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Basic Accounting Notes (With Examples

The document provides an overview of basic accounting principles, including definitions of key terms such as assets, liabilities, and equity. It outlines the golden rules of accounting, types of accounts, and the double entry system, along with examples of journal entries and ledgers. Additionally, it describes the purpose of trial balances and final accounts, and includes practice questions for application of the concepts.

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Satya Prasad An Impactian
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101 views3 pages

Basic Accounting Notes (With Examples

The document provides an overview of basic accounting principles, including definitions of key terms such as assets, liabilities, and equity. It outlines the golden rules of accounting, types of accounts, and the double entry system, along with examples of journal entries and ledgers. Additionally, it describes the purpose of trial balances and final accounts, and includes practice questions for application of the concepts.

Uploaded by

Satya Prasad An Impactian
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Basic Accounting Notes (With Examples

& Practice Questions)


1. What is Accounting?
Accounting is the process of recording, summarizing, analyzing, and reporting financial
transactions of a business.
Purpose: To provide financial information that helps stakeholders make informed decisions.

2. Basic Terms in Accounting


- Asset: Resources owned by the business (e.g., cash, land, machinery)
- Liability: Obligations or debts (e.g., loans, creditors)
- Capital/Equity: Owner’s investment in the business
- Revenue: Income earned (e.g., sales)
- Expense: Cost incurred to earn revenue (e.g., rent, salary)
- Transaction: Any business activity involving money
- Account: A record of financial transactions

3. Golden Rules of Accounting


- Personal Account: Debit the receiver, Credit the giver
- Real Account: Debit what comes in, Credit what goes out
- Nominal Account: Debit all expenses/losses, Credit all incomes/gains

4. Types of Accounts
- Personal Accounts: Accounts of people or organizations (e.g., Ram's A/c, HDFC Bank A/c)
- Real Accounts: Accounts of assets (e.g., Cash A/c, Machinery A/c)
- Nominal Accounts: Income, expenses, gains, losses (e.g., Rent A/c, Commission Received
A/c)

5. Double Entry System


For every debit, there must be a corresponding credit.
Example:
You buy furniture for ₹5,000 cash.
Furniture A/c Dr. ₹5,000
To Cash A/c ₹5,000
6. Journal Entries
A journal is the first book of entry.
Format:
Date | Particulars | L.F. | Dr. Amount | Cr. Amount
01-04-25 | Furniture A/c Dr. ₹5,000
To Cash A/c ₹5,000
(Being furniture purchased for cash)

7. Ledger
All transactions from journals are grouped under individual accounts (ledger).
Example: Cash Ledger
Date | Particulars | Dr (₹) | Cr (₹) | Balance
01-04-25 | Capital A/c | 10,000 | | 10,000 Dr
02-04-25 | Furniture A/c | | 5,000 | 5,000 Dr

8. Trial Balance
A list of all ledger account balances to check arithmetic accuracy.
Account | Dr (₹) | Cr (₹)
Cash A/c | 5,000 |
Furniture A/c | 5,000 |
Capital A/c | | 10,000
Total | 10,000 | 10,000

9. Final Accounts
- Trading Account – To find Gross Profit/Loss
- Profit & Loss A/c – To find Net Profit/Loss
- Balance Sheet – To show financial position

Practice Questions
1. Identify the type of account:
a) Rent A/c
b) Cash A/c
c) Ram's A/c

2. Pass journal entries:


a) Started business with ₹50,000
b) Paid rent ₹5,000
c) Bought goods for ₹10,000 on credit from Ramesh
3. Prepare a trial balance using:
- Capital ₹50,000
- Cash ₹30,000
- Furniture ₹20,000
- Rent Paid ₹5,000

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