UNIT 10 MAINTAINING SCHOOL

ACCOUNTS

10.1 Introduction
10.2 Objectives
10.3 Concept of Accounting
10.4 Basic Accounting Process
10.5 Financial Records
10.6 Use of Computers in Accounting
10.7 Let Us Sum Up
10.8 Unit-end Exercises
10.9 References and Suggested Readings

10. INTRODUCTION
In Unit 9 you have studied about budgeting. In this unit, we shall discuss the maintenance

As a school head, you may be having an academic background in science, social

science, literature or mathematics, However, the duty of a school head encompasses
the effective supervision of all the activities of a school including financial management.
Ineffective financial management can lead to serious consequences. Therefore, in
order to supervise the maintenance of financial records, carry out internal auditing and
respond effectively to external auditing, you need to be aware about the basic prod
dures of maintaining accounts.

10.2 OBJECTIVES
After studying this unit, you should be able to:
a get acquainted with the concept of accounting;,
a explain the steps of basic accounting process;

discuss the use of ICT in accounting.

10.3 CONCEPT OF ACCOUNTING

An organization whether it is a profit seeking organikation lice a business house or a
non-profit seeking organization like a school, has to maintair in a systematic manner
the records of day-to-day financial transactions so a$ to keep track of the income and
expenditures. Accounting involves systematic recording of financial eventsltransactions
Economic Efficiency and , as and when they occur, leading to the presentation of the complete financial position
Educational Effectiveness
of the organisation.
In this context, there are two stages - bookkeeping and accountancy. Let us have a
brief discussion on these two topics
Bookkeeping: It involves recording in financial terms, the transadtions carried out
by an organization, which in our case is a school, with some other party. In a certain
set of books, all financial transactions are regularly recorded according to certain
~ l e and
s with certain objectives (Shukla, 2004).
Accountancy: It is a concept, which is more evolved than the elementary process of
bookkeeping. According to the Technology Bulletin of the American Institute of
Certified Public ~ccountants,"Financial 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 financial character."
Accounting activity is based on a combination of principles, ~ l e spersonal
, judgments
and postulates of accounting. It is a systematic knowledge and art of observing the
~ l e on
s the basis of which the systematic records of daily business transactions are
kept (Gupta, 2004).
Accounting is also referred to as the 'Language of the Business' as it is effectively
employed to communicate the financial performance of the organization to various
stakeholders.It is basically concerned with the collection, recording, classification and
presentation of financial data to serve the purposes of the management and other
stakeholders and even the government (Financial Accounting Fundamentals, ICW
AI, 2003).
Now that we have an idea about the term, 'accounting', let us study its objectives.

Objectives of Accounting
The basic objectives of accounting are to provide financial information to the
management and other stakeholders of the school. Such financial information is essential
because:
a Analysis of the financial information helps in planning and programming for the
school.
a Decisions can be taken in the perspective of the financial information, for the
school.
a For ascertaining the financial position in terms of income and expenditure of the
school in general and for specific activities.
a For controlling expenditure and planning for augmenting the sources of
income.
a It keeps the stakeholders well informed about the financial situation of the
schools.
a The investors (govemment/privatebodies), management, donors, suppliers, lenders,
government agencies like taxation authorities, employees, agencies involved in
planning, and policy making are able to acquire the necessary financial information
about the school.
In a school you would find that accounting is done with two basic objectives: Main
Objectives and certain other Objectives that have been summed up through the
I
Fig. 10.1.
 I

Objectives Maintaining School Accouqts

Main
Objectives

a Statement of income1
expenditure

a
Statement of assetsAiabilities -
Growthldecline of financial status
a
44
To maintain p oper records and
minimise erro
Information t stakeholders

Fig. 10.1: Objectivesof Accodnting

It could thus be said that accounts are maintained s the financial position
of the school.
I
Activity 1
From the school head and the accountants of a out the users of
financial statement i.e., the parties who are uccounts
maintained by the school.

Basic concepts of accounting

The principles of accounting are based on certain cdncepts
~ are considered by
accounting professionals as self-evident. But for a professional like a
school head, who may not have an academic or any
practical experience in this field, awareness of
s h e has to supervise the functioning of even
discuss some of the important concepts here.

