Accounting is the language of business. It is the system of recording, summarizing, and analyzing an economic entity's financial transactions. The American Accounting Association offers this definition: "The process of identifying, measuring and communicating economic...
2nd Sem Accountancy Notes
Syllabus with topics linked
Accounting Types and Classification
Types of Accounting Financial Accounting Cost Accounting Management Accounting Tax Accounting Social Responsibility Accounting 1) Financial Accounting The main purpose of this branch of accounting is to record the business transaction in a systematic manner, to...
Principles of Accounting
The principles can be classified mainly into three categories: Basic assumption or concepts Basic principle Modifying Principles Basic assumption or concepts These assumptions provide a foundation for accounting process.No enterprises can prepare its financial...
Systems of Accounting
The systems of recording transaction in the books of accounts are two types. Double Entry System Single Entry System Double Entry System Double entry is an almost universally used system of business record keeping. It is a system of recording business transaction...
Generally Accepted Accounting Principles (GAAP): Introduction to Accounting
Generally accepted accounting principles (GAAP) are a common set of accounting principles, standards and procedures that companies must follow when they compile their financial statements. GAAP is a combination of authoritative standards (set by policy boards) and the...
Primary Books (Journal): Meaning and Definition
Journal is the book of original entry in which, after following the rules of debit and credit, all business transactions are recorded in a chronological order. The word journal has been derived from the French word “jour”, which means “a day”. Thus, journal means a...
Format of Journal
Format of Journal: Date Particulars L.F Amount Amount Account to be debited .............................Dr. Account to be credited (Narration) XXX XXX The various columns of the journal are explained in details below: Date: This column is used to write the...
Rules of Debit and Credit
Debit and credit are simply additions to or subtraction from an account. In accounting, debit refers to the left-hand side of any account and credit refers to the right-hand side. Asset, expenses and losses accounts normally have debit balances; liability, income and...
Opening entry, Simple and Compound entries
Opening entries Opening entries are those entries which record the balances of assets and liabilities, including capital brought forward, from a previous accounting period. In the case of going concerns, there is always a possibility of having balances of assets and...
Practical Problems on Primary Books (Journal)
Problem 1: Enter the following transactions in the Journal of Bhagwat and sons.. Year 2006 Amount (Rs) January 1 Tarun started business with cash 1,00,000 January 2 Goods purchased for cash 20,000 January 4 Machinery Purchased from Vibhu 30,000 January 6 Rent paid in...
Secondary Book (Ledger): Meaning and Uses
A ledger is an accounting book that facilitates the transfer of all journal entries in a chronological sequence to individual accounts. The process of recording journal entries into the ledger is called posting. The book in which accounts are maintained is...
Formats of Secondary Book (Ledger)
Standard Form of Ledger Account: To understand clearly as to how to write the accounts in ledger, the standard form of an account is given below with two separate transactions: Date Particulars J.R Amount Date Particulars J.R Amount 2005 Dec. 17 Cash A/C 1,200 2005...
Posting in Secondary Book (Ledger)
The process of transferring the transaction written in the journal to the ledger account is called Posting. The following procedure is followed for posting the debit and credit aspect of the transaction recorded in the journal. 1.Posting of an Account debited in a...
Practical Problems of Secondary Book (Ledger)
Format of a ledger sheet The format of a ledger sheet is as follows : POSTING OF JOURNAL PROPER INTO LEDGER You know that the purpose of opening an account in the ledger is to bring all related items of this account which might have been recorded in different books of...
Subsidiary Books its Need and Uses
Subsidiary Books Relating to something that is added but is not essential Functioning in a subsidiary or supporting capacity supplementary auxiliary ancillary additional contributory secondary Subsidiary Books used in Financial Accounting are Books which are...
Classification of Subsidiary Books (Purchase Book, Sales Book, Purchase Returns, Sales Returns & Journal Proper)
There could be many types of Subsidiary Books depending upon the volume and type of transactions. Here are five major types of Subsidiary books which our syllabus suggests:- Purchase Book Sales Book Purchase Returns Sales Returns Journal Proper 1. Purchase Book or...
