Bookkeeping and Accounting

Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, receipts and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper. Many individuals mistakenly consider bookkeeping and accounting to be the same thing. This confusion is understandable because the accounting process includes the bookkeeping function, but is just one part of the accounting process. The accountant creates reports from the recorded financial transactions recorded by the bookkeeper and files forms with government agencies. There are some common methods of bookkeeping such as the single-entry bookkeeping system and the double-entry bookkeeping system. Bookkeeping and accounting share two basic goals:

to keep track of your income and expenses, thereby improving your chances of making a profit to collect the necessary financial information about your business to file your various tax returns and local tax registration papers

Single Column Cash Book in companies It is a cash book in which only and only cash transactions are recorded. By single column we mean "one amount column" on each side of the Cash Book. One amount column on the debit side in which inflow of cash (cash received) is recorded and one amount column on the credit side in which outflow of cash (cash paid) is recorded. It is generally maintained by such business concerns which do not have bank accounts. (small business concerns).

Case study 1: Enter the following transactions in the cash book of XYZ (a client of Account Age InfoTech Pvt Ltd) 2012 Jan. 1 Mr. Jamil started business with cash Jan. 3 Bought goods for cash Jan. 5 Paid for stationary Jan. 7 Sold goods for cash Jan. 10 Paid for trade expenses Jan. 11 Sold goods for cash Jan. 14 Received cash from Mr. Asif Jan. 15 Paid cash to Mr. Qadir Jan. 18 Withdrew cash for personal use Jan. 22 Bought goods for cash Jan. 25 Sold goods for cash Jan. 27 Paid for electricity bill Jan. 31 Paid salary Jan. 31 Paid rent $ 2,00,000 1,40,000 2,000 80,000 2,000 20,000 10,000 20,000 6,000 40,000 90,000 4,000 10,000 3,000

Single Column Cash Book of XYZ

Date Particulars V.N. L.F. 2012 Jan. 1 Capital A/C (Being business started) Jan.7 Sates A/C (Being goods sold) Jan. 11 Sales A/C (Being goods sold) Jan. 14 Mr. Asif A/C (Being cash received) Jan. 25 Sales Aft (Being goods sold)

Amount ($)

Date Particulars 2012

V.N. L.F.

Amount ($)

200,000

Jan.3 Purchases A/C (Being goods bought for cash)

140,000

80,000

Jan.5 Stationery A/C (Being stationary purchased) Jan.10 Trade expenses (Being expenses paid)

2,000

20,000

2,000

10,000

Jan.15 Mr. Qadir A/C (Being cash paid)

20,000

90,000

Jan.18 Drawing A/C (Cash drawn for personal use) Jan.22 Purchase A/C (Being goods bought) Jan.27 Electricity A/C (Being bill paid) Jan.31 Salary A/C (Being salary paid) Jan.31 Rent A/C (Being rent paid) Jan.31 Balance c/d

6,000

40,000

4,000

10,000

3,000

173,000

4,00,00

4,00,00

Feb. 1 Balance b/d

173,000

A single column Cash Book may also be used even if an account is to be opened in a bank. In such a case, a separate Bank A/c will be opened in Ledger where all bank transactions are posted from Cash Book and other subsidiary books. An example is given below:

Case study 2: Enter the following transactions in a Single Column Cash Book and prepare Bank A/c in ledger.
2012 March 1 March 1 March 3 March 4 March 8 March 10 March 15 March 18 March 20 March 30 March 31 March 31 Cash in hand Bank Balance Received a cheque from Osman Deposited Osman's cheque with bank Withdrawn from bank for business use Goods sold for cash Goods bought for cash Goods sold for cash Paid Rahim by cheque Deposited into bank Paid salary in cash Paid rent by cheque $ 80,000 120,000 24,000 -20,000 30,000 80,000 60,000 26,000 16,000 10,000 6,000

