Accounting Principles and Practices

Chart of Accounts is the segmentation of Liabilities & Assets of Balance Sheet and Income & Expenses of Profit & Loss Accounts. It represents the hierarchical view of organization of Account Groups & Ledger Accounts.

The auditor can open Auditors’ Edition of Tally.ERP9 and access his client's data available locally and start audit using Audit & Compliance features.

Balancing an account involves calculating the difference between the total debits and the total credits. This difference, known as the balance, is then entered on the side with the smaller total to make both sides equal. This process is essential for preparing the trial balance and financial statements.

A double column cash book features two columns on each side (debit and credit) to record cash and bank transactions simultaneously. This allows a business to track its physical cash on hand and its bank balance in a single ledger. Credit transactions are not recorded here as they do not involve immediate cash or bank movement.

The sales journal is reserved specifically for the credit sale of goods (inventory). When an asset other than inventory, such as machinery or furniture, is sold on credit, it must be recorded in the journal proper. This is because it does not fit into the specialized subsidiary books designed for routine inventory transactions.

The purchase book, or purchase journal, is specifically designed to record the credit purchase of goods intended for resale. Cash purchases are recorded in the cash book, not the purchase book. Only transactions involving inventory bought on credit from suppliers are entered here.

The sales return journal records all returns of goods from customers. At the end of a period, the total of this journal is posted to the debit side of the sales return account in the general ledger. This account tracks the total value of goods returned, which is later deducted from gross sales.

The purchase book is exclusively for the credit purchase of goods (inventory) meant for resale. Since a machine is a fixed asset and not inventory, its credit purchase cannot be recorded in the purchase book. Instead, it must be recorded in the journal proper, which handles non-routine credit transactions.

Cash sales involve the immediate receipt of cash, so they must be recorded in the cash book. The sales journal is reserved specifically for recording credit sales of goods.

The Purchase Account is used to record the total cost of all goods purchased for resale, regardless of whether they were bought for cash or on credit. Purchases of fixed assets like buildings or furniture are recorded in their specific asset accounts instead.

Trade discounts are never recorded in the books of accounts as they are deducted directly from the invoice price. Cash discounts, however, are recorded to track the cost of encouraging early payments from customers.

Small, recurring expenses such as courier fees and bus fares are typically handled through a petty cash system. These are recorded in a petty cash book to prevent the main cash book from becoming cluttered with minor transactions.