Entity Concept
The organisation (school) is an entity, which is distinct from the
~ owning it.
Thus, accounts are maintained for the organization, as an entit
the person(s) who own it. Let us go through this illustr'ation.

In a private school, from the school accounts, the o ner of the school
withdraws Rs.50, 000 and spends it on his family, How ill the school head
accountfor such a transaction?

Withdrawal of money, which the owner has invested in the schdlolas capital, would be
recorded as withdrawal in the books of accounts. However, owner spends this
fund for his family, the transaction will not be recorded in of accounts of
school because it has no effect on the financial status of the
entity. Entity concept thus keeps out the mixing of the
affairs of the ownerlinvestor.
Money Measurement Concept: Accounting is concerned w th only those events,
which can be measured in terms of money. f i e use of monetar yardstick provides a
means by which a variety of facts 1 things of diverse nature an be expressed in a
common denominator. This enables additions, subtractionsand ther ca/culations. For
example, an event though important, like dedication of the t achers towards their I
work will not be recorded in the books of accounts as it cannot be measured in monetary
terms.
\

19
Economic Efficiency and Cost Concept: The cost concept and the money measurement concept are closely
Educational Effectiveness
related. Transactions are recorded in the books at the price that happens to be the
actual cost. This avoids an arbitrary value being plac/d on the asset and all subsequent
accounting is done in relation to the cost actually paid.
Dual Aspect Concept: This is an important concept of accounting. Before we discuss
this concept, let us understand the following terms.
Assets are what an organization, say a school owns. Major hssets of a school are
land, buildings, furniture, equipments, computers, bank balance, etc. The assets of the
firm (school) are always equal to its liabilities and equity.
Liabilities are what the school owes to various parties like lenders, suppliers, employees,
government and others.
Equity is the difference between the assets and liabilities of the organization say
school. It represents the residual interest of the owners in the assets of the organisations,
i.e. school.
Dual aspect concept refers to that fact every transaction has two sides. For example,
if a school has acquired an asset it must have resulted in one of the following events:
Some other asset has been given up or
The'obligation to pay for it has arisen.
Example 1: If computers worth Rs. 1,50,000 are purchased by a school, on one hand
the school has acquired assets i.e. computers, on the other hand its bank balance will
get reduced by Rs. 1,50,000.
Example 2: Mr. Lohia starts a school with Rs. 10.00 lacks. There are two aspects of
this transaction. In this transaction the school and Mr. Lohia are separate entities .On
one hand the school has acquired assets worth Rs. 10.00 lacks while on the other
hand the school as a-distinct entity, incurs a liability of the same amount towards
Mr. Lohia.
Thus, every transaction has a dual impact and accounting system records both the
aspects.
Accrual Concept: Revenues are recognized when service is rendere'd irrespective
of when cash is received. Similarly, expenses are recognized when goods/services
are received regardless of when the payment is made.

Examples
(i) School fees for 10 children who are defaulters, due for the month of September
2004 is actually received in December 2004. The fees received should be
accounted as revenue for September 2004 although the actual payment was
received in December 2004.
(ii) Telephone bill for the month of March 2004 of the school was actually paid in the
month of May 2004. The expenses need to be accounted in the financial year
2003-04 andnot in 2004-05.
Accounting Period Concept: Accounts should be maintained in such a manner that
it permits results i.e., financial position being ascertained and presented for each
accounting period which usually is a year.
As a school head, since you would be supervising several activities of the schaol
including the financial accounts of the school, your awareness of these concepts would
Activity 2 1 Maintaining School 4ccounts

From any school find out events to szipport the concep of dual entity and
accrual concept.
Activity 3
From a school collect data about its assets and llabilitie .
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1,
I

Check Your Progress 1

Note: Answer each of the following questions briefly.
I. What is meant by the process of accounting?
I1

2. What is the purpose of accounting?

.............................................................................................................

3. What is meant by dual concept of accounting?

4. A computer was purchased a day before the budget for ~4.45,000.Immediately

after the budget the market price rose to Rs.B0,000. hich price is to be
recorded in the book of accounts?

5. Explain the concept of business entity.

10.4 BASIC ACCOUNTING PROCESS 1

I .

