Accounting Procedure
Accounting Procedure
Accounting Procedure
SESSION 2
1/16/13
GEETHA IYER
Financial Statements
Record transaction
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GEETHA IYER
IYER
GEETHA
Accounting cycle
Journal Subsidiary books-Purchase, Sales & Return books Cash book Ledger Trial Balance
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GEETHA IYER
2. Tangible accounts Cash, Land, Car etc (Real a/c) 3. Intangible accounts Patents, Goodwill, Incomes, Losses, (Nominal a/c) Expenses etc
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GEETHA IYER
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GEETHA IYER
Rules for DEBIT and DEBIT CREDIT CREDIT Increase in Assets Decrease in Assets
1. 2. 3. 4. 5.
Decrease in Liabilities Decrease in Owners Equity Decrease in Revenues Increase in Expenses DEBIT
Increase in Liabilities Increase in Owners Equity Increase in Revenues Decrease in Expenses CREDIT The Giver What goes out All Gains / Profits
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GEETHA IYER
JOURNAL
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GEETHA IYER
Date
Proforma of a Journal
Description Furniture A/c Dr to M/s XYZ Furnishers Ltd (Being purchase of furniture on credit vide Invoice no: 205)
LF
Ref
Debit
Credit
11/8/10
Invoice 205
2000 2000
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GEETHA IYER
ILLUSTRATION
The following information relates to Shyam Enterprises Ltd. Pass Journal Entries.
Date Transaction Rs.
Starts business with Buys goods and stores them Receives order from A Delivered the goods to A, customer invoiced Customer A pays
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GEETHA IYER
Date
Description Dr
L F Ref
Debit 1000
Credit
1st Jan Cash A/c to Capital A/c (Being capital introduced in cash)
8th Jan Purchase A/c Dr to Cash A/c (Goods purchased in cash vide cash memo no 378 of M/s XYZ Ltd) 15th Jan Mr As A/c Dr to Sales A/c (Goods sold to Mr A vide sale Bill No: 001) 31st Jan Cash A/c to Mr As A/c (Being cash received on account) 1/16/13 GEETHA IYER Dr
001
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GEETHA IYER
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GEETHA IYER
Purchase Journal
Date Jan. 1 Jan. 2 Jan. 3 Jan. 4 Jan. 5 PURCHASES JOURNAL Name of the Supplier Roy and Co. Sen and Co. Carmaker and Co. Mondal and Co. Naskar and Co. Total 16000 Amount Rs.2,000 3,000 1,500 6,000 3,500 Rs 16,000
It contains all accounts of the enterprise. It classifies the transactions recorded in the Journal. May also be classified into groups of accounts, eg Sundry Debtors / Sundry Creditors Ledger etc.
LEDGER (Book of Final Ledger is a set of accounts. entry) Ledger is called main or principal book.
Proforma of a LEDGER Dr
Date Explanation J F
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Cr
Amount Date Explanation J F Amount
GEETHA IYER
POSTING OF It is the process of transferring the debit and credit items from the ACCOUNTS JOURNAL to their respective accounts in the LEDGER.
The dual aspect ensures that each transaction finds a place in at least two accounts. Total amount of debits as a result of each transaction will be equal to the credits. Debit entry will be posted on the debit side
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GEETHA IYER
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GEETHA IYER
As Account or Account Receivable Cr. Explanation Amount Date To Sales A/c Explanation Amount 500
Date
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Explanation
Amount Date
Explanation
Amoun t 500
GEETHA IYER
CASH BOOK
Subsidiary as well as a Principal book 1. Entries in the cash book can be passed directly as it is a Subsidiary Book (Journal) 2. It is also a complete a/c showing the Cash Balance which can be directly taken to the Balance Sheet, hence also a Principal Book 3. Three types of Cash Book :a. Simple or Single Column b. Two Column (Cash & Bank, or Cash & Discount) c. Three Column (Cash, Bank, & Discount) 4. Receipts on left and Payments on right side 5. Discount columns are totaled but not balanced and posted to the discount a/c in ledger
1/16/13 GEETHA IYER
Illustration
M/s Subham & Co. purchases furniture for Rs. 10,000 on which he gets a discount of 10%. He also sells goods to M/s Sohan for Rs. 15,000. It is known that M/s Sohan also makes the full payment after availing a discountthe Taken to of discount 10%. The opening cash balance is Rs. 5,000. account in the Prepare Cash Book.
M/s. Subham & Co. Cash Book Amount Date 5,000 13,500 18,500
ledger
Date
LF
LF
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GEETHA IYER
BALANCING AND CLOSING OF ACCOUNTS Balancing is the technique of finding the net
balance of a particular account by separately totaling the debit and the credit sides. The balance is put on the side which is lighter thus equating the debits with the credits. However, the nature of the balance in any account (debit or credit) is always known by the side that is heavier.
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Account type
1. 2. 3. 4. 5.
Balance
Asset accounts Liability accounts Capital/Equity accounts Revenue accounts Expense accounts
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GEETHA IYER
TRIAL BALANCE
Balances of both debit and credit accounts are first transferred to a worksheet called original trial balance or unadjusted trial balance Adjustments are worked out giving rise to an Adjusted trial balance Finally, based on the type of the account it is, the balances of individual accounts are then taken to either P & L a/c or the Balance Sheet
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GEETHA IYER
Banking Transactions
Payment made by cheques, Bearer cheques, Crossed cheques (& co, or A/c payee) Endorsing cheques to 3rd parties Cheques deposited for collection, Cheques received but not deposited into bank, Deposit/withdrawal of cash from bank, Dishonour of cheques, Overdraft, Bank charges
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GEETHA IYER
1.
It is the statement prepared to compare Bank a/c in the books with the Bank Statement (Pass Book) received from the bank It is prepared at regular intervals so that errors, if any, may be detected and rectified
2.
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GEETHA IYER
ILLUSTRATION
Prepare a Bank Reconciliation Statement to reconcile the
differences between the cash book and the bank pass book.
Balance as per the cash book Rs 2687 and balance as per
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GEETHA IYER
2,838 4,399
PRACTICE PROBLEM
Mr. As Bank Book shows a debit balance of 10,500.40 Prepare a Bank Reconciliation considering following facts 1. Cheques deposited on 3oth Dec not collected by 31st Dec (a) 300.24 (b) 500.00 (c) 200.15 2. Cheques issued but not cashed by 31st Dec (a) 600.25 (b) 200.00 (c) 489.25 (d) 50.00
3. Dividend recd directly in the bank a/c, without intimation to Mr A, amounting to 1500.00 4. Bank allowed interest 20.30 and debited charges 9.20 on 31st Dec
Ans: 12350.61
1/16/13 GEETHA IYER
THANK YOU
1/16/13 GEETHA IYER