VIBES 1

VIRTUAL INTERACTIVE BUSINESS EXPERIMENT SYSTEM (VIBES)

BASIC CONCEPTS OF BUSINESS & FINANCIAL ACCOUNTING
BUSINESS
Business means buying and selling of goods and services for the purpose of earning profit.
FORMS OF BUSINESS ORGANISATIONS
1. SOLE PROPRIETORSHIP:

Ownership and management of business by a single person is known as sole proprietorship. Sole trader is a
person who carries on business exclusively for himself. Sole proprietorship is a form of business organization in
which an individual introduces his own capital, uses his own skill and intelligence in the management of its
affairs and is solely responsible for the result of its operations.
FEATURES OF SOLE PROPRIETORSHIP

a) Contribution of Capital:
The individual trader alone has to arrange for necessary capital and other assets essential for starting and
subsequent operation of his business.
b) Management and control:
The proprietor has full authority over the affairs of the business. The working of the concern is entirely based on
his decision and control. He need not consult anybody else in taking any decision or taking any action regarding
the affair of his business.
c) Unlimited liability:
The liability of the sole trader is unlimited. The creditors claims have to be settled in full, if need be from his own
private property.
d) Sharing of profits:
The surplus earnings of his business entirely belong to the proprietor alone. Losses too are to be borne by him.
SUITABILITY OF SOLE PROPRIETORSHIP
This form of enterprises is therefore suitable in the following cases:-
1. Where the capital required is small and the risk is not heavy
(E.g.:- book stall, sweet corner shop, bakeries, stationery stall, fancy stall etc)
2. Where the quickness in decisions is very important (e.g.: brokers)
3. Where the customers require personal attention (e.g.: painters , lawyers etc)
4. Where the special regard has to be shown to the tastes and fashions of the customers.( eg: tailoring)
5. Where the market is limited.
2. PARTNERSHIP
Partnership business is an extension of proprietorship. The resources of the sole trader to finance and the
capacities to manage the growing of business are limited. Partnership is formed to combine the maximum of
resources of skill, labour and capital of different persons. Persons who have entered in to partnership are
individually called “partners” and collectively known as “firm”
Definition: According to Indian partnership Act 1932 “it is the relation between persons who have agreed to
share the profits of a business carried on by all or any of them acting for all”
FEATURES
1. Agreement
Partnership is the outcome of an agreement between two or more persons to carry on business with a view to
make profit.
2. Sharing of profits
The profits of the business must be distributed among the partners in the agreed ratio; similarly losses should be
distributed among the partners.
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3. More than one person

There must be more than one person to form a partnership. The maximum number of members should not
exceed 10 in case of banking business and 20 in other type of business.
4. Mutual agency
In partnership form of business every partner is an implied agent of other partners and of the firm. Each partner
is liable for acts performed by other partners on behalf of them.
5. Registration
The registration of partnership firm is not legally compulsory but the registered firm has certain advantages over
the unregistered one.
6. Non transferability of shares
No partner can transfer his share in the partnership without the prior consent of all the partners.
PARTNERSHIP DEED
Partnership can be formed by two or more persons on the bases of an agreement. This agreement may
be oral or written. It contains terms and conditions of partnership and the rights, duties and obligations of
partners. This agreement is commonly known as partnership deed or articles of partnership.
3. JOINT STOCK COMPANY (Companies Act 1956)
Joint stock form of business organization has become very popular as a device to overcome the shortcomings of
a partnership business. Limited resources and unlimited liability of partners are two important limitations of
partnership in undertaking big business. There shortcoming of partnership led formation to joint stock
companies.
Definition
“Joint Stock Company is a voluntary association of individuals for profit, having capital divided in to transferable
shares, the ownership of which is the condition of membership”

FEATURES
1. Legal person:
A company is an independent person in the eye of law and can own property, conduct a lawful business, enter in
to contract with others, buy, sell and hold property its own entire name, under its own seal.
2. Continuous existence
Companies are not affected by the death or lunacy or insolvency or retirements of its members. Members may
come, members go, but the company continuous its operation subject to the fulfillment of law.
3. Limited liability
Liability of members of a company is limited to the face value of the shares subscribed by each of them.
4. Transferability of shares
Members of a public limited company are free to transfer the shares held by them to any one else, because
shares of a company can be sold and purchased in the share market.
5. Large members
A joint stock company may have large number of members. While the maximum number of members of a
private company is limited to fifty there is no limit for maximum number of members in public company.
6. Democratic control
Management of the affairs of a company is entrusted to a group of persons known as directors who are elected
by the share holders.
TYPES OF COMPANIES
On the basis of ownership, companies can be classified in to
1. Private company
2. Public company
3. Government company
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1. PRIVATE COMPANY
A private company means a company by its articles of association
A) Restricts the right of its members to transfer its shares, if any
B) Limit the number of its members to fifty and
C) Prohibits any invitation to the public to subscribe for any shares in or debentures of the company.
A private company must add the words “private limited” in its name. it must have at least two members
2. PUBLIC COMPANY
A public company is one which is not a private company. In other words, it is a company which by its articles of
association
A) Puts no restrictions on the right of members to transfer their shares.
B) Does not limit the number of members to fifty
C) Is free to make an invitation to the general public to subscribe its shares and debentures.
A public company must add the word “limited” to its name. it must have a least seven members.
3. GOVERNMENT COMPANY
A government company is a company in which not less than 51% of share capital is held by the central
government or the state government or together by central government and any number of state governments.
Companies Act 2013
2013 Act has introduced several new concepts and has also tried to streamline many of the
requirements by introducing new definitions.
1 One Person Company: The 2013 Act introduces a new type of entity to the existing list i.e. apart
from forming a public or private limited company, the 2013 Act enables the formation of a new
entity a ‘one-person Company’ (OPC). An OPC means a company with only one person as its
member [section 3(1) of 2013 Act].
2 Private Company: The 2013 Act introduces a change in the definition for a private company, inter-
alia, the new requirement increases the limit of the number of members from 50 to 200 [section
2(68) of 2013 Act].
3 Small Company: A small company has been defined as a company, other than a public company.
i). Paid-up share capital of which does not exceed 50 lakh INR or such higher
amount as may be prescribed which shall not be more than 5 crore INR.
ii). Turnover of which as per its last profit and loss account does not exceed two
crore INR or such higher amount as may be prescribed which shall not be more than 20 crore
INR.
As set out in the 2013 Act, this section will not be applicable to the following.
 A holding company or subsidiary company.
 A company registered under section 8
 A company or body corporate governed by any special Act [section2(85)
of 2013 Act]
4 Dormant Company: The 2013 Act states that a company can be classified as dormant when it is
formed and registered under this 2013 Act for a future project or to hold an asset or intellectual
property and has no significant accounting transaction. Such a company or an inactive one may apply
to the ROC in such manner as may be prescribed for obtaining the status of a dormant company.
[Section 455 of 2013 Act]
Documents required for formation of a Company
In order to get Certificate of Registration from the Registrar of Joint Stock Companies, the company
management should submit an application along with certain important documents like Memorandum
of Association, Articles of Association and Prospectus.
Memorandum of Association:- Its sets out the constitution of a company and defines the
relationships of the company with outsiders and scope of activities of the company. Its purpose is to
 VIBES 4

