P acc bcs

Introduction To Accounting
• The need for recording business transactions was felt even in early
day of life. The old accounting mostly dealt with the simple and
limited number of transactions of private and government
enterprises.
• Accounting function is vital for every entity of the society whether
that is an individuals, business entity, nonprofit making organizations
like municipalities, clubs, etc. All are required to maintain accounts.

• Accounting is commonly referred to as the “language of the
business” as it is effectively employed to communicate the
financial performance of business to various interested parties
or stakeholders. It is concerned with the measurement and
communication of financial data.

The term accounting can be defined in different
ways as under:
• Accounting is the basis for business decisions. It means that the
primary purpose of accounting is to provide information that is useful
for decision making purpose.
• Accounting is a language of business. It means that accounting is
widely used to describe all type of business activities; Costs, Prices,
Sales Volume, Profit, ROI are all accounting measurements.

 Accounting is an art of identifying, recording, classifying, summarizing and
interpreting all those business transactions which can be presentable in
monetary terms and useful for all stakeholders or users to make better financial
decisions

Objectives of Accounting
• To organize the financial details of a business.
• To identify the financial transactions.
• To organize the financial data into useful information.
• To measure the value of these information in terms of money.
• To analyze, interpret, and communicate the information to persons or
groups, both inside or outside the business.

Users of Accounting
• The purpose of accounting is to provide information about the
financial operations and conditions of an enterprise to the interested
parties. These parties normally includes the following:
• The Owner
• The owners of the business want to know the financial status of their
business and income earned or loss suffered.

 Managerial Personnel
The managers of the business need the information for decision making techniques.
 Creditors
The investors and creditors of the business are interested to know the profit-earning capacity of
the business and its financial position. Those who supply goods and services on credit, or banks
and individuals who lend money to the business are called creditors.
 Employees
Employees are also interested in the stability of the business in which they are employed.

 Government Agencies
Government agencies are also keenly interested in incomes and other business activities of the
organization.
 Others
For example, customers and clients, labor unions, trade associations and journalists etc. are also
interested with the business world.

Major Field of Accounting
• Financial Accounting is concerned with general accounting system.
The chief purpose of financial accounting is to calculate profit or loss
made by the business during the year and exhibit financial position of
the business as on a particular date.
• Cost Accounting function is to ascertain the cost of a product and to
help the management in the control of cost.

Management Accounting is the accounting that provides necessary information to the management
for discharging its function. It is the reproduction of financial accounts in such a way as will enable the
management to take decisions and to control activities.
Forensic Accounting/Auditing is concerned with checkup and review of the accounting. The field
involves testing and examining the records of an enterprise to be certain that they are fair and
accurate.

Single Entry and Double Entry Accounting
The Single Entry System records only cash movement of transactions and that too up to the extent of
recording one aspect of the transactions. This means that only receipt or payment of cash is recorded
and no separate record is maintained (about the source of receipt and payment) as to from whom the
cash was received or to whom it was paid.
Double entry or commercial accounting system records both aspects of transaction i.e. receipt or
payment and source of receipt or payment. It also records credit transactions i.e. recording of
electricity bill or accruals of salary payment etc.

Accounting Terminologies
• Transaction
In accounting or business terms, any dealing between two businesses or persons involving
money or a valuable thing is called transaction.
• Voucher/Invoice
• Voucher is documentary evidence in a specific format that records the details of a
transaction. It is accompanied by the evidence of transaction.
• Assets
• Any property or Investment which can be convertible into cash.
• Liabilities
• Amount payable to providers of goods and services (Creditors) and providers of capital
(Owners).

 Revenue
Amount earned out of the sale proceeds and the amount earned on investments.
 Expense
Amount incurred or expended to earn the revenue.
Profit = Total revenue – Total expanses
 Loss
If the total expenses is more than total revenue it is termed as loss.
 Sales
Sales can be defined as the economic price paid by customers or the amount received by selling good to
the customers or the goods which are sold for the purpose of profit is called sale.
 Sales Returned
The goods which are returned by the customers due to some defect is called sale returned.
 Account Payable (Creditors)
Person who provide money or goods on credit to the business (Supplier).

