FINANCIAL ACCOUNTING

Basics concepts:

Debtor ( Account Receivable):

A person who owes money to another is a debtor, means that we have to receive amount which we have to repay.

Creditor (Account Payable)

A person who pays out some thing or to whom money is owing is a creditor. It is also termed as account Payable.

Equity:
A claim against the assets of the firm is called equity.
Equities are of two types. Equities of Creditors Equities of owners
Accounting systems: There are two types of systems.

Cash Based System : It is a system when accounting entries are made when only cash is received or paid. Accrual based system: It is a system when the amount is due for payment or Receipt

Accounting concepts:

Business entity concept Going concern concept Money measurement concept Cost concept Dual aspect concept Accounting period concept Matching concept---------expenses are matched to revenues Realization concept------------consideration of profit

Accounting Concepts & Conventions

Accounting Principles:

Consistency Principle

Disclosure principle
Materiality Principle Conservatism Principle

The Consistency Principle: Accounting practices remain unchanged from period to another for example Depreciation is calculated on fixed method or inventories are valued at Cost or Market price. The Disclosure Principle: It means that accounting material should be prepared in such a way which clearly disclosed to the reader indicates that anybody wants to study the financial statement should be able to Make a free Judgment.

Materiality Principle:

It is a recording of important event or item based on the judgment of accountant.

Conservatism Principle:

Here accountants follow the rule Anticipate no Profit but provide for all Possible losses.