accounting equation &accounting c
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8/9/2019 Accounting Equation &Accounting c
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T h e A c c o u n t i n g E q u a t i o n
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R e s o u r c e s
T h e
A c c o u n t
i n g
E q u a t
i o n
T h e
A c c o u n t
i n g
E q u a t
i o n
W h a t a r e a n o r g a n
i z a t
i o n s r e s o u r c e s c a
l l e d ?
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A s s e t s
R e s o u r c e s
=
S o u r c e s
T h e
A c c o u n t
i n g
E q u a t
i o n
T h e
A c c o u n t
i n g
E q u a t
i o n
W h a t a r e
t h e
s o u r c e s o f
t h e
a s s e t s
?
R e s o u r c e s u s e d
i n t h e
b u s i n e s s
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A s s e t s
L i a b
i l i t i e s
O w n e r s
E q u i
t y
R e s o u r c e s
=
S o u r c e s
R e s o u r c e s u s e d
i n t h e
b u s i n e s s
R e s o u r c e s
s u p p
l i e d b y
c r e d i t o r s a n
d
o w n e r s
T h e
A c c o u n t
i n g
E q u a t
i o n
T h e
A c c o u n t
i n g
E q u a t
i o n
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T h e
A c c o u n
t i n g E q u a t
i o n
E c o n o m i c
R e s o u r c e s
C l a i m s t o
E c o n o m i c
R e s o u r c e s
A s s e
t s
=
L i a b
i l i t i e s
+ O w n e r s E q u
i t y
A t a n y p o i n t o f t i m e , t h e r e s o u r c e s o f a b u s i n e s s
e n t i t y m u s t b e e q u a l t o t h e c l a i m s o f t h e p e r s o n s
w h o h a v e f i n a n c e d t h e s e r e s o u r c e s .
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T h e
A c c o u n
t i n g e q u a
t i o n
i s t h e e q u a
t i o n
w h i c h
s h o w s t
h e r e
l a t i o n s h
i p a m o n g t h e
t h r e e e l e m e n
t s o f
t h e
b a l a n c e s h e e
t n a m e l y -
A s s e t s ,
L i a b
i l i t i e s a n
d
O w n e r s
e q u
i t y o f a b u s
i n e s s .
( c a p i t a l
)
T h e e q u a t
i o n m u s
t b e
i n b a l a n c e a f
t e r e v e r y
r e c o r d e
d t r a n s a c
t i o n
i n t h e s y s t e m .
T h e
B a s
i c A c c o u n
t i n g
E q u a t i o n
T h e
B a s
i c A c c o u n
t i n g
E q u a t i o n
A s s e t s = L i a b i l i t i e s + C a p i t a l
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a . S a c h i n
d e p o s i
t s R S 2 5
, 0 0 0 i n a
b a n k
a c c o u n
t
f o r A B C L t d
A S S E T S
=
B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
O W N
E R S E Q U I T Y
L I A B I L I T I E S
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a . S a c h i n
d e p o s i
t s R S 2 5
, 0 0 0 i n a
b a n k
a c c o u n
t
f o r A B C L t d .
A S S E T S
=
B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
O W N
E R S E Q U I T Y
C a s
h
C a s
h
2 5 , 0
0 0
2 5 , 0
0 0
L I A B I L I T I E S
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a . S a c h i n
d e p o s i
t s R S 2 5
, 0 0 0 i n a
b a n k
a c c o u n
t
f o r A B C L t d .
A S S E T S
=
B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
O W N
E R S E Q U I T Y
C a s
h
C a s
h
2 5 , 0
0 0
2 5 , 0
0 0
L I A B I L I T I E S
S a c h i n
S a c h i n , C
a p i t a l
, C a p
i t a l
2 5 , 0
0 0
2 5 , 0
0 0
T o t a l
T o t a l
2 5 , 0
0 0
2 5 , 0
0 0
T o t a l
T o t a l
2 5 , 0
0 0
2 5 , 0
0 0
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
b . A B C L t d . b u y s
l a n d
f o r
R s
2 0 , 0
0 0 .
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
b . A B C
L t d . b u y s
l a n d
f o r
R s
2 0 , 0
0 0 .
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
C a s
h
C a s
h
( 2 0 , 0 0 0 )
( 2 0 , 0 0 0 )
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
b . A B C
L t d b u y s
l a n d
f o r
R S 2 0
, 0 0 0
.
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
C a s
h
C a s
h
( 2 0 , 0 0 0 )
( 2 0 , 0 0 0 )
L a n d
L a n d
2 0 , 0
0 0
2 0 , 0
0 0 B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
b . A B C
L t d b u y s
l a n d
f o r
R S 2 0
, 0 0 0
.
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
C a s
h
C a s
h
( 2 0 , 0 0 0 )
( 2 0 , 0 0 0 )
L a n d
L a n d
2 0 , 0
0 0
2 0 , 0
0 0
T o t a l
T o t a l
2 5 , 0
0 0
2 5 , 0
0 0
T o t a l
T o t a l
2 5 , 0
0 0
2 5 , 0
0 0
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
c . A B C
L t d b u y s g o o d s
f o r
R S 1 , 3 5 0 , a g r e e i n g
t o
p a y t h e s u p p
l i e r
i n t h e n e a r
f u t u r e .
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
c . A B C
L t d b u y s g o o d s
f o r
R S 1 , 3 5 0 , a g r e e i n g
t o
p a y t h e s u p p
l i e r
i n t h e n e a r
f u t u r e .
A c c o u n
t s P a y a b
l e
A c c o u n
t s P a y a b
l e
1 , 3 5 0
1 , 3 5 0
P u r c h a s e s
P u r c h a s e s
1 , 3 5 0
1 , 3 5 0
B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
c . A B C
L t d b u y s g o o d s
f o r
R S 1 , 3 5 0 , a g r e e i n g
t o
p a y t h e s u p p
l i e r
i n t h e n e a r
f u t u r e .