Solution:
Cash Book
Date Particulars 2012 Balance b/d Mar. 1 Osman A/C (Being cheque received) Mar. 8 Bank A/C (Being amount withdrawn) V.N. L.F. Amount ($) 80,000 24,000 Date Particulars 2012 Mar. 1 Bank A/C (Being cheque deposited) 24,000 V.N. L.F. Amount ($)

20,000

Mar. Purchases A/C 15 (Being goods bought for cash)

80,000

Mar. Sales A/C 10 (Being goods sold for cash) Mar. Sales A/C 18 (Being goods sold for cash)

30,000

Mar. Bank A/C 15 (Being cash deposited)

16,000

60,000

Mar. Salary A/C 30 (Being salary paid)

10,000

Mar. Balance c/d 31

84,000

2,14,000

2,14,000

Apr.1 Balance b/d

84,000

Note: Bank balance and transactions dated 20th March and 31st March are not recorded in Cash Book as they do not involve cash.
Bank Account In Ledger
Date 2012 Mar. 1 4 5 Reference Balance b/d Cash A/C Cash A/C J/F Amount $ 120,000 24,000 16,000 Date 2012 Mar. 8 20 31 31 160,000 April. 1 Balance b/d 108,000 Reference Cash A/C Rahim A/C Rent A/C Balance c/d 160,000 J/F Amount $ 20,000 26,000 6,000 108,000

Two/Double Column Cash Book: Cash A/c and Bank A/c are two busiest accounts in ledger and they are removed from the ledger to reduce its volume and size. Cash A/c is removed from the ledger and instead of it the Single Column Cash Book is kept to record cash transactions. In the same way no Bank A/c is opened in ledger for recording bank transactions, rather an additional amount column is provided on each side of 'Single Column Cash Book' for recording bank transactions. One more column for amount is provided on the debit side and one on credit side of Single Column Cash Book. These two amount columns on debit side and credit side

will serve as Bank A/c and so it will not be necessary to open a Bank A/c in the ledger. The Cash Book having two Amount Columns on both sides is called 'Double Column Cash Book'. While writing Double Column Cash Book, keep in mind that there are two separate boxes - one for the cash and other for the bank: Dr Cash Box Cr Dr Bank Box Cr

When cash or Cheques (Cheques received but not deposited on the same date ) enters into cash box, Cash Column is debited and when cash or cheque goes out of the cash box. Cash Column is credited. On the other hand, when Cash or cheque enters into bank box, Bank Column is debited and when cash goes out of bank box, bank column is credited.

Contra Entry In any account we can only have one half of a double entry. An account cannot be debited and credited at the same time. For example, when we sell goods for cash, cash received will be recorded on the debit side of Cash Book and the goods sold will be posted on the credit side of Sales Account. But in Double Column Cash Book, we have two accounts, Cash A/c and the Bank A/c, so it is possible to have both a debit entry and a credit entry at the same time. For example, cash of $5,000 is deposited into the bank. In this transaction both Bank A/c and Cash A/c are involved and they will be recorded on both sides of Double Column Cash Book i.e. on the debit side in bank column and on the credit side in cash column. Thus a transaction in which Cash A/c and Bank A/c are involved, is recorded on both the sides of Double Column Cash Book, it is called "contra entry", from the Latin prefix contra meaning 'opposite to or against'.In recording such a transaction the letter "C", is written in 'L.F' column because both aspects of the transactions are recorded and there is no need to post them into the ledger.

Case Study 3: Enter the following transactions in a double column cash book/two column cash book.

