Basic Accounting
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 the results thereof.
Business transaction: A business transaction is “The movement of money and money’s worth form one person to another”. Or exchange of values between two parties is also known as “Business Transaction”.
Purchase: A purchase means goods purchased by a businessman from suppliers.
Sales: Sales is goods sold by a businessman to his customers.
Purchase Return or Rejection in or Outward Invoice: Purchase return means the return of the full or a part of goods purchased by the businessman to his suppliers.
Sales Return or Rejection out or Inward Invoice: Sales return means the return of the full or a part of the goods sold by the customer to the businessman.
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 concern to outsiders are called liabilities.
Capital: Capital is the amount invested for starting a business by a person.
Debtors: Debtor is the person who owes amounts to the businessman.
Creditor: Creditor is the person to whom amounts are owed by the businessman.
Debit: The receiving aspect of a transaction is called debit or Dr.
Credit: The giving aspect of a transaction is called credit or Cr.
Drawings: Drawings are the amounts withdrawn (taken back) by the businessman from his business for his personal, private and domestic purpose. Drawings may be made in the form cash, goods and assets of the business.
Receipts: It is a document issued by the receiver of cash to the giver of cash acknowledging the cash received voucher.
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 book of final entry where accounts lie.
Journal entries: A daily record of transaction.
Trail Balance: It is a statement of all the ledger account balances prepared at the end of particular period to verify the accuracy of the entries made in books of accounts.
Profit: Excess of credit side over debit side.
Profit and loss account: It is prepared to ascertain actual profit or loss of the business.
Balance Sheet: To ascertain the financial position of the business. It is a statement of assets and liabilities.
Types of accounts
Personal account: Personal accounts are the accounts of persons, firms, concerns and institutions which the businessmen deal.
Principles: Debit the receiver
Credit the giver
Real Account: These are the accounts of things, materials, assets & properties. It has physical existence which can be seen & touch.
Ex. Cash, Sale, Purchase, Furniture, Investment etc.
Principles: Debit what comes in
Credit what goes out
Nominal account: Nominal account is the account of services received (expenses and Losses) and services given (income and gain)
Ex. Salary, Rent, Wages, Stationery etc.
Principles: Debit all expense/losses
Credit all income/ gains
Tally 7.2
Tally is a complete business solution for any kind of Business Enterprise. It is a full fledged accounting software.
Procedure for creating company in Tally
Double click on Tally icon on desktop. Alt+F3 Company info-Create company.
Accounts Only: To maintain only the financial accounts of the company. Inventory (stock) management is not involved in it.
Account with Inventory: This is the default option, which allows maintaining both the financial account of the company as well as the inventory of the company.
Select Company: We can choose the company which is already created.
Shortcut key - F1.
Shut Company: It is used to close the company which is opened. Shortcut key - Alt+F1.
Alter: It is used to make alterations in the company creation like name, date, maintain etc.
Quit: Exits from Tally. 1. Click on quit button.
2. Esc, Esc, Esc and enter.
3. Ctrl+Q
Gateway of tally-Accounts info-Group
Bank account Bank Account
Bank Od account Branch/division
Capital account Cash in hand
Current asset Current liability
Deposit Direct expenses
Direct income Indirect expense
Indirect income Duties and tax
Fixed asset Investment
Loans and advance Loan (liability)
Miscellaneous expenses Provisions
Retained earning Reserves and surplus
Purchase account Sales account
Secured loan Stock in hand
Sundry debtor’s Sundry creditors
Suspense Unsecured account
Meaning:
Current asset:
It is converted into cash with in a year. Ex. Bills receivable
Direct expenses:
These are the expenses which are directly related to manufacturing of goods.
Ex. Wages, factory rent, heating, lighting etc
Indirect expense:
These are the expenses which are indirectly related to manufacturing of goods.
Ex. Salary, rent, stationery, advertisement, printing
Depreciation: Decrease the value of the asset.
Sundry debtors: The person who is the receiver or customer
Sundry creditors: The person who gives or supplier.
Expenses Outstanding or Unpaid expenses or Expenses due:
Expenditure incurred during current year but the amount on which is not yet paid. (Added to the expenditure on the debit side and entered on the liability side.)
