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Karnataka Class 12 Commerce Accountancy Books of Accounts Maintained by Non Profit Organisations

Karnataka Class 12 Commerce Accountancy Books of Accounts Maintained by Non Profit Organisations

Karnataka Class 12 Commerce Accountancy Books of Accounts Maintained by Non Profit Organisations

Karnataka Class 12 Commerce Accountancy Books of Accounts Maintained by Non Profit Organisations :The book on Accountancy has been written strictly in accordance with the new syllabus framed by the Karnataka Government.
As curriculum renewal is a continuous process, Accountancy curriculum has undergone various types of changes from time to time in accordance with the changing needs of the society. The present effort of reframing and updating the curriculum in Accountancy at the Higher Secondary level is an exercise based on the feed back from the users.

This prescribed text book serves as a foundation for the basic principles of Accountancy. By introducing the subject at the higher secondary level, great care has been taken to emphasize on minute details to enable the students to grasp the concepts with ease. The vocabulary and terminology used in the text book is in accordance with the comprehension and maturity level of the students.
This text would serve as a foot stool while they pursue their higher studies. Since the text carries practical methods of maintaining accounts the students could use this for their career.

Along with examples relating to the immediate environment of the students innovative learning methods like charts, diagrams and tables have been presented to simplify conceptualized learning.

Karnataka Class 12 Commerce Accountancy Books of Accounts Maintained by Non Profit Organisations

As mentioned earlier, this text serves as a foundation course which is coupled with sample questions and examples. These questions and examples serve for a better understanding of the subject. Questions for examinations need not be restricted to the exercises alone.

Karnataka Class 12 Commerce Accountancy Books of Accounts Maintained by Non Profit Organisations

Accounting is as old as money itself”. Since in early ages commercial activities were based on barter system, record keeping was not a necessity. The Industrial Revolution of 19th century along with rapid rise in population, paved way for the development of commercial activities, mass production and credit terms. Thus recording of business transaction has become an important feature.

In recent years with the change of technologies and marketing along with stiff competition, accounting system has undergone remarkable changes.

1. Need and Importance of Accounting

When a person starts a business, whether large or small, his main aim is to earn profit. He receives money from certain sources like sale of goods, interest on bank deposits etc. He has to spend money on certain items like purchase of goods, salary, rent, etc. These activities take place during the normal course of his business. He would naturally be anxious at the year end, to know the progress
of his business.

Business transactions are numerous, that it is not possible to recall his memory as to how the money had been earned and spent. At the same time, if he had noted down his incomes and expenditures, he can readily get the required information. Hence, the details of the business transactions have to be recorded in a clear and systematic manner to get answers easily and accurately for the following questions at any time he likes.

i. What has happened to his investment?

ii. What is the result of the business transactions?

iii. What are the earnings and expenses?

iv. How much amount is receivable from customers to whom goods have been sold on credit?

v. How much amount is payable to suppliers on account of credit purchases?

vi. What are the nature and value of assets possessed by the business concern?

vii. What are the nature and value of liabilities of the business concern?

These and several other questions are answered with the help of accounting. The need for recording business transactions in a clear and systematic manner is the basis which gives rise to Book-keeping.

2. Book-keeping

Book-keeping is that branch of knowledge which tells us how to keep a record of business transactions. It is often routine and clerical in nature. It is important to note that only those transactions related to business which can be
expressed in terms of money are recorded. The activities of book-keeping include recording in the journal, posting to the ledger and balancing of accounts.
R.N. Carter says, “Book-keeping is the science and art of correctly recording in the books of account all those business transactions that result in the transfer of money or money’s worth”.

The objectives of book-keeping are
i. to have permanent record of all the business transactions.
ii. to keep records of income and expenses in such a way that the net profit or net loss may be calculated.
iii. to keep records of assets and liabilities in such a way that the financial position of the business may be ascertained.
iv. to keep control on expenses with a view to minimise the same in order to maximise profit.
v. to know the names of the customers and the amount due from them.
vi. to know the names of suppliers and the amount due to them.
vii. to have important information for legal and tax purposes.

