INTRODUCTION TO ACCOUNTANCY

PRESENTED BY:
AVNISH KUMAR CHAUHAN
10/PMB/021
MBA - ‘A’
 WHAT IS ACCOUNTING?

• ACCOUNTING IS A BUSINESS LANGUAGE

• ACCOUNTING IS A PROCESS
• ACCOUNTING IS A SCIENCE
• ACCOUNTING IS AN ART
• ACCOUNTING IS A INFORMATION SYSTEM
MEANING OF ACOUNTING
Accountancy is science of classifying the recorded business
information, summarizing it and then analyzing and
interpreting this information and lastly communicating the
results to the persons who need this information. Accountancy
is the language used to communicate with the outsiders.
ESSENTIAL FEATURES OF ACCOUNTING:
1. Business Information
2. Only those transactions measurable in terms of money are recorded.
3. Recording the transactions.
4. Art of Classifying Business Transactions
5. Art of summarizing the recorded information
6. Interpreting the Recorded Information
7. Communicating the Results
 TYPES OF ACCOUNTS
• PERSONAL : Accounts in the name of Persons (Ravi,
Mohan etc.) or Artificial Persons (Name of a Company or
Bank).

• REAL : Accounts of Assets (Machine, Furniture, Land etc.)

and Liabilities (Capital, Bills Payable, Loan etc.).

• NOMINAL : Accounts of Expenses (Salaries, Rent,

postage etc.) and Incomes (Sales, Interest, Dividends etc.)
 TYPES OF ACCOUNTS
• PERSONAL :
- Natural Personal A/c
- Artificial Personal A/c
- Representative Personal A/c

• REAL :
- Tangible Real A/c
- Intangible Real A/c

• NOMINAL :
- Accounts of Expenses or Losses
- Accounts of Incomes or Profits
 GOLDEN RULES OF ACCOUNTING

Debit the Receiver and Credit the Giver

( Applicable on PERSONAL ACCOUNT )

Debit What Comes in and Credit What Goes out

( Applicable on REAL ACCOUNT )

Debit all Expenses & Losses and Credit all Incomes & Gains.
(Applicable on NOMINAL ACCOUNT )
EXAMPLES:
Transactions Accounts Nature of Account Change Debit/Credit
Involved
Purchase Machine Real (Asset) Increase Debit (Dr.)
Machine For Cash Cash Real (Asset) Decrease Credit (Cr.)

Interest received Cash Real (Asset) Increase Debit (Dr.)

Interest Nominal (Revenue) Increase Credit (Cr.)
Deposited Cash Bank Real (Asset) Increase Debit (Dr.)
Into Bank Cash Real (Asset) Decrease Credit (Cr.)

Salary Paid Salary Nominal (Expense) Increase Debit (Dr.)

Cash Real (Asset) Decrease Credit (Cr.)

Paid to Suresh Suresh Personal (Liability) Decrease Debit (Dr.)

Cash Real (Asset) Decrease Credit (Cr.)
 JOURNAL
It records all the transactions of a business into the order in
which they occur. It is a book containing chronological record
of all the transactions.
1. Started business with cash Rs. 850000 on 01/04/10.

DATE PARTICULARS L.F AMOUNT (Dr) AMOUNT (Cr)

CASH A/c… … … …. …. Dr 850000
01/04/10 TO CAPITAL A/c 850000

2. Purchased goods for cash Rs. 50000 on 02/04/10.

PURCHASE A/c…….. … .Dr 50000

02/04/10 TO CASH A/c 50000
3. Cash paid to Ram Rs. 5000. He allowed discount Rs. 100 on 03/04/10.

