Accounts
-
Upload
hitesh-tolani -
Category
Economy & Finance
-
view
2.268 -
download
3
Transcript of Accounts
Traditional Rules of AccountsType of Account Debit Credit
Personal The Receiver The Giver
Real What comes in What goes out
Nominal All expenses & losses All Incomes & gains
Modern Rules of Accounts
Type of Account Rules for Debit Rules for Credit
Assets Increase Decrease
Liabilities Decrease Increase
Capital Decrease Increase
Income Decrease Increase
Expenses Increase Decrease
Accounting Concepts
Business Entity : Business is different
from businessman.
Monetary Measurement : Accounting
process records only those activities that
can be expressed in monetary terms.
Going Concern : It is assumed that the
business entity for which accounts are being
prepared is solvent and viable, and will
continue to be in business in the foreseeable
future.
Dual Aspect : Every transaction in accounting
have two aspects viz. giving and receiving.
Dual Aspect (Example)
Goods purchased on credit from Mr. A
Goods (received)
Mr. A (creditor)
Sold goods to Mr. B on credit
Goods (sold)
Mr. B (debtor)
Accrual
Accrual concept is something that becomes
due,especially an amount of
Money, that is yet to be paid or received at the end of
accounting period.
Example .Salaries of 10000 for a month of december
96 paid in jan 97.
Periodicity
Financial transactions are maintained on a periodic basis.
The liabilities ,assets and capital are measured at a given point of
time. Which is done atleast once on an annual basis.
To do this, income needs to be measured during the intermittent
period.
Example. Janaury 1 to december 31
Matching
• EXPENSES ARE MATCHED WITH REVENUES , FOR A
PARTICULAR PERIOD ,IN ORDER
TO DETERMINE PROFIT OR LOSS OF THE GIVEN PERIOD.
• IF REVENUE EXCEEDS EXPENSE IT IS CALLED PROFIT
OR INCOME, AND IF EXPENSE
EXCEEDS REVENUE IT BECOMES LOSS.
Realisation
THE CONCEPT STATES THAT ,AS TO WHEN REVENUE SHOULD BE
RECORDED IN THE BOOKS OF ACCOUNTS.
REVENUE IS SAID TO BE REALISED WHEN CASH HAS BEEN
RECEIVED OR RIGHT TO RECEIVE CASH HAS BEEN ESTABLISHED
ON THE SALE OF GOODS OR SERVICES.
EXAMPLE. REKHA SOLD GOODS FOR RS 50,000 FOR CASH IN 1996
AND THE GOODS HAVE BEEN DELIEVERED IN THE SAME YEAR.
Steps•Journalizing•Posting
Of•Balancing•Trial Balance
Accounting•Income Statement•Position Statement
Journal
Is a book in which the transactions are recorded in
the order in which they occur
Date Particulars Ledger folio
Debit Credit
DateOfthetran.
Name of the account to be debited Dr. To name of the account to be credited
Amount Amount
Subsidiary Journals
Purchase Book
Sales Book
Purchase Return Book
Sales Return Book
Cash Book
Journal Proper
Each bill amount is individually posted to the credit of the Supplier’s account and the total amount is posted to the debit of the Purchases account
Date Bill No
Name of the supplier L.F Amount Description
Purchase Book
Sales book
Each invoice is individually posted to the debit of the customer’s account and the total amount is posted to the credit of the sales account
Date Inv. No
Name of the customer L.F Amount Description
Each Debit note is individually posted to the debit of the Supplier’s account and the total amount is posted
to the credit of the purchase return account.
Date Debit Note No
Name of the supplier L.F Amount Description
Purchase Return Book
Each Credit note is individually posted to the Credit of the customer’s account and the
total amount is posted to the debit of the sales return account.
Date Credit note No
Name of the customer L.F Amount Description
Sales Return Book
Journal Proper
It is a residuary book, in which all those
transactions which cannot be recorded
in any other subsidiary books, are
recorded like depreciation , discounts
allowed and received
Ledger Posting
The process of transferring the transactions recorded in the Journal to the respective accounts is called ‘Ledger Posting’
Dt Particulars J/F Amount Dt Particulars J/F Amount
Balancing
Difference between the total debit & total credit.
Steps involved
1) Make debit & credit total
2) If debit side total exceeds credit side
total then it called “Debit balance”.
3) If credit side total exceeds debit side total
then it called “Credit balance”.
Trial Balance
Is a statement which shows the balance of total amounts of
debit items & credit items of all the accounts in the ledger &
cash & bank balance.
---------------------------------------------------------------------
All accounts of expenses, losses and assets have
debit balances
All accounts of incomes, profits and liabilities
have credit balances
Trading Account
After preparation of trial balance
Matching concept
Balancing figure is gross profit/loss
Profit and Loss A/c.
Income Statement
Specific period of time
Balancing figure is Net profit/loss
Useful for investors
Two Formats
Balance sheet
It is a statement
Balance sheet is an accounting statement which
shows the financial position of all assets and
liabilities of the business as on particular date.
Two sides
Assets
Liabilities
Marshalling of Assets and Liabilities
Marshalling refers to the order in which
the various assets and liabilities are
shown in the balance sheet.
The assets and liabilities can be shown
either in the order of liquidity or in the
order of permanency.
Format of Balance sheet in order of liquidityLiabilities Rs. Assets Rs.
Current liabilitiesBank overdraftBills payableOutstanding expensesSundry creditorsIncome received in advanceLong term liabilities
Secured LoansUnsecured loansCapital
Current assetsCash in handCash at bankBills receivablesSundry debtorsPrepaid expensesAccrued incomeStockInvestments
Fixed assets FurniturePlant and machineryLand and buildingGoodwill
Balance sheet in the order of permanence
Liabilities Rs. Assets Rs.
CapitalLong term liabilitiesSecured loansUnsecured loansCurrent liabilitiesIncomes received in advanceSundry creditorsOutstanding expensesBills payableBank overdraft
Fixed assetsGood willLand and buildingPlant and machineryFurniture and fixturesInvestmentsCurrent assetsStockAccrued incomePrepaid expensesSundry debtorsBills receivableCash at bankCash in hand