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Class - 2

This document provides an overview of key accounting concepts: - It defines business transactions, assets, liabilities, income, expenses and how they relate to the accounting equation. - The main financial statements are introduced: the statement of financial position, profit and loss statement, cash flow statement, and statement of retained earnings. - Journal entries and different types of journals like general, adjusting and closing journals are described. - Key elements of the financial statements are outlined, such as the breakdown of assets and expenses in the statement of financial position, and how gross and net profit are calculated in the profit and loss statement.

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Anik Ghosh
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17 views

Class - 2

This document provides an overview of key accounting concepts: - It defines business transactions, assets, liabilities, income, expenses and how they relate to the accounting equation. - The main financial statements are introduced: the statement of financial position, profit and loss statement, cash flow statement, and statement of retained earnings. - Journal entries and different types of journals like general, adjusting and closing journals are described. - Key elements of the financial statements are outlined, such as the breakdown of assets and expenses in the statement of financial position, and how gross and net profit are calculated in the profit and loss statement.

Uploaded by

Anik Ghosh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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HB

ASSOCIATES
10th Batch
Class - 03
Today’s Topics:
 Business Transaction
 Assets & Liabilities
 Income & Expenditure
 Financial Statement
 Adjusting Journal
 Closing & Opening Journal
Business Transaction
 An event that involves a financial transaction between different parties.
 The transaction can be measured in monetary terms.
 The transaction could be a ‘Cash’ or a ‘Credit” transaction.
 Accounts will only keep track of Business Transactions.
Breakdown of Business Transaction

Liabilitie
Assets
s

Expenses Income
ASSETS

Fixed Asset Current Asset


• Building • Cash
• Furniture • Accounts Receivable
• Machineries • Inventory/Stock
• Land • Short Term Investment
• Long Term Investment • Advance Payment
EXPENSES

Direct Expenses Indirect Expenses


• Raw Materials • Office Rent
• Direct Labour • Staff Salary
• Freight Inwards • Office Utilities
• Factory Rent • Office Maintenance
• Factory Cost • Finance Cost
LIABILITIES
Long Term Short Term
Liabilities Liabilities
• Bank Loan • Accounts Payable
• Long Term Lease • Bank Overdraft
• Mortgage Loan • Short Term Debt
• Advance Received
• Outstanding Exp.
INCOME

Direct Income Indirect Income


• Sales of Good • Bank Interest
• Service • Sales of Scrap
Revenue
Ledger Balance
Credit
Debit Balance
Balance
Summation of Debit side is Summation of Credit side is
Higher than the Credit Side. Higher than the Debit Side.
Ledger Balance

Liabilitie
Assets
s

Credit Balance
Debit Balance

Expenses Income
ASSET LEDGER
Asset Ledger always indicate Debit Balance

Increase

Debit Credit

Decrease
EXPENSES LEDGER
Expenses Ledger always indicate Debit Balance

Increase

Debit Credit

Decrease
LIABILITIES LEDGER
Liabilities Ledger always indicate Credit Balance

Increase

Credit Debit

Decrease
INCOME LEDGER
Income Ledger always indicate Credit Balance

Increase

Credit Debit

Decrease
Journal
A journal is a used to records all the financial transactions of a
business
 Every Transactions must have a Debit Side and a Credit Side.
 Analyse how the transaction changed the accounting equation, whether it has
increased or decreased and by how much.
 Used in preparation of Ledger and Trail Balance.
Types of Journal
There are different kind of Journal Entries. Such as;
 General Journal
 Adjusting Journal
 Opening Journal
 Closing Journal
FINANCIAL STATEMENT
There are Four Main Primary types of Financial Statement
 Statement of Business Position
 Profit & Loss Statement
 Cash Flow Statement
 Statement of Retained Earnings
Statement of Business Position
 This is a statement of the assets, liabilities, and capital of a business.
 General Equation is Asset = Liabilities + Capital/Equity.
 The balance sheet displays the company’s total assets.
 How the assets are financed, either through debt or equity.
 Balance Sheet is used to fundamental Ratio analysis.
Statement of Business Position
Profit & Loss Statement
 The profit and loss statement is the summary of Revenues and
Expenses.
 Shows the Gross Profit of the Company.
 Direct Income – Direct Expenses = Gross Profit
 Shows the Net Profit of the Company.
 Gross Profit + Indirect Income – Indirect Expenses = Net Profit
 Profit and Loss of a Company include in Balance Sheet under Equity.
Cash Flow Statement
 Summary of the amount of cash and cash equivalents In and Out.
 Highlights a company's cash management.
 Cash Flow statement complements the Balance Sheet and the Profit &
Loss Statement.
 Movement of Cash divided under operations, investment and financing.
Statement of Retained Earnings
 Shows how much earnings a company has accumulated and kept in the
company since inception.
 Reconciles the beginning and ending retained earnings for the period.
 Net Profit / Loss is included here.
 Calculation:
Beginning Retained Earning + Net Profit /Loss = Ending Retained Earning.
Next Class’s Topics:
 Bank Reconciliation,
 Advance & Dues Expenses,
 Advance & Outstanding Income,
 AIT, VAT, PF,
 Depreciation,
 Provision.
THANK YOU.

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