Transcript Foundations of Accounting

Foundations of Accounting
Accounting Process
Dr. Arun Lende
Faculty – Accounting and Finance
IBS- Ahmadabad
Accounting Process
Vouchers
Transactions
•
Ledger Posting
Subsidiary Books
–
–
–
–
–
–
–
–
Balance Sheet
Journal Entries
Purchase book
Sales book
Purchase return book
Sales return book
Cash book
Bills receivable book
Bills payable book
Journal proper
Profit & Loss
Account
Trial Balance
TradingAccount
Adjustments
Transactions
Cash
Transactions
Non-cash
Transactions
• Word “cash” is
mention
• Name of person
is not given
• Word “credit” is
mention
• Name of person
is given
Exercise –
Date
page 20
Transactions
Rs.
C/NC
10000
C
Jan. 1
Narasimha started business with cash as capital
Jan. 5
Credit sales to Hari
3200
NC
Jan. 5
Brought goods from Kamal on credit
1920
NC
Jan. 6
Brought goods from Jaimal
2300
NC
Jan. 8
Brought office furniture for cash from Mod. furniture
3050
C
Jan. 12 Paid cartage to Golden Company
70
C
Jan. 15 Paid carriage outward to Himid
20
C
Jan. 17 Paid trade expenses
10
C
200
C
50
C
1000
C
150
C
30
C
300
C
Jan. 18 Paid advertisement to Anil Agencies
Jan. 19 Received interest form Anil
Jan. 20 Deposited cash in to bank
Jan. 22 Paid rent
Jan. 27 Paid insurance premium
Jan. 29 Paid salary to Narendra a clerk
Cash Transactions
Cash comes in
First effect
Cash goes out
Second effect
• To find second effect ask • To find first effect ask
following questions. You
following questions. You
will get answer only to
will get answer only to
any one question
any one question
– Who is the giver?
– What goes out?
– Which is income or gain?
– Who is the receiver?
– What comes in?
– Which is expense or loss?
How to write a journal entry?
Jan. 1
1st effect – cash comes in
10000
Jan. 1
2nd effect – Narasimha is the giver
10000
Jan. 8
1st effect – furniture comes in
3050
Jan. 8
2nd effect – cash goes out
3050
Date
Particulars
Jan. 1
Cash a/c
LF
Dr.
To Narasimha’s Capital a/c
Debit [Rs] Credit [Rs]
10000
-
-
10000
[being cash brought in to business as capital]
Jan. 8
Furniture a/c
Dr.
To Cash a/c
[being furniture purchased for cash]
3050
3050
Non-Cash Transactions
First effect
Second effect
• To find first effect ask
• To find second effect ask
following questions. You
following questions. You
will get answer only to
will get answer only to
any one question
any one question
– Who is the receiver?
– What comes in?
– Which is expense or loss?
– Who is the giver?
– What goes out?
– Which is income or gain?
How to write a journal entry?
Jan. 5
1st effect – Hari is the receiver
3200
Jan. 5
2nd effect – Goods goes out
3200
Jan. 8
1st effect – Goods comes in
1920
Jan. 8
2nd effect – Kamal is the giver
1920
Date
Particulars
Jan. 5
Hari’s a/c
LF
Debit [Rs] Credit [Rs]
Dr.
3200
To Sale of goods a/c
-
3200
[being good sold for credit]
Jan. 8
Purchase of goods a/c
To Kamal’s a/c
[being goods purchased on credit]
Dr.
1920
1920
Ledger posting
Date
Particulars
Jan. 1
Cash a/c
LF
Debit [Rs] Credit [Rs]
Dr.
To Narasimha’s Capital a/c
10000
-
-
10000
[being cash brought in to business as capital]
Dt.
Particulars
JF
Amt. [Rs] Dt.
Particulars
JF Amt. [Rs]
Cash A/c
Jan1
To Narasimha’s cap.
10000
Narasimha’s capital A/c
Jan1
By cash a/c
10000
Ledger posting
Date
Particulars
Jan. 1
Cash a/c
LF
Debit [Rs] Credit [Rs]
Dr.
To Narasimha’s Capital a/c
10000
-
-
10000
[being cash brought in to business as capital]
Jan. 8
Furniture a/c
Dr.
3050
To Cash a/c
3050
[being furniture purchased for cash]
Dt.
Particulars
JF
Amt. [Rs] Dt.
Particulars
JF Amt. [Rs]
Cash A/c
Jan1
To Narasimha’s cap.
10000 Jan 8
By Furniture a/c
3050
Narasimha’s capital A/c
Jan1
Furniture A/c
Jan8
To cash a/c
3050
By cash a/c
10000
Balancing a ledger account
Dt.
Particulars
JF
Amt. [Rs] Dt.
Particulars
JF Amt. [Rs]
Cash A/c
Jan1
To Narasimha’s cap.
