Ch1

Accounting Equation
Asset = Capital + Liabilities

Ch2
Types of ledger
1 Sales ledger(All credit customers)
2 Purchase ledger (All credit supplier)
3 Nominal ledger (All ledger a/CS other than customer and supplier)
Format of Ledger Account
Dr Cr
Date Details F Amount $ Date Details F Amount $

Format of Three Column Running Ledger

Date Details F Debit $ Credit $ Balance $

CH3
Format of Trial Balance
Trial Balance at ………….
Name of Account (AED=LIC) F Debit $ Credit $

Asset XXX
Expenses XXX
Drawings XXX
Liabilities XXX
Incomes XXX
Capital XXX

Total XXXX XXXX

Types of Error Which Does Not affect Trial Balance

1. Commission - Same section /wrong Account
2. Complete Reversal - opposite side
3. Compensating - wrong side of 2 errors compensating each other
4. Omission - No entry Made
5. Original Entry - Wrong side / wrong amount
6. Principal - wrong Section /wrong account.
 Ch 4 Cash Book
Format of Cash Book (2 column)
Dr Cr
Date Details F Cash $ Bank $ Date Details F Cash $ Bank $

Receipts Payments

Format of Cash Book (3 column)

Dr Cr
Date Details F Discount Cash Bank Date Details F Discount Cash Bank
Allowed $ $ $ Received $ $ $

Receipts Payments

Ch 5 Petty Cash book

Format of Petty Cash Book
Analysis column
Date Details F Amount Date Details F Total Stationary Postage Repair Ledger
received paid $ $ $ $
$ $
 Ch 6 Business Documents

Documents Issued by Purpose Seller Books Buyer Books

Invoice Seller Record Sale/Purchase Sales Journal and Purchase journal

For buyer Sales ledger TR And Purchase
account Dr side ledger TP account
Cr side

Debit Note Buyer request for Reduction in NE NE

Invoice / Return

Credit Note Seller Approval of Debit Note Sales return Purchase return
Journal and journal and
Sales ledger, TR Purchase ledger
Account Cr side TP account Dr
side

Statement of Seller Reminder of monthly NE NE

account transactions and balance
due

Cheque Buyer Payment of amount Cash book Dr side Cash book Cr side
and and Purchase
sales ledger, TR ledger TP account
Account Cr side Dr side

Receipt Seller Acknowledgement of NE NE

money received
CH 7 Books of Prime Entry
1 Cash Book (transaction Related Cash, Bank, Discount allowed, discount Received)
2 Petty Cash Book ( small amount Transactions with analytical columns)
3 Purchase journal (only Credit Purchase of Goods)
4 Purchase Return Book
5 Sales book (only Credit Sales of Goods)
6 Sales Return book
7 General journal ( Opening entries ,Closing Entries, Adjustment Entries/ non regular entries,
Rectification of Errors and Purchase and Sales of Non Current Asset on Credit) -Ch15

Format of Purchase Journal

Date Name of Supplier Invoice No. Folio Amount

End of Transfer to purchase account Dr XXX

month side

Format of Purchase Return Journal

Date Name of Supplier Credit Note Folio Amount

No..

End of Transfer to Purchase Return XXX

month Account Cr side

Format of Sales Journal

Date Name of Customer Invoice No.. Folio Amount

End of Transfer to Sales Account Cr side XXX

month
 Format of Sales Return Journal
Date Name of Customer Credit Note Folio Amount
No..

End of Transfer to Sales Return Account XXX

month Dr side

Note Trade Discount Should be Deducted from list price

Purchase ledger
Suppliers Account
Dr Cr
Date Details F Amount $ Date Details F Amount $

Purchase return XX Balance b/d XXX

bank/cash XXX Purchases (credit)

Discount Received XX

Balance c/d XX

Total XXXX XXXx

Balance b/d XXXX

Sales ledger
Customers Account
Dr Cr
Date Details F Amount $ Date Details F Amount $

Balance b/d XXXX Sales return XX

Sales (credit) Bank/ Cash XXX

Discount allowed XX

Irrecoverable debts XX

Balance c/d XX

total XXXXX XXXXXX

Balance b/d XXXX

Ch 8 Income statement of Trader

Income Statement for the year ended ……….

