1. 1 2 3 OF ACCOUNTING
By. Prof. Naveen.N
Chartered Accountant

2. NEED FOR INFORMATION
INFORMATION
NON QUANTITATIVE QUANTITATIVE
INFORMATION INFORMATION
ACCOUNTING NON ACCOUNTING
INFORMATION INFORMATION
OPERATING FINANCIAL MANAGEMENT
INFORMATION ACCOUNTING ACCOUNTING

3. DEFINITION OF ACCOUNTING
THE process of identifying, measuring and
communicating economic information to
permit informed judgments and decisions by
users of the information.
-American Accounting Association Committee

4. ACCOUNTING – HISTORICAL ANTECEDENTS
When humans began keeping accounting records in their head ?
Symbols recording transactions
3200BC – Sumerian civilisation in Mesopotamia kept records in clay
tablets.
1400BC – In Greece slaves used as scribes and auditors, it was assumed
that statements from slaves who could be tortured would be more reliable
that those from freemen
990BC – Scribes in Babylonia and Egypt received formal accounting
training in school.
521-486BC – Persia under Darius had government scribes who performed
surprise audits of accounts of the province
4AD – In Byzantine empire, Constantine founded a public administration
school in which accounting was taught.
642-814AD - Roman empire under Charlemagne continued examples of
government accountants and auditors.
In the 15th century, branches of the Medici Bank were required to submit
annual balance sheets to the main office in Florence.

5. ACCOUNTING – A LANGUAGE
ACCOUNTING – LANGUAGE OF BUSINESS.
COMPLICATION SIMILAR TO TASK OF LEARNING NEW LANGUAGE.
WORDS USED IN A DIFFERENT SENSE IN ACCOUNTING THAN IN
THEIR COLLOQUIAL MEANING (EG: NET WORTH).
SOME ACCOUTING RULES ARE DEFINITE OTHERS ARE NOT.
ACCOUNTING NOT STATIC – RULES SUBJECT TO CHANGE

6. BASIC CONCEPTS
1. Money measurement.
Record is made only of information that can be expressed in monetary terms.
2. Entity.
Accounts kept for entities, as distinguished from the persons who are
associated with these entities.
3. Going concern.
Entity will continue to operate for an indefinitely long period in the future.
4. Cost concept.
The economic resources of an entity is ordinarily entered in the accounting
records at the price paid to acquire it.
5. Dual aspect.
Since all of the assets of a business are claimed by someone and since the
total of these claims cannot exceed the amount of assets to be claimed it
follows that ASSETS = LIABILITIES & EQUITIES

7. BASIC CONCEPTS
6. Accounting period.
Accounting measures activities for a specified interval of time called
accounting period. (Pacioli, first author of an accounting text, wrote in 1494:
“ Books should be closed each year, especially in a partnership, because frequent
accounting makes for long partnership.”)
7. Conservatism.
Recognition of revenues requires better evidence than does recognition of
expenses.
8. Consistency.
All the policies adopted for preparing financial statements should be consistently
Followed by the entity.
9. Materiality.
Insignificant events may be disregarded, but there must be full disclosure of all
important information.

8. ACCOUNTING PROCESS
ACCOUNTING PROCESS
IDENTIFICATION OF THE ECONOMIC EVENTS
CLASSIFYING THE BUSINESS TRANSACTIONS
MEASUREMENT IN RUPEES
RECORDING THE BUSINESS TRANSACTIONS
ANALYSING AND INTERPRETING THE BUSINESS TRANSACTIONS

9. ACCOUNTING CYCLE
TRANSACTIONS
PREPARATION OF JOURNAL AND SUBSIDIARY BOOKS
LEDGER POSTINGS
EXTRACTING TRIAL BALANCE
PREPARING FINANCIAL STATEMENTS, TRADING AND PROFIT AND
LOSS ACCOUNTS AND BALANCE SHEET

10. ACCOUNTING EQUATION
OWNER’S CAPITAL + LIABILITIES
=
ASSETS

11. FORMAL ACCOUNTING - DOUBLE ENTRY SYSTEM OF BOOK KEEPING
METHOD OF RECORDING TWO-FOLD EFFECTS OF EVERY
TRANSACTION.
BOTH DEBIT AND CREDIT ASPECT OF A TRANSACTION
IS
RECORDED.
FORMAL ACCOUNTING USES A SET OF BOOKS AND
LEDGERS TO RECORD TRANSACTIONS.
LEDGER ( T-ACCOUNTS) ARE PREPARED FROM WHICH
TRIAL BALANCES AND FINANCIAL STATEMENTS ARE
DRAWN.

