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Introduction
Accounting is a finance support system that Report transactions Classifies transactions events. Expresses transactions in monetary terms. Helps to monitor the financial performance and condition of the business. Help to evaluate the business. Help to establish control for the business.
1. TRANSCTIONS A transaction is an event that changes the organizations financial position and/or its earnings. Receipts-cash or bank Payment-cash or bank Purchase Sales The usual transactions of a business are Purchase of goods either as raw material for further processing or as finished goods for resale. Payment of expenses incurred towards business. Sale of goods or services Receipts, in cash or via cheques Other payments,in cash and cheque.
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Suppliers
Investors
Financier s
BUSINESS
Costomers
Employees
parties dealt with in a business process
Banks
TYPES OF ACCOUNTS
The three types of accounts maintained for transactions with parties are
Personal account Real account Nominal account PERSONAL ACCOUNT is the account of persons whom the
business is required to deal with
example include
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or possessed by the
Accounts can be broadly classified under the following five groups Assets Liabilities Capital Revenue Expenses
collection of accounts
Rule of accounting
PERSONAL ACCOUNT REAL ACCOUNT NOMINAI ACCOUNT
Debit
the receiver
what come in
Credit
the giver
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Mode of accounting Journals and ledgers A journal is a book In which business transactions are entered in chronological order. a record of single business transaction is called a journal entry. every journal entry is supported by a voucher, evidenceing the related transaction. a voucher is a document containing the details of a financial transaction. examples include sales invoice, purchase invoice, payslip, rent receipt and so on. an account is a statement of transactions affecting any particular asset, liability, expense or income. a ledger is the book in which all the accounts are maintained. a chart of accounts is a list of all accounts titles used by an organisation. posting posting is the process by which information about transaction is transferred or moved to an account.
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accounting period a regular period of time, such as a quarter or a year, for which a financial statement is generated is called an accounting period. Trial balance a trail balance is a list of the balances of all ledger accounts. it is prepared after all the transactions are entered in a journal, journal entries posted to the ledger and ledger accounts balanced. it is the sum of balances of all real, personal and nominal accounts of the organisation. a details trail balance has columns for account name debit balance credit balance FINANCIAL STATEMENTS a financial statement is a periodic report prepared from the accounting records of a company. Financial statements include the profit and loss statement (or income statement), the balance sheet and cash flow statement.
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financial statements are usually compiled on a quarterly or an annual basis. for reporting convenience, the profit and loss statement is divided into trading account profit and loss account The profit an loss statement can be further classified into 2 level gross profit gross profit = netsales cost of sales net profit netprofit = (gross profit + other income ) (selling and administrative expenses + depreciation + interest + taxes + other expenses ) TRADING ACCOUNT the trading account is prepared so as to arrive at the gross profit earned by an organisation over a specified period. PROFIT AND LOSS ACCOUNT
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the profit and loss account gives the net profit earned by a company, after considering all other incomes and expenses incurred over a period. BALANCE SHEET the balance sheet is a statement that summarises the assets and liabilities of a business. the excess of assets over liabilities is the net worth of a business.
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Introduction
Business organizations perform a variety of transactions and can classifies as
Services organizations Trading organizations Manufacturing organizations
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Services organizations An organization providing services is called a services organization. Accounting in a service organization
business process in a services organization
Customer
Services
Payment of bills
Service organization
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Trading organizations
An T organization involved in the process of buying and selling is calles a Trading organizations
collections
customer
demand
Trading organizations
sale
business process in a Trading organizations
Arrival of stock
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Customer
Consumption
Demand
Market
Finished goods
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