1. Accounting Principles, Concepts and Conventions What do you mean by Accounting Principles. According to the American Institute of Public Accountants “ Accounting principles are the general laws or rules adopted or professed as a guide to action. It is a basis of conduct or practice.” Characteristics of Accounting principles: 1.These rules are based on the custom, usages and traditions. 2.These principles are dynamic and not fixed or rigid. 3.They are designed to make accounting data provide objectivity, application, usefulness and simplicity to its users.

2. Kinds of Accounting Principles ConceptsConventions 1.Entity Concept 2.Cost Concept 3.Going Concern Concept 4.Accounting Period Concept 5.Money Measurement 6.Dual Aspect Concept 7.Accounting Equivalent 8.Matching Principle 9.Verifiable Objects 10.Realization Concept 11.Capital Concept 12.Accrual concept 13.True legal position 1.Disclosure Convention 2.Materiality Convention 3.Consistency Convention 4.Conservation Convention

3. Double Entry System Meaning Of Double Entry System: According to William Pickles “ Every business transaction has two fold effects and it affects two accounts.In order to keep a complete record of a transaction, one account is bound to be debited and the other is bound to be credited. Recording this two-fold effect of each transaction is called as Double Entry System”. Characteristics Of Double Entry System: 1.Effects on two accounts or parties. 2.Simultaneous recording 3.Contra-position of two accounts 4.Definite rules of recording 5.Two aspects of transaction.

4. Objective of Double-Entry System 1.To facilitate the verification of accuracy of accounting. 2.To know the position of profit or loss and the financial results with the help of Trial Balance. 3.To know the progress of the business at the end of each accounting period. 4.To check and control misappropriation and defalcation by employees. 5.To have proper and systematic record of business for future reference.

5. Stages of recording under DES The entire accounting process is divided into 3 main stages: 1.Original Record: The books in which the transaction is recorded for the first time is called as Book of Original Entry. It is also known as Journal. 2.Classification: All the transactions recorded in the journal are sorted into different accounts. The information pertaining to particular individual or party or item in different dates are recorded under one head identified by the name of the person, party or item concern, (also called as account). Such a recording is called Posting in Ledger.Ledger is also called as the Book of Final Entry. 3.Final Accounts: After recording and classification, a summary is drafted to ascertain the position of the business. In this respect, Trial balance, Trading& Profit and Loss a/c and Balance Sheet is prepared. These documents together are termed as Final Accounts.

6. What do you mean by Accounts Accounts denotes the date-wise record of all the dealings pertaining to a particular person, party, property, goods, services, expenses, income, gains and losses in one head at one place according to certain rules. Types of Accounts Natural Person Intangible Assets Tangible Assets Artificial Person Representative person Real Accounts Nominal Accounts Personal Accounts Impersonal Accounts

7. Journal Meaning of Journal:  According to Rolland“Journal is the book of original records in which a businessman enters all his daily transactions, it shows which account is debited and which one is credited.”  According to L.C.Copper “Journal is the book of original record which is kept for the purpose of sorting and classification of transactions, so that the same may be conveniently recorded later on in the ledger.”  The process of recording the transaction in the books of original records is called journalising.

8. Specimen/Proforma Of Journal Explanation of the profoma:  Journal contains 5 columns. 1.Date: In this column the date on which transaction takes place is entered. 2.Particulars: The transaction of the business is recorded in the particulars column based on the rules of journalising. Points to be remembered for recording in the particulars column: - Journal Entries in the Books Of --------- DateParticularsL. F. Debit (Rs.) Credit (Rs.)

9. a)The names of 2 accounts affected in the transaction are written in two lines. b)In the 1 st line, account which is to be debited is written and the abbreviation for debit “Dr.”is suffixed. c)In the second line, the recording starts by leaving a little space from the margin and than the account to be credited is written and it begins with the word “To”. d)Below the credit account in the next line a short description, called as “narration” of the transaction is written in the brackets starting with either “Being” or “For”. e)In the end after the narration a horizontal line in drawn in the particulars to signify the end of the transaction.

10. 3.Ledger Folio (L.F.): Folio means page. Every transaction entered in the journal is posting in the ledger. So in this column the number of page of the ledger, wherein the transaction has been posted, is entered. 4.Debit Amount: This column carries the amount against the account which has been debited. 5.Credit Amount: This column carries the amount against the account which has been credited. Balancing of the Journal The total of both the debit and the credit side of each page is calculated and carried forward to the next page. The balance at the end of the page is indicated by “c/f” which means “carried forward” Or by “b/f” as “brought forward”. The balance in the beginning of the next page is indicated by “b/d” which means “bought down”.

11. Rules Of Debit and Credit Real AccountPersonal AccountNominal Account Dr. What comes in Cr. What goes out Dr. The receiver Cr. The giver Dr. All expenses & losses Cr. All incomes & gains

12. Journal Entries Journalise the following transaction: - 1.1 st Jan: Commenced business with cash Rs. 1,00,000/-, stock Rs. 5,000/- and furniture Rs.13,000/- 2.3 rd Jan: Goods purchased from Hari Rs.8,000/- 3.5 th Jan: Sold goods to Narendra Rs.4,000/- 4.6 th Jan:Goods for Rs.2,000/- bought from Hari was returned. 5.7 th Jan: Sold goods to Zain for cash Rs.6,000/- 6.9 th Jan: Goods worth Rs.1,000/- sold to Narendra were returned by him. 7.10 th Jan: Paid salary to Ashok Rs.1,500/- 8.11 th Jan: Rent paid in advance Rs.500/- 9.12 th Jan: Paid to Hari Rs.5950/- in full settlement of his account. 10.13 th Jan: Received cash from Narendra, after a discount of Rs100/-, in full settlement of his account. 11.14 th Jan: Sunil, a debtor for Rs. 2,000/- was declared insolvent and only 45paise in a rupee could be recovered from his private estate. 12.15 th Jan: Withdrew goods of Rs.300/- and cash Rs.500/- for private use.

13. 13.18 th Jan: The salary for 3 months amounting to Rs.1,200/- is due ( not yet paid) 14.19 th Jan: Sold to Mohit goods worth Rs.5,000/- at 10% trade discount, it was also decide to offer him a discount of 2% at the time of payment. The payment was made on 25 th Jan. 15.20 th Jan: Goods worth Rs.300/- stolen by the employees, goods worth Rs.500 was given as charity and goods worth Rs. 400/- distributed as free samples. 16.21 st Jan: Purchased Office equipments for Rs.8,000/-, Land Rs.15,000/- and Machinery Rs.20,000/- 17.31 st Jan: Depreciation on furniture @ 10%p.a. 18.Opened a current a/c with bank Rs. 2000 19.Received Interest in advance for three months Rs. 400 20.Paid in wages by cheques Rs. 500