Jan19 To interest a/c
10000 Jan 8
By furniture a/c
3050
50 Jan12
By cartage a/c
70
Jan15
By carriage a/c
20
Jan17
By trade exp a/c
10
Jan18
By advt.exp a/c
200
Jan 20 By bank a/c
Jan22
By rent a/c
Jan27
By ins. pre. a/c
Jan29
By salary a/c
Jan31
By balance c/f
10050
Debit side and Credit side of an account
Debit balance and Credit balance of an account
1000
150
30
300
5220
10050
Trial Balance as on 31st Jan……
Debit accounts
LF
Amt[Rs]
Credit accounts
LF
Amt [Rs]
Cash a/c
5220
Narasimha’s cap a/c
Hari ‘s a/c
3200
Sales a/c
3200
Purchase a/c
4220
Kamal ‘s a/c
1920
Furniture a/c
3050
Jaimal ‘s a/c
2300
Cartage a/c
70
Interest a/c
50
Carriage a/c
20
Trade expense
10
Advertisement expense a/c
200
Bank a/c
1000
Rent a/c
150
Insurance premium a/c
Salary a/c
TOTAL
10000
30
300
17470
TOTAL
17470
Adjustments
• Closing stock valued at Rs 1200
• Deprecation on furniture charged at 10%
under SLM
• Salary out standing Rs. 100
• Pre paid insurance Rs. 10
• Provision for bad debts at 10% on debtors
Preparing Final Accounts
• Rules
1. Debit side items of trial balance will be posted to
debit sides of final accounts and credit side
items of trial balance will be posted to credit
sides of the final accounts.
2. All adjustments will have two effects one debit
and one credit of equal amount
Preparing Final Accounts
Dr.
Trading –Profit & Loss Account for period …………….
Particulars
Amt. [Rs]
Direct expenses
Particulars
Cr.
Amt. [Rs]
Direct incomes
Trading account show Gross profit /Gross loss
Indirect expenses
Indirect incomes
Profit & Loss account show Net profit /Net loss
Cr.
Balance sheet as on…………….
Capital and Liabilities
Amt. [Rs]
Properties and Assets
Balance sheet show the positions total affairs of the business
Dr.
Amt. [Rs]
Trial Balance as on 31st Jan……
Debit accounts
Amt[Rs]
Credit accounts
Cash a/c
b/s
5220
Narasimha’s cap a/c
Hari ‘s a/c
b/s
3200
Sales a/c
Purchase a/c
T
4220
Furniture a/c
b/s
Cartage a/c
Amt [Rs]
b/s
10000
T
3200
Kamal ‘s a/c
b/s
1920
3050
Jaimal ‘s a/c
b/s
2300
T
70
Interest a/c
P&L
50
Carriage a/c
P&L
20
Trade expense
P&L
10
Advertisement expense a/c
P&L
200
Bank a/c
b/s
1000
Rent a/c
P&L
150
Insurance premium a/c
P&L
30
Salary a/c
P&L
300
TOTAL
17470
TOTAL
17470
Preparing Final Accounts [no adjustments]
Trading –Profit & Loss Account for period …………….
Particulars
Purchases
Cartages
Amt. [Rs]
Particulars
4220 Sales
4290
20
Trading expenses
10
Adverting expenses
200
Rent
150
Salary
1090
4290
1090 Interest
Carriages
Insurance
3200
70
Gross loss transfer to P &L
Gross loss transfer form T. A/c
Amt. [Rs]
50
30
300
Net loss transfer to b/s
1800
1750
1800
Balance sheet as on…………….
Capital and Liabilities
Narasimha’s cap a/c
Amt. [Rs]
Properties and Assets
Amt. [Rs]
10000
Furniture
3050
1750
8250 Hari’s a/c
3200
Kamal ‘s a/c
1920 Bank
1000
Jaimal ‘s a/c
2300 Cash
5220
Less : Net loss
12470
12470
Preparing Final Accounts [with adjustments]
Trading –Profit & Loss Account for period …………….
Particulars
Purchases
Cartages
Gross profit transfer to P &L
Amt. [Rs]
Particulars
4220 Sales
70 Closing stock
Amt. [Rs]
3200
1200
110
4400
4400
Carriages
20 Gross profit transfer from Tr. a/c
Trading expenses
10 Interest
Adverting expenses
200
Rent
150
Depreciation
305
Insurance - prepaid
20
Salary + outstanding
400
Bad debts
320
Net loss transfer to b/s
1425
110
50
1265
1425
Balance sheet as on…………….
Capital and Liabilities
Amt. [Rs]
Narasimha’s cap a/c
10000
Less : Net loss from P&L
1265
Properties and Assets
Furniture
8735 Less :depreciation
Amt. [Rs]
3050
305
2745
Hari’s a/c
3200
Kamal ‘s a/c
1920 Less : bad debts
320
Jaimal ‘s a/c
2300 Bank
1000
100 Cash
5220
Outstanding salary
Closing stock
Pre-paid insurance
13055
2880
1200
10
13055