Basic Accounting Basic concept of accounting Accounting: It is an art of recording, classifying and summarizing in significant manner and in terms of money, transactions and events which are of financial character and interpreting the results thereof. Business transaction: A business transaction is “The movement of money and money’s worth form one person to another”. Or exchange of values between two parties is also known as “Business Transaction”. Purchase: A purchase means goods purchased by a businessman from suppliers. Sales: Sales is goods sold by a businessman to his customers. Purchase Return or Rejection in or Outward Invoice: Purchase return means the return of the full or a part of goods purchased by the businessman to his suppliers. Sales Return or Rejection out or Inward Invoice: Sales return means the return of the full or a part of the goods sold by the customer to the businessman. Assets: Assets are the things and properties possessed by a businessman not for resale but for the use in the business. Liabilities: All the amounts payable by a business concern to outsiders are called liabilities. Capital: Capital is the amount invested for starting a business by a person. Debtors: Debtor is the person who owes amounts to the businessman. Creditor: Creditor is the person to whom amounts are owed by the businessman. Debit: The receiving aspect of a transaction is called debit or Dr. Credit: The giving aspect of a transaction is called credit or Cr. Drawings: Drawings are the amounts withdrawn (taken back) by the businessman from his business for his personal, private and domestic purpose. Drawings may be made in the form cash, goods and assets of the business. Receipts: It is a document issued by the receiver of cash to the giver of cash acknowledging the cash received voucher. Account: Account is a summarized record of all the transactions relating to every person, every thing or property and every type of service. Ledger: The book of final entry where accounts lie. Journal entries: A daily record of transaction. Trail Balance: It is a statement of all the ledger account balances prepared at the end of particular period to verify the accuracy of the entries made in books of accounts. Profit: Excess of credit side over debit side. Profit and loss account: It is prepared to ascertain actual profit or loss of the business. Balance Sheet: To ascertain the financial position of the business. It is a statement of assets and liabilities. Types of accounts Personal account: Personal accounts are the accounts of persons, firms, concerns and institutions which the businessmen deal. Principles: Debit the receiver Credit the giver Real Account: These are the accounts of things, materials, assets & properties. It has physical existence which can be seen & touch. Ex. Cash, Sale, Purchase, Furniture, Investment etc. Principles: Debit what comes in Credit what goes out Nominal account: Nominal account is the account of services received (expenses and Losses) and services given (income and gain) Ex. Salary, Rent, Wages, Stationery etc. Principles: Debit all expense/losses Credit all income/ gains Tally 7.2 Tally is a complete business solution for any kind of Business Enterprise. It is a full fledged accounting software. Procedure for creating company in Tally Double click on Tally icon on desktop. Alt+F3 Company info-Create company. Accounts Only: To maintain only the financial accounts of the company. Inventory (stock) management is not involved in it. Account with Inventory: This is the default option, which allows maintaining both the financial account of the company as well as the inventory of the company. Select Company: We can choose the company which is already created. Shortcut key - F1. Shut Company: It is used to close the company which is opened. Shortcut key - Alt+F1. Alter: It is used to make alterations in the company creation like name, date, maintain etc. Quit: Exits from Tally. 1. Click on quit button. 2. Esc, Esc, Esc and enter. 3. Ctrl+Q Short cut keys Alt+F3 Company information menu Enter To accept information typed into a field. To accept a voucher or master. To get a report with further details of an item in a report. Esc To remove what has been typed into a field. To exit a screen. To indicate you do not want to accept a voucher or master. Ctrl+A To accept a form wherever you use the key combination the screen or report will be accepted as it is on this screen. Ctrl+Q It quits the screen without making any changed to it. Alt+C To create a master at a voucher screen. When working within an amount field presses Alt+C to act as a calculator. Alt+D To delete a voucher. To delete a master. Ctrl+Enter To alter a master while making an entry or viewing report. F2 Date Alt+F2 Change period Alt+F1 To see