Accounting Fundamentals: Journals, Ledgers, P&L, Balance Sheet

This document provides an introduction to accounting fundamentals, including the recording and reporting of financial transactions. It covers topics such as journals, ledgers, profit and loss statements, and balance sheets. The document also includes examples and explanations of various accounting concepts.

ACCOUNTING
FUNDAMENTALS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
a. Journal and ledgers...................................................................................................................1
b) Account balances.....................................................................................................................3
c) P& l and Balance Sheet...........................................................................................................3
TASK 2............................................................................................................................................4
a. Journals...................................................................................................................................4
b. Account Balances.....................................................................................................................7
c. Profit or loss statement & balance sheet .................................................................................7
TASK 3............................................................................................................................................8
a.Journals.....................................................................................................................................8
b) Trial Balances........................................................................................................................12
c) Profit or Loss and Balance Sheet...........................................................................................12
TASK 4..........................................................................................................................................13
a) Journals..................................................................................................................................13
b) Trial Balance..........................................................................................................................17
TASK 5..........................................................................................................................................18
Difference between revenue and capital expenditure................................................................18
CONCLUSION .............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Accounting can be defined as the process that deals with recording of financial
transaction of the business. It is the process that includes summarizing, analysis and reporting the
transactions. Accounting has been used from years by the business enterprises for keeping record
of the business transactions. This helps in analysing whether carrying out a business was
profitable or not. Accounting has been bifurcated into different fields like management
accounting, cost accounting and financial accounting. The report will represent various
accounting concepts that are used for recording and reporting of financial frameworks.
TASK 1
a. Journal and ledgers
Date Particular Debit (in £) Credit (in £)
5th April Cash Dr
To capital
300
300
7th April Purchase Dr
To cash
200
200
8th April Bank Dr
To loan
250
250
15th April Motor van Dr
To cash
150
150
20th April Cash Dr
To Sales
350
350
28th April Rent a/c Dr
To cash
50
50
29th April Loan
To cash at bank
200
200
30th April Drawing Dr
To cash
60
60
Cash a/c
Debit Credit
Date Particular Amount (in
£)
Date Particular Amount (in
£)
5th April To capital 300 7th April By purchase 200
8th April To loan 250 15th April By Motor van 150
20th April To Sales 350 28th April By Rent 50
29th April By Loan 200
1

30th April By Drawing 60
30th April By balance
c/d
240
900 900
Capital a/c
Debit Credit
Date Particulars Amount (in
£)
Date Particulars Amount (in
£)
5th April By cash 300
30th April To balance
c/d
300
300 300
Purchase a/c
Debit Credit
Date Particulars Amount (in
£)
Date Particulars Amount (in
£)
7th April To cash 200
30th April By balance
c/d
200
200 200
Sales a/c
Debit Credit
Date Particulars Amount (in
£)
Date Particulars Amount (in
£)
20th April By Cash 350
30th April To balance
c/d
350
350 350
Motor van a/c
Debit Credit
Date Particulars Amount (in
£)
Date Particulars Amount (in
£)
15th April To cash 150
30th April To balance
c/d
150
150 150
Rent a/c
Debit Credit
Date Particulars Amount (in
£)
Date Particulars Amount (in
£)
2

28th April To cash 50
30th April To balance
c/d
50
Loan a/c
Debit Credit
Date Particulars Amount (in
£)
Date Particulars Amount (in
£)
29th April To cash at
bank
200 8th April By cash at
bank
250
30th April To balance
c/d
50
250 250
Drawing a/c
Debit Credit
Date Particulars Amount (in
£)
Date Particulars Amount (in
£)
30th April To cash 60
30th April To balance
c/d
60
60 60
b) Account balances
Trial balance
Debit (in £) Credit (in £)
Cash 240
Capital 300
Loan 50
Purchase 200
Sales 350
Closing stock 100
Motor van 150
Rent 50
Drawing 60
c) P& l and Balance Sheet
Income statement of Maxim at the end of 30th April
Income Statement
Particulars Amount (in £) Amount (in £)
Sales 350
3

Less: COGS
Opening stock 0
Add: purchase 200
Less: closing stock 100 100
GP 250
Less: indirect expense
Rent 50
NP 200
Statement of Financial Position
Particulars Amount (in £) Amount (in £)
Assets
Fixed assets
Motor Van 150 150
Current assets
Cash 240
Closing stock 100 340
Total assets 490
Liabilities and shareholders’ equity
Loan 50
Capital 300
Add: net profit 200
Less: Drawing 60 440
Total Liabilities and shareholders’ equity 490
TASK 2
a. Journals
Date Particular Debit (in £) Credit (in £)
1st Jan Cash Dr
To capital
5000
5000
2nd Jan Motor vanDr
To cash
600
600
3rd Jan Purchase Dr
To cash
1300
1300
4th Jan Cash a/c Dr
To loan
1000
1000
10th Jan Expenses Dr
To cash
200
200
13th Jan Cash Dr
To sales
300
300
20th Jan Cash Dr 500
4

