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AccountingAccounting ProcessProcess
Identification of duel aspectIdentification of duel aspect
How can a transaction have two How can a transaction have two aspects ?aspects ?
1.1. Mr. Lal started a small business with Mr. Lal started a small business with Rs. 2 lakhs. Rs. 2 lakhs.
Assets = Liability Assets = Liability
Accounting ProcessAccounting Process
Liability Assets
Capital 2,00,000 Cash 200,000
2. Mr. Lal took a loan from the bank 2. Mr. Lal took a loan from the bank Rs.1 Rs.1 laclac
Accounting ProcessAccounting Process
Liability Assets
Capital 2,00,000 Cash 3,00,000Loan 1,00,000
-------- --------3,00,000 3,00,000======== ========
Owners equity + outsiders’ Claim = Assets
3. Out of the available cash he purchased a 3. Out of the available cash he purchased a Small Machine for Rs. 75,000Small Machine for Rs. 75,000
Accounting ProcessAccounting Process
Liability Assets (source ) (application)
Capital 2,00,000 Machine 75,000 Cash 2,25,000
Loan 1,00,000-------- --------3,00,000 3,00,000======== ========
Owners equity + outsiders’ Claim = Assets
Source = Application
4. Mr. Lal bought furniture from M/s Lakdiwala on 4. Mr. Lal bought furniture from M/s Lakdiwala on credit . credit .
Liability Assets (source ) (application)
Capital 2,00,000 Machine 75,000Loan 1,00,000 Furniture 25,000 Creditor 25,000 Cash 2,25,000
-------- --------3,25,000 3,25,000======== ========
Owners equity + outsiders’ Claim = Assets
5. Mr. Lal Withdrew Rs. 10,000 from the business 5. Mr. Lal Withdrew Rs. 10,000 from the business for his personal use. for his personal use.
Liability Assets (source ) (application)
Capital 2,00,000 Machine 75,000Loan 1,00,000 Furniture 25,000 Creditor 25,000 Cash 2,25,000
-------- --------3,25,000 3,25,000======== ========
Liability Assets (source ) (application)
Capital 1,90,000 Machine 75,000Loan 1,00,000 Furniture 25,000 Creditor 25,000 Cash 2,15,000
-------- --------3,15,000 3,15,000======== ========
Owners equity + outsiders’ Claim = Assets
6. Assume business entered a few sales and 6. Assume business entered a few sales and purchase transactions on cash and made a profit of purchase transactions on cash and made a profit of Rs. 50,000/-Rs. 50,000/-
Liability Assets (source ) (application)
Capital 2,40,000 Machine 75,000Loan 1,00,000 Furniture 25,000 Creditor 25,000 Cash 2,65,000
-------- --------3,65,000 3,65,000======== ========
Owners equity + outsiders’ Claim = Assets
AccountingAccounting ProcessProcess
Identification of duel aspectIdentification of duel aspect
Source = ApplicationSource = Application
Owners equity+ out side liability= Owners equity+ out side liability= AssetsAssets
Total liability = total assetsTotal liability = total assets
Liability , Revenue & profitLiability , Revenue & profit
Cr=source Cr=source Dr= UseDr= Use
Assets expenses & lossesAssets expenses & losses
Dr = use Dr = use Cr=sourceCr=source
Accounting ProcessAccounting Process
Assigning meaning to the accountAssigning meaning to the account
Debit ( debited )Debit ( debited )
Credit (credited)Credit (credited)
Accounting ProcessAccounting Process
Total Assets of the firm Increased &total liability of the firm decreased
Total Assets of the firm decreased &total liability of the firm increased
Type of account Type of account
Rule of Debit and Credit Rule of Debit and Credit
Recording of transactions Recording of transactions
Accounting ProcessAccounting Process
Financial accountingFinancial accounting
Principle: double entry system Principle: double entry system
Cash transactions
Cash book
Credit transactions
Journal
Ledger
Trial balance
Balance sheet Profit and loss account
QuizQuiz - -22
Write journal entries in the books of Write journal entries in the books of Mr. AjayMr. Ajay
1/1/071/1/07. He started business with Rs. 2 lacs. He started business with Rs. 2 lacs
2/1/072/1/07. Deposited Rs. 10,000 with bank to . Deposited Rs. 10,000 with bank to start an account with start an account with
bank.bank.
3/1/073/1/07. Paid for furniture & fittings . Paid for furniture & fittings Rs.25000/-Rs.25000/-
4/1/07 4/1/07 Purchased goods worth Rs. 10,000Purchased goods worth Rs. 10,000
5/1/07 Sold Goods worth Rs. 8,000/-5/1/07 Sold Goods worth Rs. 8,000/-
6/1/07 Purchased goods from Sam & co for 6/1/07 Purchased goods from Sam & co for Rs. 40,000Rs. 40,000
7/1/07 Sold goods to Ramesh & company 7/1/07 Sold goods to Ramesh & company Rs. 50,000/-Rs. 50,000/-
8/1/07 8/1/07 Paid wages Rs. 700 Paid wages Rs. 700
9/1/07 9/1/07 Paid Rs. 10000 to Sam & co Paid Rs. 10000 to Sam & co
10/1/0710/1/07 Purchased stationery item for Purchased stationery item for
Rs. 1000Rs. 1000