BASIS OF ACCOUNTING

1.Cash basis
2.Accrual Basis
FINANCIAL ITEMS

1. Assets : The resources of the business(Fixed Assets, Current

Assets, Liquid assets, Fictitious assets) (Dr Balance)
2. Liability : The claims against the assets of the business
(Cr balance )
3. Income : Receipts
(Cr balance )
4. Expenditure : payments
(Dr Balance)

GOLDEN RULES OF ACCOUNTING

TYPES OF ACCOUNTS

Personal a/c

Natural Persons a/c

Artificial personal a/c Representative Personal a/c

Dr - Receiver

Cr - Giver

Impersonal a/c

Real a/c

Dr What comes in

Cr What goes out

Nominal a/c

Dr expenses & Losses

Cr Incomes & gains

USERS OF ACCOUNTING INFORMATION

Internal

Users

External users

Management (BOD, CEO, chairman)

Shareholders
Employees

Investors
Govt.
Tax authorities
Debtors, creditors
Regulatory authorities
Customers

Are all shareholders stakeholders ..yes

But are all stakeholders shareholdersNo

BRANCHES

Financial Accounting

OF ACCOUNTING

Costing Accounting System

Journal
1. SALES
a.Cash Sales
b.Credit Sales
2. PURCHASE
a. Cash purchase
b.Credit purchase
3.Interest on capital
4.Interest on loan
5.Drawings & Interest on drawings
6.Cash deposited/withdrawn from the bank
7.Capital contribution
8.Bad debts
9.Discount allowed / discount received /trade discount & cash discount
10. Depreciation
11.Debtor & creditor
EXAMPLES :
1. Paid Salary worth Rs 5000.
Salary a/c . Dr 5000
To Cash
5000
(being the payment of salary for the month of June13)

Management Accounting

2. Paid Rent Rs 2000

Rent a/c ..Dr
2000
To Cash/Bank a/c 2000
(being the payment of rent for the month of..)
3.

Harish Commenced business with cash Rs 50,000

Cash a/c ..Dr
To harishs capital a/c

4.

50,000
50,000

CASH SALES :
Pritam sold goods to Rajnish for Rs 7000 cash
Cash a/c .Dr
To Sales a/c
( Being the goods sold for cash)

5.

CREDIT SALES :
Sold goods to Rakesh worth Rs 12,000 on credit
Rakesh a/c..Dr
To sales a/c
(being goods sold for credit)

6. CASH PURCHASE
Purchased goods worth Rs 8000 for cash from B.K traders
Purchase a/c..Dr
8000
To cash a/c
8000
(being goods purchased for cash)
7. Purchased goods worth Rs 6000 from B.K traders
Purchase a/c Dr
12,000
To B.K traders
12000
(Being goods purchased on credit of Rs 12000)
8. Charged Depreciation of Rs 300 to machine
Depreciation a/cDr 4000
To Machine
4000
(Being depreciation charged on machine )
9. Paid Interest on capital of Rs 500
Interest on capital a/c.Dr
500
To cash
500
(being interest on capital charged )
10. Received interest on drawings of Rs 800 from vikram
Cash a/cDr
800
To interest on drawings a/c
800
(being the interest on drawings received )
11. An amount of Rs 10,000 was deposited in the bank
Bank a/c.Dr 10,000
To Cash
10,000
(Being amount deposited in the bank)
12. Sunil withdrew Rs 15,000 from the bank
Cash a/c..Dr 5000

To Bank .. 5000
(Being the amount withdrawn form the bank )
DISCOUNT ALLOWED /DISCOUNT RECEIVED
13.Sold goods worth Rs 1000 to T.K traders for Rs 800.Discout allowed by the firm.
Cash a/c.Dr 800
Discount allowed a/c.Dr 200
To T.K traders 1000
(Being goods sold and discount received)
14.Bought from S& Co. goods worth Rs 50,000 @10% trade discount and 2% cash discount terms and paid half the amount in cash.
Purchase a/c Dr 45,000
To S& Co..
22,500
To Cash
22,050
To discount received . 450
(Being the goods purchased at a discount )

ACCOUNTING

PRINCIPLES

ACCOUNTING CONCEPTS
1.Business Entity concept
2.Money measurement concept
3.Going concern concept
4.Cost concept
5.Dual Aspect
6.Accounting period
7.matching concept
8.Realisation concept
9.Objective Evidence
10.Accrual concept

ACCOUNTING CONVENTIONS
1.Consistency
2.Full disclosure
3.Conservatism
4. Materiality

GAAP(Generally Accepted Accounting Principles) : are the commonly applied rules, procedures and conventions.
Accounting Principles : It represents the best possible guidelines based on reasons and observations and have been
developed by accountants to enhance the usefulness of accounting data.
Accounting Concepts : These are Postulates i.e the basic assumptions or conditions upon which the accounting system is
based.
Accounting Convention : Denotes circumstances or traditions which guide the accountants while preparing the accounting
statements. It refers to a statement or rule of practice