To sales 500
24th Jan Storage expenses Dr
To cash
150
150
27th Jan Loan Dr
To cash
350
350
30th Jan Drawing Dr
To cash
175
175
Cash a/c
Debit Credit
Date Particular Amount (in
£)
Date Particular Amount (in
£)
1st Jan To capital 5000 3rd Jan By purchase 1300
4th Jan To loan 1000 2nd Jan By Motor van 600
13th Jan To Sales 300 24th Jan Storage
expenses
150
20th Jan To Sales 500 27th Jan By Loan 350
30th Jan By Drawing 175
10th Jan By expense 200
31st Jan By balance
c/d
4025
6800 6800
Capital a/c
Debit Credit
Date Particular Amount (in
£)
Date Particular Amount (in
£)
1st Jan By cash 5000
31st Jan To balance
c/d
5000
5000 5000
Purchase a/c
Debit Credit
Date Particular Amount (in
£)
Date Particular Amount (in
£)
3rd Jan To cash 1300
31st Jan By balance
c/d
1300
1300 1300
Sales a/c
Debit Credit
5

Date Particular Amount (in
£)
Date Particular Amount (in
£)
13th Jan By Cash 300
30th April To balance
c/d
800 20th Jan By Cash 500
800 800
Motor van a/c
Debit Credit
Date Particular Amount (in
£)
Date Particular Amount (in
£)
2nd Jan To cash 600
31st Jan To balance
c/d
600
600 600
Storage expenses a/c
Debit Credit
Date Particular Amount (in
£)
Date Particular Amount (in
£)
24th Jan To cash 150
30th April To balance
c/d
150
150 150
Loan a/c
Debit Credit
Date Particular Amount (in
£)
Date Particular Amount (in
£)
27th Jan To cash at
bank
350 4th Jan By cash at
bank
1000
31st Jan To balance
c/d
650
1000 1000
Drawing a/c
Debit Credit
Date Particulars Amount (in
£)
Date Particulars Amount (in
£)
30th Jan To cash 175
31st Jan To balance
c/d
175
175 175
Expenses a/c
Debit Credit
6

Date Particular Amount (in
£)
Date Particular Amount (in
£)
10th Jan To cash 200
31st Jan To balance 200
200 200
b. Account Balances
Particular Debit (in £) Credit (in £)
Cash 4025
Capital 5000
Loan 650
Purchase 1300
Sales 800
Closing stock 800
Motor van 600
Expenses 200
Drawing 175
Storage expenses 150
c. Profit or loss statement & balance sheet
Profit or loss statement
Particular Figures (in £) Figures (in £)
Sales 800
Less: COGS
Opening stock
Add: purchase 1300
Less: closing stock 800 500
GP 300
Lees: Expenses 200
Less: Storage expenses 150
Net loss 50
Balance sheet
Particulars Amount (in £) Amount (in £)
Assets
Fixed assets
Motor Van 600 600
Current assets
Cash 4025
Closing stock 800 4825
Total assets 5425
Liabilities and shareholders’ equity
Loan 650
Capital 5000
7

Less: net loss 50
Less: Drawing 175 4775
Total Liabilities and shareholders’ equity 5425
TASK 3
1. Journals
Mafuta
Journal entries
Date Particulars
Debit
(£) Credit(£)
02-01-19 Harvey 124
To Sales 124
05-01-19 Wages 12
To cash 12
Purchase 150
To Rich 150
07-01-19 Cash 18
To smith 18
09-01-19 Max 21
To cash 21
11-01-19 Cash 64
To Sales 64
14-01-19 Wages 14
To cash 14
Purchases 75
To cash 75
15-01-19 Rich 162
To cash 162
20-01-19 Office desk 32
To cash 32
21-01-19 Wages 17
To cash 17
Cash 110
To Sales 110
23-01-19 Office expenses 3
To cash 3
Cash 25
To Harvey 25
28-01-19 Cash 84
To Sales 84
Wages 15
To cash 15
8

