1. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA
POSTGRADUATE DIPLOMA IN BUSINESS AND FINANCE / Principles of Financial and Cost Accounting
Thilanka Warnakulasooriya B.Com Special (Col), ACA

2. (Events & Transactions) (Financial Statements)
Accounting Process
Accounting Input
(Events & Transactions)
Accounting Process
Accounting out put
(Financial Statements)
Every Business transaction has two fold aspects called Debit & Credit.
Double Entry system transactions are recorded in terms of debits and credits. Since a debit in one account will be offset by a credit in another account

3. Accounting Equation
Mathematical presentation of the relationship between resource providers and resource holders .
At any given time aggregation of the equity & the total liabilities of an accounting unit should be equal to total assets of the Organization.
Ownership can be divided in to two
Internal Ownership or capital
External Ownership or Liabilities
Assets= Liabilities

4. Assets= Capital + Liabilities
Ownership can be divided in to two
Internal Ownership or capital
External Ownership or Liabilities
Therefore Accounting Equation is
Assets= Capital + Liabilities

5. Ex: Show how following transactions in affect Accounting Equation
Mr. Kamal Start a Business by investing cash of 100,000 , Land of 150,000 ,plant & machinery of Rs. 200,000.
Purchase goods of Rs. 50,000 on cash
Purchase goods of Rs. 100,000 on credit
Sold goods worth of Rs. 10,000 for Rs. 15,000 on cash
Paid Utility bills of Rs. 5000
Drawing cash of Rs, 6000 for personal use.
Settled Rs. 20,000 of Creditors
Sold goods worth of 12,000 for 16,000 on credit basis
Received Rs, 10,000 from Debtors
Drawing Rs.5,000 goods for personal use

6. Accounts
Accounts use to record transactions. Normally called ledger accounts
Type of Accounts
Asset Accounts
Liability Accounts
Capital Accounts
Income Accounts
Expense Accounts

7. Format of Ledger Account
T account
debit Credit
Date
Description
Page No
Value

8. Double Entry Principle
According to the double entry Principle each transactions gives a dual side impact and those dual side are recorded in the Ledger Account
Assets/ Expenditure account
Debit Credit
Increase ( + ) Decrease ( - ) Capital/ Liabilities/ Income Accounts
Debit Credit Decrease ( -) Increase (+)

9. Generally the side in Higher Value
Fill The following Table
Ledger Account
Increase
Decrease
Generally the side in Higher Value
Asset Account
Expense Account
Liability Account
Income Account
Capital Account

10. Generally the side in Higher Value
Fill The following Table
Ledger Account
Increase
Decrease
Generally the side in Higher Value
Asset Account
Expense Account
Liability Account
Income Account
Capital Account

11. Ex: Write the double entry for following transitions
Transaction
Relevant Ledger Account
Debit
Credit
Owner invest Rs. 10,000 cash
Purchase Machinery for Rs. 12,000
Paying Electricity bill of Rs 2,000
Purchase Rs, 17,000 goods on cash basis
Receipt of Rs. 12,000 from debtors
Settle Rs, 5000 Creditors
Obtain a bank loan of Rs, 50,000
Write of bad debt of Rs, 500
Credit sales of Rs. 50,000
Drawing of cash of Rs. 10,000
Credit Purchases of goods of Rs,. 40,000
Discounts given to debtors Rs. 2,000

12. Accounting Process Indentify Transaction & events
Classifying Transactions & events
Recording in primary books
Preparing adjusted trail balance
Preparing the Trail balance
Brought forwarding the balances to next year
Prepare Financial Statements
Accounting the transactions

13. Transactions initiating through Source Documents includes transaction values and other relevant information
i.e: Receipt, Invoice
Data captured in source documents is recorded in the Primary books
Recording batch total or individual figures in ledger account
Prepare financial statements from balances obtained by balancing the general ledger.

14. Primary Books or Journal
Transaction
Source Document
Primary Books or Journal
Ledger Account
Receipt of Cash
Receipt
Cash Book
Cash Payment
Payment Voucher
Credit Purchase
Purchase Invoice
Purcahse Journal/ Purchase day Book
Purchse Account
Purchase Returns
Debit Note
Purcahse Return Journal/ Return outward day book
Purchse return Account
Credit Sales
Sales Invoice
Sales Journal/ Sales day book
Sales Account
Sales Return
Credit Note
Sales Return Journal/ Return inward day book
Sales return Account
Petty cash expenses
Petty Cash Voucher
Petty Cash book
Purchase Fixed Assets, Bad debts, etc.
Journal Voucher
General Ledger
Respective ledger accounts

15. Format of Three Columnar Cash book

16. Petty cash book

17. Credit Transactions Purchase day Book Return outward day book
Sales day book
Return inward day book
General Journal

18. Purchase day Book

19. Sales day book

20. Return outward day book

21. Return inward day book

22. General Journal