FINANANCIAL ACCOUNTING & COST CONTROL

ACCOUNTING
Accounting is the art of recording, classify and summarizing the transaction and
events which are at least of financial character in significant manner and interpreting the
result, therefore it is called accounting.

Journal:

• Journal is a book of primary entry.

• Journal records the transaction in a serial sequence.
• In the journal the Dr. & Cr. Columns are placed together side by side.
• Journal is not balanced, it is only totaled.
• In journal there is a column known as LF (ledger folio) to record the page no. of
journal.
• Journal has five columns.
• In journal all the transaction are recorded.

Ledger:

• Ledger is a book of secondary entry.

• Transactions are not recorded in a logical sequence.
• Both the dr. n cr. Columns is not placed together side by side.
• Ledger is balanced periodically & at the end of the accounting year.
• In the ledger there is a column known as JF (journal folio) which records the page
no. of ledger to which the entry are posted.
• Journal has eight columns. In ledger transaction of similar natures are recorded in
one page.

Trial balance

• Trial balance is an almost which contain the summary of all the accounts.
• Trial balance is divided into two sides such as the debit side and credit side such
as the debit side and credit side.
• The left side is known as debit side as the credit side.
• All the debit balance of different a/c’s are written on the debit side and all the
credit balance of different a/c’s are written on the credit side.
• The local of debit column must agree with the local of credit columns.
• It both the side do not agree there may be error posting and balance.
• Trial balance gives all information to prepare the final account at the end of the
accounting period.
Financial accounts

Financial a/c’s consist of three things.

• Trading a/c
• Profit a/c
• Balance a/c
Trading a/c:

• Trading a/c is prepared in a ‘T’ form for manufacturing concern trading a/c is
known as “manufacturing account”.
• Trading a/c has two sides the left side is debit and the right side is credit side.
• On the debit side all the expenses relating to trading on manufacturing are
recorded and the on the credit side all the income from operation are recorded.
• When the trading a/c is balanced, the debit side and the credit may not be equal.
• If the total of the credit side is more than the total of the debit side, the different is
a “gross profit” which recorded in the debit side. If the total of the credit side is
less than the total of the debit side, the different is a “gross loss” which is written
on the credit side.

Profit and loss account:

• Like trading a/c, the profit and loss a/c has two sides.
• The gross profit on the gross loss of the trading a/c is transferred to the profit and
loss a/c.
• The balance of profit or loss a/c is known as the net profit or net loss.
• If the credit side is more than debit side there is net profit.
• If debit side is more than credit side the different is known as net loss.

Balance sheet:

• Trading profit and loss a/c is prepared for a define period but balance sheet is
prepared for a day and not for a year.
• Balance sheet is a stmt and not an account.
• Balance sheet has two sides, the left side is the liabilities side and the side is the
assets side.
• The totals of both the sides of a balance sheet must be equal.
• If both the total does not agree, the balance sheet is wrong and not accepts it.
Break-even point:

• Maintenance of accounts helps us to know the profits and loss of an organization

at the end of the specific period of time.
• While the business is running, we are not able to known whether the business in
running at profit or loss.
• It is highly essential to know beforehand, whether the business is running at a
profit, before that period actually over.
• For the purpose of calculating break-even point, it is essential to classify the lost.
• For the purpose of break-even analysis cost is divided into three categories such
as fixed cost, variable cost and semi variable cost.