31-01-19 Cash 30
To Sales 30
£956.00 £956.00
Ledger Account balance
Ledgers
Cash a/c
Date Particulars
Amount(£
) Date Particulars Amount(£)
01-01-
19
To opening
bal. 343
05-01-
19 By wages a/c 12
07-01-
19 To smith 18
09-01-
19 By Max 21
11-01-
19 To Sales 64
14-01-
19 By wages 14
21-01-
19 To Sales 110
15-01-
19 By rich 162
23-01-
19 To Harvey 25
20-01-
19 By office desk 32
28-01-
19 To Sales 84
21-01-
19 By wages 17
31-01-
19 To Sales 30
23-01-
19 By office expenses 3
28-01-
19 By wages 15
14-01-
19 By purchase 75
31-01-
19 By closing bal 323
674 674
Sales a/c
Date Particulars
Amount(£
) Date Particulars Amount(£)
02-01-
19 By Harvey 124
11-01-
19 By cash 64
21-01-
19 By cash 110
28-01-
19 By cash 84
31-01-
19 By cash 30
9

31-01-
19
To closing
bal. 412
412 412
Purchase a/c
Date Particulars
Amount(£
) Date Particulars Amount(£)
05-01-
19 To Rich a/c 150
14-01-
19 To cash a/c 75
31-01-
19 By closing bal. 225
225 225
Office expense a/c
Date Particulars
Amount(£
) Date Particulars Amount(£)
23-01-
19 To cash 3
31-01-
19 By closing bal. 3
3 3
Harvey a/c
Date Particulars
Amount(£
) Date Particulars Amount(£)
01-01-
19
To opening
bal. 39
23-01-
19 By cash 25
02-01-
19 To Sales 124
31-01-
19 By closing bal. 138
163 163
Wages a/c
Date Particulars
Amount(£
) Date Particulars Amount(£)
05-01-
19 To cash 12
14-01-
19 To cash 14
21-01-
19 To cash 17
10

28-01-
19 To cash 15
31-01-
19 By closing bal. 58
58 58
Smith a/c
Date Particulars
Amount(£
) Date Particulars Amount(£)
01-01-
19
To Opening
bal. 18
07-01-
19 By cash 18
18 18
Max a/c
Date Particulars
Amount(£
) Date Particulars Amount(£)
01-01-
19 By opening bal. 21
09-01-
19 To cash 21
21 21
Furniture and Fittings a/c
Date Particulars
Amount(£
) Date Particulars Amount(£)
01-01-
19
To opening
bal. 198
31-01-
19 By closing bal. 198
198 198
Inventory a/c
Date Particulars
Amount(£
) Date Particulars Amount(£)
01-01-
19
To opening
bal. 458
31-01-
19
By cost of goods
sold 84
31-01-
19 By closing bal. 374
458 458
Moon a/c
Date Particulars Amount(£ Date Particulars Amount(£)
11

)
01-01-
19
To opening
bal. 26
31-01-
19 By closing bal. 26
26 26
b) Trial Balances
Trial balance
Particulars Debit Credit
Cash a/c 323
Sales a/c 412
Wages a/c 58
Office expense a/c 3
Office desk a/c 32
Harvey a/c 138
Purchase a/c 225
Inventory a/c 374
Moon a/c 198
Furniture and fittings a/c 26
Capital (bal.) 965
1377 1377
c) Profit or Loss and Balance Sheet
Profit and loss account
Particular Amount Total
Revenues 412
less:Cost of goods
sold 309
Gross profit 103
Expenses
office expenses 3
Wages a/c 58
Net Income 42
Balance sheet
Particulars Amount
Total
amount
Liabilities
Capital 965
add: profits 42 1007
12

Current liabilities
Bank overdraft 84 84
Total liabilities 1091
Fixed assets 230
Furniture and fittings 198
Office desk 32
Current assets 861
cash 323
Inventory 374
Debtors:
Harvey 138
Moon 26
Total assets 1091
TASK 4
a) Journals
Ricardo
Journal entries
Date Particulars
Debit
(£) Credit(£)
02-06-19 Claire 425
To sales 425
13-06-19 Purchase 12000
To discount received 840
To Georgina 11160
14-06-19 Hywel a/c 8550
Discount allowed 450
To sales 9000
20-06-19 Cash 6000
To sales 6000
21-06-19 Purchase 4500
To discount received 90
To Andrew 4410
22-06-19 Sales return 1000
To Claire 1000
24-06-19 Mandy 4850
Discount allowed 150
To sales 5000
24-06-19 Cash 7075
13

Discount allowed 425
To Claire 7500
25-06-19 Cash 8550
To Hywel 8550
25-06-19 Georgina 11160
To Ricardo 11160
27-06-19 Andrew 4410
To Ricardo 4410
69545 69545
Ledgers
Ledger a/c
Cash a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
20-06-
19 To sales 6000
24-06-
19 To Claire a 7075
27-06-
19 By closing bal. 13075
13075 13075
Sales a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
02-06-
19 By Claire a/c 425
14-06-
19 By Hywel a/c 8550
20-06-
19 By cash a/c 6000
14-06-
19
By Discount allowed
a/c 450
24-06-
19 By mandy's a/c 4850
24-06-
19
By Discount allowed
a/c 150
27-06-
19 To closing bal. 20425
20425 20425
Sales return a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
14