12. RULES OF DEBIT AND CREDIT
T - ACCOUNT
DEBIT SIDE CREDIT SIDE
ASSET
INCREASE OR ADDITIONS DECREASE OR DEDUCTION
ON THE DEBIT SIDE ON THE CREDIT SIDE
" + " ON LEFT HAND SIDE “ - " ON RIGHT HAND SIDE

13. RULES OF DEBIT AND CREDIT
T - ACCOUNT
DEBIT SIDE CREDIT SIDE
LIABILITY (EXTERNAL) & CAPITAL(INTERNAL)
DECREASE OR DEDUCTION INCREASE OR ADDITIONS
ON THE DEBIT SIDE ON THE CREDIT SIDE
“ - " ON LEFT HAND SIDE " + " ON RIGHT HAND SIDE

14. RULES OF DEBIT AND CREDIT
T - ACCOUNT
DEBIT SIDE CREDIT SIDE
EXPENSES / LOSSES
INCREASE OR ADDITIONS DECREASE OR DEDUCTION
ON THE DEBIT SIDE ON THE CREDIT SIDE
" + " ON LEFT HAND SIDE “ - " ON RIGHT HAND SIDE

15. RULES OF DEBIT AND CREDIT
T - ACCOUNT
DEBIT SIDE CREDIT SIDE
REVENUES / GAINS
DECREASE OR DEDUCTION INCREASE OR ADDITIONS
ON THE DEBIT SIDE ON THE CREDIT SIDE
“ - " ON LEFT HAND SIDE " + " ON RIGHT HAND SIDE

16. GREEN COMPANY

17. GREEN COMPANY – Transaction 1
RAMASWAMY STARTED BUSINESS WITH CASH RS 1,00,000
Dr CASH (ASSET)
Cr
Capital Rs 1,00,000
Dr RAMASWAMY CAPITAL (EQUITY AND LIABILITY)
Cr
Cash Rs
1,00,000

18. GREEN COMPANY – Transaction 2
GREEN COMPANY RAISED BANK LOAN OF RS 50,000
Dr CASH (ASSET)
Cr
Capital 1,00,000
Bank loan
50,000
Dr BANK LOAN (EQUITY AND LIABILITY)
Cr
Cash
50,000

19. GREEN COMPANY – Transaction 3
GREEN COMPANY BOUGHT A BUILDING FOR RS 25,000 AND PAID IN CASH.
Dr CASH (ASSET)
Cr
Capital 1,00,000 Building
Bank loan 25,000
50,000
Dr BUILDING (ASSET)
Cr
Cash
25,000

20. GREEN COMPANY – Transaction 4
GREEN COMPANY BOUGHT STOCK OF SUGAR FOR RS 10,000
Dr CASH (ASSET)
Cr
Capital 1,00,000 Building
Bank loan 25,000
50,000 Stock
10,000
Dr STOCK (ASSET)
Cr
Cash
10,000

21. GREEN COMPANY – Transaction 5
GREEN COMPANY SOLD THE ENTIRE STOCK OF SUGAR FOR RS 12,000
Dr CASH (ASSET)
Cr
Capital 1,00,000 Building
Bank loan 25,000
50,000 Stock
Sales 10,000
Dr STOCK (ASSET)
12,000
Cr
Cash Cost of goods sold 10,000
10,000
Dr COST OF GOODS SOLD (EXPENSE)
Cr
Stock
10,000
Dr SALES (INCOME)
Cr
Cash
12,000

22. GREEN COMPANY
RECOLLECT HOW MANY T – ACCOUNTS HAVE WE PREPARED
1. CASH ACCOUNT (Asset)
2. RAMASWAMY CAPITAL ACCOUNT (Liability)
3. BANK LOAN ACCOUNT (Liability)
4. BUILDING ACCOUNT (Asset)
5. STOCK ACCOUNT (Asset)
6. COST OF GOODS SOLD ACCOUNT (Expense)
7. SALES ACCOUNT (Income)

