Anda di halaman 1dari 19
Accounting Equation Assets = Liabilities + Capital

Accounting Equation Assets = Liabilities + Capital

Accounting (Definition):- is art of recording, classifying and summarizing the financial transactions and interpreting the result
Accounting (Definition):- is art of
recording, classifying and
summarizing the financial
transactions and interpreting the
result therefore.

Accounting cycle

  • Recording the transaction- journal

  • Classifying Ledger

  • Summarizing Trial Balance/ Profit & Loss account/ Balance Sheet

  • Interpretation- Ratio analysis

Systems Of Accounting

  • Cash System- Receipt and expenditure account

  • Accrual System- Profit and loss account/ Balance

sheet

Types of accounts

  • Personal

    • Natural

    • Artificial

    • Representative

  • Real

    • Tangible

    • Intangible

  • Nominal

    • Expenses/ Losses

    • Incomes/ Gains

  • Example

     

    Transactions

    Account involved

    Nature of accounts

    1

    Rent paid

    Rent

    Nominal

       

    Cash

    Real

    2

    Salaries paid

    Salary

    Nominal

       

    Cash

    Real

    3

    Interest received

    Interest

    Nominal

       

    Cash

    Real

    4

    Furniture purchased

    Furniture

    Real

       

    Cash

    Real

    5

    Outstanding Salary

    Outstanding salary

    Personal

       

    Salary

    Nominal

    6

    Paid to Suresh

    Suresh

    Personal

       

    Cash

    Real

    7

    Received from Mohan

    Cash

    Real

     

    Proprietor

    Capital

    Personal

    Journal (Rules)

    For Personal account

    • 1. Debit the receiver

    • 2. Credit the Giver

    For Real Account

    • 1. Debit what comes in

    • 2. Credit what goes Out

    For Nominal Account

    • 1. Debit all expenses/losses

    • 2. Credit all income/gains

    Example

     

    Transactions

    Account involved

    Nature of accounts

    Debit/Credit

    1

    Rent paid

    Rent

    Nominal

    Debit

       

    Cash

    Real

    Credit

    2

    Salaries paid

    Salary

    Nominal

    Debit

       

    Cash

    Real

    Credit

    3

    Interest received

    Interest

    Nominal

    Credit

       

    Cash

    Real

    Debit

    4

    Furniture purchased

    Furniture

    Real

    Debit

       

    Cash

    Real

    Credit

    5

    Outstanding Salary

    Outstanding salary

    Personal

    Credit

       

    Salary

    Nominal

    Debit

    6

    Paid to Suresh

    Suresh

    Personal

    Debit

       

    Cash

    Real

    Credit

    7

    Received from Mohan

    Cash

    Real

    Debit

     

    Proprietor

    Capital

    Personal

    Credit

    Journal

    Ram purchased furniture for cash for Rs 5000 on Jan 5 1990

    Date

    Particulars

    L.F

    Rs

    Rs

    1990 Jan

           

    5

    Furniture Account

    ……Dr

    5000

     

    To Cash Account

         

    ( Being purchase of furniture)

    5000

    Ram paid rent for Business premises Rs 2000 on Jan 10 1990

    Date

    Particulars

    L.F

    Rs

    Rs

    1990

           

    Jan,

    10

    Rent account

    …Dr

    2000

     

    To Cash account ( Being payment of rent)

       

    2000

    Compound Journal

    Payment maid to Ram Rs 1000 and he allowed a cash discount of Rs 50

    Date

    Particulars

    L.F

    Rs

    Rs

     

    Ram account

    .Dr

     

    1050

     
     

    To Cash account To Discount account

       

    1000

    ( Being payment maid to Ram Rs 1000 and

    50

    he allowed a Rs 50 as a discount

    Ledger (Rules)

    • Separate account should be opened in the ledger for posting transactions relating to different accounts recorded in the journal

    • The concerned account which has been debited in the journal should also be debited in ledger. However a reference should be made of the other account which has been credited in journal

    • The concerned account which has been credited in the journal should also be credited in ledger. However a reference should be made of the other account which has been debited in journal

    Ledger

    Date

    Particulars

    L.F

    Amount

    Date

    Particulars

    L.F

    Amount

                   

    Balancing of ledger

    The balance is put on the side of the account

    which is smaller and a reference is given that it has been carried forward or carried down (c/f or c/d) to the next period. On the other hand in the

    next period a reference is given that the opening

    balance has been brought the forward or brought down (b/f or b/d) from the previous period.

    Ledger

    Balancing

    Ledger
    Ledger

    Date

    Particulars

    L.F

    Amount

    Date

    Particulars

    L.F

    Amount

                   

    Summarize the debit and credit balances of different accounts (Account ledger balances) in vertical form.

    Trial Balance

    Particulars Debit Credit
    Particulars
    Debit
    Credit
         

    Figure in lakhs

       

    Particulars

    Dr

    Cr

    Particulars

    Dr

    Cr

    stock(1.4.2008)

    375

     

    Purchase return

     

    50

    Purchase & Sales

    1225

    1700

    wages

    150

     

    Discount

     

    15

    carriage inward

    2.75

     

    Furniture & Fitting$

    85

     

    Salaries

    37.5

     

    Rent

    20

     

    Sundry expenses

    35.25

     

    Share (5 lakhs@100)

     

    500

    Interim dividend

    45

     

    Plant

    145

     

    Debtor & creditor

    137.5

    87.5

    General reserve

     

    77.5

    cash

    231

     

    Bill receivable

    25

     

    patent

    24

     

    Bill payable

     

    35

    prelim expenses

    30

     

    P&L(31.3.2008)

     

    75

    development rebate res

     

    28

    Debenture

     

    2500

    investment

    2250

     

    Debenture interest

    250

     

    Total

    5068

    5068

    Trial Balance of Flex industries on 31.03.2009 . Prepare P&L A/c

    and Balance sheet with following adjustments

    • Stock on 31.3.09 was 840 Lakhs

    • Make provision for income tax @35%

    • Transfer 10 lakhs in development rebate reserve on 31.3.09

    • Write off one third prelim expenses

    • Create debenture redemption reserve of Rs 100 lakhs

    • Depreciation (Plant @ 10% ) (Furniture @ 10%) (Patent @ 5%)

    • On 31.3.09 outstanding rent 4 lakhs and outstanding salary 4.5 lakhs

    • Debtors include 25 lakhs for more than 6 months so make provision for doubtful debts 15 lakhs

    • Proposal for dividend @ 15% per annum for the year after transfer to general reserve @ 5 %

    • Provide managerial remuneration @ 10% on net profit before tax