ACCOUNTING PPT BHUPENDER PARTAP contains class 11 accounts

Basic Understanding of
Accounting

What is Accounting?
• Accounting is the process of recording,
classifying, analysing & interpreting the business
transactions which can be measured in terms of
money.
• Thus, accounting keeps a permanent record of
all business transactions.

What is Accounting?
• Accounting helps in knowing the true financial
position of the business.
• Accounting provides all valid financial
information to owners, banks, customers,
government and other outside parties to make
correct decisions.

Business Transactions
Journal Entries
Ledger Accounts
Trial Balance
Final Accounts
Trading
Account
Profit & Loss
A/c
Balance
Sheet
Process of Accounting

Basic Terms of Accounting
• Assets:
▫ Assets are resources owned and controlled by the
business enterprise.
▫ Eg: land, machinery, furniture, cash, bank
balance, stock, etc
• Types of assets:
▫ Fixed Assets
▫ Current Assets
▫ Investments

Basic Terms
• Fixed Assets:
▫ These are assets purchased for a long period i.e. more
than 1 year.
▫ Eg: land, building, plant and machinery, vehicles,
furniture and office equipments, etc.
▫ These assets form the basic infrastructure of the
company.
▫ These assets are not held for sale.

Basic Terms
• Current Assets
▫ These assets are required to carry on the day to day
business activities.
▫ Eg:
 Inventories [raw material, work in progress & finished
goods]
 Cash balance
 Bank balance
 Debtors
 Receivables

Basic Terms
• Investments:
▫ When a business enterprise puts its surplus funds
in shares or bonds of governments, it is known as
investments.
▫ Investments generate income in form of interest,
dividends, etc.
▫ They generate gains or loss when sold.

Basic Terms
• Liabilities:
▫ Liabilities are obligations of the business enterprise,
payable to outsiders & to owners of the business.
▫ Eg:
 Owner’s capital
 Borrowings
 Creditors
 Payables

Basic Terms
• Types of liabilities;
• Long term liabilities:
▫ Any liability payable after a period exceeding 1
year.
▫ Eg: owner’s capital, bank loans for more than a
year

Basic Terms
• Current Liabilities
▫ Any liability payable within a year or liabilities
incurred in day to day course of business.
▫ Eg: creditors, payables, bank O.D or short term
credit, etc.

Balance Sheet
Liabilities Amt Assets Amt
Owner’s Capital - Fixed Assets -
- -
- -
- Current Assets -
Outside Liabilities - -
- -
- Investments -
- -
- -
Total liabilities -- Total assets --

Financial Position
• Total Assets = Total Liabilities
or
• Assets – Outside Liabilities = Owner’s Capital
• Financial position is said to be stronger if the
assets are more than outside liabilities.

Basic Terms
• Income:
▫ Business activities generate various types of revenues and
incomes.
▫ Thus income is what the firms earns
▫ Eg:
 Income from sales of goods,
 Fees from sale of services,
 Interest and dividends on investments,
 Cash discounts,
 Rent received,
 Gain from sale of investment

Basic Terms
• Expense:
▫ Many expenses are incurred in the course of
business activities.
▫ Eg:
 Raw material purchased,
 Wages and salaries,
 Power and fuel,
 Office rent,
 Advertisement expense,
 Loss on sale of investments

Financial Performance
• Excess of income over expenses is known as net
profit.
• Excess of expenses over income is known as net
loss.
• Every business strives to earn profits.

Financial Performance
• Net profit is added and net loss is deducted from
owner’s capital.
Assets- Outside Liabilities = Owner’s capital
= Capital + Net Profit
= Capital – Drawings
+ Income - Expenses

Accounting Process or Cycle
1.) Analysis of business transactions
2.) Documentation
3.) Recording
4.) Classifying
5.) Summarizing
6.) Bifurcating

Business Transactions
Journal Entries
Ledger Accounts
Trial Balance
Final Accounts
Trading
Account
Profit & Loss
A/c
Balance
Sheet
Documentation &
Recording
Classifying
Summarizing
Bifurcating

What is an Account?
• An account is a device to record business
transactions.
• There are various accounts prepared for each
asset, liability, income and expenses.
• An account has two sides:

Dr Cr
Particulars Amount Particulars Amount

What is an Account?
• The left side of an account is known as debit
(Dr).
• The right side of an account is known as credit
(Cr).
• In any account, on one side increase is recorded
and on other side the decrease in the item is
recorded.

Types of Accounts
• Nominal / temporary accounts
▫ The accounts related to all incomes and expenses.
▫ Eg: Interest A/c, Rent A/c, Salary A/c, Etc.
• Personal accounts
▫ Accounts of natural persons like Mr. Ramesh, Mr. Suresh, etc.
▫ Accounts of legal persons like companies, banks, government,
etc.
▫ These persons are generally the buyers, sellers, lenders,
investors, etc. associated with the company.
▫ In short they are debtors or creditors.

Types of Accounts
• Real / Permanent accounts
▫ These are accounts of various assets and goods.
▫ Eg: Buildings A/c, Machinery A/c, debtors’ A/c,
purchase A/c, Sales A/c.

What is Debit and Credit?
• Debit is the left hand side of an A/c.
• Thus amounts written on the left side of an
account are called debits.
• Credit is the right side of an A/c.
• Thus amounts written on the right side of an
account are called credits.

Debit Balance & Credit Balance
• Every A/c has a debit balance or a credit balance.
• Debit Balance:
▫ An account has a debit balance when the total of debit side
is more than the total of credit side.
▫ All assets and expenses have a debit balance.
▫ For assets and expenses, an increase is written on debit side
and a decrease on credit side.

Debit Balance & Credit Balance
• Credit Balance
▫ When the total of credit side is more than the total
of debit side, it is known as a credit balance.
▫ All liabilities and incomes have a credit balance.
▫ For liabilities and incomes, an increase is written
on credit side and decrease is written on debit
side.

MADE BY
• BHUPENDER PARTAP
• XI COMMERCE A
• ROLL NO.12

ACCOUNTING PPT BHUPENDER PARTAP contains class 11 accounts

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