1. BASIC ACCOUNTANCY

2. Important accountancy terms
DEBIT: Account has received a benefit
CREDIT: Account has parted with the benefit
DEBTOR: Person from whom we have to recover money
CREDITOR: Person to whom we have to pay money
CAPITAL: Amount excess of assets over liabilities
ASSET: Anything convertible to cash or equivalent
LIABILITIES: Debts for which trader is responsible for payment
INVOICE: Business document sent by seller of goods to purchaser of goods

3. Assets and Liabilities
-Fixed : Land, Building, Office equipment, etc Current : Cash in Hand, Cash at Bank, Debtors, etc
Liabilities
-Fixed : Loans, Debentures, Capital, etc Current : Creditors, Bills payable, etc

4. Double Entry Book Keeping
Method assumes that every transaction has two-fold effect and in each transaction there are two parties or accounts
One account receives benefit and other account gives benefit
Account receiving the benefit is debited and other account parting with benefit is credited
Double entry book keeping system is defined as system of recording two fold effect of each and every transaction in proper set of books

5. CLASSIFICATION OF ACCOUNTS
Personal A/c
Impersonal A/c
Real A/c
Nominal A/c
Personal A/c are those of individuals, firm or company e.g. Capital A/c, Drawings A/c, Bajaj Co. A/c, etc
Real A/c record transactions relating to property and material things e.g. Cash A/c, Goods A/c, Furniture A/c, etc
Nominal A/c record transactions relating to expenses, losses, income and gains e.g. Rent A/c, Salary A/c, Commission A/c, Interest A/c, etc

6. Rules for Debit and Credit
1)Personal A/c : Debit the receiver,
Credit the giver
2)Real A/c : Debit what comes in,
Credit what goes out
3)Nominal A/c : Debit the expenses and losses,
Credit the income and gains
e.g. 1) Paid to Rohit for salary Rs ) Withdraw from bank for personal use Rs.2000
No. A/c Affected Type DB/CR Reason
Salary Nominal DB Salary is expense
Cash Real CR Cash going out
Drawings Personal DB Received benefit
Cash Real CR Cash going out

7. Journal - Maintains original and detailed record of transactions
- Original record which provides base for subsequent accounting work
JOURNAL ENTRY
Transaction- Sold goods for cash Rs.1000

8. Ledger
- Principle book of account in which all transactions are finally posted from journal in summarised and classified manner
- Can prepare financial statements like profit & loss A/c, Balance-sheet, etc with help of ledger
- Posting is act of transferring entries from journal to ledger
- Processing of finding out difference between total of debit side and credit side of an account

9. Types of Ledger
General Ledger: Maintains all impersonal i.e. real and nominal accounts
Sales Ledger: Maintains accounts of debitors to whom goods are sold on credit basis
Purchase Ledger: Maintains accounts of creditors from whom goods are purchased on credit basis
Private Ledger: Maintains personal account i.e. Capital A/c, Drawings A/c, P & L A/c, Balance-sheet, etc

10. Closing of Account
- Essential for preparing P & L A/c and Balance-sheet
1)Personal A/c: Closed by carrying over balance to the next period
Show balance of debtors and creditors
2)Real A/c: Closed by carrying over balance to the next period
Show balance of asset and property
3)Nominal A/c: Closed by transferring difference to P & L A/c

11. Example Journal

12. LEDGER ACCOUNT Cash Account Dr. Cr.
Date Particulars Rs Date Particulars Rs.
Mar Mar
1 To Capital A/c By Expenses A/c
17 To Revenue A/c By Accounts
25 To Accounts payable A/c
receivable A/c By Balance c/d

13. Trial Balance
The total of the accounts on the debit and credit side is referred to as the trial balance.
If the debits do not equal the credits, then an error has occurred somewhere in the process
If the trial balance is not in balance, then an error has been made somewhere in the accounting process.
Common errors that would result in an unbalanced trial balance
Summation error for the debits and credits of the trial balance
Error transferring the ledger account balances to the trial balance columns
Error in the calculation of a ledger account balance
Error in posting a journal entry to the ledger
Error in the journal entry

14. Trial Balance

15. Bank Reconciliation Statement
Cash Book: Records all cash transactions i.e. cash receipts and cash payments
Pass Book (Bank’s Ledger): Account maintained by bank for each customer in which deposits and withdrawals are recorded
Bank Reconciliation Statement: Prepared to reconcile difference between Cash Book Balance and Pass Book Balance on particular date

16. Final Accounts Trading Profit & Loss Balance-sheet
Trading A/c: -Gives gross profit or loss earned by business Gross profit or loss is transferred to P & L A/c
Profit & Loss A/c:- Gives net profit or loss earned by business at the end of year Shows all indirect expenses and incomes The period a Profit and Loss Statement covers is called the accounting period.
If Credit side > Debit side => Profit If Debit side > Credit side => Loss

17. Final Accounts(contd…)
Balance Sheet: Shows financial position of business i.e position of assets, liabilities and capital on particular day
Left side shows liabilities and capital Right side shows assets
After net profit (or loss) is added to (or subtracted form) capital account, total of both sides of Balance-sheet should be same i.e.
Assets = Capital + Liabilities

18. Profit & Loss Account for year ended 31-3-93
Dr Cr.
Particulars Rs Particulars Rs.
To Salaries By Gross Profit transferred from Trading A/c
To Advertising By Discount received
To Travelling expenses By Interest received
To Printing & Stationary By Rent received
To Office Expenses
To Discount Allowed
To Net Profit transferred to
Capital A/c

19. Balance Sheet as on 31-3-93 Liabilities Rs. Assets Rs.
Current Liabilities Current Assets
Outstanding Expenses Cash in Hand
Income received in advance Cash at Bank
Creditors Outstanding Income
Bills payable Closing Stock
Bank Overdraft Debtors
Bills Receivable
Long Term Liabilities Investments
Loans
Capital Fixed Assets
Add: Interest on capital Furniture
Add: Net profit Plant & Machinery
Less: Drawings Land & property
Less: Interest on drawings Goodwill

20. Statement of Earnings

21. Assignment
Please have a read of this material. This is a wrap-up material from the beginning till today material.
As your assignment, I want you to make Balance Sheet/Statement of Financial Position and Statement of Earnings/Profit and Loss Statement in rupiahs in this year You can make it by yourself. See the format from your handbook or this powerpoint material.
Later make the ratio analysis which includes gross profit margin, debt/asset ratio, working capital, so on. (the more complete, the better).
You can have Indonesian format in making the Balance Sheet/Statement of Financial Position and Statement of Earnings/Profit and Loss Statement.
Work in group of three (3) to make it. Should have the group as same as the group in Performance of Welcoming Visitor.
Submit it next week and be ready also for the short drama performance.
THANK YOU, HAVE A NICE DAY 