The accounting process i s a series of activities that begin with the occurrence of a
transaction and ends with the closing of the books of accounts. It thk following
major steps (10.2):
Steps in the Accounting Process 1
( Identification of Transaction I
Analysing and Classifying

t
( Making Journal Entries I

I Preparing Trial Balance

+
Preparing Financial
I Statements I

I
I
Fig. 10.2
21
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Econumic Efficiency and We shall discuss these steps in a more elaborate way now.
Educational Effectiveness

Identification of Transactions
Transactions that are carried out in the school are needed to be identified from the
source document such as invoice, purchase order, etc.
Example: Furniture is purchased for the school, and the transaction is identified for
recording in the books of accounts, the source document being the bill issued by the
seller i.e. invoices.

Analysing and Classifying the Transactions

For the purpose of making entries in the books of accounts it is essential to understand
the nature of accounts. Transactions are broadly classified under three headings:
Nominal accounts relating to income and ejtpenses
Real accounts relating to assets and liabilities
Personal accounts relating to persons such as debtors and creditors.
The golden rule of accounticg that provides how duality aspect of a transaction is to
be recorded in the books of accounts has been tabulated below:
Table: 10.3

I Nature of Account I Rule 1 b ~ 1 e '1

L Nominal Account

Real Account
Dehit all expenses & losses
Credit all income & gains
Debit wllat comes in
School fees (income)
Salary (expense)
Cash, bank balance,
Credit what goes out furniture, building, etc.

Personal Account Dehit the receiver Capital investment

Credit the giver in the school hy
ownel-/management
\
(capital account)
Loan from financial
. institutions, etc.

Let us now go through this case study to understand the duality aspect of transactions.

Case Study 1
Dciring the nzotlth of Janrraty 2004 a schooi carried oirt certain trurzsuctions,
which are given below:

Itern No. Dtrte Trut1sacrions

1) 9 th January Purchased laboratory equipnzents

costing Rs. 15,000from ' Y ' Lrd.
11 rh January Purchased cornl~utersworth Rs. 1 fakh
18 rh January Puid cash to ' M ' Ltd.- Rs. 20,00
21 st Jarzrrary Receiv~dfrom'N'- Rs. 20,000
5) 27 th Jutruary Sold broker?,furniturefor Rs. 25,000
6) 31 sr Januur?, Paiil Salary Rs. 5.00 hk1i.s
+

A~la1ysi.sof' trunsacrions: The rt-unsucrion.~carried ocit have heen ancllysed in

the ,jbllowing manner:
22
 -.
I

Item No.1: Laboratory equipnzents i.e. assets (Real Acqount) me in as 'Y' Ltd. Maintaining School Accounts
sells them. Hence laboratory equipments account (a/cl) is to debited and 'Y'
Ltd. d c to be credited.
ltenz No.2: Conzputer (Real Account) comes in and hash ( R Account) goes
out. Hence, cotnputer d c to be debited and cash d c bo be
Item No.3: ' M ' Ltd is a personal a k who receives the cqsh and thus to be debited.
Cash, a Real d c goes out and hence credited. I

I
ltem No.4: Cash i.e. asset (Real u/c) comes in und hence is ebited. N's d c is
credited. . 1

Itenz No.5: Broken furniture i.e. asset (real account)

d Hence, furniture
'

d c to be credited. Cash comes in hence cash d c to be Item No.6: Salaj,

being an expense (nonzinul d c ) to he debited. goes out to be
credited.
Thus we see from this case study how transactions haqe to be identified and then
analysed into the relevant type of accounts and that eve& transaction has two sides
i.e. dual sides.
I

Classification of accounts
1
The school head has to ensure that all financial transactlions are1properly classified
and recorded in the school accounts and that they are allobated to he correct heads of
account.
A proper distinction between Capital and Revenue as
payments is one of the fundamental principles of
I both receipts and

Capital receipts in school accounts comprise collections ous sources such as

building funds, development funds, etc. that are usually on a non-recurrent
basis. While Revenue receipts constitute of tuition fees, n fees, annual fees,
miscellaneous income, etc. and are received in a
I
Capital expenditure results in the creation of laboratories,
etc. It is generally of non-recurring nature
tangible assets. Revenue expenditure, which is usually
staff salaries, management contribution towards
consumables for laboratories, sports items, etc.,
expenditure on purchase of furniture, equipments
etc., laboratory equipments, teaching aids, durable
even though of non-recurring nature, form part

