Content

Task Page 1. Introduction........................................................................................... ...............................02 1.1 ............02 2.1. A Books that Used for Transaction of Car Craft Function of

accounting ............................................................................................

Company.................................................-02-03 2.2. 3-07 3.1. .....07 3.2. B. The main account that appear in the income statement...............................................08 3.3. C. Account that recorded in ledger..................................................................................08 Conclusion..................................................................................................................................08 A. Meanings of B. Example of five

transaction...........................................................................................0

profit.....................................................................................................

Reference .......................................................................................................................................09

Accounting Task 1 Introduction : Economic activity of a business that deal with making financial report and information decisions of a firm is smiley known as accounting which keep record of all financial transaction of a business. More precisely accounting identifies measure and communicate all of the economic actives of a firm. It does revel profit or loss for a given period for a business. Function of Accounting : The value and nature of a firms assets, liabilities and owner equity are some key areas that accounting does functionalised in it. There are some basic functions of accounting which are as follows. 1. Recording : The most basic function of accounting is recording. It is not only essentially concerned with ensuring that all business transaction of financial activities are properly recorded but also recorded in systematic method. 2. Classifying: As a function of accounting classification relate with the systematic analysis of the recorded data with an order of group transaction or entries. The work of classification is documented in the book termed as Ledger which keeps record of items of similar nature under appropriate heads. 3. Summarising : Accounting summarised the classified information in a manner which is comprehendible to the internal and external users of accounting statements. Here internal users who manage the business and the external users of information are the investor, creditors, tax authorities etc. The summarising process of accounting does comprise of these statements: income statement, balance sheet, Trial balance etc. 4. Interprets and analysis : It implies that the recorded financial data is analyzed and interpret in orderly of a final accounts so that it will be helpful for the users to make a meaningful judgement about the financial condition and profitability of the business at the current stage. To predict about the future and making plan by framing policies is deeply concern with this analysis . 2

 5. Communicating : After analyse and interpret the financial information properly it has to communicated in a appropriate form and manner to a proper person. This communication is done by the distribution of accounting reports which include besides the usual income statement and the balance sheets. Task 2.1 A : Accounting books that use by Car craft company for recording its transaction : To ascertain the profit and loss made by business and to distinguish the financial soundness of the company it is essential to maintain several books and records which is helpful to achieve the objective of the firm. The Car craft is one of the leading automobile companies which were established in 1951 in Manchester. It has been expanded its business and its sales figure is respectively massive between all of domestic company. It has a sound accounting system through which it keep record all of its transaction. The number of books are maintained by car craft company for recording business transaction are sales day book, purchase day book, as well sales and purchase return books, cash receipt books, cash payment books, journal etc are used in terms of primary entry. Cash receipts, invoice, cash memos, cheque and other vouchers these are the supporting documentary evidence for preparing the income statement for the Car raft Company. Most precisely, for recording all of the transaction the journal is the vital form. All transaction of Carcraft Company are analyze into debit and credit form before recording in the journal. Journal : the form of recording transaction in chronological order is called a journal. Recording transaction in Journal is called journalising. The journal is used as a permanent record of transaction. The nature of business and the number of transaction to be recorded usually determined the kind of journal that to be used. As examples of the type of Journal that Car craft company usually used has give here : Cash Receipt journal : The cash receipt journal has a debit column for cash and a credit column for receivable account. Infect there may can other debit and credit cash column in the cash receipt journal. A sundry credit column may can used for cash receipt as cash such as coming from bank loan or non inventory assets. Cash payment journal: cash in bank. Task 2.2 B : Example of five transaction recorded by Car craft Company : For the describing five examples of transaction that recorded by car craft Company a table has been illustrated here. In different date these transaction has occurred and recorded in the Journal. In cash payment journal there are two columns for the vital function of paying suppliers or creditors has a debit column and credit column as usual. Credit column is used for

General Date Account title Investment 1. 1st August 2. 3rd August 3rd 3. August 7th 4. August Sales Sales Lincoln institute 2 R 5. A(t 9Th August Utility Expenses C5 450 Rent Expenses C4 C4 2500 technical L1 20000 20000 T11 32500 32500 Royal Bank of R1 for C1 167700 1,000000 Doc No Post Ref Debit Credit Sales credit Debit

Cash Credit

1,00000 0 167700

scotland Payed cash supplies

2500

450

Explanation Of |Transaction : A table has been illustrated for the transaction of 2011 for Car craft company. The data information for each transaction is recorded to journal as a table format is known as entry. An entry consist of four parts. Date, debit, credit and source of document as shown in the table. Before record of a transaction the data information is analyzed into a debit and credit parts. 1st Transaction : In the first 1st of August the transaction of a summation of 1,000000 has been credited as investment. This can be seen as T-account here; 4

August,1 : receive cash from Royal bank of Scotland as an investment, 1,000000. Receipt No 1. Cash 1,0000 00

Royal bank of Scotland 1,000000

Analysis : The summation of 1,000000 has received from Royal Bank of Scotland. This amount has gone in the debit column. There is no special column with the title of the account the credited, royal bank of Scotland in its heading for which the credited amount is placed in the general Credited column. The source document for this amount is Receipt No 1 which is shown in the T-table above. 2nd Transaction : For the second transaction the T-table is here : August 3. Paid Cash for supplies, 15770. Check No. 1 Supplies 1577 0