23. YELLOW COMPANY

24. YELLOW COMPANY – Transaction 1
RAMASWAMY STARTED BUSINESS WITH CASH RS 50,000 AND AVAILED
LOAN OF RS 75,000
Dr CASH (ASSET)
Cr
Capital Rs 50,000
Loan Rs 75,000
Dr RAMASWAMY CAPITAL (EQUITY AND LIABILITY)
Cr
Cash Rs
50,000
Dr MRS RAMASWAMY LOAN(EQUITY AND LIABILITY)
Cr
Cash Rs
75,000

25. YELLOW COMPANY – Transaction 2
YELLOW COMPANY BOUGHT A BUILDING FOR RS 10,000 AND PAID IN
CASH.
Dr CASH (ASSET)
Cr
Capital 50,000 Furniture 10,000
Loan 75,000
Dr FURNITURE(ASSET)
Cr
Cash
10,000

26. YELLOW COMPANY – Transaction 3
YELLOW COMPANY BOUGHT RS 50,000 WORTH OF CEMENT ON CREDIT.
Dr STOCK(ASSET)
Cr
Creditors 50,000
Dr CREDITORS (LIABILITY)
Cr
Stock 50,000

27. YELLOW COMPANY – Transaction 4
YELLOW COMPANY SOLD ENTIRE STOCK OF CEMENT FOR RS 60,000 ON CREDIT.
Dr STOCK(ASSET)
Cr
Creditors 50,000 Cost of goods sold 50,000
Dr DEBTORS (ASSET)
Cr
Sales
60,000
Dr COST OF GOODS SOLD (EXPENSE)
Cr
Stock
50,000
Dr SALES (INCOME)
Cr
Debtors 60,000

28. YELLOW COMPANY – Transaction 5
YELLOW COMPANY RECEIVED FROM CEMENT PURCHASER RS 60,000
Dr CASH (ASSET)
Cr
Capital 50,000 Furniture 10,000
Loan 75,000
Debtor
60,000
Dr DEBTORS (ASSET)
Cr
Sales Cash
60,000 60,000

29. YELLOW COMPANY – Transaction 6
YELLOW COMPANY PAID RS 50,000 TO SUPPLIER
Dr CASH (ASSET)
Cr
Capital 50,000 Furniture 10,000
Loan 75,000 Creditor
Debtor 60,000 50,000
Dr CREDITORS (LIABILITY)
Cr
Cash Stock 50,000
50,000

30. YELLOW COMPANY – Transaction 7
YELLOW COMPANY REPAID LOAN RS 25,000
Dr CASH (ASSET)
Cr
Capital 50,000 Furniture 10,000
Loan 75,000 Creditor
Debtor 60,000 50,000
Loan
25,000
Dr MRS RAMASWAMY LOAN(EQUITY AND LIABILITY)
Cr
Cash Cash Rs
25,000 75,000

31. GREEN COMPANY
RECOLLECT HOW MANY T – ACCOUNTS HAVE WE PREPARED
1. CASH ACCOUNT (Asset)
2. RAMASWAMY CAPITAL ACCOUNT (Liability)
3. MRS RAMASWAMY LOAN ACCOUNT (Liability)
4. FURNITURE ACCOUNT(Asset)
5. STOCK ACCOUNT (Asset)
6. CREDITOR ACCOUNT (Liability)
7. DEBTOR ACCOUNT (Asset)
8. COST OF GOODS SOLD ACCOUNT (Expense)
9. SALES ACCOUNT (Income)

32. IN THE BOOKS OF WOODCRAFT COMPANY

33. IN THE BOOKS OF WOODCRAFT COMPANY
1. Sept 1, Began business by investing cash Rs 10,000 in company’s share capital.
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000
DR 2. CAPITAL A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX By Cash 10,000

34. IN THE BOOKS OF WOODCRAFT COMPANY
2. Sept 4, Paid two months rent in advance for a shop Rs 2,000.
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000 4.9.XX By Rent advance 2,000
DR 3. RENT IN ADVANCE A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
4.9.XX To Cash 2,000
Capital account (2) opened earlier continues.