enable the shareholders, creditors and those who deal with the company to know what its permitted
range of activities are. No company can be registered without a Memorandum of Association.
Articles of Association:- It contains the rules and regulations for the internal management and
administration of the company. It regulates the relationship between the company and its members
and between the members themselves.
Prospectus:- According to the Companies Act 1956 & 2013, any document described or issued as a
prospectus includes any notice, circular advertisement or other document inviting deposits from the
public or inviting offers from the public for the subscription of any shares in or debentures of a public
company. Thus the prospectus is an invitation to the public to make deposits with the company or to
subscribe to its shares or debentures.

INTRODUCTION TO ACCOUNTING
Accounting is the preparation of financial records for business, governmental or other organizations. It enables
systematic recording of business transactions.
Definition
“ Accounting is the art of Recording, Classifying And Summarizing in a significant manner and in terms of money,
transactions and events which are in part at least of a financial character and interpreting the results there of .”
In simple sense accounting is the systematic recording of business transactions in a set of books
TYPES OF ACCOUNTING
1. FINANCIAL ACCOUNTING
The main purpose of this type of accounting is to record business transactions in the books of accounts in such a
way that operation results for a particular period and financial condition on a particular date can be known for
the information of the various groups of persons.
2. COST ACCOUNTING
It relates to the collection, classification, ascertainment of cost and its accounting and cost control relating the
various elements of cost i.e. materials, labour and over heads
3. MANAGEMENT ACCOUNTING
It relates to the use of accounting data collected with the help of financial accounting and cost accounting for
the purpose of policy formation, planning, control and decision making by the management.
BUSINESS TRANSACTIONS
The day to day operations of the business organizations are called business transactions. It includes any
exchange of money or moneys worth as goods and services between two parties.
Business transactions can be classified in to two. They are:-
1. CASH TRANSACTIONS
Cash transactions means a transaction in which cash payment is immediately made
2. CREDIT TRANSACTIONS
Credit transaction means a transaction in which cash payment is postponed to a future date.
ACCOUNTANT
The person who is responsible to take the accounting functions of the business are known as accountant.
DUTIES OF AN ACCOUNTANT
1. COLLECTION OF DATA
This is the first duty of an accountant. Collection of data means collecting the information relating to the business,
while collecting data no data should be added and no data should be omitted for e.g.:- collection of bill, voucher,
receipts, carbon copies and counter foils of various documents etc.

2. CLASSIFICATION OF DATA
It means separation of data according to date wise. It includes filing of data. While filing data, the first bill should be
indicated in the last of the file.
3. PRESENTATION OF DATA
It means recording the classified data according to date wise in proper books of accounts or computers.
 VIBES 5

IMPORTANT TERMS IN ACCOUNTING

1. Goods :
It includes all articles, commodities in which the business deals.
2. Equity:
A claim which can be enforced against the assets of the firm is called equity.
3. Purchase:
Purchases means commodities procured for production or resale.
4. Sales:
It is the income accruing to the firm from the sale of goods and services.
5. Debtor:
Debtor means a person who owes the business ascertain sum of money. Debtors arise mainly from credit sales.
6. Creditors :
Creditor means a person to whom the business owes certain sum of money. Creditors arise mainly from credit
purchase.
7. Capital:
Capital means investments made by the owner in the business.
8. Assets :
Any physical thing or right owned by the business that has a money value is an asset.
E.g.:- land, building, machinery, furniture etc

a) Fixed assets
Those assets which are acquired for long term use are called fixed assets
E.g.:- tangible fixed assets like furniture, machinery, building, land, motor vehicle, electrical fitting etc
b) Current assets
It includes those assets which can be converted in to cash within a short period
(Usually within a period of one year)
9. Liabilities :
Liabilities are the debts or obligations of a firm to other parties.
E.g.:- loan, creditors, bills payable etc.
a) Long term liabilities
Those liabilities which are not payable within the next accounting period but will be payable within the next five
to ten years are called long term liabilities. e.g.: debenture
b) Current liabilities:
Current liabilities are those liabilities, which are repayable within a short period
E.g.:- creditors, bills payable, tax payable, bank overdraft
10. Capital expenditure:
Capital expenditure means expenditure incurred in the acquisition of fixed assets. It also includes any amount spend
on the asset to increase production. E.g.:- cost of land, building, machinery, motor vehicle, furniture, patent, copy
right, goodwill, electrical fittings etc
11. Revenue expenditure:
Revenue expenditure means expenditure incurred in the day to day operation of the business the benefit of this
expenditure expires within a short period of time i.e., within a year.
E.g.:- expenses incurred for purchases, manufacturing expenses, rent, salaries, wages, commission ,
advertisement, depreciation , repairing charges etc

a) Direct expenses:
Direct expenses are those expenses which have been incurred to bring the goods or making the goods ready for
sale.
b) Indirect expenses:
All expenses incurred other than for production or purchases are called indirect expenses. Eg: rent, salary,
electricity charges, telephone charges etc
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12. Drawings:
Any cash or goods withdrawn by the owner of a business for personal use are called drawings
13. Carriage :
Carriage is the transportation expense incurred either for bringing the goods purchased to the business place or for
taking out the finished goods for resale.
14. Freight
The amount charged by the shipping companies for taking goods or cargo from one place to another is called freight.
15. Octroi
It is the duty payable when goods are brought within municipal limits.
16. Discount
a) Trade discount
It is the discount, which is given at the time of purchases and sale. This discount is provided for encouraging
purchasers to buy goods in large quantity. This discount is not shown in the books of accounts.
b) Cash discount
Cash discount is the discount allowed by the creditor to the debtor with a view to encouraging him to make
prompt payment. Cash discount should be recorded in the books of accounts.
17. Delivery note:
Delivery note refers to the document that accompanies the goods for delivery
18. Turn over:
It means total trading income from cash sales and credit sales.
19. Capital losses:
There are the losses arising from the sale of fixed assets or share capital
E.g.: discount on issue of shares and debentures, loss on sale of land, buildings, furniture etc.
20. Capital profit
It is the profit arising out of sale of fixed assets.
E.g.: profit on sale of land, building etc.
21. Revenue profit:
Revenue profit is the ordinary profit of a business concern
E.g.: profit on sale of goods.
22. Revenue losses:
It is the loss arising in the ordinary course of a business from its activities. E.g.: loss on sale of goods
DOUBLE ENTRY SYSTEM OF ACCOUNTING
This system was developed by an Italian merchant named Luco Pacioli. He wrote his first book named “De computis
et Scripturis” on double entry accounting in the year 1494.
It is a system of accounting which records two aspects of each transaction. One aspect is called debit and another is
credit.

