UNIT–II: Processing transactions- Double entry system – recording of transactions- Trial Balance- income measurement – accrual accounting – adjustment process – preparation of financial statement.
Processing Transactions
Many business organizations have to process thousands of business transactions. They have to record transactions systematically so that they can prepare financial and other statements. They use formal records to keep track of the multitude of transactions that affect them. In this chapter, you will find out how the accounting system records and stores the effects of any type of business transactions, regardless of the size and complexity of the business. Accounts: An accounting system classifies transactions into meaningful categories in order to prepare financial statements and other reports. To facilitate quick and easy retrieval of data, the company records transactions in accounts. An account is an individual record of increases and decreases in an item that is likely to be of interest or importance. An accounting system has separate accounts for revenue, expenses, and asset, liability and equity items. Ledger: It is the file or binder that contains the entire group of accounts of a business. Accounts in the ledger are usually arranged in the following order: assets, liabilities, equity, revenues, and expenses. A chart of accounts is a complete listing of the account titles used in an organization.
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Recording Transactions This includes journals, ledgers, trail balance. In the next page, you can see the material of above. Here, study material is given in depth with good no. of illustrations on journals, ledgers, and trail balance. Students of Gitam Institute of Management need not go in depth of this as we will get sums from Profit and loss account and Balance Sheet and adjustment which is very important. Here material is given in depth as to get knowledge of that. You should be thorough in profit and loss account and balance sheet – adjustments.
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