Details $ $ $

Trading Account section

Revenue XXXXXX
Less Sales Return (XXX)
XXXXXX
Less Cost Of Sales / Cost of Goods Sold
Opening Inventory XXXX
Add Purchases XXXXX
Add Carriage Inward XXX
Less Purchase Return (XXX)
Less Goods for own use (Drawings) (XXX) XXXXX
Less Closing Inventory (XXXX) (XXXXX)

Profit and Loss Account Section

Gross Profit XXXXX

Add Indirect Income
Commission Receivable XXX
Rent Receivable XXX
Discount Received XXX
Provision for doubtful debts (decrease) XX
Etc XXX XXXXX
XXXX
Less Indirect Expenses
Salaries / Wages XXX
Carriage Outward XXX
Commission Payable XXX
Rent Payable XXX
Discount allowed XXX
Office Expenses XX
Irrecoverable Debts XX
Provision for doubtful debts (increase) XX
Provision for Depreciation ( on NCA) XXX XXXX

Profit from Operation XXXX

Less Loan Interest XXXX

Profit for the Year / Loss for the Year XXXX

 Ch 9 Statement of Financial Position at ………

Details $ $ $

Assets Cost Accumulated Net Book

Depreciation Value

Non Current Assets

Premises XXXX XXXX
Plant and Machinery XXXX XXX XXXX
Office Equipment XXX XXX XXX
Fixtures and fittings XXX XXX XXX
Motor Vehicle XXX XXX XXX
XXXX XXXX XXXX

Current Assets
Closing Inventory XXX
Trade Receivable XXXX
Bank XXXX
Cash XX
Other Receivable(Prepaid Expenses/ XXX XXXX
Accrued Income)

Total Assets XXXX

Capital and Liability

Capital
Opening Balance XXXX
Add Profit for the year OR XXX
Less Loss for the Year (XXX)

Less Drawings (Cash + Goods ) (XXX) XXXX

Non Current -Liabilities

Long term Loan XXXX

Current-Liabilities
Trade Payable XXXX
Bank Overdraft XXXX
Other Payables (Outstanding Expenses / XXX XXXX
Advance Income)

Total Capital and Liabilities XXXX

( Including Adjustments for Ch 10,11,12 and 13)

 Capital Account
Dr Cr
Date Details F Amount $ Date Details F Amount $

End Drawings Beg Balance b/d

Loss for the year Bank (additional capital)
Balance c/d End Profit for the year

Beg Balance b/d

NY

Drawings Account
Dr Cr
Date Details F Amount $ Date Details F Amount $

End Cash/bank End Capital

Purchases

Ch 11 Other payables and other receivables

Any Expense Account
Dr Cr
Date Details F Amount Date Details F Amount $
$

Beg Balance b/d( Prepaid at XXX Beg Balance b/d (Outstanding at XX

beg/ current asset beg/ current Liabilities

End Bank / Cash XXXX End Income Statement XXX

(Paid during the year) ( Charged During the year
/Actual expense for the year

Bank (any Refund)* XX

Balance c/d(Outstanding XX Balance c/d Prepaid at end/ XXX

at end/ current Liabilities current asset

Total XXXXX XXXXX

Next Balance b/d Prepaid at XXX Next Balance b/d (Outstanding at XXX
yr Beg beg/ current asse yr Beg beg/ current Liabilities
 Any Income Account
Dr Cr
Date Details F Amount $ Date Details F Amount $

Beg Balance b/d (Outstanding/ XXX Beg Balance b/d XXXX

accrued at beg/ current (Prepaid at beg/ current
assets liabilities

End Income Statement XXXX End Bank / Cash XXXX

(Income earned during (Received during the
the year) year

Irrecoverable Debts* XXXX

Balance c/d XXXX Balance b/d XXXX

(Prepaid at end/ current (Outstanding/ accrued
liabilities at beg/ current assets

