Unit- 1

Introduction to M.A.C
Process of study:
Purpose of Study of the Subject

What is Business? General Background and Purpose. How to find out the Results of the Business? / Need for accounting. Origin of Accounting Meaning and Definitions / Distinction of Book-keeping, Accountancy and Accounting. Accounting Principles / Rules Accounting Concepts and Accounting Conventions. Methods of Accounting i.e. Double entry system and single entry system.- Rules of Debit and Credit under English System and American System. Systems of Accounting- Cash system, Mercantile and mixed system. Basic terms used in Accounting. Maintenance of Books of Accounts, posting to subsidiary books. Preparation of Trial balance. Preparation of Final Accounts i.e., Profit & loss A/c, Balance Sheet.

Purpose of Study of MAC

As you have chosen a Professional course and going to be a prospective manager / already you might be owning a business, how to increase/improve the profits of the business/ maximize the wealth of the business/shareholders. by applying management principles and by understanding and following accountancy rules, whether its worth spending the money and in return how the business will be benefited by spending that much money from the business? Even a lay man thinks twice, before spending a rupee.

Purpose of Study of MAC

When such is the situation, being a professional manager/s, you should always be alert and extra careful when it comes for money aspect.

What is Business?
The process of buying and selling goods/services from one person to another, with the objective of earning profit is called as Business. This process is called as Trading activity / Trading. Another meaning of Business, it also includes Manufacturing / production of articles, products, goods with the aim of earning profit is called as Business. This process is called as manufacturing activity. Of late, the service sectors like Banking, Insurance, Transportation, etc., have also been brought under the purview of Business. In every type of business activity, the profit element is included, whether it is trading, mfg, or service, etc., but the level of profit will differ from person to person and from business to business.
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Purpose of doing the Business

The Business is carried on for achieving some goals. One of them being important one is to earn Profit. The next goal may be to serve the society, etc. There are various forms of conducting a Business. (1) If, the business is conducted/ maintained/ entirely managed by a Single Person, it is called as Sole Proprietorship / Proprietorship concern. (2) If, the business is conducted/ maintained/ managed by minimum two persons, it is called as Partnership Firm. In this case, there must be minimum 2 persons, maximum 20 in case of general business and maximum 10 in case of Banking Business.
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 (3) The third category of doing the business is by a Company, which is to be registered under The Companies Act, 1956. If, the business is conducted by min 2 persons and maximum unlimited people, it is called as Public Ltd., Co., or its also called as Ltd., Co.,. If, the business is conducted by min 2 persons and maximum 50 people, it is called as Pvt., Ltd., Co., There are other various form of Business Organizations viz, Co-operative Societies, H.U.F., etc., In gist, the main objective / purpose of any form of business organization is to earn profit.

How to find out the Results of the Business?

Since, the business is carried on for a longer duration by the businessman; he ought to know the results of the business. As human memory is poor and it fades in due course of time, except in case of a few personalities like Mrs. Shakuntala Devi, the famous mathematician, etc., In order to know the results of the business, the duration of the business is restricted / cut off into 12 months or say 1 year, the Ministry of Finance ,Govt., of India, has fixed the period of 12 months, starting from 01st April of every year to 31st March of succeeding year, which is called as Financial Year, which is followed by most of the business people.
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 The Govt., of India, has also given some concession to the business community in regarding the maintenance of business records. It has given the freedom / liberty to the businessmen to follow their own principles according to their customs and practice in maintaining the records of the business. Eg. In case of some business community, they maintain their Books of Accounts from Amavasya Diwali i.e. blue moon day of previous year to the preceeding day of Amavasya i.e. blue moon day, in the next year. In case of M.N.C.s operating in India, they follow the Calendar Year i.e. Jan Dec. In total, whatever the accounting period, the businessmen has to maintain the Books of Accounts/follow the year, they have to produce the financial records to the statutory authorities for a total period of 365 days or 12 months or 1 year, i.e. from 01st April to 31st March. Since, it is very difficult to remember many transactions that are taking place in the business in a day and over a period of time, it is suggested / advised to put it in writing.
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What is Profit?
Profit is the extra money included between the cost price and the selling price. Profit is the reward for the businessman, who has undertaken the risks of mobilizing capital, resources and conducting the business. All businessmen anticipate profit at the end of the financial year. Sometimes, the business may not reap the profit, it may incur loss, which the businessmen have to bear. The loss may be due to reasons best known for the owner of it may be beyond his control.
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Need for Accounting / Scope of accounting

