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Introduction to accounting,
journal,
Definitions
1.
Recording,
classifying,
summarising
business
Evidence in court.
Settlement of taxation liability.
Comparative study.
Sale of business.
Assistance to various parties.
Historical in nature.
Cash Transaction:-
Basis of Accounting
a) Cash Basis
b) Accrual / Mercantile Basis
Cash Basis:-
Mercantile or Accrual Basis:In the accrual basis of accounting, the income, whether
received or not, but has been earned or accrued during the
period forms part of the total income of that period.
Similarly, if the firm has taken benefit of a particular
service, but has not paid within that period, the expenses will
relate to the period in which the service has been utilised.
Accounting concepts
1. Entity
2. Money measurement
3. Going-concern
4. Cost
5. Ralisation
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. Conservatisme
Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. ralisation
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
Expenses and
should
be
Revenues
expenses
recognizedfrom
in the
resulting
thesame
same
accounting period
during
transactions
(or events,
which the firm etc)
has
circumstances,
recognized
the associated
should
be recognized
revenues.
simultaneously.
Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. conservatism
Accounting concepts
1. Entity
2. money measurement
3. Going-concern
4. Cost
5. realization
6. Accruals
7. Matching
8. Periodicity
9. Consistency
10. Conservatisme
ILLUSTRATIONS:-
Accounting Equation
The equation is based on the principle that accounting deals
with property & rights to property & the sum of the
properties owned is equal to the sum of the rights to the
properties. The properties owned by a business are called
assets & the rights to properties are known as liabilities or
equities of the business.
Debit
Receiver
Credit
Giver
Debit
What comes in
Credit
Debit
Credit
Personal Account
Real Account
Nominal Account
Accounting Cycle
Journal
Journal means a daily record of business transactions.
Journal is a book of original entry because transaction is first
written in the Journal from which it is posted to the ledger.
Journal
Date
Particular
LF
Debit Credit
Rs
Rs [Cr]
[Dr]
Trade Discount:It
is
deduction
allowed
by
the
Example 1
Sale of food & drink as meals in a restaurant
amounted to Rs. 1,500 cash.
In this case the sales account would be credited
with the value of the food & drink leaving the restaurant as
meals, and the cash account would be debited with Rs. 1,500
cash coming into the business from the sale.
Example 2
A hotelier sent a cheque for Rs. 20,000 as
payment of her electricity bill.
In this case the bank account would be credited
with Rs. 20,000 going out of the business and electricity
account would be debited with Rs. 20,000 being the cost of
the electricity used in the business.
Debit
1.Increase in asset accounts
2.Increase in expense accounts
3.Decrease in liability accounts
4.Decrease in equity accounts
5.Decrease in revenue accounts
Credit
1.Decrease in asset accounts
2.Decrease in expense accounts
3.Increase in liability accounts
4.Increase in equity accounts
5.Increase in revenue accounts
LEDGER
Ledger Format
Date Particular
To, Name of
credit A/c
Rs
By, Name of
debit A/c
F Amoun
t
Rs
Balancing of Accounts
Trial Balance
Trial Balance is a list of balances extracted
from the ledger accounts at the end of an accounting period.
Since the balances in ledger accounts are effects of double
entries, the total of debit balances should be equal to total of
credit balances.
Nature of Balances:
Sl No Particulars
LF Debit
Credit
Balance Balance
Rs
Rs
3) Errors of principle:
This type of error occurs when a
transaction has a debit entry and a credit entry but the item is
posted in principle to the wrong classification of account.
E.g. Motor expenses of Rs. 300 has been debited to motor
vehicles account.
4) Errors of commission:
When a wrong amount is entered
either in the subsidiary books or in the ledger accounts or
when amount is posted on the wrong side, it is a case of
errors of commission.
For example, if fuel costs are incorrectly debited to the
postage account (both expense accounts). This will not affect
the totals.
5) Compensating errors:
An example of this type of errors is
where the wages account has been over-added by Rs. 5,000
& by coincidence the sales account has been over added by
Rs. 5,000. So an error on debit side is compensated by an
error on the credit side.
6) Errors of duplication:
An example of this type of error is
when the same invoice is entered into the purchases day
book twice and posted from there to the ledger account
twice.