Accounts Updated

8/6/2019 Accounts Updated

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ACCOUNTSACCOUNTS

BASICSBASICS


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AccountsAccounts

Maintenance Of RecordMaintenance Of Record


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Identification( Nature of transactions)Identification( Nature of transactions)

Recording ( Journal entries)Recording ( Journal entries)

Classification ( Ledgers)Classification ( Ledgers)

Summarize ( Trial balance )Summarize ( Trial balance )

Preparation of final A/csPreparation of final A/cs


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Final A/CsFinal A/Cs

Trading and P&l A/C B/STrading and P&l A/C B/S


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Trading & P&L AccountTrading & P&L AccountBalance sheetBalance sheet

Users Of financial statementUsers Of financial statement


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DefinitionDefinition

Accounting is the art of recording,Accounting is the art of recording,classifying, and summarizing in a significantclassifying, and summarizing in a significant

manner, and in terms of money,manner, and in terms of money,

transactions and events which are in parttransactions and events which are in partatleast of a financial character andatleast of a financial character and

interpreting the results thereofinterpreting the results thereof


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OBJECTIVEOBJECTIVE1.In order to keep systematic Record of:1.In order to keep systematic Record of:

CreditorsCreditors DebtorsDebtors Sales RecordSales Record PurchasesPurchases CapitalCapital Total expensesTotal expenses-- cost of productioncost of production-- selling priceselling price

2. To Ascertain profit & loss2. To Ascertain profit & loss3. To Reasons leading to profit or loss3. To Reasons leading to profit or loss4. To Progress of business4. To Progress of business

5. To Financial Position5. To Financial Position6. To provide information6. To provide information


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Accounting TerminologyAccounting Terminology


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Economic activityEconomic activity

Capable of being expressed inCapable of being expressed in terms ofterms ofmoneymoney

Eg: Loss due to fireEg: Loss due to fire

Non monetary activityNon monetary activity -- Retirement of aRetirement of aefficient managerefficient manager -- Big loss but cannot beBig loss but cannot bemeasuredmeasured


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Transaction:Transaction:

Economic activity which affects businessEconomic activity which affects business

Eg:Eg:

Purchase of goodsPurchase of goodsSale of goodsSale of goods

Salary paidSalary paid

Interest on borrowed capitalInterest on borrowed capital


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Capital:Capital:Amount invested by a proprietor in a business. It is theAmount invested by a proprietor in a business. It is theamt. with help of which goods and assets areamt. with help of which goods and assets arepurchased. Therefore,purchased. Therefore,Capital = AssetsCapital = Assets-- liabilitiesliabilities

Asset:Asset:Anything which will enable business to generate benefitAnything which will enable business to generate benefit

in future. Anything which has a economic value.in future. Anything which has a economic value.

Laibility:Laibility:liable to pay/ Amt which firm owes to outsidersliable to pay/ Amt which firm owes to outsiders


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Business EntityBusiness EntityConcept.Concept.

It is an important accounting principle thatIt is an important accounting principle thatthe business is treated asthe business is treated asan entity separate and distinct from itsan entity separate and distinct from itsowners and any other peopleowners and any other people

associated with it. This principle is called theassociated with it. This principle is called theBusiness EntityBusiness EntityConcept.Concept.


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ReceiptsReceipts

Capital Receipts Revenue ReceiptsCapital Receipts Revenue Receipts


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Capital ReceiptCapital Receipt Affects Balance sheet ,Affects Balance sheet ,either increase in liability or decrease in valueeither increase in liability or decrease in value

of asset.of asset.

Revenue ReceiptRevenue Receipt Affects Trading andAffects Trading and

profit & loss A/c, shown on credit sideprofit & loss A/c, shown on credit side


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ExpenditureExpenditure-- It means any type ofIt means any type ofpayment for receipt of benefit in future.payment for receipt of benefit in future.


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ExpenditureExpenditure

Capital Revenue DeferredCapital Revenue Deferredrevenuerevenue


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Capital ExpenditureCapital Expenditure--Any expenditureAny expenditurewhich is incurred in Acquiring fixedwhich is incurred in Acquiring fixedassets, benefits over a long period ofassets, benefits over a long period of

time.time.

Revenue ExpenditureRevenue Expenditure Any expenditureAny expenditure

full benefit of which is recd. in afull benefit of which is recd. in aparticular accounting period.particular accounting period.


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Deferred Revenue ExpenditureDeferred Revenue Expenditure

Expenditure which are otherwiseExpenditure which are otherwiserevenue in nature but benefits inrevenue in nature but benefits in

coming yearscoming years..


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TransactionTransaction When ever there is someWhen ever there is somemonetary exchange between the parties.monetary exchange between the parties.

i.e. Give and take between the partiesi.e. Give and take between the parties

1.May take place at same place1.May take place at same place CashCashtransactiontransaction

2. at different point of time2. at different point of time Credit transactionCredit transaction


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TransactionTransactionInvolvesInvolves

Two accountsTwo accounts


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Double entry SystemDouble entry System

According to this system, every transactionAccording to this system, every transactionhas got two fold aspect i.e. one partyhas got two fold aspect i.e. one party

giving benefit and other receiving thegiving benefit and other receiving thebenefit. One account is debited and otherbenefit. One account is debited and otheraccount is credited.account is credited.

Therefore, for every debit entry there isTherefore, for every debit entry there iscorresponding credit entrycorresponding credit entry


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Types of accountsTypes of accounts

Personal Non personalPersonal Non personal

Real A/c Nominal A/cReal A/c Nominal A/c


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Personal A/cPersonal A/c It deals with accountIt deals with account

related to personsrelated to persons

Note : Capital account & DrawingNote : Capital account & Drawing

account are personal accountaccount are personal account


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Real AccountReal Account It stands for propertiesIt stands for propertiesand assets , account of all those thingsand assets , account of all those thingswhose value can be measured in termswhose value can be measured in terms

of money.of money.

Nominal AccountNominal Account These accountsThese accountsinclude the accounts of all expensesinclude the accounts of all expenses

and incomesand incomes


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Three Golden RulesThree Golden Rules

1.1. Personal AccountPersonal Account-- Dr. the receiver, creditDr. the receiver, creditthe giver.the giver.

2.2. Real AccountReal Account Dr. what comes in, CreditDr. what comes in, Creditwhat goes out.what goes out.

3.3. Nominal AccountDr. all expenses andNominal AccountDr. all expenses andlosses credit all income and gainslosses credit all income and gains

Accounts Updated

Documents

Transcript of Accounts Updated