 Account Receivable (Debtors)
Goods sold/or money provided on credit by the business (Customers).
 Account
A summarized record of a transaction relating to a person or things is called an account.
 Purchases
Any things which are purchase for resale purpose is called purchase.
 Purchase Returned
The goods which are returned to supplier due to defect is called purchase returned.
 Commission
It is a form of compensation for services which is provided by one person to another. Commission
Received: it is income for business and received when we do some work for others or provide service.
Commission Allowed: it is expense for a business and paid to others when they do some services for us.

 Discount
o Trade Discount: it is a rebate or allowance from the scheduled price granted by the seller to
the buyer. No entry passed in journal the discount (made direct payment to payer e.g. not
written in the bill).
o Cash Discount: it is deduction or allowances allowed by a creditor to a debtor and it
motivates the debtors to pay before the due date.
• Discount receive is income and discount allowed is an expense.

 Depreciation
Depreciation is the diminution (decrease) in the value of assets due to use, wear and tear and efflux of
time. It is an estimate charge against profit for use of fixed assets. The provision for depreciation is to
create funds for replacement of assets. It may either be written off against asset accounts or it may be
Depreciation Provision Account keeping Asset Account at cost.
 Drawing
The cash and goods taken away by the owner from business for his personal use are called drawings.
 Goodwill
This is simply the value attached to the good reputation earned by the business through good and clean
conduct of business over a number of years. This good reputation also has a value and becomes part of
investment in business.
 Reserve
Reserves are amounts that are retained in the business and not distributed to the owners.

 Prepaid Expense
The expense which is paid in advance is called prepaid expense and treated as an asset.
 Unearned income
The income which is received but not earned (no goods or services provided to the customer) is called
unearned income and treated as a liability.
 Merchandise (Goods)
It includes all merchandise commodities which are purchased by the business or selling.
 Inventory (Stock)
Goods and merchandise on hand, that is goods remaining unsold, is called, stock, stock-in-trade, or
inventory.

Comparison of American and British Accounting Terms

BRITISH ACCOUNTING TERMS AMERICAN ACCOUNTING TERMS
Goods Merchandise
Capital Owner’s Equity
Profit Income
Debtors Account Receivable
Creditors Accounts Payable
Accounting Period Fiscal Period
Accounting Year Fiscal Year
Debit Note Debit Memorandum
Credit Note Credit Memorandum

BRITISH ACCOUNTING TERMS AMERICAN ACCOUNTING TERMS
On Credit On Account
Opening Stock Opening Inventory (Beginning Inventory)
Closing Stock Closing Inventory (Ending Inventory)
Gross Profit Gross Income/Gross Margin
Profit & Loss Account Income Statement
Income Revenue
Net Profit Net Income
Bills Receivable Notes Receivable
Bills Payable Notes Payable
Bad Debts Uncollectable
Provision for Bad Debts Allowances for Uncollectable
Company Corporation
Shares Stock
Shareholder Stock-holder
Ordinary Share Common Stock
Bonus Shares Stock Dividend
Profit & Loss Appreciation Account Retained Earnings
Cheque Check

Accounting life cycle
The term accounting cycle refers to the framework and processes followed in each accounting
period. The accounting cycle begins with the identification of events and transactions, and ends
with the after-close trial balance.
The accounting cycle is a conceptual framework that describes the process a company goes
through each accounting period. While the exact number and description of the steps in the cycle
is somewhat subjective, the core processes include:

 Journalisation of Transactions
Identification of events and transactions as they occur and recording them using the proper journal entry.
 Posting to Ledger
Transferring the journal debits and credits to the proper ledger accounts.
 Trial Balance and Adjustments
Includes the preparation of various worksheets to prove debits equal credits, and perform adjusting entries
such as accruals.
 Preparing Financial Statements
Company's balance sheet, income statement, and statement of assembly of accounting information to
construct the owner's equity.
 Closing Accounts
Reducing the balance of temporary accounts to zero in preparation for the journalization of transactions
associated with the next accounting period.
 After-Close Trial Balance
Following the closing of accounts and adjustments, this step proves that debits are still equal to credits.

