ZeePedia Add to Favourites   |   Contact us


Financial Accounting

<<< Previous Sample Accounts of a Company Next >>>
 
img
Financial Accounting (Mgt-101)
VU
Lesson-11
Cash Account
Cash Account Code 01
Date  No.
Narration
Cr. Rs.
Date
No.
Narration
Dr. Rs.
195,000
200,000 01-01---  02 Cash deposited
01-01---
01 Capital Introd.
60,000 08-01---
06-01---
06 Goods sold
07 Goods purch.
20,000
31-01---
15 Cash deposited
10,000
260,000
225,000
Balance
35,000
260,000
260,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Total
50
img
Financial Accounting (Mgt-101)
VU
Bank Account
Bank Account Code 02
No.
Narration
Cr. Rs.
Date
No.
Narration
Dr. Rs.
Date
195,000 02-01---
03 Furniture purch.
15,000
01-01---
02 Cash deposited
20,000 03-01---
25-01---
12 Received from B
50,000
04 Vehicle purch.
10,000 21-01---
31-01---
15 Cash deposited
11 Paid to Mr. A
25,000
5,000
31-01---
13 Salaries paid
225,000
95,000
Balance
130,000
225,000
225,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Total
51
img
Financial Accounting (Mgt-101)
VU
Capital Account
Capital Account Code 03
No.
Narration
Cr. Rs.
Date
No.
Narration
Dr. Rs.
Date
01-01---
01 Capital Introd.
200,000
0
200,000
200,000
Balance
200,000
200,000
200,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Capital Account
03
200,000
Total
52
img
Financial Accounting (Mgt-101)
VU
Furniture Account
Furniture
Account Code 04
Date
No.
Narration
Dr. Rs.
Date
No.
Narration
Cr. Rs.
02-01---
03 Furniture purch.
15,000
15,000
0
Balance
15,000
15,000
15,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Capital Account
03
200,000
Furniture Account
04
15,000
Total
53
img
Financial Accounting (Mgt-101)
VU
Vehicle Account
Vehicle
Account Code 05
Date
No.
Narration
Dr. Rs.
Date
No.
Narration
Cr. Rs.
03-01---
04 Furniture purch.
50,000
0
50,000
Balance
50,000
50,000
50,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Capital Account
03
200,000
Furniture Account
04
15,000
Vehicle Account
05
50,000
Total
54
img
Financial Accounting (Mgt-101)
VU
Purchases Account
Purchases
Account Code 06
No.
Narration
Cr. Rs.
Date  No.
Narration
Dr. Rs.
Date
05-01---  05 Goods purch.
50,000 10-01---
10,000
08 Purchase return
20,000
08-01---
07 Goods purch.
70,000
10,000
Balance
60,000
70,000
70,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Capital Account
03
200,000
Furniture Account
04
15,000
Vehicle Account
05
50,000
Purchases Account
06
60,000
Total
55
img
Financial Accounting (Mgt-101)
VU
Mr. A (Supplier)
Mr. A (Creditor)
Account Code 07
No.
Narration
Cr. Rs.
Date
No.
Narration
Dr. Rs.
Date
10,000 05-01---
05 Goods purch.
50,000
10-01---
08 Purchase return
25,000
21-01---
11 Paid to Mr. A
35,000
50,000
Balance
15,000
50,000
50,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Capital Account
03
200,000
Furniture Account
04
15,000
Vehicle Account
05
50,000
Purchases Account
06
60,000
Mr. A (Creditor)
07
15,000
Total
56
img
Financial Accounting (Mgt-101)
VU
Sales
Sales Account Code 08
No.
Narration
Cr. Rs.
Date
No.
Narration
Dr. Rs.
Date
18-01---
10 Sales return
5,000 06-01---
06 Goods sold
60,000
40,000
12-01---
09 Goods sold
5,000
100,000
Balance
95,000
100,000
100,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Capital Account
03
200,000
Furniture Account
04
15,000
Vehicle Account
05
50,000
Purchases Account
06
60,000
Mr. A (Creditor)
07
15,000
Sales
08
95,000
Total
57
img
Financial Accounting (Mgt-101)
VU
Mr. B (Customer)
Mr. B (Debtor) Account Code 09
Date
No.