Accounting is the language of business to communicate the business results to various groups of persons interested in the business.
(1) To know the Results of the Business i.e. Profit or Loss, whether a trading business, manufacturing activity & / service activity. (2) In case of most of the human beings, Poor Memory power. (3) Continuous business, Time Period-every 1 year.
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 (4) To Indicate Earning capacity and Financial Position of the business unit, which will help the owners and various other parties.
(5) To meet the Statutory formalities i.e. Govt., rules and regulations. To file the details of the business to Income Tax Authorities and others. (6) To assist the management in decision Making, which the accounting aspects / book keeping will help to give the required information. (7) To depict / give true position of the business as a whole.
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Division of Accountancy
The study of this subject i.e. M.A.C., is a combination of 3 partsAccounts, costing and management will help you to manage the business effectively and control the unnecessary expenses in the business. Since the subject Accountancy deals with financial figures, it is called as Financial Accounting. Financial Accountancy is the main root on which the other accountancy branches/twigs like Cost Accountancy, Management Accountancy, etc., have been evolved. (1) Financial Accounting transactions related to business in terms of financial figures i.e. money. A Post mortem study. (2) Cost Accountancy Transactions dealing with cost control techniques in the business i.e. either trading / manufacturing/ service sector by applying management principles and by following accountancy rules. A Biopsy. (3) Management Accounting deals with decision making based on financial a/cs and cost a/cs. Estimations / Projections for future in terms of planning, production, marketing, budgeting, etc.,.
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Origin of Accounting The process of Accounting was in existence in India, even during the times of Chandra Gupta Maurya. His finance minister Kautilya, who has written a famous book called Arthashastra, the process of accounting and auditing. Similarly, Luca Paicoli, an Italian in 15th Century is considered to be the father of accounting. He laid the principles of Double Entry System in 1494. Likewise, its only of late, that the study of accountancy has been taken up very seriously.
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Meaning and Definition

Acc. to American Institute of Certified Public Accountants (AICPA), Accounting is the art of recording, classifying & summarising in a significant manner and in terms of money, transactions and events which are in part/at least, of financial character and interpreting the results thereof. Acc. to American Accounting Association (AAA), Accounting is the process of identifying, measuring and communicating the economic information o permit informed judgements and decisions by the users of the information. Accountancy: Accountancy is concerned with the application of principles to be followed while recording the business transactions.

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 Book-keeping: The process / art of recording

the business transactions in an orderly manner/ in a set of Books of Accounts is called as Book keeping/ Accounting, which is done by either the businessman himself or by his clerk. It is purely clerical in nature. Accounting: It is the science of recording & classifying the business transactions, events of financial character, analysis, interpretation & summarising of these transactions. Communicating the results of the business transactions for an effective decisionmaking.
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Meaning and Definition

Accountancy: It relates to the formulation
of rules & principles while recording the business transactions. It is concerned with the application of principles to be followed in the recording of business transaction.

Accounts: Accounts are the classified & summarised details of the various business transactions.
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Session 2
Accounting Principles / Rules

Accounting Principles/ Rules:

It is the rules adopted in accounting as a guide to action. It can be divided into 2 aspects: I) Accounting Concepts and II) Accounting Conventions. I) Accounting Concepts: They are the general assumptions on which the basic process of accounting is based. The following are the important concepts:
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Accounting Concepts
1) Money Measurement concept 2) Business Entity concept 3)Going Concern concept 4) Cost concept 5) Dual concept / Equation concept 6) Accounting Period concept 7) Matching concept 8) Objective / Evidence concept 9) Realisation concept 10) Accrual concept
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Session 3 II) Accounting Conventions

