Index

S. No. Content

1 Introduction

2 Objectives

3 Importance of Accounting

4 Key Terms

5 Accounting Terms

6 Accounting Principles & Concepts

7 Company Profile

8 Journal Entries

9 Ledger Accounts

10 Trial Balance

11 Trading Account

12 Profit & Loss Account

13 Balance Sheet

14 Conclusion

15 Illustrations and Photos

1. Introduction

Accounting is the systematic and comprehensive recording of financial transactions pertaining

to a business. It includes summarizing, analyzing, and reporting financial data to regulatory
agencies, tax authorities, and internal stakeholders.

Accounting plays a crucial role in business management, providing necessary information for
decision-making, budgeting, and financial planning. This project will guide you through the
entire accounting cycle—from the journal entry to the final financial statements—using the
example of a fictional company.

2. Objectives

The primary objectives of this accounting project are as follows:

• To understand and apply the complete accounting process.

 • To familiarize oneself with accounting terminology and documentation.

• To learn the practical application of journal entries, ledgers, and trial balances.

• To gain experience in preparing financial statements such as Trading, Profit & Loss
Account, and Balance Sheet.

• To analyze the financial performance of a company using accounting data.

3. Importance of Accounting

Accounting is often called the language of business because it communicates the financial
health of a company. It helps in:

• Recording transactions in a systematic way.

• Classifying and summarizing data for reporting purposes.

• Ensuring compliance with financial laws and tax regulations.

• Assisting in financial planning, budgeting, and forecasting.

• Making informed decisions based on reliable financial information.

4. Key Terms

Term Description

Journal The book where transactions are initially recorded in chronological order.

Ledger A book containing individual accounts derived from the journal.

A list of all ledger accounts and their balances to check arithmetical

Trial Balance
accuracy.

Financial Reports that summarize financial data: income statement, balance sheet,
Statements and cash flow.

Debit An entry recorded on the left side of an account.

Credit An entry recorded on the right side of an account.

5. Accounting Terms Explained

Term Meaning

Assets Resources owned by a business (e.g., cash, inventory, equipment).

Liabilities Financial obligations of the business (e.g., loans, creditors).

Term Meaning

Equity Owner’s residual interest in the business after deducting liabilities.

Revenue Income earned from business activities.

Expenses Costs incurred to generate revenue.

Drawings Withdrawal of resources by the owner for personal use.

6. Accounting Principles & Concepts

Accounting follows standardized rules known as principles and concepts. These ensure
consistency, reliability, and comparability of financial data.

Concept Explanation

Business Entity Concept The business is treated as a separate entity from its owner.

Going Concern Concept Assumes the business will continue to operate indefinitely.

Money Measurement
Only transactions measurable in monetary terms are recorded.
Concept

Revenues and expenses are recorded when they are earned or

Accrual Concept
incurred.

Matching Concept Expenses are matched with the revenues they help to generate.

Dual Aspect Concept Every transaction has two effects: Debit and Credit.

Conservatism Anticipate no profits, but account for all possible losses.

7. Company Profile

Company Name: SparkTech Solutions Pvt. Ltd.

Established: 2022
Location: Bengaluru, India
Founder: Mr. Ankit Sharma
Business Type: Retail of smart electronic gadgets and accessories
Product Line: Smartwatches, Bluetooth speakers, earphones, chargers, etc.
Vision: “Empowering consumers with innovative and affordable technology.”

Illustration Tip: Include the company logo, product images, and a map showing the location.

8. Journal Entries

The journal is the book of original entry. It records all transactions in a chronological manner.
Sample Journal Entries (April 2025)

Date Particulars L.F. Debit (₹) Credit (₹)

Cash A/c Dr.

Apr 1 5,00,000 5,00,000
To Capital A/c

Furniture A/c Dr.

Apr 2 80,000 80,000
To Cash A/c

Inventory A/c Dr.

Apr 3 2,00,000 2,00,000
To Bank A/c

Purchases A/c Dr.