Narration
Dr. Rs.
Date
No.
Narration
Cr. Rs.
12-01---
09 Goods sold
40,000 18-01---
10 Sales return
5,000
20,000
25-01---
12 Received from B
40,000
25,000
Balance
15,000
40,000
40,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Capital Account
03
200,000
Furniture Account
04
15,000
Vehicle Account
05
50,000
Purchases Account
06
60,000
Mr. A (Creditor)
07
15,000
Sales
08
95,000
Mr. B (Debtor)
09
15,000
Total
58
img
Financial Accounting (Mgt-101)
VU
Salaries
Salaries
Account Code 10
No.
Narration
Cr. Rs.
Date
No.
Narration
Dr. Rs.
Date
31-01---
13 Salaries paid
5,000
0
5,000
Balance
5,000
5,000
5,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Capital Account
03
200,000
Furniture Account
04
15,000
Vehicle Account
05
50,000
Purchases Account
06
60,000
Mr. A (Creditor)
07
15,000
Sales
08
95,000
Mr. B (Debtor)
09
15,000
Salaries
10
5,000
Total
59
img
Financial Accounting (Mgt-101)
VU
Expenses
Expenses
Account Code 11
No.
Narration
Cr. Rs.
Date
No.
Narration
Dr. Rs.
Date
31-01---
14 Exp. accrued
20,000
20,000
0
Balance
20,000
20,000
20,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Capital Account
03
200,000
Furniture Account
04
15,000
Vehicle Account
05
50,000
Purchases Account
06
60,000
Mr. A (Creditor)
07
15,000
Sales
08
95,000
Mr. B (Debtor)
09
15,000
Salaries
10
5,000
Expenses
11
20,000
Total
60
img
Financial Accounting (Mgt-101)
VU
Expenses Payable
Expenses Payable
Account Code 12
No.
Narration
Cr. Rs.
Date
No.
Narration
Dr. Rs.
Date
31-01---
14 Exp. accrued
20,000
0
20,000
Balance
20,000
20,000
20,000
Name Of The Organization (Ali Traders)
Trial Balance As On ( January 31, 20--)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
35,000
Bank Account
02
130,000
Capital Account
03
200,000
Furniture Account
04
15,000
Vehicle Account
05
50,000
Purchases Account
06
60,000
Mr. A (Creditor)
07
15,000
Sales
08
95,000
Mr. B (Debtor)
09
15,000
Salaries
10
5,000
Expenses
11
20,000
Expenses Payable
12
20,000
Total
330,000
330,000
61
img
Financial Accounting (Mgt-101)
VU
PROFIT AND LOSS ACCOUNT (ACCOUNT FORM)
Name of the Entity (Ali Traders)
Profit and Loss Account for the Month Ending January 31, 20--
Debit
Credit
Particulars
Rs.
Particulars
Rs.
Cost of Sale (Purchases)
60,000
Income
95,000
Gross Profit
35,000
(income ­ Cost of Sale)
Total
95,000
Total
95,000
Admin Expenses
25,000
Gross Profit
35,000
Salaries
5,000
Expenses
20,000
Net Profit
10,000
(gross Profit ­ expenses)
Total
35,000
Total
35,000
PROFIT AND LOSS ACCOUNT (EPORT FORM)
Name of the Entity (Ali Traders)
Profit and Loss Account for the Month Ending January 31, 20--
Particulars
Amount
Amount
Rs.
Rs.
Income / Sales / Revenue
95,000
Less: Cost of Goods Sold
(60,000)
Gross Profit
35,000
Less: Administrative Expenses
(25,000)
(25,000)
Net Profit
10,000
Rules of debit & credit
Any account that obtains a benefit is Debit and
Anything that will provide benefit to the business is Credit.
Both these statements may look different but in fact if we consider that whenever an account
benefits as a result of a transaction it will have to return that benefit to the business then both the
statements will look like different sides of the same picture.