2012 March 1 March 1 March 3 March 4 March 8 March 10 March 15 March 18 March 20 March 30 March 31 March 31 Cash in hand Bank Balance Received a cheque from Osman Deposited Osman's cheque with bank Withdrawn from bank for business use Goods sold for cash Goods bought for cash Goods sold for cash Paid Rahim by cheque Deposited into bank Paid salary in cash Paid rent by cheque

$ 80,000 120,000 24,000 -20,000 30,000 80,000 60,000 26,000 16,000 10,000 6,000

Solution:
Double Column Cash Book
Date Particulars L/F 2012 Mar. 1 Balance b/d 80,000 120,000 Cash $ Bank $ Date Particulars L/F 2012 Mar. Bank A/c 4 (Being cheque deposited) 8 Cash A/c (Being cash withdrawn from bank) C 24,000 Cash $ Bank $

Osman A/c (Being cheque received) Cash A/c (Cheque deposited with bank) C

24,000

20,000

24,000

15 Purchase A/c (Being goods bought)

80,000

Bank A/c (Being cash drawn from bank) Sales A/c (Being goods sold 'for cash) Sales A/c (Being goods sold for cash) Cash A/c (Being cash deposited)

20,000

18 Cash A/c

16,000

10

30,000

20 Rahim A/c (Cheque issued)

26,000

18

60,000

31 Salary A/c (Being salary paid)

10,000

30

16,000

31 Rent A/c (Being rent paid by cheque) 31 Balances c/d 84,000

6,000

108,000

214,000

160,000

214,000

160,000

April. Balance b/d 1

84,000

108,000

Posting from Cash Book to concerned accounts In Ledger:

For posting in Ledger, it will be very helpful to see the two columns on the debit side and credit side of the Cash Book first i.e. Particulars Column and L.F Column. On the debit side, in Particulars Column, the names of concerned accounts, (accounts which are credited when Cash A/C or Bank A/C are debited) are given and in L.F Column, the page numbers on which these accounts are opened in Ledger are given. The concerned accounts on the debit side in Particulars Column are Sales A/c, Babar A/c, S. Rashid A/c, Arshad Khan A/c and Interest A/c and on the credit side M. Arshad A/c, Drawing A/c, Purchase A/c, Shakeel A/c, Arshad Khan A/c, Bank Charges A/c and Salary A/c.

Cash A/c and Bank A/c not have been opened in Ledger

Case Study 4: Enter the following transactions of ABC (a client of Account Age InfoTech Pvt. Ltd)
2012 Jan. 1 Jan. 1 Jan. 3 Jan. 4 Jan. 6 Jan. 8 Jan. 8 Cash in hand Cash at Bank Cash Sales Paid M. Arshad by a cheque Received a cheque from Babar Cash deposited into bank Babar's cheque deposited into bank $ 100,000 60,000 40,000 14,000 8,000 19,000 -15,000 24,000 57,000 10,000 -36,000 --1,400 33,00 700 14,000

Jan. 10 Drew from bank for office use Jan. 11 Drew from bank for personal use of owner Jan. 12 Cash purchases Jan. 15 Received a cheque from S. Rashid Jan. 16 Rashid's cheque endorsed to Shakeel Jan. 17 Paid Arshad Khan by a cheque Jan. 18 Rashid's cheque returned dishonored Jan. 19 Our cheque to Arshad Khan was dishonored Jan. 21 Received interest from bank Jan. 24 Cash sales Jan. 27 Incidental charges debited by bank Jan. 31 Salary paid by cheque

Solution:
Cash Book (double column)
Date Particular L/F 2012 Jun. Balance b/d 1 100,000 60,000 Cash $ Bank $ Date Particular L/F 2012 Jan. M. Arshad 4 A/c 7 14,000 Cash $ Bank $

