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8/4/2019 journal,ledger
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Accounting Equation
Assets = Liabilities + Capital
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Accounting (Definition):- is art of
recording, classifying and
summarizing the financialtransactions and interpreting the
result therefore.
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Accounting cycle Recording the transaction- journal
Classifying Ledger
Summarizing
Trial Balance/ Profit & Lossaccount/ Balance Sheet
Interpretation- Ratio analysis
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Systems Of Accounting
Cash System- Receipt and expenditure account
Accrual System- Profit and loss account/ Balancesheet
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Types of accounts Personal
Natural
Artificial
Representative
Real Tangible
Intangible Nominal
Expenses/ Losses
Incomes/ Gains
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Example
Transactions Account involved Nature of accounts
1 Rent paid Rent Nominal
Cash Real
2 Salaries paid Salary Nominal
Cash Real
3 Interest received Interest Nominal
Cash Real
4 Furniture purchased Furniture Real
Cash Real
5 Outstanding Salary Outstanding salary Personal
Salary Nominal
6 Paid to Suresh Suresh Personal
Cash Real
7 Received from Mohan Cash Real
Proprietor Capital Personal
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Journal (Rules)For Personal account1. Debit the receiver
2. Credit the Giver
For Real Account1. Debit what comes in
2. Credit what goes Out
For Nominal Account1. Debit all expenses/losses
2. Credit all income/gains
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ExampleTransactions Account involved Nature of accounts Debit/Credit
1 Rent paid Rent Nominal Debit
Cash Real Credit
2 Salaries paid Salary Nominal Debit
Cash Real Credit
3 Interest received Interest Nominal Credit
Cash Real Debit
4 Furniture purchased Furniture Real Debit
Cash Real Credit
5 Outstanding Salary Outstanding salary Personal Credit
Salary Nominal Debit
6 Paid to Suresh Suresh Personal Debit
Cash Real Credit
7 Received from Mohan Cash Real Debit
Proprietor Capital Personal Credit
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JournalRam purchased furniture for cash for Rs 5000 on Jan 5 1990
Date Particulars L.F Rs Rs
1990 Jan5 Furniture Account Dr 5000
To Cash Account( Being purchase of furniture) 5000
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Ram paid rent for Business premises Rs 2000 on Jan 10 1990
Date Particulars L.F Rs Rs
1990Jan,10 Rent account Dr 2000
To Cash account( Being payment of rent) 2000
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Compound Journal
Payment maid to Ram Rs 1000 and he allowed a cash discount of Rs 50
Date Particulars L.F Rs Rs
Ram account .Dr 1050
To Cash account
To Discount account( Being payment maid to Ram Rs 1000 andhe allowed a Rs 50 as a discount
100050
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Ledger (Rules) Separate account should be opened in the ledger for
posting transactions relating to different accountsrecorded in the journal
The concerned account which has been debited inthe journal should also be debited in ledger.However a reference should be made of the otheraccount which has been credited in journal
The concerned account which has been credited inthe journal should also be credited in ledger.However a reference should be made of the otheraccount which has been debited in journal
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Ledger
Date Particulars L.F Amount Date Particulars L.F Amount
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Balancing of ledgerThe balance is put on the side of the accountwhich is smaller and a reference is given that ithas been carried forward or carried down (c/f or
c/d) to the next period. On the other hand in thenext period a reference is given that the openingbalance has been brought the forward or broughtdown (b/f or b/d) from the previous period.
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LedgerBalancing
Ledger
Date Particulars L.F Amount Date Particulars L.F Amount
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Summarize the debit and credit balances of differentaccounts (Account ledger balances) in vertical form.
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Trial Balance
Particulars Debit Credit
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Figure in lakhs
Particulars Dr Cr Particulars Dr Cr
stock(1.4.2008) 375 Purchase return 50Purchase & Sales 1225 1700 wages 150
Discount 15 carriage inward 2.75
Furniture & Fitting$ 85 Salaries 37.5
Rent 20 Sundry expenses 35.25
Share (5 lakhs@100) 500 Interim dividend 45
Plant 145 Debtor & creditor 137.5 87.5
General reserve 77.5 cash 231
Bill receivable 25 patent 24
Bill payable 35 prelim expenses 30
P&L(31.3.2008) 75 development rebate res 28
Debenture 2500 investment 2250
Debenture interest 250 Total 5068 5068
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Trial Balance of Flex industries on 31.03.2009 . Prepare P&L A/c
and Balance sheet with following adjustments
Stock on 31.3.09 was 840 Lakhs
Make provision for income tax @35%
Transfer 10 lakhs in development rebate reserve on 31.3.09
Write off one third prelim expenses
Create debenture redemption reserve of Rs 100 lakhs
Depreciation (Plant @ 10% ) (Furniture @ 10%) (Patent @ 5%)
On 31.3.09 outstanding rent 4 lakhs and outstanding salary 4.5 lakhs
Debtors include 25 lakhs for more than 6 months so make provision for
doubtful debts 15 lakhs Proposal for dividend @ 15% per annum for the year after transfer to
general reserve @ 5 %
Provide managerial remuneration @ 10% on net profit before tax
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