A c c o u n
t s P a y a b
l e
A c c o u n
t s P a y a b
l e
1 , 3 5 0
1 , 3 5 0
P u r c h a s e s
P u r c h a s e s
1 , 3 5 0
1 , 3 5 0
T o t a l
T o t a l
2 6 , 3
5 0
2 6 , 3
5 0
T o t a l
T o t a l
2 6 , 3
5 0
2 6 , 3
5 0
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d . R
e c e i v e
f e e s
f o r s e r v
i c e s p e r f o r m e d , R
s . 7 , 5 0 0
d . R e c e i v e
f e e s
f o r s e r v
i c e s p e r f o r m e d , R
s . 7 , 5 0 0
B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
F e e s e a r n e d
F e e s e a r n e d
7 , 5 0 0
7 , 5 0 0
A S S E T S
C a s
h
C a s
h
7 , 5 0 0
7 , 5 0 0
T o t a l
T o t a l
3 3 , 8
5 0
3 3 , 8
5 0
T o t a l
T o t a l
3 3 , 8
5 0
3 3 , 8
5 0
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
e . A B C
L t d p a
i d : w a g e s
R s
2 , 1 2 5 ; r e n t , R
s 8 0 0 ;
u t i l i t i e s ,
R s
4 5 0 ; a n d
m i s c e
l l a n e o u s , R
s 2 7 5 .
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
C a s
h
C a s
h
( 3 , 6
5 0 )
( 3 , 6
5 0 )
e . A B C
L t d p a
i d : w a g e s
R s
2 , 1 2 5 ; r e n t , R
s 8 0 0 ;
u t i l i t i e s ,
R s
4 5 0 ; a n d
m i s c e
l l a n e o u s , R
s 2 7 5 .
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
C a s
h
C a s
h
( 3 , 6
5 0 )
( 3 , 6
5 0 )
E x p e n s e s
E x p e n s e s
( 3 , 6
5 0 )
( 3 , 6
5 0 )
e . A B C
L t d p a
i d : w a g e s
R s
2 , 1 2 5 ; r e n t , R
s 8 0 0 ;
u t i l i t i e s ,
R s
4 5 0 ; a n d
m i s c e
l l a n e o u s , R
s 2 7 5 .
B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
C a s
h
C a s
h
( 3 , 6
5 0 )
( 3 , 6
5 0 )
E x p e n s e s
E x p e n s e s
( 3 , 6
5 0 )
( 3 , 6
5 0 )
e . A B C
L t d p a
i d : w a g e s
R s
2 , 1 2 5 ; r e n t , R
s 8 0 0 ;
c o m m
i s s i o n , R
s 4 5 0 ; a n d m
i s c e
l l a n e o u s , R
s 2 7 5 .
T o t a l
T o t a l
3 0 , 2
0 0
3 0 , 2
0 0
T o t a l
T o t a l
3 0 , 2
0 0
3 0 , 2
0 0
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
f . A B C L t d p a y s
R s 9
5 0 t o c r e d
i t o r s o n a c c o u n
t .
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
C a s
h
C a s
h
( 9 5 0 )
( 9 5 0 )
f . A B C L t d p a y s
R s 9 5 0 t o c r e d
i t o r s o n a c c o u n
t .
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
C a s
h
C a s
h
( 9 5 0 )
( 9 5 0 )
A c c o u n
t s P a y a b
l e
A c c o u n
t s P a y a b
l e
( 9 5 0 )
( 9 5 0 )
f . A B C L t d p a y s
R s 9
5 0 t o c r e d
i t o r s o n a c c o u n
t .
T o t a l
T o t a l
2 9 , 2
5 0
2 9 , 2
5 0
T o t a l
T o t a l
2 9 , 2 5 0
2 9 , 2 5 0
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g . S o l d g o o d s w o r
t h R s .
8 0 0 f o r
R s
9 0 0
A S S E T S
=
B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
O W N
E R S E Q U I T Y
L I A B I L I T I E S
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g . S o l d g o o d s w o r
t h R s .
8 0 0 f o r
R s
9 0 0
A S S E T S
=
B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
O W N
E R S E Q U I T Y
L I A B I L I T I E S
P u r c h a s e s
P u r c h a s e s
( 8 0 0 )
( 8 0 0 )
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g . S o l d g o o d s w o r
t h R s .
8 0 0 f o r
R s
9 0 0
A S S E T S
=
B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
O W N
E R S E Q U I T Y
L I A B I L I T I E S
P u r c h a s e s
P u r c h a s e s
( 8 0 0 )
( 8 0 0 )
C a s
h
C a s
h 9 0 0 9 0 0
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g . S o l d g o o d s w o r
t h R s .
8 0 0 f o r
R s
9 0 0
A S S E T S
=
B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
O W N
E R S E Q U I T Y
L I A B I L I T I E S
P u r c h a s e s
P u r c h a s e s
( 8 0 0 )
( 8 0 0 )
C a s
h
C a s
h 9 0 0 9 0 0
P r o
f i t
P r o
f i t
1 0 0 1 0 0
T o t a l
T o t a l
2 9 , 3
5 0
2 9 , 3
5 0
T o t a l
T o t a l
2 9 , 3
5 0
2 9 , 3
5 0
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
h . S a c h i n w
i t h d r a w s R s
2 , 0 0 0 i n c a s h .
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
C a s
h
C a s
h
( 2 , 0
0 0 )
( 2 , 0
0 0 )
h . S a c h i n w
i t h d r a w s R s
2 , 0 0 0 i n c a s h .
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B u s
i n e s s
T r a n s a c
t i o n s
B u s
i n e s s
T r a n s a c t
i o n s
B u s
i n e s s
T r a n s a c t
i o n s
A S S E T S
=
O W N
E R S E Q U I T Y
L I A B I L I T I E S
C a s
h
C a s
h
( 2 , 0
0 0 )
( 2 , 0
0 0 )
S a c h
i n
S a c
h i n s s
, D r a w
i n g
, D r a w
i n g
( 2 , 0
0 0 )
( 2 , 0
0 0 )
h . S a c
h i n w
i t h d r a w s R s
2 , 0 0 0 i n c a s h .
T o t a l
T o t a l
2 7 , 3
5 0
2 7 , 3
5 0
T o t a l
T o t a l
2 7 , 3 5 0
2 7 , 3 5 0
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T r a n s a c t
i o n
S u m m
a r y
T r a n s a c t
i o n
S u m m a r y
T r a n s a c t
i o n
S u m m a r y
A S S E T S
=
O W N E R S E Q U I T Y
L I A B I L I T I E S
C a s h
C a s h
6 , 8 0 0
6 , 8 0 0
P u r c
h a s e s
P u r c
h a s e s
5 5 0 5 5 0
L a n d
L a n d
2 0 , 0
0 0
2 0 , 0
0 0
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T r a n s a c t
i o n
S u m m
a r y
T r a n s a c t
i o n
S u m m a r y
T r a n s a c t
i o n
S u m m a r y
A S S E T S
=
O W N E R S E Q U I T Y
L I A B I L I T I E S
C a s h
C a s h
6 , 8 0 0
6 , 8 0 0
P u r c
h a s e s
P u r c
h a s e s
5 5 0 5 5 0
L a n d
L a n d
2 0 , 0
0 0
2 0 , 0
0 0
A c c t s .
