Introduction of Project:-

Journal
When the business transitions take place, the first step is to record the same in the
books of original entry or subsidiary books or books of primary entry or journal. The French
word “jour” means ‘day’ journal therefore means a daily record of business transactions. Thus,
journal is a simple book of accounts in which the business transactions are originally recorded
in chronological order and from which they are posted to the ledger accounts at any convenient
time. A thorough understanding of the principles of debit and credit, which are the basis for
recording transaction in journal.

Some of the popular definitions of “journalizing is an act of entering transaction in a

journal” “recording the business transaction in the journal so as to facilitate their transfer in the
ledger is called journalizing”

Ledger
A ledger is a book which contains all the accounts whether personnel, real or nominal,
who are first, entered in journal or special purpose subsidiary books. The preparation of
different ledger accounts helps to get a consolidates pertaining to one ledger account at a time
according to l,c. cropper,

“the book which contains a classified and permanent record of all the transitions of a
business is called the ledger”

Ledger is also called the “book of final entry” or “book of secondary entry” because all
the transactions are finally incorporated in the ledger.

Trail balance:-
Trail balance is statement which shows debit and credit balance of all accounts in the
ledger to test their arithmetical accuracy. Since every debit should have a corresponding credit
as per the rules of bobble entry system. If the total of the debit balances credit balances should
agree. The total of the debit and credit amount columns of the trail balance are equal, it is
ensure that the position to the ledger in terms of debit and credit accounts is accurate. Trail
balance can be prepared at any date after balancing the provided ledger accounts. The
preparation of trail balance as on the closing date of an accounting year is compulsory. As per
carter,

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 “trail balance is the list of debit and credit balances, taken out from ledger, including the
cash and bank balances.”

Final accounts:-
After the preparation of trail balance, the ledger wants to known the trading result of
the business. The trading results of business mean whatever the business has earned profits or
suffered losses during the accounting period. Every business mean is also interested in
assessing the financial position of the business on a particular date. For this purpose, the
business man prepares financial statement of his business. I.e trading and profit class accounts
and balance sheet.

Trading account:-
Trading account is prepared for ascertaining the gross profit or gross loss of the balance
for an accounting period. In other words, it is prepared mainly to know the profitability on
account of goods purchased and sold by the business concern. The difference between the net
sales and the cost of goods sold is either gross profit or gross loss. If net sales are more than the
cost of goods sold, the difference is gross profit and cost of goods sold is more than the net
sales, the difference is gross loss.

Profit and loss account:-

After preparing the trading account, the next step is to prepare the profit and loss
account with a view to ascertaining net profit or net loss during accounting period. The balance
of trading account is either gross profit or gross loss, which is transferred to profit and loss
account, which is the starting point of the preparation of this account. Net profit represent the
excess of gross profit plus other revenue gains over sales expenses including sales cost and
other expenses which are essential for the smooth running of the business. The expenses
shown in profit and loss account are called “indirect expenses” and such expenses are not
shows in the trading account.

According to carter,

“A profit and loss account is an account into which all gains and losses are collected
in order to ascertain the excess of gains over the losses or vice-versa”

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Balance sheet:-
The balance sheet is classifies summary of accounts balance remaining open in the ledger
after the nominal accounts relating to income and expenses. This statement is prepared to
known the financial status of the business are shown on the left hand side, where as assets and
other items of debit balance are shown on the right hand side.

According to parker,

“The balance sheet is a statement on a given date showing on one side the traders property
and on the other hand the possessions and the liabilities.”

NALAMANI FOLLOWING BY Journal Ledger Trail Balance And

Final Accounts.
1. Mr. nalamani decided to start a computer business for this purpose he build the first
floor of his house at a cost of Rs. 200000and invested a further sum of Rs. 350000 in this
business. He wanted to start with 12 computers costing Rs. 40000 each. He approached
ICICI Bank and secured loan to the extent of 75% the cost of loan will be repaid in tour
annual installments as follows:
At the end of 1st year: Rs. 90000+36000 for installment
At the end of 2nd year: Rs.90000+27000 for interest
At the end of 3rd year: Rs. 90000+18000 for interest
At the end of 4th year: Rs. 90000+9000 for interest

He started business on 1 st April, 2019. On the some date he deposited RRs. 339000 in
the bank. He purchased computers and paid 25% of the value of computers from his bank and
Rs.360000 out of bank loan availed.

He deposits Rs.10000 for the electric connection with the electricity board and also
deposit Rs.150000with the BSNL for internet and telephone connection.

He spent Rs.40000 for getting the computer café furnished and also spent Rs. 6000 in
getting the pamphlets printed and distributed. All payments were to be made to by cheques
and receipts were to be deposited in the bank on the same day.

At the end of the year, the result were: purchase of computer stationery like hoppy
disks, CDs etc.Rs.92000 revenue from fees received from students of computer classes-Rs.
270000 revenue from sale of computer stationery Rs. 160000 revenue on account of internet

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facility Rs. 220000 wages paid to servant Rs.12000 electricity charge Rs.48000, telephone
chargesRs.73000, entertainment expenses Rs.7000, general expenses Rs.5200.