Rules of debit & credits can also be explained like:
62
img
Financial Accounting (Mgt-101)
VU
EXPENDITURE
o  Increase in Expenditure is Debit
o  Decrease in Expenditure is Credit
INCOME
o  Increase in Income is Credit
o  Decrease in Income is Debit
ASSETS
o  Increase in Asset is Debit
o  Decrease in Asset is Credit
LIABILITY
o  Increase in Liability is Credit
o  Decrease in Liability is Debit
Now we will explain these rules with the help of the following illustration:
No.
Date
Particulars
01
Jan 01
Mr. Rizwan invests Rs. 100,000 to commence his business.
02
Jan 03
He opened an account with bank & deposited Rs. 30,000.
03
Jan 05
He borrows Rs. 50,000 from Mr. Saleem at 12% per annum.
04
Jan 07
He purchased furniture worth Rs. 20,000 for cash.
05
Jan 09
He purchased goods (for resale) worth of Rs. 10,000 from Mr. Afzal
on credit.
06
Jan 10
He sold goods for cash Rs. 5,000
07
Jan 12
He sold goods for Rs. 5,000 to Mr. Naeem on credit basis.
08
Jan 15
Cash deposited in bank Rs. 5,000
09
Jan 16
He purchased stationery fore Rs. 3,000.
10
Jan 18
He purchased office equipment for Rs. 10,000 and paid by cheque.
11
Jan 19
He returned defective goods to Mr. Afzal worth Rs. 1,000.
12
Jan 25
Goods are returned by Mr. Naeem Rs. 500 to the business.
13
Jan 30
Cash paid to Mr. Afzal Rs. 9,000 in full settlement of his claim.
14
Jan 31
Cash received from Mr. Naeem Rs. 4,500 in full settlement of his
account.
15
Jan 31
Cash withdrawn from the bank Rs. 500.
Now first document that we prepare in accounting is the voucher. We will book first entry in voucher, i.e.
Name Of Company
Type Of Voucher
Date: 1-1-02--
No:
01
63
img
Financial Accounting (Mgt-101)
VU
Description
Code
Debit
Credit Amount
#
Amount
Cash
01
100,000
Capital
02
100,000
Total:
100,000
100,000
Narration:
Capital Introduced in Cash by Mr. Rizwan.
Prepared By:
Checked by:
Same entry is presented in simpler form:
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
01-01-2002
Cash A/c
01
100,000
Capital A/c
02
100,000
Capital Introduced in Cash by Mr.
Rizwan
In this case, cash account is debited because cash account has obtained benefit and Capital account is
credited because business has obtained benefit because of capital account.
This statement can also be interpreted like this:
As cash is an asset and it is increased in this case, so cash is debited. Capital is a liability and increase in
liability is credit. In this case capital is increased, hence it is credited.
64
img
Financial Accounting (Mgt-101)
VU
ENTRY # 2
First, we will book this entry in voucher.
Name Of Company
Type Of Voucher
Date: 3-1-02--
No:
01
Description
Code
Debit
Credit Amount
#
Amount
Bank
03
30,000
Cash
01
30,000
Total:
30,000
30,000
Narration:
Deposited cash in bank.
Prepared By:
Checked by:
Again, the same entry in simple form
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-01-2002
Bank A/c
03
30,000
Cash A/c
01
30,000
Deposited cash in bank.
Again, bank account is debited because bank account has obtained benefit and Cash account is credited
because business has obtained benefit because of cash account.
This statement can also be interpreted like this:
As bank is an asset and it is increased in this case, so bank is debited. Cash is an asset and decrease in asset is
credit. In this case cash is decreased, hence it is credited
From now onward, we will present entry in simple form.
65
img
Financial Accounting (Mgt-101)
VU
ENTRY # 3
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
05-01-2002
Cash A/c
01
50,000
Loan A/c
04
50,000
Obtained loan from Mr. Saleem.
Cash account is debited because cash account has obtained benefit and Loan account is credited because
business has obtained benefit because of Loan account.
