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Basic Accounting

Basic concept of accounting

Tally

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Drawings:       Drawings are the amounts withdrawn (taken back) by the businessman from his business for his personal, private and domestic purpose.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.

Example. 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)

Example. 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.

Esc, Esc, Esc and enter.

Ctrl+Q

Shortcut 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

Investment                                                                        Fixed asset                                                     

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                                         Direct 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             fixed asset 

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 asset

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 Si. 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)

Inventory Information

Alt+F3 Company creation-Maintain-Accounts with inventory

Gateway of Tally-Inventory information-Unit of measure

Gateway of tally –Inventory information-Godown

Gateway of tally-Inventory information-Stock group

Gateway of tally – Inventory information-Stock item

To View

Gateway of tally-Display-Day book-Alt+F2 (change period) Alt+F1 (to see detail)                        or

Gateway of tally-Stock summary

  1. On 1-4-06 Arjun commenced business with cash of Rs. 25,00,000. He further introduced Land and Building costing Rs. 30,000, Plant and Machinery costing Rs. 25,000 and furniture and fixture costing Rs. 36,000.
  2. On 2-4-06 Purchased Vehicle and Patents Rs. 20,000 and Rs. 15,000.
  3. On 5-4-06 He deposited Rs. 1, 00,000 into Canara Bank.
  4. On 6-4-06 Purchased from Cadbury Company

500      5 Stars @  Rs. 5                      1000    Cadbury @ Rs. 5

100      Kit kat @ Rs. 4                       200      Dairy milk @ Rs. 7

  1. On 10-4-06 Purchased from Paras

500            Moov @ Rs. 20

500            D’Clod @ Rs. 12

  1.              On 13-4-06 Sold to Pankaj

200            Moov @ Rs. 20.50

100            D’Clod @ Rs. 12.25

200            Adhensive tape roll @ Rs. 15.25

100            Band Aid box @ Rs. 252

200            Boric Acid powder @ Rs.14

  1. On 15-4-06 Sold to Akbar

500            Cadbury @ Rs. 6

200            5 Star @ Rs.5.25

50                Kit Kat @ Rs. 6

  1. On 16-4-06 Paid to Cadbury company Rs.
  2. On 18-4-06 Received from Pankaj
  3. On 20-4-06 Paid to Paras Rs.
  4. On 25-4-06 Received from Akbar Rs.
  5. On 26-4-06 Purchase from Well Cloth

T-Shirts           Lee-25Pc-Rs.200

Nike-30Pc-Rs.300

Formal Shirts   Pan America-35Pc-400

Peter England-30Pc-450

Jeans Pants      Tiger-20Pc-500

Ruff and Tuff-30Pc-350

Cotton Pants   Arrow-40Pc-200

Ex-Calibar-20Pc-250

  1. Paid Postage Rs. 500 by cheque
  2. Received commission Rs. 15,000
  3. Paid wages Rs. 2,500

Procedure for Inventory Problem

Gateway of Tally-Inventory Info-Unit of Measure-Create-

Symbol-            Nos.     Pcs

Formal Name-Number            Pieces

Gateway of Tally-Inventory Info-Stock Group-Create

Chocolate, Medicines, Cotton Pants, Jeans Pants, Formal Shirts, T-Shirts

Gateway of Tally-Inventory Info-Stock Item-Create

5 Stars

Kitkat                                                  Chocolate

Cadbury

Dairy milk

Moov

D’Clod

Adhensive tape rolls                           Medicines

Band Aid box

Boric Acid powder

 

Lee                                                      T-Shirts

Nike

Pan America                                        Formal Shirts

Peter England

Tiger                                                    Jeans Pants

Ruff and Tuff

Arrow

Ex-Calibar                                           Cotton Pants

Journalize the following Transactions using the debit and credit given     by the American accounts

  1. Commenced business with cash 10,000
  2. Deposited into bank 5,000
  3. Purchased goods for cash 3,000
  4. Sold goods for cash 2,500
  5. Purchased goods from A on credit 4,000
  6. Sold goods to B on credit       4,500
  7. Withdraw from bank 3,000
  8. Paid A on account                        2,000
  9. Received from B on account 2,500
  10. Took loan from C 5,000
  11. Gave loan to D 4,000
  12. Paid salary 1,000
  13. Cash withdraw from the business for personal use 200
  14. Rent paid to E 1,000

Ledger Group

Capital             Capital Account

Cash                 Cash in hand

Bank                  Bank account

Purchase           Purchase account

Sales                 Sales account

A                       Sundry creditor

B                       Sundry debtor

C                       Sundry creditor

D                        Sundry debtor

Salary                Indirect expenses

Drawings           Capital account

Rent                 Indirect expenses

Arjundhara Computer Institute Pvt. Ltd.

