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03 Process of Accounting

Types of Accounts

Account Debit Credit
Personal Receiver Giver
Real What comes in What goes out
Nominal Expenses & Losses Income & Gains

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Accounting Equation

Assets + Expenses Liabilities + Equity + Revenue
Increases Dr. Cr.
Decreases Cr. Dr.

Accounting Cycle

flowchart LR
sd[Source<br/>Documents] -->
|Journalize| Journal -->
|Posting| Ledger -->
tb[Trial<br/>Balance]-->
fs

subgraph fs[Financial<br/>Statements]
    direction LR
    bs[Balance<br/>Sheet]
    pl[Profit-Loss/<br/>Income]
    cf[Cashflow]
end

Journal

Record of transactions, regardless of income, expenses, etc

Date Particulars Debit(Dhs) Credit(Dhs)
2022-01-01 Cash A/C Dr. 20,000
To Capital A/C 20,000
(Being commencement of business)

To means: Debitor(Dr.) is indebted to Creditor(Cr.)

Purpose

  • provides permanent record
  • provides information of debit and credit in an entry and an explanation
  • reduces the possibility of error as both aspects of a business transaction are written side by side

Compound Journal Entries

Date Particulars Debit (Dhs) Credit(Dhs)
2022-01-01 Cash A/C Dr. 20,000
To Electricity Company 10,000
To Water Company 10,000
(Expenditure on Utilities)

Transactions involving Discount A/C are always compound journal entries

Ledger

Summary statement of all the transactions relating to a person, asset, expense or income which have taken place during a given period of time and shows their net effect

  • Debit side = Receipts side
  • Credit side = Payment side

It is in a ‘T’ form

T Account - What Is It, Examples, Format, Related Terminologies

Dr < Account Name > Cr.
Date Particulars Amount Date Particulars Amount
2022-01-01 To Credit A/C 2022-01-01 By Debit A/C
Total \(d\) Total \(c\)

Overage Balance

Overage = surplus of debit/credit

Symbol Meaning
C/D Carried Down
B/D Brought Down
Case Dr Cr
\(d>c\) To Balance B/D By Balance C/D
\(d<c\) To Balance C/D By Balance B/D

Trial Balance

List of overages of the ledger accounts at a particular point of time

The selected side (debit/credit) is the one having the amount brought down to next period.

If everything is right, the trial balance should result in

\[ \sum \text{Debit Overages} = \sum \text{Credit Overages} \]
S. No Name of A/C Debit (Dhs) Credit (Dhs)
\(a\)
\(b\)
Total \(k\) \(k\)
Last updated: 2024-12-26 • Contributors: AhmedThahir,

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