It refers to the traditions, customs or practices followed by the accountants as a guide in the preparation of financial statements. These are required to be adopted to make the said statements more clear and meaningful. The important conventions that are usually adopted are as follows: Convention of materiality Convention of conservation Convention of Consistency
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Types of Expenditure & Income

1) Capital Expenditure: If the amount of funds is paid for acquiring the infrastructural facilities required for conducting the business, whose benefit is spread over more than one year and which affects the profitability statement except in case of depreciation is called as Capital expenditure. Eg: Purchase of Fixed Assets, like land, building, plant & machinery, etc., 2) Revenue Expenses: If the amount of funds is paid during a certain period with the intention of receiving the benefits / Utility within the same year, it is called as Revenue Expenditure. Eg : Amount paid towards salary, rent, Creditors, etc., 3) Capital Income: An income which is received rarely and is not in the course of regular business is called as Capital Income. Eg: Amount received on sale of Fixed Assets. 4) Revenue Income: An income which is received frequently / regularly and is in the course of regular business is called as Revenue Income . Eg: Receipts from Sales, Debtors, etc.,
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5) Deferred Revenue Expenditure(D.R.E.): These are the expenses which are spent during the initial stage of the business or expense incurred during formation of the company. Eg: Huge advertisement expenses, R & D Expenses, Preliminary expenses. The D.R.E.is not transferred to profitability statement once for all. Every year, certain amount OR certain percentage of this expense is transferred to P & L A/c till it is written off completely or it becomes nil balance. This is done so, because the benefits of this expense is reaped by the business unit, after the business comes into existence. The uncharged balance amount in this a/c. will be shown as Miscellaneous Expenditure ( to the extent not written off) the Assets side of the Balance Sheet.

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Sessions 4 & 5 Basic Terms used in Accounting/ Accountancy

1)

2)
3)

4) 5) 6) (a)

Entity = strictly it means existing but referred to in case of companies or corporations, registered under the Acts. Business = the process of buying & selling with an intention of earning profit, because business is not a Charity for show. Transaction = To do a piece of business, which involves transfer of money from one person (buyer) and transfer of property by another person for the sake of money (Seller). a) Cash transactions: immediate receipt of money on transfer of product/ goods/ services from one person to another person. b) Credit transactions: Does not involve immediate receipt of money, but only moneys worth of product/ goods/ services is transferred from one person to another person. The amount is paid / collected later, i.e. after a few days of the transaction. Capital =Initial Amount contributed / invested to start the business. Drawings = Withdrawing / taking back of goods / cash from the business for personal use/ consumption, by the business man. Assets = A valuable thing owned by the business concern, without which the business cannot be conducted. It is of the following types: Tangible Assets: Which can be seen / felt . Eg: Land & Building, Cash, Inventories (R.M., WIP, F.G,etc.,).
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Basic Terms used in Accounting/ Accountancy

b) Intangible Assets = which cannot be seen and felt in the business because they have no physical existence.( like what you call devil / ghost). Eg. Goodwill, Patent rights, copy rights, trade marks, etc., c) Fixed Assets= without which the business cannot be conducted & which remain in the business for a long period. Eg. Land & Building (L & B), Plant & Machinery (P & M), Furniture & Fixtures, Motor vehicles (M.V.), etc., d) Current Assets = which are intended for conversion / resale into cash within a short period. Eg: Stock-in-trade / Inventory, Debtors, Cash, Bills Receivables, etc., e) Liquid Assets = Which can be easily converted into cash, Eg= Cash on hand, cash at bank, B/R etc., f) Fictitious Assets = It refers to the debit balances and is shown in the asset side of the Balance Sheet and do not conform to the definition of an asset. Eg: Preliminary Expenses, R & D exps. etc., g) Wasting Assets= Which diminish in value by reason of the fact i.e. removed / extracted from them such as ores, oil or timber, which they contain and are irreplaceable by nature.

