Name of Institution

Amity Business School

B.C.A-III Semester Accounting & Financial Management Module I -Accounting Ms Rajni Sinha

Meaning & Definition

Name of Institution

Accounting is an art of indentifying, recording, classifying, summarizing, analysis & interpretation and communication of the results thereof . American Accounting Association defines accounting as the process of identifying, measuring and communicating economic information to permit informed judgments and decision by users of the information.

Objectives

Name of Institution

The broad objectives of Accounting may be briefly stated follows:

1.To maintain the cash accounts through the Cash Book and to find out the Cash balance on any particular day.
2.To maintain various other Journals for recording day-to day non cash transactions. 3.To maintain various Ledger Accounts to find out the exact amounts of incomes and expenses or gain and losses or receivables and payables. 4.To furnish information regarding Purchases and Sales, both Cash and Credit.
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Contd..

Name of Institution

5.To find out the net profit or net loss or surplus or deficit for any particular period. 6.To find out the total capital on a particular date. 7.To find out the positions of assets on a particular date. 8.To find out the position of liabilities on a particular date. 9.To detect any defalcations and to check the frauds and misappropriations of money.
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Contd..

Name of Institution

10.To detect the various errors and to rectify those through entries in the journal proper. 11.To confirm about the arithmetical accuracy of the books of accounts. 12.To help the management by supplying accounting ratios, reports and relevant data. 13.To calculate the cost of productions. 14.To help the management formulate policies for controlling cost, preparation of quotation for competitive supply etc.
5

Usefulness

Name of Institution

It provides information useful for making economic decisions. It provide information useful to inventors and creditors for predicting, comparing and evaluating potential cash flows in term of amount, timing and related uncertainty. It provides factual and interpretative information about transactions and other events which useful for providing, comparing and evaluating the enterprises earning power. It supplies information useful in judging the managers ability to utilize enterprise resources effectively in achieving primary enterprise goals.

Limitations

Name of Institution

1. Accounting records only those transactions which can be measured in monetary terms. 2. Accounting transactions are recorded at cost in the books. The effect of price level changes is not brought into the books with the result that comparison of the various years becomes difficult. For example, the sale to total asset in 2013 would be much higher than in 2002 due to rising prices , fixed assets being shown at the cost and not at market price.

Contd..

Name of Institution

3. Accounting statements are prepared by following basic concepts and conventions. Therefore the accounting information may not be realistic. 4. Accountant may select any method of depreciation , valuation of stock, amortization of fixed assets , treatment of deferred revenue expenditure. Therefore accounting statements are influenced by the personal judgement of the accountant.

Accounting Concepts

Name of Institution

1. Dual Aspect Concept -Dual aspect principle is the basis for Double Entry System of book-keeping. All business transactions recorded in accounts have two aspects receiving benefit and giving benefit. For example, when a business acquires an asset (receiving of benefit) it must pay cash (giving of benefit).
2. Revenue Realization Concept-According to this concept, revenue is considered as the income earned on the date when it is realized. Unearned or unrealized revenue should not be taken into account. The realization concept is vital for determining income pertaining to an accounting period. It avoids the possibility of inflating incomes and profits.
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Contd..

Name of Institution

3. Historical Cost Concept- Under this concept, assets are recorded at the price paid to acquire them and this cost is the basis for all subsequent accounting for the asset. For example, if a piece of land is purchased for Rs.5,00,000 and its market value is Rs.8,00,000 at the time of preparing final accounts the land value is recorded only for Rs.5,00,000. Thus, the balance sheet does not indicate the price at which the asset could be sold for.

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Contd..

Name of Institution

4. Matching Concept-Matching the revenues earned during an accounting period with the cost associated with the period to ascertain the result of the business concern is called the matching concept. It is the basis for finding accurate profit for a period which can be safely distributed to the owners. 5. Full Disclosure Concept- Accounting statements should disclose fully and completely all the significant information. Based on this, decisions can be taken by various interested parties. It involves proper classification and explanations of accounting information which are published in the financial statements.
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Contd..

