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Accounting Introduction to snistforum.com. Backdrop of Accounting Accounting did exist as long as 2600 B.C. In India thousand years ago accounting was.

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Presentation on theme: "Accounting Introduction to snistforum.com. Backdrop of Accounting Accounting did exist as long as 2600 B.C. In India thousand years ago accounting was."— Presentation transcript:

1 Accounting Introduction to snistforum.com

2 Backdrop of Accounting Accounting did exist as long as 2600 B.C. In India thousand years ago accounting was being practiced, ‘Kautilya’s Arthashastram’ Modern Accounting came into existence in 17 th Century Father of modern accounting is Fra Luka Paciolo, Franciscan monk, in 1494 Premier Accounting Institutions: CAI, ICWAI, IASC, ASB etc…. snistforum.com

3 Definition of Accounting AICPA : “Accounting as an art of recording, classifying and summarizing in a significant manner, and in terms of money and events which are, in part at least, of a financial character and interpreting the result thereof” AAA : “Accounting as the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of the information” snistforum.com

4 Simple Definition of Accounting “Accounting system is a means of collecting, summarizing, analyzing and reporting in monetary terms and transactions, the information about the business” “Accounting is a means of measuring and reporting the results of economic activities of a business” “Accounting is a systematic process of collecting, measuring, recording, summarizing, analyzing and reporting of all monetary transaction of a business” snistforum.com

5 Significance of Accounting To maintain its Own Records of Business To Monitor the business activities To calculate Profit or Loss for a given period To fulfill Legal Obligations To show Financial Position for a given period To communicate Information to Interested Parties snistforum.com

6 Accounting Cycle Transacti ons Journal Entry Ledger Posting Trial Balance Trading Account Profit & Loss Account Balance Sheet snistforum.com

7 Double Entry System There are two systems of book-keeping and recording financial transactions 1. Single Entry System (Unorganized, Unscientific) 2. Double Entry System (Organized, Scientific) Double Entry book keeping is a scientific way of recording transactions based on the fact that for every debit, there is a corresponding credit. Finally Total Debits equal to Total Credits for all transaction over a period of time Ex: Suppose GMR firm buys Machine worth of Rs.1,00,000/- snistforum.com

8 Types of Accounts Personal Accounts Natural Personal Accounts (Ex: Ramu A/c, Rani A/c) Artificial Personal Accounts (Ex: Indian Bank A/c, General Mills A/c) Representative Personal Accounts (Ex: Outstanding Rent A/c, Outstanding Salaries A/c) Real Accounts Tangible Real Accounts (Ex: Building A/c, Furniture A/c, Sale A/c, Cash A/c, Machine A/c, Purchase A/c ) Intangible Real Accounts (Ex: Patent A/c, Goodwill A/c) Nominal Accounts Expenses and Losses Accounts ( Ex: Rent A/c, Insurance A/c, Dividend A/c, Salaries A/c, Advertising A/c, Depreciation A/c, Interest A/c) Income and Gains Accounts ( Ex: Interest Received A/c, Discount Received A/c) snistforum.com

9 Golden Rules of Accounting Debit the Receiver Credit the Giver Personal Accounts Debit what comes In Credit what goes Out Real Accounts Debit all Expenses & Losses Credit all Gains & Incomes Nominal Accounts snistforum.com

10 Prepare Journal entries for given transactions Problem 1 : Journalize the following transactions in the book of Suraj Pvt. Limited Company. 1. The firm brought furniture worth Rs. 4000/- for cash on 10.09.2014 2. Paid salaries Rs. 20,000/- to the employees on 12.09.2014 3. Sold good worth Rs. 5000/- on credit to Mr. Madhu on 15.09.2014 snistforum.com

11 Example 1 to Application of Golden Rules Transaction 1: The firm brought furniture worth Rs. 4000/- for cash on 10.09.2014 Furniture A/cCash A/c Real Account Debit what comes In Credit what goes Out Debit what comes In Credit what goes Out Debit (Dr.) the Furniture A/c Credit (Cr.) The Cash A/c snistforum.com

12 Example 2 to Application of Golden Rules Transaction 2: Paid salaries Rs20,000/- to the employees on 12.09.2014 Salaries A/cCash A/c Nominal AccountReal Account Debit all Expenses & Losses Credit all Gains & Incomes Debit what comes In Credit what goes Out Debit (Dr.) the Salaries A/c Credit (Cr.) the Cash A/c snistforum.com

