Teacher : Mohammad Junaid Iqbal

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Lecture # 1

Book keeping:- The word book or books mean the book of accounts and keeping implies maintaining in proper form & order.

The book keeping may be defined as the art of recording business transactions in book in a regular and systematic

manners. OR

The science and art of correctly recording in books of

account all those business transactions that result In the

transfer of money worth. ORThe science and art of recording business transactions in

systematic way as a trader may we know the result of this

trade at the end of certain period and may also prove the

accuracy of such records.The science and art of correctly recording

business daily in a set of books with a view of having permanent record of transaction and financial result there-of. Important terms of book keeping Transaction Proprietor Drawing Purchase return sellers sellers return

Debtor Creditor Assets Voucher Cash discount Equity Transaction:-

The dealing between two person or things or parties is called transaction. Transactions are of two types

1) Cash transaction 2) Credit transaction

Cash transaction:-

when a cash is paid or required as a result of

an exchange the transaction is said to be

cash transaction.

Credit transaction:-

when a payment or receipt of cash is postponed for a future data this transaction is said to be credit transaction.

Proprietor:- He is the owner of a business, he invest capital

in it and give his time and attention to it.

Capital:-

The amount with which the trader start his business OR

The amount which is actually invested in business at any given time is known as capital.

Drawing:-

The cash or goods taken away by the proprietor from the business for his personal use are called Drawings.

Purchase return:-

If a goods purchases are found defter or unsatisfactory. They are sometime return to the

person from whom they were purchased are called purchase return.

sellers:- sold the goods is called sellers. It has two types 1) cash sellers 2) credit sellers Sellers return:- If a person to whom goods have been sold

finds that they are defective and unsatisfactory and return, then are called sellers return.

Debtor :- A person who owe money to another is

Debtor. When we say that owe Mr. rahim R.s=2000

we mean that we have received from Mr.Rahim R.s=2000 which we have to repay

• we stand as debtor to Mr.rahim for r.s=2000.

Creditor:- A person who pays out something or to

whom money is owing is a creditor. Assets:- The property that are possessed by the

business is called assets.

• Liabilities:-

They are the debts due by a business to it proprietor and others.

Voucher:-

Any written evidence in support of a business transaction is called voucher.

Cash discount:-

It is a deduction allowance allowed by a creditor to a debtor.

If a person pays his debts before the due date of payment the recipient may grant

him an allowance for doing to. This allowance is known as cash discount.

Equity:-

A clam which can b enforced against the assets of the firm is called Equity .

Equity are of two types.

1) The right of the creditor

2) The right of the ownerThe equities of creditor represent debts of the

business and are called liabilities . The equities of the owners is called capital

proprietorship or owners equity.

Double ENTRY BOOK-Keeping The double entry theory of book keeping can be defined as the system of recording

transactions having two fundamental aspects.One involving the receiving of a benifet and the

other to giving the benefit in the same set of book.

Every transaction involves two fold aspects e.g an aspects of receiving and an aspects of giving.

One who receives is a debtor (DR) and

Lecture # 2

one who gives is a creditor (cr).

Single entry VS Double entrySingle entry system is a system of book-keeping

which does not follow the double entry system. as such does not record or give effect to the two

fold aspects of each and every transaction.As such single entry system of book-keeping is

not perfect and fraud and mistakes can easily be detected.

Meaning of Accounting Accounting is defined as “the art of recording

classifying and summarizing in term of money

transaction and event of a financial characters and interpreting the result there-of.

Branches of Accounting

Accounting has three main forms of branches Financial Accounting Cost Accounting Management Accounting

1) Financial Accounting:-

It is the original form of accounting. It is mainly confined to the preparation of financial statement for the use of outsiders like

creditor , banks and financial institution etc.

the chief purpose of financial accounting is to calculate profit or loss made by the business.

2) Cost Accounting:- Function of cost accounting is to ascertain the

cost of product and help the management in the control of cost.

3) Management accounting:- It is the accounting for the management i.e accounting which provides necessary information to the management for discharging its information. It is the reproduction of financial accounting in such a way as will enable the management to take decision and to control activities.

Parties interested in Accounting information (1) Owner (2) Management (3) Creditor (4) Employees (5) Investors (6) Government (7) Consumers The above portion was given as assignment Accounting Cycle:- It refers to a complete sequence of an accounting

procedures which are required to be repeated in same order during each accounting period.

Accounting cycle include (a) Recording (b) Classifying (c) summarizing

lecture # 05

Recording:-

All transaction should be recorded in the journal or books of original entry known as

subsidiary books as and when they take place . Classifying:-

All the entries in journal or book of original Entry should be posted to the appropriate ledger accounts to find at a glance the total effect of all such transaction in a particular account.

Summarizing:-

Last stage is to prepare the trial balance and final accounts with a view to ascertaining the profit or

loss made during a trading period and the financial position of the business on a particular date.

Lecture # 06 Journal The word journal has been derived from the French word

"jour " means day .so journal means daily. Transaction are recorded daily in journal and hence it has been name so.Its is a book of original entry to record chronologically ( I.e. on order of date and in detail the various transaction of a traders. 

Characteristics of Journal 1) journal is the first successful step of double entry

system. A transaction is recorded first of all in journal .so the journal is called the " book of original Entry" .

2) A transaction is recorded on the same day it takes place so the journal is called day book.

3) Transaction are recorded chronologically so journal is called chronological book.

4) For each transaction the name of two concerned accounts indicating which is debited and which is credited are clearly written in two consecutive lines.

5) Narration is written below each entry.

6) The amount is written in the last two column debited amount in debit column and credit amount in credit column.

