mgt101_06
DESCRIPTION
Learning Objective • Voucher is a document in a specific format that records the details of a transaction. • It is accompanied by the evidence of transaction. General Ledger Cash/Bank Book • This lecture will cover following areas: o An overview of the flow of transactions. o An introduction to the basic books of accounts. o The General Ledger, and o The ledger balance Trial Balance Profit & Loss Account Balance Sheet The Voucher Occurrence of an Event General JournalTRANSCRIPT
FINANCIAL ACCOUNTING (Lecture-06) Learning Objective
• This lecture will cover following areas: o An overview of the flow of transactions. o An introduction to the basic books of accounts. o The General Ledger, and o The ledger balance
The Voucher
• Voucher is a document in a specific format that records the details of a transaction.
• It is accompanied by the evidence of transaction.
The Flow Of Transactions
General Journal
General Ledger Cash/Bank Book
Trial Balance Profit & Loss Account Balance Sheet
The Voucher
Occurrence of an Event
FINANCIAL ACCOUNTING (Lecture-06) A Sample Voucher
Name Of Company Type Of Voucher
Date: 1-1-20-- No: 01
Description Code #
Debit Amount
Credit Amount
Cash 01 100,000
Capital 02 100,000
Total: 100,000 100,000
Narration: Capital Introduced in Cash by Owner
Prepared By: Checked by:
The General Journal
• The Journal used to be a chronological (day-to-day) record of business transactions. All vouchers were first recorded in books.
• It was also called the Book of Original Entry or Day Book. • But in present day accounting and especially with the introduction of computers
for accounting, this book is not in use any more. • We will, therefore, not study the use of Journal in detail but we should know that
it is a book that keeps day-to-day record of transactions. General Ledger – The ‘T’ Account
• Ledger – is a book that keeps separate record for each account (Book of Accounts).
• We know that Account or Head of Account is systematic record of transactions of one type.
• An account in its simplest form is a T-shape and looks like this:
FINANCIAL ACCOUNTING (Lecture-06)
A Standard General Ledger
• Since the ledger keeps record of transactions that affect one head of account, therefore, it should provide all the information that a user may need.
• Usually the ledger is required to provide following information: o Title of account o Ledger page number, called Ledger Folio / Account Code o Date of transaction o Voucher number o Narration / particulars of transition o Amount of transaction
A Standard General Ledger Capital Account (Title of Account) Account Code 02
Date Voucher Number
Particulars / Narration
Debit Amount
Credit Amount
20-- Jan 01 01 Capital Introduced in cash by
Owner 100,000
Title of Account
Left hand side. The Debit side.
Right hand side. The Credit side.
FINANCIAL ACCOUNTING (Lecture-06) Recording From Voucher To General Ledger Voucher Date: 1-1-20-- No: 01
Description Code #
Debit Amount
Credit Amount
Cash 01 100,000 Capital 02 100,000 Narration: Capital Introduced in Cash by Owner Capital Account (Title of Account) Account code 02 Date Voucher
Number Particulars / Narration
Debit Amount
Credit Amount
20-- Jan 01 01 Capital Introduced in cash by
Owner 100,000
Completing The Recording – Both Effects Description Code
# Debit Amount
Credit Amount
Cash 01 100,000 Capital 02 100,000 Narration: Capital Introduced in Cash by Owner Capital Account Account Code 02 Date Voucher
Number Particulars / Narration
Debit Amount
Credit Amount
20-- Jan 01 01 Capital Introduced in cash by
Owner 100,000
Cash Account Account Code 01 Date Voucher
Number Particulars / Narration
Debit Amount
Credit Amount
20--
Jan 01 01 Capital Introduced in cash by Owner
100,000
FINANCIAL ACCOUNTING (Lecture-06)
The Ledger Balance
• In the earlier lecture, we discussed that in order to have the total figure in respect of each head of expense/income, asset/liability we need to maintain different accounts.
• We had also said that each account may have figures on the debit as well as the credit side.
• Therefore, the difference between the debit and the credit sides, known as the BALANCE, would represent the required total of the particular account.
• The total of all balances on the Debit side is ALWAYS equal to the total of all balances on the Credit side. This is called the balancing of books of accounts. We will study about this concept at a later stage.
• The balance may be written out after every transaction in a third column or calculated at the end of a specific time period (an accounting period).
• A Debit balance is shown without brackets and a Credit balance is shown in brackets (XYZ).
A Simple Presentation of a Recorded Transaction is as under:
Cash Account Code 01
Capital
Capital Account Code 02
Cash 100,000
FINANCIAL ACCOUNTING (Lecture-06)
Cash Account Account Account Code 01 te Voucher
Number Narration / Particulars
Debit Amount
Credit Amount
Balance Dr/(Cr)
20-- Jan 01 01 Capital Introduced in cash by
Owner 100,000 100,000
Jan 01 02 Cash Paid for Purchase of Building
50,000 50,000
Jan 02 03 Cash Paid for Purchase of Furniture
10,000 40,000
Capital Account Account Code 02 Date Voucher
Number Narration / Particulars
Debit Amount
Credit Amount
Balance Dr/(Cr)
20-- Jan 01 01 Capital Introduced in cash by
Owner 100,000 (100,000)