Transaction
Journals
Ledger
Trial
Balance
Financial
Statements

Major Accounts and Rules of Debit and Credit
There are five major accounts under American approach:
 Assets account
 Expenses account
 Liabilities account
 Revenues account
• Owner Equity account

NATURE OF
ACCOUNT
DEBIT CREDIT
Assets Increase Decrease
Expenses Increase Decrease
Liabilities Decrease Increase
Revenues Decrease Increase
O.E Decrease Increase

DEBIT CREDIT
Increase in Assets and Expenses Decrease in Assets and Expenses
Decrease in O.E, liabilities, and income Increase in O.E, liabilities, and Income

Illustration – 1
1. Started business with cash AFN 20000.
2. Purchased merchandise for cash AFN 1000.
3. Sold merchandise to A AFN 3000.
4. Purchased merchandise from C AFN 2000.
5. Purchased furniture for cash AFN 400.
6. Received from A AFN 1000.
7. Paid to C AFN 2000.
8. Sold merchandise for cash AFN 3200.
9. Paid rent AFN 1100.

Item Accounts Involved
Account to be
Debited
Account to be
Credited
Kinds of Account Effect
1 Cash
Capital
Cash Capital Asset
O.E
(+)
(+)
2 Purchases
Cash
Purchases Cash Expense
Asset
(+)
(-)
3 Account Receivables – A
Sales
A/R – A Sales Asset
Revenue
(+)
(+)
4 Purchases
Account Payable – C
Purchases A/P – C Expense
Liability
(+)
(+)
5 Furniture
Cash
Furniture Cash Asset
Asset
(+)
(+)
6 Cash
Account Receivable – A
Cash A/R – A Asset
Asset
(+)
(-)
7 Account Payable – C
Cash
A/P – C Cash Liability
Asset
(-)
(-)
8 Cash
Sales
Cash Sales Asset
Revenue
(+)
(+)
9 Rent
Cash
Rent Cash Expense
Asset
(+)
(-)

Illustration
1. Started business with capital of AFN 10000.
2. Purchased office equipment for AFN 2000 on account.
3. Purchased office supplies for cash AFN250.
4. Paid AFN 1500 to the corporation from which the office
equipment was purchased.
5. Salary paid AFN 1200.
6. Paid for office rent AFN 500.
7. Paid telephone bill AFN 200.

1.Capital introduced by the proprietor 50000.
2.Purchased furniture for cash 3000.
3.Merchandise purchased from Ali 2000.
4.Merchandise sold for cash 6500.
5.Salaries paid to the staff 1200.
6.Received cash from Hassan 3400.
7.Paid Rent AFN 1050.
8.Food charges paid AFN 500.

Journal
It is a book in which all the transactions of a business are
recorded first.
It is also known as a book of original record, a book of original
entry or day book because the day to day transactions are
recorded in it

Form of Journal
Date Description Ref. Dr. Cr.

Date column is used for writing the date of transaction occurred.
Description is used for recording the names of two or more accounts affected by
the transaction.
Reference is used for noting the number of the page of the ledger on which the
particular account appears in that book.
Debit a place where you have to write the value of amount that is debited to an
account.
Credit a place where you have to write the value of amount that credited to an
account.

Rules of Journalizing
The act of recording transactions in journal is called journalizing.
The rules may be summarized as follow:
Use two separate lines for writing the names of the two accounts concerned in
each transaction.
Write the names of debtors or account to be debited in the first line and the
name of the creditor or the account to be credited in the next line.
To separate one entry from another a line is drawn below. Every entry to cover
descriptions column only. The line does not need extend to amount column.

Illustration – 1
On first January, Abdul Salam started business with a capital of AFN 200000
and his transactions of the month were as follows:
Jan 2 Purchased building for cash AFN 5000.
8 Purchased goods from C AFN 10000.
15 Sold goods for cash AFN 4000.
20 Goods returned to C AFN 500.
25 Rehman returned goods AFN 100.
31 Salaries paid for the Month AFN 50000.
31 Rent paid for AFN 2000.