RAM A/c … … … Dr. 5000

TO DISCOUNT A/c 100
03/04/10
TO CASH A/c 4900

4. Cash received from Ram Rs. 6000. Allowed him discount Rs. 200 on 04/04/10.

CASH A/c … … … Dr. 5800

DISCOUNT A/c .. .. .. .. Dr. 200
04/04/10
TO RAM A/c 6000

5. Cash received from Ram Rs. 6000. Allowed him discount Rs. 200 on 04/04/10.
Cash A/c … … … … Dr. 5000
5/04/10 To Bank A/c 5000
 LEDGER
Contains all the asset, liability, and stockholders’ equity,
Expenses and Incomes accounts

POSTING
Transferring information from the journals to the ledger
accounts
 POSTING ENTRIES
DATE PARTICULARS J.F AMT DATE PARTICULARS J.F AMT
2010 2010
April 1 To Balance b/d 850000 April 2 By Purchases 50000
April 3 To Ram 5800 April 4 By Ram 4900
April 5 To Bank 5000 April 31 By Balance c/d 805900

860800 860800

May 1 To Balance b/d 805900

 TRIAL BALANCE OF MR. GULSHAN MEHTA
PARTICULARS AMOUNT PARTICULARS AMOUNT
DEBIT BALANCES: CREDIT BALANCES:
Opening Stock 6000 Capital 60000
Drawings 3000 Creditors
Debtors 16100
40000 Sales
Interest On Loan 180000
300 6% Loan
Motor Trucks 40000 10000
Provision for Doubtful
Cash 15000 Debts
Buildings 80000 Purchases Return 800
Bad Debts 600 Rent Received 3000
Carriage Inward 4000 Discounts 4800
Carriage Outward 1500 Commission 1200
Purchases 70000 3000
Sales Return 6000
Salaries 8000
Insurance 4500

278900 278900
ADJUSTMENTS :
1. 6% Loan was taken on July 1, 2004.
2. Depreciate Buildings at 5% on Motor Trucks at 10%.
3. Salaries Rs. 500 are outstanding.
4. Closing stock was Rs. 4000
5. Stock worth Rs. 500 was stolen full claim was received by Inc. company.
6. Prepaid Insurance is Rs. 500.
7. Create Provision for Doubtful debts at the rate of 6% on Debtors.
8. There are further Bad Debts of rs. 800.
9. Goods drawn for private use Rs. 1500.
10. Goods costing Rs. 600 were sent to a customer for approval for Rs. 800.
They have been recorded as Sale and they are likely to be returned.
11. Provide Manager’s Commission at 10% after charging such
commission
 BOOKS OF THE FIRM
TRADING ACCOUNT FOR THE YEAR ENDED MARCH 31, 2005
Dr. Cr.
PARTICULARS AMOUNT PARTICULARS AMOUNT

To Opening Stock 6000 By Sales 180000

To Purchases 70000 Less: Sales on
Less: Return 3000 approval 800
Less: Drawings 1500 Less: Returns 6000 173200
Less: Lost by theft 500 65000
By Closing Stock 4000
To Carriage Inwards 4000 Add: Cost of good
To Gross Profit c/d 102800 sold on
approval 600 4600

177800 177800
 PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2005
PARTICULARS AMOUNT PARTICULARS AMOUNT

To Bad Debts By Gross Profit 102800

600 By Rent Received 4800
Add: New Bad Debts 800 By Discount 1200
Add: Provision (new) 2304 2904 By Commission 3000
Less: Provision (old) 800

To Interest on Loan 300 450

Add: Outstanding 150 1500
To Carriage Outward

To Salaries 8000 8500

Add: Outstanding 500

To Insurance 4500 4000

Less: Prepaid 500

To Depreciation
Building 8000
4000
Motor Truck
4000 carried forward …….
brought forward……

To Profit Before 86446

Commission

111800 111800
To Manager’s Commission
By Profit Before
[86446 * 10/110] 7859 Commission 86446

To Net Profit
78587

86446 86446
 BALANCE SHEET AS ON MARCH 31, 2005
LIABILITIES AMOUNT ASSETS AMOUNT

Capital 60000 Building 80000

Add: Net Profit 78587 Less: Depreciation 4000 76000
Less: Drawings 3000
Less: Goods Used 1500 134087 Motor Trucks 40000
6% Loan 10000 Less: Depreciation 4000 36000
Creditors 16100 Closing Stock 4000
Manager’s Commission 7859 Add: Stock on
Salaries Outstanding 500 approval 600 4600
Interest On Loan
Outstanding 150 Debtors 40000
Less: New Debts 800
Less: Sale on
Approval 800
Less: Provision 2304 36096
Prepaid Insurance 500
Insurance Co. 500
Cash 15000

168696 168696