Fardus Mahmud.BBA.AIS. (1st Batch). Comilla University.

Mob: 01722572057
Principles and Practices of Accounting Course Code: ...........
TOPIC: WHAT DO YOU MEAN BY ACCOUNTING?

Accounting is the language of business. In modern age accounting is called the information science. Actually accounting is the process that is started from recording the transactions and preparing the financial statement and reporting of that transaction. Another way we can say accounting is an information system for measuring, processing, and communicating information that is useful in making economic decisions. According to American institute of certified committee and terminology-Accounting is the art of recording ,classifying and summarizing in a significant manner and in terms of money, transaction and events which are in part at least of a financial character and interpreting the result there of From the above discussion and definition we can say that Accounting is the process used to measure and report to various users relevant financial information regarding the economic activities of an organization and unit.
TOPIC: OBJECTIVES OF ACCOUNTING

In previous ,the prime objectives of Accounting was to count the assets of the organization and to record the transaction of the organization .But in the present time ,the main objective of Accounting is to supply information .Some important objective of Accounting of are given below: 1. To record business transaction: The first and prime objective of Accounting is to record the financial transaction of the organization permanently so that one can get any king of information about that transaction at a time. It can remove misunderstanding among the business. 2. To ascertain profit and loss of business: After certain period of time for knowing the profit and loss of the organization, profit and loss accounts are

prepared. It is impossible to distribute the profit or loss among the shareholders without determining the profit and loss of the business. 3. To ascertain the total debtors and creditors: To know how many debtors and creditors are available in the organization, the debtors account and creditors account is important for measuring. 4. To control the expenditure in conformity with income: If the expenditure of a business excess than income, the business will not run and it will be disclosed. Accounting determines the sectors where perform excess and non-economical expenses of that sector according to the income. 5. To know financial position of the business: Assets, liabilities or capital that are the total financial condition of the organization which is known by making balance sheet. To know the financial condition of the business is the important objective of Accounting. 6. To maintain proper management: To maintain proper management various information regarding production, distribution, purchase, sale and expenses in various sectors are needed. Accounting helps the management through the supplying important information. So at the end of the above discussion we can say, to know about the financial condition of the organization perfectly, to take the decision and conduct the business organization successfully etc. are the main objectives of Accounting through the proper recording of transactions.
TOPIC: USERS OF ACCOUNTING INFORMATION

Various people and govt. or non-govt. organizations use accounting information in conducting personal and business activities. Users of accounting information are as follows1. Individuals: Every individuals uses accounting information on their daily life. Every step in their life, they keep account and for that they use accounting information. 2. Businessmen: Every business owner is eager to know the amount of their investment & profit, so they use accounting information to ascertain their position in business.

3. Investors & creditors: Before investing in the business firm, the investor & creditor want to know about the financial capability & ability to earn profit of the firm. And they get accounting information by analyzing the financial statement of the business firm. 4. Government and regulatory agency: Govt. & other regulatory agencies use accounting information for the purpose of auditing the account of the business firm. 5. Tax authority: Tax authority uses accounting information to fix up tax & to record the information about tax. So, accounting informations is always used by the tax authority. 6. Non-profit organizations: Non-profit organization, such as public university, govt. school & college use accounting information for handling the organization properly. Without accounting it is impossible to run the organization for them. 7. Other users: Other users such as employees, labor unions, consumer groups and economic planners use accounting information. Customers are interested, whether a company will continue to honor product, warranties and support its product line. Labor union wants to know whether the owner can pay increased wages and benefits. Economic planners use accounting information to forecast the economic activity. At the end it can be said that accounting information is used by every kind of people or institution directly or indirectly in every steps of their life.
TOPIC: BRANCHES OF ACCOUNTING