This statement can also be interpreted like this:
As cash is an asset and it is increased in this case, so cash is debited. Loan is a liability and increase in liability
is credit. In this case Loan is increased, hence it is credited
ENTRY # 4
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
07-01-2002
Furniture A/c
05
20,000
20,000
Cash A/c
01
Purchased furniture for cash
Again, furniture account is debited because furniture account has obtained benefit and Cash account is
credited because business has obtained benefit because of cash account.
This statement can also be interpreted like this:
As furniture is an asset and it is increased in this case, so furniture is debited. Cash is an asset and decrease in
asset is credit. In this case cash is decreased, hence it is credited.
ENTRY # 5
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
09-01-2002
Purchases A/c
06
10,000
Mr. Afzal(Creditors) A/c
07
10,000
Purchased goods from Mr. Afzal on
credit
Purchase account is debited because purchase account has obtained benefit and Creditors account is credited
because business has obtained benefit because of Creditors account.
This statement can also be interpreted like this:
As purchase is an expense and it is increased in this case, so purchase is debited. Creditors are liabilities and
increase in liability is credit. In this case Creditors are increased, hence it is credited.
66
img
Financial Accounting (Mgt-101)
VU
Creditor is any third person or organization, to whom business has to pay in future.
ENTRY # 6
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
10-01-2002
Cash A/c
01
5,000
Sale A/c
08
5,000
Sold goods for cash
Cash account is debited because cash account has obtained benefit and Sale account is credited because
business has obtained benefit because of Sale account.
This statement can also be interpreted like this:
As cash is an asset and it is increased in this case, so cash is debited. Sale is an income and increase in income
is credit. In this case income is increased, hence it is credited
ENTRY # 7
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
12-01-2002
Mr. Naeem(Debtors) A/c
09
5,000
Sale A/c
08
5,000
Sold goods to Mr. Naeem on credit
Debtors account is debited because Debtors account has obtained benefit and Sale account is credited
because business has obtained benefit because of Sale account.
This statement can also be interpreted like this:
As Debtors is an asset and it is increased in this case, so debtors account is debited. Sale is an income and
increase in income is credit. In this case income is increased, hence it is credited
Debtor is any third person or organization, from whom cash is receivable by the business.
67
img
Financial Accounting (Mgt-101)
VU
ENTRY # 8
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
15-01-2002
Bank A/c
03
5,000
Cash A/c
01
5,000
Cash deposited in bank
ENTRY # 9
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
16-01-2002
Stationery A/c
10
3,000
Cash A/c
01
3,000
Stationery purchased for cash
Stationery account is debited because stationery account has obtained benefit and Cash account is credited
because business has obtained benefit because of Cash account.
This statement can also be interpreted like this:
As stationery is an expense and it is increased in this case, so stationery is debited. Cash is an asset and
decrease in asset is credit. In this case Cash is decreased, hence it is credited
ENTRY # 10
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
18-01-2002
Office Equipment A/c
11
10,000
Bank A/c
03
10,000
Office equipment purchased by
cheque
Office Equipment account is debited because Office Equipment account has obtained benefit and Bank
account is credited because business has obtained benefit because of Bank account.
This statement can also be interpreted like this:
As Office Equipment is an asset and it is increased in this case, so Office Equipment is debited. Bank is an
asset and decrease in asset is credit. In this case bank account is decreased, hence it is credited
68
img
Financial Accounting (Mgt-101)
VU
ENTRY # 11
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
19-01-2002
Mr. Afzal(Creditors) A/C
07
1,000
Purchase return A/C
12
1,000
Creditors account is debited because Creditors account has obtained benefit and Purchase return account is
credited because business has obtained benefit because of Purchase return account.
This statement can also be interpreted like this:
As Creditors is a liability and it is decreased in this case, so Creditors is debited. Purchase return is an
expense and decrease in expense is credit, So it is credited.
ENTRY # 12
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
25-01-2002
Sales return A/C
13
500
09
500
Mr. Naeem(Debtors) A/C
Goods returned by Mr.