Name of Institution

6 . Verifiable and Objective Evidence Concept-This principle requires that each recorded business transactions in the books of accounts should have an adequate evidence to support it. For example, cash receipt for payments made. The documentary evidence of transactions should be free from any bias. As accounting records are based on documentary evidence which are capable of verification, it is universally acceptable.

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Generally accepted accounting principles

Name of Institution

1. Cost Benefit Principle-This modifying principle states that the cost of applying a principle should not be more than the benefit derived from it. If the cost is more than the benefit then that principle should be modified.

2. Materiality Principle-The materiality principle requires all relatively relevant information should be disclosed in the financial statements. Unimportant and immaterial information are either left out or merged with other items.

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Contd..

Name of Institution

3. Consistency Principle- The aim of consistency principle is to preserve the comparability of financial statements. The rules, practices, concepts and principles used in accounting should be continuously observed and applied year after year. Comparisons of financial results of the business among different accounting period can be significant and meaningful only when consistent practices were followed in ascertaining them. For example, depreciation of assets can be provided under different methods, whichever method is followed, it should be followed regularly.

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Contd..

Name of Institution

4. Prudence (Conservatism) Principle-Prudence principle takes into consideration all prospective losses but leaves all prospective profits. The essence of this principle is anticipate no profit and provide for all possible losses. For example, while valuing stock in trade, market price or cost price whichever is less is considered.

15

Double entry system- introduction

Name of Institution

There are numerous transactions in a business concern. Each transaction, when closely analyzed, reveals two aspects. One aspect will be receiving aspect or incoming aspect or expenses/loss aspect. This is termed as the Debit aspect. The other aspect will be giving aspect or outgoing aspect or income/gain aspect. This is termed as the Credit aspect. These two aspects namely Debit aspect and Credit aspect form the basis of Double Entry System. The double entry system is so named since it records both the aspects of a transaction

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Definition
According to J.R.Batliboi

Name of Institution

Every business transaction has a two-fold effect and that it affects two accounts in opposite directions and if a complete record were to be made of each such transaction, it would be necessary to debit one account and credit another account. It is this recording of the two fold effect of every transaction that has given rise to the term Double Entry System.

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Features

Name of Institution

I. Every business transaction affects two accounts. II. Each transaction has two aspects, i.e., debit and credit. III. It is based upon accounting assumptions concepts and principles. IV. Helps in preparing trial balance which is a test of arithmetical accuracy in accounting. V. Preparation of final accounts with the help of trial balance.

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Accounting Cycle

Name of Institution

An accounting cycle is a complete sequence of accounting process, that begins with the recording of business transactions and ends with the preparation of final accounts.

When a businessman starts his business activities, he records the day-to-day transactions in the Journal. From the journal the transactions move further to the ledger where accounts are written up. Here, the combined effect of debit and credit pertaining to each account is arrived at in the form of balances.
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Contd..

Name of Institution

To prove the accuracy of the work done, these balances are transferred to a statement called trial balance. Preparation of trading and profit and loss account is the next step. The balancing of profit and loss account gives the net result of the business transactions. To know the financial position of the business concern balance sheet is prepared at the end. These transactions which have completed the current accounting year, once again come to the starting point the journal and they move with new transactions of the next year. Thus, this cyclic movement of the transactions through the books of accounts (accounting cycle) is a continuous process.
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Journalizing

Name of Institution

Journalizing is the process of recording business transactions to the book of original entry called journals. Journals, or records of original entry, are tabular records in which business activities are analyzed in terms of debits and credits and recorded in chronological order before they are entered in the general ledger.

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Name of Institution

Journal entry
Journal entry - an analysis of the effects of a transaction on the accounts, usually accompanied by an explanation of the transaction This analysis identifies the accounts to be debited and credited.

