Session on Accounting

By
$treet 20

Introduction
What is accounting ?
Language of business
Means to communicate financial information
A way to convey information about a
business to users.

Branches of Accounting
Financial Accounting
Cost Accounting
Managerial Accounting
Tax Accounting

Elements of Financial Statements

Assets :- Economic resources of the
enterprise that
carry future economic
benefits
Current Assets
Cash & Cash Equivalents
Accounts Receivables
Prepaid Expenses
Marketable Securities
Inventory
Non-current Assets

Elements of Financial Statements

Liabilities :- Financial obligations of an
enterprise
Current Liabilities
Accounts Payables
Unearned Revenue
Current portion of Long Term Debt
Non-current Liabilities
Long Term Debt

Elements of Financial Statements

Equity :- Residual claim on the assets after
deducting
the liabilities
Common Stock
Preferred Stock
Retained Earnings
Revenue :- Inflows from sale of
goods/services
Expenses :- Amounts incurred to generate

Accounting Equation
Assets = Liabilities + Owners Equity
The equation should always be in balance. This
equation is used to create a :Balance Sheet
Double Entry Book-Keeping
A transaction has to be recorded in at least
two accounts
Eg. Purchase equipment for Rs. 10000 cash ?

Major Financial Statements

Balance Sheet :- Outlines Fundamental
Accounting
Equation
Income Statement : - Profit & Loss Statement.
Revenues & Expenditure
Cash Flow Statement :- Cash Inflows &
Outflows

Some more concepts

Term

Cash

Unearned
Revenue

Received

Accrued
Revenue
Deferred
Expense
Accrued
Expense

Goods/Ser
vice

Provided

Paid

Received

Example

Asset/Liabi
lity

Magazine
Subscription

Liability

Goods sold
on credit

Asset

Prepaid
Rent

Asset

Labour
Wages

Liability

DEBIT/CREDIT RULE-1
Assets = Liabilities + Owners Equity
Assets
Debit

Liabilities/Owners
Equity
Credit

If increase in Assets --> Then Debit the

account
If increase in Liabilities/Owners Equity -->
Then Credit
the account
If decrease in Assets --> Then Credit the
account

DEBIT/CREDIT RULE-2
Types of
Accounts

Meaning

Real
accounts

Accounts relate
to tangible or
intangible real
assets

Personal
accounts

Accounts relate
to a person or
an entity

Rams A/c,
Marutis A/c

Debit the receiver

Credit the giver

Nominal
account

Accounts relate
to losses,
expenses, profit
and gains

Purchase A/c,
Sales A/c, Loss
A/c, Discount
Received A/c

Debit all expenses &

losses
Credit all gains
&profits

Example

Land A/c,
Goodwill A/c

Debit/Credit Rule

Debit what comes in

Credit what goes out

Sample Case

Transactions
Transactions
Date

Details
Opening bank balance Rs. 91,000
Opening cash balance Rs. 1,20,000
Travel Advance Account Rs. 10,000
1-Jan-11 Sold goods worth Rs. 100,000 for cash with 10% discount.
3-Jan-11 Purchased goods worth Rs. 30,000 for cash
15-Jan-11 Incurred office expenses of Rs. 50,000.
Paid staff salary of Rs. 100,000 for the month which is net
16-Jan-11 of tax deducted at source (TDS) of Rs. 30,000.
17-Jan-11 Deposited TDS of Rs. 30,000 with tax authorities.
Purchased an equipment of Rs. 5,00,000 from M/s. ABC
3-Feb-11 and paid by check
Borrowed Rs. 10,00,000 from bank. The money is
4-Feb-11 deposited in the business bank account
Purchased computer for Rs. 50,000 and payment made by
5-Feb-11 check.

Transactions
(Contd.)
Transactions (Contd.)
Date
Details
21-Feb-11 Purchased goods on credit Rs. 25,00,000.
1-Mar-11 Sold goods on credit Rs.40,00,000.
One old customer who owned Rs. 20,000 could pay only
3-Mar-11 Rs. 15,000 in full settlement of his dues.
Brought ten personal computers for Rs. 3,00,000 and the
5-Mar-11 amount is paid by check.
Paid annual maintenance charges (AMC) for the
15-Mar-11 computers Rs. 6,000.
21-Mar-11 Paid staff welfare expenses of Rs. 5,000 by check
23-Mar-11 Received check of Rs. 38,00,000 from customers.
27-Mar-11 Paid suppliers by check Rs. 22,00,000.
30-Mar-11 Paid advance income tax of Rs. 10,00,000 by check.
Settled travel bills of sales manager of Rs. 15,000 and
31-Mar-11 adjusted travel advance of Rs. 10,000.