Activity 4 ,
Analyse the jbllowing transactions by clussifiing the acc70 yts. Purchuse of
teuching aids from ' M ' Ltd.
I
, i'
Selling off old newspapers and journals to 'Vi.
Receiving Rs.20,000 as do~zationfronz ' Z ' .
Purchasing gardening equipments front 'S'. 1
Paid in cash (bills) to electricity depart~nent.
I
~
Making Journal Entries
i
I
Following the identification and analysis of transactions, about dhich you have learnt
through table 1G. 1 and case study 10.1, the transactions are r corded in Books of
Accounts as 'debit' and 'credit'. Such entries are made in chro ological order. The
3
journal is the entry point for financial transactions into the acco nting system. Every
Economic Efficiency and transaction is accompanied by a description about it, the accounts affected, whether
Educational Effectiveness
those accounts are increasedldecreased and by the extent to which it occurs (Table
I . .
10.1).
Table 10.2: Journals

Particular , *LF Amount (Rs.)

Debit Credit :

Name of the alc to be debited J

Name of the a'c to be credited J
.aF (narration about transaction
1 1 briefly) I I I 1
* LF: (Ledger Folio) i.e. Page No. of the Ledger.

Date Particular LF Amount (Rs.)

27/9/2004 Electricity charges l0,OOO
Cash a/c l0,oOO
(Electricity charges paid for
the month of August. 2004)

Posting to Ledger
Journal entries are then transferred to ledger accounts. A ledger of a school is a
collection of the school's accounts. It is a book that contains .records of all financial
transactions in a summarized and classified form. It is the principal book of accounts
as finai information regarding the financial situation of an organization (school) emerges
from it. The form of maintaining an account in the :edger is as follows (Table 10.3).

Table 10.3: Ledger

Debit (Dr.) Credit (Cr.)

Date Particulars *JF Amount Date Particulars JF Amount

-- (h.) (Rs.1

* JF: (Journal Folio) i.e. Page No. of the Journal.

Illustration of Ledger IE
Consider the following Journal Entry: .

Date Particulars Ledger Amount Amount (Rs.)

Folio (h.) Credit
Debit
2004 Furniture & Fittings l0,oOO
May 20 a/c 10,oOO
To Bank d c
(Being Furniture &
fittings purchased)
 I

The above journal entry if posted to the ledger accourits will appe$r as in tables 10.4 and Maintaining School Accounts

I
Table 10.4: Furniture & Fittings N c
Credit (Cr.)

Date Particulars JF Amount Date ~articulsrs JF Amount

-------- (Rs.1 P
(Rs.1
2004 To Bank alc l0,ooO
May 20

Table 10.5: Bank N c

Credit (Cr.)

Particulars JF Amount Date Particu ars JF Amount

Preparing Trial Balance

Objectives of preparing Trial Balance

Errors not disclosed by Trial Balance:

Omissions in recording any transaction

Recording a transaction twice (errors of duplication)

Accounting Fundamentals).

25
 Electricity &Water l0,OOO
Charges
Depreciation - 1,80,000
Buildings 1,50,000
Vehicles 30,000
26,30,000 26,30,000

recording of transactions by making adjustment entries and posting them to the

concerned ledger account.
1

Activity 6
Prepure a trial balunce for a school with data collected on 10 transactions.

Preparation of Financial Statements

I

After the adjustment entries are made in the journal and posted to the ledger accounts,
preparation of financial statements can be taken up.
The financial statements prepared in a school are usually the following:
(i) Income and Expenditure accounts - prepared from incomes, expenses
(ii) Balance sheet prepared from the assets and liabilities.
Income and expenditure account
As discussed earlier the schools are supposed to be non-profit making organizations.
Therefore they do not prepare the profit and loss accounts. They prepare the income
and expenditure account to know the surplus and the deficit situation.
The income and expenditure account is prepared to know:
The net income and net expenses
The surplus and deficit situation
The actual income and the expenses
26
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 Whether the revenue income is enough for balahcing th revenue expenses Maintaining School Accounts
I

Whether there is balance between income and eppendihjre. etc.

