2. Finance Basics Introduction to Accounting Need for Accounting Meaning of Accounting Attributes of Accounting Branches of Accounting Users of Accounting Information Accounting Cycle Accounting Equation Introduction and Meaning Effects of Business Transactions on Accounting Equation Purchase of an asset of credit Rules of Accounting Equation

3. Finance Basics Double Entry System Types of Accounting Rules of the Double Entry System (Debit and Credit) Advantage of Double Entry System Journal Meaning of Journal Objectives of Journal Rules of Journalizing Miscellaneous Journal Entries

4. Finance Basics Ledger Trial Balance Cash Book

5. Finance Basics Ledger Meaning of Ledger Ledger is the principal book of accounts. It contains all the accounts of a business whether real, personal or nominal. It is also called the book of final entry. A ledger may be defined as a summary statement of all transactions relating to a person, asset, expense or income which have taken place during a given period of time and shows their net effect.

6. Finance Basics Ledger Ledger posting The following example will make the process of posting clear: JOURNAL DateParticulars L.F. Debit (SAR) Credit (SAR) 2010 April 1 Ramy’s a/c Dr. To Sales a/c (Being goods sold on credit) 2000 2000

7. Finance Basics Ledger Ledger posting Ledger (Ramy’s Account) Ledger (Sales Accoun t) DateParticularsAmountDateParticularsAmount 2010 April 1 To Sales a/c 2000 DateParticularsAmountDateParticularsAmount 2010 April 1 By Ramy’s a/c2000

8. Finance Basics Ledger Ledger posting (More example) Ledger (Cash Account) DateParticularsAmountDateParticularsAmount Jan 1 Jan 5 Jan 16 Jan 25 To Capital a/c To Sales a/c To Badr & Co. 10,000 1,700 650 2,850 Jan 3 Jan 4 Jan 7 Jan 26 Jan 31 By Furniture a/c By Purchase a/c By tele rent a/c By bank a/c By Salaries a/c By Balance a/c 900 4,000 400 2,500 600 6,800 15,200 Feb 1 To Balance b/d 6,800

9. Finance Basics Ledger Ledger posting (More example) Ledger (Sales Account) DateParticularsAmountDateParticularsAmount Jan 31 To Balance c/d 5,250 Jan 1 Jan 5 Jan 16 By Badr & Co. By Cash a/c 2,900 1,700 650 5,250 Feb 1By Balance b/d5,250

10. Finance Basics Ledger Difference between Journal and Ledger JournalLedger 1.NatureIt is the book of first entry It is the book of secondary entry. 2.RecordThis is the book of chronological record The ledger is an analytical record 3.DatewiseEntries are mad datewise Postings are made accountwise 4.PermanencyThis is only the original record and not a permanent record This is a permanent record of various accounts

11. Finance Basics Ledger Difference between Journal and Ledger JournalLedger 5.ProcessingThe process of journal entries is known as journalizing The process is knows as posting 6.NarrationThe narration is given after every entry. The narration is not given. 7.FolioFolio of journal is written Ledger folio is written 8.Basis in final accounts Final accounts cannot be prepared directly from journal Ledger is the basis of preparing the final accounts 9.BalancingJournal is not balanced Every account is balanced

12. Finance Basics Ledger Advantages of Ledger This is an important book of a business. It records the summary of all the transactions effected in a specific period. The following are the advantages of ledger: 1.Knowledge of assets: Leger records each and every asset separately; hence, it can readily give the knowledge of present value of asset. 2.Knowledge of purchases and sales: It can give a clear picture of purchases and sales. 3.Knowledge of profit and loss: Ledgers are the basis of profit and loss account. No business result can be known unless we prepare the profit and loss account.

13. Finance Basics Ledger Advantages of Ledger 4.Arithmetical accuracy: Ledgers are helpful for preparing the trial balance. If in a trial balance both debit and credit sides are equal, then it is evident that the ledger balances are correctly carried forward. Thus, it is a check of arithmetical accuracy. 5.Knowledge of income and expenditure: In ledger, a separate account of income and expenditure is kept which can tell us how much is spent on each item. 6.Helpful in preparing balance sheet: Various ledger balances are carried to the trial balance, which is the basis of the balance sheet.

14. Finance Basics Ledger Questions Choose the correct answer 1.Ledger is a set of: a)balances b)accounts c)rules d)None of these

15. Finance Basics Ledger Questions Choose the correct answer 1.Ledger is a set of: a)balances b)accounts c)rules d)None of these

16. Finance Basics Ledger Questions Choose the correct answer 2.Assets always have …….. balances: a)debit b)credit c)Both debit and credit d)None of these

17. Finance Basics Ledger Questions Choose the correct answer 2.Assets always have …….. balances: a)debit b)credit c)Both debit and credit d)None of these

18. Finance Basics Ledger Questions Choose the correct answer 3.If the total of debit side of an account is higher than total of credit side, it is called balance: a)debit b)Credit c)debit or credit d)None of these

19. Finance Basics Ledger Questions Choose the correct answer 3.If the total of debit side of an account is higher than total of credit side, it is called balance: a)debit b)Credit c)debit or credit d)None of these

20. Finance Basics Ledger Questions Choose the correct answer 4.……………. Is the principal book of accounts. a)Ledger b)Journal c)Trial balance d)None of these

21. Finance Basics Ledger Questions Choose the correct answer 4.……………. Is the principal book of accounts. a)Ledger b)Journal c)Trial balance d)None of these

22. Finance Basics Ledger Questions Choose the correct answer 5.The process of transferring entries from journal to ledger is called………... a)balancing b)posting c)recording d)None of these

23. Finance Basics Ledger Questions Choose the correct answer 5.The process of transferring entries from journal to ledger is called………... a)balancing b)posting c)recording d)None of these