35. IN THE BOOKS OF WOODCRAFT COMPANY
3. Sept 5, Bought equipment for cash Rs 1,200.
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000 4.9.XX By Rent advance 2,000
5.9.XX By Equipment 1,200
DR 4. EQUIPMENT A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
5.9.XX To Cash 1,200
Capital account (2), Rent in advance account (3) opened earlier continues.

36. IN THE BOOKS OF WOODCRAFT COMPANY
4. Sept 7, Bought supplies on credit, Rs 700
DR 5. SUPPLIES A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
7.9.XX To Creditors 700
DR 6. CREDITORS A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
7.9.XX By Supplies 700
Capital account (2) , Rent in advance account (3), Cash account (1), Equipment account (4)
opened earlier continues.

37. IN THE BOOKS OF WOODCRAFT COMPANY
5. Sept 10, Received payment for remodeling a kitchen Rs 8,600
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000 4.9.XX By Rent advance 2,000
10.9.XX To Revenue 8,600 5.9.XX By Equipment 1,200
DR 7. REVENUE FROM SERVICE A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
10.9.XX By Cash 8,600
Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account
(5), Creditors account (6) opened earlier continues.

38. IN THE BOOKS OF WOODCRAFT COMPANY
6. Sept 14, Paid for advertisement that appeared in local newspaper Rs 1,400.
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000 4.9.XX By Rent advance 2,000
10.9.XX To Revenue 8,600 5.9.XX By Equipment 1,200
14.9.XX By Advertisement 1,400
DR 8. ADVERTISEMENT A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
14.9.XX To Cash 1,400
Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account
(5), Creditors account (6), Revenue account (7) opened earlier continues.

39. IN THE BOOKS OF WOODCRAFT COMPANY
7. Sept 17, Received payment for furnishing office room Rs 11,200
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000 4.9.XX By Rent advance 2,000
10.9.XX To Revenue 8,600 5.9.XX By Equipment 1,200
17.9.XX To Revenue 11,200 14.9.XX By Advertisement 1,400
DR 7. REVENUE FROM SERVICE A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
10.9.XX By Cash 8,600
17.9.XX By Cash 11,200
Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account
(5), Creditors account (6), Advertisement account (8) opened earlier continues.

40. IN THE BOOKS OF WOODCRAFT COMPANY
8. Sept 23, Billed customers for work done other than on cash terms Rs 13,100
DR 7. REVENUE FROM SERVICE A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
10.9.XX By Cash 8,600
17.9.XX By Cash 11,200
23.9.XX By Debtors 13,100
DR 9. DEBTORS A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
23.9.XX To Revenue 13,100
Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account
(5), Creditors account (6), Advertisement account (8) , Cash account (1) opened earlier
continues.

41. IN THE BOOKS OF WOODCRAFT COMPANY
9. Sept 25, Paid wages to assistant Rs 1,500
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000 4.9.XX By Rent advance 2,000
10.9.XX To Revenue 8,600 5.9.XX By Equipment 1,200
17.9.XX To Revenue 11,200 14.9.XX By Advertisement 1,400
25.9.XX By Wages 1,500
DR 10. WAGES A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
25.9.XX To Cash 1,500
Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account
(5), Creditors account (6), Revenue account (7), Advertisement account (8) , Debtors account
(9) opened earlier continues.

42. IN THE BOOKS OF WOODCRAFT COMPANY
10. Sept 28, Paid electricity charges Rs 240
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000 4.9.XX By Rent advance 2,000
10.9.XX To Revenue 8,600 5.9.XX By Equipment 1,200
17.9.XX To Revenue 11,200 14.9.XX By Advertisement 1,400
25.9.XX By Wages 1,500
28.9.XX By Electricity 240
DR 11. ELECTRICITY CHARGES A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
28.9.XX To Cash 240
Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account
(5), Creditors account (6), Revenue account (7), Advertisement account (8) , Debtors account
(9), Wages account (10) opened earlier continues.

