Financial Accounting

(contd.)
The subject of Financial Accounting is based on the double entry system of accounting using debits and credits Cash transactions are entered in Cash book Credit transactions (non cash transactions) are entered in the Journal The transactions of Cash book and Journal are integrated into the Ledger which is a summary of all cash and credit entries When all the Ledger accounts are tabulated as a summary statement it is known as Trial Balance Trial Balance establishes the arithmetical accuracy of the accounting records. From the Trial Balance two separate accounting documents are prepared namely Profit and Loss Account and Balance Sheet All income and expenditure accounts are taken to Profit and Loss Account All Assets and Liabilities accounts are taken to Balance sheet The net result of Profit and Loss Account namely Profit or Loss is taken to Balance Sheet.