Naeem(Debtors)
Sales return account is debited because Sales return account has obtained benefit and Debtors is credited
because business has obtained benefit because of Debtors account.
This statement can also be interpreted like this:
As sales return is decrease in income and decrease in income is debit, so it is debited. Debtors account is
decreased and decrease in asset is credit, so it is credited.
ENTRY # 13
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
30-01-2002
Mr. Afzal(Creditors) A/C
07
9,000
Cash A/C
01
9,000
Cash paid to Mr. Afzal(Creditors)
69
img
Financial Accounting (Mgt-101)
VU
ENTRY # 14
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
31-01-2002
Cash A/C
01
4,500
Mr. Naeem(Debtors) A/C
09
4,500
Cash received from Mr.
Naeem(Debtors)
ENTRY # 15
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
31-01-2002
Cash A/C
01
500
Bank A/C
03
500
Cash withdrawn from bank
CASH AND BANK BOOK
Ledger is a book that keeps separate record for each account;
The Account or Head of Account is a systematic record of transactions of one type; and
Like other things, a separate account is also required to record the movements in cash (usually called
cash in hand) and bank account (usually called cash at bank).
If the volume of transactions is high then we can separate books for cash and bank account.
These separate books for cash and bank account are called cash book and bank book respectively.
The Cash Book records all the movements in the cash account.
A cash book would look like one of the two samples shown here
70
img
Financial Accounting (Mgt-101)
VU
Cash Book
Account Code 01
Receipt Side
Payment Side
Date No. Narration / Ledger
Receipt  Date No. Narration / Ledger Payment
Particulars Code
Amount
Particulars  Code  Amount
OR
Cash Book
Account Code 01
Date Voucher
Narration /
Ledger
Receipt  Payment
Balance
Number
Particulars
Code
Amount Amount
Dr/(Cr)
THE CASH BOOK
In the first format / presentation, receipts (Debits) are written on left hand side of the page and
payments (Credits) on the right hand side.
In the second presentation, instead of using two pages, we use two columns on the same page.
Both these presentations are correct.
In the second format, we have an additional facility of knowing the balance of the account after
every transaction.
Whereas in the first one, we have to add up the receipts and payments every time we need to know
the balance.
Moreover, the second format utilizes less space, therefore, we will use this format in our future
discussions
THE BANK BOOK
The Bank book records all the movements in the bank account.
The format of the bank book is the same as that of cash book axcept for an additional column for
Cheque Number.
Again, we can use either two pages OR two columns to present the bank book.
71
img
Financial Accounting (Mgt-101)
VU
Bank Book (Bank Account Number)
Account Code 02
Date
Voucher
Chq.
Narration /
Ledger
Receipt
Payment
Balance
Number
No.
Particulars
Code
Amount
Amount
Dr/(Cr)
As you can see that except for a few minor differences, the formats of Cash and Bank book are
almost similar to that of the General Ledger.
The differences are explained here:
The title of debit and credit columns has been changed to receipt and payment respectively. It is not
necessary to make this change. But, it is done to simplify things as we know that in case of cash and
bank, debit side would signify receipt and credit side would represent payment.
There is an additional column titled ledger code. In this column, we write the code of the other head
of account that is affected by the transaction. This helps in understanding the complete transaction
at a glance.
There may be a column for cheque number in the bank book.
It may be noted that in case the organization operates more than one bank account, separate ledger
accounts will be opened in bank book for each account.
Now we will summarize all cash transactions in both two page cash book & one page cash book for the
convenience of the reader.
Two page cash book will be presented asunder:
Cash Account
Account Code 01
Receipt Side
Payment Side
Date
No.
Narration /
Ledger Receipt
Date
No.