ACCOUNT (A/C)
An account is a summary of all business transactions affecting a person or property or an income or expense.
Accounting concepts or Assumptions

Following are the some important accounting concepts

1) Business entity concept.

2) Money measurement.
3) Going concern.
4) Accounting period.
 VIBES 7

Business Entity Concept

This concept implies that a business is a separate accounting entity apart from its owner. This accounting
principle separates the activities of the business from the personal activities of the proprietor of the business.

Money measurement concept

This concept indicates that only such transactions as can be measured in terms of money are recorded in the books
of accounting.

Going concern concept.

This concept considers the business as having indefinite life until it goes into liquidation or winding up.

Accounting period

Normally accounting period adopted is one year as it helps to take any corrective action, to pay income tax, to
absolve the seasonal fluctuations and for reporting to the outsiders. A period of more than one year reduces the utility of
accounting data.

TYPES OF ACCOUNTS
1. Personal account:
These accounts record business dealings with persons or firms. The person receiving something is given debit and
person giving something is given credit.
2. Real account :
These are the accounts of assets. Assets entering the business are given debit and asset leaving the business is given
credit.
3. Nominal account:
These accounts deal with expenses, incomes, profits and losses. Accounts of expenses and losses are debited and
accounts of incomes and gains are credited.
DEBIT AND CREDIT
Debit and credit is the two fold aspects of accounting. Debit and credit is meaning full with the help of supporting
rules.
Accounts Debit Credit
Personal The receiver The giver
Real What comes in What goes out
Nominal All expenses & losses All incomes & gains
ALTERNATIVE RULES FOR DEBIT AND CREDIT

Accounts Debit Credit

Assets & expenses Increases Decreases
Liabilities, capital & income Decreases increases
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JOURNAL
Journal is a book of original entry in which transactions are recorded fist in the order of their accuracy. It is also
called book of original entry or primary book
JOURNALISING
Journalizing is the process of recording transactions in journal
JOURNAL ENTRY
The recorded transactions in the journal are called journal entry.
JOURNAL FOLIO (JF)
It denotes the page in the journal in which concerned transaction is recorded.

FORM OF JOURNAL
YEAR/
DATE LF PARTICULARS DEBIT CREDIT
MONTH

SIMPLE AND COMPOUND JOURNAL ENTRY

Simple journal entry: The journal entry having only one debit and one credit is known as simple journal entry
Compound journal entry: the journal entry having more than one debit and more than one credit is known as
compound journal entry.
 VIBES 9

TAX
Tax is a compulsory financial contribution imposed by a government to raise revenue, levied on the income or property
of person or organizations, on the production costs or sales prices of goods and services.

TYPES OF TAX

The type of taxes even depends on whether a particular Tax is being levied by the central or state government or any
other local Authorities. Taxes are categorized as Direct Tax and Indirect Tax

DIRECT TAX

Direct Taxes are the personal liability of tax payers. These are collected directly from the tax payers and they have to be
paid by the persons on whom it is imposed.

Eg : Income Tax, Building Tax, Land Tax, Property Tax, Road Tax etc.…

INDIRECT TAX

As opposed to the direct Taxes, such a Tax in the nation is generally levied on some specified services or some particular
goods.

Eg: Sales Tax, GST.

GOODS AND SERVICE TAX (GST)

GST is an Indirect Tax applicable throughout India which replaced multiple Cascading Taxes levied by the central
or state Government. India would be Implementing duel GST which would be CGST and SGST and Interstate transactions
would be governed by IGST which is equal to CGST and SGST.GST will be levied on goods and services. It will replace all
the various taxes and bring them under one umbrella to make compliance easier.

GST to be levied by the Centre on intra state supply of goods and services is Central GST(CGST) and that by the
state is State GST (SGST). On Interstate supply of goods and services integrated GST (IGST) will be collected by Centre.
IGST apply on Imports.

GST is a Consumption based Tax. The Tax should be received by the state in which the goods and services are
consumed and not by the state in which such goods are manufactured. IGST is designed to ensure seamless flow of input
Tax Credit from one state to another. One state has to deal only with the Centre.

INPUT TAX

Input Tax in relation to be a Taxable person, means the (IGST & CGST) in respect of CGST act and (IGST and SGST) in
respect of SGST act, Charged on any Supply of goods or services to him which are used, or are intended to be used, in
the course or furtherance of his Business and include the Tax payable under sub section 3 of section 7.
 VIBES 10

OUTPUT TAX

Output tax means the tax charged or chargeable under this Act by a registered dealer for sale of goods and services in
the course of business and includes reverse charge under this Act.

INPUT TAX CREDIT UNDER GST

Input credit means at the time of paying tax on output tax you can reduce the tax have already paid on Inputs. It
is important for Business to know to set off the input credit against each of these components in the order us prescribed
by the law.

In simple words input tax credit means reducing the Taxes paid on Inputs from Taxes to be paid on output.

INPUT TAX CREDIT SET OF AGAINST LIABILITY

CGST CGST AND IGST, (SGST)
SGST SGST AND IGST, (CGST)
IGST IGST, CGST, SGST
NB:-ITC not allowed in the case of building and allied items, personal vehicles.

TAXES SUBSUMED UNDER GST

Central Excise Duty, Service Tax, VAT, Sales Tax, Central Sales Tax, Entertainment Tax, Octroi, Purchase Tax, Luxury Tax,
Betting and Gambling, Taxes on Lottery, State Cesses and Surcharges etc.….

ADVANTAGES OF GST

1. GST is a Transparent Tax and also reduces number of indirect Taxes.

2. Prices will come down which in turn will help companies to increase productivity.

3. All the taxes are integrated it would make possible the taxation burden to be slip equally between Manufacturing and

Services.

4. In GST The Tax will be levied only at the final destination of consumption.

5. No cascading effect under GST (Tax on tax)

Compulsory Registration under GST

Any Persons or entity providing taxable supply of goods or services to persons in India with an Annual Aggregate
Turnover of more than Rs:20 Lakhs is required to obtain GST registration.

