By Prof.

Jitendra Udawant
M.Com, CFP, GDCA, NET, M.Phil, GST Practioner

COMMERCE STUDY CENTER

 Accounting is the language of Business.

 Where Book-keepings end there Accounting

Start.

 Book-Keeping is a first step of Accounting.

 Book-Keeping is Clerical Work, done by

Book-Keeping Clerk.
 „Book-keeping‟ means recording of the business
transactions in the books of accounts in a
systematic way.

 Book-keeping is an art or science of systematic

recording, classifying and summarizing the
financial transactions of business for a
particular period, generally one year.
 J. R. Batliboi : “Book-keeping is an art of recording
business dealings in a set of books.”

 Nocth Cott: “Book-keeping is an art of recording in the

books of accounts the monetary aspects of commercial or
financial transactions.”

 R.N. Carter : “Book-keeping is the science and art of

correctly recording in the books ofaccounts, all those
business transactions that results in transfer or money or
money‟s worth.”
 Recording day to day business transactions.

 Only financial transactions are recorded.

 All records are prepared for a specific

period.

 It is art as well as Science.

 Record is kept in Chronological Order.

 Useful for future references.

 Keep a complete and accurate record.
 Transactions are to be recorded date wise and
account wise.
 Permanent record.
 To know the profit or loss of the business.
 To know the total assets and liabilities.
 To know the current year‟s progress over
previous year.
 Records of all the transactions permanently and
systematically.
 Useful to get Financial information related to Profit,
Loss,Assets, Liabilities at any given time.
 provides financial information to the businessman for
Decision making.
 control the activities of the business.
 Financial evidence to be produced in the Court of law in
case of any disputes.
 Useful to find out the Tax Liabilities
 Owner

Reserchers Management

Customer Lenders

Government Investors

Labor Unions
 Accounting is the process of identifying,
measuring, recording and communicating the
financial information relating to organization to
the interested users.
 Accounting plays important role in providing
quantitative information.
 Primarily financial in nature,
 About economic entities, that is
 Intended to be useful in making economic decisions.
 Accounting is an Art and Science of
Recording, Classifying and Summarizing the
Financial Information in Systematic and
Scientific manner and in monetary term to
calculate financial result and Financial
Position and communicate it to various user
to make decisions.
Identifying Financial • From Vouchers
Transactions

Measuring in • Identifying Money Value

Monetary Term

Recording in Prime • In Journal

Book

Classifying in • Ledger Posting

Accounts

Preparing Financial • Profit & Loss A/c and Balance

Statements Sheet

Communicating to • Internal Users

Users • External Users
 Keep systematic record.
 Preventing and detecting the errors and frauds.
 Calculating the profit or loss.
 Ascertaining the financial position.

 Provides useful information to its users.

 Useful to Decision Making.
 Useful to Future Planning.
 Useful to Future Reference and Evidence.
Point Book-keeping Accounting
Meaning Recording financial Summarizing, Classifying,
Information Calculating Financial data.
Stage Primary Stage Secondary Stage
Base Vouchers, Bills, Book-Keeping Data
Agreement, Bank
Statement, etc
Objective To make systematic To calculate Results
permanent Record
Responsibility Junior Staff- Clerk Senior Staff- Accountant,
Account Manager etc
Outcomes Journal and Ledger Profit and Loss Account ,
Balance Sheet
Period Day to day Record Entire Year
Skill Required No Knowledge of Accountancy
Required
 • Records only Actual Cash Paid or Received.
Cash Basis • NPO, Professional i.e. Doctor, CA, Lawyers, etc.

Mercantile /
• Records Cash as well as Credit Transactions.
Accrual • All Business and Industries
Basis

Hybrid / Mix • Records Assets and Income on Cash System and

Expenses and Liabilities on Mercantile System.
Basis • This method strictly prohibited in India.
1 •Reliability

2 •Relevance

3 •Understandable

4 •Comparability
1. Debit and Credit

•Every transaction have TWO FOLD Effects.

