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ACCOUNTING PROCESS

Sreejith S FIMS August 2008

November 19, 2014

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

Sreejith S FIMS August 2008

November 19, 2014

Fundamental Accounting Principle


(equation)
Assets = Liabilities + Capital

Sreejith S FIMS August 2008

November 19, 2014

Fundamental Accounting Principle


(equation)
Assets = Liabilities + Capital

Sreejith S FIMS August 2008

November 19, 2014

Fundamental Accounting Principle


(equation)
Assets = Liabilities + Capital

Sreejith S FIMS August 2008

November 19, 2014

Double Entry System


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

Sreejith S FIMS August 2008

November 19, 2014

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

November 19, 2014

Fundamental Accounting Principle


(equation)

Assets

Liabilities + Capital

Increase Credit
Decrease - Debit
November 19, 2014

Sreejith S FIMS August 2008

Expenses

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

Decrease in Benefits During


the accounting Period in
the form of Outflow
Expenses - Debit

Income - Credit
Sreejith S FIMS August 2008

November 19, 2014

Debit Credit Rule


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

Sreejith S FIMS August 2008

November 19, 2014

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Asset

Liabilities/Capital

Debit

Credit

Debit

Credit

Increase

Decrease

Decrease

Increase

Debit

Credit

Expenses/ Incomes/
losses
Gains

Sreejith S FIMS August 2008

November 19, 2014

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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

November 19, 2014

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June 1 : Commenced capital for the business Rs 1200000

Journal
Date

Particulars

June 1

Cash a/c

LF
Dr

Debit Amount

Credit Amount

1200000

To Capital a/c

1200000

(being business started with


Rs 1200000)

Sreejith S FIMS August 2008

November 19, 2014

13

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

November 19, 2014

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Make Journal Entries For the


Transaction
transactions
Commenced Business
20000

Jan 08

1
2

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

15000
500
1000
1500
1000
250

Received Commission

300

Goods Returned to syam

100

10

Goods Sold to Kamal

11

Paid for postage and telegram

12

Goods Returned by Kamal

15

Paid for stationary

18

Paid into Bank

250

20

Goods Sold for cash

22

Bought goods for cash 500

25

Paid Salaries

350

28

Paid Rent

250

31

Drawings

500

375

5000

100
250
100
Sreejith S FIMS August 2008

November 19, 2014

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

Sreejith S FIMS August 2008

November 19, 2014

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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

November 19, 2014

17

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

November 19, 2014

18

Journal

Date

Particulars

LF

June 1

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

Debit

Credit

1200000
1200000

Ledger
Dr

Cash a/c

Date

Particulars

JF

June 1

To Capital

1200000

Particulars

Capital
A/c
Amount

Dr
Date

JF

Amount

Date

Cr
Particulars

JF

Amount

Cr
Date

Particulars

June 1

By Cash

Sreejith S FIMS August 2008

JF

Amount
1200000

November 19, 2014

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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

November 19, 2014

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Cash a/c
Date

Particulars

Amount

Date

Particulars

Amount

June 1
22

To capital a/c
To bank a/c

200000
100000

June 12
17
27

By bank a/c
By postage a/c
By Stationary a/c

20000
200
800

Cash a/c
Date

Particulars

Amount

Date

Particulars

Amount

June 1
22

To capital a/c
To bank a/c

200000
100000

June 12
17
27

By bank a/c
By postage a/c
By Stationary a/c

20000
200
800

By balance c/d

279000
300000

31
300000
July 1

To balance b/d

279000
Sreejith S FIMS August 2008

November 19, 2014

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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

November 19, 2014

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Performa of Trial Balance


Trial Balance as on March
Particulars

Debit (Rs)

Cash
Capital
Stock
Purchase
Sales
Salary
Loans and advances

Xxxx

Total

Xxxx

Credit(Rs)
Xxxx

Xxxx
Xxxxx
Xxxx
Xxxx

Xxxx

Sreejith S FIMS August 2008

November 19, 2014

Xxxxx

23

Sreejith S FIMS August 2008

November 19, 2014

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Jan 08

Transaction

Commenced Business

1500000

Paid into Bank

800000

Furniture (goods)

500000

Purchased furniture(goods) from Ratan

Purchased furniture (office purpose)

Sold to j Mitra

Bought goods

180000

22 Loan to Naren
15000

Return to Ratan

5000

23

Return fro j mitra

20000

10

Taxi fare

11

Sold to Kabiraj goods costing Rs 50000 a @ 10%


Discount

12

Received commission from J Das

13

Paid to Ratan

100000

18

Send to Bank

20000

20

Received a cheque of Rs 42000 from Kabiraj for full and


final settlement

Transaction

200000
100000

200000

21 Received a cheque from J Mitra


50000

Received Interest
1000

24 Rent
2000

1000

1500

Sreejith S FIMS August 2008

November 19, 2014

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