Basically there are two branches of accounting. This are1. Public accounting 2. Private accounting 1. Public accounting: Public accounting is those to serve the general public & collect professional fees for their work. Such as auditing, income tax planning & preparation and management consulting are included their activities. Public accounting can be classified into three categories, such as-

a. Auditing: An audit is the independent examination that assure the reliability of the accounting report that management prepare and submit to the investors, creditors, and the other outside business. b. Tax accounting: Taxation is another major area of public accounting. The work performed by tax specialist includes tax advice & planning, preparing tax returns and representing clients in front of governmental agencies such as the internal revenue service. c. Management consulting: It is the accounting which helps the management to maximize profit and minimize the losses. Management accounting provides information to plan, promote & take the decision in future. As a result management organization structure becomes strong. 2. Private accounting: Private accounting work for a single business such a local departmental store, a mining company, a govt. body or university. Their work may involve in the preparation of financial statement for the business, the preparation of budget & plans, and internal reports, the preparation of tax return for the business and so on. It can be classified into four groups. Such asa. Cost accounting: Cost accounting has been invented after the industrial revolution. It determines the cost of producing specified product. b. Budgeting: Budgeting assist management in quantifying goal concerning revenues, cost of goods sold & operating expenses. Many companies regard their budgeting activities as one of the most important aspect of their accounting system. c. Information & system design: Identification of an organization informations need & development and implementation of the system to meet those needs. It helps to control the organizations operation. d. Internal auditing: It is performed by a business own accountants. These accountants evaluate the firms own accounting & management system. Their aim is to improve operating efficiency and to ensure that employees and departments are following managements procedures & plans.

TOPIC: PRINCIPLE CONCEPT & CONVENTION OF ACCOUNTING

There are some concept & convention of accounting which are as follows1. The accounting entity concept: An organization or a section of an organization that stand apart from other organization and individuals as a separate economic unit. From an accounting perspective sharp boundaries are drawn around each entity so as not to confuse its affairs with those of other entities. 2. Reliability concept: An accounting records & statements are based on the most reliable data available to them so that they will be as accurate and as useful as possible. 3. Cost concept: Cost concept states that assets and services are recorded on the basis of their purchase cost and that the accounting record of the assets continues to be based on cost rather than current market value. 4. The going concern concept: Accountants assumption is that the business will continue operating in the foreseeable future. 5. The periodic concept: The accounting period concept ensures that accounting information is reported at regular intervals. This timely presentation of accounting data aids the comparison of business operation over time from year to year, half yearly to half yearly and so on. 6. Revenue recognition concept: A revenue recognition principle provides guidance on the timing of the recording of revenue and the account of revenue to record. The term recognition implies the recording and incorporation of revenue in the body of the financial statement. The general role is that the revenue should be recorded when it is earned and not before. 7.Comparability Concept: Comparability principle specifies that accounting information must be comparable from business to business. 8. Discloser principle: This principle is that a business financial statement should report enough information outsiders to make sagacious decision about the business.

9. Dual aspect concept: Dual aspect conveys the two sides of a transaction where one side is debt and other one is Credit.
TOPIC: THE ACCOUNTING CYCLE

The order or sequence in which accounting procedures are performed is known as accounting cycle which is shown in figure first:

Recording of Transaction
Recording of business transaction

Interpreting & analyzing of financial statement

classification of Transaction

Preparing of financial statement summerising of transaction

Now these cycles are discussed in below: 1. Recording of transaction: The very fast process of accounting is to record the business transactions chronologically as soon as they take place in either journal or any other book of original entry. The basic steps in recording process are analysis each transaction in terms of its effect on the accounts, enter the transaction information in a journal, transfer the journal information to the appropriate account in the ledger. 2. classification of transaction :After the business transaction have already been recorded in journal or in various books of original entry or books of

primary entry ,the transactions are transferred and posted to the principle book which is called ledger. 3. Summarizing of transaction: The next step is the preparation of trial balance of ledger account. after the end of the financial or accounting period, which may be six months or one year or any other periodical segments all the ledger, account are balanced and the balancing figure is taken in the trial balance to prove the arithmetical accuracy of the accounts in the ledger. 4. Preparation of financial statement: The next step of accounting cycle is the preparation of financial or final account to find out the net trading result and to show the financial position of business. 5. Interpretation and analysis of financial statement: Giving, requisite information to the interested group by calculating accounting rations and by interpreting the performance of the company or organizations concerned. So these are the steps of accounting cycle which comes one after another and they are closely related with each other.
TOPIC: CLASSIFICATION OF JOURNAL