P a y a b
l e
A c c t s .
P a y a b
l e
4 0 0 4 0 0
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T r a n s a c t
i o n
S u m m
a r y
T r a n s a c t
i o n
S u m m a r y
T r a n s a c t
i o n
S u m m a r y
A S S E T S
=
O W N E R S E Q U I T Y
L I A B I L I T I E S
C a s h
C a s h
6 , 8 0 0
6 , 8 0 0
P u r c
h a s e s
P u r c
h a s e s
5 5 0 5 5 0
L a n d
L a n d
2 0 , 0
0 0
2 0 , 0
0 0
A c c t s .
P a y a b
l e
A c c t s .
P a y a b
l e
4 0 0 4 0 0
S a c
h i n
S a c
h i n
, C a p
i t a l
, C a p
i t a l
2 5 , 0 0 0
2 5 , 0 0 0
S a c
h i n
S a c
h i n
, D r a w
i n g
, D r a w
i n g
( 2 , 0 0 0 )
( 2 , 0 0 0 )
F e e s
E a r n e
d
F e e s
E a r n e
d
7 , 5 0 0
7 , 5 0 0
W a g e s
E x p e n s e
W a g e s
E x p e n s e
( 2 , 1 2 5 )
( 2 , 1 2 5 )
R e n t
E x p e n s e
R e n t
E x p e n s e
( 8 0 0 )
( 8 0 0 )
C o m m
i s s i o n
( 4 5 0 )
C o m m
i s s i o n
( 4 5 0 )
M i s c . E x p e n s e
M i s c . E x p e n s e
( 2 7 5 )
( 2 7 5 )
P r o
f i t
1 0 0
P r o
f i t
1 0 0
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A c c o u n
t i n g
E q u a t
i o n
E x a m p
l e
A c c o u n
t i n g
E q u a t
i o n
E x a m p
l e
R s .
2 s , 0
0 0
P a i
d s a
l a r i e s
R s .
4 , 0 0 0
P a i
d t o c r e
d i t o r s
R s .
1 , 7 0 0
S o l
d g o o d s o n c r e d
i t ( c o s t
R s .
1 , 5 0 0 )
R s .
1 , 0 0 0
R e c e i v e d
i n t e r e s t
R s .
3 , 0 0 0
P a i
d r e n t
R s .
1 , 0 0 0
W i t h d r e w c a s h
f o r p r i v a t e u s e
R s .
1 , 5 0 0
P u r c h a s e d
f u r n
i t u r e
f o r c a s
h
R s .
4 , 0 0 0
P u r c h a s e d
g o o d s
f o r c a s
h
R s .
2 4 , 0
0 0
P u r c h a s e d
g o o d s o n c r e
d i t w o r
t h
R s .
2 , 5 0
, 0 0 0
A n i
l s t a r t e
d b u s i n e s s w i t
h c a s h
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A c c o u n
t i n g
E q u a t
i o n
E x a m p
l e
A c c o u n
t i n g
E q u a t
i o n
E x a m p
l e
R s .
2 s , 0
0 0
P a i
d s a
l a r i e s
R s .
4 , 0 0 0
P a i
d t o c r e
d i t o r s
R s .
1 , 7 0 0
S o l
d g o o d s o n c r e d
i t ( c o s t
R s .
1 , 5 0 0 )
R s .
1 , 0 0 0
R e c e i v e d
i n t e r e s t
R s .
3 , 0 0 0
P a i
d r e n t
R s .
1 , 0 0 0
W i t h d r e w c a s h
f o r p r i v a t e u s e
R s .
1 , 5 0 0
P u r c h a s e d
f u r n
i t u r e
f o r c a s
h
R s .
4 , 0 0 0
P u r c h a s e d
g o o d s
f o r c a s
h
R s .
2 4 , 0
0 0
P u r c h a s e d
g o o d s o n c r e
d i t w o r
t h
R s .
2 , 5 0
, 0 0 0
A n i
l s t a r t e
d b u s i n e s s w i t
h c a s h
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T h e
D o u
b l e E n t r y
S y s t e m
T h e
D o u
b l e E n t r y
S y s t e m
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O n e d e b i t
O n e c r e d i t
E a c h t r a n s a c t i o n i s r e c o r d e d
w i t h a t l e a s t :
T o t a l d e b i t s m u s t e q u a l t o t a l c r e d i t s .
T h e
D o u b
l e - E n t r y
S y s
t e m
T h e
D o u
b l e E n
t r y
S y s t e m
T
h e
D o u
b l e E n
t r y
S y s t e m
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D o u
b l e -
E n t r y
A c c o u n t
i n g
D o u
b l e
D o u
b l e - - E n t r y
A c c o u n t
i n g
E n t r y
A c c o u n t
i n g
I n t h e D o u b l e e n t r y s y s t e m ,
b o t h t h e s e a s p e c t s a r e
r e c o r d e d i n t e r m s o f
a c c o u n t s , s u c h t h a t a t l e a s t t w o
a c c o u n t s a r e a l w a y s a f f e c t e d b y e a c h t r a n s a c t i o n .
T h e T a c c o u n t i s a r e p r e s e n t a t i o n o f a s c a l e o r b a l a n c e .
T h e t o t a l o f t h e d e b i t e n t r i e s a n d t o t a l o f t h e c r e d i t
e n t r i e s
i n t h e v a r i o u s a c c o u n t s m u s t b e e q u a l
S c a
l e o
r B a l a n c e
R e c e i v e
D E B I T
G i v e
C R E D I T
T a c c o u n
t
L e f t S i d e
R e c e i v e
D E B I T
R i g h t S i d e
G i v e
C R E D I T
L u c a
P a c
i o l i
D e v e l o p e r o f
D o u
b l e -
E n t r y
A c c o u n t
i n g
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A d v a n
t a g e o f
D o u
b l e E n
t r y
S y s t e m
1 ) A c o m p l e t e r e c o r d
o f t h e f i n a n c i a l t r a n s a c t i o n s i s
m a i n t a i n e d b e c a u s e i t r e c o r d s b o t h t h e a s p e c t s o f
e v e r y f i n a n c i a l t r a n s a c t i o n .
