WHAT IS

ACCOUNTING?
Accounting or accountancy is the measurement,
processing, and communication of financial and non-
financial information about economic entities such
as businesses and corporations. Accounting, which
has been called the "language of business”,
measures the results of an organization's economic
activities and conveys this information to a variety
of users including investors, creditors, management,
and regulators. Practitioners of accounting are
known as accountants. The terms "accounting" and
"financial reporting" are often used as synonyms.
 Accounting can be divided into several fields including financial
accounting, management accounting, external auditing, tax
accounting and cost accounting. Accounting information systems are
designed to support accounting functions and related activities.
Financial accounting focuses on the reporting of an organization's
financial information, including the preparation of financial statements,
to the external users of the information, such
as investors, regulators and suppliers and management accounting
focuses on the measurement, analysis and reporting of information for
internal use by management. The recording of financial transactions, so
that summaries of the financials may be presented in financial reports,
is known as bookkeeping, of which double-entry bookkeeping is the
most common system.
 WHAT IS THE MEANING OF
DOUBLE ENTRY SYSTEM?
Double-entry bookkeeping was developed in the
mercantile period of Europe to help rationalize
commercial transactions and make trade more
efficient. It also helped merchants and bankers
understand their costs and profits. Some thinkers
have argued that double-entry accounting was a key
calculative technology responsible for the birth
of capitalism. The accounting equation forms the
foundation of the double-entry accounting and is a
concise representation of a concept that expands
into the complex, expanded and multi-item display of
the balance sheet. 
 The balance sheet is based on the double-entry
accounting system where total assets of a company
are equal to the total of liabilities and shareholder
equity. Essentially, the representation equates all
uses of capital (assets) to all sources of capital
(where debt capital leads to liabilities and equity
capital leads to shareholders' equity). For a company
keeping accurate accounts, every single business
transaction will be represented in at least of its two
accounts. For instance, if a business takes a loan
from a financial entity like a bank, the borrowed
money will raise the company's assets and the loan
liability will also rise by an equivalent amount. If a
business buys raw material by paying cash, it will
lead to an increase in the inventory (asset) while
reducing cash capital (another asset).
 Because there are two or more accounts
affected by every transaction carried out by a
company, the accounting system is referred
to as double-entry accounting.
 What is the Meaning of debit ?
A debit is an accounting entry that results in either
an increase in assets or a decrease in liabilities on a
company's balance sheet. In fundamental
accounting, debits are balanced by credits, which
operate in the exact opposite direction. For
instance, if a firm takes out a loan to purchase
equipment, it would debit fixed assets and at the
same time credit a liabilities account, depending on
the nature of the loan. The abbreviation for debit is
sometimes "dr," which is short for "debit."
 What is the Meaning of credit ?
A credit is an outstanding amount that is due to a
creditor by a debtor (borrower). In the accounting
ledger, this is recorded on the right side of
the balance sheet (negative) as it is a decrease in
assets. Crediting an account implies that there is a
negative amount in that account. As an increase in
liabilities due to an increased amount in the
accounts payable account, the outcome will be
increased by a negative amount, balancing credits
may be a bit confusing before getting a solid grasp
of the so-called double entry bookkeeping principle.
 What is a Journal ?
A journal is a detailed account that records all the
financial transactions of a business, to be used for the
future reconciling of accounts and the transfer of
information to other official accounting records, such as
the general ledger. A journal states the date of a
transaction, which accounts were affected, and the
amounts, usually in a double-entry bookkeeping method.
Journaling is an essential part of objective record-
keeping and allows for concise reviews and records-
transfer later in the accounting process. Journals are
often reviewed as part of a trade or audit process, along
with the general ledger. Typical information that is
recorded in a journal includes sales, expenses,
movements of cash, inventory, and debt.
 Typical information that is recorded in a journal
includes sales, expenses, movements of cash,
inventory, and debt. It is advised to record this
information as it happens as opposed to later so that
the information is recorded accurately without any
guesswork at a later date. Having an accurate
journal is not only important for the success of a
business, by spotting errors and budgeting correctly,
but is also imperative when taxes are filed.
 What is a ledger ?
A general ledger represents the record-keeping
system for a company’s financial data, with debit
and credit account records validated by a trial
balance. It provides a record of each financial
transaction that takes place during the life of an
operating company and holds account information
that is needed to prepare the company’s financial
statements. Transaction data is segregated, by type,
into accounts for assets, liabilities, owners’ equity,
revenues, and expenses. Ledger is the foundation of
a company’s double-entry accounting
System.