Income received in advance or Income received but not earned
Income received during the current year but not earned or a part of which relates to the next year. (Deducted form the concerned income on the credit side and entered on the liability side)
Prepaid advance or Expenses or Prepaid expenses
Expenditure paid during current year but not incurred or a part of which relates to the next year is called expenditure prepaid. (Deducted form the concerned expenditure on the debit side and entered on the assets side)
Income outstanding or income earned but not received or Income 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)
Inventory information
Alt+F3 Company creation-Maintain-Accounts with inventory
Gateway of Tally-Inventory information-Unit of measure
Gateway of tally –Inventory information-Godown
Gateway of tally-Inventory information-Stock group
Gateway of tally – Inventory information-Stock item
To View
Gateway of tally-Display-Day book-Alt+F2 (change period) Alt+F1 (to see detail) or
Gateway of tally-Stock summary
1. On 1-4-06 Raman commenced business with cash of Rs. 25,00,000. He further introduced Land and Building costing Rs. 30,000, Plant and Machinery costing Rs. 25,000 and furniture and fixture costing Rs. 36,000.
2. On 2-4-06 Purchased Vehicle and Patents Rs. 20,000 and Rs. 15,000.
3. On 5-4-06 He deposited Rs. 1, 00,000 into Canara Bank.
4. On 6-4-06 Purchased from Cadbury Company
500 5 Stars @ Rs. 5 1000 Cadbury @ Rs. 5
100 Kit kat @ Rs. 4 200 Dairy milk @ Rs. 7
5. On 10-4-06 Purchased from Paras
500 Moov @ Rs. 20
500 D’Clod @ Rs. 12
6. On 13-4-06 Sold to Pankaj
200 Moov @ Rs. 20.50
100 D’Clod @ Rs. 12.25
200 Adhensive tape roll @ Rs. 15.25
100 Band Aid box @ Rs. 252
200 Boric Acid powder @ Rs.14
7. On 15-4-06 Sold to Akbar
500 Cadbury @ Rs. 6
200 5 Star @ Rs.5.25
50 Kit Kat @ Rs. 6
8. On 16-4-06 Paid to Cadbury company Rs.
9. On 18-4-06 Received from Pankaj
10. On 20-4-06 Paid to Paras Rs.
11. On 25-4-06 Received from Akbar Rs.
12. On 26-4-06 Purchase from Well Cloth
T-Shirts Lee-25Pc-Rs.200
Nike-30Pc-Rs.300
Formal Shirts Pan America-35Pc-400
Peter England-30Pc-450
Jeans Pants Tiger-20Pc-500
Ruff and Tuff-30Pc-350
Cotton Pants Arrow-40Pc-200
Ex-Calibar-20Pc-250
13. Paid Postage Rs. 500 by cheque
14. Received commission Rs. 15,000
15. Paid wages Rs. 2,500
Procedure for Inventory Problem
Gateway of Tally-Inventory Info-Unit of Measure-Create-
Symbol- Nos. Pcs
Formal Name-Number Pieces
Gateway of Tally-Inventory Info-Stock Group-Create
Chocolate, Medicines, Cotton Pants, Jeans Pants, Formal Shirts, T-Shirts
Gateway of Tally-Inventory Info-Stock Item-Create
5 StarsKitkat Chocolate
Cadbury
Dairy milk
MoovD’Clod
Adhensive tape rolls Medicines
Band Aid box
Boric Acid powder
 |
Lee T-Shirts
Nike
 |
Pan America Formal Shirts
Peter England
 |
Tiger Jeans Pants
Ruff and Tuff
ArrowEx-Calibar Cotton Pants
Journalize the following Transactions using the debit and credit given by the American accounts