Illustration –2
On 1st April 1991 a merchant started business with a capital of AFN 15000
April 2 Bought machinery for AFN 7000.
3 Bought furniture from Salman AFN 1000
7 Purchased goods for cash AFN 2500.
8 Sold goods to Rahman & Sons AFN 1500.
10 Purchased goods from B AFN 1000 and from C AFN 2000.
12 Received cash from Rahman & Sons AFN 1450. Allowed him discount of AFN 50.
15 Paid B cash AFN 975. Discount received AFN 25.
16 Returned goods to C AFN 500.
17 Sold goods to Din Muhammad AFN 800.
20 Goods returned by Din Muhammad AFN 200.
21 Purchased from Karim goods of the list price of AFN 600 subject to a 10% cash trade
discount.
22 Paid C cash AFN 1500.
28 Amount withdrawn by the proprietor for private use AFN 200.
31 Salaries paid for the month AFN 500.

Illustration – 3
On 01 March 1991 Jaleel started his business by introducing
a machine valuing AFN 2000 and cash AFN 13000.
5 Bought furniture for cash for office AFN 500.
8 Purchased goods from Khalid Bros. AFN 3000.
15 Sold goods to Farman & Co AFN 450.
17 Paid Khalid Bros. AFN 2985; Discount received AFN 15.
18 Purchased goods from Noor. AFN 800.
20 Paid food expenses in cash AFN 100.
22 Paid for office stationary AFN 250.
23 BOught a typewriter for cash for office use AFN 900.
24 Farman & Co-returned goods worth AFN 100.
26 Paid insurance premium AFN 450 for one year.
28 Drew cash for private expenses AFN 50.
31 Paid rent AFN 200; office salaries AFN 500.

Bank
Cash
(cash paid into bank OR current account opened)
15000
15000
Understanding Bank Transactions
(A) WHEN CASH IS DEPOSITED INTO THE BANK (OR) CURRENT
ACOUNT IS OPENED.
Transaction: Deposited cash AFN 15000 into the bank or opened current
account with bank.
Bank account is debited and cash account is credited as given below:

Cash
Bank
(cash withdrawn from the bank)
8000
8000
(B) WHEN CASH IS WITHDRAWN FROM THE BANK.
Transaction: Drew cash from bank AFN 8000 for office use.
Cash account will be debited and bank account credited as given below:

Fixed Deposit
Cash
(fixed deposit account opened)
50000
50000
(C) WHEN FIXED DEPOSIT ACCOUNT IS OPENED.
Transaction: Fixed deposit account opened for AFN 50000.
Fixed deposit account will be debited and cash account credited as given
below:

Cash
Fixed Deposit
(fixed deposit account opened)
50000
50000
(D) WHEN FIXED DEPOSIT ACCOUNT IS CLOSED.
Cash account is debited and fixed deposit account credited as given below:

Ledger
When all the transactions for a given period have been
journalized. The next thing is to classify them according to the
accounts affected. All similar transactions must be brought
together.
The ledger is a book which contains a condensed and classified
record of all the transactions posted from the books of original
entry.

The ledger contains the following features:
It has two identical sides – left-hand and right-hand side. The left-hand side is
called Debit and the right-hand side is called Credit.
Debit aspect of all the concerned transactions is recorded on Debit side, while
credit aspect on Credit side according to date.
The difference of the totals of the two sides represents balance. The excess of
Debit side over Credit side indicates debit balance, while excess of Credit side
over Debit side indicates credit balance. If the total of the two sides is equal,
there will be no balance.

Date Description Ref. Amount Date Description Ref. Amount
The genera form of ledger is as below:
Account…………………………

Illustration – 1
Journalize the following transactions and post them into the ledger accounts concerned:
2015 Jan. 1 Purchased goods for cash AFN 2000.
3 Sold goods to Karim AFN 500.
10 Received from Karim AFN 500.
15 Purchased Machinery for cash AFN 1000.
20 Cash sales AFN 300.
25 Sold goods to Rahim AFN 600.
28 Received from Rahim AFN 590 and Discount allowed 10.
30 Paid rent AFN 50.
31 Paid salaries AFN 100.

