Accounting Professional

BUSINESS ACCOUNTING
Meaning of Accounting
Accounting is the art of

• recording
• classifying and
• Summarising in a significant manner and in
terms of money, transaction and events,
which are, in part at least, of a financial
character, and interpreting the result
thereof
BUSINESS ACCOUNTING
Characteristics of Accounting
1. Accounting is an Art as well as Science
2. Recording of Financial Transaction only
3. Recording in terms of money
4. Classifying
5. Summarising
6. Interpretation of the results
7. Communicating
BUSINESS ACCOUNTING
Objectives of Accounting
1. To Keep systematic record of business transaction
2. To Calculate profit or loss
3. To Know the exact reasons leading to net profit or net loss
4. To ascertain the reasons leading to net profit or net loss
5. To ascertain the progress from year to year
6. To Prevent and detect errors & frauds
7. To provide info to various parties

BUSINESS ACCOUNTING
Functions of Accounting
1. Maintaining complete & systematic Records
2. Communicating the Financial results to Various Parties
3. Protecting the Assets of Business
4. Providing Assistance to Management
5. Trusteeship
6. Compliance of legal needs
7. Fixing Responsibility
BUSINESS ACCOUNTING
Accounting Concepts / Principles
1. Business Entity Concept 6. Full Disclosure Principle

2. Money Measurement 7. Materiality Concept
Concept 8. Historical Cost Principle
3. Accrual Concept 9. Consistency
4. Matching Concept 10.Going Concern
5. Conservatism
BUSINESS ACCOUNTING
1. Business Entity Principle
Business Owner
A) Capital & B) Drawing
The business is regarded as being separate from the owner or owners.

Has a totally separate identify to its owners
BUSINESS ACCOUNTING
2. Money Measurement Principle
Furniture Rs 10,000 /-
No monetary Value but most

Important
The money measurement concept states that a business should only record an
accounting transaction if it can be expressed in terms of money. This means that the
focus of accounting transactions is on quantitative information, rather than on
qualitative information.
BUSINESS ACCOUNTING
3. Accrual Concept
Total receipts from students for tuition fees for April Rs
10,00,000/- =>(100*10,000)
Total receipts from students for tuition fees for May Rs 0/-
=>(100*0)
1. Income Received in Advance
2. Accrued Income-(Income Earned but nt received)
3. Prepaid Expenses
4. Outstanding Expenses
Accrual concept is the most fundamental principle of accounting which requires recording revenues
when they are earned and not when they are received in cash, and recording expenses when they
are incurred and not when they are paid.
BUSINESS ACCOUNTING
4.Matching Principle
Total receipts from students for tuition fees for June =>(100*1,000) Rs 1,00,000/-
Less: Total rent for the month June (10,000 * 0) Rs 0/-
-
Profit Rs 1,00,000/
Total receipts from students for tuition fees for July =>(100*1,000) Rs 1,00,000/-
Less: Total rent for the month July (10,000 * 2) Rs 20,000/-
Profit Rs 80,000/-
Matching concept is an accounting practice whereby

firms recognize revenues and their related expenses in
the same accounting period. Firms report "revenues,"
that is, along with the "expenses" that brought them.
BUSINESS ACCOUNTING
5.Conservatism or Prudence
Closing Stock: Lower of = Cost or Realisable value
Provision for Doubtful debts

Conservatism principle is accounting principle that concern about the
reliability of Financial Statements of an entity. Conservatism principle
provide the guidance to accountants on how to records and recognize the
uncertainty outcome of revenues, expenses, assets and liabilities in financial
statements.
BUSINESS ACCOUNTING
6.Full Disclosure Principle

• All Sales
• All Expenditure
• All Assets
• All Liabilities,
• All legal contracts
• All legal cases pending
• Any violation of rule And regulation etc.
Full Disclosure Principle is the accounting principle that require entity
to disclose all necessary information in its financial statements and
others related signification.
BUSINESS ACCOUNTING
7.Materiality Principle
The materiality principle. The materiality principle states that
an accounting standard can be ignored if the net impact of
doing so has such a small impact on the financial statements
that a reader of the financial statements would not be misled.
BUSINESS ACCOUNTING
8.Historical Cost Principle

Sales 1,00,000
Machinery 50,000 Raw Material 50,000
Life 5 Years
Labour 10,000
Every Year expenses Rent 10,000

=50,000/5 Profit 30,000
=10,000 Depreciation 10,000
Actual Profit 20,000
Purchase Value – Depreciation = Book Value

It means that fixed assets must be reported in financial statements on the
cost on which they were purchased Fixed assets should not be recorded
on their market value.
BUSINESS ACCOUNTING
9.Consistency Concept
Method of charging depreciation