In some special category states like Assam, Nagaland, Manipur and Others, The Aggregate Turnover criteria has
been reduced to Rs: 10 Lakhs. Other than the Aggregate Turnover criteria a Person could be required to obtain GST
registration if they undertake Interstate supply of goods or services or have an existing VAT or service Tax or Central
Excise registration.
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Registration irrespective of Annual turnover (No threshold limit)

a) Casual Taxable person.

b) Persons liable to pay GST under reverse charge.
c) Every Electronic Commerce operator.
d) Non-Resident Taxable person
e) Persons who supply goods and services on behalf of other taxable persons weather as an Agent or otherwise
f) An outsider who sold goods in Kerala

GST Registration Fees/security Deposit

In GST registration there is no registration fee, Security Deposit and Renewal fee.

GSTIN (GST Identification Number)

All the Business entities registering under GST will BE PROVIDED A UNIQUE Identification number known as GSTIN or
GST Identification number.15 Digits are in GST first two digits represent the state code, Next 10 Digits will be the Pan No
of the Taxpayers.13th Digits will be the Number of Registration with in the state. 14th digits will be Z by default. The last
digits will be for check code.

GSTN (Goods & Service Tax Network)

GSTN is a one shop solution for all Indirect Tax requirements, not for profit organizations owned by government and
private players jointly.

HSN (Harmonized System of Noman clature)

It means a Code used for classifying the goods under GST.

SAC (Service Accounting Code)

It means Service Accounting Code under which services fall under GST are classified. HSN code and SAC Code used for
classifying goods and services under GST

DOCUMENTS REQUIRED FOR GST REGISTRATION (Online Registration)

GST Registration is set to begin in India from 1st JULY 2017.All Persons classified as taxable persons under GST are
required to obtain GST registration. Following are the Documents required for GST registration.

1. PAN card of Business Applicant.

2 .Identity and Address proof a long with photographs.

3. Business Registration Document.

4. Address proof for place of Business. (Own premises, Rented or leased premises, SEZ premises are

Acceptable)

5. Bank Account Proof.

6. Digital Signature.
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7. Partnership deed in the case of partnership concern.

8. Memorandum of Association, Articles of Association, Certificate of Incorporation in the case of Companies.
TAX RATE IN GST
0% Taxable (Exempted):-
Vegetables, Fruits, Eggs, Fresh Meat, Salt, Milk, Bread, Honey, Rice, wheat, Butter Milk, Curd, Raw Chicken, Raw Fish,
Glass Bangles, Printed Books, Handloom, Cattle feed, Lassi, Un Packed food Grains, un Packed Paneer, etc.
.25% Taxable:-
Bullions, Precious stones etc.
3% Taxable:-
Gold, base metals, silver, diamonds etc.
5% Taxable:-
Transport Services, Railways, Flights, Cream, Milk Powder,
Masala Powders, Paneer, pizza bread, frozen vegetables,
Tea coffee spices, Carriage for Disabled person, Edible Oil,
Sugar, Domestic LPG, Cashew nut, Milk food for Babies,
Coal, Fabric etc.….
12% Taxable:-
Butter, Ghee, Almonds, Fruit juice, Packed coconut water, Mobile phone, Tractor,
Electric vehicle, Bicycle, pickles, squash, Umbrella, Note book, Pen, Insulin etc.…
18% Taxable:-
Hair oil, Tooth paste, soap, pasta, corn flakes, Ice cream, Helmets, mineral water, soups Stove, Electronic toys,
Camera, steel products, monitors, printed circuits, Speakers,
Printer, PVC Pipe etc.….
28% Taxable:-
Cement, paint, Granite Tiles, Boost, Horlicks, Washing Machine, Television,
5 star hotels, Movie Tickets, Watches, Water heater, Air conditioner, Fan,
Chocolate, Glass etc.…
REVERSE CHARGE
Reverse Charge, Where the recipient is liable to pay tax, is common to many countries like Canada where it is applicable
on import of services and intangible properties. Normally, the supplier pays the tax on supply. In certain cases, the
receiver becomes liable to pay the tax, i.e., the chargeability gets reversed which is why it is called reverse charge.
In India, this is a partly new concept introduced under GST. The purpose of this charge is to increase tax
compliance and revenues.
The concept of reverse charge mechanism is already present in service tax. In GST regime, reverse charge may
be applicable for both services as well as goods.
Reverse charge Exempted in the case of salary, wages, interest.
COMPOSITION TAX
Large organizations have the requisite resources and expertise to address these requirements, many startups and asses
units may struggle to comply with these provisions. To resolve such problems the government has introduced
composition scheme under GST. It is nearly an extension to the current scheme under VAT law. In the scheme tax payers
will require to file summarize return on quarterly basis. Business dealings only in goods can opt for composition scheme
services providers have been kept outside the scope of this scheme. Annual Turnover of composition Tax dealers is
below 75 Lakhs.
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COMPOSITION TAX
Category of Registered Dealers Rate of Tax CGST Rate of Tax SGST Total Rate of Tax
Manufactures (Other than
manufactures of notified goods) 1% 1% 2%
Suppliers (Food or any other
article for human consumption or
any drink other than Alcoholic
liquor) 2.5% 2.5% 5%
Other Suppliers 0.5% 0.5% 1%

Type of GST Returns & Their Due Dates

Sl. No. Type of Return for Due Date To be filled by

return

Out ward supplies made by tax payer (other 10th of the

1 GSTR 1 than compounding tax payer and Input next month
Service Distributer [ISD]) All regular tax
th
Inward supplies received by a tax payer 15 of the payers and
2 GSTR 2 (other than a compounding tax payer and next month casual/non-
ISD) resident tax payers
Monthly return (other than compounding 20th of the
3 GSTR 3 tax payer and ISD) next month
18th of the Compounding tax
4 GSTR 4 Quarterly return for compounding tax payer month next to payers
quarter
7 days from Non-resident tax
5 GSTR 5 Periodic return by Non-resident foreign tax last day of payers
payer registration
13th of the Input Service
6 GSTR 6 Return for ISD next month Distributers
10th of the Persons deducting
7 GSTR 7 Return for Tax Deducted at Source next month GST at source
31st Dec of All regular tax
8 GSTR 8 Annual Return next FY payers
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LEDGER
Ledger is the group of accounts, which is is maintained to take each and every account balance separately. It is
called book of secondary entry or secondary book.
Specimen of Ledger

YEAR & Dr/

DATE JF PARTICULARS DEBIT CREDIT BALANCE
MONTH Cr

POSTING
Posting refers to transferring journal entries in to concerned ledger account. This is the second step of accounting.
TRIAL BALANCE
Trial balance is a list of ledger account balances. It is mainly prepared to check the arithmetical accuracy of the
books. It is always prepared in a separate sheet of paper. With the help of trial balance we can prepare final
accounts easily.