Practical Problems: Subsidiary Books
Before moving to problems it's important to know basics of how to solve them:-
Cash book Introduction
The cash book is set up as a ledger in which all cash transactions are recorded according to date. It is a book of original entry and final entry. That is, the cash book serves as the general ledger. Features of Cash Book It plays a dual role. It is both a book of...
Advantages of Using a Cash Book for Managing A Business Finances
Learn why cash book is essential for hotel accountancy. Find out the advantages of cash book and how it helps in keeping track of cash flow, provides an accurate record of transactions, and helps with budgeting and forecasting.
Simple, Double and Three Column Cash Book
There are three types of cash books 1.Simple Column Cash Book: For recording cash transaction only. This is the simplest form of Cash Book and is used in businesses where payments are made and received mostly in cash and where usually no cash discount is received or...
Petty Cash Book with Imprest System (simple and tabular forms)
Petty Cash Book is the book which is used for the purpose of recording expenses involving small amounts. Beside petty expenses, receipts from main cash are recorded. Petty Cash Book is maintained by Petty Cashier and acts as the petty cash account. Petty cash book may...
Practical Problem on Cashbook
Problem Enter the following transactions of the Premier Trading Company in Cash Book with three columns- Discount, Cash and Bank and balance the accounts as on 31st December 2004: 2004 Dec. 1 Cash in hand Rs 4,000 2004 Dec. 1 Bank Rs 1,000 (Cr.) 2004 Dec. 3 Received a...
Bank Reconciliation Statement
A bank reconciliation is the balancing of a company's cash account balance to its bank account balance. A nice video to watch before you go further.. https://www.youtube.com/watch?v=qBKOYZYl3NM A businessman maintains cash book with bank column to record cash and bank...
Reasons for difference in Pass Book and Cash Book Balances
The main reason for a difference between a cash book and a passbook is the timing of when transactions are recorded. A cash book is maintained by the account holder to record all cash transactions, whereas a passbook is a record of all transactions maintained by the...
Preparation of Bank Reconciliation Statement
It is very easy to prepare the bank reconciliation statement. While preparing the bank reconciliation statement the accountant has to go step by step. We are describing the various steps to be taken while preparing of bank reconciliation statement:- First of all, the...
Trial Balance Introduction
A trial balance is a bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit columns. A nice video to help you get started smoothly:- https://www.youtube.com/watch?v=e-e5Fpi5zko Trial Balance is a list of closing balances...
Methods of Trial Balance
There are three methods for the preparation of trial balance. These methods are: Total or gross trial balance Balance or net trial balance Total - cum - balance trial balance The method 1 and 2 are described below: Total or Gross Trial Balance Under this method, the...
Advantages of Trial Balance: Keeping The Hotel’s Finances in Check
As a hotel owner or accountant, keeping track of your finances is critical to your business's success. One essential tool to help you do this is the trial balance. This accounting report is a summary of all your hotel's accounts, giving you an overview of your...
Limitations of Trial Balance
A trial balance has some limitations : It does not prove that all transactions have been recorded It does not prove that the ledger is correct Numerous errors may exist even though the trial balance columns agree It cannot find the missing entry from the journal It...
Practicals: Trial Balance
Please note. In following answers:- tl stands for Total Dr stands for Debit Cr stands for Credit Problem - 1 Record the following transactions in the Journal and post them into ledger and prepare a Trail Balance Oct 1st : Neel started business with a capital of 80,000...
Final Accounts
Final accounts are the statement prepared at the end of the accounting period to show financial performance during the accounting period and financial position of the business as on that date. The final accounts or financial statements consists of: Trading and profit...
Procedure for preparation of Final Accounts
Preparation of Trading Account Trading Account is a Nominal Account and all expenses which relate to either purchase or manufacturing of goods are written on the Dr. side of the Trading Account. Item written on the Dr. side of the Trading Account: Opening Stock: The...