ACCOUNTING ………

Accounting is a process which includes identifying ,measuring,

recording , classifying, summarizing, analyzing the transaction which can be
measured in terms of money .

Basic Accounting Terminology ………..

1. Asset
Fixed Assets Current Assets

eg. Building, land, machinery eg. Cash ,Bank Balance

2. Capital
3. Liability
4. Goods
5. Debtors
6. Creditors
7. Outstanding Expenses
8. Prepaid Expenses
 Objective of Accounting………
 To keep systematic records
To protest business properties
To the operational profit/loss
To calculate the financial position
To communicate the accounting information
To provide additional information for research purpose

Advantages of account…….
 help in ascertaining the profit earned /losses suffered
 Assists in managing the business proof in court in law
 Helps in remembering
 Helps in taxes matters
 Helps in case of sale of business
 Helps the manager in planning ,decision making and controlling the business
operation
Limitation of accounting …….
 Not absolutely exact as it based on different estimates made by different people
All items are shown at historical value it ignores price level changes
Records only monetary transaction and avoids other important non-monetary
transaction
Omission of qualitative information, such as calibre of the management, quality of
product, health of proprietor
Based on accounting concepts and conventions
Influenced by personal judgement

ACCOUNTING CONCEPTS, PRINCIPLES

 Money measurement concept
 Going concern concept
 Cost concept
 Conservative concept
 Accounting period concept
 Matching principle

ACCOUNTING EQUATION
Capital + Liabilities = Assets
JOURNAL
A journal is a book of original entry wherein transactions are first recorded

Various Types Of Accounts

Real Account (eg. Asset)
Nominal Account (eg. Expenses, gain etc.)
Personal Account (eg. Debtors and creditors)

RULES OF ACCOUNTING
No. 1
Debit what comes in
Credit what goes out
(this rule is related to real accounts)
No. 2
Debit the receiver
Credit the giver
(this rule is related to the personal account)
No. 3
Debit all the loses and expenses
Credit all the gains and profit
(this rule is related to nominal account)
SOME IMPORTANT FACTS RELATED TO ACCOUNTING
In case of goods related transactions the entry will not be passed by the name of good
that should be either purchase or sales return

DISCOUNT

 Trade discount It is a discount which is given or receive at the time of bulk

purchase or sale this discount is not shown in the book of account
 Cash discount It is a discount which is given or receive if the cash is paid timely
this discount is shown in the book of account

BAD DEBT
The money due from a person not recoverable is called Bad Debt

BAD DEBPT RECOVER

If any amount is received from bad debtor it is kind of profit for business
written as Bad Debt Recover