1)Debit and 2) Credit
• In every transaction something in Give to Get Something.
• In Accounting Money is Give to Get Goods and Services.
• This GIVE and GET are two fold of each transaction.
• This two fold categorized ad Debit and Credit.

Debit

• Debits increase asset or expense accounts and decrease liability,

revenue (income) or equity (Capital) accounts.
• In short account which get benefit called Debit.
• Debit effects recorded to Left Hand side of Account.
Credit

• Credits increase liability, revenue (income) or equity (Capital)

accounts and decrease asset or expense accounts.
• In short account which gives benefit called Credit.
• Credit effect recorded to Right Hand side of Account.

To simply this explanation

Debit entry always adds a positive number and

Credit entry always adds a negative number

(even though positives and negatives are not used in the actual journal entries).
2. Transaction
Exchange of Goods and Services between TWO persons for
money or money worth.

Monetary Non-Monetary
Transactions Transactions

Cash Barter
Transactions Transactions

Credit
Transactions
 Classes
Available

1) 11th, 12th
2) B.Com, BBA
3) M.Com,
MBA
4) LLB, DTL
5) CA, CMA, CS
Foundation
6) CA, CMA, CS
Inter (Exe)

For more detail Contact to

Prof. Jitendra Udawant
COMMERCE STUDY CENTER
Ph. 9860893818, 8208352980
Monetary Transactions Non–Monetary Transactions

•The transactions which involved •The transactions which does not

Money or Money worth directly or involved money or money worth in
indirectly any manner.

•CASH TRANSACTIONS: •BARTER TRANSACTIONS:

•Cash is paid or received •Exchange goods and services for
immediately. another goods and services

•CREDIT TRANSACTIONS:
•Cash is payable or receivable later.
3. Capital and Drawings

•Total Amount invested by OWNER in to

business.

•Owner and Business are separate from

Capital each others, so Capital is LIABILITY of
business.

•Capital = Total Assets - Liabilities

•The amount, Goods or any assets taken by

owner from business for his personal use.
Drawings
•Drawings reduce the Capital of Owner.
4. Debtors and Creditors

• The persons from whom money is receivable.

• The persons to whom goods SALE on CREDIT.
• It is the GROUP of Persons from whom money is receivable.
Debtors • Types of Debtors -
• Bad Debts
• Doubtful Debts
• Goods Debts

• The Persons to whom money is payable.

• The persons from whom goods PURCHASE on CREDIT.
• It is GROUP of persons to whom money is payable.
Creditors • Types of Creditors -
• Creditors for Purchase
• Creditors for Expenses (Outstanding Expenses)
• Creditors for Loan (Secured and Unsecured Loan)
5. Expenditures

Amount spent by business for get Goods, Services, Assets or

any benefit.

TYPES OF EXPENDITURES

Capital Expenditures

Revenue Expenditures

Deferred Revenue Expenditures

a) Capital Expenditures

• Expenses is paid for acquiring (Purchase) Fixed Assets.

• Expenses which increase value of Fixed Assets.(major repairing)
• Expenses made for Long Term (Long Period) benefit.
• It increase Profit earning capacity of business.
• It is Non-Recurring (irrecoverable fully at a time)in nature.

b) Revenue Expenditures

•Expenses is paid for day to day activities and needs.

•Expenses which paid for maintenance of assets.
•Expenses made for Short Term (1year Period) benefit.
•It maintain the Profit earning Capacity.
•It is Recurring in nature out of Income earn during the same
year.
c) Deferred Revenue Expenditures

• The Expenses which are in Revenue nature but paid for more
than one year, so that it is recovered proportionately
over the years.
• The balance not recovered is temporarily called as Assets.
• Examples- Prepaid Expenses, Preliminary Expenses, License
Fees, etc.

TYPES OF REVENUE EXPENDITURES

Revenue Expenses

Direct Expenses Indirect Expenses

Direct Expenditures

• Expenses which are directly related to Production or purchase of

Goods.
• Examples- Goods Purchased, Transportation paid for Goods
Purchased, Wages paid, Factory Light Bill, Godown Expenses, etc.

