accounting process

April 7, 2023Sreejith S FIMS August 2008 1

Sreejith SFIMS

Introduction

Recording in Journal Ledger posting & balancing Trial balance preparation Final Accounts


Fundamental Accounting Principle (equation)

Assets = Liabilities + Capital


AssetsResources of BusinessResults of Past EventsFuture Economic Benefits




LiabilitiesPresent ObligationResult of past eventsSettlement in Future




CapitalOwner’s ContributionInternal Liability

Profit is the reward

Double Entry System

Every transactions have two aspects Benefits & Sacrifice Debit & Credit –Accounting





Increase in Assets and Increase in Liability/Capital

Increase in one Asset and Decrease in other Asset

Decrease in Assets And Decrease in Liability

Decrease in One Liability and Increase in other Liability




Increase –Debit

Decrease - Credit

Increase – Credit

Decrease - Debit

IncomeIncrease in Economic

benefit during the accounting period in the form of in flows

Income - Credit


Expenses

Decrease in Benefits During the accounting Period in the form of Outflow

Expenses - Debit

Debit – Credit Rule

Credit represents the sources of financingDebit represents the uses of financing


Debit Credit

Increase Decrease

Debit Credit

Decrease Increase

Debit Credit

Expenses/ losses

Incomes/ Gains


Asset Liabilities/Capital

Journal

All business transactions are firstly recorded

Chronological order Recording transactions in a Journal is

Known as Journalisation Double Entry System Each Transactions in a journal known as

Journal Entry


Date Particulars LF Debit Amount

Credit Amount

June 1

Cash a/c Dr To Capital a/c

(being business started with Rs 1200000)

1200000

1200000


Journal

June 1 : Commenced capital for the business Rs 1200000

Bank Loan Rs 800000 Purchased Land and Building Rs 600000 Transportation Exp Rs 5000 Purchased machinery Rs 400000 on Mortgage Raw materials Purchased Rs 80000 Advertising Exp 23000 Stationary 2000 Commission received Rs 5000 Full & Final Settlement of Mortgage Rs

480000


Make Journal Entries For the transactions

Jan 08 Transaction1 Commenced Business

20000 2 Purchased goods on credit from Syam

150003 Purchased goods for cash

5004 Paid Gopal an advance for goods

10005 Received advance from Murhy for Goods

15006 Purchased furniture

10007 Paid Wages

2508 Received Commission

3009 Goods Returned to syam

10010 Goods Sold to Kamal

500011 Paid for postage and telegram

100 12 Goods Returned by Kamal

25015 Paid for stationary

100


18 Paid into Bank 250

20 Goods Sold for cash 375

22 Bought goods for cash 500

25 Paid Salaries 350

28 Paid Rent 250

31 Drawings 500

General Ledger

Principle book of accounts Classifying all the items in Journal Grouping of all accounts It’s a summary device “T” Account It gives the cumulative effect


Posting

Process of transferring - Business transactions

- From books of original entry- To the respective accounts in ledger

It aims to make a classified and summarised business transactions in appropriate accounts


Rules - Posting

Separate accounts should opened

All the pertaining transactions should posted in the same account

Dual aspects should be posted on the respective side of accounts



Date Particulars LF Debit Credit

June 1

Cash a/c Dr To Capital a/c(being business started with Rs 1200000)

12000001200000

Journal

Ledger

Date Particulars JF Amount Date Particulars JF Amount

June 1 To Capital 1200000

Cash a/c

Date Particulars JF Amount Date Particulars JF Amount

June 1

By Cash 1200000

Capital A/c

Dr

Dr

Cr

Cr

Balancing of an Account


Ascertaining the net balance

Considering the two balances

Comparing the total of both sides

Balance is put on the side which is smaller

Balance is carried forwarded.

Balance is termed as debit/credit balance


Date Particulars Amount Date Particulars Amount

June 1 22

To capital a/cTo bank a/c

200000100000

June 12 17 27

By bank a/cBy postage a/cBy Stationary a/c

20000 200 800

Cash a/c

Date Particulars Amount Date Particulars Amount

June 1 22

July 1

To capital a/cTo bank a/c

To balance b/d

200000100000

300000

279000

June 12 17 27

31

By bank a/cBy postage a/cBy Stationary a/c

By balance c/d

20000 200 800

279000300000

Cash a/c

Trial balance

Listing of all accounts & respective balance

A statement – Not an account Prepared on a particular date Shows the arithmetical accuracy

Debit/credit balance is extracted from ledger accounts on a particular Date


Performa of Trial Balance

Particulars Debit (Rs)

Credit(Rs)

CashCapitalStockPurchaseSalesSalaryLoans and advances

Total

Xxxx

XxxxXxxxx

Xxxx

Xxxx

Xxxx

Xxxx

Xxxx

Xxxxx


Trial Balance as on March

Jan 08 Transaction

1 Commenced Business 1500000

2 Paid into Bank 800000

3 Furniture (goods) 500000

4 Purchased furniture(goods) from Ratan 200000

5 Purchased furniture (office purpose) 100000

6 Sold to j Mitra 200000

7 Bought goods 180000

8 Return to Ratan 5000

9 Return fro j mitra 20000

10 Taxi fare 1000

11 Sold to Kabiraj goods costing Rs 50000 a @ 10% Discount

12 Received commission from J Das 1500

13 Paid to Ratan 100000

18 Send to Bank 20000

20 Received a cheque of Rs 42000 from Kabiraj for full and final settlement


Transaction

21

Received a cheque from J Mitra 50000

22

Loan to Naren 15000

23

Received Interest 1000

24

Rent 2000

accounting process

Education

business started

business transactions

accounting

accounts june

transactions

increase

balance

decrease