TRIAL BALNCE ERRORS:

Trial balance errors are classified in to four
1. Errors of principle: Errors of principle is occurred while violating any of the accounting principles.
Eg: purchase of machinery was debited to purchase account
2. Errors of omission: When a transaction is omitted to be entered in the journal or omitted to be posted from the
journal to the ledger. It is called error of omission.
3. Errors of commission: Errors committed or made in the process of posting, totaling, balancing etc.
Are called errors of commission
4. Compensating errors: If the effect of an error in one account is cancelled by the effect of one or more
STOCK REGISTER
It is the register, which is kept by every business units, so as to know the value of closing stock. It follows nine
columns date, opening stock, and purchase, purchase return, total, sales, sales return, closing stock and remarks.
Closing stock =opening stock+ purchase-purchase return-sales + sales return
Commonly stock is valued at cost price or market price which ever is lower.
FINAL ACCOUNTS
These are accounts, which are prepared at the end of a trading period, so as to know the financial position of the
business concern. In India final accounts consist of Trading and profit and loss account and balance sheet.
INCOME STATEMENT
This is the statement, which are prepared at the end of a trading period so as to know the net profit or net loss
made by the business concern during particular period. It is a statement which contains expenses, incomes, profit
losses etc. here expenses are classified in to two i.e. . Direct expenses and indirect expenses
Direct expenses:
Direct expenses are those expenses which have been incurred to bring the goods or making the goods ready for sale.
Eg:-Carriage on Purchase, Freight on purchase, Wages, Factory Exp, etc
Indirect expenses:
All expenses incurred other than for production or purchases are called indirect expenses.
Eg: rent, salary, electricity charges, telephone charges etc

BALANCE SHEET
It is statement of assets and liabilities. It is always prepared at the end of the financial period to know the
financial status of the business concern. In foreign system, assets are shown in left hand side and liabilities are
shown in right hand side of the balance sheet.
 VIBES 15

NAME OF THE FIRM

Income statement for the year ended 31st December………………
Amount in Amount in
(RS) (Rs)
Revenue
sales Xxxxxx
Less: sales return xxx
Net sales
Cost of goods sold xxxxxx
Opening stock Xxxxxx
Add: purchase xxxx
xxxxxx
Less: purchase return xxxxx
Xxxxxx
Add: Direct expenses
Carriage on purchase/fright on purchase /
Xxxxx
wages
Xxxxx
Labour charges/shipping exp etc
Xxxxxx
Cost of goods available for sales
xxxxx
Less: closing stock
Cost of goods sold xxxxxxx

Gross profit/ Gross loss Xxxxxx

Add or Less: indirect expense
Salary Xxxxxx
Bonus Xxxxxx
Carriage on sales Xxxxxx
Freight on sales Xxxxxx
Discount allowed Xxxxx
Commission Xxxxxx
Interest on loan Xxxxx
xxxxx
Rent /electricity/ telephone expenses etc. xxxxx
Actual gross profit /Gross loss Xxxxx
Add or Less: indirect income
Rent/commission /discount received Xxxxxx
Interest on deposit etc. xxxxx xxxxxx

Net profit/ Net loss

xxxxx
 VIBES 16

NAME OF THE FIRM

Balance sheet as on 31st December ………………….
Assets Amount Liabilities Amount
Current assets Current liabilities

Cash in hand XXXXX Sundry creditors:

Cash at bank: S to C Enterprises XXXXX
SBI XXXXX Malabar Agency XXXXX
SIB XXXXX Bills payable XXXXX
Stock XXXXX Bank overdraft XXXXX
Bills receivable XXXXX Duties and taxes:
Sundry debtors: Tax payable XXXXX
Mavila traders XXXXX Short term loans:
Modern Agenncy XXXXX Loan from party XXXXX
Investments: Other Current Liability:
Rent Deposit XXXXX Outstanding Exp XXXXX
Telephone deposit XXXXX Unearned income XXXXX
Agency deposit XXXXX Advance from party XXXXX
Other Investments XXXXX Long term liabilities
Loans and Advances:
Loan to Party XXXXX Long term loans
Advance to Party XXXXX Loan on mortgage
Other Current Assets:
Prepaid Expenses XXXXX
Equity
Accrued Income XXXXX
Insurance Claim XXXXX
A’s Capital xxxxx
Less: A’s Drawings xxx
Fixed assets Add/ less: N/P, N/L xxx
XXXXX
Land & building
Machinery XXXXX
XXXXX B’ s capital xxxxxx
Furniture Less: B’s Drawings xxxx
Motor vehicle XXXXX Add /less N/P, N/L xxxx
Computer & allied item
Fixtures and Fittings XXXXX
Electrical Fittings

Intangible assets

Goodwill
Patent & copy right XXXXX
Trade mark
XXXXX

XXXXXX XXXXXX
 VIBES 17

OPENING BALANCE SHEET

The balance sheet of previous year is considered as opening balance sheet of current year. This type of balance
sheet is always seen in running concern or existing concern. In such cases balances of assets and liabilities is to be
brought down to current year.
ADUJUSTING ENTRIES
These are entries, which are prepared at the end of trading period so as to adjust certain account. Adjusting entries
are basically classified as:-
Outstanding expenses:
These are expenses, which are to be payable during the current year but not paid during the year. It is the liabilities
of the firm.
Expenses A/C…………………………….……….. Dr
To Outstanding expenses
Prepaid expenses:
These are expenses, which are paid in advance during the current year but the benefit of such expenses will be
received in the coming year, so it should be considered as an asset of the current year.
Prepaid expenses A/C………………………………….. Dr
To expenses
Accrued income:
These are income, which are to be receivable during the current year, but not received in the same year. It is an
asset of the business
Accrued income A/C ………………………………………Dr
To Income
Unearned income (Income received in advance)
These are income, which are received during a particular trading period for the work or service to be done in future.
It is a liability of the business.
Income A/C …………………………………………. Dr
To unearned income

Depreciation:
Depreciation means decreasing the value of tangible assets after a continuous usage. The depreciation amount is to
be calculated properly in order to know exact value of asset.
Depreciation A/C ……………………………………… Dr
To Asset
Amortization:
Amortization means decreasing the value of intangible assets such as Goodwill, patent, copyright, trade mark etc.
Amortization A/C …………………………………….. Dr
To, Asset
Depletion:
Depletion means decrease in the value of natural resources such as mines, quarries, etc.
Depletion A/C ……………………………….. Dr
To Asset
Interest of capital:
It is an interest allowed at an agreed rate on the capital of partners. Interest on capital is an expense to the firm
Interest on capital A/C ……………………………….. Dr
To, Capital
Interest on drawings:
It is an interest charged on the personal drawings of partners. It is an indirect income.
Drawings A/C ……………………………… Dr
To Interest on drawings
 VIBES 18