Narration /
Ledger
Payment
Particulars
Code  Amount
Particulars
Code
Amount
Jan-1
Capital introduced
02
100,000 Jan-3
Deposited in bank
03
30,000
Jan-5
Loan received
04
50,000 Jan-7
Furniture purchased
05
20,000
Jan-10
Goods sold
08
5,000 Jan-15
Deposited in bank
03
5,000
Jan-31
Received
from
09
4,500 Jan-16
Stationery purchased
10
3,000
debtors
Jan-31
Cash drawn from
03
500 Jan-30
Paid to creditors
07
9,000
bank
72
img
Financial Accounting (Mgt-101)
VU
Same record will be presented in two column cash book now
Date
Voucher
Narration /
Ledger
Receipt
Payment
Balance
Number
Particulars
Code
Amount
Amount
Dr/(Cr)
Jan-1
Capital introduced
02
100,000
100,000
Jan-3
Deposited in bank
03
(30,000)
70,000
Jan-5
Loan received
04
50,000
120,000
(20,000)
Jan-7
Furniture purchased
05
100,000
Goods soGoods sold
ld
08
5,000
105,000 0
Jan-10
5,00
(5,000)
Jan-15
Deposited in bank
03
100,000
(3,000)
Jan-16
Stationery purchased
10
97,000
(9,000)
Jan-30
Paid to creditors
07
88,000
Jan-31
Received from debtors
09
4,500
92,500
Jan-31
Cash drawn from bank
03
500
93,000
Now, we will present Bank entries in bank book.
Bank Book (Bank Account # xxx) Account Code 02
Date
Voucher
Chq.
Narration /
Ledger
Receipt
Payment
Balance
Number
No.
Particulars
Code
Amount
Amount
Dr/(Cr)
Jan-3
Cash deposited
01
30,000
30,000
Jan-15
Cash deposited
01
5,000
35,000
Jan-18
Off. Equip.
11
(10,000)
25,000
purchased
Jan-31
Cash drawn
01
(500)
24,500
RECOMMENDED READING
After reading this lecture, you will be able to read
 Chapter # 2 of business accounting by Frank Woods
 Chapter # 2, 3 of accounting by M. Arif & Sohail Afzal
73
img
Financial Accounting (Mgt-101)
VU
ILLUSTRATION
Nawab Sons started their business in the month of March, 2002. Following are their transactions for the
month. Pass journal entries, prepare ledger accounts, and make their profitability analyses.
No.
Date
Particulars
01
Mar. 01
Started business with Rs. 150,000
02
Mar. 05
Purchased office furniture for cash Rs. 2,000
03
Mar. 07
Purchased goods for cash Rs. 9,000
04
Mar. 10
Paid carriage on purchases Rs. 250
05
Mar. 12
Purchased goods from Saleem &co. Rs. 7,000
06
Mar. 13
Sold goods for cash Rs. 12,000
07
Mar. 15
Sold goods to Usman & Sons Rs. 25,000
08
Mar. 21
Received cash From Usman & Sons Rs. 25,000
09
Mar. 21
Paid cash to Saleem &co Rs. 7,000
10
Mar. 23
Paid salaries for the month Rs. 2,500
11
Mar. 25
Paid rent Rs. 3,000
12
Mar. 29
Purchased stationery Rs.2,000
13
Mar. 31
Utility bills are accrued Rs. 5,000
JOURNAL ENTRIES
ENTRY # 1
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-01-2002
Cash A/c
01
150,000
Capital A/c
02
150,000
Started business with cash.
74
img
Financial Accounting (Mgt-101)
VU
ENTRY # 2
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
01-05-2002
Office Furniture A/c
03
2,000
Cash A/c
01
2,000
Purchased office furniture
ENTRY # 3
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-07-2002
Purchases A/c
04
9,000
Cash A/c
01
9,000
Purchased goods for cash.
ENTRY # 4
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-10-2002
Carriage on purchase A/c
05
250
Cash A/c
01
250
Paid carriage on purchase.
ENTRY # 5
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-12-2002
Purchases A/c
04
7,000
Salim & co.(Creditors)
06
7,000
Purchased goods on credit
75
img
Financial Accounting (Mgt-101)
VU
ENTRY # 6
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-13-2002
Cash A/c
01
12,000
Sale A/c
07
12,000
Goods sold for cash.
ENTRY # 7
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-15-2002
Usman & Sons(Debtors) A/c
08
25,000
25,000
Sale A/c
07
Goods sold on credit.
