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Financial Accounting

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Financial Accounting (Mgt-101)
VU
Lesson-13
LEARNING OBJECTIVE
After studying this lecture, you should be able to:
 Understand different types of vouchers.
 How to book entry in voucher.
 Carrying forward the balance of an account.
VOUCHER
In book keeping, voucher is the first document to record an entry. Normally three types of vouchers are
used. i-e.:
 Receipt voucher
 Payment voucher
 Journal voucher
RECEIPT VOUCHER
Receipt voucher is used to record cash or bank receipt. Receipt vouchers are of two types. i-e.
 Cash receipt voucher
 Bank receipt voucher
Cash receipt voucher denotes receipt of cash; bank receipt voucher indicates receipt of cheque or demand
draft. Standard format of cash receipt voucher is given below:
Name of the Organization
Bank Receipt / Cash Receipt OR Receipt Voucher
Date:
No:
Description / Title:
Cash / Bank code:
Description /
Code
Credit
Title of Account
#
Amount
Total:
Narration:
Prepared By:
Checked By:
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Financial Accounting (Mgt-101)
VU
PAYMENT VOUCHER
Payment voucher is used to record a payment of cash or cheque. Payment vouchers are of two types. i.e.
 Cash Payment voucher
 Bank Payment voucher
Cash Payment voucher denotes Payment of cash, bank Payment voucher indicates payment by cheque or
demand draft. Standard format of cash Payment voucher is given below:
Name of the Organization
Bank Payment / Cash Payment OR Payment Voucher
No:
Date:
Description / Title:
Cash / Bank code:
Description /
Code
Credit
Title of Account
#
Amount
Total:
Naration
Prepared By:
Checked By:
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Financial Accounting (Mgt-101)
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JOURNAL VOUCHER
Journal voucher is used to record transactions that do not affect cash or bank. Standard format of journal
voucher is given hereunder:
Name Of Organization
Journal Voucher
Date:
No:
Description
Code
Debit
Credit Amount
#
Amount
Total:
Narration:
Prepared By:
Checked by:
HOW TO CARRY FORWARD A BALANCE
It is already mentioned that in `T' account, at the end of accounting period, if one side is greater than the
other side, balancing figure will be written on the lesser side as balance. For instance, if amount on debit side
is greater than the amount on credit side, the balancing figure is written on the credit side as balance & it is
known as Debit Balance. On the other hand, if amount on the credit side is greater than that of amount on
the debit side, the balance is shown on the debit side. It is called the Credit Balance.
At the start of next accounting period, these balances are carried forward. Debit balance is written on the
credit side, but it is the excess of debit side over the credit side, when it is carried forward, it is written on the
debit side. For example, ledger account of cash is given below:
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Financial Accounting (Mgt-101)
VU
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
250
21-3-02
Received from
10-3-02
Carriage paid
05
7,000
debtors
08
25,000
21-3-02
Paid to creditors
06
2,500
23-3-02
Paid salaries
09
3,000
25-3-02
Paid rent
10
29-3-02
Paid for stationery
11
2,000
BALANCE
161,250
Total
187,000
Total
187,000
This cash account is showing the balance of Rs. 161,250 on the credit side. This balance is excess of debit
side over the credit side and, therefore, is called the debit balance. When it is carried forward it is written
on the debit side because debit side of the cash account is greater & Rs. 161,250 is the balancing amount of
the debit side of cash account. So, it is an asset & it will be used for further expenses in the forth coming
period.
This is another example of accrued expenses:
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
In this account, balance is written on the debit side & it is called the credit balance. As this balance
represents excess of credit side over debit side, when it is carried forward it is again written on the credit
side.
It can also be explained like this:
 Debit balance when carried forward, is written on the debit side
 Credit balance when carried forward, is written on the credit side
This is further explained with the help of the following solved illustration:
ILLUSTRATION
Following is the trial balance of Saeed & sons for the month ended January 31, 2002
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Financial Accounting (Mgt-101)
VU
Saeed & Sons.
Trial Balance As On ( January 31, 2002)
Title of Account
Code
Dr. Rs.
Cr. Rs.
Cash Account
01
55,000
Accrued expense Account
02
10,000
Bank Account
03
25,000
Loan Account
04
100,000
Furniture Account
05
20,000
Office Equipment
06
10,000
Total
110,000
110,000
In the month of February, following transactions took place:
No.
Date
Particulars
01
Feb 07
They purchased stationery worth of Rs. 5,000
02
Feb 10
They paid their first installment of loan Rs. 10,000
03
Feb 12
They received a cheque from a customer of Rs. 5,000
04
Feb 17
Accrued expenses of Rs. 5,000 are paid.
05
Feb 20
They purchased furniture of Rs. 1,000
06
Feb 23
Office equipment of Rs. 2,000 is sold
07
Feb 25
Staff salaries are paid by cheque Rs. 10,000
08
Feb 28
Sold goods for cash Rs.2,000
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Financial Accounting (Mgt-101)
VU
SOLUTION
The ledger accounts of Saeed & Sons will bear the following changes:
Cash Account
Account code # 1
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
1-2-02
Balance c/f
55,000 7-2-02
Stationery
10
5,000
23-2-02
Sold office
06
2,000
purchased
equipment
10-2-02
Loan paid
04
10,000
28-2-02
Sold goods
01
2,000 17-2-02
Accrued expenses
02
paid
5,000
Furniture
05
purchased
1,000
Balance c/d
38,000
Total
59,000
Total
59,000
Accrued Expenses
Account code # 2
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
17-2-02
Accrued
01
5,000 1-1-02
Balance c/f
10,000
expenses paid
Balance c/d
5,000
Total
10,000
Total
10,000
Bank Account
Account code # 3
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
17-2-02
Balance c/f
01
25,000 25-2-02
Salaries paid
10,000
12-2-02
Cheque received
07
5,000
Balance c/d
20,000
Total
30,000
Total
30,000
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Financial Accounting (Mgt-101)
VU
Loan Account
Account code # 4
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
10-2-02
Installment paid
01
10,000
Balance c/f
100,000
Balance c/d
90,000
Total
100,000
Total
100,000
Furniture Account
Account code # 5
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
10-2-02
Balance c/f
20,000
23-2-02
20-2-02
Furniture
01
1,000
purchased
Balance c/d
21,000
Total
21,000
Total
21,000
Office Equipment Account
Account code # 6
Date
Particulars
Code  Amount
Date
Particulars
Code
Amount
#
Rs. (Dr.)
#
Rs. (Cr.)
10-2-02
Balance c/f
10,000
Office Equipment
01
2,000
sold
Balance c/d
8,000
Total
10,000
Total
10,000
Balance c/f is balance carried forward & balance c/d is balance Carried down.
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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