2 ) I t g i v e s a c c u r a t e i n f o r m a t i o n o f a m o u n t
d u e f r o m
v a r i o u s
d e b t o r s a n d a m o u n t
d u e
t o v a r i o u s
c r e d
i t o r s b y m a i n t a i n i n g p e r s o n a l a c c o u n t s o f
d e b t o r s a n d c r e d i t o r s .
3 ) P r o v i d e s a c h e c
k o n
A r i
t h m e t i c a l a c c u r a c y o f t h e
a c c o u n t b o o k s .
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A d v a n
t a g e o f
D o u
b l e E n
t r y
S y s t e m
( C o n
t . )
4 ) I t i s h e l p f u l i n p r e v e n
t i n g
f r a u d s a n
d e r r o r s .
t o
l o c a t e t h e e r r o r s .
5 ) H e l p f u l i n a s c e r t a i n
i n g p r o f
i t o r l o s s o f a p a r t i c u l a r
p e r i o d b y p r e p a r i n g t h e P r o f i t a n d L o s s A c c o u n t .
6 ) F i n a n c i a l p o s i
t i o n
o f t h e b u s i n e s s e n t i t y c a n b e
a s c e r t a i n e d b y p r e p a r i n g t h e B a l a n c e S h e e t .
7 ) I t p r o v i d e s r e a d i l y a v a i l a b l e i n f o r m a t i o n t o b e s e n t
t o i n c o m e
t a x a n
d s a l e s
t a x a u
t h o r i
t i e s .
8 ) I t i s h e l p f u l i n f i l i n g a c c u r a t e c l a i m f o r l o s s o f
s t o c k a s a r e s u l t o f f i r e t o t h e i n s u r a n c e c o m p a n y
b e c a u s e
a c o m p l e t e r e c o r d o f s t o c k i s k e p t .
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D i s a d v a n t a g e o
f D o u
b l e E n t r y
S y s t e m
1 ) T h i s s y s t e m r e q u i r e s t h e m a i n t e n a n c e
o f a
n u m b e r o f b o o k s
o f a c c o u n t s w h i c h i s n o t
p r a c t i c a l i n s m a l l c o n c e r n s .
2 ) T h e s y s t e m i s c o s t l y b e c a u s e a n u m b e r o f
r e c o r d s a r e t o b e m a i n t a i n e d .
3 ) T h e r e i s n o g u a r a n t e e o f a b s o l u t e a c c u r a c y o f
t h e b o o k s o f a c c o u n t b e c a u s e t r i a l b a l a n c e m a y
a g r e e i n s p i t e o f e r r o r s .
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C l a s s i
f i c a t
i o n o
f A c c o u n t s
A c c o r
d i n g
t o
T r a d
i t i o n a
l A p p r o a c
h I m p e r s o n a l
A c c o u n t s
P e r s o n a
l
A c c o u n t s
A C C O U N T S
R e a l
A c c o u n
t s
N o m
i n a l
A c c o u n t s
N a t u r a l
P e r s o n s
A c c o u n t s
A r t i
f i c i a l
P e r s o n s
A c c o u n t s
R e p r e s e n t a t
i v e
P e r s o n s
A c c o u n t s
T a n g
i b l e
A c c o u n t s
I n t a n g
i b l e
A c c o u n t s
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A : P E R S O N A L A C C O U N T :
1 .
N a t u r a l P e r s o n s P e r s o n a l A c c o u n t .
A n a c c o u n t r e c o r d i n g t r a n s a c t i o n s w i t h a n
i n d i v i d u a l h u m a n b e i n g i s k n o w n a s a n a t u r a l p e r s o n s P e r s o n a l A c c o u n t , e . g . ,
A n e e s h s
A c c o u n t .
2 .
A r t i f i c i a l P e r s o n s P e r s o n a l A c c o u n t . A n a c c o u n t r e c o r d i n g f i n a n c i a l t r a n s a c t i o n s
w i t h a n a r t i f i c i a l p e r s o n c r e a t e d b y l a w o r o t h e r w i s e i s c a l l e d a n a r t i f i c i a l p e r s o n s p e r s o n a l
a c c o u n t , e . g . , A B C I n d u s t r i e s L t d . , B
a n k A c c o u n t , S
& . C o . e t c .
3 .
R e p r e s e n t a t i v e P e r s o n a l A c c o u n t .
A n a c c o u n t i n d i r e c t l y r e p r e s e n t i n g a p e r s o n o r
p e r s o n s i s k n o w n a s a r e p r e s e n t a t i v e p e r s o n a l a c c o u n t .
W h e n a c c o u n t s a r e o f a s i m i l a r
n a t u r e a n d t h e i r n u m b e r i s l a r g e , i t i s b e t t e r t o g r o u p t h e m u n d e r o n e h e a d
a n d o p e n a
r e p r e s e n t a t i v e p e r s o n a l a c c o u n t . E x a m p l e s o f s u c h t y p e s o f a c c o u n t s c a n b e : R e n t
O u t s t a n d i n g A c c o u n t ,
I n t e r e s t O u t s t a n d i n g A c c o u n t , P r e p a i d S a l a r y A c c o u n t e t c . R e n t
O u t s t a n d i n g A c c o u n t i s a p e r s o n a l a c c o u n t r e p r e s e n t i n g r e n t p a y a b l e t o . .
B : R E A L A C C O U N T :
1 .
T a n g i b l e R e a l A c c o u n t . S u c h t y p e o f a c c o u n t r e l a t e s t o a n a s s e t w h i c h c a n
b e t o u c h e d ,
F e l t , s e e n a n d
m e a s u r e d e . g . ,
P l a n t A c c o u n t ,
C a s h A c c o u n t ,
B u i l d i n g A c c o u n t , S t o c k
A c c o u n t e t c .
2 .
I n t a n g i b l e
R e a l A c c o u n t . S u c h t y p e o f a c c o u n t r e l a t e s t o a n a s s e t w h i c h c a n n o t b e
t o u c h e d p h y s i c a l l y b u t c a n b e m e a s u r e d i n v a l u e . F o r e x a m p l e , G o o d w i l l A c c o u n t , P a t e n t s
A c c o u n t , T r a d e M a r k s A c c o u n t , C o p y R i g h t s A c c o u n t e t c .
C . N
O M I N A L A C C O U N T S .