A specimen of income and expenditure accounts is aq follow (table 10.7):

Table 10.7: Income and Expenditurie

s ,

(For the year ended ..................

Expenditure Amount Income Amount

(Rs.) * (Rs.1
To Salar~es By Tuition Fees
To prlnting & stationary
'r ,Telephone
To Sundry Expenses By Grants
To Gardening
To Depreciation:
Land & building
Sports equipments
Furniture
To excess of income over I

expenditure (if surplus)

I

Rs. 1
I
Rs. 1
I
Preparation of Balance Sheet
i
It is essential to prepare a balance sheet after preparing the i 4 o m e and expenditure
account. It shows the financial condition of an organisqtion school at a given point
of time. In the balance sheet, the information assets and liabilities
such as capital fund, surplusldeficit,cash in hand, land & outstanding expenses,
accrued income etc. should be given.
I I
A specimen of the balance sheet is shown as follows i'n Table 10.8:
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Table 10.8: Balance sheeli
(as on ..........)

Liabilities Amount
(Rs.)
Assets ~
I

Capital fund Land and Buildin s

(Net of Depreciation)
Add: Surplus ~urniture&
Fixtures (Net of
Depreciation)
Less: Deficit Equipments
(Net of Depreciation)
Endowment fund Fixed deposits
- 1 Donations I I Accrued interest I I 1
Security Deposits Inventori$s in hank
Outstanding salaries Bank
Outstanding rent
I Cash
Economic Efficiency and We have discussed the various stages involved in the accounting process. So that you
Educational Effectiv'eness
may have an idea about the whole process in its entirety, we shall study an illustration
in which all these stages have been integrated.
211ustration: The following transactions have been journalised (entered in the journal),
then posted to the Ledger and the accounts are then balancld. Thereafter Trial Balance
as on 30th April 2004, Income & Expenditure Account for the month of April 2004
and Balance Sheet as on 30th April 2004 has been prepared.
On 1st April 2004 Mr. X started a Pvt. School with Rs. 15,00, 000 of which
Rs. 5,00,000 were borrowed @ 12% p.a. from Y Bank Ltd. All the transactions have
been carried out through bank.

Date Transactions
April
2 Hired a Building at a monthly rent of Rs. 50,000
2 Purchased'fumiture and fittings worth Rs. 2,00,000
3 purchased equipments worth Rs. 50, QOO from Z
4 Received Rs.5, 50,000 towards admission fees
28 Paid Electricity and Water Charges for Rs. 20,000
29 Paid salaries to the teachers and other staff for Rs. 4,50,000
30 Miscellaneous Expenses for Rs. 5,000
30 Interest of Ks. 5000 paid to Y Bank ~ t d on . loan (12% on
Rs. 5 lakhs = Rs.60,000. Therefore, interest per month
= 60,00011 2 = Rs. 5000).

Journal

Date Particulars U. Dr. (Rs.) Cr. (Rs.)

-

m
April 1 Bank A/c Dr. 1~,00,obo
To Capital A/c 10,00,000
ToYBankLtd.A.1~ - 5,(K),000
(Capital brought in and loan taken
from Y Bank Ltd @ 12% p.a.
to start a school.)
April 2 Rent Ale Dr. S0,ooO
To Bank A/c 50,m
(Rent paid.)
April 3 Furniture & Fittings A/c Dr. 2,00,m
To Bank A/c 2,00,000
(Purchased furniture and
fittings.)
-

April 4 Equipmenis A/c Dr. 50,OOo

To Z's personal A/c 50,m
(Equipments purchased
froin Z.)
April5 BankA/c Dr. 5,50,000
To Admission fees A/c 5,50,000
(Received admission fees.)
April 28 Electricity &Water Charges A/c Dr. 20,000
To Bank Alc 20,000
(Electricity and water charges paid.)
April 29 Salaries A/c Dr. 1 L-,50,000 Maintaining School Accuunts
Particulars L.F. 4,S0,000
(Pa~dsalaries.)
Ap11130 Misc. Expenses N c -Dr. 5,000
To Bank N c 5,000
(Incurred miscellaneous expenses.) I

April 30 Interest Alc Dr. I 5,000

To Bank N c 5,000
(Interest paid on loan takcn ,

from Y Bank Ltd.)