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Basic Terms used in Accounting/ Accountancy

7) Liabilities = An amount due from a business to others, on a/c. of purchases, borrowings, bank overdraft, etc., This is of 2 types: a) Fixed Liabilities = are repayable after a long period of time. Eg: Capital, Debentures, etc., b) Current Liabs = are required to be paid within a short period of time, say, 1 year or less than 1 year. Eg; Amount payable to supplier of goods, salary to employees, etc., 8) Debtor = A person who owes money to the business for goods having purchased on credit. 9) Creditor = A person to whom the business owes money because of having goods having purchased on credit. 10) Solvent = A person who is able to meet his financial obligations, whose assets are more than his liabilities. 11) Insolvent = A person who is unable to meet his financial obligations, whose liabilities are more than his assets. 12) Goods =are physical commodities, usually moveable and consumed sometimes after production. They are commodities which a trader purchases for reselling.

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Basic Terms used in Accounting/ Accountancy

13) Account = It is a statement recording all business transactions relating to a person, thing or service during a period and showing the current balance of money receivable OR payable. A/c is the abbreviation of account. 14) Folio = It is the page in a journal or ledger, or two facing pages assigned a single number. 15) Entry = It refers to the record of a transaction or other event in a journal or a ledger. 16) Expenses and Losses=Expenditure or expense refers to the amount spent or cost of acquiring a service or using up an asset. Loss means the excess of costs over related revenues. It is the excess of expenses and losses over incomes & gains of a business. 17) Incomes & Gains = Income is the money or other assets received, especially periodically or in a year from ones business or investments or lands. Gains = Gain is an increment in wealth that results either from operations or from holding assets or liabilities.

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Basic Terms used in Accounting/ Accountancy

18) Debit = The left side of an a/c. is called the debit side. An entry on the LHS of an a/c. is called a debit or that entry is called as debit entry. 19) Credit = The right side of an a/c. is called the credit side. An entry on the RHS of an a/c. is called a credit or that entry is called as credit entry. 20) Voucher = A documentary evidence of a transaction is called a voucher. When goods are purchased for cash, a cash receipt is given by the seller to the buyer. This cash receipt if a voucher. 21) Equity = It is a synonym for owners equity which means, that part of the finance of an enterprise is provided by the owners. -----------------

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Session 6

Double Entry System of Book-Keeping

Double-entry system of accounting does not mean double work. All that it means is complete entry.

Meaning:
A system of Accounting in which both the aspects of a transaction are recorded as per prescribed rules is called Double Entry System. Double Entry System is a system of Accounting in which, out of the 2 aspects of a transaction, one aspect is debited and the other aspect is credited. The debits & credits are decided by applying certain rules.
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I
Every business transaction, has a two fold effect receiving of benefit of some value and giving of benefit of the same value. The double entry system requires that the two entries for a transaction should be made in two different a/cs., simultaneously for the same amount and on the opposite sides of the account.

Features:
1) 2) 3) 4) It is based on dual-aspect concept. There must be two parties for each transaction. Each transaction has two aspects, the debit aspect / receiving aspect and the credit aspect / giving aspect. In every transaction, there are 2 accounts.
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5) 6) 7) 8)

9)

Every debit has a corresponding credit and every credit has a corresponding debit. Every a/c. is divided into parts / sides i.e. L.H.S.= Debit side and R.H.S. = Credit Side. Both personal aspect (affecting personal a/c.) and impersonal aspects (affecting real or nominal a/cs.)are recorded. The total of debits given to all the a/cs. must always be equal to he total of credits given to all the a/cs. D.E.S. does not mean that recording the transactions 2 times. It is designated as completeentry system.
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Objectives & Advantages of D/E System

1) To record both the aspects (i.e. every debit has a corresponding credit and every credit has a corresponding debit) of a transaction in the books of a/c. To maintain all the 3 types of A/c. viz, a) the Personal A/c. b) the Impersonal A/c. OR the Real A/c. and the Nominal A/c.

2)

3) Helps in detecting of errors in the books of account in time and to reduce the chances of errors and frauds.
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4) 5) 6) 7)

To check the arithmetical accuracy of the entries in the books of a/c, through preparation of trial balance. To ascertain the true profit or loss of the business through preparation of trading and p & l a/c. To ascertain the true financial positions of the business through preparation of Balance sheet. To know the progress of the business from year to year.