3 6 8 8

Sales A/c
1

5 9 C C

40,000 8,000 19,000 8,000

8 8

Bank A/c Bank A/c

C C C 11

19,000 8,000 15,000 24,000

Babar A/c

Cash A/c
2

10 Cash A/c 11 Drawing A/c 12 Purchase A/c 16 Shakeel A/c

Cash A/c

10 Bank A/c

15,000

13

57,000

15

S.Rashid's 15 A/c
4

10,000

16

10,000

19

Arshad Khan A/c

5

17

36,000

17 Arshad Khan A/c 27 Bank charges A/c 31 Salary A/c 31 Balance C/d

17

36,000

21

Interest A/c

19

1,400

20

700

24 Sales A/c

33,000

21 112,000

14,000 20,7000

206,000

124,400

206,000

124,400

Feb. Balanced 1 b/d

112,000

20,700

1. On 6.1.2012, cheque received from Babar is treated as cash because it is not deposited into the bank on the same date. 2. A contra entry is passed when Babar's cheque (which was treated as cash) is deposited into the bank on 8.1.2012. 3. On 15.1.2012, cheque received from S. Rashid is treated as cash, so recorded in Cash Column. 4. Cheque issued to Arshad Khan on 17.1.2012 is dishonored, so the bank is debited again and Arshad Khan became a creditor again. 5. On 21.1.2012, the bank allowed us interest which is revenue for the business and our bank balance is increased by $1,400. Note: The transaction on 18.1.2012 is not entered in the Cash Book because it does not involve cash A/c or Bank A/c. Simply S. Rashid will become debtor and

Shakeel will become creditor again and entry will be passed in proper journal as: 18.1.12. S. Rashid A/C ............. Dr. 10,000 Shakeel A/C.............................. Cr. 10,000 Ledger Posting:
Sales A/C (Folio 5)
Cash A/C 3.1.2012 Cash A/C 3.1.2012 40,000 33,000

Baber A/C (Folio 9)

Cash A/C 6.1.2012 8,000

S. Rashid A/C (Folio 15)

Cash A/C 15.1.2012 10,000

Interest A/C (Folio 19)

Bank A/C 2.1.2012 1,400

Arshad Khan A/C (Folio 17)

Bank A/C 17.1.2012 36,000 19.1.2012 Bank A/C 36,000

M. Arshad Khan A/C (Folio 7)

14,000 4.1.2012

Drawings A/C (Folio 11)

24,000 11.1.2012

Purchase A/C (Folio 10)

Cash A/C 12.1.2012 57,000

Shakeel A/C (Folio 16)

Cash A/C 16.1.2012 10,000

Bank Charges A/C (Folio 20)

Bank A/C 27.1.2012 700

Sales A/C (Folio 21)

Bank A/C 31.1.2012 14,000

Important Concepts of Accounting 1) Sundry Debtors: When a trader sells on credit basis, The Buyers Account in the Ledger is debited. For each buyer, there is one Ledger a/c. Some of the buyer accounts may be automatically balanced. But it is quite natural that many of these Customers Accounts have a debit balances. When we bring these balances to the Trial Balance, if we are going to write all individual names of customers, then the Trial balance will be too lengthy. Therefore, first a list of Debtors with their individual debit balances are prepared and totaled. Instead of writing the individual names of Debtors, the total is written under the heading Sundry Debtors which appears in the Trial Balance.

2) Sundry Creditors: There are a number of parties from whom the Trader buys goods on credit basis. For each one of them, an Account is opened in the Ledger. As in the case of Debtors, a List of Creditors with the balances due to them is prepared. In the Trial Balance, instead of writing

the individual names of Creditors,, the total of the balances of the creditors is written under the heading Sundry Creditors.

3) Trial Balance: Trial Balance can be defined as a list of all balances standing in the Ledger Accounts and Cash Book of a concern at any given time. If a Statement is prepared with debit balances on one side and credit balances on the other side, the totals of the two sides will be equal. Such a Statement is called Trial Balance.

Case Study 5: The balances extracted from the books of ABC (a client of Account Age InfoTech Pvt. Ltd) are given below. From the prepare Trial Balance on 31st March 2012.

