final accountancy

8/7/2019 Final ACCOUNTANCY

1/18


2/18

WHAT IS ACCOUNTING?WHAT IS ACCOUNTING?

ACCOUNTING IS A BUSINESS LANGUAGE

ACCOUNTING IS A PROCESS ACCOUNTING IS A SCIENCE

ACCOUNTING IS AN ART

ACCOUNTING IS A INFORMATION SYSTEM


3/18

MEANING OF ACOUNTINGMEANING OF ACOUNTING

Accountancy is science ofclassifying the recorded businessinformation, summarizing it and then analyzing and

interpreting this information and lastly communicating the

results to the persons who need this information. Accountancy

is the language used to communicate with the outsiders.

ESSENTIAL FEATURES OF ACCOUNTING:

1. Business Information2. Only those transactions measurable in terms of money are recorded.3. Recording the transactions.4. Art of Classifying Business Transactions5. Art of summarizing the recorded information6. Interpreting the Recorded Information7. Communicating the Results


4/18

TYPES OF ACCOUNTSTYPES OF ACCOUNTS

PERSONAL : Accounts in the name of Persons (Ravi,Mohan etc.) or Artificial Persons (Name of a Company or

Bank).

REAL :Accounts of Assets (Machine, Furniture, Land etc.)

and Liabilities (Capital, Bills Payable, Loan etc.).

NOMINAL :Accounts of Expenses (Salaries, Rent,postage etc.) and Incomes (Sales, Interest, Dividends etc.)


5/18

PERSONAL :- Natural Personal A/c

- Artificial Personal A/c

- Representative Personal A/c

REAL :- Tangible Real A/c

- Intangible Real A/c

NOMINAL :- Accounts of Expenses or Losses

- Accounts of Incomes or Profits

TYPES OF ACCOUNTSTYPES OF ACCOUNTS


6/18

Debit the Receiver and Credit the Giver( Applicable on PERSONAL ACCOUNT )

DebitWhat Comes in and CreditWhat Goes out( Applicable on REAL ACCOUNT )

Debit all Expenses & Losses and Credit all Incomes & Gains.(Applicable on NOMINAL ACCOUNT )

GOLDEN RULES OF ACCOUNTINGGOLDEN RULES OF ACCOUNTING


7/18

TransactionsTransactions AccountsAccountsInvolvedInvolved Nature of AccountNature of Account Change Debit/CreditDebit/Credit

PurchasePurchase

Machine For CashMachine For Cash

MachineMachine

CashCash

Real (Asset)

RealReal (Asset)

Increase

Decrease

Debit (Dr.)Debit (Dr.)

Credit (Cr.)Credit (Cr.)

Interest receivedInterest received CashCash

InterestInterest

Real (Asset)Real (Asset)

Nominal (Revenue)Nominal (Revenue)

Increase

Increase

Debit (Dr.)Debit (Dr.)

Credit (Cr.)Credit (Cr.)

Deposited CashDeposited Cash

Into BankInto Bank

BankBank

CashCash

RealReal (Asset)

RealReal (Asset)

Increase

Decrease

DebitDebit (Dr.)(Dr.)

CreditCredit (Cr.)(Cr.)

Salary PaidSalary Paid SalarySalary

CashCash

Nominal (Expense)Nominal (Expense)


Increase

Decrease



Paid to SureshPaid to Suresh SureshSuresh

CashCash

Personal (Liability)Personal (Liability)


Decrease

Decrease



EXAMPLES:EXAMPLES:


8/18

JOURNALJOURNAL

It records all the transactions of a business into the order in

which they occur. It is a book containing chronological record

of all the transactions.

DATE PARTICULARS L.F AMOUNT (Dr) AMOUNT (Cr)