Bad debts:
Bad debt means irrecoverable portion of debt of the business which is a business loss.
Bad debt A/C ………………………………….. Dr
To Debtors
PAY ROLL STATEMENT

‘’A pay roll statement is a company’s list of its employees, but the term is commonly used to refer to: the total
amount of money that a company pays to its employees. A pay roll statement contains Name of employees, Basic
pay, No. of attendance, Additions (i.e. HRA, DA, TA, etc.), Deductions (i.e. ESI, EPF, TDS, etc.), and Net salary, etc.
Specimen of Pay roll
Pay roll statement for the month of

S Name of Desig B. S N W Additions GS Deductions TD NS

N Employee nation W D D T HR O BN O EP ES TD PT O
D S A A A T S A F I S D

(B.S=Basic Salary, NWD=No. of Working days, WDS=Working days salary, D.A=Dearness allowance, TA=Travelling
allowance, HRA=House Rent allowance, OT=Over Time allowance, BNS=Bonus, OA=other allowance, GS=Gross
salary, PT=Professional Tax, OD=Other deductions, TD=Total deductions, NS=Net Salary)
TAX DEDUCTED AT SOURCE (TDS)
Assessee pays tax in the assessment year on the income earned in previous year. Due to this rule the tax collection is
delayed till the completion of the previous year. Even sometimes people conceal their income and the tax is not paid
at all. In order to overcome these problems, government started deducted some amount of tax from the amount
which is receivable by the assessee. The amount of tax so deducted is called as “Tax Deducted at Source”.

INCOME TAX SLAB FOR FINANCIAL YEAR 2017-18(ASSESSMENT YEAR 2018-19)(TDS RATE FOR SALARY IS
APPLICABLE THE FOLLOWING SLAB RATE)
Income tax slab for individual tax payers and HUF (less than 60 years old)(both men and women).

INCOME TAX RATE

Income up to 250,000 No tax
Income from Rs 250,001-Rs 500,000 5%
Income from Rs 500,001-Rs 1000,000 20%
Income more than 1000,000 30%
Special rebate is applicable for income Rs 250,001-Rs 350,000 is Rs 2500
Surcharge: 10% of income tax, where total income is between Rs 50 lakh and 1 crore. 15%
of income tax, where total income exceed Rs 1 Crore
Cess 3% of Income tax + Surcharge
 VIBES 19

Income tax slab for individual tax payers and HUF (60 years old or more but less than 80 years old
(both men and women)
INCOME TAX RATE
Income up to Rs 300,000 No Tax
Income from Rs 300,001- Rs 500,000 5%
Income from Rs 500,001- Rs 1000,000 20%
Income more than 1000,000 30%
Surcharge: 10% of income tax, where total income is between Rs 50 lakh and 1 crore. 15%
of income tax, where total income exceed Rs 1 Crore
Cess 3% of Income tax + Surcharge

Income tax slab for Super senior Citizen (80 Years old or more) (both men and women)
INCOME TAX RATE
Income up to Rs 500,000 No Tax
Income from Rs 500,001- Rs 1000,000 20%
Income more than 1000,000 30%
Surcharge: 10% of income tax, where total income is between Rs 50 lakh and 1 crore. 15%
of income tax, where total income exceed Rs 1 Crore
Cess 3% of Income tax + Surcharge
Eg1: if salary/month Rs 32000 (Age below 60). Calculate TDS?
Salary/ Year (32000*12) = 384000
Less Exemption =250000
Taxable amount =134000
Tax amount/ year (134000x5%) =6700
Less special rebate = Nil
Add Cess(6700x3%) =201
TDS (6901/12) =575.08 3

Eg2: If salary/month Rs28000 (Age below 60). Calculate TDS?

Salary/Year (28000x12) =336000
Less Exemption = 250000
Taxable amount =86000
Tax amount/Year (86000x5%) =4300
Less Special rebate =2500
1800
Add Cess (1800x3%) =54
TDS (1854/12) =154.5

Eg3: If Salary/month Rs 47000 (age below 60). Calculate TDS?

Salary/year (47000x12) =564000
Less Exemption = 250000
5%Tax amount (250000x5%) =12500
20%Tax amount(64000x20%) =12800
Total (12500+12800) =25300
Special rebate = Nil
Add Cess(25300x3%) =759
TDS (26059/12) =2171.58
 VIBES 20

TDS rate applicable for other payments are:-

ITEM LIMIT RATE
Interest & finance charges Rs5000/yr Individual- 10%
Company/firm-20%
Contract :- Each bill Rs 30000 Indivual-1% (with PAN)
Advt, sub contract, lorry Aggregate payment for 1 year Rs100000 Company/firm-2% (,,)
transport, catering, courier, Without PAN- 20%
printing etc
Commission and Brokerage Rs 15000/yr Indivual-5% (with PAN)
Company/firm-5% (,,)
Without PAN-20%
Hire charges under HP agreement Rs 120000/yr Indivual-10% (with PAN)
vehicle Company/firm-10% (,,)
Without PAN -20%
Rent for Plant, machinery and Rs 180000/yr Indivual-2% (with PAN)
Equipments Company/firm-2% (,,)
Without PAN-20%
Rent for Land & Building Rs 180000/yr Indivual-10% (with PAN)
Company/firm-10% (,,)
Without PAN-20%
Fee for Professionals / technical Rs 30000/yr Indivual-10% (With PAN)
consultancy Company/firm-10% (,,)
Without PAN-20%
All payments to NRI Nil Individual 30.9%
Company/firm-41.2%

Remittance –7th day next month

Retun Filing – Qurterly
Return Form:-
Salary 24Q
Others 26Q
NRI 27Q
TDS Certificate –Quarterly
Salary – Form-16
Others- Form-16A

EMPLOYEES PROVIDENT FUND (EPF)

Employee’s provident fund is a statutory and compulsory deduction from employee’s salary and the deducted
amount with employer share will be deposited in a recognized provident fund account for the welfare of the
employee. A recognized provident fund account may be a government managed fund or the fund managed by
private trust of the organization as per employee provident fund and miscellaneous provisions (EPF & MP) Act 1952.
Whoever may manage the provident fund, but the rules are same and same benefit should be given to employees

Features of Employees Provident Fund

1. In an employees provident fund account, every employer has his /her own account on which both employer and
employee will contribute.
2. The rate of total contribution of employer is 12% + Administration Charges