Indirect Expenditures

• Expenses which are not directly related to Production or

purchase of Goods but need to growth of business.
• Examples- Advertisement, Transportation paid for Goods Sold,
Salary paid, Office Light Bill, Warehouse Expenses,
Advertisement, etc.
• This Expenses helps for growth indirectly.
• It is called General Overheads
6. Discount

• Concession allowed by seller to buyer.

• It is loss of seller.
• When such concession is not loss of seller, not consider in to
Books of Accounts.

Types of Discount

Trade Discount
•When seller allows concession on offer price to buyer for purchase more.
•After deduction of Trade Discount selling price is final, so it is not Loss.
•It is bargaining difference, so it is not consider into Account.
Cash Discount
•When concession allowed for fast or immediate recovery from Debtors.
• It is actual loss.
7. Trading and Non-Trading Concern

Trading Concern

• The business Concern (Organization) which is engaged in

business activity to earn profit.
• The Organization which having profit motive.

Non-Trading Concern

• The Concern (Organization) which is engaged in Social

activity without aim of earn profit.
• The Organization which does not have profit motive.
• Examples – Charitable Organization, Educational
Institution, Charitable Hospitals, Religious Organizations,
Universities, Rotary Clubs, Red Cross Society, etc.
8. Accounting Year and Financial Year

Accounting Year

• The period of TWELVE months selected for maintaining of

Books of Accounts.
• Any year starts 1st date of month and ends after twelve
months.
• It may be Calendar Year, Financial Year or Traditional Year.

Financial Year

• The period of TWELVE months selected or fixed by Government

for Tax purpose called Financial Year.
• Indian Financial Year Start on 1st April and ends on next 31st
March.
• Generally Businessman adopted financial year as Accounting
year due to tax calculation.
9. Solvent and Insolvent

Accounting Year

• The period of TWELVE months selected for maintaining of

Books of Accounts.
• Any year starts 1st date of month and ends after twelve
months.
• It may be Calendar Year, Financial Year or Traditional Year.

Financial Year

• The period of TWELVE months selected or fixed by Government

for Tax purpose called Financial Year.
• Indian Financial Year Start on 1st April and ends on next 31st
March.
• Generally Businessman adopted financial year as Accounting
year due to tax calculation.
10. Solvent and Insolvent
Solvent

• Person who is capable to pay his liabilities easily out of his

assets.
• Persons who‟s Assets more than his Liabilities.
• Person who is Financially Sound and in a position of to pay off
his all debts.

Insolvent

• Person who is not capable to pay his liabilities easily out of his
assets.
• Persons who‟s Liabilities more than his Assets.
• Person who is Financially not Sound and not in a position of to
pay off his all debts.
11. Income and Revenue

• The earning from all sources called Income.

Types

Direct Income (Revenue)

• Income earned from normal (main / Primary) source of Business
Activity.
• Examples – Sales of Goods and Services.
Indirect Income
• Income earned from other than prime source.
• Examples – Rent received, Commission received, Dividend
received, etc.
12. Profit and Loss

Profit

• When income is more than expenditures, the balance income

called Profit.
• It is further classify as – a) Gross Profit and b) Net Profit

Loss

• When expenses is more than income, the excess expenses

called loss.
• It is further classify as – a) Gross Loss and b) Net Loss
13. Assets and Liabilities

Assets

• The properties of the Business.

• The tangible or intangible things which have monetary value
owned by business.

Types
Fixed, Current and Fictitious

Long Term Assets and Short Term Assets

Tangible and Intangible

Depreciable and Appreciable

13. Assets and Liabilities

Liabilities

• Amount payable by the business to others.

• It is amount due from business to others for various reasons.
• Examples – Creditors, Loans, Outstanding Expenses, etc.

Types

Fixed and Current Liabilities

Long Term Liabilities and Short Term Liabilities