Apr 5 1,50,000 1,50,000
To Creditors A/c

Cash A/c Dr.

Apr 8 90,000
To Sales A/c 90,000

Additional Journal Entries (April 2025)

To show a wider variety of business transactions, here’s an expanded list of journal entries:

Date Particulars L.F. Debit (₹) Credit (₹)

Cash A/c Dr.

Apr 1 5,00,000 5,00,000
To Capital A/c

Furniture A/c Dr.

Apr 2 80,000 80,000
To Cash A/c

Inventory A/c Dr.

Apr 3 2,00,000 2,00,000
To Bank A/c

Rent A/c Dr.

Apr 4 20,000 20,000
To Cash A/c

Purchases A/c Dr.

Apr 5 1,50,000 1,50,000
To Creditors A/c

Wages A/c Dr.

Apr 6 15,000 15,000
To Cash A/c

Cash A/c Dr.

Apr 8 90,000 90,000
To Sales A/c

Bank A/c Dr.

Apr 10 40,000 40,000
To Sales A/c

Telephone Expense A/c Dr.

Apr 12 5,000 5,000
To Bank A/c
Date Particulars L.F. Debit (₹) Credit (₹)

Advertisement A/c Dr.

Apr 15 10,000 10,000
To Cash A/c

Commission A/c Dr.

Apr 20 8,000 8,000
To Bank A/c

Insurance A/c Dr.

Apr 25 12,000 12,000
To Bank A/c

Depreciation A/c Dr.

Apr 30 4,000 4,000
To Furniture A/c

9. Ledger Accounts

The ledger is a collection of all accounts. Each account is created and maintained individually.

Cash Account

Date Particulars Debit (₹) Credit (₹) Balance (₹)

Apr 1 Capital A/c 5,00,000 5,00,000

Apr 2 Furniture A/c 80,000 4,20,000

Apr 8 Sales A/c 90,000 5,10,000

Apr 12 Rent A/c 20,000 4,90,000

More Ledger Accounts (Selected)

Furniture A/c

Date Particulars Debit (₹) Credit (₹) Balance (₹)

Apr 2 Cash A/c 80,000 80,000

Apr 30 Depreciation A/c 4,000 76,000

Bank A/c

Date Particulars Debit (₹) Credit (₹) Balance (₹)

Apr 3 Inventory A/c 2,00,000 (2,00,000)

Apr 10 Sales A/c 40,000 (1,60,000)

Date Particulars Debit (₹) Credit (₹) Balance (₹)

Apr 12 Telephone Exp A/c 5,000 (1,65,000)

Apr 20 Commission A/c 8,000 (1,73,000)

Apr 25 Insurance A/c 12,000 (1,85,000)

10. Trial Balance

Trial balance ensures that the total debit balances equal total credit balances, which is a basic
check for accuracy.

Trial Balance (As on 30-April-2025)

Account Debit (₹) Credit (₹)

Cash A/c 4,90,000

Furniture A/c 80,000

Purchases A/c 1,50,000

Inventory A/c 2,00,000

Rent A/c 20,000

Sales A/c 1,30,000

Creditors A/c 1,50,000

Capital A/c 5,00,000

Totals 9,40,000 9,40,000

Extended Trial Balance (As on 30-Apr-2025)

Account Title Debit (₹) Credit (₹)

Cash A/c 4,65,000

Bank A/c 1,85,000

Furniture A/c 76,000

Inventory A/c 2,00,000

Purchases A/c 1,50,000

Rent A/c 20,000

Wages A/c 15,000

Account Title Debit (₹) Credit (₹)

Telephone Exp. A/c 5,000

Advertisement A/c 10,000

Commission A/c 8,000

Insurance A/c 12,000

Depreciation A/c 4,000

Sales A/c 1,30,000

Creditors A/c 1,50,000

Capital A/c 5,00,000

Total 8,15,000 8,15,000

11. Trading Account

This account determines the gross profit or loss for the period.