T h e s e a c c o u n t s d e a l w i t h e x p e n s e s , i n c o m e s , p r o f i t s a n d l o s s e s .
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R u l e s
F o r D o u
b l e
E n t r y
S y s
t e m
o n t h e B a s
i s o f T r a
d i t i o n a l
C l a s s
i f i c a
t i o n
R e a
l A c c o u n t =
D e b
i t W
h a t c o m e s
i n
C r e
d i t - w
h a t g o e s o u t
P e r s o n a l
A c c o u n t =
D e b
i t R e c e i v e r
C r e
d i t - G i v e r
N o m
i n a l
A c c o u n t =
D e b
i t E x p e n s e s / L o s s e s
C r e
d i t -
I n c o m e s
/ G a i n s
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C l a s s i
f i c a t
i o n o f
A c c o u n t s
A c c o r
d i n g
t o
A c c o u n
t i n g
E q u a
t i o n
A s s e
t s A c c o u n t s
R e l a t e s t o t a n g i b l e a n d i n t a n g i b l e a s s e t s
L i a b i l i t i e s A c c o u n
t s
E g . C r e d i t o r s , b
i l l s p a y a b l e , u n e a r n e d r e v e n u e , o t h e r
s h o r t - t e r m l i a b i t l i t i e s , l o n g t e r m l i a b i l i t i e s ( s e c u r e d a n d
u n s e c u r e d )
E q u i
t y A c c o u n t s
E g c a p i t a l / s h a r e c a p i t a l a / c , d r a w i n g s a / c , r e t a i n e d
e a r n i n g s , R e v e n u e A c c o u n t s , E x p e n s e A c c o u n t s ,
d i v i d e n d s
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R e g a r
d i n g a s s e t s :
I n c r e a s e s i n a s s e t s
- D E B I T
D e c r e a s e s i n a s s e t s
- C R E D I T
R e g a r
d i n g
L i a b i l i t i e s :
I n c r e a s e s i n l i a b i l i t i e s
- C R E D I T
D e c r e a s e s i n l i a b i l i t i e s
- D E B I T
R e g a r
d i n g
C a p i t a l :
I n c r e a s e s i n c a p i t a l
- C R E D I T
D e c r e a s e s i n c a p i t a l
- D E B I T
R e g a r
d i n g
E x p e n s e s a n d
R e v e n u e :
E x p e n s e s , D r a w i n g s , D i v i d e n d s
- D E B I T
R e v e n u e
- C R E D I T
R e g a r
d i n g
I n c o m e s o r
P r o f
i t s a n d
L o s s e s :
I n c o m e s o r p r o f i t s
- C R E D I T
L o s s e s
- D E B I T
R u l e s
F o r
D o u b
l e E n t r y
S y s t e m o n
B a s
i s o f
A c c o u n t
i n g
E q u a t
i o n
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A n a l y s i s o f t r a n s a c t i o n s i s n e c e s s a r y f o r c o r r e c t
r e c o r d i n g o f t r a n s a c t i o n s .
S t e p s :
I d e n t i f y t h e a c c o u n t s i n v o l v e d i n t h e t r a n s a c t i o n t o
b e r e c o r d e d .
C l a s s i f y t h e a c c o u n t s i d e n t i f i e d a s p e r s o n a l , r e a l o r
n o m i n a l ; o r a s a s s e t , l i a b i l i t i e s , c a p i t a l , r e v e n u e o r
e x p e n s e
D e t e r m i n e d t h e r u l e s o f d e b i t a n d
c r e d i t a p p l i c a b l e t o
t h e a c c o u n t s i n v o l v e d
F i n a l l y d e t e r m i n e t h e a c c o u n t ( s ) t o b e d e b i t e d a n d
t h e a c c o u n t ( s ) t o b e c r e d i t e d .
A n a l y s i s o f T r a n s a c t i o n s
A n a l y s i s o f T r a n s a c t i o n s
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1 . S t a r t e d b u s i n e s s w i t h R s . 5 0 , 0 0 0
2 . P u r c h a s e d f u r n i t u r e f o r R s . 1 , 0 0 0 o n c r e d i t f r o m
P a n k a j
3 . G o o d s p u r c h a s e d f o r c a s h R s . 2 0 , 0
0 0
4 . G o o d s s o l d t o R a h u l N i w a s f o r R
s . 5 , 0 0 0 o n c r e d i t
5 . P a i d s a l a r i e s t o s t a f f R s . 1 , 8 0 0
6 . G o o d s w o r t h R s . 5 0 0 r e t u r n e d b y R a h u l N i w a s
7 . R s . 1 , 0
0 0 c o m m i s s i o n r e c e i v e d
E x a m p l e
E x a m p l e
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A c c o u n t
i n g C y c
l e
I t r e f e r s
t o a c o m p l e t e s e q u e n c e o f a c c o u n t i n g
p r o c e d u r e s , w
h i c h a r e r e q u i r e d t o b e r e p e a t e d i n t h e
s a m e o r d e r d u r i n g e a c h a c c o u n t i n g p e r i o d .
I t i s c o m p l e t e s e q u e n c e b e g i n n i n g w i t h t h e r e c o r d i n g
o f t h e t r a n s a c t i o n a n d e n d i n g w i t h t h e p r e p a r a t i o n o f
t h e f i n a l a c c o u n t s .
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A c c o u n t i n g c y c l e i n c l u d e s :
( a ) R e c o r
d i n g : F i r s t , a l l t r a n s a c t i o n s s h o u l d b e r e c o r d e d i n t h e
J o u r n a l o r B o o k s o f O r i g i n a l E n t r y k n o w n a s s u b s i d i a r y
b o o k s a s a n d w h e n t h e y t a k e p l a c e .
( b ) C l a s s i
f y i n g : A l l e n t r i e s i n t h e J o u r n a l o r B o o k s o f O r i g i n a l
E n t r y s h o u l d b e p o s t e d t o t h e a p p r o p r i a t e l e d g e r a c c o u n t s t o
f i n d o u t a t a g l a n c e t h e t o t a l e f f e c t o f a l l s u c h t r a n s a c t i o n s i n a
p a r t i c u l a r a c c o u n t .
( c ) S u m m a r
i z i n g : L a s t s t a g e i s t o p r e p a r e t h e t r i a l b a l a n c e a n d
f i n a l a c c o u n t s w i t h a v i e w t o a s c e r t a i n i n g t h e p r o f i t o r l o s s
m a d e d u r i n g a t r a d i n g p e r i o d a n d t h e f i n a n c i a l p o s i t i o n o f t h e
b u s i n e s s o n a p a r t i c u l a r d a t e .