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Classification of Accounts
For the purpose of recording the entries, accounts are classified into two types namely A) The English System and B) The American System. A) The English System: Under this system, the a/cs. are broadly classified into two types namely (1) Personal Accounts and (2) Impersonal Accounts. 1) Personal Accounts: It records the dealings of the business with persons or firms. The accounts of individuals like Rama A/c. Krishna A/c. OR the accounts may be of artificial persons like firms or companies like Bharat & Co., Nandini Pvt. Ltd., banks, clubs, etc., 2) Impersonal Accounts: These Accounts are of 2 types viz. Real Accounts and Nominal Accounts.
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Contd.,
a) Real Accounts are the accounts of assets, properties or things owned by a business like Buildings A/c., Furniture A/c., Cash a/c. etc., b) Nominal Accounts are accounts of expenses, losses, gains and profits. They are called nominal because they exist only in name and cannot be seen. Eg: Salaries A/c., Rent A/c., Interest Paid A/c., Discount Received A/c. etc., Thus, under English System, accounts are broadly divided into three categories for making entries in the books of accounts, which are as follows: (a) Personal Accounts (b) Real Accounts and (c ) Nominal Accounts

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B)

The American System: Under this system 5 types of Accounts are to be maintained namely: 1) Capital Accounts 2) Asset Accounts 3) Liability A/cs. 4) Incomes & Gains A/c. 5) A/cs of Expenses & Losses. Capital Accounts = Amount Invested by the proprietor is recorded and no other transactions. Asset A/cs. =Assets like Land & Bldgs., P& m, F & F, Stock, cash in hand, Debtors, B/R, etc., only. Liability A/cs. = Amount payable to others such as Creditors, overdraft, B/P, Income received in advance, etc.,

1) 2) 3)

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4) Incomes & Gains = Income is the money received periodically, especially from ones business or investments or lands. Gains is an increment in wealth that results either from operations or from holding assets Or liabilities. 5) Expenses & Losses = Expenditure refers to the amount spent on or cost of acquiring a service or using up an asset. Loss refers to the act of losing. A businessman loses when he allows a commission or discount.

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Rules of Debit & Credit

1) Under the English System:
a) In the case of Personal Accounts: Debit the receiver and Credit the giver. b) In the case of Personal Accounts: Debit what comes in and Credit what goes out. c) In the case of Nominal Accounts: Debit all expenses & Losses and Credit all incomes & gains.
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Contd.,
2) Under the American System:
a) In the case of Capital Accounts: Debit decreases the capital and Credit increases the capital. b) In the case of Assets: Debit increases in an asset Credit decreases in an asset. c) In the case of Nominal Accounts: Debit decreases the liability and Credit increases the liability.
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d) In the case of Incomes & Gains: Debit decreases incomes & gains and Credit increases incomes & gains. e) In the case of Nominal Accounts: Debit increases the expenses & losses and Credit decreases the expenses & losses.
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Systems of Accounting
There are 3 systems of Book-keeping viz: 1) Cash System 2) Mercantile System 3) Mixed System 1) Cash System: In this system, all the expenditure is treated as expenses only, when cash is actually paid. Similarly all incomes really received only when cash is actually received. Thus, the difference b/w the total income received in cash and the total expenditure incurred n cash represents the Profit OR Loss of a business concern for a particular accounting period. b) This system is generally practiced by advocates, brokers, chartered accountants, auditors, doctors, small traders Sports Clubs, etc.,. Receipts & Pmts A/c. is prepared to determine the excess expenses over income (Loss) / excess income over expenses (Profit).

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2) Mercantile / Accrual System: In this system, all transactions relating to a period are recorded disregarding whether the income is received or expenses is incurred. In this system, outstanding & prepaid expenses, accrued and incomes received in advance are taken into consideration. In this system, Profit & Loss A/c. is prepared for ascertaining the Profit / Loss of the Business. This system is popular and all the business houses follow even to this day. 3) Mixed System: This is a system under which both the cash & mercantile systems are followed. some records are maintained under the cash system and some others are kept under the Mercantile system. But, this system is not popular and only a few business people follow even to day.