22-06-
19 To Claire 1000
27-06-
19 BY closing bal. 1000
1000 1000
Purchase a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
13-06-
19
To Discount
received a/c 840
13-06-
19 To Georgina a/c 11160
21-06-
19
To Discount
received a/c 90
21-06-
19 To Andrew a/c 4410
27-06-
19 By closing bal. 16500
16500 16500
Claire a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
02-06-
19 To sales a/c 425
22-06-
19 By sales return a/c 1000
24-06-
19 By cash a/c 7075
24-06-
19
By Discount allowed
a/c 425
27-06-
19 To closing bal. 8075
8500 8500
Discount received a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
13-06-
19 BY purchase a/c 840
21-06-
19 BY purchase a/c 90
27-06-
19 To Closing bal. 930
930 930
Georgina a/c
15

Date Particulars
Amount(£
) Date Particulars
Amount(£
)
13-06-
19 BY purchase a/c 11160
25-06-
19 To Ricardo a/c 11160
11160 11160
Hywel a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
25-06-
19 By cash a/c 8550
14-06-
19 To sales a/c 8550
8550 8550
Discount allowed a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
14-06-
19 To sales a/c 450
24-06-
19 To sales a/c 150
24-06-
19 To Claire a/c 425
27-06-
19 By Closing bal. 1025
1025 1025
Andrew a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
21-06-
19 BY purchase a/c 4410
27-06-
19 To Ricardo a/c 4410
4410 4410
Mandy a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
24-06- To sales a/c 4850 27-06- By closing bal. 4850
16

19 19
4850 4850
Ricardo a/c
Date Particulars
Amount(£
) Date Particulars
Amount(£
)
25-06-
19 By Georgina a/c 11160
27-06-
19 By Andrew a/c 4410
27-06-
19 To closing bal. 15570
15570 15570
b) Trial Balance
Trial balance
Particulars Debit Credit
Claire 8075
Sales 20425
Purchase 16500
Discount
received 930
Discount allowed 1025
Cash 13075
Sales Return 1000
Mandy 4850
Ricardo 15570
Suspense 2000
41775 41775
TASK 5
Difference between revenue and capital expenditure.
Differences between the revenue and capital expenditure includes whether purchases will
be short term or long term use. Revenue expenditure is typically referred as an ongoing operating
expense. On the other hand capital expenditure is typically a one time big investment of fixed
assets which is used over long period for generating revenues.
Capital expenditures
17

It represents major investment of capital and that is made by company for maintaining or,
expanding the business and for generating additional profits (Muda and Hutapea, 2018). These
capital expenses are made for acquiring long term assets like manufacturing equipments or
facilities. The expenditure on assets provide long term economic benefits to company. Capital
expenditure includes purchase of fixed assets , replacement of machinery part that will increase
the efficiency and useful life of asset or the investments made by company for the expansion
projects. There is larger requirement of funds for carrying out capital expenditures.
Revenue Expenditure
Revenue expenditures are of two types :
Expenditure to generate revenues including expense required for meeting ongoing
operational cost of running business, and are more likely as the operating expenses. Revenue
expenditures are tax deductible unlike capital expenditures. Revenue expenditures in comparison
with capital expenditure do not involve larger amount of funds.
Expenditure of maintenance of the revenue generating assets which includes ordinary
repairs and the maintenance cost which are essential for keeping he assets in working conditions
with improved and extended useful life of assets. These expenses include repair and the regular
maintenance, painting, cleaning & renewal expenses (Thanh and Lien, 2017). The revenue
expenditures are recurring in in nature.
CONCLUSION
From the above study it could be concluded that accounting fundamentals are very essential for
the business enterprises. It helps to record the transactions for having proper record of each
transaction carried out by business. The process starts with recording transactions in journals.
Which are then posted to the individual ledger account, than a trial balance is extracted at the end
of period from the closing balance of accounts. From the trial balance accounts are transferred to
profit or loss statement and balance sheet respectively. The financial statements are prepared as
the accounting frameworks provided by the accounting bodies.
18

REFERENCES
Books and Journals
Muda, I. and Hutapea, A.A.F., 2018, March. Influence of capital expenditure and income
original region to the income per capita in Indonesia. In IOP Conference Series: Earth and
Environmental Science (Vol. 126, No. 1, p. 012065). IOP Publishing.
Thanh, S.D. and Lien, N.P., 2017. Tax revenue, expenditure, and economic growth: an analysis
of long run relationships. Journal of Economic Development, (JED, Vol. 24 (3)). pp.4-26.
19