Rs. Sankars Capital Sales Purchases Interest (Dr) Sales returns Purchases Returns Sundry Debtors Commission (Dr) Plant and Machinery Misc. Income 30,000 30,000 20,000 400 1,000 800 15,000 1,000 8,000 400 Sundry Creditors Cash in hand Cash in Bank Bills Receivables Bills Payable Discount earned Wages Rent Telephone charges

Rs. 4,000 1,800 6,000 11,000 7,000 800 7,000 800 1,000

Solution: Trial Balance of ABC as on 31st March 2012

S.No. 1. Name of Account Sankars capital A/c L.F. Debit Balance Rs. P. Credit Balance Rs. 30,000 P.

2. 3. 4. 5. 6.

Sales A/c Purchases A/c Interest A/c Sales Returns A/c Purchaes Returns A/c 20,000 400 1,000

30,000

800

7.

Sundry Debtors A/c

15,000

8. 9. 10. 11.

Sundry Creditors Cash in hand Cash at Bank Bills Receivable A/c 1,800 6,000 11,000

4000

12. 13. 14.

Bills Payable A/c Commission A/c Discount Earned A/c 1,000

7,000

800

15. 16. 17.

Wages A/c Rent A/c Plant and Machinery A/c

7,000 800 8,000

18.

Telephone charges A/c Miscellaneous income A/c

1,000

19.

400

Total

73,000

73,000

4) Trading Account: Trading refers buying and selling of goods. Trading A/c shows the result of buying and selling of goods. This account is prepared to find out the difference between the Selling prices and Cost price. If the selling price exceeds the cost price, it will bring Gross Profit. For example, if the cost price of Rs. 50,000 worth of goods are sold for Rs. 60,000 that will bring in Gross Profit of Rs. 10,000. If the cost price

exceeds the selling price, the result will be Gross Loss. For example, if the cost price Rs. 60,000 worth of goods are sold for Rs. 50,000 that will result in Gross Loss of Rs.10, 000. Thus the Gross Profit or Gross Loss is indicated in Trading Account.

Format of Trading A/c

Trading Account for the year ending ___________
Dr. Particulars Amount Rs. To Opening Stock To Purchase Less: Returns Outwards To Wages To Freight To Carriage Inwards To Clearing Charges To Packing charges To Dock dues To Power To Gross Profit (to be transferred to P&L A/c) xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx P. Amount Rs. xxx P. By Sales Less: Returns Inwards By Closing Stock By Gross Loss (to be transferred to P&L A/c) Particulars Amount Rs. xxx xxx xxx P. Amount Rs. P. Cr.

xxx

xxx

xxx xxx xxx

5) Profit and Loss Account: Trading account reveals Gross Profit or Gross Loss. Gross Profit is transferred to credit side of Profit and Loss A/c. Gross Loss is transferred to debit side of the Profit Loss Account. Thus Profit and Loss A/c is commenced. This Profit & Loss A/c reveals Net Profit or Net loss at a given time of accounting year.
Format of P&L A/c Profit & Loss Account For the year ending _________
Particulars Amount Particulars Amount

To Trading A/c (Gross Loss) To Salaries To Rent & Taxes To Stationeries To Postage expenses To Insurance To Repairs To Trading expenses To office expenses To Interest To Bank charges To Establishment expenses To Sunder expenses To Commission To Discount To Advertisement To Carriage outwards To Traveling expenses To Distribution expenses To Bad debt provision To Net Profit (transferred to Capital A/c)

By Trading A/c (Gross Profit) By Commission earned By Rent received By Interest received By Discounts received By Net Loss (Capital A/c)

6) Balance Sheet: The Word Balance Sheet is defined as a Statement which sets out the Assets and Liabilities of a business firm and which serves to ascertain the financial position of the same on any particular date. On the left hand side of this statement, the liabilities and capital are shown. On the right hand side, all the assets are shown. Therefore the two sides of the Balance sheet must always be equal. Capital arrives Assets exceeds the liabilities.