43. IN THE BOOKS OF WOODCRAFT COMPANY
11. Sept 29, Received from customers billed amount of Rs 4,800
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000 4.9.XX By Rent advance 2,000
10.9.XX To Revenue 8,600 5.9.XX By Equipment 1,200
17.9.XX To Revenue 11,200 14.9.XX By Advertisement 1,400
29.9.XX To Debtors 4,800 25.9.XX By Wages 1,500
28.9.XX By Electricity 240
DR 9. DEBTORS A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
23.9.XX To Revenue 13,100 29.9.XX By Cash 4,800
Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account
(5), Creditors account (6), Revenue account (7), Advertisement account (8) , Wages account
(10), Electricity account (11) opened earlier continues.

44. IN THE BOOKS OF WOODCRAFT COMPANY
12. Sept 30, Paid a dividend Rs 2,500
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000 4.9.XX By Rent advance 2,000
10.9.XX To Revenue 8,600 5.9.XX By Equipment 1,200
17.9.XX To Revenue 11,200 14.9.XX By Advertisement 1,400
29.9.XX To Debtors 4,800 25.9.XX By Wages 1,500
28.9.XX By Electricity 240
30.9.XX By Dividend 2,500
DR 12. DIVIDEND A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
30.9.XX To Cash 2,500
Capital account (2) , Rent in advance account (3), Equipment account (4), Supplies account
(5), Creditors account (6), Revenue account (7), Advertisement account (8) , Wages account
(10), Electricity account (11), Debtors account (9) opened earlier continues.

45. IN THE BOOKS OF WOODCRAFT COMPANY
Ascertaining the closing balance
DR 1. CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
1.9.XX To Capital 10,000 4.9.XX By Rent advance 2,000
10.9.XX To Revenue 8,600 5.9.XX By Equipment 1,200
17.9.XX To Revenue 11,200 14.9.XX By Advertisement 1,400
29.9.XX To Debtors 4,800 25.9.XX By Wages 1,500
28.9.XX By Electricity 240
30.9.XX By Dividend 2,500
30.9.XX By Balance 25,760
34,600 34,600
DR 2. CAPITAL A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
30.9.XX To balance 10,000 1.9.XX By Cash 10,000
10,000 10,000

46. IN THE BOOKS OF WOODCRAFT COMPANY
Ascertaining the closing balance
DR 3. RENT IN ADVANCE A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
4.9.XX To Cash 2,000 30.9.XX By Balance 2,000
2,000 2,000
DR 4. EQUIPMENT A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
5.9.XX To Cash 1,200 30.9.XX By Balance 1,200
1,200 1,200
DR 5. SUPPLIES A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
7.9.XX To Creditors 700 30.9.XX By Balance 700
700 700
DR 6. CREDITORS A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
30.9.XX To balance 700 7.9.XX By Supplies 700
700 700

47. IN THE BOOKS OF WOODCRAFT COMPANY
Ascertaining the closing balance
DR 7. REVENUE FROM SERVICE A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
30.9.XX To balance 32,900 10.9.XX By Cash 8,600
17.9.XX By Cash 11,200
23.9.XX By Debtors 13,100
32,900 32,900
DR 8. ADVERTISEMENT A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
14.9.XX To Cash 1,400 30.9.XX By Balance 1,400
1,400 1,400
DR 9. DEBTORS A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
23.9.XX To Revenue 13,100 29.9.XX By Cash 4,800
30.9.XX By Balance 8,300
13,100 13,100

48. IN THE BOOKS OF WOODCRAFT COMPANY
Ascertaining the closing balance
DR 10. WAGES A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
25.9.XX To Cash 1,500 30.9.XX By Balance 1,500
1,500 1,500
DR 11. ELECTRICITY CHARGES A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
28.9.XX To Cash 240 30.9.XX By Balance 240
240 240
DR 12. DIVIDEND A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
30.9.XX To Cash 2,500 30.9.XX By Balance 2,500
2,500 2,500

49. TRIAL BALANCE – WOODCRAFT COMPANY
PARTICULARS DEBIT (RS.) CREDIT (RS.)
CASH 25,760
CAPITAL 10,000
PREPAID RENT 2,000
EQUIPMENT 1,200
SUPPLIES 700
CREDITORS 700
REVENUE 32,900
ADVERTISEMENT 1,400
DEBTORS 8,300
WAGES 1,500
ELECTRICITY 240
DIVIDEND 2,500
43,600 43,600

