A man who cannot make mistakes cannot do

anything. (Bernard's Bingo Magazine)

ACCOUNTING
MECHANICS

Dr. Jatin Pancholi

Email: email@jatinpancholi.com
Website: http://www.jatinpancholi.com
Dr. Jatin Pancholi has compiled and prepared this note from various sources, as the basis for class discussion rather than to illustrate
either effective or ineffective handling of a management situation. The handling of a management situation requires personal guidance by
a professional. To obtain copies, request permission to reproduce and to send feedback, please send email to email@jatinpancholi.com.
Visit website http://www.jatinpancholi.com. Those wishing to co-author next edition of this handout are requested to contact via email. 1
ACCOUNTING EQUIVALENCE
Assets = Owner’s Equity +
Outside Liabilities

A = OE + OL

2
 DOUBLE ENTRY SYSTEM

A = OE + OL
Debit = Credit
In the double-entry accounting system,
every transaction is recorded by equal
amounts of debits and credits.
3
 ACCOUNTANT’S LIFE
A = OE + OL
ASSETS LIABILITIES EQUITIES
Debit Credit Debit Credit Debit Credit
for for for for for for
Increase Decrease Decrease Increase Decrease Increase

ASSETS LIABILITIES EQUITIES

Debit Credit Debit Credit Debit Credit

+ - - + - + 4
ACCOUNTING CYCLE
1. Business Transaction
2. Transaction is recorded in document
(Voucher / Receipt)
3. Analyze the transaction – location ?
4. Journal Entry
5. Ledger Accounts (or ‘T’ account)
6. Trial Balance
7. Balance Sheet, P&L A/c, Cash Flow
Statement 5
 ACCOUNTANT’S ROUTINE

Source
Transaction documents Analyze

Balance Sheet
Prepare a trial Post to the Journal Entry
P & L A/c ledger
balance
Cash Flow
6
 ACCOUNTANT’S ROUTINE

Source
Transaction documents Analyze

Balance Sheet
Prepare a trial Post to the Journal Entry
P & L A/c ledger
balance
Cash Flow
7
 TRANSACTION-1
Chirag started business with cash $
30,000.
The accounts involved are:
(1) Cash (asset)
(2) Owner’s Equity (equity)
Assets = OE + OL
Accounts Notes Owners'
Cash Supplies Equipment Payable Payabl Capital
(1) 30000 30000

30000 0 0 0 0 30000

30000 = 30000
8
 TRANSACTION-1
Chirag started
ASSETS business with cash Rs.
EQUITIES

30,000.
The accounts involved are:
Debit
(1) Credit
Cash (asset) Debit Credit
(2) Owner’s Equity (equity)
+ - - +

JOURNAL ENTRY Page 1

Date Particulars LF Debit Credit
2001
Dec. 1 Cash 30,000
To Capital 30,000
Investment by owner
9
 TRANSACTION-1 - LEDGER
JOURNAL ENTRY Page 1
Date Particulars LF Debit Credit
2001
Dec. 1 Cash 30,000
To Capital 30,000
Investment by owner

Dec. 2 Supplies 2,500

Cash 2,500
Purchased
Cash store supplies Capital
(1)
for cash
30,000 (1) 30,000

10
 Thank You Now, was that debits
to the left or credits
to the left?
I sure wish I had paid
more attention in
class!

Email: email@jatinpancholi.com
Website: http://www.jatinpancholi.com
•Dr. Jatin Pancholi has compiled and prepared this teaching note from various sources, as the basis for class discussion rather than to
illustrate either effective or ineffective handling of a management situation. The handling of a management situation requires personal
guidance by a professional. To obtain copies, request permission to reproduce and to send feedback, please send email to
email@jatinpancholi.com. Visit website http://www.jatinpancholi.com. Those wishing to co-author next edition of this handout are
requested to contact via email. 11