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Procedure

Name of Institution

The procedure for recording entries in the journal is as follows:

Indicate the year, month, and date of the entry. Usually the year and month are rewritten only at the top of each journal or at the point where they change.
Enter titles of the accounts affected in the description column. Accounts debited are entered close to the left-hand margin and are traditionally recorded first. Accounts credited are then recorded, indented one-half inch to the right. Place the appropriate money amounts in the left-hand (debit) and right (credit) money columns. Write an explanation of the transaction below the account titles. The explanation should be as brief as possible, disclosing the information necessary to understand the event being recorded.
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Format

Name of Institution

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Classification of Accounts
Name of Institution

Transactions can be divided into three categories. i. Transactions relating to individuals and firms

ii. Transactions relating to properties, goods or cash

iii. Transactions relating to expenses or losses and incomes or gains.

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Contd..

Name of Institution

I. Personal Accounts : The accounts which relate to persons. Personal accounts include the following. Natural Persons : Accounts which relate to individuals. For example, Mohans A/c, Shyams A/c etc. Artificial persons : Accounts which relate to a group of persons or firms or institutions. For example, HMT Ltd., Indian Overseas Bank, Life Insurance Corporation of India, Cosmopolitan club etc. Representative Persons: Accounts which represent a particular person or group of persons. For example, outstanding salary account, prepaid insurance account, etc.

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Contd..

Name of Institution

II. Impersonal Accounts: All those accounts which are not personal accounts. This is further divided into two types viz. Real and Nominal accounts. Real Accounts: Accounts relating to properties and assets which are owned by the business concern. Real accounts include tangible and intangible accounts. For example, Land, Building, Goodwill, Purchases, etc. Nominal Accounts: These accounts do not have any existence, form or shape. They relate to incomes and expenses and gains and losses of a business concern. For example, Salary Account, Dividend Account, etc.
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Rules of Dr. & Cr. Traditional Classification Real Account = Debit What comes in Credit- what goes out

Name of Institution

Personal Account = Debit Receiver Credit - Giver Nominal Account =Debit Expenses/Losses Credit- Incomes/Gains

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Modern classification

Name of Institution

DEBIT 1. Increase in Assets 2. Decrease in Liabilities

CREDIT 1. Decrease in Assets 2. Increase in Liabilities

3. Decrease in Capital a. Withdrawal by the Owner

b. Increase in Expenses c. Decrease in Revenue

3. Increase in Capital a. Investment by the Owner

b. Decrease in Expenses c. Increase in Revenue

Business Transactions
Entry A. Amit deposits Rs25,000 in a bank account for XYZ Ltd..
receive Debit

Name of Institution

Amit (investor)

XYZ Ltd (investee)

give give Credit Credit

Journal
Date Description Debit Credit

11/1

30

Name of Institution

Entry A. Amit deposits Rs25,000 in a bank account for XYZ Ltd.. Cash

Amit (investor)

receive Debit

XYZ Ltd.(investee)

give give Credit Credit

l Journal
Date Description Debit Credit

11/1

Cash

25,000

31

Name of Institution

Entry A. Amit deposits Rs 25,000 in a bank account for XYZ Ltd.. Cash

Amit (investor)

A promise to the owner XYZ Ltd.(investee)

give give Credit Credit

receive Debit

Journal
Date Description Debit Credit

11/1

Cash Amit, Capital

25,000 25,000

32

Name of Institution

Entry B. XYZ Ltd. buys land for Rs20,000.