Total XXXXXX XXXXX

Next yr Balance b/d (Outstanding/ XXX Next Balance b/d XXX

Beg accrued at beg/ current yr beg (Prepaid at beg/ current
assets liabilities

Expenses charged during the year = Expenses paid (bank ) + Outstanding at the end +
Prepaid in the Beginning - Outstanding in the Beginning
- Prepaid at the end.
Vice a versa

Expenses Paid During the year = Expenses charged during the year -Outstanding at the
end - Prepaid in the Beginning +Outstanding in the Beginning
+Prepaid at the end

Income Earned during the year = Income received (bank) + Outstanding at the end +
Prepaid in the Beginning - Outstanding in the Beginning
- Prepaid at the end
Vice a versa

Income received During the year = Income Earned during the year -Outstanding at the
end - Prepaid in the Beginning +Outstanding in the Beginning
+Prepaid at the end
Ch 12 Depreciation

Non Current Asset Account (Cost)

Dr Cr
Date Details F Amount $ Date Details F Amount $

Op Dt Balance b/d XXX Dt of Disposal (Cost of XXXx

sale sold asset)

Dt of Bank / Supplier XXX Cl Dt Balance c/d XXXX

pur (new purchase)

Total XXXXX XXXXX

Next Balance b/d

yr op

Provision for Depreciation of NCA Account

Dr Cr
Date Details F Amount $ Date Details F Amount $

1st yr Balance c/d XXXX 1st yr Income statement XXXX

clo dt clo dt (Depreciation for
the year)

total XXXXX XXXX

Dt of Disposal ( total dep XXX Op dt Balance b/d XXXX

sale on NCA till date if
sale )

Cl dt Income statement XXX

(Depreciation on
Sold NCA used
during yr )

Cl dt Balance c/d XXXX Cl dt Income statement XXX

(Depreciation on
Total NCA at end
of year )

Total XXXXX XXXXX

Next yr Balance b/d XXXX

op
 Disposal of NCA Account
Dr Cr
Date Details F Amount $ Date Details F Amount $

Dt of NCA cost XXXX Dt of Provision for XXXX

sale sale Depreciation (AD)

Bank / customer XXXX

End IS (profit on sale) XXXx End IS ( loss on sale) XX

Total XXXXXX XXXXXX

Methods of Depreciation

1 straight line method / Fixed instalment method

Annual depreciation = (Cost - Residual value)/ estimated useful life
Annual depreciation = Total Cost x rate of Depreciation / 100 ….when rate is available
2 Written Down value method/ Reducing Balance method
Year 1 depreciation = Total Cost x rate of Depreciation / 100
Year 2 and subsequent years depreciation = Net book Value x rate of Dep / 100
NBV = cost - accumulated dep
3 Revaluation method
Annual depreciation = NBV at beginning of year + NCA purchased during year - NCA sold
during the yr (NBV) - NBV at end of the yr

Causes of depreciation
1 Physical deterioration
2 Economic Reasons
3 Passage of Time
4 Depletion
Ch 13 Irrecoverable debts and Provision for Doubtful Debts

Irrecoverable debts Account

Dr Cr
Date Details F Amount $ Date Details F Amount $

end Trade Receivable / XXXX end Income statement XXXX

Debtor/ customer
(amount can not
recovered)

Total XXXXX XXXXX

Debts recovered account

Dr Cr
Date Details F Amount $ Date Details F Amount $

End Income statement XXXX Given bank/ cash XXXX

dt

Total XXXXX XXXXX

Provision for doubtful debts account

Dr Cr
Date Details F Amount $ Date Details F Amount $

1st yr Balance c/d XXX 1st yr Income Statement XXX

end end (TR x Rate /100)

Total XXXXX XXXXX

end IS ( Decrease) XX beg Balance b/d XXXX

Balance c/d (TR at XXX end IS ( increase)

end x Rate/100)

