Basic Accounting Basic concept of accounting Accounting: It Accounting: It is an art of recording, classifying and summarizing in significant manner and in terms of money, transactions and events which are of financial character and interpreting interpreting the results thereof. Business transaction: A transaction: A business transaction is “The movement of money and money’s worth form one person to another. !r e"change of values between two parties is also #nown as “Business Transaction. Purchase:
A purchase means goods goods purchased by a businessman businessman from suppliers. suppliers.
Sales:
$ales is goods sold by a businessman to his customers.
Purchase Return or Rejection in or Outward Invoice: Invoice: a part of goods purchased by the businessman to his suppliers. Sales Return or Rejection out or Inward Invoice: goods sold by the customer to the businessman.
%urchase return means the return of the full or
$ales return means the return of the full or a part of the
Assets: Assets Assets: Assets are the things and properties possessed by a businessman not for resale but for the use in the business. Liabilities:
All the amounts payable by a business business concern to to outsiders are called liabilities. liabilities.
Capital:
&apital is the amount invested for starting a business by a person.
ebtors:
'ebtor is the person who owes amounts to the businessman.
Creditor:
&reditor is the person to whom amounts are owed by the businessman.
ebit:
The receiving aspect of a transaction is called debit or 'r.
Credit:
The giving aspect of a transaction is called credit or &r.
rawings: 'rawings are the amounts withdrawn (ta#en bac#) by the businessman from his business for his personal, private and domestic purpose. 'rawings may be made in the form cash, goods and assets of the business. Receipts: voucher.
It is a document issued by the receiver of cash to the giver of cash ac#nowledging the cash received
Account: Account is a summarized record of all the transactions relating to every person, every thing or property and every type of service. Ledger:
The boo# of final entry where accounts lie.
!ournal entries:
A daily record of transaction. transaction.
"rail Balance: It is a statement of all the ledger account balances prepared at the end of particular period to verify the accuracy of the the entries made made in boo#s of accounts. Profit: *"cess of credit side over debit side.
Profit and loss account: Balance Sheet: liabilities.
It is prepared to ascertain actual profit or loss of the business.
To ascertain the financial position of the business. It is a statement of assets and "#pes of accounts
Personal account: businessmen deal. Principles:
%ersonal accounts are the accounts of persons, firms, concerns and institutions which the
'ebit the receiver &redit the giver
Real Account: These are the accounts of things, materials, assets + properties. It has physical e"istence which can be seen + touch. *". &ash, $ale, %urchase, urniture, Investment etc. Principles:
'ebit what comes in &redit what goes out
$o%inal account: -ominal account is the account of services received (e"penses and osses) and services given (income and gain) *". $alary, /ent, 0ages, $tationery etc. Principles:
'ebit all e"pense1losses &redit all income1 gains
"all# &'( Tally is a complete business solution for any #ind of Business *nterprise. It is a full fledged accounting software. %rocedure for creating company in Tally 'ouble clic# on Tally icon on des#top. Alt)*+ Co%pan# info2&reate company. Accounts Onl#: To maintain only the financial accounts of the company. Inventory (stoc#) management is not involved in it. Account with Inventor#: This is the default option, which allows maintaining both the financial account of the company as well as the inventory of the company. Select Co%pan#: 0e can choose the company which is already created. $hortcut #ey 2 3. Shut Co%pan#:
It is used to close the company which is opened. $hortcut #ey 2 Alt43.
It is used to ma#e alterations in the company creation li#e name, date, maintain etc. ,uit:
*"its from Tally. 3. &lic# on 5uit button. 6. *sc, *sc, *sc and enter. 7. &trl48
Short cut -e#s Alt47
&ompany information menu
*nter
To accept information typed into a field. To accept a voucher or master. To get a report with further details of an item in a report.
*sc
To remove what has been typed into a field. To e"it a screen. To indicate you do not want to accept a voucher or master.
To accept a form wherever you use the #ey combination the screen or report will be accepted as it is on this screen. It 5uits the screen without ma#ing any changed to it. Alt4& To create a master at a voucher screen. 0hen wor#ing within an amount field presses Alt4& to act as a calculator. Alt4'
&trl4*nter
To delete a voucher. To delete a master.