From the above objectives of book-keeping, the following advantages can be noted

i. Permanent and Reliable Record: Book-keeping provides permanent record for all business transactions, replacing the memory which fails to remember everything.

ii. Arithmetical Accuracy of the Accounts: With the help of book keeping trial balance can be easily prepared. This is used to check the arithmetical accuracy of accounts.

iii. Net Result of Business Operations: The result (Profit or Loss) of business can be correctly calculated.

iv. Ascertainment of Financial Position: It is not enough to know the profit or loss; the proprietor should have a full picture of his financial position in business. Once the full picture (say for a year) is known, this helps him to plan for the next year’s business.

v. Ascertainment of the Progress of Business: When a proprietor prepares financial statements every year, he will be in a position to compare the statements. This will enable him to ascertain the growth of his business. Thus book keeping enables a long range planning of business activities besides satisfying the short term objective of calculation of annual profits or losses.

vi. Calculation of Dues : For certain transactions payments may be made later. Therefore, the businessman has to know how much he has to pay others.

vii. Control over Assets: In the course of business, the proprietor acquires various assets like building, machines, furniture, etc. He has to keep a check over them and find out their values year after year.

viii. Control over Borrowings: Many businessmen borrow from banks and other sources. These loans are repayable. Just as he must have a control over assets, he should have control over liabilities.

ix. Identifying Do’s and Don’ts : Book keeping enables the proprietor to make an intelligent and periodic analysis of various aspects of the business such as purchases, sales, expenditures and incomes. From such analysis, it will be possible to focus his attention on what should be done and what should not be done to enhance his profit earning capacity.

x. Fixing the Selling Price : In fixing the selling price, the businessmen have to consider many aspects of accounting information such as cost of production, cost of purchases and other expenses. Accounting information is essential in determining selling prices.

xi. Taxation: Businessmen pay sales tax, income tax, etc. The tax authorities require them to submit their accounts. For this purpose, they have to maintain a record of all their business transactions.

xii. Management Decision-making: Planning, reviewing, revising, controlling and decision-making functions of the management are well aided by book-keeping records and reports.

xiii. Legal Requirements: Claims against and for the firm in relation to outsiders can be confirmed and established by producing the records as evidence in the court.

Karnataka Class 12 Commerce Accountancy Books of Accounts Maintained by Non Profit Organisations

Book-keeping does not present a clear financial picture of the state of affairs of a business. When one has to make a judgement regarding the financial position of the firm, the information contained in these books of accounts has to be analysed and interpreted. It is with the purpose of giving such information that accounting came into being.

Accounting is considered as a system which collects and processes financial information of a business. These information are reported to the users to enable them to make appropriate decisions.

American Accounting Association defines accounting as “the process of identifying, measuring and communicating economic information to permit informed judgement and decision by users of the information”.

The main objectives of accounting are
i. to maintain accounting records.
ii. to calculate the result of operations.
iii. to ascertain the financial position.
iv. to communicate the information to users.

Accounting process starts with identifying the transactions to be recorded in the books of accounts. Accounting identifies only those transactions and events which involve money. They should be of financial character. Accountant does so by sorting out various cash memos, invoices, bills, receipts and vouchers. In the accounting process, the first step is the recording of transactions in the books of accounts. The origin of a transaction is derived from the source document.

Books of Original Entry

The books in which a transaction is recorded for the first time from a source document are called Books of Original Entry or Prime Entry. Journal is one of the books of original entry in which transactions are originally recorded in a chronological (day-to-day) order according to the principles of Double Entry System. Journal is a date-wise record of all the transactions with details of the accounts debited and credited and the amount of each transaction.

In the Journal, each transaction is dealt with separately. Therefore, it is not possible to know at a glance, the net result of many transactions. So, in order to ascertain the net effect of all the transactions relating to a particular account are collected at one place in the Ledger. A Ledger is a book which contains all the accounts whether personal, real or nominal, which are first entered in journal or special purpose subsidiary books. According to L.C. Cropper, ‘the book which contains a classified and permanent record of all the transactions of a business is called the Ledger’.

Each one of the subsidiary books is a special journal and a book of original or prime entry. Though the usual type of journal entries are not passed in these sub-divided journals, the double entry principles of accounting are strictly followed. 6.1.1 Kinds of Subsidiary Books The number of subsidiary books may vary according to the requirements of each business. The following are the special purpose subsidiary books.

i. Purchases Book records only credit purchases of goods by the trader.

ii. Sales Book is meant for entering only credit sales of goods by the trader.

iii. Purchases Return Book records the goods returned by the trader to suppliers.

iv. Sales Return Book deals with goods returned (out of previous sales) by the customers.

v. Bills Receivable Book records the receipts of bills (Bills Receivable).

vi. Bills Payable Book records the issue of bills (Bills Payable).

vii. Cash Book is used for recording only cash transactions i.e., receipts and payments of cash.

viii. Journal Proper is the journal which records the entries which cannot be entered in any of the above listed subsidiary books.

Karnataka Class 12 Commerce Accountancy Books of Accounts Maintained by Non Profit Organisations

for more details On Karnataka Class 12 Commerce Accountancy Need for Maintaining of Accounts by Non Profit Organisation syllabus check here Non Profit Organisations Syllabus

Karnataka Class 12 Commerce Accountancy Books of Accounts Maintained by Non Profit Organisations

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  • Need for Maintaining of Accounts books by Non Profit Organisation

  • Accounting book 1

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  • Accounting book 3

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