Lecture # 07 Rules of Debit & Credit In order to understand the rules of debit and credit

the accounts are classified into five(5) categories   1) assets 2 liability 3) proprietorship 4) Revenue  5) Expenses 1). Assets:-       Assets means the resources of the business

or commodities possessed by the business. e.g Land building , cash stock in trade etc.

 2) liability:-       Liability mean claim of the suppliers of cash or  commodities on credit up to his balance due on the date .e.g.

e.g Suppliers of goods 3) Proprietorship:- It means the claim of the owner of the

business for his interest up to his investment after finalizing the expanses and revenue up to the date of capital

4) Revenue:-  It means any type of income directly or

indirectly of the business .e.g interest received, sale of goods, dividend received etc.

5) Expenses:- Expenses means any type of expenses

directly or indirectly of the business. e.g.

HOW TO USE THESE RULES HOW TO DEBIT & HOW TO CREDIT

ASSETS:-      Increase in assets is debit.      Decrease in assets is credit.LIABILITIES:-

  Decrease in liability account is debit.      Increase in liability account is credit.PROPRIETORSHIP:-

        Decrease in proprietorshiip account is debit.        Increase in proprietorship account is credit.REVENUE:-

        Decrease in revenue account is debit.       Increase in revenue account is credit.EXPENSES:-

       Increase in expenses is debit.       Decrease in expenses is credit.

                       PRACTICALLY

DEBIT       NAME OF Financial ACCOUNT     CREDITIncrease     Assets                   DecreaseIncrease      Expenses              DecreaseDecrease      Liability               IncreaseDecrease     Proprietor             IncreaseDecrease     Revenue Increase

Numerical on next page

On 1st January 1991 , salman started business with a capital of at R.S 20'000 and his transection of the month were as follows

Jan 02           Purchased build for cash R.s   8000      Jan 08           Purchased goods from C   R.s  1000   Jan 15           Sold goods for cash         R.s 500   Jan 20           Goods returned to  C     R.s. 100     Jan 22           Sold goods to rehman     R.s. 400     Jan 25           Rehman returned goods   R.s. 25     Jan 31           Salaries  paid for month   R.s. 200     Jan 31           Rent paid for month           R.s. 150

Rescored these transaction in journal 

  Date         Particular         L.F      Dr           Cr                                                                                         Cash

 1st jan              Cash account to                          20,000                                    Capital acc

     1991             Started business                                                  20,000                                    Or  Cap. into 

 2nd Jan.           Building acc to                            8000                                     Cash acc     1991.            Purchased build                                                    8000                                   For cash

   8th Jan.             Purchased  acc                           1000                                    To C acc      1991.           Purchased goods                                               1000                                           From C

   15th Jan.         Cash acc.                                      500                                      To sale acc   1991.                Sold goods for cash                                            500

  20th Jan.          C     to purchase                           100                                       Return   1991.               Goods return to C                                               100

   22nd Jan          Rehman to                                    400                                                Sale acc   1991.              Sold goods to rehman                                         400

   25th Jan.         Sales return                                      25                                          To rehman     1991.              Rehman return goods                                          25

    31st Jan.          Salaries to                                       200                                        Cash       1991.             Salaries paid                                                          200

    31st Jan.          Rent to                                           150                                           Cash      1991.               Rent paid                                                             150 _____________________________________________________________                                                                Total.       10,375          10, 375

On 1st April 1991 a merchant started business with a capital of R.s 15000 and his transactions of the month were as follows

   April 2nd          Purchase  machinery  For R.s   700

    April 3rd        Bought furniture from  salman   R.s  300

    April   07       Purcgase goods for cash     R.s 2500

    April 08       Sold goods to rehman &sons  R.s. 1500

    April 10         Bought goods from b         R.s. 1000                                                &                          Bought goods from.  C     R.s. 2000  April 12         Received cash from rehman      R.s. 1450

                                           & sons Allowed him discount  Of Rupee R.s. 50

    April 15         Paid " B " cash                                     R.s. 975                             Discount receive                               R.s. 25   April 16         Returned  goods to "C"                       R.s.   500  April  17         Sold goods to aslam.                          R.s. 200  April 20         Goods return by aslam.               R.s.   200  APRIL 21       Purchase from kareem goods  Of    RS 600                           of the list price subject to a 10%

                trade discount  April 22           paid "c" cash                                   RS 1500  April 25           Gave away a charity                       RS 50                            cash  &  goods worth                       RS 30  April 27          Distributed goods                            RS 200                            worth as free sample                          & Goods taken away                       RS 100                             by the proprietor for personal use  April 28           Amount withdraw                                 RS 200                              By the proprietor for private use  April 30      Salaries paid for  month                   RS 500

  Date              Particular         L.F      Dr            Cr    1st april                Cash account to                  15,000

                                    Capital acc                                   Cash to capital                           15,000

   2nd April             Machinery acc to                   7000                                                Cash acc                           Purchased  Machinery for cash                                  7000

   3rd april              Furniture acc                           300                                    To  salman                              Bought furniture  to salman                                        300

  April 07               Purchase acc.                                       2500                                     To cash acc                            Purchase goods for cash                                              2500

  April 08.         rehman & sons to                                   1500                                      Sold acc                       Sold goods to rehman and sons                                       1500

  April 10             Purchase acc                                           3000                                       To "B" , " C "                       Bought goods from B &                                                   1000                                                      C.                                                            2000

  April 12        Cash discount to                                       1450 cash                                      rehman & sons.                           50 discount                     Received cash from rehman & sons                         1500

some little bit transaction left from 15 to 30 in above we are sorry and its now up-to-date completely.

This is

Introduction to financial accounting

For BSCS students

waiting for next lecture…….

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