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Accounting cycle

Accounting cycle – It is a process by which the business used to maintain the books of account in a systematic manner. Business transaction recorded in to Journal, then Journal converted in to ledger, ledger converted in to Trial balance, finally trial balance converted in to final accounts.

a) Transaction

Any exchange of goods & services from one business to another business or outsiders in the monetary or non-monetary term is known as transaction. An event which changes the financial position of business is also termed as transactions.

e.g– Goods purchase, sale of goods, any expenses or income etc. and many day to day activities of the business are known as transaction.

Like Purchase of goods of Rs 5000/- from Mr Dash. (Here business purchase goods from Mr Dash with the exchange value)




The sale of the business concern is also known as turnover. In the trading account gross profit transferred to credit side of Profit & loss account, simultaneously if loss occurred , it will transferred to debit side of profit & loss account.


The P& L account description as follows. Here all indirect expenses are posted in debit side & all indirect income show in credit side in order to know the Net profit or net loss of the business concern which is crucial point of view for every business concern and also income tax calculation.


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