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Accounting Overview:
Accounting is the language of business, with book-keeping being a detailed record of financial transactions. These records help prepare financial statements like the income statement (profit/loss) and the statement of financial position (assets/liabilities).
Assets-Any resourced owned by a business.
Capital- Any resourced provided by the owner of the business for the business; investments.
Liabilities-The amount owed by a business to a person(s) or business(s).
The accounting equation is: Capital + Liabilities = Assets.
Double Entry Book-keeping:
Every transaction affects two accounts (debit and credit). Ledgers track assets, liabilities, income, and expenses. A trial balance is used to check the accuracy of the records, but some errors (e.g., omission, principle, or compensating errors) may not be detected.
Carriage: Carriage refers to transportation costs. Carriage inwards is the cost of receiving goods, while carriage outwards is the cost of delivering goods to customers.
Types of Errors:
Error of Commission: Wrong amount but correct account.
Error of Complete Reversal: Debit and credit are switched. Error of Omission: Transaction not recorded. Error of Original Entry: Transaction recorded incorrectly. Error of Principle: Transaction violates accounting principles. Compensating Error: Errors cancel each other out.
Sales & Purchase Ledgers:
Sales Ledger: Tracks credit customers.
Purchase Ledger: Tracks credit suppliers. Nominal Ledger: Summarizes all financial transactions, including assets and expenses.
Cash Book: A two-column cash book records cash receipts and payments. A three-column cash book also tracks bank transactions.
Journal Entries: Journal entries record transactions, adjust errors, and close accounts at the end of the period. These entries are essential for accurate financial reporting.
Business Documents:
Invoice: Requests payment for goods/services.
Debit Note: Requests a reduction in payment due to returned goods. Credit Note: Acknowledges a return or reduces the amount owed. Statement of Account: Summarizes transactions between buyer and seller. Cheque: Payment order to a bank. Receipt: Confirms payment received. Sales and Purchases Journals:
Sales Journal: Records all credit sales.
Sales Returns Journal: Tracks returned goods.
Purchase Journal: Logs credit purchases. Purchase Returns Journal: Records items returned to suppliers.
1 A PROJECT ON CAMPARATIVE STUDY BETWEEN PRIVATE SECTOR AND PUBLIC SECTOR BANKS AMRIT KAUR MR AKASH DESHMUKH THAKUR COLLEGE OF SCIENCE AND COMMERCE A project submitted to University of Mumbai for practical completion of degre