Format of Balance Sheet

Balance Sheet of _________ As on _________

Liabilities Sundry Creditors Bills Payable Bank overdraft Loans Mortgage Reserve Fund Outstanding exp. Capital Add: Net Profit Less : Net Loss Less Drawings Less: Income tax (or) Amount xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx Assets Cash in hand Cash at bank Bills receivable Sundry Debtors Closing Stock Furniture & Fittings Investments Plant & Machinery Loose tools Land & Buildings Business premises Horses & carts Prepaid exp. Patents & Trade marks Good will xxx Amount xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx

7) Assets: Assets represent everything which a business owns and has money value. Assets are always shown as debit balance in the ledger. 8) Liabilities: All that the business owes to others are called Liabilities. It also includes Proprietors Capital. They are known as credit balances in ledger.

Case Study 6:

From the following trial balance extracted from the books of ABC (a client of Account Age InfoTech Pvt. Ltd) as on 31.12.11. Prepare (i) Trading and Profit & Loss A/c and (ii) Balance Sheet.

Trial Balance as on 31.12.11

Debit Balances Cash in hand Machinery Stock Bills receivable Sundry debtors Wages Land Carriage inwards Purchases Salaries Rent Postage Return inwards Drawings Furniture Interest Cash at bank Rs. 2,000 60,000 50,000 1,600 50,000 70,000 40,000 2,400 1,80,00 0 24,000 4,000 1,000 3,200 10,000 18,000 600 6,600 5,23,40 0 5,23,400 Credit Balances Capital Sales Sundry Creditors Bank overdraft Return outwards Discount received Bills payable Rs. 2,00,000 2,54,800 40,000 22,000 3,000 1,800 1,800

Stock as on 31.12.11 to Rs. 1, 00,000.

Solution:

Trading, Profit & Loss A/c of ABC For the year ending 31.12.11
Dr. Particulars To Stock (1.1.11) To Purchases 1,80,000 Less Returns 3,000 To Wages To Carriage inwards To Gross Profit C/d (transferred to P&L A/c) To Salaries Amount 50,000 1,77,000 70,000 2,400 52,200 3,51,600 24,000 3,51,600 52,200 Particulars By Sales 2,54,800 Less Returns 3,200 By Closing Stock Amount 2,51,600 1,00,000 Cr.

By Gross Profit b/d (transferred from trading A/c)

To Rent To Postage To Interest To Net Profit A/c) (Capital

4,000 1,000 600 24,400 54,000 54,000 By Discount received 1,800

Balance Sheet of ABC as at 31.12.11

Liabilities Sundry Creditors Bank overdraft Bills payable Capital 2,00,000 Add: Net profit 24,400 -------------------------------Less: Drawings 2,24,400 10,000 2,14,400 2,78,200 2,78,200 Amount 40,000 22,000 1,800 Assets Cash in hand Cash at bank Machinery Bills receivable Sundry debtors Land Furniture Closing Stock Amount 2,000 6,600 60,000 1,600 50,000 40,000 18,000 1,00,000

DIFFERENCE BETWEEN A TRIAL BALANCE AND A BALANCE SHEET

S.No. 1. 2. 3. 4. 5. 6.

Trial Balance It shows the balances of all ledger accounts. It is prepared after the completion of the ledger accounts or arrival of the balances. Its object is to check the arithmetical accuracy. Items shown in the Trial balance are not in order. It shows the opening stock. It has the headings, debit and credit.

Balance Sheet It shows the balances of personal and real accounts only. It is prepared after the completion of Trading and P&L A/c. Its object is to reveal the financial position of the business. But in the B/S, the items shown must be in order. It shows the closing stock. It has the heading of Assets and Liabilities.