XXXXX XXXXX

Next yr Balance b/d XXX

bg
 Ch 14 Bank Reconciliation Statements
Steps to follow
1 compare bank account in cash book with the bank statement
2 update cash book (record transaction which appears only in bank statements),
Correct errors in cash book, close cash book and bring down balance

Format of updated Cash book( bank column only)

Dr Cr
Date Details F Amount $ Date Details F Amount $

Date of Balance b/d XXXX Date of Balance B/d XXXX

BRS (positive Bank Bal) BRS (bank overdraft)

Error ( Dr undercast Error (Dr overcast / Cr

/ Cr overcast) undercast)

Direct Deposits XXX Direct Payments/ XXX

standing instructions

Income received XX Bank charges XX

Balance c/d (od) XXX Balance C/d XXXX

Total XXXXX XXXXXX

Date of Balance B/d XXXX Date of Balance b/d XXX

BRS BRS

3 Prepare bank reconciliation statement on a particular date

Details Amount $ Amount $

Balance shown in Bank statement XXXX

Add: 1 amounts/ cheques not yet credited ( generally XXXXX

appears on dr side of cash book XXXXXX XXXXXX
2 Error : amounts wrongly deducted / Debited
XXXXX

Less : 1 cheques not yet presented for payments XXXX

2 Error: Amounts wrongly credited XXXXX XXXXXX

Balance shown in Cash book XXXXX

OR
Details Amount $ Amount $

Balance shown in cash book XXXX

Add: 1 cheques not yet presented for payments XXXXX

2 Error: Amounts wrongly credited XXXXXX XXXXXX

XXXXX
Less :1 amounts/ cheques not yet credited ( generally
appears on dr side of cash book XXXX
2 Error : amounts wrongly deducted / Debited XXXXX XXXXXX

Balance shown in Bank statement XXXXX

Note : if Bank Overdraft is given start with negative figure

Ch 15 Journal Entries
Uses of General Journal
1 Opening entries
2 purchase and sale of non current asset on credit
3 non regular transaction such as year end transfers
4 correction of errors (refer ch 3 for types of errors)

Undervalued/ understated =same side

Over valued/ overstated = opposite side
 Ch 16 Control accounts

Sales ledger Control Accounts

(Total Trade Receivables Account / All Customers Account)
Dr Cr
Date Details F Amount $ Date Details F Amount $

Balance b/d XXXX Balance b/d (DORA) XX

Sales (credit) XXXXX Sales return XX

Bank ( Refund) XX Bank/ Cash XXX

Bank (Dishonoured XXX Discount allowed XX

cheque)

Interest charged Irrecoverable debts XX

Cotra / Setoff XX

Balance C/d (DORA) Balance c/d XX

total XXXXX XXXXXX

Balance b/d XXXX Balance b/d

Purchase ledger Control Accounts

( Total Trade Payables / All Suppliers Account)
Dr Cr
Date Details F Amount $ Date Details F Amount $

Balance b/d (DORA) XX Balance b/d XXXX

Purchase return XX Purchases (credit) XXXXX

bank/cash XXX Bank ( Refund) XX

Discount Received XX Bank (Dishonoured XX

cheque)

Contra / Setoff XX Interest charged XX

Balance c/d XX Balance c/d (DORA) XX

Total XXXX XXXx

Balance b/d (DORA) Balance b/d XXXX

Ch 17 incomplete Record

(i) Capital at beginning/ Opening Capital = Assets at beginning - Liabilities at beginning

You can also prepare opening Statement of Affairs
(ii) Capital at the end / Closing Capital = Assets at the end after all the adjustment - liabilities
at the end of the year
You can also prepare closing statement of affairs

(iii) statement showing profit or loss for the year

Closing capital XXXXX
Less Opening capital ( xxxxx)
Add Drawings Cash XXX
Goods XXX
Less Additional capital introduced (xxxxx)
Profit for the year/Loss for the year XXXXX

(iv) Credit Purchase = Closing TP + Bank ( amount paid) + Discount Received - Opening TP
Total purchases =Credit purchases + Cash Purchases
Or prepare total Trade Payables Accounts / Purchase Ledger Control Account