To alter a master while ma#ing an entry or viewing report.
6
'ate
Alt46
&hange period
Alt43
To see detail
33
eatures company
36
&onfiguration options are applicable to all the companies in a data directory.
&trl4-
&alculator screen.
&trl49
9oucher mode (&r. 'r)
Invoice mode (name of item, rate, 5uantity, and amount) .atewa# of tall#/Accounts info/.roup Ban# account Ban# Account Ban# !d account Branch1division &apital account &ash in hand &urrent asset &urrent liability 'eposit 'irect e"penses 'irect income Indirect e"pense Indirect income 'uties and ta" i"ed asset Investment oans and advance oan (liability) :iscellaneous e"penses %rovisions /etained earning /eserves and surplus %urchase account $ales account $ecured loan $toc# in hand $undry debtor’s $undry creditors $uspense ;nsecured account 0eaning: Current asset: It is converted into cash with in a year. *". Bills receivable irect e1penses: These are the e"penses which are directly related to manufacturing of goods. *". 0ages, factory rent, heating, lighting etc Indirect e1pense: These are the e"penses which are indirectly related to manufacturing of goods. *". $alary, rent, stationery, advertisement, printing 'ecrease the value of the asset. Sundr# debtors: Sundr# creditors:
The person who is the receiver or customer The person who gives or supplier.
21penses Outstanding or 3npaid e1penses or 21penses due: *"penditure incurred during current year but the amount on which is not yet paid. (Added to the e"penditure on the debit side and entered on the liability side.) Inco%e received in advance or Inco%e received but not earned Income received during the current year but not earned or a part of which relates to the ne"t year. ('educted form the concerned income on the credit side and entered on the liability side)
Prepaid advance or 21penses or Prepaid e1penses *"penditure paid during current year but not incurred or a part of which relates to the ne"t year is called e"penditure prepaid. ('educted form the concerned e"penditure on the debit side and entered on the assets side) Inco%e outstanding or inco%e earned but not received or Inco%e accrued
Income outstanding means income earned during the current year but the amount on which is not yet received (added to the concerned income on the credit side and entered on the asset side)
Opening stock Purchase Purchase return Fright charges Carriage inwards or Purchases Cartage and coolie Octroi Manufacturing wages Coal, gas, water Oil and fuel Factory rent, insurance, electricity, lighting and heating Sales Salary Postage and telegrams elephone charges !ent paid !ates and taxes Insurance "udit fees Interest on #ank loan Interest on loans paid $ank charges %egal charges Printing and stationery &eneral expenses Sundry expenses Discount allowed Carriage outwards or sales ra'eling expenses "d'ertisement $ad de#ts !epair renewals Motor expenses Depreciation on assets Interest on in'estment recei'ed Interest on deposit recei'ed Interest on loans recei'ed Commission recei'ed Discount recei'ed !ent recei'ed Di'idend recei'ed $ad de#ts reco'ered Profit #y sale of assets Sundry income %oan from others $ank loan $ank o'erdraft $ills paya#le
Group Stock in hand Purchase account Purchase account Direct expenses Direct expenses Direct expenses Direct expenses Direct expenses Direct expenses D irect expenses Direct expenses Sales account Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect expenses Indirect income Indirect income Indirect income Indirect income Indirect income Indirect income Indirect income Indirect income Indirect income Indirect income %oan %ia#ilities %oan %ia#ilities $ank OD Current %ia#ilities
Sundry creditors Mortgage loans (xpense outstanding Income recei'ed in ad'ance Other lia#ilities Capital Drawings Cash in hand Cash at #ank Fixed deposit at #ank In'estments $ills recei'a#le Sundry de#tors Closing stock Stock of stationery %oose tools Fixtures and fittings Furniture Motor 'ehicles Plant and machinery %and and #uilding %easehold property Patents &oodwill Prepaid expenses Income outstanding
Sundry creditors Secured loans Current %ia#ilities Current %ia#ilities Current %ia#ilities Capital account Capital account Cash in hand $ank account Deposit In'estments Current asset Sundry de#tors Stock in hand Current asset Fixed asset Fixed asset Fixed asset Fixed asset Fixed asset Fixed asset Fixed asset Fixed asset Fixed asset Current asset Current assset
"rading account= Buying and selling of goods. 'r.
