Presented By

Ajendra Mehar Sadhna Singh Umesh Patel Vishal Sahu Vasant Roy

Topics covered :
Accounting Equation
Journal Ledger

Topics covered :
Accounting Equation
Journal Ledger

Each Business transaction has a two fold effect and it is referred to as dual aspect or duality of a transaction. The dual aspect states that for each debit there is a credit i.e, for every debit there is a credit.

An accounting equation is a statement of equality between the assets and the sources through which the assets have been financed and this can be expressed as

Assets=Sources Assets=Liabilities+ Capital Assets=Liabilities+Owners equity

CLASSIFICATION OF ACCOUNTS:
Personal Account: Natural Personal Account i.e. account of natural or physical persons e.g Rams A/c, Sitas A/c etc.
Artificial Personal Accounts i.e accounts of artificial or legal person

e.g.accounts of firms,companies,banks,government,schools and colleges etc.

Representative personal accounts these accounts are called

representative personal account as they represent certain person behind them e.g outstanding expenses account,income received account

Impersonal Account: Real Account: Real accounts are accounts of properties , assets or things owned by a

concern and with which the business is carried on.

Real or assets accounts may be1) Tangible Assets-assets such as goods account ,cash account , furniture account etc. 2) Intangible Assets- such as goodwill account, patent account , copyrights etc.

Nominal Account: Nominal or fictitious accounts are accounts of the expenses and loses and income and gains which a concern earn in the course of its business1)income account-accounts of revenue , income , gains etc 2)Expenses account-accounts of loses such as bad debts ,discount allowed.

RULES OF DEBIT AND CREDIT

Personal Accounts: Debit the receiver and credit the giver Real Accounts: Debit what comes in and Credit what goes out Nominal Account: Debit expenses and loses and Credit incomes and gains

JOURNAL

According to Cropper A journal is a book employ to classify or sort out

transactions in a form convenient for their subsequent entry in the ledger

According to Rowland The basic book of Journal is called Journal

The process of recording the transaction into journal is called journalizing .

NECESSITY OF JOURNAL
Convenient recording of transaction
Maintaining and preserving the identity of transaction Ascertaining the true nature of transaction

Maintaining permanent record of information

FUNCTIONS OF JOURNAL
To analyze each transaction into debit and credit so as

to enable their posting in the ledger

To arrange transaction ,chronological i.e.

in order of date.

ADVANTAGES OF JOURNAL
Show all necessary information relating to a

transaction Provide the explanation of the transaction Date wise record of all the transaction can be obtained Help in locating and preventing the errors

LIMITATIONS OF JOURNAL
Recording all the transaction in a journal requires:

1) writing down name of account involved 2) individual posting of each account debited and credited Does not provide information on prompt basis
Does not facilitate the internal check system since the

journal can be handled only by one person

Journal become bulky and voluminous

LEDGER
It is the principal book of accounts where similar

transactions relating to particular person or thing are recorded According to Cooper ledger epitomizes the general operations of principles of book keeping

FEATURES OF LEDGER
Book of principal entry

Classified and summarized record

Posting

ADVANTAGES
Transactions relating to a particular person, item or heading of

expenditure or income are grouped in the concerned account at one place. When each account is periodically balanced it reflects the net position of that account. Ledger is the stepping stone for preparing Trial Balance - which tests the arithmetical accuracy of the accounting books. Since the entries recorded in the journal are referenced into ledger the possibility of errors of defalcations are reduced to the minimum. Ledger is the destination of all entries made in journal or subjournals. Ledger is the "store-house" of all information which subsequently is used for preparing final accounts and financial statements.