3. Employee also needs to pay 12% of his/her salary amount.

 VIBES 21

4. If employees want to contribute more than 12% of his salary on his/her account, the law allows employees to do
so, but the employer contribution is limited to 12%
5. Employees can take loan from their PF A/C without interest
6. Interest accumulated on the EPF account is exempted from income tax
7. Partial withdraw is allowed to employees on special occasion.
8. Total payment will be paid to the employee or his/her nominee in case of retirement, permanent disablement,
death in service or early retirement.
9. EPF is run by EPFO the largest service provider, run by government of India.
Specimen of EPF Register

EPF Register
Sl.No Name of Employee EPF Deduction EPF Contribution

Total

EMPLOYEES STATE INSURANCE (ESI)

ESI refers to Employee State Insurance. This is an insurance scheme run by the government. In this scheme, an
employee contributes part of his salary as an insurance premium. Along with the employee, the employer also
contributes to the scheme. The government collects this money and operates ESI hospitals.
It provides benefits in case of sickness, maternity and employment injury and to make provisions for related
matters. As the name suggests, it is basically an insurance scheme i.e. employee gets benefits if he is sick or
disabled.
Employees' State Insurance scheme (ESI) is a self-financing social security and health insurance scheme
for Indian workers. For all regular employees earning less than 21000 per month salary, the employers and
employees contribute a fixed percentage of the salary. This fund is managed by the ESI Corporation, which oversees
the provision of medical and other benefits to the employees, through its large network of dispensaries and
hospitals throughout India
It is obligatory on the part of the employer to calculate and remit ESI Contribution comprising of employers' share
4.75% plus employees' share of 1.75% which is payable on or before 21st of the following month, to the month to
which the salary relates. If the employee is drawing upto Rs.70/- as daily average wage, he is exempt from the
payment of his share of contribution. The employer is however to pay employer's share of 4.75% of the salary
received/receivable by the employee.
Benefits under the Scheme
Employees covered under the scheme are entitled to medical facilities for self and dependants. They are also
entitled to cash benefits in the event of specified contingencies resulting in loss of wages or earning capacity. The
insured women are entitled to maternity benefit for confinement. Where death of an insured employee occurs due
to employment injury or occupational disease, the dependants are entitled to family pension. Various benefits that
the insured employees and their dependants are entitled to, the duration of benefits and contributory conditions
thereof are as under:
 Medical benefits
 Sickness benefits
 Extended sickness benefit
 Enhanced sickness benefit
 Maternity benefit
 Disablement benefit
 Dependents benefi
 VIBES 22

Specimen of ESI Register

ESI Register
Sl.No. Name of Employee ESI Deductions ESI Contribution

Total

ACCOUNTS OF MANUFACTURING CONCERN

Manufacturing concerns are those concerns which are mainly involved in production process. It includes producing,
making, extracting, altering, ornamenting, finishing, assembling, or otherwise processing or adapting any goods.

Differences between manufacturing and trading concern

1. In trading concern buying and selling activities are undertaken. In manufacturing concern production is
undertaken.
2. In trading concern cost of goods manufacturing statement in not prepared. But it is prepared in manufacturing
concern.
3. In trading concern stock register of raw material and finished goods are not calculated. But it is calculated in
manufacturing concern.
4. In trading concern cost per unit of production is not taken in to consideration. But it is taken into consideration
in manufacturing concern.

RAW MATERIAL

These are material, which are used in factory for converting in to finished product.
FINISHED GOODS

These are final product, which are obtained after processing.

ISSUE

Issue here means supply of raw material for production. It always varies according unit of production.
ISSUE = RAW MATERIAL USED/UNIT X PRODUTION UNIT

COST OF PRODUCTION

Cost of production means total cost incurred for manufacturing a particular product.
COST OF PRODUCTION /unit = COST OF RAWMATERIAL USED /unit +LABOUR COST /unit+ OTHER
MANUFACTURING EXPENSES/unit
COST OF GOODS MANUFACTURING STATEMENT

In addition to income statement cost of manufacturing statement is prepared to find cost of production.
 VIBES 23

NAME OF THE FIRM

Cost of manufacturing income statement for the year ended 31st December ……………..
Amount Amount
XXXXXX
Opening stock of RM XXXX
Add: purchase of RM XXXXXX
XXXXX
Less: purchase return of RM
XXXXXX
xxxxxx
Less : closing stock of RM
XXXXX
Raw material consumed
Add: manufacturing exp
Wages
XXXXX
Carriage on purchase/freight on purchase
XXXXX
Labour charges /factory electricity etc
XXXXXX
Cost of goods manufactured
Revenue
Sales
Less: sales return XXXXXX
Net sales XXXXXX
Cost of goods sold XXXXXXX
Opening stock of FG
Add: cost of goods manufactured XXXXXXX
Cost of goods available for sales XXXXXXX
Less: closing stock XXXXXXX
Cost of goods sold XXXXXXX
XXXXXXX
Gross profit or Gross loss
XXXXXXX
Add or Less: indirect income
Commission received
Rent received /discount received /interest on XXXXXX XXXXXX
deposit XXXXXX

Actual Gross profit or Gross loss XXXXXXX

Add or Less: indirect expenses

Salary XXXXXXX
Office rent /advt/interest on loan XXXXXXX
Telephone charges XXXXXXX
Electricity charges XXXXXXX
Commission paid etc. XXXXXXX
XXXXX
Net Profit or Net loss
 VIBES 24

NON PROFIT MAKING ORGANISATIONS AND ITS ACCOUNTING SYSTEM

The organizations, which are established for the purpose of rendering social services to its members and
to the society is known as non-trading concern. Such organization includes clubs, schools, colleges, hospitals,
libraries, trusts, charitable societies, professional associations and unions. These organizations render their service
to the members and to the general public, such as a club provides sports and other recreational services to the
members. Schools and colleges provides educational services, hospital provides treatment and services to the
patients.
The sole object of non-trading concern is to provide necessary services to its members and the society at large
through welfare activities. The aim of such organization is not to make profit. They should prepare systematic book
of account to provide necessary information about receipts and payments. It also helps to know, whether the
current income is sufficient to meet the current expenditure or needs. The balance sheet is prepared to know the
financial position, besides providing information about the proper utilization of grants, donations, and so on.

Important terms related to non-profit making organizations.

1) Entrance fee: This fee is paid by the members at the time of admission.

2) Life membership fee: It is paid only once in the form of annual subscriptions. So it’s treated as a liability

3) Legacy : it is the amount which a non trading concern will receive as per will of a deceased person. It is treated
as a liability.

4) Donation: Donation is the amount which is given to the non trading concerns as gift by members and non
members.

a) General donation: When the donor does not lay down any specific condition for using the amount of donation,
then it is called as general donation.
b) Specific donation: If the donation is for a specific purpose, say construction of a building or room, then it is
called specific donation.

