INTRODUCTION TO FINANCIAL ACCOUNTS

THREE GOLDEN RULES OF ACCOUNTANCY

Personal Account Real Account Nominal Account

Examples A’s A/c, Loan A/c, capital A/c, drawings A/c, Debtor’s A/c, Creditor’s A/c

Assests’ A/c, cash A/c, stock A/c, Bank A/c

Expenses’ A/c, Incomes’ A/c, Losses’ A/c, Gains’ A/c

DEBIT The receiver What comes in Expenses’ A/c, Losses’ A/c

CREDIT The giver What goes out Incomes’ A/c, Gains’ A/c

Ledger Machinery purchased for cash Rs 4000/

JOURNAL ENTRY- Machinery A/c …..Dr 4000

To cash A/c 4000

Dr MACHINAERY A/C Cr TO CASH A/C 4000

Dr CASH A/C Cr

TO MACHINERY A/C 4000

BANK RECONCILIATION STATEMENT • BALANCE AS PER CASH BOOK (given)• Do as per pass book

ADD LESS

Cheque issued but not yet presented(payment)

Cheque collected but not cleared by bank

Cheque received recorded twice on receipt side of cash book

Cheque dishonored

Bank credited income/ customer directly deposited in our A/c

Bank debited expenses not recorded in cashbook

Cheque received (and cleared by bank) was wrongly recorded on credit side of cashbook

Rule of thumb

Favorable Balance- (Given) Balance As Per Cashbook- Do As per Passbook

Unfavorable Balance- (Given) Balance As Per Cashbook- Do As per Cashbook

Common Period- Find Uncommon Items

Uncommon Period Find Common Items