1. Straight Line Method
2.Written down value Method
The consistency principle requires accountants to be consistent from
one accounting period to another in applying accounting principles,
methods, practices, and procedures
BUSINESS ACCOUNTING
10.Going Concern Concept

Going concern simply means that an organization is going to continue its
business operations in future and currently there is no reason to believe that
the business operations of the organization will come to an end.
For example
If a machine is purchased for Rs 1,00,000 with a depreciation of Rs 20,000 p.a. can
be shown for Rs 80,000 (1,00,000 – 20,000) at the end of first year, Rs 60,000
(80,000 – 20,000) at the end of second year and so on. These are the written down
values of the machine at the end of each financial year as per the books of the
organization. Whereas the realizable value of the machine may be more or less
than the book values. We can carry forward the book values only if the
organization is a going concern else we will have to show the assets and liabilities
at their realizable values.
BUSINESS ACCOUNTING
Capital Liability
Assets
BUSINESS ACCOUNTING
Types of Assets
1.Non Current Assets
2.Current Assets
3.Fictitious Assets
BUSINESS ACCOUNTING
Non Current Assets

Those assets which are held for continued use in the business
for the purpose of Producing goods or services and are “not
meant for resale” Example: Machinery, Land, Building, Plant,
Furniture etc
Tangible Assets Intangible Assets

 Plant and Machinery  Goodwill
 Building  Patents
 Furniture  Copyright
 Computers  Trademark
 Vehicle  Etc….
 Etc…..
BUSINESS ACCOUNTING
Current Assets
Those assets which are meant for sale or which the
management would want to convert into cash within
one year
1. Stock
1. Raw Material
2. Work In progress
3. Finished Goods
2. Debtors
3. Bills Receivable
4. Short term investment
5. Bank Balance
6. Cash
BUSINESS ACCOUNTING
1. Creditors
Current 2. Bills Payable

Liabilities
External
Non-Current
Type of Liabilities 3. Bank Overdraft
Liabilities
Internal Capital
4. Any other short term loan

BUSINESS ACCOUNTING
• Entity
• Insolvent
• Voucher
• Drawings
• Bad Debts
• Cash Discount
• Trade Discount
• Deferred Revenue Expenditure
BUSINESS ACCOUNTING
There are always Two aspects of any financial transaction

BUSINESS ACCOUNTING
Double Entry System

The double entry system of accounting or book keeping means that every business
transaction will involve two accounts (or more). For example, when a company borrows money
from its bank, the company's Cash account will increase and its liability account Loans Payable
will increase.
American Approach English Approach

 Assets Accounts  Real Account
 Liabilities Accounts  Personal Account
 Capital account or Owner’s equity account  Nominal Account
 Revenue or Income Account
 Losses or Expenses Account
BUSINESS ACCOUNTING
1.Real Account
General Rule:
A.Debit (Dr.) What comes “IN” &
B.Credit (Cr.) What goes “OUT”
Simplified Rule:
A.Assets Increases ( ) Debit (Dr.)

B.Assets Decreases( ) Credit (Cr.)
BUSINESS ACCOUNTING
Practical Examples
1.Machienry purchased for Cash Rs. 10,000/-
Assets Increase(Machinery) 10,000 Dr.
Assets Decrease(Cash) 10,000 Cr.
Dat Particular L Amount (Dr.) Amount
e . (Cr.)
F
1 Machinery A/C Dr. 10,000
To Cash A/C 10,000
(Being Machinery bought for
cash)
BUSINESS ACCOUNTING
2.Personal Account
General Rule:
A.Debit (Dr.) What comes “Receiver” &

B.Credit (Cr.) What goes “Giver”
Simplified Rule:
Liabilities/Capital Decreases ( ) Debit (Dr.)

Liabilities/Capital Increases( ) Credit (Cr.)
BUSINESS ACCOUNTING
Practical Examples
2.Capital Introduced for Rs 1,00,000/-
Assets Increases(Cash) 1,00,000 Dr.
Capital Increases(Capital) 1,00,000 Cr.
Date Particular L.F Amount (Dr.) Amount (Cr.)
2 Cash A/C Dr. 1,00,000

To Capital A/C 1,00,000
(Being Capital Introduced in
cash)
BUSINESS ACCOUNTING
Practical Examples
3.Purchsed Scooter on Credit from Rahim Rs 25,000/-
Assets Increases(Scooter) 25,000 Dr.

