ACCOUNTING BASICS
1. Accounting:-Accounting is defined as the art of recording. Classifying and summarizing in a significant manner and in teams of transactions and event which are in part at lead of financial character. Or
The art of recording Business Transactions in a proper manner in various books of accounts.
2. Single and Double Entry System of Accounting:- In business Accounting. Both single and Double entry System of accounting are in use. But among them the double accounting form of accounting are being used widely because of its advantages. Like accuracy completeness and durability Etc.
Single Entry System:-This system is based on cash accounting i.e. transactions are accorded only which cash is received or paid. This system ignores credit transactions and accruals. It is used only in Government accounting.
Double entry system:-This system is widely used by non-government organizations. Under
this system transactions are recorded on aucural basis. i.e. irrespective of
whether cash is paid or sot. For example
where salary is due at the end of a month,
It
is recorded as an expense of that particular month,though cash is paid in the
subsequent month. Further all transaction have two aspects namely debit and
credit. This is the reason why the system is called double entry system. This
system is been developed Enca Picalio.
Statistician and he is known as Father of Modern Accounting system.
(*Accrual = The amount which is due or yet to be receivable from others)
Date of accountings:-
1. Personal Accounting:-
Transactions relating to persons and companies which carries their names.
Debit:-The
receiver
Credit:-The Giver
Ex:-Raju
given a gift worth Rs.10, 000 to Rani.
Debit :
Rani A/c 10,000
Credit :
Cash A/c 10,000
2. Real Account:-
What comes in : debit
What goes out : credit
Ex:-Purchased
computer worth Rs.40, 000 by paying cash
Debit: Computer A/c 10,000
Credit: Cash 10,000
Nominal Account:-All Non-Visible items like good will, expenses and profiles will be covered under this principle. This is also called as Dependent Principle. Because it will not satisfy fully (i.e. both debit and credit) with out sharing one of the side with call or personal principle.
Debit: All expenses and Losses
Credit: All Incomes and Gains
Ex:-Paid Salaries Rs.5, 000
Debit: Salaries A/c 40000
Credit: Cash 40000