Journal can be classified into eight types. Which are explained below-1. Cash book: Every kinds of transaction in cash are recorded in cash book. For recording all cash receives and payment, is count and allowance and receipt. Such as Mr. Tutul open a bank account in Sonali bank of 100, 00 0 tk. 2. Purchase book: All kinds of purchases in credit are recorded into purchases book. For example Mr. Tutul purchases 300 kg milk vita per pound at 500 tk. in credit from Putul and sons. 3. Purchase return book: For recording all purchases return to creditor, this journal is used. Such as Putul gives return of purchases in credit to Mr. Tutul. 4. Sales book: In this journal all kinds of sales in credit are recorded. Such as, Mr. Tutul and sons sales 10 dozen plate, per dozen 5000 tk. in 5% discount in credit to Salam and sons.

5. Sales return book: If the salesman get return of his sold goods in credit from purchaser, it will be included here. Such as Mr. Tutul gets return of his goods from purchaser, which price was 300,000 tk. 6. Bills receivable book: In this book all kinds of the transaction which concerned with receivable bills are recorded. Such as received a two months bill from r and co: for 60,000 tk draw by j and co: 7. Bills payable book: In this book all kinds of payable bill transaction are recorded. Such as Sajeeb and co: drew on us at two months date for tk. 50,000 which draft we accepted 8. Proper or general or miscellaneous book: Which transactions can not be recorded in any other journal book that is recorded in proper or general or miscellaneous book. For example, Mr. Hasan starts his business with 10,000 tk. in cash and a machine in 50,000 tk. In accounting all kinds of journal are used significantly.
TOPIC: TRANSACTION AND ITS CHARACTERISTICS

Business transaction means the economic events of the enterprise recorded by accountants. It must necessarily require two parties, for its fulfillment and this involves received of a benefit in shape of cash, goods or services in one hand. Each business transaction must have a dual effect on the accounting equation. Again any happening, occurrence, process, condition or policy which brings about a change in the status of individuals, assets or equity items in a business enterprise is called transactions. Characteristics of transactions: There are some characteristics of a transaction which identifies it, from an ordinary event. Which are as follows 1. Event must be measurable in terms of money. 2. Financial change must be brought by that event. 3. There must have two parties or accounts in each transaction.

4. Transaction must be independent. 5. Invisible events may be a transaction. Such as- depreciation account. 6. Historical event such as provision of bad debt can be treated as transaction. 7. Basis of accounting.
TOPIC: ACCOUNTS AND ITS CLASSIFICATION,,

Account: An account is an individual accounting record of increase and decrease in a specific asset, liability, or owners equity item. The detailed record of the changes that have occurred in a particular assets, liability or owners equity, during a period of time is called accounts. Classification of account: Accounts may be classified according to the objectives and principles of accounting equation in four parts. Such as 1. Asset account 2. Liability account 3. Expenditure account 4. Income account On the other hand, on the basis of nature of accounts we may classify 1. Personal account: The list of transaction related with person and institution is called personal account. Arifs account, Tutul and cos account etc. 2. Nominal account: The list of transaction related with expenditure and income is called nominal account. Such as rent account, salary account etc. 3. Real account: The list of transaction related with property and assets is called real or property account. Such as purchase furniture account, machinery account etc.