Liabilities Increases(Creditors) 25,000 Cr.
2 Scooter A/C Dr. 25,000

To Rahim A/C 25,000
(Being Scooter Purchased
on Credit)
BUSINESS ACCOUNTING
Practical Examples
4. Paid to Rahim Rs 15,000/-
Liabilities Decreases(Creditors) 15,000 Dr.

Assets Decreases(Cash) 15,000 Cr.
2 Rahim A/C Dr. 15,000

To Cash A/C 15,000
(Being Cash Paid to Rahim)
BUSINESS ACCOUNTING
3.Nominal Account
General Rule:
A.Debit (Dr.) What comes “Expenses” &

B.Credit (Cr.) What goes “Incomes”
Simplified Rule:
All Expense Increases ( ) Debit (Dr.)

All Incomes Increases ( ) Credit (Cr.)
BUSINESS ACCOUNTING
Practical Examples
5. Salary Paid for Rs 5,000/-
Expenses Increases(Salary) 5,000 Dr.

5 Salary A/C Dr. 5,000

To Cash A/C 5,000
(Being Salary Paid )
BUSINESS ACCOUNTING
Practical Examples
6. Commission Received of Rs. 20,000/-
Assets Increases(Cash) 20,000 Dr.
Income Increases(Commission) 20,000 Cr.
Date Particular L. Amount (Dr.) Amount (Cr.)
F
6 Cash A/C Dr. 20,000
To Commission Received A/C 20,000
(Being Commission Income received )
BUSINESS ACCOUNTING
Illustration (only for Student)
Which two elements/accounts are effected by the following transactions?
Also state the nature/kind/type of the elements
• Started business with capital 75,000
• Bought furniture 10,000
• Bought goods for cash 20,000
• Bought goods from Ram on Credit 10,000
• Sold goods for cash 15,000
• Sold goods to Shyam on credit 5,000
• Returned goods to Ram 1,000
• Goods Returned from Shyam 500
• Goods taken by Proprietor for his personal use 1,000

BUSINESS ACCOUNTING
Name the two elements/accounts effected by the following transactions. Also state the
nature/kind/type of the elements
• Paid cash to Ram 5,000
• Received cash from Shyam 3,000
• Wages Paid 750
• Rent Received 2,000
• Cash taken by proprietor for his personal use 2,500
• Purchased stationery 300
• Received interest 800

BUSINESS ACCOUNTING
What are the two elements/accounts effected by the following transactions. Also state the nature
/kind/type of the elements
• Paid Cash into Bank 25,000 • Salary paid by cheque 4,500
• Withdrawn from bank 5,000 • Commission received by Cheque 7,200
• Paid to Ram by Cheque 3,500 • Withdrawn from bank for office use 5,000
• Received a cheque from Shyam 2,700 • Withdrawn from bank for personal use 3,000
• Purchased Machinery and paid by cheque 12,000 • Advertisement expenses paid by cheque 5,000
BUSINESS ACCOUNTING
Practical Examples
7. Purchased Goods of Rs. 10,000/-
Expenses Increases(Purchase) 10,000 Dr.
7 Purchased A/C Dr. 10,000

To Cash A/C 10,000
(Being Goods Purchased in
Cash )
BUSINESS ACCOUNTING
Practical Examples
8. Purchased Goods from Kamal of Rs. 8,000/-

Liabilities Increases(Creditors) 8,000 Cr.

To Kamal A/C 8,000
(Being Goods Purchased on
Credit )
BUSINESS ACCOUNTING
Practical Examples
9. Purchased Goods from Kamal in cash of Rs. 11,000/-


To Cash A/C 11,000
(Being Goods Purchased in
Cash )
BUSINESS ACCOUNTING
Practical Examples
10. Goods sold for Rs. 12,000/-
Assets Increases(Case) 12,000 Dr.

Income Increases(Sales) 12,000 Cr.
10 Cash A/C Dr. 12,000

To Sales A/C 12,000
(Being Goods Sold in Cash )
BUSINESS ACCOUNTING
Practical Examples
11. Goods sold to Raman for Rs. 15,000/-
Assets Increases(Debtors) 15,000 Dr.
11 Raman A/C Dr. 15,000

To Sales A/C 15,000
(Being Goods Sold on Credit
)
BUSINESS ACCOUNTING
Practical Examples
12. Goods sold to Kishore for Rs. 10,000/- in Cash
12 Cash A/C Dr. 10,000

To Sales A/C 10,000
(Being Goods Sold In Cash )
BUSINESS ACCOUNTING
Practical Examples
13. Goods returned by Raman of Rs. 3,000/-
Income Decreases(Sales return) 3,000 Dr.
Assets Decreases(debtors) 3,000 Cr.
13 Sales Return A/C Dr. 3,000