Journal
Entries
Journal Entries
Date

Transaction

1-Jan-11 Cash Account

Dr.
Cr.
Amount Amount
90,000

To Sales Account
(Sale of goods at 10% discount)
3-Jan-11 Purchase Account

90,000

30,000

To Cash Account
(Purchase of goods)
15-Jan-11 Office Expenses Account
To Cash Account
(Being office expenses incurred)
16-Jan-11 Salary Account

30,000

50,000
50,000
130,000

Journal
Entries
Journal Entries
Date Transaction
17-Jan-11 TDS Account
To Cash Account
(Deposited TDS with tax
authorities)
3-Feb-11 Equipment Account
To Bank Account
(Equipment purchased)
4-Feb-11 Bank Account

Dr.
Cr.
Amount Amount
30,000
30,000

500,000
500,000

1,000,000

To Loan Account
(Loan taken from Bank)
5-Feb-11 Computer Account

1,000,000

50,000

Journal
Entries
Journal Entries
Date Transaction
21-Feb-11 Purchase Account
To Creditors Account
(Goods purchased on credit)
1-Mar-11 Debtors Account

Dr.
Cr.
Amount Amount
2,500,000
2,500,000
4,000,000

To Sales Account
(Goods sold on credit)
3-Mar-11 Cash Account
Discount Allowed Account
To Debtors Account
(Realised Rs. 15,000 from a
customer in full settlement of his

4,000,000

15,000
5,000
20,000

Journal
Entries
Journal Entries
Date

Transaction

15-Mar-11 Maintenance Charges Account

Dr.
Amount
6,000

To Cash Account
(Paid annual maintenance charges
for computers)
21-Mar-11 Staff Welfare Expenses Account

6,000

200,000

To Bank Account
(Being staff welfare expenses
incurred)
23-Mar-11 Bank Account
To Debtors Account

Cr.
Amount

200,000

3,800,000
3,800,000

Journal
Entries
Journal Entries
Date

Transaction

30-Mar-11 Advance Income Tax Account

To Bank Account
(Advance Tax Paid)
31-Mar-11 Travelling Expenses Account

Dr.
Amount

Cr.
Amount

1,000,000
1,000,000
15,000

To Travel Advance Account

10,000

To Cash Account
(Settled travel bill and adjusted
travel advance)

5,000

Ledger
Ledger Accounts
Accounts
Date

Particulars

Purchases Account
Debit Date
Particulars

Credit

31-Mar- By Profit and Loss

11 Account

2,530,00
0

21-Feb- To creditors
2,500,00
11 account
0

Office
Expenses
Account
Date
Particulars
Debit Date
Particulars
2,530,00 31-Mar- By Profit and Loss
15-Jan11To cash Account 0 50,000
11 Account

Credit
2,530,00
0
50,000

3-Jan-11To Cash Account 30,000

Date
Particulars
16-Jan11To cash account
17-Jan11To TDS Account

50,000
Salary Account
Debit Date
Particulars
31-Mar- By Profit and Loss
100,000
11 Account
30,000

50,000
Credit
130,000

Ledger
Ledger Accounts
Accounts
Date
Particulars
16-Jan11To cash account

Date

Particulars

TDS Account
Debit Date
Particulars
17-Jan30,000
11By Salary Account

30,000

30,000

30,000

Sales Account
Debit Date
Particulars

1-Mar11By Debtors Account

31-Mar- To Profit and Loss 4,090,00

11 A/c
0 1-Jan-11By Cash Account
Discount Allowed Account
Date
Particulars
Debit Date
Particulars
4,090,00
3-Mar- To debtors
31-Mar- By Profit and Loss
0
11 account
5,000
11 Account
5,000