5) Capital fund: In simple words, the accumulated surplus of a non profit making organization is known as capital
fund.

6) Surplus: total receipt over disbursement is known as surplus. Surplus is always added with capital fund.

7) Deficit: Total disbursement over receipt is known as deficit. Deficit always deducted from capital fund.
 VIBES 25

NAME OF THE FIRM

Receipt and disbursement statement for the year ended 31st December……
Amount Amount
Receipt
Sales XXXXX
Less: sales return XXXX
XXXXX
General donation XXXXX
Admission fee XXXXX
Tuition fee XXXXX
Subscription received XXXXX
General grand XXXXX
Doctors consulting fee XXXXX
Commission received XXXXX
Total receipt XXXXXXX
Disbursement

Opening stock XXXXX

Add: purchase XXXXX
Less: purchase return XXXXX
Less : closing stock XXXXX
Sports material XXXXX
Medical material XXXXX
Papers and periodicals XXXXX
Rent XXXXX
Electricity charges XXXXX
Telephone charges XXXXX
Salary XXXXX
XXXXX
Total disbursement XXXXXXX

Surplus / Deficit XXXXXXX

 VIBES 26

BANK RECONCILIATION STATEMENT (BRS)

Meaning
It is a statement which is prepared by a trader on a particular date in order to reconcile the balance as shown by the
bank account with the balance as shown by the bank pass book. It may be defined “as a statement which contains a
complete and satisfactory explanation of the differences in the balances as per bank account and bank statement”.
Causes for differences
As already stated before, the balance shown by the bank account and the pass book normally do not tally on
account of certain reasons. These reasons are as follows
1) Cheque issued but not yet presented to bank for payment:-
Cheque issued by the trader may not as yet, have been presented for payment. These cheque must have been
entered In the bank column on the credit side of the bank account, thus reducing the balance at bank (or increasing
the overdraft). In the books of bank entries will be made only on payment. Due to this fact, the balance according to
the pass book appears more than that shown in the bank account.
2) Cheque deposited in the bank, but not yet collected by the bank :-
Whenever cheque is received from clients they are immediately deposited with the bank and debited in the bank
account. But all the same, the bank does not credit the customer’s account until the bank gets the cheque realized
especially when it is drawn on another bank. In the mean time, therefore the bank account will show a higher
balance than that shown by the pass book.
3) interest allowed by the bank, not recorded in the bank account:-
When the bank allows interest to a customer, it credits the customer’s account and his bank balance would increase.
But the customer comes to know about it only at the end of the month and then he would pass an appropriate
entry. Until then, the bank balance as per the pass book would be more than the balance as per bank account.
4) payment made by the bank, not recorded in the bank account:-
The bank may be given standing instructions for certain payment such as insurance premium, rent, taxes, electricity
charges etc. when the bank make such payments, it immediately debits the customer’s account, but the customer
on his part will credit the bank account only after the receipt of the pass book or intimation from the bank to that
effect. In the mean time, therefore the bank account shows higher balance than that of the pass book.
5) Amount deposited by the customer directly in our bank account, not recorded in the bank account:-
When any amount is directly deposited by a debtor into the bank account of the depositor, the bank would credit
the depositor’s account immediately but the customer would know about it only after receiving the advice from his
bank. Until then, the bank balance as per pass book would be more the balance as per bank account.
6) Bank charges not recorded in the bank account:-
The bank generally charges the customer for the service it renders to them. These charges are called bank charges.
These charges are some times entered in the passbook only. The same is entered in the bank account either on
receipt of intimation from the bank or after the receipt of the passbook customer. Until such time, bank account will
show higher balance than that of the passbook.
7) Cheque received or issued but dishonored:-
Whenever Cheque is deposited, they are shown on the debit side of the bank account, but
when a cheque is dishonored, the amount of cheque is not credited to the customer‘s account by the bank. As a
result, balances as shown by the bank account and pass book differ. Similarly, if a cheque issued by the trader and
recorded on credit side of the bank account is dishonored, bank balance as per bank account shows fewer amounts
as compared to the bank balance as per the pass book.
 VIBES 27

CASH BOOK
Cash book is the most important subsidiary book of a business. It is used to record all transactions relating to cash
receipts and cash payments. A cash book is maintained by all organizations irrespective of its size (big or small) and
nature (profit making or not profit making). A cash book is a journal as well as a ledger. It is a journal because it is
the book of original entry in which cash transactions are first recorded. It is a ledger because by preparing cash book
we will get cash balance.
Types Of Cash Book
1) Single column or Simple cash book
2) Double Column Cash book ( Cash book with cash column and bank column)
3) Petty Cash book

Single Column Cash Book/simple cash book

A simple cash book records only cash receipts and cash payments. It has two sides, namely debit and credit. Cash
receipts are recorded on the debit side and cash payments are recorded on the credit side.

Specimen form of Simple cash book

Dr Cr
Date Particulars Receipt No L F Amount(Rs.) Date Particulars Voucher No LF Amount(Rs.)

Double Column Cash book

Now a days receipts and payments, on business transactions are mostly performed through bank. In such cases the
trader will feel it convenient to provide a separate amount column on each side of the simple cash book to record
bank transactions.
In double column cash book, cash and bank column appear in one account. Example, deposit cash into bank,
withdrawal of cash from bank for office use. In this case cash and bank column would appear in one account is also
called contra entry.
Specimen form of Double Column cash book
Dr Cr
Date Particulars RN LF Cash(Rs) Bank( Rs) Date Particulars VN LF Cash(Rs) Bank(Rs)

Petty Cash Book

In every business organizations, a large number of payments frequently made for postage, telegrams, courier,
carriage, conveyance, stationary, and other expenses. The organization appoints an assistant to the head cashier is
known as petty cashier. He makes payments of these expenses and maintains a separate cash book is called petty
cash book. The petty cashier works on the imprest system. Under this system, a definite sum say Rs. 4,000 is given to
the petty cashier at the beginning of the period. This amount is called imprest money. The petty cashier makes all
small payments out of this imprest amount. At the end of the period he presents the account to the head cashier
and gets reimbursed from the head cashier. Suppose out of Rs. 4000/- he has spend Rs. 3850/- by the end of the
period, he will get Rs. 3850/- from the head cashier. Thus, again he has the full amount of the beginning of the next
period.
 VIBES 28

Specimen form of Petty cash book

Amount Date Particulars Voucher Amount

Received No Paid (Rs) Analysis of payments

Postage Telephone Conveyance Stationary Miscellaneous

&Telegram expense
1 2 3 4 5 6 7 8 9 10