/eceiving aspect Direct expenses
o o o o o o o o o o
Opening stock Purchases )*+purchase return Freight charges Cartage and coolie %orry hire Manufacturing expenses ages Factory rent, fuel power &ross profit )transfer to profit and loss account+
Direct Income $y Sales $y )*+Sales return $y Closing stock
Amount xxx xxx xxx
"o Profit and loss account: Actual profit and loss of the business o o o o o o o o o o o o o o o o o
Indirect expenses or payments Salary Postage and elegram elephone charges !ent paid !ate and taxes Insurance paid Interest on #ank loan $ank charges Printing and stationery Discount allowed "d'ertisement Carriage outward )sales+ Depreciation on assets &eneral expenses ra'eling $ad de#ts -et profit
Amount xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx
$y $y $y $y $y $y $y $y $y
Indirect income or receipts &ross profit Interest on in'estment recei'ed Interest on deposit recei'ed Interest on loans recei'ed Discount recei'ed Discount recei'ed !ent recei'ed $ad de#ts recei'ed -et loss
Amount xxx xxx xxx xxx xxx xxx xxx xxx xxx
Balance sheet: Actual financial position %ia#ilities $ank loan $ank o'erdraft $ills paya#le Sundry creditors (xpenses outstanding Capital )*+drawings -et profit
"mount xxx xxx xxx xxx xxx xxx xxx xxx
"ssets Cash in hand Cash at #ank Fixed deposit at #ank In'estments $ills recei'a#le Sundry de#tors Closing stock Stock of stationery Furniture Plant machinery %and and #uilding Motor 'ehicles Prepaid expenses Income outstanding
"mount xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx
Alt)*+ Co%pan# Creation
&ontra=
?
%ayment=
@
/eceipt=
D
ournal= $ales=
E
%urchase=
party)
/ecords funds transfer between cash and ban# accounts. 'eposit into ban# or !pened ban# account &r. &ash 'r. Ban# 0ithdraw form ban# &r. Ban# 'r. &ash /ecord all ban# and cash payments. %aid or
!ournali4e the following transactions 3. &ommenced business with cash /s.3F, FFF. 6. 'eposit into ban# /s. 3?,FFF 7. Bought office furniture /s.7,FFF >. $oled goods for cash /s.6,?FF ?. %urchased goods form :r G on credit /s.6,FFF @. $oled goods to :r H on credit /s.7,FFF . /eceived cash form :r. H on account /s.6,FFF D. %aid cash to :r G /s. 3,FFF E. /eceived commission /s. ?F 3F. /eceived interest on ban# deposit /s. 3FF 33. %aid into ban# /s. 3,FFF 36. %aid for advertisement /s.?FF 37. %urchased goods for cash /s. DFF 3>. $old goods for cash /s. 3,?FF 3?. %aid salary /s. ?FF .atewa# of tall#/Account info/Ledger/Create .atewa# of tall# 5 Accounting voucher Sl.o
/ey
0oucher
%edger Cr. Capital
1
F2
!eceipt
Dr. Cash Cr. Cash
4 7
F5 F6
Contra Payment
Dr. $ank Dr. Office
&roup Capital account Cash in hand Cash in hand $ank account Fixed asset
ype of account
Principles
Personal
&i'er
13,333
!eal
Comes in
13,333
!eal
&oes out
16,333
!eal
Comes in
16,333
!eal
Comes in
7,333
"mount
furniture Cr. Cash Dr. Cash 5
F8
Sales
Cr. Sales Cr. :
6
F9
Purchase
Dr. purchase Dr. ;
2
<
8
F8
F2
F6
Sales
Cr. Sales
!eceipt
Cr. ; Dr. cash
Payment
Dr. : Cr. Cash Cr. commission
9
13
F2
F2
!eceipt
!eceipt
Dr. cash Cr. Interest on #ank deposit Dr. $ank Cr. Cash
11
14
F5
F6
Contra
Payment
Dr. $ank Dr. "d'ertisement Cr. Cash Cr. Cash