Land Owner (seller)

receive Debit

XYZ Ltd(buyer)

give give Credit Credit

Journal
Date Description Debit Credit

11/5

33

Name of Institution

Entry B. XYZ Ltd. buys land for Rs20,000. Land

Land Owner (seller)

receive Debit

XYZ Ltd(buyer)

give give Credit Credit

General Journal
Date Description Debit Credit

11/5

Land

20,000

34

Name of Institution

Entry B. XYZ Ltd. buys land for Rs 20,000. Land

Land Owner (seller)

Cash

receive Debit

XYZ Ltd(buyer)

give give Credit Credit

Journal
Date Description Debit Credit

11/5

Land Cash

20,000 20,000

35

Name of Institution

Entry C. XYZ Ltd. buys supplies for Rs1,350, agreeing to pay in the near future.
receive Debit

Supplier (seller)

XYZ Ltd (buyer)

give give Credit Credit

Journal
Date Description Debit Credit

11/10

36

Name of Institution

Entry C. XYZ Ltd. buys goods for Rs1,350, agreeing to pay in the near future. Supplies

Supplier (seller)

receive Debit

XYZ Ltd. (buyer)

give give Credit Credit

General Journal
Date Description Debit Credit

11/10

Purchases

1,350

37

Name of Institution

Entry C. XYZ Ltd. buys goods for Rs1,350, agreeing to pay in the near future. Supplies

Supplier (seller)

A promise to pay later

receive Debit

XYZ Ltd. (buyer)

give give Credit Credit

Journal
Date Description Debit Credit

11/10

purchases Accounts Payable

1,350 1,350

38

Name of Institution

Entry D. XYZ Ltd. earns fees of Rs7,500, receiving cash.

Customer (buyer)

receive Debit

XYZ Ltd. (seller)

give give Credit Credit

Journal
Date Description Debit Credit

11/18

39

Name of Institution

Entry D. XYZ Ltd. earns fees of Rs7,500, receiving cash. Cash

Customer (buyer)

receive Debit

XYZ Ltd. (seller)

give give Credit Credit

Journal
Date Description Debit Credit

11/18

Cash

7,500

40

Name of Institution

Entry D. XYZ Ltd. earns fees of Rs7,500, receiving cash. Cash

Customer (buyer)

Services

receive Debit

XYZ Ltd. (seller)

give give Credit Credit

Journal
Date Description Debit Credit

11/18

Cash Fees Earned

7,500 7,500

41

Name of Institution

Entry E. XYZ Ltd. paid: wages, Rs 2,125; rent, Rs 800; commissions, Rs450; and misc, Rs275. Journal
Date Description

Various suppliers

receive Debit

XYZ Ltd. (buyer)

give give Credit Credit

Debit

Credit

42

Name of Institution

Entry E. XYZ Ltd. paid: wages, Rs 2,125; rent, Rs 800; commissions, Rs450; and miscellaneous, Rs275. Services, benefits

Various suppliers

receive Debit

XYZ Ltd. (buyer)

give give Credit Credit

Journal
Date Description Debit Credit

11/18

Wages Expense Rent Expense Commission Misc. Expense

2,125 800 450 275

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Name of Institution

Entry E. XYZ Ltd. paid: wages, Rs 2,125; rent, Rs 800; commissions, Rs 450; and misc Rs 275. Journal
Date Description

Various suppliers Services, benefits

Cash

receive Debit

XYZ Ltd. (buyer)

give give Credit Credit

Debit

Credit

11/18

Wages Expense Rent Expense Commission Misc. Expense Cash

2,125 800 450 275 3,650

44

Name of Institution

Entry F. XYZ Ltd. pays Rs950 to creditors on account.

Supplier (payee)

receive Debit

XYZ Ltd. (payor)

give give Credit Credit

Journal
Date Description Debit Credit

11/30

45

Name of Institution

Entry F. XYZ Ltd. pays Rs950 to creditors on account.

Supplier (payee) Reduction in obligation

receive Debit

XYZ Ltd. (payor)

give give Credit Credit

Journal
Date Description Debit Credit

11/30

Accounts Payable

950

46

Name of Institution

Entry F. XYZ Ltd. pays Rs950 to creditors on account.

Supplier (payee) Reduction in obligation

Cash

receive Debit

XYZ Ltd. (payor)

give give Credit Credit

Journal
Date Description Debit Credit

11/30

Accounts Payable Cash

950 950

47

Name of Institution

Entry G. Amit withdraws Rs 2,000 in cash.