detail F11 Features company F12 Configuration options are applicable to all the companies in a data directory. Ctrl+N Calculator screen. Ctrl+V Voucher mode (Cr. Dr) Invoice mode (name of item, rate, quantity, and amount) Gateway of tally-Accounts info-Group Bank account Bank Account Bank Od account Branch/division Capital account Cash in hand Current asset Current liability Deposit Direct expenses Direct income Indirect expense Indirect income Duties and tax Fixed asset Investment Loans and advance Loan (liability) Miscellaneous expenses Provisions Retained earning Reserves and surplus Purchase account Sales account Secured loan Stock in hand Sundry debtor’s Sundry creditors Suspense Unsecured account Meaning: Current asset: It is converted into cash with in a year. Ex. Bills receivable Direct expenses: These are the expenses which are directly related to manufacturing of goods. Ex. Wages, factory rent, heating, lighting etc Indirect expense: These are the expenses which are indirectly related to manufacturing of goods. Ex. Salary, rent, stationery, advertisement, printing Depreciation: Decrease the value of the asset. Sundry debtors: The person who is the receiver or customer Sundry creditors: The person who gives or supplier. Expenses Outstanding or Unpaid expenses or Expenses due: Expenditure incurred during current year but the amount on which is not yet paid. (Added to the expenditure on the debit side and entered on the liability side.) Income received in advance or Income received but not earned Income received during the current year but not earned or a part of which relates to the next year. (Deducted form the concerned income on the credit side and entered on the liability side) Prepaid advance or Expenses or Prepaid expenses Expenditure paid during current year but not incurred or a part of which relates to the next year is called expenditure prepaid. (Deducted form the concerned expenditure on the debit side and entered on the assets side) Income outstanding or income earned but not received or Income accrued Income outstanding means income earned during the current year but the amount on which is not yet received (added to the concerned income on the credit side and entered on the asset side) Gateway of Tally-Accounts info-ledger-create Ledger Group Opening stock Stock in hand Purchase Purchase account Purchase return Purchase account Fright charges Direct expenses Carriage inwards or Purchases Direct expenses Cartage and coolie Direct expenses Octroi Direct expenses Manufacturing wages Direct expenses Coal, gas, water Direct expenses Oil and fuel D irect expenses Factory rent, insurance, electricity, lighting and heating Direct expenses Sales Sales account Salary Indirect expenses Postage and telegrams Indirect expenses Telephone charges Indirect expenses Rent paid Indirect expenses Rates and taxes Indirect expenses Insurance Indirect expenses Audit fees Indirect expenses Interest on bank loan Indirect expenses Interest on loans paid Indirect expenses Bank charges Indirect expenses Legal charges Indirect expenses Printing and stationery Indirect expenses General expenses Indirect expenses Sundry expenses Indirect expenses Discount allowed Indirect expenses Carriage outwards or sales Indirect expenses Traveling expenses Indirect expenses Advertisement Indirect expenses Bad debts Indirect expenses Repair renewals Indirect expenses Motor expenses Indirect expenses Depreciation on assets Indirect expenses Interest on investment received Indirect income Interest on deposit received Indirect income Interest on loans received Indirect income Commission received Indirect income Discount received Indirect income Rent received Indirect income Dividend received Indirect income Bad debts recovered Indirect income Profit by sale of assets Indirect income Sundry income Indirect income Loan from others Loan Liabilities Bank loan Loan Liabilities Bank overdraft Bank OD Bills payable Current Liabilities Sundry creditors Sundry creditors Mortgage loans Secured loans Expense outstanding Current Liabilities Income received in advance Current Liabilities Other liabilities Current Liabilities Capital Capital account Drawings Capital account Cash in hand Cash in hand Cash at bank Bank account Fixed deposit at bank Deposit Investments Investments Bills receivable Current asset Sundry debtors Sundry debtors Closing stock Stock in hand Stock of stationery Current asset Loose tools Fixed asset Fixtures and fittings Fixed asset Furniture Fixed asset Motor vehicles Fixed asset Plant and machinery Fixed asset Land and building Fixed asset Leasehold property Fixed asset Patents Fixed asset Goodwill Fixed asset Prepaid expenses Current asset Income outstanding Current assset Trading account: Buying and selling of goods. Dr. Receiving