To Raman A/C 3,000
(Being Goods returned by
Raman )
BUSINESS ACCOUNTING
Practical Examples
14. Proprietor withdrew Cash for personal use
Rs. 5,000/-
Capital Decreases(Drawings) 5,000 Dr.
Date Particular L. Amount Amount (Cr.)
F (Dr.)
14 Drawing A/C Dr. 5,000
To Cash A/C 5,000
BUSINESS ACCOUNTING
Practical Examples
15. Proprietor withdrew Goods from business for
personal use Rs. 5,000/-
Capital Decreases(Drawings) 5,000 Dr.
Assets/Exp Decreases(Purchases) 5,000 Cr.

To Purchases A/C 5,000
BUSINESS ACCOUNTING
Compound Journal Entries

16. On 31st March Rs 15,000 are paid for salary
and Rs 10,000 are paid for rent.
Expenses Increases(Salary) 15,000 Dr.
Expenses Increases(Rent) 10,000 Dr.

Rent A/C Dr. 10,000
To Cash A/C 25,000
BUSINESS ACCOUNTING
Discounts
Sales 20,000
Less: Trade Discount (@ 10%) 2,000
Net Sales 18,000
Less: Cash Discount (@ 5%) 900
Net Cash Payment 17,100
Trade Discount
1. For All Customers
2. Not disclosed in Accounting
Cash Discount
1. For only those who pays in Cash
2. Disclosed in Accounting
BUSINESS ACCOUNTING
17. Company has the policy of giving 10% Trade discount and 5%
cash discount. Rayan purchased goods having list price Rs. 20,000
and paid full amount through cheque
Sales 20,000
Less: Trade Discount (@ 10%) 2,000
Net Sales 18,000

Less: Cash Discount (@ 5%) 900
Net Cash Payment 17,100
Assets Increases(Bank) 17,100 Dr.

Loss Increases(Discount) 900 Dr.
BUSINESS ACCOUNTING
17 Bank A/C Dr. 17,100

Discount A/C Dr. 900
To Sales A/C 18,000
18. Goods worth Rs 10,000 Sold to Vishal
Assets Increases(Debtors) 10,000 Dr.

18 Vishal A/C Dr. 10,000

To Sales A/C 10,000
BUSINESS ACCOUNTING
19. Vishal paid Rs 9,500 in full settlement of

his dues
Expenses Increases(Discount) 500 Dr.
Assets Decreases(Debtors) 10,000 Cr.
19 Bank A/C Dr. 9,500

To Vishal A/C 10,000
BUSINESS ACCOUNTING
20. On 1st March sold goods to Pranjal for Rs 2,00,000 at 20%
trade discount and 10% cash discount if the payment is
received Within 15 days. She paid half the payment on
March 10th and 30% of remainder on 31st March.
1st March
Sales 1,00,000
TD @ 20% 20,000
Net Sales 80,000
6th March
40,000 40,000
-
4,000 31st March
36,000 12,000 28,000

BUSINESS ACCOUNTING
(1st Mar) Assets Increases (Debtors) 80,000 Dr

Income Increases (Sales) 80,000 Cr
(6th Mar) Assets Increases (Cash) 36,000 Dr
Expenses Increases (Discount) 4,000 Dr
Assets Decreases (Debtors) 40,000 Cr
(10th Mar) Assets Increases (Cash) 12,000 Dr
Income Decreases (Debtors) 12,000 Cr
Date Particular L. Amount Amount

F (Dr.) (Cr.)
1st Anjali A/C Dr. 80,000
March To Sales A/C 80,000
6th Cash A/C Dr. 36,000
March Discount A/C Dr. 4,000
To Anjali 40,000
31st Cash A/C Dr. 12,000
March To Anjali 12,000
BUSINESS ACCOUNTING
Banking Journal Entries

21. Cash deposited into bank for Rs 10,000

Date Particular L.F Amount Amount

(Dr.) (Cr.)
21 Bank A/C Dr. 10,000
To Cash A/C 10,000
BUSINESS ACCOUNTING

22. Cash Withdrawn from bank of Rs 3,000

Assets Decreases(Bank) 3,000 Cr.
(Dr.) (Cr.)
22 Cash A/C Dr. 3,000
To Bank A/C 3,000
BUSINESS ACCOUNTING

23. Chq received from Aishwarya (a Debtors) and deposited
into Bank on the same date of Rs 8,000

Assets Decreases(Aishwarya) 8,000 Cr.
(Dr.) (Cr.)
23 Bank A/C Dr. 8,000
To Aishwarya A/C 8,000
BUSINESS ACCOUNTING

