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    The document discusses the double-entry accounting system and provides examples of journal entries and adjustments to assets, liabilities, equity, revenues and expenses. It summarizes the key accounting processes as recording transactions through journals and subsidiary ledgers, classifying accounts, summarizing information in financial statements, and analyzing data through financial ratios. The accounting equation of assets equal to liabilities plus equity is demonstrated through examples of a company establishing share capital and making purchases.

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    The document discusses the double-entry accounting system and provides examples of journal entries and adjustments to assets, liabilities, equity, revenues and expenses. It summarizes the key accounting processes as recording transactions through journals and subsidiary ledgers, classifying accounts, summarizing information in financial statements, and analyzing data through financial ratios. The accounting equation of assets equal to liabilities plus equity is demonstrated through examples of a company establishing share capital and making purchases.

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    14 views13 pages

    Accounting Mechanism: K N Badhani

    Uploaded by

    maysh
    The document discusses the double-entry accounting system and provides examples of journal entries and adjustments to assets, liabilities, equity, revenues and expenses. It summarizes the key accounting processes as recording transactions through journals and subsidiary ledgers, classifying accounts, summarizing information in financial statements, and analyzing data through financial ratios. The accounting equation of assets equal to liabilities plus equity is demonstrated through examples of a company establishing share capital and making purchases.

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    © All Rights Reserved
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    of 13

    Accounting Mechanism

    K N Badhani

    DOUBLE

    ENTRY SYSTEM

    Assets

    Expenses

    Liabilities + Equity + Revenue

    When
    increases

    When
    decreases

    When
    increases

    When
    decreases

    Dr.

    Cr.

    Cr.

    Dr.

    Mehta Autocare Pvt. Ltd. Started with a Share Capital of Rs.


    20.00 lakh
    Assets
    +
    Expenses =
    Liability+
    Equity+
    Revenue
    *

    Cash
    Increases

    Increases

    Rs. 20,00,000

    Rs. 20,00,000

    Journal Entry
    Bank a/c

    Dr.

    Dr.

    Cr.

    20,00,000

    To Share Capital a/c

    20,00,000

    Balance Sheet
    Liabilities
    Share Capital

    (Equity)

    Amount
    Assets
    20,00,00
    0
    Bank
    20,00,00
    0

    Amount
    20,00,00
    0
    20,00,00
    0

    Paid Security Deposit Rs. 2,00,000 and Advance Rent Rs.


    50,000
    Assets
    +
    Expenses =
    Liability+
    Equity+
    Cash
    deposit

    Revenue

    Security
    Advance

    Rent

    Decrease
    Increase
    Rs. 2,50,000
    2,00,000

    Rs.

    Dr.

    Journal Entry

    Security Deposit Dr.


    Rs
    Advance
    Dr.
    50,000 Rent
    To Bank a/c

    Cr.

    2,00,000
    50,000
    2,50,000

    Balance Sheet
    Liabilities
    Amount
    Share Capital (Equity) 20,00,000

    Assets
    Bank
    Security Deposit
    Advance Rent

    20,00,000

    Amount
    17,50,00
    0
    2,00,000
    50,000
    20,00,00
    0

    Equipment Purchased from Alpha Ltd. Rs. 15,00,000


    Assets
    +
    Expenses =
    Liability+
    Equity+
    Alpha Ltd
    Equipments
    Increased

    Increased

    Rs. 15,00,000

    Rs 15,00,000
    Dr.

    Journal Entry
    Equipments

    Dr.

    Revenue

    Cr.

    15,00,000

    To Alpha Ltd.

    15,00,000

    Balance Sheet
    Liabilities
    Amount
    Share Capital (Equity) 20,00,000
    Creditors
    15,00,000

    Assets

    Bank
    Security Deposit
    Advance Rent
    Equipments

    35,00,000

    Amount
    17,50,00
    0
    2,00,000
    50,000
    15,00,00
    0
    35,00,00

    Paid to Alpha Ltd. Rs. 10,00,000


    Assets
    +
    Expenses =
    Liability+
    Alpha Ltd
    Cash
    Decreased

    Decreased

    Rs. 10,00,000

    Rs 10,00,000

    Journal Entry
    Alpha Ltd.

    Dr.

    Equity+

    Dr.

    Revenue

    Cr.

    10,00,000

    To Bank a/c

    10,00,000

    Balance Sheet
    Liabilities
    Share Capital (Equity)
    Creditors

    Amount
    Assets
    20,00,000
    5,00,000 Bank
    Security Deposit
    Advance Rent
    Equipments
    25,00,000

    Amount
    7,50,000
    2,00,000
    50,000
    15,00,00
    0
    25,00,00
    0

    The Process of Accounting

    Recording
    Classifying
    Summarizing
    Analyzing

    Recording
    Voucher
    Journal
    Subsidiary Books of Accounts:
    Cash Book
    Purchase
    Purchase Return Book
    Sales Return Book
    Journal Proper

    Computerized Accounting
    Some of the popular software for small organizations are :
    Tally
    Busy
    FACT
    E. X. (by TCS)
    Small Business Manager
    Simply Accounting

    Classification
    General Ledger
    Trail Balance

    Summarizing
    Balance Sheet
    Profit and Loss Account
    Cash Flow Statement
    Permanent Vs Temporary Accounts
    Adjustment Entries

    Analyzing
    Ratio Analysis

    Ledger Accounts:
    Date
    12/4/2007
    26/6/2007
    16/8/2007
    23/12/2007

    6/3/2008

    Travelling Expenses : CRY project


    Amount
    Particulars
    C.F.
    (Rs.)
    Date
    Particulars
    1123.0
    To Bank
    12
    0

    To Bank
    26 896.00

    To Cash
    32 321.00

    To Bank
    44 965.00

    2341.0
    By Income&Exp.
    To Cash
    56
    0 31/03/2008 A/C
    7023.0

    Amount
    C.F.
    (Rs.)

    7023.0
    0
    7023.0
    0

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