50. VENU’S MUSIC CORNER

51. VENU’S MUSIC CORNER - PROFIT AND LOSS ACCOUNT
PARTICULARS RS RS
Revenues from services 12,660
Expenses
Salaries 5,600
Electricity 410
Advertisement 130
Rent 300 6,440
Profit for the year 6,220

52. VENU’S MUSIC CORNER – BALANCE SHEET
PARTICULARS
ASSETS
CASH 570
DEBTORS 1,210
SUPPLIES 2,190
EQUIPMENT 25,500 29,470
LIABILITIES
CREDITORS 2,510
UNEARNED INCOME 600
EQUITY
VENUGOPAL CAPITAL
Opening balance 21,140
Add: Additions during the year 3,000
Add: Profit 6,220
30,360
Less: Drawings 4,000 26,360 29,470

53. RELIANCE TENNIS LIMITED

54. IN THE BOOKS OF RELIANCE TENNIS LIMITED
Ascertaining the closing balance
DR CASH A/C CR
DATE PARTICULARS J.F AMOUNT(RS) DATE PARTICULARS J.F AMOUNT (RS)
01.03.12 Balance 5,000 02.03.12 Salary 2,500
01.03.12 Revenue 3,600 03.03.12 Bank loan repaid 2,000
12.03.12 Unearned revenue 1,400 06.03.12 Supplies 700
26.03.12 Receivable 7,850 08.03.12 Maintenance 900
09.03.12 Advertisement 300
14.03.12 Electricity 650
28.03.12 Creditors 440
29.03.12 Prepaid Insurance 830
30.03.12 Dividend 1,100
31.03.12 Balance c/d 8,430
17,850 17,850
01.04.12 Balance b/d 8,430

55. RELIANCE TENNIS LIMITED – TRIAL BALANCE
PARTICULARS DEBIT (RS.) CREDIT (RS.)
Tennis court 20,000
Accounts receivable 1,180
Cash 8,430
Supplies 4,100
Unearned revenue 4,200
Bank loan payable 4,000
Share capital 23,000
Dividends 3,200
Revenue from services 19,740
Electricity expenses 1,480
Insurance expenses 2,720
Prepaid insurance 830
Repairs & maintenance 2,100
Salaries 6,600
Advertisement 300
50,940 50,940

56. ANUPAMA SECURITIES LTD

57. ANUPAMA SECURITIES LTD
Revenue
Broking commission earned (24,630 + 910) 25,540
Expenses
Salaries expenses (6,400+340) 6,740
Electricity expenses 720
Telephone expenses 910
Rent expenses (4,400+400) 4,800
Interest on loan (20,000 @ 15% for 4 months) 1,000
Supplies (1,430- 680) 750
Depreciation on computer 3,600 18,520
PBT 7,020
Less: Tax @ 50% 3,510
PAT 3,510

58. VASAN VIDEO LIMITED

59. VASAN VIDEO LTD
Capital 20,000
Revenue 22,590
Supplies 1,540
Debtor 970
Insurance 1,200
Creditor 6,450
Expenses 2,210
Rent 3,000
Advance rent 500
Salary 9,620
Unearned revenue 1,300
Camera 30,000
Salary payable 380
Electricity 1,005
Telephone 450
Prepaid insurance 1,200
Electricity charges payable 95
Bank charges 880
51,695 51,695

60. JOURNAL
WORD JOURNAL HAS BEEN DERIVED FROM THE FRENCH WORD
‘JOUR’ WHICH MEANS A DAY. THEREFORE JOURNAL MEANS DAILY
RECORD.
JOURNAL IS A BOOK IN WHICH DAY TO DAY TRANSACTIONS ARE
RECORDED.
IN JOURNAL EACH TRANSACTION IS CLASSIFIED INTO DEBIT AND
CREDIT ASPECT AND BOTH THE ASPECT ARE RECORDED
TOGETHER WITH EXPLANATION FOR EACH ENTRY.
THE PROCESS OR ACT OF RECORDING A TRANSACTION IN THE
JOURNAL IS CALLED JOURNALISING. THE RECORD OF A
TRANSACTION IN THE JOURNAL IS CALLED JOURNAL ENTRY.

