GOLDEN RULES OF ACCOUNTING

1)

REAL ACCOUNT
NOMINAL ACCOUNT PERSONAL ACCOUNT

2)

3)

REAL ACCOUNT

DEBIT CREDIT

What Comes In What Goes Out

NOMINAL ACCOUNT

DEBIT CREDIT

All Expenses & Losses All Incomes & Gains

PERSONAL ACCOUNT
DEBIT The Receiver

CREDIT

The Giver

MEANING OF F/Y, CALENDAR YEAR, A/Y, LEAP YEAR

F/Y means Financial year which is always start from 1st April and ends on 31st March Calendar Year is what we all know that from 1st Jan to 31st Dec. A/Y mainly uses in Income Tax, A/y can be start from any moth during the year.

Leap year has 366 days or we can say that digits of that year can be divisible by 4 (e.g. 2004, 2008, 2012, etc.)

A PROCESS OF COMPLETE ACCOUNTING

BALANCE SHEET TRADING & P&L A/C TRIAL BALANCE LEDGER POSTING JOURNAL ENTRY TRANSACTION

SOME IMPORTANT POINTS TO REMEMBER

Dr is a symbol which means Debit (Due for)

Cr is a symbol which means Credit (Due to)

Debit generally denoted on Assets/Expenses/Losses Credit generally denoted on Liabilities/Incomes/Profits

TYPES OF ASSETS
CURRENT ASSETS An asset such as receivables, inventory, cash, etc. that is constantly flowing in and out of an organization in the normal course of its business. INVESTMENT Two main classes of investment are (1) Fixed Income Investment such as Bonds, Fixed Deposits, Preference Shares and (2) Variable income investment such as Business Ownership (equities), or property ownership.

FIXED ASSETS An asset that is not consumed or sold during the normal course of business, such as land, buildings, equipments, machinery, vehicles and other such items

In accounting, fixed does not necessarily mean immovable; any asset expected to last, or be in use for more than one year is considered a fixed asset. On a balance sheet, these assets are shown at their book value (purchase price less depreciation)

TYPES OF LIABILITIES
CAPITAL In accounting Capital means Money Invested in a business to generate Income. LOANS & ADVANCES The term Loan refers to the amount borrowed by one person from another. It is a debt for the borrower. Advance on the other hand, is a credit facility granted by the bank. Banks grant advances largely for short-term purposes, such as purchase of goods traded in and meeting other short-term trading liabilities.

CURRENT LIABILITIES
A company's debts or obligations that are due within one year. Current liabilities appear on the company's balance sheet and include short term debt, accounts payable, accrued liabilities and other debts. Current liabilities are what a company currently owes to its suppliers and creditors. These are short-term debts, all due in less than a year.

HOW TO APPLY

GOLDEN RULES OF
ACCOUNTING

EXAMPLE NO. 1

TRANSACTION:-

Capital Introduced Rs. 500000/-

JOURNAL ENTRY:Cash (REAL) A/c Dr. 500000 500000

To Capital (PERSONAL) A/c

(Being Cash Introduced in Business)

Effect of this Entry:ASSETS Cash 500000 LIABILITIES Capital * Total of Both Sides must tally 500000

EXAMPLE NO. 2

TRANSACTION:-

Goods Purchased from Ram for Rs. 100000/-

JOURNAL ENTRY:Purchase (NOMINAL) A/c Dr. 100000 To Ram (PERSONAL) A/c 100000

(Being Goods purchased from Ram on Credit)

Effect of this Entry:ASSETS Goods 100000 LIABILITIES Ram(Creditor) 100000

EXAMPLE NO. 3

TRANSACTION:-

Cash Deposited in a Bank amounting Rs. 20000/-

JOURNAL ENTRY

Bank (REAL)A/c Dr. 20000

To Cash (REAL)A/c

20000

(Being cash deposited in a Bank)

Effect of this Entry:ASSETS Cash 20000 Bank (20000) * Understand the Concept of CONTRA LIABILITIES