24. Cash withdrawn from bank for personal use of the proprietor
of Rs 4,000
Capital Decreases(Drawing) 4,000 Dr.

(Dr.) (Cr.)
To Bank A/C 4,000
BUSINESS ACCOUNTING

25. Tushar (a debtors) directly deposited Rs 12,000 into our
Bank Account

Assets Decreases(Tushar) 12,000 Cr.
25 Bank A/C Dr 12,000
To Tushar A/C 12,000
BUSINESS ACCOUNTING

26. Chq received from Tushar got dishonored
Assets Increases(Tushar) 12,000 Dr.

(Dr.) (Cr.)
26 Tushar A/C Dr. 12,00
To Bank A/C 0 12,00
0
BUSINESS ACCOUNTING
27. Received cheque of Rs 9,500 from Bhavya in full
settlement of his dues of Rs 10,000

Expenses Increase (Discount) 500 Dr
Assets Decreases(Bhavya) 10,000 Cr.
(Dr.) (Cr.)
27 Bank A/C Dr. 9,500
To Bhavya A/C 10,000
BUSINESS ACCOUNTING
28. Chq received from Bhavya got dishonored
Assets Increases(Bhavya) 10,500 Dr.

Expenses Increase (Discount) 500 Dr
(Dr.) (Cr.)
28 Bhavya A/C Dr. 10,50

To Discount A/C 0 500
To Bank A/C 10,000
BUSINESS ACCOUNTING

29. Issued Chq of Rs 5,000 for Salary
Expense Increases(Salary) 5,000 Dr.

(Dr.) (Cr.)
To Bank A/C 5,000
BUSINESS ACCOUNTING

30. Bank Charges of Rs. 1,000
Expense Increases(Bank Charges) 1,000 Dr.


(Dr.) (Cr.)
30 Bank Charges A/C Dr. 1,000
To Bank A/C 1,000
BUSINESS ACCOUNTING

31. Interest charged by Bank for Rs. 1,500
Expense Increases(Interest) 1,500 Dr.

(Dr.) (Cr.)
31 Interest A/C Dr. 1,500
To Bank A/C 1,500
BUSINESS ACCOUNTING
Bad Debts
When the goods are sold to a customer on
Credit, and if the amount becomes
irrecoverable due to insolvency or any reason
Expense/Losses Increases(Bad Debts) Debit

Assets Decreases(debtors) Credit
BUSINESS ACCOUNTING
Bad Debts
32. Vijay become insolvent & Rs 8,000 is irrecoverable.
Expense Increases(Bad debts) 8,000 Dr.

Assets Decreases(Debtors) 8,000 Cr.
Date Particular L.F Amount Amount (Cr.)
(Dr.)
32 Bad debts A/C Dr. 8,000
To Vijay A/C 8,000
BUSINESS ACCOUNTING
Opening Entry
The first entry in each year’s journal will
be to record the previous year’s closing
balances of all the assets and liabilities.
Debit All Assets Opening Balance
Credit All Liabilities & Capital Balances

BUSINESS ACCOUNTING
Opening Entry
33.Assets: Cash 10,000; Bank Balance 25,000;Stock 45,000;Debtors
22,000 (Neeta 10,000;Geeta 12,000);Land & Building 40,000.
Liabilities: Creditors 18,000(Sunita 10,000; Pamita 8,000; Capital
1,24,000
33 Cash A/C Dr. 10,000
Bank A/C Dr. 25,000
Stock A/C Dr. 45,000
Debtors A/C Dr.
Neeta A/C 10,000
Geeta A/C 12,000
Land And building Dr. 40,000
To Creditors A/C
Sunita A/C 10,000
Pamita A/C 8,000
To Capital A/C 1,24,000
BUSINESS ACCOUNTING
Bad Debts
34. Received Rs 5,000 from Vijay, which were written off
as bad- debts in the Previous Year.

Income Increases(Bad debts recovered) 5,000 Cr.

32 Cash A/C Dr. 5,000
To Bad Debts Recovered A/C 5,000
BUSINESS ACCOUNTING
Outstanding Expenses
Salary A/C Dr.

To Cash A/C
Salary A/C Dr.

To Outstanding Exp. A/C
BUSINESS ACCOUNTING
Outstanding Expenses
35. Salaries due to clerks Rs 10,000 but not yet Paid
Expenses Increases(Cash) 10,000 Dr.

Liabilities Increases(Outstanding exp) 10,000 Cr.

(Dr.) (Cr.)
To Outstanding Salary A/C 10,000
BUSINESS ACCOUNTING
Prepaid Expenses
When Expenses are “Paid but not due” are called
Prepaid expenses
Salary A/C Dr.

