Accounting Process

ACCOUNTING PROCESS AFTERSCHO☺OL – DEVELOPING CHANGE MAKERS CENTRE FOR SOCIAL ENTREPRENEURSHIP PGPSE PROGRAMME – World’ Most Comprehensive programme in social entrepreneurship & spiritual entrepreneurship OPEN FOR ALL FREE FOR ALL

let us change the world www.afterschoool.tk

afterschoool AFTERSCHO☺OL's - PGPSE MATERIAL - online mba programme FORwww.afterschoool.tk PGPSE PARTICIPANTS

ACCOUNTING PROCESS Dr. T.K. Jain.

AFTERSCHO☺OL Centre for social entrepreneurship Bikaner M: 9414430763 [email protected] www.afterschool.tk, www.afterschoool.tk let us change the world www.afterschoool.tk

afterschoool AFTERSCHO☺OL's - PGPSE MATERIAL - online mba programme FORwww.afterschoool.tk PGPSE PARTICIPANTS

GOALS OF ACCOUNTING • To provides complete and accurate information • To enable a business firms to have proper record of transactions • To identify the results of business transactions • To enable proper tax payments and proper legal administration let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

Systems • Single entry system (generally cash book is maintained, for non-cash transactions, you make entries in respective accounts) • Double entry system (For each transaction, there are two aspects and debit and credit total is always equally. It is easier to rectify errors).

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

FEATURES OF SINGLE ENTRY • • • • •

Maintenance of personal accounts : Usually under this system, personal accounts are maintained while real and nominal accounts are avoided. Maintenance of cash book : A cash book is maintained which usually mixes up both personal transaction and business transaction. Dependence on original vouchers : In order to collect the necessary information, the original vouchers are referred. No uniformity : The application of this system may differ from firm to firm as per its individual requirements and convenience. Similarity: The system is suitable in case of small proprietary or partnership concerns.

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

WHAT IS STATEMENT OF AFFAIRS •

Statement of affairs is a statement of assets and liabilities of a business on a particular date. It is virtually the balance sheet of the business and has got two sides, assets side and liabilities side. All the assets of the business are listed on the assets side. The amount of cash in hand, cash at bank and those due from debtors appear at their correct figure but all other assets are shown at their estimated values.

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

HOW TO ASCERTAIN PROFIT IN SINGLE ENTRY SYSTEM ? • • • •

•

Take help of statement of affairs. Calculation of Capital at the beginning : For this purpose a statement of Affairs is prepared for the beginning of the period. The balancing figure is treated as capital at the beginning of the period. Calculation of Capital at the end : For this purpose also a Statement of Affairs is prepared for the end of the year and the balancing figure is treated as capital at the end. Adjustment of Capital at the end : For this purpose, drawing made during the year is added to the capital at the end and deduct there from the additional capital introduced during the year. Drawings are added to the capital at the end because any drawings made during the year can reduce capital at the end but not profit. The fresh capital introduced is deducted from the capital at the end because any increase in capital at the end due to introduction of capital during the year is not an increase in capital due to profits made during the year. Calculate the difference : The difference between capital in the end and capital in the beginning gives profit

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

HOW TO SWITCH OVER FROM SINGLE ENTRY TO DOUBLE ENTRY

• You can go for conversion of all the accounts or you may also go for step by step conversion.

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

CONVERSION FROM SINGLE ENTRY TO DOUBLE ENTRY •

• •

• • •

All the accounts appearing in the Statement of Affairs as in the beginning of the year should appear in ledger. Accounts which are not already there in the ledger should be opened with opening balances as appearing in the Statement of Affairs. Cash Account in the form of Cash Book and the accounts of trade debtors and trade creditors would already be there. Other personal accounts and all real accounts will have to be opened. The items which have not already been posted form the Cash Book will have to be posted to the relevant accounts. It will mean that all the nominal accounts will also be opened. The accounts of all the customers and suppliers will be analysed and double aspect of all those transaction will be completed whose double aspect has not already been completed. It will be mean that Sales Account, Purchases Account, Sales Returns Account, Purchases Returns Account, Bad Debts Account, Discount Account etc., will also be opened in ledger. Transactions which have not been recorded so far will now be recorded. For example entries will have to be made for outstanding expenses, depreciation of assets, income received in advance, etc. Trial balance will be prepared. If it does not agree, errors will be located and rectified till the trial balance agrees. Final accounts and balance sheet will be prepared.

