Corporate Fin Mgt NDLM.PDF

Learning Unit - 1

Reading Material

Basics of Commercial Accounting and Balance Sheets

1. Accounting Policy

1.1. An organization must have a policy regarding accounting procedure,

valuation of assets and documentation for the purpose of consistency,

transparency, uniformity and accountability.

2. Focus

2.1. One of the basics of Commercial Accounts is the double-entry system. The

fundamentals of double entry will focus on :-

• Classification of Accounts and the meaning of debit and credit


• Journal entries


• Subsidiary Accounts


• reconciliation of accounts with Bank


• Trial balance.


• Trading Account


• Manufacturing Account


• Adjusting entries and closing entries


• Profit and loss account


• Balance Sheet

2.2. The learner must understand the salient features of the sub-units listed above.

The objective is to enable the learner to acquire a proper foundation to skills

relating to the ‘reading of balance sheets’ and thus enable the learner to take

appropriate financial decisions.

3. Basics of Double Entry System

3.1. Every transaction affects two accounts. One account will be debited and the

other account will be credited. The left hand side of the account is debit and

the right hand side of the account is credit.