13 Example 3 to Application of Golden Rules Transaction 3: Sold good worth Rs. 5000/- on credit to Mr. Madhu on 15.09.2014 Sales A/cMadhu A/c Real AccountPersonal Account Debit what comes In Credit what goes Out Debit the Receiver Credit the Giver Credit (Cr.) The Sales A/c Debit (Dr.) The Madhu A/c snistforum.com

14 Suraj Pvt. Limited Company JOURNALIZATION (Journal Book) DateParticularsL.F. No Amount Dr. Amount Cr. 10.09.2014 Furniture A/c Dr. To Cash A/c (Being furniture purchased on cash ) 4,000.00 ------ ----- 4,000.00 12.09.2014Salaries A/c Dr. To Cash A/c (Being salaries paid to employees by cash) 20,000.00 ------ ----- 20,000.00 15.09.2014Madhu A/c Dr. To Sales A/c (Being goods are sold to Madhu on credit) 5,000.00 ------ ----- 5,000.00 Total29,000.00 snistforum.com

15 Problem 2 : Journalize the following transactions in the books of Akash Limited Company. 1. 1 Jan, 2014 – Akash started business with cash Rs. 50,000 2. 5 Jan, 2014 – He paid into the Bank Rs. 10,000 3. 8 Jan, 2014 – He purchased snistforum.com

16 Accounting Accounting Concepts (rules/regulations) Accounting Conventions (customs/usages) snistforum.com

17 Accounting Concepts Business Entity ConceptGoing Concern ConceptMoney Measurement ConceptCost ConceptAccounting Period Concept Dual Aspect ConceptMatching Cost ConceptRealization Concept snistforum.com

18 Accounting Conventions Full DisclosureMaterialityConsistencyConservatism snistforum.com

19 Trial Balance Problems - Solutions on snistforum.com

20 Rules for Trail Balance Expenses Losses Assets Debit Aspects Income Gain Liability Credit Aspects snistforum.com

21 Illustration V: Solution: Trial Balance as on 30-6-2003 ParticularsDebit (Rs.)Credit (Rs.) Opening Stock1800.00 Wages1000.00 Sales 12000.00 Bank Loan 440.00 Coal Coke (RM)300.00 Purchases7500.00 Repairs200.00 Carriage Expenses150.00 Income Tax150.00 Debtor2000.00 Leasehold Premises600.00 Cash in hand20.00 Plant750.00 Machinery Tools180.00 Lighting230.00 Creditor 800.00 Capital 4000.00 Misc. Receipts 60.00 Office Salaries250.00 Office Furniture60.00 Patents100.00 Goodwill1500.00 Cash at Bank510.00 TOTAL17300.00 snistforum.com

22 Final Accounts Problems - Solutions on snistforum.com

23 Prepare Final Accounts for the year ended 31.12.2001 from given trial balance ParticularsDebit (Rs.)Credit (Rs.) Furniture6500 Plant and Machinery60000 Buildings75000 Capital125000 Bad Debts1750 Reserves for Bad Debts3000 Sundry Debtors40000 Sundry Creditors24000 Stock (1.1.2001)34600 Purchases54750 Sales154500 Bank Overdraft28500 Sales Returns2000 Purchase Returns1250 Advertising4500 Interest1080 Commission Received3750 Cash in hand6500 Salaries33000 General Expenses7820 Car Expenses9000 Tax and Insurance3500 TOTAL 340000 Closing stock valued at Rs. 50000 snistforum.com

24 Prepare Final Accounts for the year ended 31.12.2001 from given trial balance ParticularsDebit (Rs.)Credit (Rs.) Furniture6500 Plant and Machinery60000 Buildings75000 Capital125000 Bad Debts1750 Reserves for Bad Debts3000 Sundry Debtors40000 Sundry Creditors24000 Stock (1.1.2001)34600 Purchases54750 Sales154500 Bank Overdraft28500 Sales Returns2000 Purchase Returns1250 Advertising4500 Interest1080 Commission Received3750 Cash in hand6500 Salaries33000 General Expenses7820 Car Expenses9000 Tax and Insurance3500 TOTAL 340000 Closing stock valued at Rs. 50000 snistforum.com

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