Trading Account for April 2025

Particulars Amount (₹) Particulars Amount (₹)

To Opening Stock 0 By Sales 1,30,000

To Purchases 1,50,000 By Closing Stock 2,00,000

To Gross Profit 1,80,000

Total 3,30,000 Total 3,30,000

Expanded Trading Account (April 2025)

Particulars Amount (₹) Particulars Amount (₹)

To Opening Stock – By Sales 1,30,000

To Purchases 1,50,000 By Closing Stock 2,00,000

To Wages 15,000

To Gross Profit c/d 65,000

Total 2,30,000 Total 2,30,000

12. Profit & Loss Account

This account shows the net profit or loss by comparing indirect expenses and incomes.

Profit & Loss Account for April 2025

Particulars Amount (₹) Particulars Amount (₹)

To Rent 20,000 By Gross Profit 1,80,000

To Salary 35,000

To Net Profit transferred to Capital A/c 1,25,000

Total 1,80,000 Total 1,80,000

Detailed Profit & Loss Account

Particulars Amount (₹) Particulars Amount (₹)

To Rent 20,000 By Gross Profit 65,000

To Telephone Exp. 5,000

To Advertisement 10,000

To Insurance 12,000

To Commission 8,000

To Depreciation 4,000

To Net Profit 6,000

Total 65,000 Total 65,000

13. Balance Sheet

The balance sheet provides a snapshot of financial position on a specific date.

Balance Sheet as on 30-April-2025

Liabilities

Particulars Amount (₹)

Capital 5,00,000

Add: Net Profit 1,25,000

Total Capital 6,25,000

Creditors 1,50,000

Total 7,75,000
Assets

Particulars Amount (₹)

Cash 4,90,000

Furniture 80,000

Inventory 2,00,000

Bank 5,000

Total 7,75,000

Updated Balance Sheet (As on 30-Apr-2025)

Liabilities

Particulars Amount (₹)

Capital 5,00,000

Add: Net Profit 6,000

Total Capital 5,06,000

Creditors 1,50,000

Total 6,56,000

Assets

Particulars Amount (₹)

Cash 4,65,000

Furniture (after dep.) 76,000

Inventory 2,00,000

Total 6,56,000

Optional: Cash Book Summary

Date Receipts Payments Balance

Apr 1 Capital ₹5,00,000 – ₹5,00,000

Apr 2 – Furniture ₹80,000 ₹4,20,000

Apr 8 Sales ₹90,000 – ₹5,10,000

Date Receipts Payments Balance

Apr 12 – Rent ₹20,000 ₹4,90,000

Apr 15 – Advertisement ₹10,000 ₹4,80,000

Optional: Depreciation Schedule (2025)

Asset Original Value Depreciation Rate Depreciation Net Book Value

Furniture ₹80,000 5% ₹4,000 ₹76,000

Additional Notes (Theoretical)

Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. In
this project, furniture has been depreciated by 5% using the straight-line method.

Commission and Advertisement are treated as indirect expenses and are written off in the
Profit & Loss Account.

Suggested Photos or Visuals

• Picture of a ledger or voucher

• Screenshot of Excel trial balance

• Sample invoice used in journal entry

• Flowchart of accounting process (Transaction → Journal → Ledger → Trial Balance →

Financial Statements)

15. Conclusion

This accounting project offered a comprehensive practical experience of how accounting is

applied in a business environment. Through journal entries, ledger accounts, trial balances, and
financial statements, it reflects the financial discipline that every business must adhere to. It
also highlighted the importance of accuracy, compliance, and the role accounting plays in
successful business operations.

Final Conclusion (Rewritten for Impact)

This project has demonstrated the comprehensive structure of the accounting cycle, from basic
entries to financial statement preparation. It bridges theoretical knowledge with practical
execution, enabling a deeper understanding of how financial information is processed,
interpreted, and reported. By creating realistic transactions and reflecting them through proper
formats, we have understood the real value of accounting as both a record-keeping and
decision-making tool.
.