aspect Giving aspect Cr. Direct expenses Amount Direct Income Amount To Opening stock xxx By Sales xxx To Purchases xxx By (-)Sales return xxx To (-)purchase return xxx By Closing stock xxx To Freight charges xxx To Cartage and coolie xxx To Lorry hire xxx To Manufacturing expenses xxx To Wages xxx To Factory rent, fuel power xxx To Gross profit (transfer to profit and loss account) xxx To Profit and loss account: Actual profit and loss of the business Indirect expenses or payments Amount Indirect income or receipts Amount To Salary xxx By Gross profit xxx To Postage and Telegram xxx By Interest on investment received xxx To Telephone charges xxx By Interest on deposit received xxx To Rent paid xxx By Interest on loans received xxx To Rate and taxes xxx By Discount received xxx To Insurance paid xxx By Discount received xxx To Interest on bank loan xxx By Rent received xxx To Bank charges xxx By Bad debts received xxx To Printing and stationery xxx By Net loss xxx To Discount allowed xxx To Advertisement To Carriage outward (sales) To Depreciation on assets To General expenses To Traveling To Bad debts To Net profit Balance sheet: Actual financial position Liabilities Amount Assets Amount Bank loan xxx Cash in hand xxx Bank overdraft xxx Cash at bank xxx Bills payable xxx Fixed deposit at bank xxx Sundry creditors xxx Investments xxx Expenses outstanding xxx Bills receivable xxx Capital xxx Sundry debtors xxx (-)drawings xxx Closing stock xxx Net profit xxx Stock of stationery xxx Furniture xxx Plant machinery xxx Land and building xxx Motor vehicles xxx Prepaid expenses xxx Income outstanding xxx Alt+F3 Company Creation Gateway of tally-Accounting voucher F4 Contra: Records funds transfer between cash and bank accounts. Deposit into bank or Opened bank account Cr. Cash Dr. Bank Withdraw form bank Cr. Bank Dr. Cash F5 Payment: Record all bank and cash payments. Paid or Give Dr. Cr. Cash/bank (in case cheque) F6 Receipt: Records all receipts into bank or cash accounts. Received or Borrow or Take Cr. Dr. Cash/bank (in case cheque) F7 Journal: Records adjustments between ledger accounts. F8 Sales: Records all sales. Dr. Cash/party (incase of credit-party) Cr. Sales F9 Purchase: Records all purchase. Cr. Cash/party (incase of credit-party) Dr. Purchase Journalize the following transactions 1. Commenced business with cash Rs.10, 000. 2. Deposit into bank Rs. 15,000 3. Bought office furniture Rs.3,000 4. Soled goods for cash Rs.2,500 5. Purchased goods form Mr X on credit Rs.2,000 6. Soled goods to Mr Y on credit Rs.3,000 7. Received cash form Mr. Y on account Rs.2,000 8. Paid cash to Mr X Rs. 1,000 9. Received commission Rs. 50 10. Received interest on bank deposit Rs. 100 11. Paid into bank Rs. 1,000 12. Paid for advertisement Rs.500 13. Purchased goods for cash Rs. 800 14. Sold goods for cash Rs. 1,500 15. Paid salary Rs. 500 Gateway of tally-Account info-Ledger-Create Gateway of tally – Accounting voucher Sl.No Key Voucher Ledger Group Type of account Principles Amount 1 F6 Receipt Cr. Capital Capital account Personal Giver 10,000 Dr. Cash Cash in hand Real Comes in 10,000 2 F4 Contra Cr. Cash Cash in hand Real Goes out 15,000 Dr. Bank Bank account Real Comes in 15,000 3 F5 Payment Dr. Office furniture Fixed asset Real Comes in 3,000 Cr. Cash Cash in hand Real Goes out 3,000 4 F8 Sales Dr. Cash Cash in hand Real Comes in 2,500 Cr. Sales Sales account Real Goes out 2,500 5 F9 Purchase Cr. X Sundry creditor Personal Giver 2,000 Dr. purchase Purchase account Real Comes in 2,000 6 F8 Sales Dr. Y Sundry debtors Personal Receiver 3,000 Cr. Sales Sales account Real Goes out 3,000 7 F6 Receipt Cr. Y Giver 2,000 Dr. cash Cash in hand Real Comes in 2,000 8 F5 Payment Dr. X Receiver 1,000 Cr. Cash Cash in hand Real Goes out 1,000 9 F6 Receipt Cr. commission Indirect income Nominal Credit all income 50 Dr. cash Cash in hand Real Comes in 50 10 F6 Receipt Cr. Interest on bank deposit Indirect income Nominal Credit all income 100 Dr. Bank Bank account Real Comes in 100 11 F4 Contra Cr. Cash Cash in hand Real Goes out 1,000 Dr. Bank Bank account Real Comes in 1,000 12 F5 Payment Dr. Advertisement Indirect expenses Nominal Debit all expenses 500 Cr. Cash Cash in hand Real Goes out 500 13 F9 Purchase Cr. Cash Cash in hand Real Goes out 800 Dr. purchase Cr cash Purchase account Real Comes in 800 14 F8 Sales Dr. cash Cash in hand Real Comes in 1,500 Cr. Sales Sales account Real Goes out 1,500 15 F5 Payment Dr. salary Indirect expense Nominal Debit all expenses 500 Cr. Cash Cash in hand Real Goes out 500 To view- Gateway of tally-Accounts info-Ledger-Multiple ledger Alter-All items (for ledger) Gateway of tally-Display-Day book-Alt+F1 (to see detail) (Accounting Voucher)

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