To Cash A/C
Prepaid Salary A/C Dr.
To Cash A/C
BUSINESS ACCOUNTING
Prepaid Expenses
36. Out of the Rent Paid this year, Rs 7,000 is related to
next year
Assets Increases(Prepaid Rent) 7,000 Dr.

(Dr.) (Cr.)
36 Prepaid Rent A/C Dr. 7,000
To Cash A/C 7,000
BUSINESS ACCOUNTING
Accrued Income
When income is due but not yet received is called
Accrued Income.
Cash A/C Dr.

To Commission Income A/C
Accrued Commission A/C Dr.

BUSINESS ACCOUNTING
Accrued Income
37. Rs 5,000 earned as commission but received next
year in cash
Assets Increases(Accrued Commission) 5,000 Dr.
Income Increases(Commission income) 5,000 Cr.

(Dr.) (Cr.)
37 Accrued Commission A/C Dr. 5,000
To Commission Income A/C 5,000
BUSINESS ACCOUNTING
Income Received in Advance
When Income has been “received but not yet due” is
called Advance Income
Cash A/C Dr.

Cash A/C Dr.

To Advance Commission A/C
BUSINESS ACCOUNTING
Depreciation
It is permanent and continuing decrease in
the value of an asset
on account of wear and tear and passage of
time
Expenses/Losses Increase(Depreciation) Debit

Assets Decrease (Fixed Assets)
BUSINESS ACCOUNTING
Depreciation
38. Provide 10% depreciation on furniture costing Rs 45,000.
Expenses Increases(Depreciation) 5,000 Dr.

Assets Decreases(Furniture) 5,000 Cr.
Date Particular L. Amount (Dr.) Amount (Cr.)

F
38 Depreciation A/C Dr. 5,000
To Furniture A/C 5,000
BUSINESS ACCOUNTING
Journal Entries
On April 01, 2016 Anees started business with Rs. 100,000 and other transactions for the
month are:
2. Purchase Furniture for Cash Rs. 7,000.
8. Purchase Goods for Cash Rs. 2,000 and for Credit Rs. 1,000 from Khalid Retail Store.
14. Sold Goods to Khan Brothers Rs. 12,000 and Cash Sales Rs. 5,000.
18. Owner withdrew of worth Rs. 2,000 for personal use.
22. Paid Khalid Retail Store Rs. 500.
26. Received Rs. 10,000 from Khan Brothers.
30. Paid Salaries Expense Rs. 2,000
BUSINESS ACCOUNTING
Journal Entries
Prepare general journal entries for the following transactions of a business called Pose for Pics in 2016:
Aug. 1: Hashim Khan, the owner, invested Rs. 57,500 cash and Rs. 32,500 of photography equipment in
the business.
04: Paid Rs. 3,000 cash for an insurance policy covering the next 24 months.
07: Services are performed and clients are billed for Rs. 10,000.
13: Purchased office supplies for Rs. 1,400. Cash paid Rs. 400 and remaining outstanding.
20: Received Rs. 2,000 cash in photography fees earned previously.
24: The client immediately pays Rs. 15,000 for services to be performed at a later date.
29: The business acquires photography equipment. The purchase price is Rs. 100,000, pays Rs.
25,000 cash and signs a note for the balance.

BUSINESS ACCOUNTING
Journal Entries
On March 2017, Farhan Rahim, starts wholesaling business. Following transactions as follows:
1. He started business with capital of Rs. 15,000 and Land worth Rs. 10,000.
8. Bought goods from Bilal and Friends Rs. 1,000 and by cash from XYZ Co. Rs 2,000.
13. Sold goods to Rehman & sons Rs. 1,500 and sale by cash Rs. 5,000.
17. Gave away charity of cash Rs. 50 and merchandising worth Rs. 30.
21. Paid Bilal and Friends cash Rs. 975; discount received Rs. 25.
28. Received cash from Rehman & Sons Rs. 1,450; allowed him discount of Rs. 50.
BUSINESS ACCOUNTING
Journal Entries
Shah Sauood Marine is a boat repair yard. During August 2016, its transactions included the
following:
03. Loan taken from Habib Bank Ltd. of Rs. 25,000. Rs. 20,000 withdrawn for business and
remaining in the bank a/c.
06. Paid rent for the month of August Rs. 4,400 and accrued rent expenses was Rs. 600.
12. At request of Kiwi Insurance, Inc, made repairs on boat of Jon Seaways. Sent bill for Rs. 5,620
for services rendered to Kiwi Insurance Inc. (credit Repair Service Revenue).
18. Made repairs to boat of Dennis Copper and collected in full the charge of Rs. 2,830.
20. Placed Advertisement in The Dawn of Rs. 165, payment to be made within 30 days.
25. Received a check for 5,620 from Kiwi Insurance Inc representing collection of the receivable of
August 12.
30. Sent check to The Dawn in payment of the liability incurred on August 20.
BUSINESS ACCOUNTING
Subsidiary Books
Cash Book – Acash book is a book of prime entry which records all
transactions made by a business in both cash and a bank instrument.
Purchase Book – A purchase book is one of the special purpose books

