BUSINESS ACCOUNTING

Journal, Ledger, Trial Balance

1. Present By,
Mr. V. GURUMOORTHI
Assistant Professor
Department of Commerce.
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2. PRINCIPLES OF ACCOUNTANCY
05.07.2016
TUESDAY.
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3. Contents….
1.History of Accounting
2.Book keeping
3.Accounting Meaning
4.Steps of Accounting
5.Types of Accounting
6.Golden Rules
7.Accounting Cycle
8.Accounting concepts & Conventions
9.Journal
10.Ledger
11.Trial Balance
12.Final Accounts
Slides
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4. History:
Ithasevidencein4-thCenturyin
ArthaSasthiramWrotebyGowdilya.
After14-thCentury,Establishedcertain
proceduresinAccountingsystemby
ItalianMerchantLucaPecioli.
HeIntroducedDoubleEntrySystem
at1494.
HeisaFatherofAccounts.
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5. BOOK KEEPING
ItisconcernedwiththeRecording
ofBusinessTransactionina
systematicmanner.
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6. 6
ACCOUNTING

7. Meaning:
Accounting,thetermrefers“artofrecording,classifyingand
summarizingandinterpretationofthebusiness
transactioninasignificantmannerandintermsofmoney”.
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8. 8

9. 9

10. TYPES OF ACCOUTS
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Real A/c
Nominal
A/c
PERSONAL IMPERSONAL
Natural
person
Artificial
person
Representative
person
Tangible
Assets
Intangible
Assets
Expenses
Incomes

11. I. Personal Accounts:
Accounts of persons with whom with business has
dealingsare known as personal accounts.
A) Natural Persons:Owner, Debtors(Customer),
Creditors(Suppliers).
B) Artificial Persons:Bank, Institution, Company,
Government.
C)Representative Persons:Out Standing(O/s),
Prepaid Expenses.
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12. II. IMPERSONAL ACCOUNTS
Other than the personal accountsknown as
Impersonal Accounts.
Real Accounts: All assets of the company.
Tangible Assets: It can be see, touch, feel. Such as, Land,
Building, Cash, Bank balance.. ect.,
Intangible Assets:It can’t see, touch, feel. Such as, Copy Right,
pattern rights, Good will, Trade mark.
Nominal Accounts:All Expenses and Incomes. Such
as, Salary paid, Rent paid, Interest received.
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13. GOLDEN RULES
ACCOUNTS DEBIT
ASPECTS
CREDIT
ASPECTS
Personal
Account
ReceiverGiver
Real
Account
What
comes in
what
goes out
Nominal
Account
Expenses/
Losses
Incomes/
Gains
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14. OBJECTIVES OF ACCOUNTING
To maintain accounting records.
To Ascertain true profitor loss.
To Find out correct financialpositions.
To provide informationto Users.
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15. ADVANTAGE OFACCOUNTING
Maintaining Systematic records
Preparation of financialstatements
Assessment of progress
Aid to decisionmaking
Full fill Statutory requirements
Information to interested groups
Evidence in courts
Taxation Problems
Merger of firms.
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16. Accounting Concepts and
Conventions
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17. ACCOUNTING CONCEPT
Theterm‘concept’isusedtoconnoteaccounting
postulate,thatisnecessaryassumptionsand
conditionsuponwhichaccountingisbased.
Thesearethetheoriesonhowandwhycertain
categoriesoftransactionsshouldbetreatedina
particularmanner.
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18. Such as,
1.The entity Concept
2.The money measurement concept
3.Going concern concept
4.Dual aspect concept
5.Accounting period concept
6.Realization concept
7.Cost concept
8.Matching concept
9.The accounting Equation Concept
10.Objective evidence concept
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19. •Thebusinessanditsowner(s)aretwo
separateentities
1. BUSINESS ENTITY CONCEPT

20. Capital (Liability)
Drawings (Asset)
TheBooksOfAccountsareprepared
fromthepointofviewofthe
business……Hence,

21. Itisassumedthattheentityisagoing
concern,i.e.,itwillcontinuetooperate
foranindefinitelylongperiodinfuture
andtransactionsarerecordedfromthis
pointofview.
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2. GOING CONCERN CONCEPT

22. Inaccounting,arecordismadeonlyof
thosetransactionsoreventswhichcanbe
measuredandexpressedintermsof
money.
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3. MONEY MEASUREMENT CONCEPT

23. Non monetary transactions are not
recorded in accounting.
Attitude
Experience
Innovativeness
Honesty
Team work
Passion
skill

24. Formeasuringthefinancialresultsofa
businessperiodically,theworkinglifeof
anundertakingissplitintoconvenient
shortperiodscalledaccountingperiod.
4.ACCOUNTING PERIOD CONCEPT

26. Anassetacquiredbyaconcernis
recordedinthebooksofaccountsat
historicalcost(i.e.,atthepriceactually
paidforacquiringtheasset).Themarket
priceoftheassetisignored.
5.COST CONCEPT

27. Historical
Cost Of
Market Value
Of

28. For Every Debit,
there is a Credit
Everytransactionshould
haveatwo-sidedeffectto
theextentofsame
amount..
6. DUAL-ASPECT CONCEPT

29. •Cash Account Rs. 10,000
•Sales Account Rs. 10,000
For Example:
Cash Sales Rs. 10,000

30. Profitisearnedwhengoodsor
servicesareprovided/
transferredtocustomers.The
Therevenueshouldbe
recognizedonlywhenitis
legallydueandrealizable.
7. REALISATION CONCEPT

31. The matching principle ensures that
revenues and all their associated
expenses are recorded in the
same accounting period.
Hence, the Outstanding and prepaid
expenses and incomes have to be
properly adjusted.
8. MATCHING CONCEPT

32. 9. ACCOUNTING EQUATION CONCEPT

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10. OBJECTIVE EVIDENCE CONCEPT
All accounting entries must be based on
objective evidence.It refers, verifiability,
reliability and absence of bias.

34. Accounting
Conventions

35. ACCOUNTING CONVENTIONS
AccountingConventionsarethecommon
practiceswhichareuniversallyfollowedin
recordingandpresentingaccounting
informationofbusiness.Ithelpsin
comparingaccountingdataofdifferent
businessorofsameunitsfordifferentperiods.
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36. Such as,
Convention of Materiality
Convention of Full Disclosure
Convention of Conservatism
Convention of Consistency
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37. Onlythosetransactions,
importantfactsanditems
areshownwhichareuseful
andmaterialforthe
business.Thefirmneed
notrecordimmaterial
andinsignificantitems.
1. MATERIALITY

38. FinancialStatementsand
theirnotesshouldpresent
allinformationthatis
relevantandmaterialto
theuser’sunderstandingof
thestatements.
2. FULL DISCLOSURE

40. Anticipate No Profitsbut
Provide for all Losses..
Accountant should always
be on side of safety. FOR
uncertainty
3. CONSERVATISM

41. ForExample
•Making Provision for Bad and
Doubtful Debts
•Showing Depreciation on Fixed
Assets, but not appreciation…

42. Theaccountingpracticesand
methodsshouldremainconsistentfrom
oneaccountingperiodtoanother.
Whateveraccountingpracticeis
followedbythebusinessenterprise,
shouldbefollowedonaconsistentbasis
fromyeartoyear.
4. CONSISTENT

43. For
Example
2009-10
•Straight
Line
Method
2010-11
•Written
Down
Value
Method
2011-12
•Units of
Measure
Method
Year
Method of
Depreciation
followed