1991 Jan. 1
Purchases
Cash
(purchases by cash)
2000
2000
3
Account Receivables – Karim
Sales
(sales on credit to Karim)
500
500
10
Cash
A/R – Karim
(cash received from Karim)
500
500
15
Machinery
Cash
(machinery purchased)
1000
1000
20
Cash
Sales
(goods sold on )
300
300
25
Account Receivables – Rahim & Sons
Sales
(goods sold on credit)
600
600
28
Cash
Discount Allowed
A/R – R & S
(cash received and discount allowed)
590
10
600
30
Rent
Cash
(paid rent in cash)
50
50
31
Salaries
Cash
(salaries paid)
100
100

1.Capital introduced by the proprietor. 40,000
2.Purchased furniture for cash AFN 8000.
3.Merchandise purchased from Ali AFN 5,700.
4.Merchandise sold for cash AFN 12,000.
5.Salaries paid to the staff AFN 2,500.
6.Sold Goods to Hassan AFN 15,000
7.Received cash AFN 12,000 from Hassan.
8.Repair charges paid for Vehicle 2,300.

1. Businessman started business with investment AFN 80,000
2. Purchased building for cash AFN 9000.
3. Merchandise purchased from Khan AFN 6,000.
4. Merchandise sold to Ahmad for AFN 8,500.
5. Good purchased from Khan AFN 11,000
6. Sold Goods to Ahmad AFN 15,000
7. Received cash AFN 16,000 from Ahmad.
8. Paid to Khan 14,000
9. Salaries paid to the staff AFN 6,500.
10.Rent Exp paid for Vehicle 4,500.

1 Purchased furniture for office AFN 5000.
8 Purchased goods from Khalid M. AFN 3000.
15 Sold goods to Farman AFN 4500.
17 Paid Khalid . AFN 2800; Discount received AFN 200.
20 Paid trade expenses in cash AFN 100.
22 Paid for office stationary AFN 250.
23 Purchased a typewriter for office use AFN 900.
24 Farman returned goods worth AFN 1000.
26 Paid insurance premium AFN 450.
31 Paid rent AFN 200; office salaries AFN 500.

Illustration – 4
Record the following transactions in Journal.
1 Purchased merchandise for AFN 15,000 on account; terms being 2/10 – n/30.
4 Merchandise sold to Qasim Ali for AFN 5000; terms being 2/10 – n/30.
5 Purchased machinery for AFN 80,000 from Iqbal; terms being 1/5 – n/30.
7 Paid cash for merchandise purchased on January 01.
8 Received cash against Qasim.
9 Paid cash for inventory purchased from Iqbal.

Introduction to Cash Book
The book in which all cash transactions (either cash is received or
paid) are primarily recorded according to dates, is called cash
book.

 It has two identical sides-left hand side, the debit side and right hand side, the
credit side.
 All the items of cash receipts are recorded on the left hand side and all items of
cash payments on the right hand side in order of date.
 The difference between the total of two sides shows cash in hand.
 Its balance is verified by counting actual cash in the cash box.
 It always shows debit balance. It can never show credit balance.
The Cash Book Has the Following features,

'Cash Book is a Journal'. Thus we see that a Cash Book
is the 'mixture of Journal and Ledger'. According to
Spicer & Pegler, "the Cash Book is actually a ledger
account, but owing to the large number of entries
made therein, it is kept in a separate book, called a
Cash Book, which is used also as a book of prime
entry."

Three Kind of Cash Book
1:- Simple Cash Book (one column Cash Book).
2:- Cash Book with Discount Column (two column Cash Book).
3:- Cash Book with Discount and Bank Column (three column Cash Book).

Receipt PAYMENTS
Date Invoice Description Ref. Amount Date Invoice Description Ref. Amount
Balance Balance
Simple Cash Book
A simple cash book is maintained only in small enterprises. The page is divided into two halves, one
half (left leaf) is meant for receipts of cash and the other (right leaf) is used for recording all payments
of cash. Specimen of a simple cash book is as under:

Illustration – 1
Record the following transactions in Mr. Von Zugbach’s cash book and show the
transactions in respective ledgers.
January 01, Cash in hand AFN 1000.
2 Received AFN 1575 from a customer Sajjad, voucher No.1.
4 Paid AFN 500 rent of shop; voucher No.2.
5 Purchased equipment for AFN 250; voucher No.3.
8 Paid AFN 80 for a newspaper advertisement; voucher No.4.
10 Paid salaries to the receptionist AFN 750; voucher No.5.
20 Received AFN 1280 from sales; voucher No.6.
27 Paid AFN 85 for electricity bill; voucher No.7.
31 Received AFN 470 from Miss Rosemary; voucher No.8.