9) Final Accounts: The final accounts are usually prepared annually. It consists of Trading A/c, Profit and Loss A/c and a Balance Sheet. The Trading Account reveals Gross Profit or Gross Loss and the Profit and Loss Account shows Net Profit or. Net Loss. In the case of a trading concern the opening stock, purchases (net), and direct expenses are shown on the debit side of the Trading Account, and sales (net), and closing stock on its credit side. The Gross Profit or Gross Loss is transferred to the Profit and Loss Account which is prepared to find out the Net Profit or Net Loss. The Gross Profit transferred from the Trading Account is shown on the credit side of the Profit and Loss Account and the indirect expenses and revenue losses on its debit side. In the Balance Sheet all assets are shown on the right hand side and all liabilities including capital on the left hand side. The totals on two sides of the Balance Sheet must tally. At the time of preparing the final accounts we also have to make adjustments in respect of various items in order to arrive at the true profit or loss and the true financial position.

Case Study 7:

From the following Trial Balance of ABC (a client of Account Age InfoTech Pvt. Ltd) prepare Trading and Profit and Loss Account for the year ended December 31, 2011 and Balance Sheet as on that date.
Name of the Account Capital Drawings Furniture Stock on January 1, 2012 Purchases and Sales Returns Salaries Rent Carriage Rates and Taxes Apprentice Premium Bank Overdraft Bad Debts Sundry Debtors Cash in Hand Sundry Creditors Provision for Bad Debts Bills Receivable Bills Payable Discount Dr. Balances (Rs.) 4,260 5,700 8,760 62,172 1,260 2,640 720 1,500 1,200 1,032 19,200 288 6,000 600 1,440 1,10,172 1,080 360 1,10,172 Cr. Balances (Rs.) 27,000

71,436 1,746

750 1,200

You are required to consider the following adjustments: 1. Stock on December 31, 2011 was valued at Rs. 10,200. 2. Provide for doubtful debts at 5% on Sundry Debtors and for Discount on Creditors at 2%. 3. Rent due was Rs. 160. 4. Taxes of Rs. 320 were paid in advance. 5. Depreciate Furniture at 10% per annum. 6. Apprentice Premium of Rs. 120 was to be carried forward. 7. Calculate interest on capital at 5% per annum.

Solution:
Trading and Profit and Loss Account of ABC for the year ended December 31,2011
Dr. Particulars To opening stock To purchases Less: Returns outward To carriage To gross profit c/d To salaries To rent Add: outstanding To rates and taxes Less: Taxes paid in advance To Provision for Bad Debts: Provision required Add: Bad Debts Less: Existing Provision To depreciation on furniture To interest on capital To Net Profit (Transferred to Capital A/c) Amount (Rs.) 62,172 1,746 60,426 1,500 9,690 80,376 2,640 720 160 880 1,200 320 960 1,032 1,992 600 880 Amount (Rs.) 8,760 Particulars By sales Less: Returns inward By closing stock Amount (Rs.) 71,436 1,260 70,176 10,200 80,376 9,690 750 120 630 360 120 Cr. Amount (Rs.)

By gross profit b/d By Apprentice Premium Less: Amount carried forward By discount received By provision for discount on creditors

1,392 570 1,350 3,088 10,800 10,800

Balance Sheet of ABC as on December 31,2011

Liabilities Current Liabilities: Rent Outstanding Apprentice Premium carried forward Bank Overdraft Bills Payable Sundry creditors Less: Provision for Discount Amount (Rs.) Amount (Rs.) 160 120 1,200 1,080 6,000 120 Assets Current Assets: Cash in Hand Bills Receivable Sundry Debtors Less: Provision for Doubtful Debts Amount (Rs.) Amount (Rs.) 288 1,440 19,200 960

5,880 Closing stock Prepaid taxes Long-term Liabilities: Capital: Balance on 1-1-2011 Add: Interest on Capital Add: Net Profit for the year Less: Drawings Fixed Assets: Furniture Less: Depreciation at 10%

18,240 10,200 320

27,000 1,350 3,088 31,438 4,260

5,700 570 5,130

27,178 35,618 35,618

Implementation of Accounting Software Tally Tally is a financial accounting software package designed by Tally Solutions mainly for small businesses and shops. Tally 9.0 is the latest version to date. It is a complete business accounting and inventory management software that provides various facilities like Govt. supported formats, multilingual operations, online functions and processing for small and medium businesses. It offers a range of inventory options from simple inventory and stock management to advanced including invoicing, purchase orders, discount column in invoicing, flexible units of measure, stock query and multiple stock valuation methods. It includes Drill down display, complete bookkeeping options, flexible classification of accounts, general ledger, accounts receivable and payable, bank reconciliation and more operating with speed, flexibility and online help.