Credit

Credit
4,000,00
0
90,000
Credit
4,090,00
0
5,000
5,000

Ledger
Ledger Accounts
Accounts
Date

Cash Account
Debit Date
Particulars

Particulars
Credit
To opening balance
1-Jan-11 b/d
120,000 3-Jan-11 By Purchases Account 30,000
15-Jan- By Office Expenses
1-Jan-11 To Sales A/c
90,000
11
A/c
50,000
3-Mar16-Jan11
To Debtors A/c
15,000
11
By Salary A/c
100,000
16-Jan
11
By TDS A/c
30,000
15-Mar- By Maintenance chgs
Bank Account
11
A/c
6,000
Date
Particulars
Debit 31-MarDate ByParticulars
Credit
Travelling
To opening balance
By Equipment

11
expenses
A/c
5,000
1-Jan-11 b/d
91,000 31-Mar 3-Feb-11 Account
500,000

11
By Balance C/d
4,000
1,000,00
By Computer
4-Feb-11 To Loan Account
0
50,000
225,000
5-Feb-11 Account
225,000
23-Mar3,800,00
By Computer
11
To Debtors Account 0
3-Mar-11 Account

300,000

Ledger
Ledger Accounts
Accounts
Date

Particulars

Debtors Account
Debit Date
Particulars

1-Mar4,000,00 3-Mar- By discount allowed

11
To sales account 0

11
A/c
3-Mar
11
By Cash account

Date

Particulars

23-Mar
11
By bank account
31-MarCreditors Account

11
By Balance c/d
Debit Date
Particulars

Credit
5,000
15,000
3,800,00
0
180,000
Credit

4,000,00
4,000,00
27-Mar2,200,00 21-Feb2,500,00
0

0
11
To bank account 0

11
By Purchases Account 0
31-Mar11
To balance c/d
300,000
2,500,00
0

2,500,00
0

Ledger
Ledger Accounts
Accounts
Date

Particulars

3-Feb-11To Bank A/c

Equipments Account
Debit Date
Particulars

Credit

500,000 31-Mar-11 By Balance c/d

500,000

500,000

500,000

Staff Welfare Expenses Account

Date
Particulars
Debit Date
Particulars
21-MarBy Profit and Loss
11To Bank A/c
200,000
A/c

200,000

200,000

200,000

Date

Advance Income Tax Account

Particulars
Debit Date
Particulars

30-Mar11
To Bank A/c

1,000,00 31-Mar0

11
By balance c/d

Credit

Credit
1,000,00
0

Ledger
Ledger Accounts
Accounts
Date

Particulars

1-Jan-11 To balance b/d

Travel Advance Account

Debit Date
Particulars
Credit
By travelling expenses
10,000 31-Mar-11 A/c
10,000
10,000

Date

Particulars

5-Feb-11To Bank A/c

5-Mar11
To Bank A/c
Date

Particulars

31-Mar11To balance c/d

10,000

Computers Account
Debit Date
Particulars
50,000

31-Mar-11 By Balance c/d

Credit
350,000

300,000
Loan Account
350,000
Debit Date
Particulars

350,000
Credit

1,000,00
0
4-Feb-11By Bank A/c

1,000,00
0

Trial
Trial Balance
Balance
Trial Balance 31 March, 2011

Debit

Credit

Cash

4,000

Bank

641,000

Debtors

180,000

Creditors

300,000

Profit and Loss Account

1,375,000

Equipments

500,000

Profit
Account
Profitand
and Loss
Loss Account
Date
31-Mar11
31-Mar11
31-Mar11
31-Mar11

Particulars

Debit

Date

Particulars

2,530,00 31-Mar0

11
By Sales A/c

To Purchases A/c
To Office Expenses
A/c
50,000

Credit
4,090,00
0

To Salaries A/c
130,000
To Discount Allowed
A/c
5,000

31-Mar- To Profit Transferred 1,375,00

11
to
0

Balance Sheet

4,090,00
0

4,090,00
0

Balance
Sheet
Balance Sheet
Balance Sheet as at 31st March 2011
Liabilities
(Rs)
Assets
Creditors
Profit and Loss
Account
Loan Account

300,000 Cash
1,375,000 Bank

(Rs)
4,000
641,000

1,000,000 Debtors
Equipments
Computers
Advance Payment of
Tax

180,000
500,000
350,000
1,000,00
0

2,675,00
0

2,675,0
00

Hope You All Are Still Awake

Team $treet :Rohit Chopra

Anupam Dhamija
Apoorva Garg
Meera Mohan
Kumar Utkarsh
Pinaki Ghosh
Sourav
Bhattacharya
Nitin Sengar