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Single Entry System of Book-keeping: As against the D..E.S. of Book-keeping, there is also a system called the S.E.S. of Book-keeping. S.E.S.: Under this system, only a Cash Book is maintained and no other ledger a/c. is maintained. Further, a rough book is maintained for recording transactions relating to Personal a/cs, Real a/cs., and Nominal a/cs are not maintained at all. In some cases, only one aspect of the transaction is recorded. EG: When a Credit sale takes place, only the credit aspect is recorded in the Sales A/c. and the debit aspect is ignored by not debiting the Customers a/c.

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In case of some transactions, both the aspects are of the transaction is recorded. Eg: When cash is received from a customer, it is entered in two places the cash book and the personal account of the customer concerned. In case of some transactions, both the aspects are of the transaction is recorded. Eg: When cash is received from a customer, it is entered in two places the cash book and the customer a/c. The customer a/c. shows only Credit balance and not the debit particulars like sales details. In case of some transactions, no entry can be found in the ledger accounts, both the aspects are of the transaction is omitted. Eg: Depreciation, Interest charges paid to Bank, etc,
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There are no hard & fast rules under this system. There are plenty of disadvantages, only few business organi sations follow this method. Therefore it is not widely adopted by big business organisations. Assignment Topic First, twenty students, Sum No. 1, pg.101, Second -25 students, sum No. 2, pg-110, Third 20 students, sum no.1 Whole class, sum no. 3, pg.120

Note : Please do not refer to the answer from the text book, Or copy from your friends answer. Try to solve on your own / you can take the help of your friend.

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Session 7 Journal
Journal is the gateway to ledger.

Meaning:
Journal is a book in which accounts to be debited and credited are written. The word Jour means a day. Therefore, journal means a daily record of transactions. The art of recording a transaction in the journal is called as Journalising. The record itself is called a journal entry. Journal is a book of Primary Record. The transactions can be directly recorded in the Ledger, but there is a greater chance of committing mistakes / many mistakes. Hence, it is advisable to record first in the journal and then proceed.
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Proforma of a Journal
Date Particulars L.F. Debit Rs. Credit Rs.

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1)
2)

3)

The first column i.e. the date column is used for recording the date of transaction. The second column i.e. the particulars column is use for recording the journal entry for the transaction. While making an entry, the name of the a/c. to be debited should be written first and it is essential to write the word Dr. (Debtor). In the next line, after leaving little space, the name of the a/c. should be credited and it should start with To. Then a brief explanation should be given as to why one a/c. is debited and the other a/c. is credited, which is called as narration, which should be given in brackets. The third column i.e. L.F. means ledger folio, which is used for recording the page number of the ledger to which the journal entry is transferred. This column has to be filled-in, only after the journal entry is posted.

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4)

5)

6)

The fourth column i.e. the Debit column is used for recording the amount to be debited. The amount to be debited should be entered against the name of the account to be debited. The fifth column, i.e., the Credit column is used for recording the amount to be credited. The amount to be credited should be entered against the name of the account to be credited. A line should be drawn only in the particulars column, to indicate that the entry is over or to differentiate another entry.

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Process in Journalising
Identify the nature of transaction, i.e., whether it is cash or credit. Then ascertain the head of Accounts to be recorded. Categorise the head of Account i.e., Personal, Real or Nominal and then pass the entry.

Format of a journal entry.

Mr.Gopal commenced business with cash Rs.5,000/-, then the entry will appear as follows: Cash A/c. Dr. 5,000 To Capital A/c. 5,000

(Being cash introduced into the business by the proprietor Mr. Gopal)

Sums Illustration 1 Pg 41 Financial acctg Illustration 8, Pg.189-B.S.Raman I Puc

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Simple & Compound Entries: A simple journal entry is an entry for a transaction with one a/c. being debited and another a/c. being credited. On the other hand, when there are two or more transactions of the same nature on the same day, like purchase of goods, purchase of furniture, machinery, etc., a single entry may be passed for all of them. Such an entry is called as Compound Entry, which involves more than one debit or more than one credit.