Journal Entry in Tally.erp 9

Most common and easiest transaction recording in tally.erp 9 is the Journal entry. Journal entry in tally.erp 9 also consist of debit and credit note. In Tally all Transactions are accounted by selecting a properly voucher 1. Payment voucher for payment made by cash/cheque (F5) 2. Receipts Voucher for all receipts in cash/cheque (F6) 3. Journal Voucher for transaction which does not involve cash/bank)(F7) 4. Sales Voucher for Credit Sales (F8) 5. Purchase Vouchers for Credit Purchases (F9) Process of Ledger Creation
Go to Gateway of Tally > Accounts Info. > Ledgers

To Create Account Ledgers Individually select Create from Single Ledger under Accounts Info -> Ledgers -> Create The result will be as follow:

Introduction to Financial Statements A financial statement is an organized collection of data according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. It may show a position at a moment of time as in the case of a Balance Sheet or may reveal a series of activities over a given period of item, as in the case of a Income Statement.

Generally, a business may have many financial statements. The following are the two basic financial statements (i) (ii) The Income Statement The Balance Sheet.

(i) Income Statement (also known as Profit and Loss Account) It is considered to be most the useful of all financial statements. It explains what had happened to a business as a result of operations between two balance sheet dates. For the purpose, it matches revenues (incomes) and cost (expenses) incurred in the process of earning revenues and shows the gross profit and the net profit earned or loss suffered during a particular period. Income statement is a summary of accounts that affects the profit or loss of an enterprise. Many accounts shown in the trial balance relate to expenditure or income, these accounts either increase or decrease the profit. The accounts that increase the profit are shown in the credit side and the accounts that decrease the profit (losses and expenses) are shown in the debit side. The difference between the two sides is either profit or loss. Income statement has two parts, namely 1. Trading Account 2. Profit and Loss Account

(ii) Balance Sheet It is a financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. The accounting balance sheet is one of the major financial statements used by accountants and business owners. (The other major financial statements are the income statement, statement of cash flows, and statement of stockholders' equity) The balance sheet is also referred to as the statement

of financial position. The balance sheet presents a company's financial position at the end of a specified date.

FINAL ACCOUNTS AND TALLY Final account depicts the summarized position of the activities, performance and state of affairs of the business. Naturally, these reports from the essence of the business. Anyone associated with the company must be quite curious to get these reports. One of the major advantages of Tally is its report generation. Using Tallys display option, you can get the desired reports easily. It provides excellent navigation facilities through buttons at Button bar to jump from one report to another without leaving the screen. Appearance of various reports 1. Trial Balance: In Tally, the Trial Balance is displayed as a list of all primary Groups on the left closing Debits and Credits balances on the right. The Trial Balance is displayed in grouped form with main groups and their closing balances. In other words, the Trial Balance Report provides account balance listing for all the accounts for the company sorted according to groups. In Tally, the matching of the Trial Balance is a foregone conclusion as all voucher entries are in the debit and credit format and must balance at the entry point.

2. Profit and loss account: The Profit and Loss Account is a statutory report that shows the operational results for a given period of time. It lists out the Incomes and Expenditures based on the Primary Groups of Tally. The Profit & Loss Account in Tally is updated instantly with every transaction voucher that is entered and saved. No special processing is required to produce a Profit & Loss Account.

3. Balance sheet: The Balance sheet at the Gateway of Tally screen provides ready summary figure still the last voucher entered. From here, you can move on to any direction and any part of the system, even the lowest level and trace back.