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THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA . Thilanka Warnakulasooriya B.Com Special (Col), ACA . POSTGRADUATE DIPLOMA IN BUSINESS AND FINANCE - 2013/2014 Principles of Financial and Cost Accounting. Accounting Process.

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the institute of chartered accountants of sri lanka

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA

Thilanka WarnakulasooriyaB.Com Special (Col), ACA

POSTGRADUATE DIPLOMA IN BUSINESS AND FINANCE - 2013/2014Principles of Financial and Cost Accounting

accounting process
Accounting Process
  • Every Business transaction has two fold aspects called Debit & Credit.
  • Double Entry system transactions are recorded in terms of debits and credits. Since a debit in one account will be offset by a credit in another account

Accounting Input

(Events & Transactions)

Accounting Process

Accounting out put

(Financial Statements)

accounting equation
Accounting Equation
  • Mathematical presentation of the relationship between resource providers and resource holders .
  • At any given time aggregation of the equity & the total liabilities of an accounting unit should be equal to total assets of the Organization.
  • Ownership can be divided in to two
    • Internal Ownership or capital
    • External Ownership or Liabilities

Assets= Liabilities

slide4

Ownership can be divided in to two

    • Internal Ownership or capital
    • External Ownership or Liabilities
    • Therefore Accounting Equation is

Assets= Capital + Liabilities

slide5

Ex: Show how following transactions in affect Accounting Equation

  • Mr. Kamal Start a Business by investing cash of 100,000 , Land of 150,000 ,plant & machinery of Rs. 200,000.
  • Purchase goods of Rs. 50,000 on cash
  • Purchase goods of Rs. 100,000 on credit
  • Sold goods worth of Rs. 10,000 for Rs. 15,000 on cash
  • Paid Utility bills of Rs. 5000
  • Drawing cash of Rs, 6000 for personal use.
  • Settled Rs. 20,000 of Creditors
  • Sold goods worth of 12,000 for 16,000 on credit basis
  • Received Rs, 10,000 from Debtors
  • Drawing Rs.5,000 goods for personal use
accounts
Accounts
  • Accounts use to record transactions. Normally called ledger accounts
  • Type of Accounts
    • Asset Accounts
    • Liability Accounts
    • Capital Accounts
    • Income Accounts
    • Expense Accounts
format of ledger account
Format of Ledger Account
  • T account

debit Credit

double entry principle
Double Entry Principle
  • According to the double entry Principle each transactions gives a dual side impact and those dual side are recorded in the Ledger Account

Assets/ Expenditure account

DebitCredit

Increase ( + )Decrease ( - )Capital/ Liabilities/ Income Accounts

DebitCredit Decrease ( -) Increase (+)

ex write the double entry for following transitions

Ex: Write the double entry for following transitions

Owner invest Rs. 10,000 cash

Purchase Machinery for Rs. 12,000

Paying Electricity bill of Rs 2,000

Purchase Rs, 17,000 goods on cash basis

Receipt of Rs. 12,000 from debtors

Settle Rs, 5000 Creditors

Obtain a bank loan of Rs, 50,000

Write of bad debt of Rs, 500

Credit sales of Rs. 50,000

Drawing of cash of Rs. 10,000

Credit Purchases of goods of Rs,. 40,000

Discounts given to debtors Rs. 2,000

accounting process1
Accounting Process

Indentify Transaction & events

Classifying Transactions & events

Recording in primary books

Accounting the transactions

Preparing the Trail balance

Preparing adjusted trail balance

Brought forwarding the balances to next year

Prepare Financial Statements

slide13

Transactions initiating through Source Documents includes transaction values and other relevant information

    • i.e: Receipt, Invoice

Data captured in source documents is recorded in the Primary books

Recording batch total or individual figures in ledger account

Prepare financial statements from balances obtained by balancing the general ledger.

credit transactions
Credit Transactions
  • Purchase day Book
  • Return outward day book
  • Sales day book
  • Return inward day book
  • General Journal