What is Accounting???

Accounting consists of these functions:

 Recording
 Classifying
 Summarizing
Dealing with financing Transaction
Analyzing and interpreting
Communicating
 Reporting and evaluating the
financial activities of a business.
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 Basic Terms- Assets
Assets
Assets are property or legal rights owned by an individual or
business to which money value can be attached.
Two kinds of Assets
Current assets:-
Current Assets are those assets that will be converted into cash within one year,
and assets that will be used up in the operation of a business within one year.
Ex-Debtors, Unsold goods, Bank balance.

Fixed assets:-
fixed assets are those assets which is tangible and not change in short period of
time
Ex- Land, Building, Machinery, Furniture etc.

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 Basic Terms-Capital & Liabilities
·Capital Capital means the amount (in terms of money or assets having
money value)
·Liability Amounts owed to entities outside of the business e.g.
bank loan, supplier payments & overdrafts

Important Terms- Goods, Debtors & Creditors

 Goods  Which is produced, then traded, bought or sold, then finally
consumed
·Debtor Amount owed to the business from a customer

·Creditor Amount owed to a supplier from the business

Basic Term-Expenses

Outstanding expenses:-
The expenses remaining unpaid at the end of the accounting period are called
outstanding expenses. Certainly expenses like salaries, rent etc. of the every month will
be paid in the next months
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 Prepaid expenses:-
The cost of goods or services already paid for but not yet fully used or consumed.
Prepaid insurance premiums and prepaid rent are examples of prepaid expenses.

Basic Term- Income

Accured income Income which is earned, but not received.
For e.g. Interest due in Dec. 2009 if not received in Dec 2009

Income received in advance

Those income which are received in advance they have become
due.

Accounting Equation
All accounting entries in the books of account for an organisation have a relationship
based on the ‘accounting equation’:

Assets = Liabilities + Owner’s equity

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 What is the process of
Accounting
Journal Subsidiary Book

Ledger

Trial Balance

Final Account
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 What are the various type of
Accounts?

Accounts

Real Nominal Personal

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 Journal Rule- 1
Debit what comes in
Credit what goes out.
Aloo, the owner has purchased a machinery worth Rs. 10,000 for his business
Explaination:
  Machinery Account will be Debited by 10,000
(because business is receiving a machinery)
Cash Account will be Credited by 10,000
(because business is giving cash )
Entry :
  Machinery A/c Dr. 10,000
To Cash A/c 10,000

Journal Rule - 2
Debit the receiver
Credit the giver.
Business purchased Machinery from Tomato on credit worth Rs. 2,000
Explanation
Machinery has come into the business so according to rule # 1 it will be
debited and on the other hand Tomato is giving something to the business therefore
according to rule # 2 his account will be credited
Entry
Machinery A/c Dr. 2,000
To shyam A/c 2,000
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 Journal Rule - 3
Debit all the losses and expenses
Credit the gains and profit.
Business paid a salary of Rs. 5,000 to staff
Explanation
  Cash has gone out of the business so according to rule # 1 cash will be credited
and on the other hand salary a kind of expense for the business and it will be debited as
per rule # 3.
Entry
Salary A/c Dr. 5,000
To Cash A/c 5,000

Discount
Trade discount A discount from the list price of a commodity allowed by a
manufacturer or wholesaler to a merchant
Ex-purchase goods worth Rs.20000, trade discount 10%
purchase A/C Dr 18000
cash A/C 18000

Cash discount A percentage reduction in price for payment within a

specified period of time
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 Ex-purchase goods worth Rs.20000,cash discount 10%.
purchase A/C Dr 20000
to cash A/C 18000
to discount A/C 2000

Bad debts
The data who failed the paid amount. It is called bad dates.it is a kind of loss of
bisiness.
Ex-john owe us Rs.10000 became insolvent.we could receive only 40 paisa
per in rupes.
Cash A/C Dr 4000
bad dates A/C 6000
To john A/C 10000

Bad debts recover

If any amount receive at bad dates. It is a kind of profit of business.

Ex-amit who was debtas a bed dates Rs.5000.last year has pay the amount.
cash A/C Dr 5000
To bad dates A/C 5000

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 What is Journal ? Show its
format.

Date L.F Dr.(Rs.) Cr.(Rs.)

Particular

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 What is Ledger? Show its
format.
Ledger : Book or Register which contains, in a summarized and
classified form, a permanent record of all transactions.

Ledger Format
J. Amo Date J Amo
Da Particular F Particular .
unt unt
te F

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 Ledger Posting
Let us understand how to post the journal entries into ledger
 
Example: there is entry to Paid to Rent

Rent A/c……………..Dr 2000

To Cash A/c……………….Cr 2000

Cash A/c Rent A/c

By Rent A/c 2000 To Cash A/c

2000

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 What is Trial Balance???

A Trial Balance is a statement ,

prepared with the debit and credit
balance of the ledger account to test
the arithmetical accuracy of the
book. A Trial Balance is prepared
after having posted the journal
entries into the Ledger and
balancing the account. 13
 Trial Balance Shows its
Format
L. Debit Total
Ledger Accounts F Rs.
Credit Total
Rs.

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The End

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