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

WHAT ARE THE TYPICAL ACCOUNTING ENTRIES..? • • • • • • • • • • •

On receiving application money : Bank a/c dr. To Share Application and Allotment A/c On allotment : Share application dr. To share capital a/c On calls : Share Calls a/c dr. To share capital account Bank a/ c dr. To share calls a/ c

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

Basic principles : • Debit what comes in, credit what goes out • Debit the receiver, credit the giver • Debit all expenses and credit all income.

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

HOW TO ENSURE ERROR FREE ENTRIES… • Prepare trial balance every month • Prepare bank reconciliation statement • Prepare control accounts (control accounts like debtors control account and creditors accounts are prepared). • Establish proper internal control system – ensure that every transaction is properly verified – so that there is no possibility of error) let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

What are non-profit organisations?? • NPOs, NGOs, VOs, are registered under section 25 of companies act or societies registration act or Indian trust act or other such law.

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

Objectives of NPOs •

• • •

•

The main aim of non-profit organizations is to render services to various sections of the society for which people of the society will be charged either free of cost or charge at no profit and no loss basis. Non-profit organization raise funds from agencies who neither accept return for their donations nor desire benefits for the resources they provide. Such organizations earn their reputation on the basis of their contribution to the society. There is no individual or joint ownership as regards non-profit organisations. The identity on behalf of the society is considered as the honour and its ownership can neither be transferred nor be sold. Management of the organization is entrusted to persons having interest in rendering services and who have no recoverable investment with them.

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

WHAT ARE ACCOUNTING IN NON PROFIT ORGANISATIONS? • They are not for profit, so they don’t prepare P&L account but prepare receipt and payment account and income and expenditure account. • Receipt and payment account is like cash book and income and expenditure

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

RECEIPT AND PAYMENT ACCOUNT • Left side is receipt, right side is payment, the closing balance is equal to cash in hand.

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

Income and expenditure account • Left side is expenditure and right side is income and the balance is surplus (we don’t call it profit) or deficit (we don’t call it loss).

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

RECEIPT AND EXPENDITURE ACCOUNT • Similar to income and expenditure account • Left side is expenditure (on accruel basis) and right side is receipt (on cash basis) and we also provide for outstanding income – but make a provision for this also • Maintained by professionals like doctors, consultants, architects let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

FINAL ACCOUNTS OF FIRMS • P & L ACCOUNT, BALANCE SHEET, • After these : • P & L APPROPRIATION ACCOUNT

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

FINAL ACCOUNTS OF COMPANIES • BALANCE SHEET - Part I of Schedule VI • Profit & loss : Part II of Schedule VI, •

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

Some requirements … • Profits have to be declared as per accounting systems • Dividends have to be declared after providing for reserve, last year loss, depreciation, interest, and other such matters. • Divident has to be approved by the shareholders, who can reduce it but cant increase (from what has been suggested by the board of directors). let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

PRECAUTIONS… • Accounts have to be varified to ensure that that they are true and fair • They have to be authenticated by the directors / secretary to ensure that the accounts are properly verified.

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

About AFTERSCHO☺OL • PGPSE - World’s most comprehensive programme on social entrepreneurship – after class 12th • Flexible – fast changing to meet the requirements • Admission open throughout the year • Complete support from beginning to the end – from idea generation to making the project viable. let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

Branches of AFTERSCHO☺OL • PGPSE programme is open all over the world as free online programme. • Those who complete PSPSE have the freedom to start branches of AFTERSCHO☺OL • A few branches have already started one such branch is at KOTA (Rajasthan).

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

Workshop on social entrepreneurship • We conduct workshop on social entrepreneurship – all over India and out of India also - in school, college, club, association or any such place - just send us a call and we will come to conduct the workshop on social entrepreeurship. • These workshops are great moments of learning, sharing, and commitments. let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

FREE ONLINE PROGRAMME • AFTERSCHO☺OL is absolutely free programme available online – any person can join it. The programme has four components : • 1. case studies – writing and analysing – using latest tools of management • 2. articles / reports writing & presentation of them in conferences / seminars • 3. Study material / books / ebooks / audio / audio visual material to support the study • 4. business plan preparation and presentations of those plans in conferences / seminars let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

100% placement / entrepreneurship • AFTERSCHO☺OL has the record of 100% placement / entrepreneurship till date • Be assured of a bright career – if you join AFTERSCHO☺OL

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk

Pursue professional courses along with PGPSE • AFTERSCHO☺OL permits you to pursue distance education based professional / vocational courses and gives you support for that also. Many students are doing CA / CS/ ICWA / CMA / FRM / CFP / CFA and other courses along with PGPSE. • Come and join AFTERSCHO☺OL

let us change the world

afterschoool - PGPSE - online mba programme www.afterschoool.tk