36 Account Basic by Mukesh Agarwal Sir

8/8/2019 36 Account Basic by Mukesh Agarwal Sir

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By MUKESH AGARWAL SIR

Mob.: +98930-16415

E-mail: [email protected]

Basic Accounting:Basic Accounting:

Concepts, Techniques,Concepts, Techniques,and Conventionsand Conventions



AECs New Batch for CA-CPT

Subjects Fees Classes By Time & Day1. Account

(60 Marks)

Rs. 10,000/- Mukesh Agarwal 10:00 am to 12:00 pmThursday, Friday & Saturday

2. Quantitative Aptitude

(Math + Stats)

(50 Marks)

Rs. 1,000/- Satellite Class 12:00 pm to 1:00 pm

Every Friday & Saturday

3. Mercantile Law(40 Marks)


Every Thursday

4. General Economics(50 Marks)


Every Sunday

Contact at: E-mail:

AECIndia [email protected]

208, Gopal Madhav Extension Place Contact No.:

Shinde ki Chhawani, Gwalior (MP) (+91) 9893016415

Starting from 2nd August 2010Enrol and save your Seat.... Today

(only 14 Seats are rest)

DOWNLOAD REGISTRATION FORM

And Form Purchase from Punjab National Bank, Jaindraganj, Gwalior (MP)



The Need for Accounting

Managers, investors, and other internal groupsManagers, investors, and other internal groups

want the answers to two important questions:want the answers to two important questions:

How well did

the organization

perform? Where does

the organization

stand?




Accountants answer these questionsAccountants answer these questions

with three major financial statements:with three major financial statements:

IncomeIncome

statementstatement

BalanceBalance

sheetsheet

Statement of Statement of

cash flowscash flows




A transactiontransaction is any event that affects the

financial position of an organization

and requires recording.



Balance Sheet

The balance sheet (also called statement of

financial position or statement of financial

condition) is a snapshot of the financial

status of an organization at a point in time.



Balance Sheet

Assets are economic resources that

are expected to benefit futureactivities of the organization.

Liabilities are the entitys economic

obligations to no owners.

Owners equity is the excess

of the assets over the liabilities.



Balance Sheet

Stockholders equity

Paid-in

capital

Retained

earnings

The owners equity of a corporation

is called stockholders equity .



Learning Objective 2

Analyze typical business

transactions using thebalance sheet equation.



AEC Hardware Transactions

Initial investment by owners: Rs.100,000 cash

Acquisition of inventory: Rs.75,000 cash

Acquisition of inventory on

open account: Rs.35,000

Merchandise costing Rs.1,00,000 was

sold on open account for Rs.1,20,000.




1)1) CashCash +100,000+100,000 +100,000+100,000

2)2) CashCash 75,00075,000

InventoryInventory + 75,000+ 75,000

3)3) InventoryInventory + 35,000+ 35,000 + 35,000+ 35,000

4a)4a) ReceivableReceivable +120,000+120,000 +120,000+120,000

4b)4b) CostCost 100,000100,000 100,000100,000

SubtotalSubtotal +155,000+155,000 + 35,000+ 35,000 +120,000+120,000

AssetsAssets == LiabilitiesLiabilities ++

StockholdersStockholders

equityequity

1,55,0001,55,000 1,55,0001,55,000




Cash collections of accounts receivable: Rs.15,000

Cash payments of accounts payable: Rs.20,000

On March 1, paid Rs.3,000 cash for store rent for

March, April, and May. Rent is Rs.1,000 per month.




5)5) CashCash + 15,000+ 15,000

ReceivableReceivable 15,00015,0006)6) CashCash 20,00020,000 20,00020,000

7)7) CashCash 3,0003,000

7a)7a) PrepaidPrepaid + 3,000+ 3,000

7b)7b) ExpenseExpense 1,0001,000 1,0001,000TotalTotal 21,00021,000 20,00020,000 1,0001,000

Totals (1Totals (1--4)4) +155,000+155,000 + 35,000+ 35,000 +120,000+120,000

AssetsAssets == LiabilitiesLiabilities ++

StockholdersStockholders

equityequity

134,000134,000 134,000134,000



The Analytical Power of the

Balance Sheet Equation

The balance sheet equation can highlight the link

between the income statement and balance sheet.

Assets (A) = Liabilities (L) + Stockholders equity (SE)

A = L + Paid-in capital + Retained income

A = L + Paid-in capital + Revenue Expenses



Retained Earnings

Retained earnings isRetained earnings is

a result of profitablea result of profitableoperations, it is not aoperations, it is not a

pot of cash awaitingpot of cash awaiting

distribution todistribution to

stockholders.stockholders.



AEC Hardware Company

Income StatementIncome Statement

for the Month Ended April 30, 20xxfor the Month Ended April 30, 20xx

Sales Rs.85,000Cost of goods sold __ 70,000

Gross profit Rs.15,000

Operating expenses:

Rent Rs. 1,000Wages __6,600 __ 7,600

Net income Rs. 7,400




Statement of Retained Earnings

for the Month Ended April 30, 20xx

Retained earnings, March 31, 20XX Rs.19,000Add: Net income for April 7,400

Total 26,400

Deduct: Drawings/Dividends 18,000

Retained earnings, April 30, 20xx Rs. 8,400




Balance Sheet as of April 30, 20xx

AssetsAssets

CashCash Rs. 60,000Rs. 60,000Accounts receivableAccounts receivable 102,000102,000

InventoryInventory 20,00020,000

Prepaid rentPrepaid rent 1,0001,000

Total assetsTotal assets Rs.183,000Rs.183,000




Liabilities and Stockholders Equity

LiabilitiesAccounts payable Rs. 71,000

Accrued wages payable 600

Unearned sales revenue 3,000 Rs. 74,600

Stockholders equityPaid-in capital Rs.100,000

Retained income 8,400 108,400

Total equities Rs.183,000

Balance Sheet as of April 30, 20xx





Generally Accepted

Accounting Principles (GAAP)

Accounting is based

on a set of principles

on which there is

general agreement,

not on rules that

can be proved.



36 Account Basic by Mukesh Agarwal Sir

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