where all the credit purchases are recorded by a business.
Sales Book – A sales book is one of the subsidiary books where all the
credit sales are recorded by a business.
Purchase Returns Book – Also known as returns outward book, a

purchase returns book is prepared to record goods returned by a
business to its suppliers.
BUSINESS ACCOUNTING
Subsidiary Books
Sales Return Book – Also known as returns inward book, a sales return
book is prepared to record goods returned to a business by the
customers.
Journal Proper – It is a book in which all miscellaneous transactions

which are not recorded in any other subsidiary book is called a journal
proper.
Bills Receivable Book – is a book that records all bills receivable to

a business, the total of bills receivable book is posted on the debit side
of the B/R account.
Bills Payable Book – is one of the subsidiary books that records all
bills payable by a business, the total of bills payable book is posted on
the credit side of the B/P account.
BUSINESS ACCOUNTING
Ledger
Ledger is a book which contains various accounts. In simple words, ledger is a set of
accounts. It includes all accounts of the business enterprise whether Real, Nominal or
Personal.
Ledger is the book of secondary entry. An account in its simplest form is a T-shape. It
should be noted that journal contains a chronological record while Ledger contains a
classified record of all economic activities.
Post following entries to Cash Standard Ledger

Account and Cash Running Balance Ledger Account:
BUSINESS ACCOUNTING
Ledger
BUSINESS ACCOUNTING
Cash Standard
General Ledger
Account:
Cash Running
Balance Ledger
Account:
BUSINESS ACCOUNTING
Bank Reconciliation Statement
A Bank Reconciliation Statement can be defined as a statement prepared at periodical
intervals With a view to indicate the items which cause disagreement between the balances
as per the bank Columns of the cash book and the pass book on any given date.
Need and Importance
1. A bank reconciliation statement, the customer becomes sure of the correctness of the
bank balance shown by the Cash Book. It helps him in making the further transactions
with the bank.
2. A reconciliation statement. Locates the errors or omissions that may have been
committed either on the part of the customer or the bank. The errors so detected can be
rectified accordingly.
3. A reconciliation statement facilitates the preparation of a revised Cash Book.
4. Periodic preparation of this statement reduces the chances of embezzlement by the staff
of the firm or even that of the bank.
5. A reconciliation statement helps in revealing the unnecessary delay in the collection of
cheques by the bank.
6. It also helps in keeping a track of cheque which have been sent to the bank for collection.
BUSINESS ACCOUNTING
Debit Balance of Cash Book is given On 30th June, 2017, the bank Column of Anil’s Cash
Book showed a debit balance of Rs.8,250. On examination of Cash Book and bank
statement you find that:
1. Out of total cheques amounting to Rs.8,000 issued, cheques amounting to Rs.5,800 have
been presented for payment up to 30thJune, 2017.
2. Out of total cheques amounting to Rs.6,000 sent to bank for collection, cheques of
Rs.4,1 00 were credited in pass book up to 30thjune, 2017.
3. On 28th June a customer deposited Rs.3,500 direct ¡n the Bank account but it was
entered only in the Pass Book.
4. Debit side of Anil’s Cash Book (Bank Column)has been overcast by Rs. 100.
5. No entry has been made in the Cash Book for the Rent of Rs. 800paid by bankers
according to Anil’s standing instructions.
6. The Pass Book showed a credit of Rs.320 for interest and a debit ofRs.40 for bank
charges, but these have not been entered in the Cash Book. Prepare a Bank
Reconciliation Statement as on 30th June,2017.
BUSINESS ACCOUNTING

(Overdraft Balance of Cash Book is given)
On December 31, 2017, the cash of book of Mittal Bros. Showed an overdraft of Rs.6,920.
From the following particulars make out a Bank Reconciliation Statement and as certain
the balance as per pass book.
1. Debited by bank for Rs.200 on account of interest on overdraft andRs.50 on account of
charges for collection bills.
2. Cheques drawn but not cashed before December 31, 2017 forRs.4,000.
3. The bank has collected interest and has credited Rs.600 in Pass Book.
4. A bill receivable for Rs.700 previously discounted with the bank had been dishonored
and debited in the pass book.
5. Cheque paid into bank but not collected and credited before December 31, 2017
amount to Rs.6,000.
BUSINESS ACCOUNTING