Amit (payee)

receive Debit

XYZ Ltd. (payor)

give give Credit Credit

Journal
Date Description Debit Credit

11/30

48

Name of Institution

Entry G Amit withdraws Rs 2,000 in cash. Reduction in obligation

Amit (payee)

receive Debit

XYZ Ltd. (payor)

give give Credit Credit

Journal
Date Description Debit Credit

11/30

Amit, Drawing

2,000

49

Name of Institution

Entry G. Amit withdraws Rs 2,000 in cash. Reduction in obligation

Amit (payee)

Cash

receive Debit

XYZ Ltd. (payor)

give give Credit Credit

Journal
Date Description Debit Credit

11/30

Amit, Drawing Cash

2,000 2,000

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Ledger-Introduction

Name of Institution

The elements of transactions are organized into accounts that group similar items together In a double-entry system, a ledger contains the records for a group of related accounts A ledger is the collection of accounts that accumulate the amounts reported in the financial statements

51

Ledger Accounts

Name of Institution

A simplified version of a ledger account is called the T-account. They allow us to capture the essence of the accounting process without having to worry about too many details.

The account is divided into two sides for recording increases and decreases in the accounts.

Account Title
Left Side Right Side

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Debits and Credits

Name of Institution

Debit (dr.) - an entry or balance on the left side of an account Credit (cr.) - an entry or balance on the right side of an account

Remember: Debit is always the left side! Credit is always the right side!

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Advantages/Utility

Name of Institution

i. Complete information at a glance: All the transactions pertaining

to an account are collected at one place in the ledger. By looking at the balance of that account, one can understand the collective effect of all such transactions at a glance. ii. Arithmetical Accuracy With the help of ledger balances, Trial balance can be prepared to know the arithmetical accuracy of accounts. iii. Result of Business Operations It facilitates the preparation of final accounts for ascertaining the operating result and the financial position of the business concern. iv. Accounting information The data supplied by various ledger accounts are summarized, analyzed and interpreted for obtaining various accounting information.

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POSTING TO THE LEDGER

Name of Institution

POSTING REFERS TO TRANSFERRING THE INFORMATION IN A JOURNAL ENTRY TO THE APPROPRIATE LEDGER ACCOUNT ENTER DATE ENTER AMOUNT IN PROPER DEBIT OR CREDIT COLUMN ENTER JOURNAL SOURCE INFO
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Proforma for Account

Name of Institution

Debit

Credit

Date Particulars L.f Amt. Date

Particulars L.f Amt.

56

Ledger Accounts

Name of Institution

Balance - difference between total left-side amounts and total right-side amounts at any particular time Assets have left-side balances. Increased by entries to the left side Decreased by entries to the right side Liabilities and Owners Equity have right-side balances. Decreased by entries to the left side Increased by entries to the right side
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Details of Journals and Ledgers

Name of Institution

Journal Date Particulars Debit Credit April 2 Cash 30,000 Capital 30,000 (Received initial investment from owner)

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Posting

Name of Institution

Debit Credit
Date
April 2

Cash Account
Ref. Particulars
1 To Capital

Amount Date Ref

30,000

Particulars

Amount

Insert the number of the journal page.

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Recording and Posting an Entry

Journal
L.F.
Date Description Debit

Name of Institution

Page 1

Credit

12/1

Prepaid Insurance Cash

2,400 2,400

1. Analyze and record the transaction as shown. 2. Post the debit side of the transaction.

3. Post the credit side of the transaction.

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Name of Institution

Journal
L.f
Date Description Debit

Page 1

Credit

12/1

Prepaid Insurance Cash

15

2,400 2,400

Ledger Prepaid Insurance Account Dr. Cr.

Date

Particulars Fol Amt. Date

Particulars Fol Amt.

12/1

. To Cash 1

. 2400

61

Name of Institution

Journal
Date Description L.f. Debit

Page 1

Credit

12/1 1

Prepaid Insurance Cash 4

15 11

2,400

2,400
3

Ledger Prepaid insurance Account

Page No.15

Dr.