Cash Book with Discount Column
• When the discount is indicated on the voucher.
• A discount column is added on both sides of the cash
book to record discount allowed and received.
• Discount allowed is written on the debit side while
discount received is recorded in discount column on
the credit side of the cash book.

Illustration – 1
Record the following transactions in two column cash book and show them in the ledgers
concerned.
Feb 1989
1 Started business with cash AFN 20000.
2 Purchased furniture for AFN 2000.
8 Paid to supplier AFN 1000; received discount AFN 100.
15Cash sales AFN 1000.
20Received from Bukhari Sons AFN 2550; allowed discount AFN 50.
25Paid rent for the month AFN 400.
27Paid to Yasin Shah AFN 5000 less received 10% discount on total Payable.
28Received from Irfan Lodhi cash AFN 6000 allowed 5% discount on total receivable.
28Paid salaries AFN 1050.

Cash Book with Discount, Cash and Bank Columns
It is a book in which there are three columns to record the amounts on
each side (debit and credit side). First column is meant for discount, the
second for cash and the third for bank transactions.

Illustration – 1
1989 March Mr. Ahmad started business with AFN 3000 out of which AFN 2000 were
banked.
02 Paid by check to Batool AFN 350 and discount allowed AFN 30.
03 Purchased goods for cash AFN 500.
04 Cash sales for AFN 900 of which AFN 300 were banked.
05 Received from Jameel by check AFN 80; discount AFN 4 and deposited
into bank.
06 A safe was purchased for cash AFN 190.
07 Wages paid by check for AFN 60.
08 Paid in cash for personal expenses of the proprietor AFN 250.

Illustration – 1
Record the following transactions in two column cash book and show them in the ledgers concerned.
Jan 2016
1 Started business with cash AFN 2000.
2 Purchased Mobile for AFN 500.
8 Paid to Creditor AFN 900; received discount AFN 150.
15Cash sales AFN 3000.
20Received from Ahmad AFN 2500; allowed discount AFN 50.
25Paid Salary for the January AFN 400.
27Paid to Yasin Shah AFN 10,000 and receied received 10% discount on total Payable.
28Received from Aziz cash AFN 8,000 allowed 5% discount on total receivable.
28Paid Rent AFN 1050.

Illustration – 2
2015 April 1.
1. Cash at bank from previous month AFN 45,000.
2. Cash from previous month AFN 20,000
02 Bought office furniture by check AFN 900.
05 Received check from A for AFN 870; discount allowed AFN 20.
10 Paid check to M AFN 680 and discount received from him AFN 10.
15 Paid wages in cash AFN 170.
18 Received check from R AFN 2800 and discount allowed to him AFN 10.
19 Paid rent by check AFN 1500.
20 Drew from bank for office AFN 1000.
28 Sold merchandise and received check AFN 8000.
30 Drew from bank for office use AFN 500.
30 Paid into bank from office cash AFN 400.

Illustration – 3
Prepare a three column cash book from the following transactions of M.M.
Company for the period ending April, 2010.
1. AFN 30000 brought in by the owner on starting the business, of which AFN
15,000 were deposited into the bank.
2. Paid to Hanif 2000 and received 2% discount on total payable
3. Bought goods for AFN 3800. Paid by check
4. Cash sales of AFN 4000, of which AFN 3000 were banked.
5. Paid wages by check AFN 500.
6. Purchased an office safe for cash AFN 1500.
7. Paid cash for personal expenses of the owner AFN 600.
8. Cash withdrew from Bank for office use AFN 2,500

Illustration – 4
Prepare three column cash book from the following transactions:
1. Started business with cash AFN 20000. Opened a bank account with AFN 13000.
2. Received a check from Mahmood for AFN 450; allowed them discount AFN 20.
3. Paid to Kamran cash AFN 725; discount received AFN 25.
4. Paid to Saleem. AFN 790; received discount AFN 45.
5. Purchased furniture for cash AFN 900.
6. Cash Sales AFN 3000, of which 2000 was deposited into bank
7. Purchased merchandise for cash AFN 400.
8. Drew check for office AFN 1000.
9. Drew from business for personal use AFN 475.
10.Paid office rent AFN 250.
11.Paid salaries AFN 750.
12.Cash sales AFN 1200.