ENTRY # 8
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-21-2002
Cash A/c
01
25,000
Usman & Sons(Debtors A/c
08
25,000
Cash received from Usman & Sons
ENTRY # 9
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-21-2002
Salim & co.(Creditors) A/c
06
7,000
Cash A/c
01
7,000
Paid cash to Salim & co.
76
img
Financial Accounting (Mgt-101)
VU
ENTRY # 10
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-23-2002
Salaries A/c
09
2,500
Cash A/c
01
2,500
Started business with cash.
ENTRY # 11
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-25-2002
Rent A/c
10
3,000
Cash A/c
01
3,000
Paid rent..
ENTRY # 12
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-29-2002
Stationery A/c
11
2,000
2,000
Cash A/c
01
Stationery purchased.
ENTRY # 13
Date
Particulars
Code #
Amount(Dr.)
Amount(Cr.)
Rs.
Rs.
03-31-2002
Utility Bills A/c
12
5,000
Accrued Expenses A/c
13
5,000
Accrual of utility bills for the month..
77
img
Financial Accounting (Mgt-101)
VU
LEDGER ACCOUNTS
Cash Account
Account code # 1
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
1-3-02
Commenced
02
150,000 5-3-02
Office furniture
03
2,000
business
purchased
13-3-02
Goods sold
07
12,000 7-3-02
Goods purchased
04
9,000
21-3-02
Received from
10-3-02
Carriage paid
05
250
debtors
08
25,000 21-3-02
Paid to creditors
06
7,000
23-3-02
Paid salaries
09
2,500
25-3-02
Paid rent
10
3,000
29-3-02
Paid for stationery
11
2,000
BALANCE
161,250
Total
187,000
Total
187,000
Capital Account
Account code # 2
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
1-3-02
Cash introduced
01
150,000
BALANCE
150,000
Total
150,000
Total
150,000
Office furniture Account
Account code # 3
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
5-3-02
Office furniture
01
2,000
purchased
BALANCE
2,000
Total
2,000
Total
2,000
78
img
Financial Accounting (Mgt-101)
VU
Purchases Account
Account code # 4
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
7-3-02
Purchased
01
9,000
goods
12-3-02
Purchased
7,000
goods on credit
BALANCE
16,000
Total
16,000
Total
16,000
Carriage on purchase Account Account code # 5
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
10-3-02
Paid carriage on
01
250
purchase
BALANCE
250
Total
250
Total
250
Salim & co.(Creditors) Account
Account code # 6
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
12-3-02
Purchased
04
7,000 21-3-02
Paid cash
01
7,000
goods
BALANCE
0
Total
7,000
Total
7,000
Sale Account  Account code # 7
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
13-3-02
Goods sold
01
12,000
15-3-02
Goods sold on
08
credit
25,000
BALANCE
37,000
Total
37,000
Total
37,000
Usman & sons(Debtors) Account
Account code # 8
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
79
img
Financial Accounting (Mgt-101)
VU
#
Rs. (Dr.)
#
Rs. (Cr.)
15-3-02
Goods sold
07
25,000 21-3-02
Received cash
01
25,000
BALANCE
0
Total
25,000
Total
25,000
Salaries Account
Account code # 9
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
23-3-02
Salaries paid
01
2,500
BALANCE
2,500
Total
2,500
Total
2,500
Rent Account Account code # 10
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
Rent paid
01
3,000
25-3-02
BALANCE
3,000
Total
3,000
Total
3,000
Stationery Account
Account code # 11
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
29-3-02
Stationery
01
2,000
purchased
BALANCE
2,000
Total
2,000
Total
2,000
Utility Bills Account
Account code # 12
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
80
img
Financial Accounting (Mgt-101)
VU
31-3-02
Accrued utility
13
5,000
bills
BALANCE
5,000
Total
5,000
Total
5,000
Accrued Expenses Account  Account code # 13
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
31-3-02
Accrued utility
12
5,000
bills
BALANCE
5,000
Total
5,000
Total
5,000
TRIAL BALANCE
Saeed & co.