Cash 15770

Analysis: For the title of the account debited there is no special column therefore the debited amount 15770 is recorded in the general debit column and in order to articulate that in which account the amount debited, write the title of the account , supplies in the Account title column. The source document for the transaction is check no 1. The assets in terms of supplies 5

is increased by a debited amount15770 whether at the same time cash is decreased by a credit of 157700. 3rd and 4th Transaction : here two consecutive table can be seen with the account title as general sales and sales for Lincoln Technical Institute by Car Craft company. T-Table for 3rd Transaction August 3. Received cash from sales, 32500, tape No12. Cash
32500

Sales 32500

T-table for 4th Transaction : August. 7. Sold automobile particles to Lincoln technical Institute.20000. Sales Invoice No 1. Lincoln technical Institute 2,000 0

Sales 2,0000

Analysis l : For the third and fourth transaction there are sales. For debit cash the amount of 32500 has been written in the cash debit column. The title of column is not necessarily used in the account title column. As well the amount also be written in the sales credit column. The asset account , as cash is increased by debited 32500 as well the revenue account sales is increased by 6

the credit. The capital account has a normal balance for the company but increase of the owners capital are shown as credit as revenues increase owners equity. Increase of revenue always written as credit. For the fourth transaction it is as usual but only the amount write down in the general debited column instead of cash debited column and the sales also goes to the sales credit column. The account title has been written in the account title column. 5th Transaction : August. 9. Paid cash for rent 2500. Rent Expenses 2500 Cash 2500 Analysis :The debit amount 2500 is written in the general debit column with the title of the rent expenses in the account title column. Rent expenses is increased by a debit of 2500 while the asset account decreased with a summation of 2500.

Task 3.1 A. Meanings of profit : In the income statement for 2011 of Car Craft company, there is a remarkable profit can be seen which has explained here: In the income statement there are revenues, expenses and profit can be seen. The income statement usually formulised all of the information for a given period. More precisely income statement shows the financial performance for a specific period of time. Here the revenues is the money that an entity receives from sale of goods, services provided, fees, interest etc. And the expenses means the money that used to create revenues which include cash of goods sold, salaries, wages, utilities, rent etc. However the profit is revenues minus expenses. The amount of money left after the expenses are subtracted from the revenues is profit. Profit is also referred as net income. Task 3.2

B : The main account that appear in the income statement of the Car Craft income statement : There are several account may can appear in the income statement of the Car Craft company. These are capital account, sales account, purchase account, goods account, balance sheet account etc. Capital account : The initial incursion of capital of a business form of cash provided by the owner is known as capital account. It might can further converted into the machinery, building etc. Sales account : The account is used for recording the sale of good is sale account. Purchase account. he account used for recording the purchase of the company is purchase Account. Balance sheet account: The most important account is balance sheet which actually shows the company worth at given time period. The net value of all bank account and other assets, debtors and creditors control all of these appear in the balance sheet account. Apart from that there can be profit and loss account, nominal account, sales return account, purchase return account. Task 3.3 C. Account that recorded in ledger : The net result for each transaction and account could not be assume from a journal as each transaction dealt separately. Therefore all transaction are relating to a particular account are collected at one place which is known as ledger to ascertain the net profit. A ledger is a book which contains all of the account whether real, nominal, balance sheet account. The initial entry of all account going to the journal and later they are recorded in Ledger. Each account are recorded in the ledger separately. If one page is completed then the account will be continue in the next page and completed account can be removed and accounts can be arranged in desired order in the ledger. The account of the ledger book is divided into two parts. One side is debit and the right hand side known as credit. At the top in middle the name of account appeared. The date of the transaction has to be recorded in each account in the date column. These are the usual process to record account in the ledger. Conclusion : For every financial transaction accounting is the only basic means. It is no longer possible to operate the business without accounting. Although this is a world of computer but accounting software has been also updated in technical sectors. The manual process of keeping record in the ledger is the best and secured source for company. Although the online record become more popular but the necessity of the hard copy evidence of ledger and other method of accounting will not diminish.

Reference : 8

1. McPhail, K. Walter,D. 2009. Accounting and Business Ethics. USA. 2. Available at : http://universities.boardguess.com/chapter-1-accounting-its-function-1952.htm Access at : 16th may, 2011.12:30. 3. [Available at] http://businesscasestudies.co.uk/business-theory/finance/accountingconcepts.html [Access at : 16th may, 2011. 1:30.] 4. Tracy,J.A. 2009. How to read a financial report: Writing Vital Signs Out of the Numbers, p:3. John Wiley & Sons. USA. 5. Kieso, D. E. Weygandt, J. J. Warfield, T. D. 2011. Intermediate Accounting. P: 142. USA. 6. [Availableat] http://ebooks.narotama.ac.id/files/A%20Textbook%20of%20Financial%20Cost %20&%20Management%20Accounting%20(Revised%20Edition)/Chapter %203%20%20Accounting%20Books%20and%20Records [Access at : 16th may, 2011. 2:05.] 7. [Available at ]: http://www.scribd.com/doc/72141818/CarCraft-Undertaking 17th may, 2011. 11.00] [Access at :