( d ) I n t e r p r e
t i n g : T h e f i n a n c i a l s t a t e m e n t s a r e i n t e r p r e t e d i n a
m a n n e r u s e f u l t o t h e u s e r s , s o a s t o e n a b l e t h e m t o m a k e
d e c i s i o n s .
A c c o u n
t i n g
C y c l e
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1 . A n a l y z e t h e t r a n s a c t i o n
2 . J o u r n a l i z e t h e t r a n s a c t i o n
3 . P o s t t h e t r a n s a c t i o n t o a c c o u n t s i n l e d g e r
4 . P r e p a r e t h e t r i a l b a l a n c e
5 . P r e p a r e f i n a n c i a l s t a t e m e n t s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
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A c c o u n
t i n g
C y c l e
T h e s e q u e n c e o
f s t e p s
i n r e c o r
d i n g
t r a n s a c
t i o n s :
T r a n s a c t i o n s
D o c u m e n t a t i o n
J o u r n a l
F i n a n c i a l
S t a t e m e n
t s
T r i a l
B a l a n c e
L e d g e r
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
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A c c o u n
t i n g
C y c l e
A n a l y s i s o f t r a n s a c t i o n s f r o m s o u r c e d o c u m e n t s
J o u r n a l i s i n g t h e t r a n s a c t i o n s
P o s t i n g o f j o u r n a l e n t r i e s i n t o t h e l e d g e r a c c o u n t s
B a l a n c i n g o f e a c h l e d g e r a c c o u n t
P r e p a r a t i o n o f a t r i a l b a l a n c e t o e s t a b l i s h e q u a l i t y o f
d e b i t s a n d c r e d i t s i n
t h e l e d g e r a c c o u n t s .
R e c o r d i n g o f a d j u s t i n g e n t r i e s i n t h e j o u r n a l
R e c o r d i n g o f a d j u s t i n g e n t r i e s i n t h e L e d g e r a c c o u n t .
R e c o r d i n g o f c l o s i n g e n t r i e s i n t h e j o u r n a l
P r e p a r a t i o n o f f i n a n c i a l s t a t e m e n t s / f i n a l a c c o u n t s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
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A c c o u n
t i n g
C y c l e
T h e p r o c e s s s t a r t s w
i t h s o u r c e
d o c u m e n
t s , w
h i c h a r e
t h e s u p p o r
t i n g
o r i g i n a
l r e c o r
d s o f a n y
t r a n s a c t
i o n .
E x a m p l e s a r e s a
l e s s l
i p s o r i n v o i c e s , c h e c
k
s t u b s
, p u r c h a s e o r
d e r s , b a
n k d e p o s i
t s l i p s ,
a n d c a s h r e c e i p t s l
i p s .
1 . A n a l y z e t h e t r a n s a c t i o n
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
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2 . J o u r n a l i z e t h e t r a n s a c t i o n
I n t h e s e c o n d s t e p , a n a n a l y s i s o f
t h e
t r a n s a c
t i o n
i s p l a c e d
i n t h e b o o
k
o f
o r i g
i n a
l
e n
t r y ,
j o
u r n a
l , w h
i c h i s a
c h r o n o l o g
i c a l
r e c o r
d
o f
h o w
t h e
t r a n s a c
t i o n s
a f f e c t t h e
b a l a n c e s
o f
a p p l
i c a b l e a c c o u n t s .
T h e m o s
t c o m m o n e x a m p l e
i s t h e
g e n e r a l
j o u r n a
l - a d
i a r y o f a l
l e v e n
t s
( t r a n s a c
t i o n s
) i n a n e n
t i t y s
l i f e .
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
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I n t h e
t h i r d s t e p ,
t r a n s a c
t i o n s a r e e n
t e r e d
i n t o
t h e l e d g e r .
R e m e m
b e r t h a
t a t r a n s a c t i o n
i s n o
t
e n t e r e
d i n j u s t o n e p l a c e ; i
t m u s
t b e
e n t e r e
d i n e a c
h a c c o u n
t t h a t
i t a f
f e c t s .
D e p e n d
i n g o n
t h e n a
t u r e o
f t h e
o r g a n i z a
t i o n , a n a
l y s i s o f
t h e
t r a n s a c
t i o n s
c o u l
d o c c u r c o n t
i n u o u s
l y o r p e r
i o d i c a l l y .
3 . P o s t t h e t r a n s a c t i o n t o a c c o u n t s i n l e d g e r
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
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A c c o u n
t i n g
C y c l e
T h e
f o u r t h s t e p
i n c l u d e s
t h e p r e p a r a
t i o n
o f t h e t r
i a l b a l a n c e , w
h i c h
i s a
s i m p l e
l i s t i n g o
f a l l a c c o u n
t s f r o m
t h e
l e d g e r
w i t h t h e i r b a l a n c e s .
A i d s i n v e r i f y i n g a c c u r a c y a n
d
i n p r e p a r i n g
t h e f i n a n c i a l
s t a t e m e n
t s
P r e p a r e
d p e r i o
d i c a l
l y a s n e c e s s a r y
4 . P r e p a r e t h e t r i a l b a l a n c e
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
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A c c o u n
t i n g
C y c l e
I n t h e f i n a l
s t e p , t h e
f i n a n c i a l
s t a t e m e n
t s
a r e p r e p a r e
d .
F i n a n c i a l
s t a t e m e n
t s m a y
b e
p r e p a r e d
a f t e r e a c
h q u a r t e r o f
t h e y e a r .
t h e c o m p a n i e s m
a y p r e p a r e
f i n a n c
i a l s t a t e m e n
t s a t
v a r i o u s o t
h e r i n
t e r v a l s
t o
m e e t
t h e n e e d s o f
t h e i r u s e r s .
D e c e m b e r 2 0 0 7
5 . P r e p a r e f i n a n c i a l s t a t e m e n t s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
T h e
A c c o u n
t i n g
C y c l e :
S t e p s
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J o u r n a l
I t i s a l i s t i n c h r o n o l o g i c a l o r d e r o f a l l t h e
t r a n s a c t i o n s f o r a b u s i n e s s .
W h a t i s a
j o u r n a l
?