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TOPIC: RULES OF DETERMINING DEBIT AND CREDIT

There are two types of rule for measuring debit and credit. Which are . 1. Golden rule 2. Modern rule 1. Golden rule: According to golden rule of accounting debtor and creditors can be measured by following ways. a. In personal accounts: Debitthe receiver Credit the giver b. In real accounts: Debit..what comes in Credit.what goes out c. In nominal accounts: Debitexpenses or losses Credit incomes and gains. 2. Modern rule: According to the modern rule of accou7nting debtor and creditor can be measured in the following ways: a. Assets, expenditure: Increase......... dr Decrease.cr. b. Capital, liability, income: Decreasedr Increasecr.
TOPIC: WHAT IS JOURNAL AND JOURNALIZING?

Transactions are initially recorded in chronological order in a journal before being transferred to the accounts. There are two functions of journal such as _ 1. To analyze each transaction into debit and credit so as to facilitate their transference into the ledger. Each transaction has in brief explanation. 2. To arrange transactions chronologically in order to date.

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The book in which these two functions are fulfilled is said to be a journal. Journalizing: Entering transaction into the journal is known as journalizing. Separate journal entries are made for each transaction. A complete entry consist of (1) The date of the transaction. (2) The accounts and amounts to be debited and credited, and a brief explanation of the transaction. Types of entry 1. Simple entry. 2. Compound entry. 1. Simple entry. When an entry involves only two accounts, one debit and credit is consider as a simple entry. For example: Purchase van 5,000 tk Purchase van account-------- dr ---- 5,000 Cash account ---- ----------- cr 5,000 2. Compound entry: When more then two than accounts are used in recording one transaction, the entry is called compound entry. But it must be remembered that is case of compound entry, the total debit and credit accounts are equal. For example: Julhaz starts a business on 14th February with cash 5,0,0,000 tk, furniture 20,000 tk, machineries 10,000 tk and office equipment 5,000 tk as capital. This transaction may write: Cash a/c -------------------dr . Furniture a/c ----------------dr . Machinery a/c ---------------dr . Office equipment a/c----------- dr . Capital a/c-------------- cr. 50,000 20,000 10,000 5,000 85,000.

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TOPIC: ASCERTAINING THE DEBIT AND CREDIT SIDE OF TRIAL BALANCE

We can ascertain the debit and credit side of trial balance by followings1. Assets account is always shown the debit balances, such as furniture, machinery etc. 2. Liability accounts is always shown the debit balances, such as creditors, bill payable, loan a/c etc. 3. All expenses and losses are always shown in debit balance such as salaries, wages etc. 4. All incomes and gains are always shown in credit balance such as sale a/c, commission received. 5. Reserve making on assets are shown in credit. Such as, reserve for depreciation, bad debts etc. 6. Accounts those are reduced the amount of income or profit is treated as debit. Such as, sales return account. 7. Accounts those are reduced the amount of loss or expenses is treated as credit. Such as discount on purchase, purchase return etc. 8. The amounts those are created from the unexpected profit of business are treated as credit, such as general reserve, pension fund etc. 9. Capital a/c is always credit and with drawn a/c is always debit. After the above discussed method, we can ascertain the debit and credit side of a trial balance.
TOPIC: WHAT IS FINAL ACCOUNT AND ITS OBJECTIVES?

Final account is the important step of the accounting cycle. We can know gross profit, net profit and financial position of the business firm with the help of final account. The main objective of business is to earn profit. And to know the amount of this profit, final account has to be made.

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The tern final account means the statement which results finally from the preparation of the accounts showing the profit earned or loss suffered by the firm and the financial state of affairs of the firm at the end of the period concerned. Objectives: There are mainly two objectives of a final account, which are: 1. To ascertain the profit or loss of a certain period of a business firm. 2. To show the financial status of a business firm of a certain date.
TOPIC: DEFINITION OF LEDGER

Ledger is the permanent store house of all transaction. Ledger can be defined as the book in which a traders transactions are recorded in a classified manner, in the permanent form. It is called the king of all books; one can know the total financial position of the firms with the help of the ledger.
TOPIC: DEFINITION OF TRIAL BALANCE

According to J.R. Batli Boi- A trial balance may be defined as the statement of the debit and credit balances, extracted from the ledger with a view to test the arithmetical accuracy of the books. According to r.n. carter- a trial balance is a schedule or list of balances both debit and credit, extracted from the accounts in the ledger and including the cash and bank balances from the cash book. So at last we can say that a trial balance is the list of various debit and credit balances which proves the arithmetical accuracy of accounts.