17
15
F9
F8
Purchase
Sales
Dr. purchase Cr cash Dr. cash Cr. Sales Dr. salary
16
F6
Payment
Cr. Cash
Cash in hand Cash in hand Sales account Sundry creditor Purchase account Sundry de#tors Sales account Cash in hand Cash in hand Indirect income Cash in hand Indirect income $ank account Cash in hand $ank account Indirect expenses Cash in hand Cash in hand Purchase account Cash in hand Sales account Indirect expense Cash in hand
!eal
&oes out
7,333
!eal
Comes in
4,633
!eal
&oes out
4,633
Personal
&i'er
4,333
!eal
Comes in
4,333
Personal
!ecei'er
7,333
!eal
&oes out
7,333
&i'er
4,333
Comes in
4,333
!ecei'er
1,333
!eal
&oes out
1,333
-ominal
Credit all income
63
!eal
Comes in
63
-ominal
Credit all income
133
!eal
Comes in
133
!eal
&oes out
1,333
!eal
Comes in
1,333
-ominal
De#it all expenses
633
!eal
&oes out
633
!eal
&oes out
833
!eal
Comes in
833
!eal
Comes in
1,633
!eal
&oes out
1,633
-ominal
De#it all expenses
633
!eal
&oes out
633
!eal
"o view/
Inventor# infor%ation Alt47 &ompany creation2:aintain2Accounts with inventory
or
3. !n 32>2F@ /aman commenced business with cash of /s. 6?,FF,FFF. Je further introduced and and Building costing /s. 7F,FFF, %lant and :achinery costing /s. 6?,FFF and furniture and fi"ture costing /s. 7@,FFF. 6. !n 62>2F@ %urchased 9ehicle and %atents /s. 6F,FFF and /s. 3?,FFF. 7. !n ?2>2F@ Je deposited /s. 3, FF,FFF into &anara Ban#. >. !n @2>2F@ %urchased from &adbury &ompany ?FF ? $tars K /s. ? 3FFF &adbury K /s. ? 3FF Lit #at K /s. > 6FF 'airy mil# K /s.
F F
F F F
F F
?. !n 3F2>2F@ %urchased from %aras :oov K /s. 6F '’&lod K /s. 36 @. !n 372>2F@ $old to %an#aC :oov K /s. 6F.?F '’&lod K /s. 36.6? Adhensive tape roll K /s. 3?.6? Band Aid bo" K /s. 6?6 Boric Acid powder K /s.3> . !n 3?2>2F@ $old to A#bar &adbury K /s. @ ? $tar K /s.?.6? Lit Lat K /s. @ D. !n 3@2>2F@ %aid to &adbury company /s. E. !n 3D2>2F@ /eceived from %an#aC 3F. !n 6F2>2F@ %aid to %aras /s. 33. !n 6?2>2F@ /eceived from A#bar /s.
36. !n 6@2>2F@ %urchase from 0ell &loth
T2$hirts
ee26?%c2/s.6FF -i#e27F%c2/s.7FF ormal $hirts %an America27?%c2>FF %eter *ngland27F%c2>?F eans %ants Tiger26F%c2?FF /uff and Tuff27F%c27?F &otton %ants Arrow2>F%c26FF *"2&alibar26F%c26?F
37. %aid %ostage /s. ?FF by che5ue 3>. /eceived commission /s. 3?,FFF 3?. %aid wages /s. 6,?FF
Procedure for Inventor# Proble%
:edicines
T2$hirts
ormal $hirts
eans %ants
&otton %ants
!ournali4e the following "ransactions using the debit and credit given b# the A%erican accounts 3. &ommenced business with cash 6. 'eposited into ban# 7. %urchased goods for cash >. $old goods for cash ?. %urchased goods from A on credit @. $old goods to B on credit . 0ithdraw from ban# D. %aid A on account E. /eceived from B on account 3F. Too# loan from & 33. . /ent paid to *
3F,FFF ?,FFF 7,FFF 6,?FF >,FFF >,?FF 7,FFF 6,FFF 6,?FF ?,FFF >,FFF 3,FFF 6FF 3,FFF
edger
&apital
&apital Account
&ash
&ash in hand
Ban#
Ban# account
%urchase
%urchase account
$ales
$ales account
A
$undry creditor
B
$undry debtor
&
$undry creditor
'
$undry debtor
$alary
Indirect e"penses
'rawings
&apital account
/ent
Indirect e"penses
/a#esh and company 3. 6. 7. >. ?. @. . D. E. 3F. 33. 36. 37. 3>. 3?. 3@. 3.