Apr1l30 Income &Expenditure N c Dr. I , 5,30,000
To Rent Alc 50,000
To Electricity & Water Charges Alc 20,000
To Salaries Alc 4,50,000
To Miw. Expenses Alc 5,oOO
To Interest N c
(Various expenses transferred to
the debit of

April 30 Admission fees N c

To Income of Expend~tureN c
(Admission fees transferred to
the credit of Income and Expend~tureA/c)
Income & Expenditure A/c
April 30 Income & Expend~tureN c Dr. ~0,000
To excess of Income I 2moo
over Expenditure N c
(Belng excess of income over expenditure)

Ledger
- I

Dr. I a.

I (Rs.)
2aM 2004
April 30 To Balance cld* 10,00,000 April 1 By Bank Alc lO,oO,000
10,00,m lO,oo,000
May 1 By Balance b/d**
*cld = carried down,
** bld = brought down

Y Bank Ltd. (Loan)A/c

Dr. Cr.
Date Particulars J.F Amount Date Partidulars J.F. Amount
(Rs.) (Rs.)
2004 2004
!

I
April 30 To Balance c/d 5,00,000 April 1 By Bank N c 5,00,000
5.00.000 $.00.000

May 1 By Balance bld 5,00,m

29

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Economic Efficiency and Rent A/c
Educational Effectiveness
Dr. a.
Date Particulars J.F Amount Date Particulars J.F. Amount
(h.) (h.)
2004 2004 d

April2 ToBankA/c 50,000 April 30 By Income & 50,000

Expenditure A/c
50,000 50,m

Furniture & Fittings Alc

Dr. G.

Date Particulars J . Amount Date Particulars J.F. Amount

-- - -- -
(h.1
- - -
(b.1
2004 2004
April 3 To Bank A/c 2,00,000 April 30 Balance c/d 2 , 0
2,00,000 2,00,000

May I To Balance b/d &Mi000

EquipmentsAlc
Dr. G.

Date Particulars JP Amount Date Particulars J.F. Amount

(h.) (h.)

April 4 To Z's A/c 50,000 April 30 Balance c/d

50,000
May I To Balance b/d 50,000

Z's AJc
Dr. G.

Date Particulars J.F Amount Date Particulars J.F. Amount

(k.) (h.)
2004 m -
April 30 To Balance A/c 50,000 April 4 By Equipments A/c 50,000
50.000 50,ooo

May 1 By Balance b/d 50,000

Admission Fees Alc

Dr. a.
- - -- - - - -

Date Particulars JP Amount Date Particulars J.F. Amount

(k.) (k.)
2an m
April 5 To Income & 5,50,000 Apri 5 By Bank A/c 5,50,000
Expenditure A/c.
 Dr.
Electricity & Water Charges Alc ~~ (3
Maintaining School Accounts

Date Particulars JP Amount Date Particulars J.E Amount

(h.1 (h.)
2004 2004
April28 ToBankAlc 20,000 April 30 By 1ncode & 20,000

13.
Salaries ~ l c ~
I a.
Date Particulars . JP Amount Date ~articulk J.E Amount
th.) (h.)
2004 2004
April29 ToBankAIc 4,50,000 April 30 4,50,000

Miscellaneous Expenses Ak 1
Dr. a.
Date Particulars JP Amount Date Particu ars J.F. Amount

April 30 To Bank Alc 5,000 April 30 By 1ncoLe & 5,Ooo

' Interest Alc

Ix. I a.
I
Date Particulars J.F Amount Date Particulars J.E Amount
(h.) (h.)
t
m 2004
April 30 To Bank Alc , 5,000 April 30 By 1ncdme& 5,000

Bank NC i
Dr. Cr.
I

Date Particulars J.F Amount Date ~articqblars J.F. Amount

I th.) th-)

2004 2004
April1 ToCapitalNc 10,00,000 April I , By Funiture &
2,00,000
Y BankLtd. Alc 5,00,000
April 5 Admission fees Alc 5,50,000 April 2 , Rent 50,m
I I
Economic Efficiency and April 28 Elect. & Water
Educational Effectiveness
Charges Alc 20,000
April 29 Salaries Alc 4,50,000
April 30 Mise. Expenses Alc 5,000
April 30 Interest Alc 5,000
Balance cld 13,20,000
20,50,000 20,50,000
May 1 To Balance bld 13.20,000

Trial Balance
(As at 30th April, 2004)
Dr. (3.

