Preparation of Final A/C

Monetary Business Transactions

Journal

Ledger
Trial Balance

Adjusting entries
Profit & Loss A/C Balance Sheet

Accounting System
Cash System Cash Received Cash paid Mercantile System or (Accrual System) Received/Receivable Paid/Payable

Cost( Exp or Loss)

Expired Cost (Revenue Exp) Unexpired Cost (Capital Exp)

Profit & Loss A/C

Balance Sheet

Revenue Exp
Recurring in nature. Benefit expires in the particular month. Authorised by middle level managers. Staff salary Traveling & conveyance Printing & Stationeries Postage & telegrams Carriage Inwards/carriage outwards All manufacturing exp

Capital Exp
Non- recurring in nature. Authorised by top management. Meant for infrastructure development Land- lease hold & free hold Building P/M F/F Vehicles Road & culverts Other development exp Railway siding.

Deferred revenue exp

Nature is of Unexpired cost but as per the management decision the cost is spread over the time period to be written off from the books of accounts. Over burden removal exp Preliminary exp Heavy advertisements. Suppose Rs 20 crores spent on OB removal exp in a coal mine and mines life is 20 years then each year profit will accommodate Rs1 crore as Expired cost and balance is shown in the balance sheet as Unexpired cost under the head Misc. exp not yet written off or adjusted on the Asset side.

Deferred revenue Exp

Expired cost (Written off) Unexpired cost (Carry Forward to
next year as Asset)

P&L A/C

Balance Sheet

Golden Rules of DR & CR

Personal A/C Real A/C Nominal A/C Representative Personal A/C

Personal A/C
Dr
The receiver

Cr
The Giver

Nominal A/C
Dr
All Exp/Loss

Cr
All Gains/Incomes

Real A/C( Cash, Goods, Assets)

Dr
What Comes in ?

Cr
What Goes out ?

Representative personal A/C

Bank( Bank is acting as the agent of the proprietor) Accrued Income( Income due but not received)Current Asset Advance Income(Income received in advance)Current Liability Prepaid Exp Exp paid in this financial year but due for next financial year. Outstanding ExP- Exp payable.

Expenditure
Manufacturing exp
Purchase Carriage inwards Power, Coal Freight Trading A/C

Revenue exp
Carriage outwards Salaries & wages Printing & Stationeries Postage & telegrams Profit & Loss A/C

Income
Revenue Income(Gross Profit)& Capital Receipt- Go to Profit & Loss A/C- Credit side.

Liability( Source of funds)

Share Capital- Equity & Preference Share Reserves & Surpluses Profit & Loss A/C(Cr) Loans Secured(From Bank like SBI) -Unsecured( From friends & Relatives) Current Liabilities a) Current Liabilities b) Provisions

Current Liabilities
Sundry creditors Outstanding exp Bills Payable Bank over draft Advance Income

Assets( Application of funds)

Intangible Assets Fixed Assets Investments Current Assets Misc exp not yet writtten off or adjusted Profit & Loss A/C (Dr Balance)

Intangible Assets
Goodwill Patents Copy rights Trademarks

Fixed Assets
Land Lease hold and free hold Building Plant & Machineries Furniture & fittings Vehicles Other development exp Roads & culverts Railway sidings

Investments
Short term marketable securities like Fixed deposits LIC Shares Debentures This money is surplus in times of off seasons . This money in invested in some securities to earn some interest income during off season.

Current Assets
Closing stock- Raw Materials, WIP & FG. Sundry debtors B/R( Bills Receivable) Prepaid exp Accrued Income` Loans & advances Cash in hand Cash at Bank

Transactions
Credit Cash

Sale day Book-Credit Sale Cash Book Purchase Day Book- Credit Purchase Bills payable book Bills Receivable book Return inward book( Sale return) Return outward book ( Purchase return)

Cash Book
Single column( cash only) Double column( Cash & Discount) Triple column( Cash ,Bank & Discount) Imprest system of maintaining petty cash

Adjustment entry
Prepaid exp Advance income Valuation of closing stock Outstanding exp Depreciation of fixed assets. All adjustment items will affect both to the Trading P/L as well as Balance sheet.

Trial Balance
All the closing balance of a ledger willl go to the Trial balance. Trial balance is trial of all the Dr and Cr of all the ledger before the adjustment entry.

Monetary Business Transactions

Cash Vouchers Cash received & cash paid Bank Vouchers- Cheques received & cheques paid Journal Vouchers- Receivable and payables,Cash received in advance, accrued income, closing stock, prepaid exp, provisions , write off.

Journal Proper
Opening entries Closing entries Adjustment entries Transfer entries Rectification entries Purchase of fixed assets Drawings( money or goods withdrawn by proprietor for personal purpose)