Day 1: What is Accounting? Business & Transactions
✅ Today you will learn
- What accounting is and why every business needs it
- Bookkeeping vs accounting vs Tally
- Business types and who uses accounts
- Which events are transactions (cash and credit)
- The accounting cycle and 6 core concepts
🏢 In the real world
Rohit opens “Rohit Stationers” in Aligarh with ₹2,00,000. In the first week he buys pens, sells notebooks, pays rent and gives goods on credit to a school. At month-end the bank asks for his profit figure for a loan. Without accounts he cannot answer – this course teaches him (and you) to record everything correctly, first on paper and then in TallyPrime.
What is accounting?
Accounting is the process of identifying, recording, classifying, summarising and communicating the financial transactions of a business, so that owners, banks and the government can understand its profit and financial position.
Bookkeeping
- Recording daily transactions
- Routine, clerical work
- Output: journal and ledgers
- Done by accounts assistant / data-entry operator
Accounting
- Classifying, summarising, analysing
- Needs judgement and rules
- Output: P&L, balance sheet, reports
- Done by accountant / CA
Types of business and users of accounts
| Form | Owner(s) | Example | Main law/registration |
|---|---|---|---|
| Sole proprietorship | One person | Kirana store, coaching centre | Shop & establishment, GST if needed |
| Partnership / LLP | 2 or more partners | CA firm, wholesale trader | Partnership Act 1932 / LLP Act 2008 |
| Company | Shareholders, run by directors | Pvt Ltd software firm | Companies Act 2013 |
| Trust / society | Members, non-profit | School, NGO | Trust / Societies Act |
What is a transaction?
A transaction is an exchange between two parties that can be measured in money and changes the financial position of the business. Only transactions are recorded in the books.
| Event | Transaction? | Why |
|---|---|---|
| Bought furniture for ₹15,000 cash | Yes – cash | Money paid, furniture received |
| Sold goods to Gupta School ₹8,000, payment after 30 days | Yes – credit | Exchange done, payment later |
| Received an order for ₹50,000 of goods | No | No goods or money exchanged yet |
| Hired a new accountant at ₹18,000 per month | No (until salary is due/paid) | Only an agreement |
| Paid salary ₹18,000 | Yes – cash/bank | Money paid |
| Owner’s mobile phone stolen at home | No | Not a business event (entity concept) |
Cash transaction: payment happens immediately (cash, UPI, cheque, card). Credit transaction: payment happens later; a debtor or creditor is created.
The accounting cycle
- 1Transaction happens and a source document is made (bill, receipt, bank statement)
- 2Journal entry (in TallyPrime: a voucher)
- 3Posting to ledger accounts (TallyPrime does this automatically)
- 4Trial balance to check Dr = Cr
- 5Adjustments at year-end (depreciation, outstanding, prepaid)
- 6Final accounts: Trading, Profit & Loss account, Balance Sheet
- 7Closing and carrying balances to the next year
Never enter a transaction without a document: tax invoice, cash memo, payment receipt, bank statement, salary sheet or debit/credit note. Auditors match every voucher to its document.
Six concepts every accountant uses
| Concept | Meaning | Example |
|---|---|---|
| Business entity | Business and owner are separate | Owner’s home electricity bill is not a business expense |
| Money measurement | Only events measurable in money are recorded | Staff loyalty is not recorded |
| Going concern | Business will continue in future | Machinery shown at cost less depreciation, not scrap value |
| Accounting period | Accounts are made for a fixed period | Financial year 1 April – 31 March |
| Dual aspect | Every transaction has two sides (Dr and Cr) | Capital ₹2,00,000: cash increases, capital increases |
| Accrual | Income/expense recorded when earned/incurred, not when cash moves | March rent unpaid on 31 March is still a March expense |
Indian businesses follow Accounting Standards (AS) issued by ICAI; listed and large companies follow Ind AS. This course follows the common practice for small and medium businesses.
Careers after this course
| Role | Typical work | Skills from this course |
|---|---|---|
| Accounts assistant | Voucher entry, bank reconciliation, ledgers | Days 4–14, 24 |
| GST executive | GST invoices, GSTR-1, GSTR-3B, ITC matching | Days 19–23 |
| Billing / inventory executive | Item invoices, stock, orders | Days 15–18 |
| Payroll assistant | Salary, PF, ESI | Day 28 |
| Freelance bookkeeper | Monthly books for shops and clinics | Whole course + Day 30 project |
Solved examples
Example 1: Transaction or not? Cash or credit?
Rohit Stationers – decide for each event.
| # | Event | Answer |
|---|---|---|
| 1 | Started business with ₹2,00,000 cash | Transaction – cash (capital introduced) |
| 2 | Bought goods from Sai Traders ₹40,000 on credit | Transaction – credit purchase (Sai Traders becomes a creditor) |
| 3 | Sold goods for ₹12,000 via UPI | Transaction – cash sale (UPI counts as cash/bank) |
| 4 | Owner paid his child’s school fees from personal account | Not a business transaction |
| 5 | Quotation received for a printer | Not a transaction |
| 6 | Owner took ₹5,000 from the shop for personal use | Transaction – drawings |
Example 2: Which concept applies?
- Rent of March ₹10,000 paid on 5 April → Accrual: it is an expense of March (show as outstanding on 31 March).
- Owner’s car used only for family trips is not shown in the balance sheet → Business entity.
- A building bought for ₹20 lakh is shown at cost less depreciation, not at today’s market price → Going concern / cost.
Practice exercises (unsolved – answer hidden)
Try each exercise on paper or in TallyPrime first, then open the answer to check.
🏋️ Practice – do it yourself
Show solution
(a) Transaction – cash/bank. (b) Not a transaction. (c) Transaction – credit sale (Meena Store is a debtor). (d) Transaction – cash receipt from a debtor.Show solution
(a) Accounting period. (b) Business entity. (c) Dual aspect.Show solution
Source document → Journal → Ledger → Trial balance → Final accounts.Show solution
Bookkeeping only records daily transactions (routine work); accounting also classifies, summarises and interprets them and prepares final accounts (needs judgement).🏅 Job skills unlocked today
Quick quiz
🧠 Quick Quiz – test yourself
Interview corner
💼 Interview Corner
What is the difference between bookkeeping and accounting?
Bookkeeping records transactions; accounting classifies, summarises, analyses them and prepares financial statements. Bookkeeping is a part of accounting.
Explain the accrual concept with an example.
Income and expenses are recorded in the period they are earned or incurred, not when cash is received or paid. Example: March electricity ₹4,000 paid in April is a March expense and shown as outstanding on 31 March.
Summary
- Accounting = identify, record, classify, summarise, communicate.
- Only money-measurable exchanges are transactions; they can be cash or credit.
- Cycle: document → journal → ledger → trial balance → adjustments → final accounts.
- Key concepts: entity, money measurement, going concern, period, dual aspect, accrual.
Day 2: accounting terms (capital, assets, liabilities, debtors, creditors…) and the accounting equation, with a transaction table that always balances.
Frequently Asked Questions
Do I need commerce background to learn Tally?
Why learn manual accounting if TallyPrime does everything?
Tally and TallyPrime are trademarks of Tally Solutions Pvt. Ltd. This is an independent course, not affiliated with or endorsed by Tally Solutions. All business names, GSTINs and figures in the examples are fictional samples.