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TOPIC: ERRORS WHICH ARE NOT DETECTED BY TRIAL BALANCE. / LIMITATIONS OF TRIAL BALANCES.

Different kinds of errors organized at the time of making accounts. Sometimes inspire of some errors in a trial balance, the debit and credit side can be equal which are not indicated by trial balance. Basically there are two types of errors such as 1. Clerical errors 2. Errors of principle. 1. Clerical errors are divided into four parts such as _ a. Errors of omission. b. Errors of commission. c. Errors of disposing. d. Compensating errors. These are described below briefly 1. Clerical errors: Clerical errors are those which occurred by the Clark at the time of book keeping or posting in on accounts. It is in four types _ a. Errors of omission: If any entry has not been posted in a subsidiary book or posted partly then that type of errors create. Both the debit and credit of that transaction would be omitted and the agreement of the trial balance wont be affected. b. Errors of commission: If any entry has been posted in a subsidiary books in a wrong way then that type of errors create. Akashs account has been debited instead of Tutuls account; the trial balance will not be defected such as error is an example of errors of disposing c. Errors of miss-posting: At the time of posting the accounts in a ledger books from the journal, if the account is posted at the proper side with same amount in the place of another account. Then that type of errors is created. d. Errors of compensating: When one error is filling up by another error is called errors of compensating. Some errors arise from the over debit

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or under debit of account being neutralized by the over credits or under credits to the same extent of some other accounts it is called the errors of compensating. 2. Errors of principle: Those types of errors are created for avoiding the generally accepted accounting rules. There are certain types of errors which arise from the debiting and crediting of wrong heads of account and would be inconsistent with the fundamental principles of double entry; this error will not make the trial balance disagree. After the above discussion we can say that these types of errors are not indicated by the trial balance and the trial balance equal.
TOPIC: DIFFERENT STEPS OF FINAL ACCOUNTS.

Different steps of final accounts are as follows: 1. Trading account: Main objective of trading account is to find out gross profit or gross loss of the business organization. Those expenses and incomes are directly related with the production is treated in trading account. 2. Profit and loss account: By profit and loss account net profit or net loss of a business firm is ascertained. 3. Balance sheet: It is a statement of assets and liabilities. It is a formal statement of accounting equation (assets = Liability + owners equity of proprietorship ) at a certain date, as a result of business transaction, the assets and liabilities change from day to day, and the trader must necessarily feel anxious to find out what is true financial position is at the end of the each trading period. A balance sheet may be defined as a statement drowns up at the end of each trading or financial period, setting forth the various assets, and liabilities of the concern as at a particular date. So it is prepared to measure the exact financial position of a business on a particular date. Marshalling of balance sheet: The order in which the assets and liabilities are shown in the balance sheet is known as marshalling of balance sheet. There is no hard and first rule as to the order in which the assets and liabilities of a sole trader or a partnership firm should be stated in the balance sheet. On

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method is to place the most easily realizable assets first and then the assets which are less easily realizable are placed. So the assets most difficult of realization will be shown last.
TOPIC: WHAT IS CASH BOOK?

