Accounting tutorial

(Q)What is Account?
(Ans) Account is a place where transactions are recorded in a systematic manner.

(Q)What is a basic principle of the account?

(Ans)There are three golden rules of account.

* Real Account: - Debit what comes in

Credit what goes out

* Personal Account: - Debit the receiver

Credit The giver

* Nominal Account: - Debit all expenses and losses

Credit all income and gain

So these are the basic rule or principle of account.

These principles are done some work for e.g.:-Real A\C this account handles all the transaction of
goods and cash. Shiv purchased goods of rupees 10,000 OR Sold goods for cash of rupees 9,000.

Personal A\C:- This account handles all the transactions of persons. For e.g.:- Abdul Rehman Purchase
goods from Abdul Rahim.

Nominal A\C:- This account handle all the expenses and losses OR all the income and gain. There is
great difference between the Expenses and Loss.

For e.g.:- Mr.ABC purchase news paper for every day that his expenses. Loss means Mr.ABC was come
from his office and suddenly his an accident, it’s called a loss.

(Q)What is meant by incomplete accounting?

(Ans)Single entry system is an incomplete form of account keeping.”A system of book keeping in
which only records of cash and personal accounts are maintained”.

(Q)What is Double entry system?

(Ans)The double entry system of book keeping is the most satisfactory and a scientific system of
maintaining accounts of the business. Every business transaction has a two-fold effect and that it
affects two accounts in opposite directions and if a complete record was to be made of each such
transaction, it would be necessary to debit one account and credit another account.

Dual Aspect Concept

When the firm …. Double entry that it makes
1.Pays Cash Debit The receiver
Expenses
Assets
Credit Cash
2.Gets Credit Debit Expenses
Assets
Credit The giver
3.Receives Cash Debit Cash

Credit The giver

Incomes/Gains
Assets
4.Allows Credit Debit The receiver

Credit Incomes/Gains
Assets

(Q)What is difference between single entry system and double entry system?
(Ans)

Sr.no Double Entry System Single Entry System

(1)Double Aspects Double entry system records Single entry system does not
both the aspects – debit and record both the aspect of all the
credit of all transactions. transactions.
(2)Nature It is a complete and scientific It is a incomplete and
system of book keeping. unscientific system of book
keeping
(3)Trial Balance It is possible to prepare trial It is not possible to prepare trial
balance to verify the balance to verify the
arithmetical means arithmetical accuracy of
(Calculation, mathematics) accuracy of accounts.
accounts.

(4)Record of transaction All the personal, real and Only personal accounts of
nominal accounts are debtors and creditors and cash
maintained. book are maintained.
(5)Trading A/C Trading account is prepared to Trading account cannot be
find out the gross profit. prepared and hence gross profit
cannot be ascertained.
 (6)Profit and Loss A/C Profit and Loss account is Profit and Loss account cannot
prepared to find out the net be prepared and hence net
profit. profit cannot be ascertained.
(7)Balance Sheet Balance sheet can be prepared Statement of affairs can be
on the basis of trial balance. prepared on the basis of book
values of some accounts
maintained and on estimates
and owners memory.
(8)Suitability It is suitable for all types of It is suitable only for very small
business whether small and business concern.
large.

(Q)What is meant by Journal?

(Ans)”Journal” is derived from the French word, “Jour” which means a day, Journal therefore, means a
“daily record”. Following are the example of journal entries.

For e.g.:- Purchased goods for cash.

Purchase A\c Dr

To Cash A\c

(Q)What is meant by ledger?

(Ans)The term ‘ledger’ is derived from the Dutch word ‘legger’ which means to lie. Ledger therefore,
means a book where the various accounts lie. Lie means a book lay open on his bedside table.

(Q)How to pass journal entry and convert into the ledger?

(Ans) For e.g.:- Purchased goods for cash Rs\5000.

Purchase A\c Dr 5000

To Cash A\c 5000

Dr Purchase A\c Cr

Date Particular J.F Amount Date Particular J.F. Amount

.
1 To Cash A\c 5000

Dr Cash A\c Cr

Date Particular J.F Amount Date Particular J.F. Amount

.
1 By purchase 5000
(Q)What is Trial balance?
(Ans)The final list of balances, totaled and combined, is called Trial balance. It is a list of debit and
credit balances which are extracted from various ledger accounts.

Particulars Ledger Folio(LF) Debit Amount(DR) Credit Amount(CR)

Cash 10,320
Capital 20,000

(Q)What is Trading Account?

(Ans)It is an account of purchases OR sales and direct expenses OR direct income. Normally this
account maintained by manufacture. All direct expenses are written in the debit side and all direct
income are written in the credit side of the trading account.

DR Trading A/C CR

Particulars Amount Amount Particulars Amount Amount

To Opening Stock 45000 By Sales 20000

(Q)What is Profit And Loss Account?

(Ans)It is an account of receipts OR payments and indirect expenses OR indirect incomes. Normally
this account maintained by retailer. All indirect expenses are written in the debit side and all indirect
income are written in the credit side of the Profit And Loss account.

DR Profit And Loss A/C CR

Particulars Amount Amount Particulars Amount Amount

To Salary 45000 By Discount 20000
(Q)What is Balance Sheet?
(Ans)It shows the financial position of a business on a particular date. It is a statement of Assets and
Liability. A balance sheet is a statement and not an account. A balance sheet is divided into two parts.
The left-hand side is called the liability side and the right–hand side the assets side.

Balance Sheet

Liabilities Amount Amount Assets Amount Amount

Capital 45000 Plant&Machiner 20000
y

(Q)What is Liabilities?

(Ans) Liabilities refers to debts or amounts due from a business to others either for money borrowed
or for goods or assets purchased on credit or for services received without making immediate for the
same. Liabilities of business can be classified into three types.

1. Fixed Liabilities are those liabilities, which are to be redeemed after a long period of time.
For e.g.:- Long-term loans and capital are example of such liabilities.

2. Current Liabilities are those liabilities, which are to be redeemed in the operating period
usually within a year.

For e.g.:-Sundry creditors, bank loans and bills payable are included under such liabilities.

3. Contingent Liabilities are not actual liabilities but their becoming an actual liability is
Contingent on the happening of certain events.

For e.g.:-Worker’s compensation fund, bills under discount etc.

(Q)What is Assets?
(Ans)The entire property of all kinds possessed by or owing to a person or organization is called as an
assets. Assets are valuable resources owned by a business. Assets of business can be classified into
three types.

1. Fixed Assets are assets of a permanent nature, which are used in business over and over again.
For e.g.:-Machinery, Building, Loose, Tools, Plant, etc. are all fixed assets.

2. Floating Assets are those assets, which are held temporarily.

For e.g.:-Cash in hand, Cash at bank, Sundry debtors, Bills Receivable, etc.

3. Fictitious Assets are those assets, which are not represented by anything concrete. There is no
tangible property behind such assets.

For e.g.:-preliminary expenses, formation expenses are example of such assets.

(Q)What is meant by taxes?

(Ans) A tax is a payment made by a person who has earned income during a year to the government.

On other words” Tax is nothing but it is a charge made by government on the goods, on travelling,
medicien, that is a sort of income to the government and these money is used for developing
Purpose”.

Following are the different types of taxes

Related Links Direct Tax

Indirect Tax
Flat Tax
Consumption Tax
Income Tax
Sales Tax
Excise Tax
Wealth Tax
Transfer Tax
Poll Tax
Payroll Tax
Dividend Tax
Fuel Tax
Social Security Tax
Self Employment Tax
Federal Income Tax
Deposit Interest Retention Tax
Estate Tax