Financial Accounts Project

What is Book-Keeping?
Bookkeeping, commonly referred to as keeping the books, is
the process of keeping full, accurate, up-to-date business
records. Proper bookkeeping can help businesses effectively
manage cash flow, stay abreast of profits and losses, and
develop plans for the future. Transactions that are recorded in
bookkeeping are sales, purchases, income and payments by
an individual or an organisation.
Bookkeeping is usually done in two manners i.e.
a) Single Entry System (followed by small businesses)
b) Double Entry System (followed by industries, corporates, etc.)

The Double Entry System

The Double Entry system came into existence during the 13 th
century in Italy. Luca Pacloli is known to be the father of the
double Entry System.
In double entry system every transaction has two accounts.
That is each debit entry has a corresponding credit entry of same
amount in another account and vice versa and hence maintains
the accounting equation i.e.
Credits = Debits
This means that the increase in company's assets will either
increase the liabilities or will increase the equity. Or decrease in
company assets will either decrease the liabilities or will
decrease the equity.
What is Accountancy?
Accountancy is the branch of mathematics that is useful in
discovering the causes of success and failure in a business.
It is defined as “Accountancy is the art of communicating
financial information about a business entity to users such as
shareholders and managers”.
The earliest accounting records were found amongst the ruins of
ancient Babylon, Assyria and Sumeria, which date back more than
7,000 years. The people of that time relied on primitive accounting
methods to record the growth of crops and herds. Accounts are
usually denoted by “a/c”

Heads Of accounts
Personal Account: The accounts which represents individuals or
organisations fall under this category.

e.g. : Capital a/c, Rent a/c, Consignment Debtors a/c.

Real Account: The accounts which represent assets are included in

this category.

e.g. : Goodwill a/c, Stock a/c, patent a/c.

Nominal Account: The accounts which represent incomes, losses,

expenses or gains are classified as Nominal Accounts.

e.g. : Salary a/c, Discount a/c, Commission a/c.

What is a Journal?
A Journal is a book in which an accounting transaction is
written in accounting terms. This is the first accounting record
for a transaction. The Journal is always written from the
business’ point of view. It is also known as the book of prime
entry (since the transaction related to business are entered for
the first time in a journal). Every transaction recorded in the
journal is known as a journal entry.

What is a Ledger?
Ledger is short for “general ledger”– and refers to the “books”
in businesses where all accounting transactions are recorded.
A general ledger is organized by accounts. The categories for
these accounts include: Assets, Liabilities, Owner’s Equity,
Revenue, and Expenses.
What is a Subsidiary Book?
Subsidiary book are the sub division of journal where the business
transactions are first time recorded.
They include:
a) Purchase Book
b) Purchase Returns Book
c) Sales Book
d) Sales Returns Book

What is a Cash Book?

Journal in which all cash receipts and payments (including bank
deposits and withdrawals) are recorded first, in chronological order,
for posting to general ledger. A Cash book has two sides. Left hand
side of the cash book is known as debit side or receipt side while the
right side is known as credit side or payment side.