Among the various important accounts books of business, the cash book is primarily important. Cash book is a book of original entry, the object of which is to keep a record of all receipts and payments of money. All kinds of cash and bank transactions are recorded in cash book.
TOPIC: TYPES OF CASH BOOK

There are various types of cash book, such as 1. Single column cash book: In this cash book there is only one column of money in booth debit and credit side. 2. Double column cash book: In double column cash book there are two column of money in both debit and credit side. One is cash column and another is bank column. 3. Triple column cash book: Here cash book has there column in both debit and credit side, these are cash column, bank column and discount column. 4. Petty cash book: Under such circumstances it is necessary to maintain a certain amount of cash of office to make numerous small payments on account of expenses which have to make in the course of each day.
TOPIC: WHAT IS THE BANK RECONCILIATION STATEMENT?

Bank reconciliation statement is a statement drawn up in order to agree the bank balance as shown by the bank pass book, with the bank balance as shown by the bank column of the cash book.
TOPIC: CAUSES OF DISAGREEMENT BETWEEN PASS BOOK AND THE BANK BALANCE OF CASH BOOK.

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There are some reasons for why pass book balance and cash book bank balance are unequal. Causes of disagreement between pass book and the bank balance of cash book are given below __ 1. Cheque issue but not presented in time: At the time of cheque issue, the bank column of cash book credit side will increase but if that cheque is not presented in the bank then pass books debit side will not increase. 2. Cheque deposited into bank but not yet cleared : Cheques may have been paid or deposited to bank for collection and debited in the bank column in cash book but the same, may not be credited in pass book because of the cheque being not cleared. 3. Direct deposit into bank by third party: Sometimes cheque sent to bank directly by our debtors or third party may have been credited in the pass book but not entered into cash book. 4. Dishonor of cheque or bills receivable: There may be dishonored bills or cheque which stands debited in the pass book but the same may not enter into our cash book. 5. Direct payment as per standing order of the depositor: Sometimes bank pays directly to another account by the standing order of the depositor which has been debited in the pass book but not enter into the cash book. 6. Bank charges, commission, VAT etc: Debit may have been given into the pass book in repeat of bank charges, commission but it may not enter into our cash book. 7. Interest on deposit: The banker might have given credit for interest on deposit but no corresponding entry may have been made in the cash book. 8. Bankers error: There may be disagreement between the two balances due to an error or omission of an entry by the bankers. 9. Depositors error: by the mistakes or omission of the depositor there may be disagreement between the two balances of cash book and pass book. Direct payment of insurance premium, loan interest, loan installment as per standing order of customer also creates disagreement between two balances.

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These are the causes of disagreement between two balances.

TOPIC: SOME IMPORTANT ITEMS OF NON TRADING CONCERN AND THEIR TREATMENT IN ACCOUNTS:

1. Capital fund: Non trading concerns also prepare balance sheets showing their assets and liabilities like trading concerns. The excess of assets over the liabilities is denoted as net assets. Non trading institution like hospitals, schools, public libraries, college etc shows such excess as capital fund or general fund. Modern accountants also denote such capital fund as accumulated fund. 2. Special fund: Some non trading concerns sometimes maintain several types of funds such as prize fund, scholarship funds, tournament fund, pension fund, entertainment fund, charity fund, building fund, endowment fund etc. Any expenditure on account of these funds is charged to the accounts of respective funds instead of giving any debit for the same in the income and expenditure account. Similarly any respective fund account. Credit balances of these funds after necessary adjustment are shown is balance sheet. 3. Donation: Donation is a principle source of income for hospital, clubs, libraries, and societies. The articles or by laws of non -trading concerns may contain necessary instructions about treatment of donation as capital or revenue receipts. But in the absence of such instruction, it is better to consider donation receipts as capital receipts. 4. Entrance fees: receipts under this account should be transferred to capital fund account. But if the rules of instruction concerned or instruction given in the problem, desire to consider such fees as revenue receipts then it should be credited to income and expenditure account. 5. Subscription: Non trading organization gets certain amount of money as subscription on weekly or monthly or yearly basis. Revenue expenditure is performed by this subscription. Subscription due for the current period will be treated in debit side of receipt and payment account and in credit side of income and expenditure account. 6. Life membership fees: Some members of organization give their subscription for whole life by a single period. Such types of subscription are

