I want to develop a simple operating system. One that asks user to login by entering username and password. Once logged in the user sees their desktop and can create some text files.
I don't have any prior experience of OS development. I know C and C++ and Java.
I don't know where to start. I want to use the Linux kernel, but I don't know how to use it, modify it and use it as per my requirements.
How can I do this?
As stated by pavium, there is no short answer. It's going to be a very interesting, long, and challenging task.
Here is a university courses link for an operating systems class, and building a simple one
And here is an interesting primer as well
And an even more interesting primer, an already built OS which is open source, can be modified and messed with. -- this and the previous one are related to each other!
Developing an operating system
If you could write Operation System, You won't come to ask at SO, believe me.
If you don't already have a good understanding of operating systems I suggest you buy the book Modern Operating Systems by Andrew S. Tannenbaum.
If you want to use the linux kernel you could start to explore it by writing linux kernel modules. It's a great way to explore the kernel internals. See Kernel Newbies for more information on this and other kernel related subjects.
Why do you even want to develop your own Operating System? Any of the freely available Linux distributions fulfill all of your requirements immediately out of the box. Try installing Ubuntu and see how it fits your needs. If not, ask a question on Superuser on how to modify it.