Cr.

Date

Particulars Fol. Amt. Date

Particulars Fol. Amt.

12/1

To Cash

2400
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Balancing an Account

Name of Institution

Balance is the difference between the total debits and the total credits of an account. When posting is done, many accounts may have entries on their debit side as well as credit side. The net result of such debits and credits in an account is the balance. Balancing means the writing of the difference between the amount columns of the two sides in the lighter (smaller total) side, so that the grand totals of the two sides become equal.

63

Introduction- Subsidiary Books

Name of Institution

Cash

Cash transactions

All subsidiary books combined make up the ledger. Ledger

Accounts Payable

liability accounts
Purchase Book

Credit purchases
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Utility
i.

Name of Institution

Division of Labour : The division of journal, resulting in division of work, ensures more clerks working independently in recording original entries in the subsidiary books. ii. Efficiency : The division of labour also helps the reduction in work load, saving in time and stationery. It also gives advantages of specialization leading to efficiency. iii. Prevents Errors and Frauds : The accounting work can be divided in such a manner that the work of one person is automatically checked by another person. With the use of internal check, the possibility of occurrence of errors and frauds may be avoided. iv. Easy Reference : It facilitates easy references to any particular item. For instance total credit sales for a month can be easily obtained from the Sales Book. v. Easy Postings : Posting from the subsidiary books are made at convenient intervals depending upon the nature of the business.
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Need

Name of Institution

When no. of transactions are large, it is practically impossible to record all the transactions through one journal. To overcome the shortcomings of the use of Journal, the Journal is subdivided into special journals Special Journals refer to the journal meant for specific transactions of similar nature.

Types
1. 2. 3. 4. 5. 6.

Name of Institution

7. 8.

Purchase Book Credit Purchase of Goods Sales Book Credit Sale of Goods Sales Return Book Goods returned by customers (sold on credit) Purchase Return Book Goods returned to suppliers (purchased on credit) Bills Receivable Book Bills drawn on customers Bills Payable Book Bills accepted in favor of suppliers Journal Proper Transactions not covered elsewhere Cash Book Cash and Bank transactions

Purchase Book

Name of Institution

Only CREDIT purchases of goods are to be recorded in this journal. Cash purchases are recorded in cash book. The term goods covers only those items that are procured by the business for resale Entries in the purchase book are made on the basis of invoices received from the suppliers with the amounts net of trade / quantity discounts.

Format
PURCHASES BOOK Date Purchase Invoice No. Name of Supplier L.F.

Name of Institution

Details (Rs.)

Amount (Rs.)

Sales Book

Name of Institution

Sales Book is used for the purpose of recording the sale of goods on credit. It records neither the cash sales of the goods nor sale of any asset other than merchandise. Entries in the sales book are made on the basis of invoices issued to the customers with the amounts net of trade / quantity discounts.

Format

Name of Institution

SALES BOOK
Date Sales Invoice No. Name of Customer L.F. Details (Rs.) Amount (Rs.)

Purchase Return Book

Name of Institution

Used for the purpose of recording the returns of merchandise purchased on credit It records neither the return of goods purchased on cash basis nor the return of any asset other than merchandise. Entries are made on the basis of Debit Notes issued to the suppliers

Format
PURCHASE RETURN BOOK
Date Debit Note No. Name of Supplier L.F.

Name of Institution

Details (Rs.)

Amount (Rs.)

Sales Return Book

Name of Institution

Used for the purpose of recording the returns of merchandise sold on credit It records neither the return of merchandise sold on cash basis nor the return of any asset other than merchandise. Entries are made on the basis of Credit Notes issued to the customers

Format
SALES RETURN BOOK
Date Credit Note No. Name of Customer L.F.

Name of Institution

Details (Rs.)

Amount (Rs.)