I t i s t h e b o o k o f o r i g i n a l ( f i r s t ) e n t r y
I t i s t h e b o o k o f o r i g i n a l ( f i r s t ) e n t r y
I t h a s t h e f o l l o w i n g c o l u m n s :
I t h a s t h e f o l l o w i n g c o l u m n s :
D a t e
D a t e
P a r t i c u l a r s
P a r t i c u l a r s
L e d g e r F o l i o
L e d g e r F o l i o
V o u c h e r N u m b e r
V o u c h e r N u m b e r
A m o u n t ( D
E B I T )
A m o u n t ( D E B I T )
A m o u n t ( C R E D I T )
A m o u n t ( C R E D I T )
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J o u r n a
l e n t r y
J o u r n a l e n t r y i s a n a n a l y s i s o f t h e e f f e c t s o f a
t r a n s a c t i o n
o n
t h e
a c c o u n t s , u s u a l l y
a c c o m p a n i e d b y
a n e x p l a n a t i o n o f
t h e
t r a n s a c t i o n .
T h i s a n a l y s i s i d e n t i f i e s t h e a c c o u n t s t o b e
d e b i t e d a n d c r e d i t e d .
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T y p e s o f
j o u r n a l e n
t r i e s
S i m p l e e n
t r y - a n e n t r y f o r a t r a n s a c t i o n t h a t
a f f e c t s o n l y t w o a c c o u n t s
C o m p o u n
d e n t r y - a n e n t r y f o r a t r a n s a c t i o n
t h a t a f f e c t s m o r e t h a n t w o a c c o u n t s
R e m e m
b e r :
w h e t h e r
t h e
e n t r y
i s
s i m p l e
o r
c o m p o u n
d , t h e
d e b i t s ( l e f t s i
d e )
a n d c r e
d i t s ( r i g h t
s i d e ) m u s
t a l w a y s b e e q u a
l .
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J o u r n a
l e n t r y
W h a t d o e s a j o u r n a l e n t r y i n c l u d e ?
D a t e o f t h e t r a n s a c t i o n
T i t l e o f t h e a c c o u n t d e b i t e d
T i t l e o f t h e a c c o u n t c r e d i t e d
A m o u n t o f t h e d e b i t a n d c r e d i t
D e s c r i p t i o n o f t h e t r a n s a c t i o n ( n a r r a t i o n )
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R e c o r d
i n g
t r a n s a c t
i o n s
i n t h e
j o u r n a
l .
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S t e p s
I n v o
l v e d
i n J o u r n a
l i z i n g
T r a n s a c t
i o n s
A n a l y s e t h e t r a n s a c t i o n i n s o u r c e d o c u m e n t t o i d e n t i f y
a p p r o p r i a t e a c c o u n t s a f f e c t e d
D e t e r m i n e w h i c h a c c o u n t s a r e t o b e d e b i t e d a n d t h o s e
t o b e c r e d i t e d b a s e d o n r u l e s o f d e b i t a n d c r e d i t
E n t e r d a t e i n f i r s t c o l u m n (
d a t e c o l u m n )
I n p a r t i c u l a r s c o l u m n
e n t e r t h e n a m e o f t h e a c c o u n t
d e b i t e d a t e x t r e m e l e f t o f c o l u m n a n d a b b r e v i a t i o n D r .
a t r i g h t e n d o f p a r t i c u l a r s c o l u m n .
W r i t e a m o u n t i n D e b i t c o l u m n
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S t e p s
I n v o l v e d
i n J o u r n a l
i z i n g
T r a n s a c
t i o n s
I n p a r t i c u l a r s c o l u m n e n t e r t h e t i t l e o f t h e a c c o u n t t o
b e c r e d i t e d i n d e n t e d
t o r i g h t p r e c e d e d b y t h e
w o r d
T o a n d w r i t e a m o u n t i n C r e d i t c o l u m n .
I n s e r t a n a r r a t i o n w h i c h i s a b r i e f d e s c r i p t i o n o f
t r a n s a c t i o n
D r a w a
l i n e a c r o s s p a r t i c u l a r s c o l u m n
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J o u r n a l
i z i n g
O n
A p r i l 1 , G a r g e
i n v e s t e d
R s 3
0 , 0 0 0
i n
G i l l e n T r a v e
l .
J o u r n a
l e n t r y
D a t e
P a r
t i c u l a r s
D e b
i t
C r e
d i t
A p r
i l
R s
R s
1 C a s h
A c c o u n t
D r
3 0 , 0
0 0
T o G a r g e
C a p i t a l
3 0 , 0 0 0
( R e c e i v e
d i n i t i a l
i n v e s
t m e n
t
f r o m o w n e r )
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S u b s i d i a r y
B o o k s
S u b s i d i a r y b o o k s , o r b o o k s o f p r i m e e n t r y o r o r i g i n a l e n t r y
a r e t h o s e w h e r e b u s i n e s s t r a n s a c t i o n s
a r e r e c o r d e d
i n t h e
b o o k s i n t h e f i r s t i n s t a n c e a n d t h e n p o s t e d t o t h e
l e d g e r
f r o m t h e s e b o o k s .
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T y p e s o f
J o u r n a l s
1 ) C a s h B o o k .
2 ) P u r c h a s e ( o r B o u g h t o r I n v o i c e ) B o o k .
3 ) S a l e s ( o r d a y ) B o o k .
4 ) P u r c h a s e s R e t u r n s ( o r R e t u r n O u t w a r d s ) B o o k .
5 ) S a l e s r e t u r n ( o r R e t u r n O u t w a r d s ) B o o k .
6 ) B i l l s R e c e i v a b l e B o o k .
7 ) B i l l P a y a b l e B o o k .
8 ) J o u r n a l P r o p e r ( G e n e r a l J o u r n a l )
* * F i r s t s e v e n j o u r n a l s a r e s p e c i a l J o u r n a l s w h i l e j o u r n a l
p r o p e r i s g e n e r a l j o u r n a l
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T y p e s o f
J o u r n a l s
1 ) C a s
h B o o
k - r e c o r d s
c a s h
( a n d
b a n k
) r e c e
i p t s a n
d
p a y m e n t s
S h o w s b a l a n c e o f c a s h i n
h a n d a n d a t b a n k .
M a y a l s o
s h o w d i s c o u n t a l l o w e d o r r e c e i v e d e t c .
