FUNDAMENTAL OF ACCOUNTING

ACCOUNTING BASIC TERMONOLOGIES

 ACCOUNTING: Accounting Is Language of Business.

 BUSINESS: Any legal activity which is undertaken for the purpose of earning profit.
 BOOK-KEEPING: Recording of business transaction in a systematic way.
 PROPRIETOR: the owner of concern, invest capital, time and attention, bear loss n
enjoy profit.
 CAPITAL: Anything n amount invest by the owner.
 Three Major Types of Businesses:
a) Service (accountant, Lawyer, Doctor)
b) Merchandising (Wal-Mart, Safeway, The Gap)
c) Manufacturing (cotton mills, General Motors)
 TRANSACTION: Any dealing between two person or things. (it may be for cash, it may
be on credit)
 DRAWINGS: Good n cash taken away by the owner.
 GOOD/MERCHANDIZ: all things in which business deals.
 PURCHASES: Anything purchase for re sale purpose.
 ASSETS: all the things own or possessed by the biz.
 LIABILITIES: any debts due by biz.
 SALES: goods are sold for profit.
 RETURNS: if return by customer its sales return and if return to seller/supplier its
purchases return.
 REVENUE: Any income generating by biz.
 DISCOUNT: Any reduction in price.
 TRADE DISCOUNT: Any concession in listed/printed price,at the spot.
 CASH DISCOUNT:Deduction allowed by the creditor to the debtor for prompt
payment.
 ALLOWANCE: Any reduction in price due to defect.
 DEBTORS: from whom the biz receive.
 CREDITOR:To whom the biz pay.
 COST: Any assets acquired.
 EXPENSES: Used/enjoyed benefit of expenditure
 STOCK/INVENTORY: Unsold goods.
 ACCOUNT: Brief record of transaction; about person or things.

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 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(GAAP)
ACCOUNTING CONCEPTS:

 BUSINESS ENTITY
 GOING CONCERN
 MONEY MEASUREMENT
 COST
 DUAL ASPECT
 ACCOUNTING PERIOD
 MATCHING
 REALISATION
ACCOUNTING CONVENTIONS:

 PROPER DISCLOSURE
 MATERIALITY
 CONSISTENCY
 CONSERVATISM
ACCOUNTING CONCEPTS

 BUSINESS ENTITY CONCEPT: Business and business man/owner both are separate
entities accounting deals and concerned with only business, financial matters. in short we
done our work of accounting with business point of view.

 GOING CONCERN CONCEPT: It shows that the business will exist for a long time to
come.

 MONEY MEASUREMENT CONCEPT: Accounting records only those transactions

which can be expressed in terms of money. Transaction or event which cannot be
expressed in money do not place in books of accounts.

 (HISTORICAL) COST CONCEPT: recording of an assets at their purchasing price.

 ACCOUNTING PERIOD CONCEPT: The life of the business is divided into equal
segments, for studying the results after each segment. The time/duration of business can
be annually, semi annually, quarterly, monthly.

 MATCHING CONCEPT: Compare business expense of a particular period with its

relevant period’s revenue. Match the expenses with revenue

 REVENUE REALISATION CONCEPT: Record the revenue at the time of delivering

of product/Services to the customer/client irrespective of receipt of cash.

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  DUAL ASPECT CONCEPT: Every transaction has two aspects. One what benefit
business is receiving and other what benefit business is giving.

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