Particulars hmt Amount

Rs. Rs.
Furniture & Fittings 2,00,00~
Equipments 50,000
Balance at Bank 15,20,000
Capital
Excess of Income over
Expenditure
Y Bank Ltd. (Loan taken)
2's Alc
Admission Fees
Rent
Electricity &Water Charges
Salaries
Miscellaneous Expenses
Interest on loan
Excess of Income over
Expenditure

Income & Expenditure Alc

(For the month April, 2004)
Dr. a.
Expenditure Amount Income Amount

To Rent 50,000 By Admission Fees 5,50,000

To Electricity & Water Charges 20,000
To Salaries 4,50,o@l
To Miscellaneous Expenses 5,oOo
To Interest on loan 5,000
To Excess of Income over
Expenditure 20,000
 Liabilities
Balance Sheet
(As at 30th April, 2004)
Amount Assets
I
I
1 Amwnt
Maintaining School Accounta

Capital lO,oO,000 2 , O
Ercess of Income over 50,m
Expenditure 20,000 13,20,000
Y Bank Ltd. (Loan taken) 5,oo,000
Z's A/c (Amount payable
against purchase of Equipments) 50,000
15,70,000 15,70,000

10.5 FINANCIAL RECORDS

Let us now study the financial records (books of be maintained by the
school. The Head of school is responsible for maintenance of the
accounts, which implies day-to-day accounts1registers1
records by each school:
(i) Day booklDaily collection registers to record the rnoneb received by the School
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from various sources such as school fees, fines; registr tion fees, donations, etc.
(ii) Receipt books with pages numbered so as to ttace out lost and damaged pages

I
(iii) The Cashbook should incorporate the entire transaction relating to the school in
chronological sequence. Separate cashbooks a r e to e kept for transactions
relating to School fund and Pupil's fund and are to be m intained on a daily basis.
The book has to be balancld daily so that cash recei ed on a day is balancld
against that spent on the same day. Details of cheques eceivedlpaid as a day's

~ p
income and expenses also have to be recorded. Cashb ok has to be signed by
the controlling officer at the end of each day.

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(iv) Ledger is the head-wise repository of all cash transac ions. The necessity for
maintaining the ledger arises due to the fact that the ccounts of a school are
required to be maintained under the double eqtry sys m. There are different
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types of ledgers as general ledger, fees ledger, credit le ger, etc.
General Ledger: It is a book with all
pages for each item and daily
All information in receipt
making it comprehensive
Fees Ledger: It records all information pertainin to student's fees, their

4
picture of the fees collected, outstanding ees, etc.
",
date of payment, amount received, outstanding bal nce, etc. It gives a clear

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Creditor's Ledger: It is a book with the list ~f scho 1's debtors, the amounts
owed to the school by each, dates of settlement, o tstanding amounts, etc.
Updating the entries regularly is necess* to kee track of creditors.
Stores Ledger (Stationery and other inventory): it 1s a book where various
stocks and equipments are listed& keep track of tbe school's property.
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(v) Fee Register class-wise and section-wise showipg fees dhat are recoverable and
recovered
(vi) Fee concession register
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(vii) student's Security deposit register ~
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Economic Efficiency and (viii) Telephone Register for keeping a record for outstation calls. The nature of call
Educationai Effectiveness
whether official or private shall also be noted so that recovery of charges in
respect of private calls can be done.
(ix) Register for recording the donations received.
(x) Log book for staff car and other vehicles of the school.
(xi) Vehicle maintenance register.
(xii) Advance accounts register.
(xiii) Voucher files month-wise to detail the purpose of the payment, its date, amount,
the budgetary items within which the expense is being incurred, authority
sanctioning the payment, etc. The voucher should be written and signed before
money is released. It must bear a number that can be quoted. Receipts obtained
following purchases should be attached to the voucher. It thus informs about the
expense incurred.
(xiv) Monthly bank reconciliation statements.
(XV)Trial balance and monthly receipts and payments accounts.
(xvi) Annual receipt and payment account, income and expenditure account and balance
sheet.
This list of books of accounts is not an exhaustive one and you may need additional
records depending upon the operaiions of the school. Different schools have income
and expenditure that may vary. Hence, a school has to maintain its own set of financial
records.