61. JOURNAL FORMAT
DATE PARTICULARS L.F DEBIT (RS.) CREDIT (RS.)

62. FINANCIAL STATEMENTS
STAGES IN ACCOUNTING
1)Journal
2)Ledger
3)Trial Balance to verify the accuracy of ledger
account balance
4)Preparation of financial statements

63. TYPES OF BUSINESS ESTABLISHMENTS
TYPES
1)TRADING CONCERNS
2)MANUFACTURING CONCERNS
Trading concerns purchase finished goods from market and sell it at a profit. Such
firm prepare
1)Trading account
2)Profit and loss account
3)Balance sheet
Manufacturing concerns are those which purchase raw material and effect certain
productive activities on it and convert the same into marketable goods and then
sell it. Such concern while preparing final accounts prepare
1)Manufacturing account
2)Trading account
3)Profit and loss account
4)Balance sheet

64. TRADING & MANUFACTURING ACCOUNT
Particulars Amount Particulars Amount
To Opening stock By Sales Less Returns
To Purchases Less Returns By Closing stock
To Direct expenses By Gross Loss c/d to profit and
loss account
To Gross profit c/d to profit
and loss account
TOTAL XXX TOTAL XXX

65. PROFIT AND LOSS ACCOUNT FORMAT
Particulars Amount Particulars Amount
To Gross loss c/d from By Gross profit c/d from trading
Trading account account
To Indirect expenses By Interest income
To Interest expenses By Miscellaneous income
To Depreciation By Net loss transferred to capital
account
To Net profit transferred to
capital account
TOTAL XXX TOTAL XXX

66. BALANCE SHEET
LIABILITIES Amount ASSET Amount
CAPITAL FIXED ASSETS
LIABILITIES CURRENT ASSETS
TOTAL XXX TOTAL XXX

67. DIFFERNCE – TRADING AND P&L ACCOUNT
TRADING ACCOUNT PROFIT AND LOSS ACCOUNT
FIRST STAGE OF FINAL ACCOUNT SECOND STAGE OF FINAL ACCOUNT
IT RECORDS SALES AND DIRECT THIS ACCOUNT RECORDS GROSS
COSTS PROFIT, INCOMES, INDIRECT COSTS
AND LOSSES
IT DISCLOSES GROSS PROFIT OR IT DISCLOSES NET PROFIT OR NET
GROSS LOSS LOSS

68. DIFFERNCE BETWEEN GP AND NP
GROSS PROFIT NET PROFIT
It is the difference between sales and direct It is the difference between gross profit and
costs indirect expenses
Gross profit is transferred to profit and loss Net profit is transferred to capital account
account
Drawing of a owner does not depend on the Drawings of the owner depends on the net
gross profit profit

69. ENGLISH SYSTEM OF ACCOUNTING
CLASSIFICATION OF ACCOUNTS
1) PERSONAL ACCOUNTS
2) REAL ACCOUNTS
3) NOMINAL ACCOUNTS

70. PERSONAL ACCOUNTS
ACCOUNTS OF PHYSICAL PERSONS
EG., NAVEEN’S ACCOUNT
ACCOUNTS OF LEGAL PERSONS
EG., CANARA BANK’S ACCOUNT
REPRESENTATIVE PERSONAL ACCOUNTS
EG., OUTSTANDING EXPENSES

71. REAL & NOMINAL ACCOUNTS
REAL ACCOUNTS REPRESENT THE PROPERTY OF THE
BUSINESS.
NOMINAL ACCOUNTS REPRESENT LOSSES OR EXPENSES
OR INCOMES OR GAINS OF A BUSINESS.

72. MATCH THE FOLLOWING
A B
A RAMESH 1 REAL
B DENA BANK 2 PERSONAL
C RENT 3 NOMINAL
D COMPUTER 4 REAL
E LAND 5 NOMINAL
F DISCOUNT 6 PERSONAL

73. CONCEPT OF DEBIT AND CREDIT
PERSONAL DEBIT THE RECEIVER
ACCOUNTS CREDIT THE GIVER
REAL ACCOUNTS DEBIT WHAT COMES IN
CREDIT WHAT GOES OUT
NOMINAL DEBIT ALL EXPENSES AND LOSSES
ACCOUNTS CREDIT ALL INCOMES AND GAINS