(v) Credit sales = Closing TR + Bank ( amount Received) + Discount Allowed Sales Return +
Irrecoverable Debts - Opening TR
Total Sales = Credit Sales + Cash Sales
Or prepare total Trade Receivable Account/ Sales ledger control accounts

(vi)Preparation of Trading Account with missing Information

If Revenue and Margin are given in question You can Directly find Gross Profit
But If Revenue and markup are Given - Need to convert markup to margin
And if Cost of sales and Margin are given - Need to convert margin to markup to find
Gross profit
Mark-Up Margin

% Fraction % Fraction

100.00 1 50.00 1/2

50.00 1/2 33.33 1/3

40.00 2/5 28.57 2/7

33.33 1/3 25.00 1/4

25.00 1/4 20.00 1/5

11.11 1/9 10.00 1/10

10.00 1/10 9.09 1/11

Gross Profit = Revenue x margin % OR Gross profit = Cost of Sales x markup %
Ch 18 Clubs and Societies

Receipts and Payments

Date Details $ Date Details $

Beg Balance b/d Beg Balance b/d

(if bank od)
End Capital Receipt End Capital expenditure
Revenue Receipt Revenue expenditure
Balance c/d Balance c/d

Beg ny Beg ny

Subscription Account
Date Details $ Date Details $

Beg Balance b/d Beg Balance b/d

(Outstanding - Assets) (Prepaid -Liabilities)
End Income and Expenditure End Bank ( Subscription
(Subscription earned Received during year)
during the year) Irrecoverable Debts

Balance c/d Balance c/d

(Prepaid -Liabilities) (Outstanding - Assets)

Beg ny Balance b/d Beg ny Balance b/d

(Outstanding - Assets) (Prepaid -Liabilities)

Trading account section for Shop /refreshments for club or society

Details Amount $ Amount $

Sales
Less Cost of Sales
Opening Inventory
Add Purchases (clo TP + amt paid - Op TP)
Add Carriage Inward
Less Purchase Return
Less Closing Inventory
Add Wages of Shop/ Refreshment

Profit on Shop / Refreshments

Income and Expenditure account

Details $ $

Subscription
(Bank + Os end + Pp beg - Pp end - Os beg)
Fund raising Activity Receipt
Less expenses
Profit from shop / Refreshments

Less
All expenses
Depreciation on NCA

Surplus/ Deficit

Statement of Financial Position Capital section

Details $ $

Accumulated Fund
Add surplus / Less deficit

Outstanding Subscription will come under Current Assets

Advance subscription will come under Current liabilities
Rest all will be same as any other statement of Financial Position

Ch 19 Partnership

Profit and loss Appropriation Account

Details $ $ $

Profit for the year XXXX

Add: Interest on Drawings A XXX
B XXX XXXX
XXXX
Less: Interest on Capital A XXXX
B XXXX XXXX
Partners Salary XXXX (XXXXX)

Residual Profit (PSR) XXXX

A XXXX
B XXXX
 Partners Current Account

Date Details A B Date Details A B

Beg Balance b/d Beg Balance B/d

End Drawings End IOC
IOD Salary
Loss share Profit Share
Capital ( decrease in Capital (increase in
current a/c) current a/c)

Balance c/d Balance c/d

Beg ny Balance b/d Beg ny Balance b/d

Extract of Statement of Financial Position -Capital only (When Current account is Prepared)
Details A B Total

Capital Account XXXX XXXXX XXXX

Current Account (Closing balance of current XXX (XXX) XXX
Account- Cr Positive/ Dr Negative)

XXXX

Extract of Statement of Financial Position(When Current account is not Prepared Separately

Details A B Total

Capital Account XXXX XXXX XXXXX

Current Accounts
Opening Balance (Cr Positive/ Dr Negative) XXX (XXX)
Add Profit Share XXX XXX
IOC XXX XXX
Salary XXX XXX
Less Drawings (xx) (xx)
IOD (xx) (xx)
Loss Share (XXX) (XXX) XXX
Closing Balance