1 Activity 7
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Enlist thr books of accourzts maintained by your schooL+our neighbouring school.

10.6 USE OF COMPUTERS IN ACCOUNTING

Computers are nowadays used in every field and maintenance of financial records is
no exception. In schools too, computers are being used to maintain financial accounts.
It is well known that computers ensure economy of time, manpower and help in storing
a huge volume of information, which is always available at the click of a switch.
Processing of the information stored i.e. carrying out analysis, comparisons, arithmetic
ca~culations,etc. also become very easy with computerization. Besides one of the
greatest advantages is that computers do not make the errors or intentional fraud that
hdman beings would. Space for storage of huge amount of papers is also not required.
Use of computers in School Accounting
Due to the difficulties mentioned above, that are inherent in the manual system of
maintaining records, there has been a growing tendency to switch over to the use of
computers in the'day-to-day maintenance of accounts.
A number of ready-made softwares are available for easy accounting, some of which
are even flexible enough to allow it to make it compatible to the requirements of an
organization. These softwares facilitate recording of data on the basis of day-to-day
transactions, processing and preparing various ledger accounts, trial balance, income
and expenditure, balance sheets apd various other statements according to the need.
~inanciaistatementslreports can be generated from the stored data without any time
loss. The user can also shift across dates in any records without losing time. For
example if one is viewing an entry in the cash accounts for I st April, slhe can
immediately select 5th of August and will be able to see the entry in the cash accounts
instantaneously on that date. Thus computers are of great help in the process of
 Check Your Progress 2
Note: Answer the following questions briefly.
~~ Maintaining School Accounts

1. A television set worth,Rs 15,000 was purchased for the from Gautam
Brothers Ltd. Analyse and classify this financial

2. Ms. Sur donates an amount of Rs, 0.5 million in dash to a chool. Analyse and
classify this financial transaction.

3. What are the advantages of using coniputers in

. . . . .

4. Enlist any three types of financial records to be naintaijed by a school.

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10.7 LET US SUM UP

Accounting in schools involves recording, classifying and
manner the financial transactions carried out during
framework of accounting is based on certain
needs to be thoroughly acquainted with. The
various steps of the basic accounting process
and monitor the internal audit process. The
of the school at a given point of time. For
ensure that the necessary books of
Nowadays there is a growing
a
maintenance of financial accounts in schools. It has several adv ntages like economy
of time, manpower, minimum errors, etc.
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10.8 UNIT-ENDEXERCISES
~ n s w e each
r of.the following questions briefly.
Who are the users of information related to financial acc unts?

!
i),
ii) Explain with example the concepts of cost concept and d a1 aspect concept.
iii) Explain with illustration the procldure of making jpurnal e tries
iv) Prepare a trial balance for a school after coIlectidg data om it.
V) Write a note on the application of computers in financial * ccounting in schools.
Economic Efficiency and
Educational Effectiveness 10.9 REFERENCES AND SUGGESTED READINGS
Gupta, S.P. (2004): "ManagenzentAcco~inting",Sahitya Bhawan Publication, Agra.
Chandra, P. (2004): "Finance Sense. Finance jbr Non Finance Executives", Tata
McGraw Hill, New Delhi.
Shukla, M.C. and Grewal, T.S. (1976): "Advanced Acco~ints",S.Chand and Co.
(Pvt) Ltd.,' New Delhi.
Shukla, S.M. (2004): "Book Keeping and Accountancy", Sahitya Bhawan
Publication, Agra.
Financial Accounting Fundumentc~ls(Study Notes) Directorate of Studies, ICWAI,
Kolkata, (July, 2003).
Better Schools - Resource Materials for School Heads. Module 5 - Financial
Management, Commonwealth Secretariat, (1 993).
Websites