JOURNAL PROPER

Name of Institution

Journal Proper is a residuary book in which those transactions are recorded which cannot be recorded in any other subsidiary book. For example: Opening Entries; Closing Entries; Transfer Entries; Adjusting Entries; Rectifying Entries and Miscellaneous Entries.

Example

Name of Institution

Purchased on credit from Bansal & Co. 2 printers @ Rs.4,500/ Returned one printer, being defective, to Bansal & Co. @ Rs.4,500/ Sold on credit two old printers to Murli @ Rs.750/ Rent due to landlord Rs.2,000/ Salaries due to employee Shyam Rs.1,000/-

Journal proper entries

Name of Institution

1. Opening Entries-Opening entries are used at the beginning of the financial year to open the books by recording the assets, liabilities and capital appearing in the balance sheet of the previous year.

2. Closing Entries-Closing entries are recorded at the end of the accounting year for closing accounts relating to expenses and revenues. These accounts are closed by transferring the balances to the Trading, Profit and Loss Account.

78

Contd..

Name of Institution

3. Adjusting Entries-To arrive at a correct figure of profits and loss, certain accounts require some adjustments. Entries for making such adjustments are called as adjusting entries. These are needed at the time of preparing the final accounts. 4. Transfer Entries-Transfer entries are passed in the journal proper for transferring an item entered in one account to another account. 5. Rectifying Entries-Rectifying entries are passed for rectifying errors which might have committed in the book of accounts.
79

Contd..

Name of Institution

6. Miscellaneous Entries or Entries of Casual Nature-

These are entries of casual nature which do not occur so frequently. Such transactions include the following:
i. Credit purchases and credit sale of assets which cannot be recorded through purchases or sales book ii. Endorsement, renewal and dishonor of bill of exchange which cannot be recorded through bills book. iii. Other adjustments like interest on capital and loan, bad debts, reserves etc.

80

Terminology

Name of Institution

Debit Note:- A debit note is prepared by the buyer and it contains the date of of the goods returned, name of the supplier, details of the goods returned and reasons for returning the goods. Each debit note is serially numbered. A duplicate copy or counter foil of the debit note is retained by the buyer. On the basis of debit note, the suppliers account is debited in the books. Credit Note:- A credit note is prepared by the seller and it contains the date on which goods are returned, name of the customer, details of the goods received back, amount of such goods and reasons for returning the goods. Each credit note is serially numbered. A duplicate copy of the credit note is retained for the record purpose. On the basis of credit note, the customers account is credited in the books.
81

Cash Book

Name of Institution

To record cash transaction, separate book is kept which is called Cashbook. The function of cashbook is to keep records of all cash transactions. Cashbook takes the place of cash account that is it is not necessary to open separate cash account in the ledger after keeping record in the cashbook.

Types of cash book

Name of Institution

Simple cash book.

Double column cash book. Triple Column cash book. Petty Cash book

Simple cash book

prepared like cash account in ledger.

Name of Institution

All the cash received are entered in amount column on debit side and all cash paid appear on credit side in amount column. Cash book is closed and balanced at the end of the month.

Format of simple cash book

Name of Institution

Date

Particular

L.F.

Amount

Date

Particular L.F

Amount

Double column cash bookName of Institution

A cashbook with discount column is called double column cashbook. Two accounts, cash and discount are combined in this book. Discount allowed to the customers represent loss.

Double column cash Book Format

Name of Institution

Date Particular L.F Discount Amount Date Particular L.F Discount Amount

Triple Column cash book

Name of Institution

A cash book with discount and bank column is triple column cashbook. Three accounts are combined. In business firm most of the payment are received and paid by cheque. Transactions are preformed through bank.

Triple Column Cash book Name of Institution

Date Particular L.F Discount Amount Bank Date Particular L.F Discount Amount Bank

Petty Cash Book

Name of Institution

Used to record small amount of expenses.

Like stationary, cleaning charges and postage.

Format of petty cash book

Name of Institution

Date Particulars

Amount

Date

Particulars

Amount

Name of Institution

92