Following are the general types of financial statement.
 Balance Sheet
 Income Statement
 Cash Flow Statement
 Statement of Changes in Equity
 Notes to Financial Statements

Income Statement
The most important task of the accountant is to determine the profit earned by a
business during a specific period of time. Accurate measurement of profit (net
income) is essential because:
 It enables the owners and the creditors to evaluate the financial performance,
security and soundness of their investment in the business.
 It helps the management to make better the performance, implementation,
planning and control.

The income statement reflects the net income or loss earned by the business during a specific
period of time. Income statement serves the following purposes:
 To determine the profit earned and loss sustained during a particular period of time.
 To know the gross profit on sales to chalk out the selling policy.
 To know the operative expenses to control the cost of operation.
 To know the other income and expenses to help the management for the expansion
purposes.

Trail Balance
Desc Amt Desc Amt
Cash in Hand 49,000Capital 71,000
Purchases 43,000Income From Sale 65,000
Disccount Allowed 2,000Account Payble 3,000
Salary Exp 4,500
Transportation Exp 2,300
Depreciation Exp 1,600
Internet Charges 4,000
Rent Exp 5,200
Building 12,000
Machinary 8,900
Inventroy 6,500
139,000 139,000

Trail Balance for the month of February-15
Desc Amt Desc Amt
Purchases 61,000Sale 105,000
Disccount Allowed 4,000Account Payble 6,000
Salary Exp 5,300
Food Exp 3,100
Rent Exp 8,900
Computer 12,000
Furniture 4,500
Inventory 8,700
180,000 180,000

Trail Balance for the month of February-15
Desc Amt Desc Amt
Purchases 46,200Sale 105,000
Travel Exp 1,200Account Payble 9,200
Salary Exp 5,300
Depreciation 3,200
Rent Exp 8,900
Motor car 15,000
Furniture 4,500
Inventory 8,700
187,200 187,200

Trail Balance for the month of Auguest-15
Desc Amt Desc Amt
Cash at Bank 102,000Sale 260,000
Purchases 185,000Account Payble 46,000
Salary Exp 7,500Loan from bank for two year 60,000
Depreciation 2,500
Rent Exp 12,000
Motor car 20,000
Furniture 9,000
Inventory 16,000
Bad Dept 2,100
Debtor 24,500
475,000 475,000
Prepare the income statement and Balance sheet form Trail Balance

Trail Balance for the year of 2015
Desc Amt Desc Amt
Cash at Bank 185,000Sale 540,000
Salary Exp 35,000Loan from bank for two year 145,000
Travel Exp 12,000Creditor 23,000
Internet Charges 18,500Outstanding Salary 8,000
Adertisment Exp 25,900Accrued Rent 3,000
Rent Exp 24,000Loan for 9 Month 81,900
Furniture 29,000
Mobile 4,000
Stock 32,500
Bad Dept 23,000
Account Receivble 23,000
Advance Salary 50,000
Rent in Advance 40,000
1,031,900 1,031,900

Desc Amt Desc Amt
Cash 360,000Owner Investment 340,000
Bank 230,000Revenue from Sale 680,000
Survey Exp 35,000Loan from AIB Bank 175,000
Salary Exp 17,000Creditor 41,000
Food Exp 18,500Outstanding Exp 18,500
Rent Exp 31,000Accrued Rent 17,300
Stationery Exp 19,000loan from Azizi Bank 11 Month 90,000
Building 108,000 Purchase Return 3,500
Furniture 15,000
Inventroy 45,700
Debtor 19,200
Advance Salary 65,000
1,426,300 1,426,300

Desc Amt Desc Amt
Cash 360,000Equity 340,000
Bank 230,000Sale 780,000
Survey Exp 35,000Loan from AIB Bank 2 year 175,000
Salary Exp 17,000Creditor 41,000
Food Exp 18,500Purchase return 18,500
Rent Exp 31,000Outstanding Rent 17,300
Stationery Exp 19,000loan from Azizi Bank 11 Month 93,500
Building 108,000
Laptop 15,000
Inventroy 45,700
Sale Return 19,200
Bad Dept 65,000
1,526,300 1,526,300

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