1. Commenced business with cash 10,000
2. Deposited into bank 5,000
3. Purchased goods for cash 3,000
4. Sold goods for cash 2,500
5. Purchased goods from A on credit 4,000
6. Sold goods to B on credit 4,500
7. Withdraw from bank 3,000
8. Paid A on account 2,000
9. Received from B on account 2,500
10. Took loan from C 5,000
11. Gave loan to D 4,000
12. Paid salary 1,000
13. Cash withdraw from the business for personal use 200
14. Rent paid to E 1,000
Ledger | Group |
Capital | Capital Account |
Cash | Cash in hand |
Bank | Bank account |
Purchase | Purchase account |
Sales | Sales account |
A | Sundry creditor |
B | Sundry debtor |
C | Sundry creditor |
D | Sundry debtor |
Salary | Indirect expenses |
Drawings | Capital account |
Rent | Indirect expenses |
Rakesh and company
1. Started business with cash Rs. 2,000, Bank Rs. 20,000.
2. Issued cheque for goods purchased Rs. 1,000.
3. Bought goods for cash Rs.8,000.
4. Bought furniture from Anil for cash Rs.100.
5. Bought goods from harish Rs. 1,500.
6. Bought goods from chandan on credit Rs. 5,800.
7. Returned damaged goods to Chandan Rs.800.
8. Bought goods from Naveen and paid by cheque immediately Rs.400.
9. Sold goods to Guptha Rs. 1,000.
10. Received a cheque from Guptha Rs.1,000 for goods sold.
11. Paid commission Rs.2,000.
12. Paid wages by cheque Rs.4,000.
13. Draw cheque for personal use Rs.4,000.
14. Draw cash for personal use from bank Rs.3,000.
15. Receive a cheque from Manju Rs.2,800.
16. Borrow loan from Anands Rs.1,000.
17. Paid Anands Loan with interest Rs.1,000.
Ledger | Group |
Capital | Capital account |
Bank | Bank account |
Purchase | Purchase account |
Anil | Sundry Creditor |
Chandan | Sundry Creditor |
Harish | Sundry Creditor |
Purchase return | Purchase account |
Naveen | Sundry Creditor |
Sales | Sales account |
Guptha | Sundry debetor |
Commission | Indirect expenses |
Wages | Direct expenses |
Drawings | Capital account |
Manju | Sundry Creditor |
Anand | Sundry Creditor |
Haridas and company
1.Started business with cash Rs.10,000,furniture Rs.4,000 and machinery Rs.5,000.
2.Bought goods from Anil on credit Rs. 4,000 and for cash Rs.5,000.
3.Sold goods to Rajesh on credit Rs.5,000 and for cash Rs.3,000.
4. Bought goods from Arun Subject to trade discount of 2% of Rs.2,000.
5. Sold goods to Ramesh subject to trade discount of 5% of Rs.4,000.
6. Paid salary Rs.1,000, printing Rs.150 and wages rs.100.
7.Received rent Rs.500, commission Rs.400.
8. Received a cheque from Ganesh Rs.1,000.
Ledger | Group |
Capital | Capital account |
Furniture | Fixed asset |
Machinery | Fixed asset |
Purchase | Purchase account |
Anil | Sundry Creditor |
Sales | Sales account |
Rajesh | Sundry debtor |
Arun | Sundry creditor |
Ramesh | Sundry debtor |
Salary | Indirect expenses |
Printing | Indirect expenses |
Wages | Direct expenses |
Rent | Indirect expenses |
Commission | Indirect expenses |
Ganesh | Sundry creditor |
Trade discount | Indirect expenses |
Memorandum book
Particulars
1. Commenced business with cash Rs. 10,000.
2. Purchased goods for cash Rs.3,000.
3. Opened a bank account with Rs.2,000.
4. Purchased stationary Rs.1,00.
5. Purchased furniture Rs.1,000.
6. Sold goods to A Rs.2,000.
7. Purchased goods from B Rs.2,000.
8. Sold goods for cash Rs.1,000.
9. Paid for postage Rs.20.
10. Took loan from C Rs.1,500.
11. Paid rent Rs.300.
12. Withdraw from bank Rs.800.
13. Received from A on account Rs.500.
14. Paid commission by cheque Rs.200.
Ledger | Group |
Capital | Capital account |
Purchase | Purchase account |
Bank | Bank account |
Purchase | Purchase account |
Stationary | Indirect expenses |
Furniture | Fixed asset |
Sales | Sales account |
A | Sundry debtor |
B | Sundry Creditor |
Potage | Indirect expenses |
C | Sundry Creditor |
Rent | Indirect expenses |
Commission | Indirect expenses |
Roa and company
Particulars Rs.
1. Bought goods for cash 2,500
2. Bought office furniture for cash 500
3. Paid for postage 10
4. Purchased goods from Rajkamal 2,000
5. Sold goods for cash 150
6. Bought goods from Rahim 400
7. Sold goods to Suresh 400
8. Sold goods to Nayak 250
9. Purchased goods for cash 400
10. Recevied cash from Nayak 200
11. Paid cash to Rahim 50
12. Returned goods to Ralkamal 200
13. Suresh returned goods 50
14. Paid salary 150
15. Sold goods for cash 500
16. Rao withdraw for his personel use 800
17. Paid for stationery 100
18. Paid rent 50
19. Received commission 225
Ledger | Group |
Capital | Capital account |
Purchase | Purchase account |
Postage | Indirect expenses |
Rajkamal | Sundry Creditor |
Sales | Sales account |
Rahim | Sundry Creditor |
Suresh | Sundry Debtor |
Nayak | Sundry Debtor |
Purchase returns | Purchase account |
Salary | Indirect expenses |
Drawings | Capital account |
Stationary | Indirect expenses |
Rent | Indirect expenses |
Commission | Indirect income |
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