01/04/10

CASH A/c . . Dr 850000

TO CAPITAL A/c 850000

1. Started business with cash Rs. 850000 on 01/04/10.

2. Purchased goods for cash Rs. 50000 on 02/04/10.

02/04/10

PURCHASE A/c.. .Dr 50000

TO CASH A/c 50000


9/18

3. Cash paid to Ram Rs. 5000. He allowed discount Rs. 100 on 03/04/10.

03/04/10

RAM A/c Dr. 5000

TO DISCOUNT A/c 100

TO CASH A/c 4900

4. Cash received from Ram Rs. 6000. Allowed him discount Rs. 200 on 04/04/10.

04/04/10

CASH A/c Dr. 5800

DISCOUNT A/c .. .. .. .. Dr. 200

TO RAM A/c 6000

5. Cash received from Ram Rs. 6000. Allowed him discount Rs. 200 on 04/04/10.

5/04/10

Cash A/c Dr. 5000

To Bank A/c 5000


10/18

Contains all the asset, liability, and stockholders equity,

Expenses and Incomes accounts

LEDGERLEDGER

POSTINGPOSTINGTransferring information from the journals to the ledger

accounts


11/18

POSTING ENTRIESPOSTING ENTRIES

DATE PARTICULARS J.F AMT DATE PARTICULARS J.F AMT

2010

April 1

April 3April 5

May 1

To Balance b/d

To RamTo Bank

To Balance b/d

850000

58005000

2010

April 2

April 4April 31

By Purchases

By RamBy Balance c/d

50000

4900805900

860800 860800

805900


12/18

TRIAL BALANCE OF MR. GULSHAN MEHTATRIAL BALANCE OF MR. GULSHAN MEHTA

PARTICULARS AMOUNT PARTICULARS AMOUNT

DEBIT BALANCES:

Opening StockDrawingsDebtorsInterest On LoanMotor TrucksCashBuildingsBad DebtsCarriage InwardCarriage Outward

PurchasesSales ReturnSalariesInsurance

60003000

40000300

400001500080000

60040001500

70000600080004500

CREDIT BALANCES:

CapitalCreditorsSales

6% LoanProvision for DoubtfulDebtsPurchases ReturnRent ReceivedDiscountsCommission

6000016100

18000010000

8003000480012003000

278900 278900


13/18

ADJUSTMENTS :ADJUSTMENTS :

1. 6% Loan was taken on July 1, 2004.

2. Depreciate Buildings at 5% on Motor Trucks at 10%.3. Salaries Rs. 500 are outstanding.

4. Closing stock was Rs. 4000

5. Stock worth Rs. 500 was stolen full claim was received by Inc. company.

6. Prepaid Insurance is Rs. 500.

7. Create Provision for Doubtful debts at the rate of 6% on Debtors.

8. There are further Bad Debts of rs. 800.

9. Goods drawn for private use Rs. 1500.

10. Goods costing Rs. 600 were sent to a customer for approval for Rs. 800.

They have been recorded as Sale and they are likely to be returned.

11. Provide Managers Commission at 10% after charging such

commission


14/18

BOOKSBOOKS OFOF THETHE FIRMFIRM

TRADINGTRADING ACCOUNTACCOUNT FORFOR THETHE YEARYEAR ENDEDENDED MARCHMARCH 3131,, 20052005


To Opening StockTo Purchases 70000Less: Return 3000

Less: Drawings 1500Less: Lost by theft 500

To Carriage InwardsTo Gross Profit c/d

6000

65000

4000102800

177800

By Sales 180000Less: Sales on

approval 800

Less: Returns 6000

By Closing Stock 4000Add: Cost of good

sold onapproval 600

173200

4600

177800

Dr. Cr.


15/18


To Bad Debts 600Add: New Bad Debts 800Add: Provision (new) 2304Less: Provision (old) 800

To Interest on Loan 300

Add: Outstanding 150To Carriage Outward

To Salaries 8000Add: Outstanding 500

To Insurance 4500Less: Prepaid 500

To DepreciationBuilding 4000Motor Truck 4000

2904

4501500

8500

4000

8000

By Gross ProfitBy Rent ReceivedBy DiscountBy Commission

102800480012003000

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2005PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2005

carried forward .


16/18

To Profit BeforeCommission

To Managers Commission

[86446 * 10/110]

To Net Profit

86446

111800

7859

78587

86446

By Profit BeforeCommission

111800

86446

86446

brought forward


17/18

LIABILITIES AMOUNT ASSETS AMOUNT

Capital 60000Add: Net Profit 78587Less: Drawings 3000Less: Goods Used 15006% LoanCreditorsManagers CommissionSalaries OutstandingInterest On LoanOutstanding

1340871000016100

7859500

150

168696

Building 80000Less: Depreciation 4000

Motor Trucks 40000Less: Depreciation 4000Closing Stock 4000Add: Stock on

approval 600

Debtors 40000Less: New Debts 800Less: Sale on

Approval 800Less: Provision 2304Prepaid InsuranceInsurance Co.Cash

76000

36000

4600

36096500500

15000

168696

BALANCE SHEET AS ON MARCH 31, 2005BALANCE SHEET AS ON MARCH 31, 2005


18/18

final accountancy

Documents