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called life membership fees. This fee is one kind of capital income. So it will go for balance sheet at liability side adding with capital fund, if there is no instruction. 7. Legacies: For getting respect some donor of the society give some property is known as legacy. The amount of legacy is huge and it is not accepted regularly. So it will be shown in debit side of receipt and payment account and in balance sheet at liability side adding with capital fund. If there is no instruction. 8. Entertainment: It is revenue receipt. So it will go for debit side of income and expenditure account. 9. Income from sale of old news per and periodical: As it is come from the revenue expenditure so it will be shown in credit side of income and expenditure account. 10. Receipt from sale of old furniture and equipments: This receipt will be added to determine capital fund, and will be less from furniture. It will be shown in balance sheet at assets side. 11. Stationary expenses: It will be treated at debit side of income and expenditure account. If there is an instruction of unused stationary, then unused stationary will be less from the stationary. And this unused stationary will go for balance sheet at assets side.
TOPIC: HOW TO RECTIFY THE ERRORS STATES? UNDER DIFFERENT

Rectification of errors depends on the nature of errors and time of identification of errors. Rectification of errors can be done in three times, such as_ 1. Errors before preparation of trial balance: If errors are identified before preparation of trial balance then trial balance is prepared to rectify it. a. In case of one side error: here the exact / proper account is debited or credited against that error account. For an example in case of the cash payment tk 100 is less recorded than the actual amount in the cash column of journal. So the rectification will be-

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Errors a /c ..dr 100/= To cash a /c cr 100 /= b. In case of two side errors: Here if the wrong account is exist in debit side then accurate account is placed in debit side and wrong account is transferred to credit side and vise versa. For example payment of salary was recorded as payment of rent tk 5000. So the rectification entry will beSalary account..dr 5000 To rent accountcr5000 2. Detection of errors after preparation of trial balance but before preparation of final a /c: Here suspense a / c is used for balancing the both side of trial balance. a. In case of one side error: Suspense a/c is used for rectification. For example after preparation of trial balance it is found that in case of cash payment 100 tk is less recorded in the cash column of journal. So the rectification will be __ Suspense a/c ..dr100.00 To cash a/c .. 100.00 b. Incase of two side error: In case of two side error no suspense a /c is created. So it is rectified as same as the rectification before preparation of trial balance. For example payment of salary was recorded as payment of rent tk 500. So the rectification entry will be. Salary a /c .dr .500/= To rent a /c 500/= 3. Errors discover after preparation of final a /c: Here the following rules is followed. a. In case of one side error: If the errors a / c is nominal account then income statement adjustment is debited or credited and suspense a /c is credited or debited.

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But if the error a /c is real a/c then assets and liability a / c is debited or credited. For example purchase of machinery tk 6000 was recorded properly in cash a /c but in machinery a/c only 600 tk was written. So the rectification will be Machinery a /c .dr 5400/= To suspense a/c 5400/= b. In case of two side error: If both a/c are nominal a/c then no rectification is needed because it has no impact on profit and loss. But if one a/c is nominal and another is real a/c then rectification is needed. For example purchase goods from Mr Tutul in credit TK 500 was not written down. So the rectification will be Income statement adjustment dr 500/= To accounts payable Mr Tutul 500/=
TOPIC: WHAT ARE THE DISADVANTAGES OF SINGLE ENTRY SYSTEM?

Single entry system is one of the non scientific, incomplete and wrongful accounting systems. This accounting system follows some rules of single entry system and some rules of double entry system. This system is the mixture of single entry system and double entry system. For this reasons there are some limitations or disadvantages of single entry system, which are as follows some rules of single entry system and double entry system entry system. For this reason there are some limitations or disadvantages of single entry system, which are as follows1. Partial and incomplete accounting system: In single entry system, the transactions are not recorded according to the dual aspect concept. Each transaction is recorded partially or incompletely. 2. Possibility of errors: As in this system, transactions are recorded incompletely, so there is the possibility of errors. Sometimes the accountant keeps his account according to his idea and concept.