Trial Balance As On ( January 31, 2002)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
161,250
Capital Account
02
150,000
Furniture Account
03
2,000
Purchases Account
04
16,000
Carriage on purchase account
05
250
Salim& co. (Creditor)
06
0
Sales
07
37,000
Usman & co. (Debtor)
08
0
Salaries
09
2,500
Rent
10
3,000
Stationery
11
2,000
Utility billst
12
5,000
Accrued expenses
13
5,000
Total
192,000
192,000
81
img
Financial Accounting (Mgt-101)
VU
Saeed & Co.
Profit & Loss Account for the period ended January 31, 2002
Particulars
Amount
Amount
Rs.
Rs.
37,000.
Income / Sales / Revenue (See Note #1)
Less: Cost of Goods Sold
(16,250)
(See Note # 1)
Gross Profit
20,750.
Less: Admin. Expenses
(12,500)
(See Note # 2)
Net Profit/ (Loss)
8,250
Note # 1 Cost of goods sold
Purchases
16,000
Add: carriage on purchase
250
Cost of goods sold
16,250
Note # 2 Admin. Expenses
Salaries
2,500
Rent
3,000
Stationery
2,000
Utility bills
5,000
Total Admin. Expenses
12,500
RECOMMENDED READING
After reading this lecture, you will be able to read
 Chapter # 3 of business accounting by Frank Woods
 Chapter # 5 of accounting by M. Arif & Sohail Afzal.
82
Table of Contents:
  1. Introduction to Financial Accounting
  2. Basic Concepts of Business: capital, profit, budget
  3. Cash Accounting and Accrual Accounting
  4. Business entity, Single and double entry book-keeping, Debit and Credit
  5. Rules of Debit and Credit for Assets, Liabilities, Income and Expenses
  6. flow of transactions, books of accounts, General Ledger balance
  7. Cash book and bank book, Accounting Period, Trial Balance and its limitations
  8. Profit & Loss account from trial balance, Receipt & Payment, Income & Expenditure and Profit & Loss account
  9. Assets and Liabilities, Balance Sheet from trial balance
  10. Sample Transactions of a Company
  11. Sample Accounts of a Company
  12. THE ACCOUNTING EQUATION
  13. types of vouchers, Carrying forward the balance of an account
  14. ILLUSTRATIONS: Ccarrying Forward of Balances
  15. Opening Stock, Closing Stock
  16. COST OF GOODS SOLD STATEMENT
  17. DEPRECIATION
  18. GROUPINGS OF FIXED ASSETS
  19. CAPITAL WORK IN PROGRESS 1
  20. CAPITAL WORK IN PROGRESS 2
  21. REVALUATION OF FIXED ASSETS
  22. Banking transactions, Bank reconciliation statements
  23. RECAP
  24. Accounting Examples with Solutions
  25. RECORDING OF PROVISION FOR BAD DEBTS
  26. SUBSIDIARY BOOKS
  27. A PERSON IS BOTH DEBTOR AND CREDITOR
  28. RECTIFICATION OF ERROR
  29. STANDARD FORMAT OF PROFIT & LOSS ACCOUNT
  30. STANDARD FORMAT OF BALANCE SHEET
  31. DIFFERENT BUSINESS ENTITIES: Commercial, Non-commercial organizations
  32. SOLE PROPRIETORSHIP
  33. Financial Statements Of Manufacturing Concern
  34. Financial Statements of Partnership firms
  35. INTEREST ON CAPITAL AND DRAWINGS
  36. DISADVANTAGES OF A PARTNERSHIP FIRM
  37. SHARE CAPITAL
  38. STATEMENT OF CHANGES IN EQUITY
  39. Financial Statements of Limited Companies
  40. Financial Statements of Limited Companies
  41. CASH FLOW STATEMENT 1
  42. CASH FLOW STATEMENT 2
  43. FINANCIAL STATEMENTS OF LISTED, QUOTED COMPANIES
  44. FINANCIAL STATEMENTS OF LISTED COMPANIES
  45. FINANCIAL STATEMENTS OF LISTED COMPANIES