Accounting: Trupti Deshpande Saba Walikar

ACCOUNTING
Trupti Deshpande
Saba Walikar
Agenda
• Accounting cycle
• Purchase Return Book
• Error of Principle
• Book Keeping
• Credit note
ACCOUNTING CYCLE
Accounting Cycle
Accounting cycle
• Identify Transactions
– Gather together all the information you have on every transaction that took place during the
period
• Record Transactions
– writing down the transaction in the appropriate journals
– each transaction should be recorded as both a credit and debit injournal.
• Post to General Ledger
– a master list of all transactions
– After recording a transaction in the appropriate journals, it is also added it to the general ledger
• Calculate Unadjusted Trial Balance
– Creating an unadjusted trial balance is done to ensure that the total debit balance and total
credit balance are equal. If not, something was missed or misclassified.
– It’s normal to discover anomalies at this stage. Whatever the case, an unadjusted trial balance
simply shows all debits and credits in a table. And if they don’t add up to the same amount, this
table can be used to begin investigating.
Accounting cycle
• Make Adjusting Journal Entries
– Resolves any anomalies that are found and make Journal entries to fix them
• Adjusted Trial Balance
– shows your unadjusted trial balance, your adjusting entries, and your adjusted
amounts
• Create Financial Statements

– The income statement and balance sheet are accurate records of what happened in
your business over the last accounting.
– They’re important documents for anyone outside your business who needs to be able
to compare your business to others (investors, lenders, etc.), but they’re also
incredibly valuable to business owners.
• Make Closing Entries
– closing out temporary accounts like revenue and expenses and folding them into
permanent accounts, like retained earnings
Once this final step is complete, you can start the whole process over again.
PURCHASE
RETURN BOOK
Purchase Return Book
• Type of subsidiary book , used to record the goods returned to the supplier or the vendor
• It is also called returns outward book
• Debit Note Is prepared at the time of returning the goods
ERROR OF
PRINCIPLE
Error of Principle
• Definition
– error of principle is caused by a lack of knowledge of accounting principles
– common error is the treatment of capital expenditure as revenue expenditure or vice
versa
• Effect on accounts
– Either the correct account will not be debited and an irrelevant account will be
debited, or
– The correct account will not be credited and an irrelevant account will be credited .
• Errors of Principle – Rectification entry
– If an irrelevant account has been debited instead of the correct account:
• Debit the account that should have been debited.
• Credit the account that has been erroneously debited.
– If an irrelevant account has been credited, instead of the correct account:
• Debit the account that has been erroneously credited.
• Credit the account that should have been credited.
Error of Principle - Rectification
• Rent received from a tenant, 4,500, was credited to premises account
• Rectification done
BOOK KEEPING
Book Keeping
• R.N.CARTER defined book keeping as the science and the art of recording correctly in the
books of accounts all those business transaction that results in the transfer of money or
money’s worth.
• A.J.FAVELL defined book keeping as recording of financial transaction of a business in a

methodical manner so that information at any point in relation to them may be quickly
obtained.
• Scope: concered with the identification, measuring, recording, classifying, business

transactions.
• Stage: it’s a primary stage.
• Objective: to maintain systematic records of business transactions.
• Nature: routine, repetitive and clerical in nature.
CREDIT NOTE
Credit Note
• Whenever the goods are returned by the customer to the business, business would have
received a debit note from the customer along with the returned by him. Along with the
returned by him. This note or statement will state the value of goods being returned by the
customer or any allowance that he is claiming that we have to grant.
• At the time of sales, we would have to debited the customer’s account in our books as he
would be the receiver of benefit. Now when we receive the goods being returned by him,
we will have to credit the customer’s account, which in one way is reducing the amount of
benefits received by him from the business. Since we credit the customer’s account is a
credit note.
• The day when we prepare the credit note is what is material for the business for recording
in the sales return books as that is the day we would be crediting the customer’s account.
Hence the day we received the debit note from the customer is ignored for recording
purposes.
THANK YOU

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ACCOUNTING

• Create Financial Statements

• A.J.FAVELL defined book keeping as recording of financial transaction of a business in a

• Scope: concered with the identification, measuring, recording, classifying, business

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