ACCOUNTING FOR MANAGERS

Accounting definition:
Accounting is an art of recording, classifying and summarizing the day-to-day
economic activities of business in a systematic manner through which
interpretations will be made.

key points:
- accounting is an art
- the first process of accounting is - recording
- the second process of accounting is - classifying
- the final process of accounting is - summarizing
- recording cassifying and summarising ofeconomic activities of business
- systematic manner
- interpretations (reveals facts and figures from the final statement or summary)

GOLDEN RULES OF ACCOUNTING :

personal account : debit the receiver, credit the giver

ex. Indian bank, Mr.Gopi, LIC

real account : debit what comes in, credit what goes out
ex. cash, furniture, machinery, land

nominal account : debit all expenses and losses, credit all incomes and gains
ex. rent, salary, commission, interest, dividend

DUAL ASPECT : each transaction will have two impacts

JOURNAL ENTRIES :

1. On 01.04.2021 Ganesh started business with cash Rs. 10,000 , Land worth Rs.
1,00,000 and Machine worth Rs. 75000

cash a/c Dr 10,000

land a/c Dr 1,00,000
machine a/c Dr 75,000
To Ganesh Capital a/c
1,85,000

2. Sold goods worth Rs. 25000 to Mr.X for cash on 02.04.2021 (Cash sales)

cash a/c Dr 25000

To sales 25000

3. Above transaction on (credit sales)

Mr.X Dr 25000
To Sales 25000

4. Purchase goods on cash for Rs. 25000

purchase a/c Dr 25000

To Cash a/c 25000

5. Purchase goods on credit from Mr.X for Rs. 25000

Purchase a/c Dr 25000

 To Mr.X a/c 25000

6. Purchase return of goods

cash a/c Dr
To purchase return

7. Sales return of goods

sales return a/c Dr

To cash a/c

8. sales return of goods bought on credit from Mr.X

sales return a/c Dr

To Mr.X a/c

9. Purchase return of goods returned to Mr.X

Mr.X a/c Dr
To Purchase return a/c

10. Drawings

Cash a/c Dr
To Bank a/c

11. Drawings for personal use

Ganesh Drawings a/c Dr

To Cash a/c

12. Cash deposited in Bank

Bank a/c Dr
To Cash a/c

13. Purchased goods and paid in cheque

Purchase a/c Dr
To Bank a/c

14. Sold goods and received Cheque

Bank a/c Dr
To sales a/c

15. Sale of Land

cash a/c Dr
To Land a/c

16. discount allowed - debit and discount received - credit

17. commission received - credit and commission allowed - debit

18. assets - debit

LEDGER :
YK, Discount allowed and received journal will have 3 entries and you have to
create the ledger accounts
If, dis allowed account is prepared - write only the opposite (to) and give the
amount in the allowed a/c

TRIAL BALANCE :
Reserve on Bad debts - credit
Bank O/D - credit
Rent received - credit ( income )
Capital - credit
Return inwards - debit and Return outwards - credit
Carriage inwards and outwards both - debit
Duty on purchase - debit
Bills payable - credit and Bills receivable - debit