Part 1
Keeping the books
Every rupee that moves in a business leaves a trace on paper — a bill, a receipt, a payslip. Accounting is the habit of turning those papers into a few simple records that never disagree with each other. This part builds the whole system from four pieces: the document, the account, the posting and the journal entry. Everything else — the ledger, the trial balance, the profit and loss, the balance sheet — is just those pieces sorted a different way. Learn the four pieces and the reports stop being mysterious.
- 1.1Why keep accountsWithout a record nobody knows who is winning. A short history: Venice 1494, the bahi-khata, day books, Tally, software
- 1.2Every entry starts with a documentThe document is the evidence. Four kinds: no entry, stock only, money only, money and stock
- 1.3AccountsAn account is a named bucket. Five types: asset, liability, equity, income, expense. The account is the name; the ledger is its story
- 1.4Debit and creditWhat leaves one bucket enters another. Debit is where it went, credit is where it came from
- 1.5Postings and journal entriesA posting is one line to one account. A journal entry is a balanced set of postings — and the bill is the entry
- 1.6Parties and cost centresOne party can have many accounts (advance and balance). Party and cost centre are tags on postings, not accounts
- 1.7The journal and the ledgerThe same postings, sorted by date or by account. Running balance is calculated, never stored
- 1.8The trial balanceTotal debits equal total credits, or something is broken
- 1.9Profit and loss, and the balance sheetOne shows the year as it happened, the other shows one day
- 1.10Sales, purchases and returnsCorrect a bill with a credit or debit note; never tear the page
- 1.11Money in, money outReceipts and payments; matching your books to the bank statement
- 1.12Who owes whomReceivables, payables and ageing; party ledgers vs the debtors account
- 1.13Stock and marginStock is cash sitting on the shelf; margin is what stays in your hand
- 1.14Fixing mistakesAn edit replaces the whole entry; a closed month needs a reversing entry
- 1.15GSTEach business pays tax only on the value it adds; input credit passes forward
- 1.16Income taxBook profit vs taxable profit; advance tax
- 1.17TDS and TCSThe payer carries part of your tax to the government
- 1.18Are the books right?Five link rules, then trial balance, bank match, party confirmation