He withdrew Rs.5000 by cheque each month for his personnel expenses and duly paid the bank
loan. You are required to:-

1. Journalized the above transaction and post them into ledger and prepare a trail balance.
2. Prepare a profit and loss account and a balance sheet taking into consideration is that a
telephone bill of Rs.6800 is yet to be paid.
3. Depreciate building by 5% furniture by 20% and computer by 30%
4. Calculate profitability ration and comment on the efficiency of the business it the norms
set for gross profit ratio is similar type of business enterprises are 60% and 25%
receptively.

JOURNAL
DATE L/F
Particulars Debit Credit

1ST Building account dr 200000

April Cash account dr 350000
2019 To capital account 550000
(Being capital invested in the business)
1ST Bank account dr 330000
April To cash account 330000
2019 (being deposit into cash)
1ST Bank account dr 360000
April To bank loan account 360000
2019 (being loan taken from ICICI Bank)
1ST Computer account dr 480000
April Bank account 480000
2019 (being computer purchased paying Rs.360000
from the loan and the balance from own
sources)
1ST Electricity board account dr 10000
April BSNL account dr 150000
2019 To bank account 160000
(being security deposited with the electricity
board and the BSNL)
1ST Furnature account dr 40000
April To bank account 40000
2019 (being purchase furniture for computer cafe)
31ST Advertisement account dr 6000
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Mar To bank account 6000
2020 (being payment mode for pamphlets)
31ST Purchases account dr 92000
Mar To bank account 92000
2020 (being purchase of computer machinery)
31ST Bank account dr 650000
Mar To revenue from fees and sales account 650000
2020 (being fees received from computer clases
Rs.27000 from internet facility Rs. 220000
from sale of computer machinery rs.160000)
31ST Wages account dr 12000
Mar Electricity charges account dr 48000
2020 Telephone charges account dr 37000
Entertainment expenses account dr 7000
General expenses account dr 5200
To bank account 145000
(being expenses are paid)
31ST Drawings account dr 60000
Mar To bank account 60000
2020 (being withdrew for personnel use)
31ST Interest on bank loan account dr 126000
Mar To bank account 126000
2020 (being payment of first installment of bank
loan)
31ST Depreciation account dr 162000
Mar To Building account 10000
2020 To furniture and futures account 8000
To computer account 144000
(being depreciation is paided)
31ST Telephone charges account dr 6800
Mar To outstanding telephone charges account 6800
2020 (being outstanding telephone charges)

Ledger
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Cash A/C
Dt particulars J/f amt Dt particulars amt

1 To capital A/C 350,000 1 By bank A/C 3,30,000

Apl Apl
2019 2019
By balance c/d 20,000
350,000 31 350000
1 Mar
Apl 2020
2020 To balance b/d 20,000

Bank Account
Date Particulars l/f amount Date Particulars amount

1 To cash account 330000 1 By computer account 48000

Apr To bank loan account 360000 Apr By electricity account 10000
2019 2019 By BSNL Account 15000
By furniture and fixture
31st To revenue from fees and sales 650000 accounts 40000
st
mar account 31 By advertisement A/C 6000
2020 mar By purchase account 92000
2020 By wages accounts 12000
By electricity account 48000
By entrainment
expenses account 7000
By telephone charges
account 73000
By drawings accounts 60000
By bank loan account 126000
By general expenses
account 5200
By balance C/D 23000
31st 13,40,000 13,40,000
mar
2020 By balance B/D 230000

Building account

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Date Particulars j/f Amount Date Particulars amount
1 Apr To capital A/C 200000 31 By depreciation A/C 10000
2019 Mar By balance C/D 190000
200000 2020 200000
1st
apr
2020 To balance B/D 190000

Capital A/C
Date Particulars Amount Date Particulars Amount

31 To drawings A/C 60000 1st By building A/C 200000

Mar april
2020 2019 By cash account 350000
TO Balance C/D 49000
559000 559000

1st By balance B/D 49000

apr
2020
Bank loan account
Date Particulars Amount Date Particulars amount

31st To bank account 126000 1st By bank A/C 360000

mar To balance C/D 270000 April By interest in bank loan A/C 360000
2020 2019
396000 396000

By Balance B/D 270000

COMPUTER A/C

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DAT Particulars Amount Date Particulars Amount
E
1st To bank account 480000 31st By depreciation A/C 144000
apr mar By Balance C/D 336000
2019 2020
480000 480000
st
1 To balance B/D
april
2020

Electricity Account
DAT PARTICULARS AMOUN DATE PARTICULARS AMOUNT
E T
1st To bank account 10000 31st By balance C/D 10000
apr mar
2019 2020
10000 10000

1st
apr To balance B/D 10000
2020
BSNL ACCOUNT
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT

1st To bank account 150000 31st By balance C/D 150000

apr mar
2019 2020
150000 150000

TO BALANCE B/D 150000

FURNITURE AND FIXTURE A/C

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DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT

1st To bank a/c 40000 31st By depreciation a/c 8000

apr mar By balance C/D 32000
2019 2020
40000 40000

TO BALANCE B/D 32000

ADVERTISEMENT A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT

31st To bank a/c 6000 31st By p/l Account 6000

2020 mar
2020
6000 6000

PURCHASE A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT

31st To bank A/c 92000 31st By trading account 92000

mar mar
2020 2020

92000 92000

REVENUE FROM FEES AND SALES A/C

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Date Particulars Amount Date Particulars Amount

31st To trading A/C 650000 31st By bank A/C 650000

mar mar
2020 2020

650000 650000

WAGES A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS DATE

31st To bank A/C 12000 31st By trading A/C 12000

mar mar
2020 2020

12000 12000

Electricity A/C
Date Particulars Amount Date Particulars Amount

31st To bank A/C 48000 31st By P/L A/C 48000

mar mar
2020 2020

48000 48000

TELEPHONE CHARGES A/C

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DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT

31st To bank A/C 73000 31st By P/L A/C 79800

mar TO OUTSTANDING mar
2020 TELEPHONE CHARGES A/C 6800 2020

79800 79800

Entertainment Expenses A/C

DATE PARTICULARS AMOUNT DAT PARTICULARS AMOUNT
E
31st To bank A/C 7000 31st By P/L A/C 7000
mar Mar
2020 2020

7000 7000

GENERAL EXPENSES A/C

DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
31st To bank A/C 5200 31st By capital a/c 5200
mar mar
2020 2020

5200 5200

Drawings A/C

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DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT

31st To bank A/C 60000 31st By capital A/C 60000

mar Mar
2020 2020

60000 60000

Depreciation A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNTS

31st To building a/c 10000 31st By P/L A/C 162000

mar To furniture & fixture a/c 8000 mar
2020 To computer a/c 144000 2020

162000 162000

Outstanding Telephone Charges A/C

DATE PARTICULARS AMOUNT DATE PARTICULARS DATE

31st To balance c/d 6800 31st By telephone charges A/C 6800

mar mar
2020 2020

6800 6800

INTEREST ON BANK LOAN A/C

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DATE PARTICULARS AMOUNT DAT PARTICULARS AMOUNT
E
31st To bank A/C 36000 31st By P/L A/C 36000
mar mar
2020 2020

36000 36000

TRAIL BALANCE

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Particulars Note Debit (Rs) Credit (Rs)
no

Cash A/C 20000

Bank A/C 230800
Building A/C 190000
Computer A/C 336000
Electricity A/C 10000
BSNL A/C 150000
Furniture A/C 32000
Advertisement A/C 6000
Purchases A/C 92000
Wages A/C 12000
Electricity Charges A/C 48000
Entertainment Expenses A/C 79800
General Expenses A/C 7000
Interest On Bank Loan A/C 5200
Depreciation A/C 36000
Capital A/C 162000
Bank Loan A/C 490000
Revenues From Fees And Sales A/C 270000
Outstanding Telephone Charges A/C 650000
6800

1416800 1416800

Trading and P/L for year ending 31st march 2020

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Particulars Amount Particulars Amount

To purchase A/C 92000 By revenues from fees and sales a/c 650000
To wages A/C 12000
To gross profit c/d 546000

650000 650000
To advertisement a/c 6000
To electricity a/c 46000 By gross profit b/d 546000
To telephone charges a/c 79800
To entertainment expenses a/c 7000
To general expenses a/c 5200
T o interest on bank loan A/C 36000
To depreciation on building10000,
furniture and fixtures 8000,
computers144000 162000
To net profit transfer to capital a/c 201900

546000 546000

Balance sheet as on 31st march 2020

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 Liabilities Amount Assets Amount

Outstanding telephone charges 6800 Cash in hand 20000

Bank loan 270000 Bank 230800
Capital 490000 Electricity board 10000
Add: net profit 201900 692000 BSNL 150000
Furniture and fixture
(less: depreciation) 32000
Building (less: depreciation) 190000
Computer (less: depreciation) 336000

968800 968800

Profitability Ratios
GROSS PROFIT X 100
I. Gross profit ratio = NET SALES
54600 X 100
650000

net profit X 100

ii. Net profit ratio =
net sales

202000 X 100
=
650000
=31.08%
 Chowdary Enterprises Gross Profit ratio is 84% compared to 60% in similar type of
business enterprises.

 Chowdary Enterprises net profit ratio is 31.08% compared to 25% in similar type of
enterprises.

Conclusion

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 While the profit & loss account act as an indicator of a business
progress, on the other hand balance sheet shows the financial position
of the business.

From the above final statements it is clearly disclosed that the firm is
earning handsome amount of profits in past financial year. It is also
depict that the financial position of the business is good or satisfactory.

Reference

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1. M/s Pandey traders
2. V.k global publication
3. Kalyani publisure
4. Google.com
5. Wikipedia
6. Yahoo.com

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