ACCOUNTING PROCESS

Sreejith S FIMS
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Sreejith S

FIMS August 2008

January 24, 2012

Introduction
 Recording in Journal  Ledger posting & balancing  Trial balance preparation  Final Accounts

Sreejith S

FIMS August 2008

January 24, 2012

Fundamental Accounting Principle (equation)

Assets = Liabilities + Capital

Sreejith S

FIMS August 2008

January 24, 2012

Fundamental Accounting Principle (equation)

Assets = Liabilities + Capital

Sreejith S

FIMS August 2008

January 24, 2012

Fundamental Accounting Principle (equation)

Assets = Liabilities + Capital

Sreejith S

FIMS August 2008

January 24, 2012

Double Entry System

 Every transactions have two aspects  Benefits & Sacrifice  Debit & Credit Accounting

Sreejith S

FIMS August 2008

January 24, 2012

Fundamental Accounting Principle (equation)

Assets = Liabilities + Capital
Increase in Assets and Increase in Liability/Capital Increase in one Asset and Decrease in other Asset Decrease in Assets And Decrease in Liability Decrease in One Liability and Increase in other Liability
Sreejith S FIMS August 2008 January 24, 2012

Fundamental Accounting Principle (equation)

Assets

Liabilities + Capital

Increase Credit
Sreejith S

Decrease - Debit 24, 2012 FIMS August 2008 January

Expenses Decrease in Benefits During the accounting Period in the form of Outflow Expenses - Debit

Income Increase in Economic benefit during the accounting period in the form of in flows Income - Credit

Sreejith S

FIMS August 2008

January 24, 2012

Debit Credit Rule Credit represents the sources of financing Debit represents the uses of financing

Sreejith S

FIMS August 2008

January 24, 2012

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Asset
Debit Credit

Liabilities/Capital
Debit Decrease Credit Increase

Increase

Decrease

Debit

Credit

Expenses/ Incomes/ losses Gains

Sreejith S

FIMS August 2008

January 24, 2012

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Journal
 All business transactions are firstly recorded  Chronological order  Recording transactions in a Journal is Known as

Journalisation  Double Entry System  Each Transactions in a journal known as Journal Entry

Sreejith S

FIMS August 2008

January 24, 2012

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June 1 : Commenced capital for the business Rs 1200000

Journal
Date June 1 Particulars Cash a/c Dr LF Debit Amount 1200000 1200000 Credit Amount

To Capital a/c (being business started with Rs 1200000)

Sreejith S

FIMS August 2008

January 24, 2012

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 Bank Loan Rs 800000  Purchased Land and Building Rs 600000  Transportation Exp Rs 5000  Purchased machinery Rs 400000 on Mortgage  Raw materials Purchased Rs 80000  Advertising Exp 23000  Stationary 2000  Commission received Rs 5000  Full & Final Settlement of Mortgage Rs 480000

Sreejith S

FIMS August 2008

January 24, 2012

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Jan 08

1 2 3 4 5 6 7 8 9 10 11 12 15

Make Journal Entries For the Transaction transactions Commenced Business 20000
Purchased goods on credit from Syam Purchased goods for cash Paid Gopal an advance for goods Received advance from Murhy for Goods Purchased furniture Paid Wages Received Commission Goods Returned to syam Goods Sold to Kamal Paid for postage and telegram Goods Returned by Kamal Paid for stationary 15000 500 1000 1500 1000 250 300 100 5000 100 250 100
Sreejith S FIMS August 2008 January 24, 2012

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Paid into Bank Goods Sold for cash Paid Salaries Paid Rent Drawings

250 375 350 250 500

Bought goods for cash 500

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General Ledger

 Principle book of accounts  Classifying all the items in Journal  Grouping of all accounts  It s a summary device  T Account  It gives the cumulative effect

Sreejith S

FIMS August 2008

January 24, 2012

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Posting
 Process of transferring

- Business transactions - From books of original entry - To the respective accounts in ledger

It aims to make a classified and summarised business transactions in appropriate accounts

Sreejith S FIMS August 2008 January 24, 2012

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Rules - Posting
 Separate accounts should opened  All the pertaining transactions should posted in the

same account
 Dual aspects should be posted on the respective

side of accounts

Sreejith S

FIMS August 2008

January 24, 2012

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Date June 1

Particulars

Journal

LF

Debit 1200000

Credit 1200000

Cash a/c Dr To Capital a/c (being business started with Rs 1200000)

Ledger Dr
Date June 1 Particulars To Capital JF

Cash a/c
Amount 1200000 Date Particulars JF

Cr
Amount

Dr
Date Particulars JF

Capital A/c Amount

Cr
Date June 1
Sreejith S

Particulars By Cash
January 24, 2012

JF

Amount 1200000
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FIMS August 2008

Balancing of an Account
Ascertaining the net balance Considering the two balances Comparing the total of both sides Balance is put on the side which is smaller Balance is carried forwarded. Balance is termed as debit/credit balance
Sreejith S FIMS August 2008 January 24, 2012

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Cash a/c
Date June 1 22 Particulars To capital a/c To bank a/c Amount 200000 100000 Date June 12 17 27 Particulars By bank a/c By postage a/c By Stationary a/c Amount 20000 200 800

Cash a/c
Date June 1 22 Particulars To capital a/c To bank a/c Amount 200000 100000 Date June 12 17 27 31 300000 July 1 To balance b/d 279000
Sreejith S FIMS August 2008 January 24, 2012

Particulars By bank a/c By postage a/c By Stationary a/c By balance c/d

Amount 20000 200 800 279000 300000

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Trial balance
 Listing of all accounts & respective balance  A statement Not an account  Prepared on a particular date  Shows the arithmetical accuracy

Debit/credit balance is extracted from ledger accounts on a particular Date

Sreejith S

FIMS August 2008

January 24, 2012

22

Performa of Trial Balance

Trial Balance as on March
Particulars Cash Capital Stock Purchase Sales Salary Loans and advances Debit (Rs) Xxxx Xxxx Xxxx Xxxxx Xxxx Xxxx Xxxx Credit(Rs)

Total

Xxxx

Xxxxx

Sreejith S

FIMS August 2008

January 24, 2012

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Sreejith S

FIMS August 2008

January 24, 2012

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Jan 08 1 2 3 4 5 6 7 8 9 10 11 12 13 18 20

Transaction Commenced Business Paid into Bank Furniture (goods) Purchased furniture (office purpose) Sold to j Mitra Bought goods Return to Ratan Return fro j mitra Taxi fare 1500000 800000 500000 200000 100000 200000 180000 5000 20000 1000 Transaction 21 Received a cheque from J Mitra 50000 22 Loan to Naren 15000 23 Received Interest 1000

Purchased furniture(goods) from Ratan

24 Rent 2000

Sold to Kabiraj goods costing Rs 50000 a @ 10% Discount Received commission from J Das Paid to Ratan Send to Bank 1500 100000 20000

Received a cheque of Rs 42000 from Kabiraj for full and final settlement
Sreejith S FIMS August 2008 January 24, 2012

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