(Overdraft Balance of Pass Book is given)From the following information supplied by Sanjay,
Prepare his Bank Reconciliation statement as on December 31, 2008.
1. Bank Overdraft as per pass book Rs.16,500

2. Cheques issued but not presented for payment Rs.8,75O
3. Cheques deposited with the Bank but not collected Rs.10,500
4. Cheques recorded in the cash book but sent to the bank for collection Rs.2,000
5. Payments received from customers directly by the bank Rs 3,500
6. Bank charges debited in the pass book Rs 200
7. Premium on life policy of Sanjay paid by the bank on stand in advice 1,980.
8. A bill for Rs.3,000 (discounted with the bank in Nov.) dishonored on December 31, 2008
and nothing charges paid by the bank Rs.100
BUSINESS ACCOUNTING

(Balance of Pass Book is given)
Prepare a Bank Reconciliation Statement as on 30th September, 2003
from the following particulars:
1. Bank balance as per the Pass Book Rs.10000
2. Cheque deposited into the bank, but no entry was passed in the Cash Book Rs.500
3. Cheque received and entered in the Cash Book but not sent to bank Rs.1,200
4. Credit side of the Cash Book bank column cast short Rs.200
5. Insurance Premium paid directly by the Bank under the standing advice Rs. 600
6. Bank charges entered twice in the Cash Book Rs.20
7. Cheque issued, but not presented to the bank for payment Rs.500
8. Cheque received entered twice in the Cash Book Rs.1,000
9. Bill discounted dishonored not recorded in the Cash Book Rs.5,000
BUSINESS ACCOUNTING
Revenue Profit Gain
Revenue – Expenditure = Profit/Loss

BUSINESS ACCOUNTING
Revenue Expenditure
1.Short term benefits
2.It Maintain the value of Fixed assets
3.It maintain the level of revenue
4.It usually of small amount
Capital Expenditure
1.Long term benefits
2.It Increase the value of Fixed assets
3.It increase the level of revenue
4.It usually of large amount

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BUSINESS ACCOUNTING

Accounting is the art of

1. Accounting is an Art as well as Science

2. Recording of Financial Transaction only

3. Recording in terms of money

6. Interpretation of the results

1. To Keep systematic record of business transaction

2. To Calculate profit or loss

3. To Know the exact reasons leading to net profit or net loss

4. To ascertain the reasons leading to net profit or net loss

5. To ascertain the progress from year to year

6. To Prevent and detect errors & frauds

7. To provide info to various parties

1. Maintaining complete & systematic Records

2. Communicating the Financial results to Various Parties

3. Protecting the Assets of Business

4. Providing Assistance to Management

6. Compliance of legal needs

Accounting Concepts / Principles

1. Business Entity Concept 6. Full Disclosure Principle

1. Business Entity Principle

The business is regarded as being separate from the owner or owners.

No monetary Value but most

Matching concept is an accounting practice whereby

Closing Stock: Lower of = Cost or Realisable value

Provision for Doubtful debts

6.Full Disclosure Principle

8.Historical Cost Principle

Every Year expenses Rent 10,000

Purchase Value – Depreciation = Book Value

Method of charging depreciation

10.Going Concern Concept

1.Non Current Assets

Non Current Assets

Tangible Assets Intangible Assets

Current 2. Bills Payable

4. Any other short term loan

There are always Two aspects of any financial transaction

Double Entry System

American Approach English Approach

A.Assets Increases ( ) Debit (Dr.)

A.Debit (Dr.) What comes “Receiver” &

Liabilities/Capital Decreases ( ) Debit (Dr.)

2 Cash A/C Dr. 1,00,000

Assets Increases(Scooter) 25,000 Dr.

2 Scooter A/C Dr. 25,000

Liabilities Decreases(Creditors) 15,000 Dr.

Date Particular L.F Amount (Dr.) Amount (Cr.)

2 Rahim A/C Dr. 15,000

A.Debit (Dr.) What comes “Expenses” &

All Expense Increases ( ) Debit (Dr.)

Expenses Increases(Salary) 5,000 Dr.

5 Salary A/C Dr. 5,000

• Started business with capital 75,000

• Bought furniture 10,000

• Bought goods for cash 20,000

• Bought goods from Ram on Credit 10,000

• Sold goods for cash 15,000

• Sold goods to Shyam on credit 5,000