Ledger accounts encompass all the transaction data
needed to produce the income statement, balance
sheet, and other financial reports. Ledger
transactions are a summary of transactions made as
journal entries to sub-ledger accounts. The trial
balance is a report that lists every general ledger
account and its balance, making adjustments easier
to check and errors easier to locate.
 What is a Trial balance ?
A trial balance is a list of all the general
ledger accounts (both revenue and capital) contained
in the ledger of a business. This list will contain the
name of each nominal ledger account and the value of
that nominal ledger balance. Each nominal ledger
account will hold either a debit balance or a credit
balance. The debit balance values will be listed in
the debit column of the trial balance and
the credit value balance will be listed in the credit
column. The trading profit and loss statement
and balance sheet and other financial reports can then
be produced using the ledger accounts listed on the
same balance.
 What is a cash book ?
A cash book is a subsidiary of the general ledger in
which all cash transactions during a period are
recorded. The cash book is recorded in chronological
order, and the balance is updated and verified on a
continuous basis. Larger organizations usually divide
the cash book into two parts: the cash disbursement
journal and the cash receipts journal. A cash book
differs from a cash account in that it is a separate
ledger in which cash transactions are recorded,
whereas a cash account is an account within a general
ledger. There are three common types of cash books:
single column, double column, and triple column.
 THE Twenty transaction are :-
Date Particulars Amount
2020, April
1 Siya Ram & Sons started business with cash 50000
2 Purchased goods with cash 20000
4 Purchased goods from Subhash 12000
5 Purchased furniture for cash 6000
7 Sold goods for cash 13000
9 Sold goods to Mahesh 15000
10 Paid cash to Subhash 8000
12 Received cash from Mahesh 10000
16 Purchased goods from Ravi for cash 7500
17 Purchased goods from Ravi 5000
18 Sold goods to Suresh for cash 12600
Date Particulars Amount
19 Sold goods to Suresh 7000
20 Bought machinery for cash 8000
21 Suresh returned goods 1500
22 Purchased goods from Vinod of list price of 40000 rupees at 40% trade
discount
24 Withdrew cash for personal use 2500
27 Paid rent 400
29 Paid Wages 450
30 Paid salary to Gopal 1200
30 Received mCommission 200
 Date Particulars L.F Debit Credit
2020
April 1 Cash A/c Dr. 50000 50000
To Capital A/c
(Started business with cash)
April 2 Purchases A/c Dr. 20000
To Cash A/c 20000
(Purchased Goods for cash)
April 3 Purchases A/c Dr. 12000
To Subhash 12000
(Goods purchased from him on credit)
April 5 Furniture A/c Dr. 6000
To Cash A/c 6000
(Furniture Purchased for cash)
April 7 Cash A/c Dr. 13000
To Sales A/c 13000
(Sold goods for cash)
April 9 Mahesh Dr. 15000
To Sales A/c 15000
(Goods sold to Mahesh on credit)
C/F 1,16,000 1,16,000
 Date Particulars L.F Debit Credit
B/F 1,16,000 1,16,000
April 10 Subhash Dr. 8000
To cash A/c 8000
(Cash paid to Subhash)
April 12 Cash A/c Dr. 10000
To Mahesh 10000
(Cash received from Mahesh)
April 16 Purchases A/c Dr. 7500
To Cash A/c 7500
(Purchased goods on cash)
April 17 Purchases A/c Dr. 5000
To Ravi 5000
(Purchased goods from Ravi)
April 18 Cash A/c Dr. 12600
To Sales A/c 12600
(Goods sold for cash)
April 19 Suresh Dr. 7000
To Sales A/c 7000
(Goods sold to Suresh on credi)
C/F 1,66,100 1,66,100
 Date Particulars L.F Debit Credit
B/F 1,66,100 1,66,100
April 20 Machinery A/c Dr. 8000
To Cash A/c 8000
(Machinery purchased for cash)
April 21 Sales returns A/c Dr. 1500
To Suresh 1500
(Suresh returned goods)
April 22 Purchases A/c Dr. 36000
To Vinod 36000
(Goods purchased 10% trade discount)
April 24 Drawings A/c Dr. 2500
To Cash A/c 2500
(Amount withdrew for personal use)
April 27 Rent A/c Dr. 400
To Cash A/c 400
(Rent paid)
April 29 Wages A/c Dr. 450
To Cash A/c 450
(Wages paid)
C/F 214950 214950
 Date Particulars L.F Debit Credit
B/F 214950 214950
April 30 Salary A/c Dr. 1200
To Cash A/c 1200
(Paid Salary)
April 30 Cash A/c Dr. 200
To Commission Received 200
(Commission received )
Total amount 216350 316350