Total Capital XXXXX

Ch 20 Manufacturing A/c

Format of Manufacturing Account

Details $ $

Raw Material Consumed

Opening Inventory of Raw Material XXX
Add Purchases of Raw Material XXXXX
Add Carriage Inward of Raw Material XXX
Less Purchase Return of Raw Material (XX)
Less Closing Inventory of Raw Material (XXX) XXXXX

Direct Labour/ Wages (Productive Wages Only) XXXXX

Direct Expenses ( Royalty/ Special Equipment) XXXXX

PRIME COST XXXXX

Factory Overheads ( Factory Indirect Expenses)

Factory Rent and Rates XXXX
Factory Insurance XXXX
Factory Supervisors Wage/ Unproductive XXX
Depreciation on Factory Building/ Machinery XXXX XXXXXX
Etc XXXX

Add Opening Inventory of Work in Progress XXXX

Less Closing Inventory of Work in Progress (XXXX) XXXX

COST OF PRODUCTION XXXX

Trading account section of Manufacturing Firm

Details $ $

Revenue XXXXX
Less: Sales Return XXX
XXXXX
Cost of Goods Sold
Opening Inventory of Finished Goods XXXX
Add COST OF PRODUCTION XXXXX
Add Purchases of Finished Goods XXX
Add Carriage Inward of Finished Goods XXX
Less Goods for own use (XXX)
Less Closing Inventory of Finished Goods (XXX) XXXXX

Gross Profit XXXX

Statement of Financial Position (extract)
Details $ $ $

Current assets
Inventories
Raw Materials XXXX
Work in progress XXX
Finished Goods XXXX XXXXX

Ch 21 Limited Company
Format of statement of changes in Equity

Details Ordinary General Retained Total

Share capital reserve Earnings

Opening balance XXXX XXXX XXXXX XXXXX

Issue of shares XXXX XXXX
Profit for the year XXX XXX
(After Preference
Dividend)
Less : Final Dividend (XXX) (XXX)
paid (py)
Less : Interim Dividend (XXX) (XXX)
paid (cy)
Transfer to General XXXXX (XXXX)
Reserve

XXXXXX XXXXX XXXX XXXXX

Extract of statement of Financial Position for limited company

Details $ $

Equity and liabilities

Equity
Ordinary Share capital XXXXXX
General Reserve XXXX
Retained Earnings XXXX XXXXX

No of ordinary Share = Value of Share Capital / Value Per Share

Total Dividend = no of ordinary Share and Dividend per share

Or
Total Dividend = Total Value of Share Capital x rate of Dividend/100

Ch 22 Analysis of Financial Statements

I Profitability Ratios
1 Return on capital Employed
Return on Capital Employed = Profit for the year before interest/ Capital Employed x
100
2 Gross Margin/ Gross Profit Ratio
Gross Margin = Gross Profit/ Revenue x 100
3 Profit Margin/ Net profit Ratio
Profit Margin = Profit for the year/ Revenue x 100
II Liquidity Ratios
1 Current Ratio
Current Ratio = Current Assets : Current liabilities
2 Liquid Ratio/Asid test Ratio
Liquid Ratio = Current Assets - Inventory : Current liabilities
3 Rate of Inventory turnover
Rate of inventory turnover (times) = cost of sales / Average inventory
Rate of inventory turnover (days) = Average inventory / cost of sales x 365
Rate of inventory turnover (month s) = Average inventory / cost of sales x 12
Rate of inventory turnover (weeks) = Average inventory / cost of sales x 52
4 Trade Receivable Turnover
Trade receivable turnover (Days ) = Trade Receivable / Credit sales x 365
Trade receivable turnover (weeks ) = Trade Receivable / Credit sales x 52
Trade receivable turnover (months) = Trade Receivable / Credit sales x 12
5 Trade Payable Turnover Ratio

Trade payable Turnover (Days ) = Trade payable / Credit purchases x 365

Trade Payable turnover (weeks ) = Trade Payable / Credit Purchase x 52
Trade payable turnover (months) = Trade payable / Credit Purchases x 12