Class notes

Meaning of accounting cycle The accounting cycle is the complete sequence of accounting processes or procedures which begin with the recording of business transactions in the book or books of original entry and end with the preparation of final accounts, and which are repeated in the same order in each accounting period. Diagram showing accounting process of an accounting cycle: The sequential steps involved in the accounting cycle are 1.Recording the business transactions in a journal or special journals Recording the business transactions date wise in the book or books of original entry called the journal or in a number of books of original entry called the special journals or subsidiary books, as and when they occur. 2. Classifying the transactions through posting to  ledger periodically Classifying the transactions (i.e., the entries found in the book or books of original entry) by posting or transferring those entries to the appropriate accounts in the Ledger perio...

Rules of accounts Rules of accounts under English system The procedure of debiting and crediting the different kinds of accounts under English system has been summarised as under 1.Personal accounts Debit the receiver Credit the giver 2. Real or property accounts Debit what comes in Credit what goes out 3. Nominal or fictitious accounts Debit expenses or losses Credit incomes or gains Applying the rules of debit and credit under English system 1.Understand clearly the meaning of a transaction given in the problem. For example:  commenced business with ₹10000 2.Find out which two accounts affected in the above transaction. Cash a/c Capital a/c 3.Find out to which class the above two accounts belong Cash a/c belongs to Real account Capital a/c belongs to representative personal account 4.Apply the respective rules to the two accounts Cash comes in to the business , so,as per real account rule - debit what comes in will apply here. Owner is the giver and he represents personal accou...