journal,ledger

8/4/2019 journal,ledger

1/19

Accounting Equation

Assets = Liabilities + Capital


2/19

Accounting (Definition):- is art of

recording, classifying and

summarizing the financialtransactions and interpreting the

result therefore.


3/19

Accounting cycle Recording the transaction- journal

Classifying Ledger

Summarizing

Trial Balance/ Profit & Lossaccount/ Balance Sheet

Interpretation- Ratio analysis


4/19

Systems Of Accounting

Cash System- Receipt and expenditure account

Accrual System- Profit and loss account/ Balancesheet


5/19

Types of accounts Personal

Natural

Artificial

Representative

Real Tangible

Intangible Nominal

Expenses/ Losses

Incomes/ Gains


6/19

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


7/19

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


8/19

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


9/19

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


10/19

Ram paid rent for Business premises Rs 2000 on Jan 10 1990


1990Jan,10 Rent account Dr 2000

To Cash account( Being payment of rent) 2000


11/19

Compound Journal

Payment maid to Ram Rs 1000 and he allowed a cash discount of Rs 50


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


12/19

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


13/19

Ledger

Date Particulars L.F Amount Date Particulars L.F Amount


14/19

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.


15/19

LedgerBalancing

Ledger

Date Particulars L.F Amount Date Particulars L.F Amount


16/19

Summarize the debit and credit balances of differentaccounts (Account ledger balances) in vertical form.


17/19

Trial Balance

Particulars Debit Credit


18/19

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


19/19

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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journal,ledger