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3. Mathematical accuracy: AS the dual aspect concept is absent in the single entry system, so it is not possible to know mathematical accuracy by preparing trial balance. 4. Determination of financial statement: By this method financial statement may not be focused accurately, because in this system the assets and liabilities are not kept accurately. 5. International acceptability: International association or business organization do not support this system. There are no particular principles of this method. 6. Lack of control of expense: If the information or transactions are recorded then it may possible to control the expense in conformity with income. Besides these disadvantages or limitations there are also some disadvantages which are as follows: Lack of reliability. - Impossible to determine accurate capital and liability - It is not helpful in management etc.
TOPIC: WHAT ARE THE DIFFERENCES BETWEEN STATEMENT OF AFFAIRS AND BALANCE SHEET?

Though both statement of affairs and balance sheet represent assets and liabilities, after that there are some differences between them. These are discussed in bellow1. Definition: When the transactions are recorded into the non-scientifically or incompletely, means one side of the transaction are recorded is called single entry system. So the assets and liabilities are not recorded completely in the statement of affairs. On the other hand, in double entry system assets and liabilities are recorded scientifically and completely. 2. Objects: The main purpose of, statement of affairs is to ascertain capital by the differentiating between assets and liabilities.

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On the other hand the main purpose of balance sheet is to as certain financial position of an enterprise. 3. Basis of information: It is prepared, on the basis of incompletion, idea, and non-scientific method. On the other hand, balance sheet is prepared in scientific method. 4. Mathematical accuracy: The statement of affairs is not prepared on the basis of trial balance so here it is not possible to determine mathematical accuracy before preparing statement of affairs. On the other hand, Balance sheet is prepared on the basis of trial balance preparing balance sheet. 5. Reliance: In single entry system, expenditures and income account are not kept accurately. So from the statement of affairs, it is impossible to get reliable information. On the other hand, in double entry system, all accounts are kept scientifically, so from the balance sheet it is possible to get reliable information. So from the above differences between statement of affairs and balance sheet we can say easily that the acceptability of balance sheet is much more than the statement of affairs.
TOPIC: RULES FOR ASCERTAINING PROFIT OR LOSS ACCOUNT UNDER SINGLE ENTRY SYSTEM.

In single entry system expenditure accounts are not kept. As a result like double entry system it is not possible to ascertain gross profit / loss and net profit / loss by making trading account and profit and loss account. But in single entry system to as certain profit and loss it is necessary to prepare the statement of loss and profit or profit and loss statement. By this method profit or loss is ascertained from the difference between opening capital and closing capital. If closing capital is more than opening capital, then it focuses net profit. On the other hand if closing capital is less than opening capital, then it focuses net loss.

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Net profit = (closing capital + withdraw) (opening capital + additional capital)

TOPIC: DIFFERENCE BETWEEN RECEIPTS AND PAYMENT ACCOUNT AND INCOME AND EXPENDITURE ACCOUNT.

Difference between receipts and payment account and income and expenditure accounts are given below _ 1. Opening balance: In receipt and payment account opening cash balance and opening bank balance are included. But, in income and expenditure account these opening balances are not included. 2. Including subject matter: In receipt and payment account, both capital account and revenue account are included. But, in income and expenditure account only revenue accounts are included. 3. Side of debit and credit: In receipt and payment account all receipts are included in debit side and payments are included in credit side. But, in income and expenditure account, all expenses are included in debit side and all income is included in credit side. 4. Out standing income and expenditure: In receipt and payment account out standing income and expenditure must not be included. But, outstanding income and expenditure must be included. Which is related to present year. So from the above discussion we can say that, there are some difference between receipt and payment account, and income and expenditure account.