P.S.: Rest of the theory portion in this chapter, to be learnt by the students themselves as pedagogy.

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Session 8 Ledger
Ledger is the permanent storehouse of all the transactions. Meaning: The term ledger is derived from the Dutch word Legger which means to lie. Therefore, ledger means a book where the various accounts lie (i.e. a/cs. are kept). Ledger is a book in which various accounts are opened and maintained. It contains all types of a/c.-Real, Personal & Nominal, including whether an expense or an income, for a given period of time, showing their net effect.
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Features of a Ledger
1) 2) 3) It is an analytical record of transactions i.e. classified transactions. It is a derived or secondary record, i.e. it is prepared after the journal. It is a Book of final entry. In the words of William Pickles, Ledger is the destination of the entries made in the subsidiary books or journals. It is called the Principal Book of accounts. Hence it is rightly called as The King of Books of Account. It serves a permanent record of transactions.

4) 5)

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Format of a LEDGER
Form 1:

Dr.

------Account

CR.

Date

Particulars

Jf

Amount Rs.

Date

Particulars

Jf

Amount Rs.

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Format of a LEDGER
Form 2 : Dr.
Date Particulars

------Account
JF Debit Rs. Credit Rs.

CR.
Dr./Cr. Balance Rs.

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Ledger Posting

The process of transferring of entries from the journal to the ledger is called Posting or Ledger Posting. Posting may be done immediately after an entry has been recorded in the journal or at anyconvenient date after the transactions have been journalised.

P.S.: Rest of the theory portion as assignment for the students.

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Steps involved in Posting

1) 2) 3) 4) A separate account should be opened for each account found in the journal. The journal entries should be posted in the order of their dates. The name of any account shall not appear in that account either on the debit side or credit side. The debit side of an a/c. should commence with the word To and the credit side of an a/c. commences with the word By, which should be prefixed appropriately while the entry is being made. While posting an entry to the debit side of an a/c., after the word To write the name of the a/c., that has been credited in the journal entry. Similarly, when an entry is to be posted to the credit side of an a/c., after the word By write the name of the a/c., that has been debited in the journal. Eg: If an entry is to be posted: Cash A/c. Dr. ------To Capital A/c. ------55

5)

Posting an Opening Entry

The opening balance of each asset should be entered on the debit side of the concerned asset a/c. with the words To Bal. b/d.

The opening balance of each liability, including capital a/c., should be entered on the credit side of the concerned asset a/c. with the words By Bal. b/d.

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Balancing of Ledger Accounts

Balance is the difference b/w the total debits and total credits of an a/c. or the total of an a/c. containing only debits or credits. Balancing refers to the difference b/w. the 2 sides on the lower side, which is done periodically, i.e. weekly, monthly, quarterly, half yearly or yearly depending upon the requirements of the business. Personal A/cs. are balanced monthly, except in case of Capital A/c. which is usually balanced annually. Real a/cs. are generally balanced at the end of the financial period when final a/cs. are being prepared. However, Cash a/c.& Bank A/cs. are balanced everyday. In case of Purchases a/c., Sales A/c., Purchase Returns a/c., Sales Returns a/c., the outstanding balance will be either transferred to Purchases a/c., Sales a/c. as the case may be or to the Trading A/c. In case of Nominal a/cs., it is closed / transferred to final a/cs. i.e. Trading A/c. or Profit and Loss A/c.
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Sums on opening of various ledger a/cs. 1) Illustrtation No. 1 Reddy & Appannaiah, Pg.98 2) Illn no.9 B.S.Ramana, pg. no.266 3) Kadkol pg. no.

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Session 9 Maintenance of various Subsidiary Books

A Famous Quote:
Subsidiary Books are books of original entry, but they are subordinate to the ledger, the principal book of accountancy.
Need for journal: Pg 277 B.S.R.

Meaning:
Subsidiary Books or Special Journals are the various books of original entry maintained under the modern system of accounting for recording the various business transactions, as and when they take place.

Features: 1.
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