$tarted business with cash /s. 6,FFF, Ban# /s. 6F,FFF. Issued che5ue for goods purchased /s. 3,FFF. Bought goods for cash /s.D,FFF. Bought furniture from Anil for cash /s.3FF. Bought goods from harish /s. 3,?FF. Bought goods from chandan on credit /s. ?,DFF. /eturned damaged goods to &handan /s.DFF. Bought goods from -aveen and paid by che5ue immediately /s.>FF. $old goods to ,FFF. 'raw che5ue for personal use /s.>,FFF. 'raw cash for personal use from ban# /s.7,FFF. /eceive a che5ue from :anCu /s.6,DFF. Borrow loan from Anands /s.3,FFF. %aid Anands oan with interest /s.3,FFF. edger &apital Ban# %urchase Anil &handan Jarish %urchase return -aveen $ales
7aridas and co%pan# 3.$tarted business with cash /s.3F,FFF,furniture /s.>,FFF and machinery /s.?,FFF. 6.Bought goods from Anil on credit /s. >,FFF and for cash /s.?,FFF. 7.$old goods to /aCesh on credit /s.?,FFF and for cash /s.7,FFF. >. Bought goods from Arun $ubCect to trade discount of 6M of /s.6,FFF. ?. $old goods to /amesh subCect to trade discount of ?M of /s.>,FFF. @. %aid salary /s.3,FFF, printing /s.3?F and wages rs.3FF. ./eceived rent /s.?FF, commission /s.>FF. D. /eceived a che5ue from
edger
&apital
&apital account
urniture
i"ed asset
:achinery
i"ed asset
%urchase
%urchase account
Anil
$undry &reditor
$ales
$ales account
/aCesh
$undry debtor
Arun
$undry creditor
/amesh
$undry debtor
$alary
Indirect e"penses
%rinting
Indirect e"penses
0ages
'irect e"penses
/ent
Indirect e"penses
&ommission
Indirect e"penses
$undry creditor
Trade discount
Indirect e"penses
:emorandum boo# %articulars 3. &ommenced business with cash /s. 3F,FFF. 6. %urchased goods for cash /s.7,FFF. 7. !pened a ban# account with /s.6,FFF. >. %urchased stationary /s.3,FF. ?. %urchased furniture /s.3,FFF. @. $old goods to A /s.6,FFF. . %urchased goods from B /s.6,FFF. D. $old goods for cash /s.3,FFF. E. %aid for postage /s.6F. 3F. Too# loan from & /s.3,?FF. 33. %aid rent /s.7FF. 36. 0ithdraw from ban# /s.DFF. 37. /eceived from A on account /s.?FF. 3>. %aid commission by che5ue /s.6FF. edger &apital %urchase Ban# %urchase $tationary urniture $ales A B %otage & /ent &ommission
/oa and company %articulars
/s.
3. Bought goods for cash 6. Bought office furniture for cash 7. %aid for postage >. %urchased goods from /aC#amal ?. $old goods for cash @. Bought goods from /ahim . $old goods to $uresh D. $old goods to -aya# E. %urchased goods for cash 3F. /ecevied cash from -aya# 33. %aid cash to /ahim 36. /eturned goods to /al#amal 37. $uresh returned goods 3>. %aid salary 3?. $old goods for cash 3@. /ao withdraw for his personel use 3. %aid for stationery 3D. %aid rent 3E. /eceived commission
6,?FF ?FF 3F 6,FFF 3?F >FF >FF 6?F >FF 6FF ?F 6FF ?F 3?F ?FF DFF 3FF ?F 66?
edger &apital %urchase %ostage /aC#amal $ales /ahim $uresh -aya# %urchase returns $alary 'rawings $tationary /ent &ommission