  1. Started business with cash Rs. 2,000, Bank Rs. 20,000.
  2. Issued cheque for goods purchased Rs. 1,000.
  3. Bought goods for cash Rs.8,000.
  4. Bought furniture from Anil for cash Rs.100.
  5. Bought goods from harish Rs. 1,500.
  6. Bought goods from chandan on credit Rs. 5,800.
  7. Returned damaged goods to Chandan Rs.800.
  8. Bought goods from Naveen and paid by cheque immediately Rs.400.
  9. Sold goods to Guptha Rs. 1,000.
  10. Received a cheque from Guptha Rs.1,000 for goods sold.
  11. Paid commission Rs.2,000.
  12. Paid wages by cheque Rs.4,000.
  13. Draw cheque for personal use Rs.4,000.
  14. Draw cash for personal use from bank Rs.3,000.
  15. Receive a cheque from Manju Rs.2,800.
  16. Borrow loan from Anands Rs.1,000.
  17. Paid Anands Loan with interest Rs.1,000.

Ledger                   Group

Capital                   Capital account

Bank                      Bank account

Purchase               Purchase account

Anil                        Sundry Creditor

Chandan               Sundry Creditor

Harish                    Sundry Creditor

Purchase return      Purchase account

Naveen                    Sundry Creditor

Sales                       Sales account

Guptha                    Sundry debetor

Commission             Indirect expenses

Wages                     Direct expenses

Drawings                Capital account

Manju                    Sundry Creditor

Anand                    Sundry Creditor

Haridas and company

1.Started business with cash Rs.10,000,furniture Rs.4,000 and machinery Rs.5,000.

2.Bought goods from Anil on credit Rs. 4,000 and for cash Rs.5,000.

3.Sold goods to Rajesh on credit Rs.5,000 and for cash Rs.3,000.

  1. Bought goods from Arun Subject to trade discount of 2% of Rs.2,000.
  2. Sold goods to Ramesh subject to trade discount of 5% of Rs.4,000.
  3. Paid salary Rs.1,000, printing Rs.150 and wages rs.100.

7.Received rent Rs.500, commission Rs.400.

  1. Received a cheque from Ganesh Rs.1,000.

Ledger Group

Capital Capital account

Furniture              Fixed asset

Machinery            Fixed asset

Purchase               Purchase account

Anil                      Sundry Creditor

Sales                  Sales account

Rajesh                 Sundry debtor

Arun                    Sundry creditor

Ramesh              Sundry debtor

Salary                  Indirect expenses

Printing                 Indirect expenses

Wages                  Direct expenses

Rent                      Indirect expenses

Commission           Indirect expenses

Ganesh                   Sundry creditor

Trade discount        Indirect expenses

Memorandum book

Particulars

  1. Commenced business with cash Rs. 10,000.
  2. Purchased goods for cash Rs.3,000.
  3. Opened a bank account with Rs.2,000.
  4. Purchased stationary Rs.1,00.
  5. Purchased furniture Rs.1,000.
  6. Sold goods to A Rs.2,000.
  7. Purchased goods from B Rs.2,000.
  8. Sold goods for cash Rs.1,000.
  9. Paid for postage Rs.20.
  10. Took loan from C Rs.1,500.
  11. Paid rent Rs.300.
  12. Withdraw from bank Rs.800.
  13. Received from A on account Rs.500.
  14. Paid commission by cheque Rs.200.

Ledger Group

Capital Capital account

Purchase           Purchase account

Bank                  Bank account

Purchase           Purchase account

Stationary          Indirect expenses

Furniture            Fixed asset

Sales                 Sales account

A                        Sundry debtor

B                       Sundry Creditor

Potage Indirect expenses

C                        Sundry Creditor

Rent                   Indirect expenses

Commission       Indirect expenses

Roal and company

Particulars                                                  Rs.

  1. Bought goods for cash                            2,500
  2. Bought office furniture for cash               500
  3. Paid for postage                                     10
  4. Purchased goods from Rajkamal             2,000
  5. Sold goods for cash                                 150
  6. Bought goods from Rahim                       400
  7. Sold goods to Suresh                              400
  8. Sold goods to Nayak                              250
  9. Purchased goods for cash                      400
  10. Recevied cash from Nayak                    200
  11. Paid cash to Rahim                                50
  12. Returned goods to Ralkamal                  200
  13. Suresh returned goods                           50
  14. Paid salary                                            150
  15. Sold goods for cash                                500
  16. Rao withdraw for his personel use          800
  17. Paid for stationery                                 100
  18. Paid rent                                                50
  19. Received commission                           225

Ledger Group

Capital Capital account

Purchase                         Purchase account

Postage                           Indirect expenses

Rajkamal                         Sundry Creditor

Sales                                Sales account

Rahim                              Sundry Creditor

Suresh                             Sundry Debtor

Nayak                              Sundry Debtor

Purchase returns            Purchase account

Salary                              Indirect expenses

Drawings                        Capital account

Stationary                        Indirect expenses

Rent                                Indirect expenses

Commission                   Indirect income

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