2 ) P u r c h a s e s
D a y
( o r
B o u g h
t o r
I n v o
i c e )
B o o
k -
r e c o r d s a l
l t r a n s a c t i o n s o f c r e d i
t p u r c
h a s e s o f a l
l
m e r c h a n
d i s e
S h o w s t h e t o t a l c r e d i t p u r c h a s e s o f g o o d s a n d m a t e r i a l s m a d e
d u r i n g a p a r t i c u l a r p e r i o d .
C r e d i t p u r c h a s e s o f g o o d s ,
d e a l t i n o r o f t h e m a t e r i a l s a n d
s t o r e s r e q u i r e d i n t h e f a c t o r y
3 ) S a l e s ( o r
d a y )
B o o
k - r e c o r d s a
l l c r e d
i t s a l e s
( o f
g o o d s d e a l
t i n )
S h o w s t o t a l s a l e s m a d e d u r i n g a p a r t i c u l a r p e r i o d .
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T y p e s o f
J o u r n a l s
4 ) P u r c h a s e s
R e t u r n s
( o r
R e t u r n
O u t w a r
d s ) B o o
k -
r e c o r d s a l
l r e
t u r n s o
f g o o d s a n
d m a t e r
i a l s p r e v i o u s l y
p u r c
h a s e d
S h o w s t o t a l r e t u r n s d u r i n g a p a r t i c u l a r p e r i o d .
5 ) S a l e s r e
t u r n
( o r R e t u r n
O u t w a r d s )
B o o
k - r e c o r
d s
a l l s a l e s r e
t u r n s m a d e
b y t h e c u s t o m
e r s
S h o w s t h e t o t a l r e t u r n s i n w a r d s d u r i n g a p a r t i c u l a r p e r i o d . .
6 ) B i l l s R e c e i v a
b l e
B o o
k - r e c o r d s a l
l b i l l s r e c e
i v e d
f r o m
t h e
c u s t o m e r s .
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T y p e s o f
J o u r n a l s
7 ) B i l l P a y a b
l e B o o
k - r e c o r d s a l
l a c c e p t a n c e s o f
b i l l s m a d e
b y t h e f i r m
I n d i c a t e s t h e v a r i o u s d a t e s o n w h i c h p a y m e n t s o f v a r i o u s b i l l s
a r e t o b e m a d e .
8 ) J o u r n a l
P r o p e r
( G e n e r a l
J o u r n a
l ) - r e c o r d s a l
l
r e s i
d u a l
t r a n s a c t
i o n s
R e c o r d s a l l t h o s e t r a n s a c t i o n s w h i c h c o u l d n o t b e r e c o r d e d i n
a n y o f t h e a b o v e s u b s i d i a r y b o o k s w i l l b e r e c o r d e d i n t h i s b o o k
s u c h a s
i . C r e d i t p u r c h a s e a n d s a l e o f a s s e t s
i i . O p e n i n g e n t r i e s
i i i .
A d j u s t m e n t a n d R e c t i f i c a t i o n E n t r i e s
i v .
C l o s i n g E n t r i e s
v . A n y o t h e r n o n - c a s h t r a n s a c t i o n n o t r e c o r d e d e l s e w h e r e
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3 / 2
6 1 5
M y M u s
i c C l u b . c o m
2 , 2 0 0
3 / 6
6 1 6
R a p
Z o n e . c
o m
1 , 7 5 0
3 / 1 8
6 1 7
W e b
C a n
t i n a
2 , 6 5 0
3 / 2 7
6 1 8
M y M u s
i c C l u b . c o m
3 , 0 0 0
T o t a l s
9 , 6 0 0
S a l e s
J o u r n a
l
I n v o
i c e
D a t e
N o .
P a r
t i c u l a r s
D e t a
i l s
A m o u n t
P a g e
3 5
T h e S
a l e s
J o u r n a l
T h e S
a l e s
J o u r n a l
A l l s a
l e s o n c r e d i
t a r e r e c o r d e d
i n t h i s j o u r n a
l . E a c
h
s a l e s
i n v o
i c e
i s l i s t e d
i n n u m e r
i c a l o r
d e r .
T h i s
j o u r n a
l i s o f
t e n r e
f e r r e d
t o a s a n
i n v o i c e r e g i s t e r .
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3 / 3
H o w a r
d S u p p l
i e s
6 0 0
3 / 7
D o n n e
l l y S u p p l
i e s
4 2 0
3 / 1 9
D o n n e
l l y S u p p l
i e s
1 , 4
5 0
3 / 2 7
H o w a r
d S u p p l
i e s
9 6 0
T o t a l s
3 , 4
3 0
P u r c h a s e s
J o u r n a
l
P a g e
1 1
T h e
P u r c
h a s e s
J o u r n a l
T h e
P u r c
h a s e s
J o u r n a l
A l l p u r c
h a s e s o n a c c o u n
t a r e r e c o r d e d
i n t h i s j o u r n a
l .
D a t e
P a r t i c u l a r s
D e t a i
l s
A m o u n t
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C a s h j o u r n a l s
S i n g l e c o l u m n C a s h B o o k
=
S i m
p l e c a s h B o o k
D o u b l e c o l u m n C a s h B o o k
= C a s h B o o k w
i t h b a n k c o l u m n
T r i p l e c o l u m n C a s h B o o k
= C a s h B o o k w i t h B a n k & D i s c o u n t C o l u m n
P e t t y C a s h B o o k = R
e c o r d s m a l l c a s h p a y o u t s
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L
e d g e r
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L e d g e r
L e d g e r - a g r o u p o f r e
l a t e d a c c o u n
t s
k e p t c u r r e n t
i n a s y s t e m a t i c m a n n e r
T h i n k o f a
l e d g e r a s a
b o o k w
i t h
o n e p a g e
f o r e a c
h a c c o u n
t .
L e d g e r
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L e d g e r
L e d g e r
i s a r e g i s t e r
h a v i n g a n u m
b e r o f p a g e s
w h i c h a r e n u m
b e r e d c o n s e c u t i v e l y .
O n e a c c o u n t
i s u s u a l
l y a s s i g n e
d o n e p a g e
i n t h e
l e d g e r .
H o w e v e r ,
i f t h e t r a n s a c
t i o n s ,
p e r t a
i n i n g t o a
p a r t i c u
l a r a c c o u n t a r e m o r e ,
i t m a y
b e a s s
i g n e
d
m o r e t
h a n o n e p a g e
i n t h e
l e d g e r .
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L e d g e r
A l e d g e r i s a s e c o n d a r y b o o k .
T h e s e c o n d a r y b o o k s m a y b e c l a s s i f i e d
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