Beruflich Dokumente
Kultur Dokumente
Sl
Terminology
Meaning
Accounting
Financial
accounting
Management
accounting
Accounting
principles
Accounting
concepts
Accounting
convention
s
Cash system of
accounting
Mercantile
system of
accounting
Journal
10
Compound
Journal
entry
11
Nominal
accounts
12
Opening journal
entry
13
Journalizing
14
Personal
accounts
15
Real accounts
16
Ledger
17
Posting
18
Trial balance
19
Voucher system
20
Cash journal
21
Contra Entry
22
Bills journal
23
General journal
24
Goods journal
25
Imprest
26
27
Special journal
of a specific type.
28
Accommodation
bill
29
Bills of exchange
30
Cheque
31
Demand bill
32
Promissory note
33
Time bill
34
Trade bill
35
Assets
36
Adjustment entry
37
Balance Sheet
38
Current assets
39
Current liabilities
40
Fixed assets
41
Fictitious assets
42
Fixed liabilities
43
Liabilities
44
Liquid assets
45
Manufacturing
account
46
47
Trading account
48
Compensating
errors
49
Errors of
omission.
50
Errors of
commissio
n
51
Errors of
Principle
52
Suspense
account
53
Amortization
54
Depletion
55
Dilapidation
56
Depreciation
57
Depreciation
accounting
58
Accounting ratio
other.
59
Balance sheet
60
Balance sheet
ratios
61
Composite ratios
62
Financial
analysis
63
Financial ratios
64
Financial
statement
65
Interpretation
66
67
Turnover ratios
68
Funds
69
Funds flow
statement
70
Working capital
current liabilities.
71
Cash
72
Cash flow
analysis
73
Cash flows
statement
74
Activity based
costing
75
Back flush
costing
76
Cost Sheet
77
Direct labour
78
Direct material
79
Fixed cost
80
81
Material
made.
82
Overhead/Indirec
t cost
83
Semi-variable
cost
84
Value added
concept
85
Variable cost
86
Historical cost of
Inventories
87
Inventory
88
Net realizable
value
89
Periodic
inventory
system
90
Perpetual
inventory
system
91
Budget
92
Budgeting
93
Budgetary
control
94
Budget manual
95
Budget period
96
Fixed budget
97
Flexible budget
98
Forecast
99
Master budget
composition of mixture.
114 Revision
variances
115 Variance
124 Differential
costing
Analyzing
performance
Data used
Financial accounting
It is designed to supply
information in the form of
profit and loss account
and Balance Sheet to
external
parties
like
shareholders,
creditors,
banks,
investors
and
Government
It portrays the position of
business as a whole. The
financial
statements
shows
the
overall
performance or status of
the business
Management accounting
It is designed for the
internal use by the
management.
Monetary
measurement
Periodicity
reporting
Precision
Information
is
more
precise as it is for the
external use
Nature
It is more objective
Legal compulsion
It is more or less
compulsory for every
business on account of the
legal provisions of one or
the other.
business transactions
Journal
Ledger
It is the book of first or It is the book of second
original entry
and final entry
System of record
Reliability
process
It records transactions
in a chronological order
Journal is more reliable
since entry is first made
here
It records transactions
in a analytical order
It is less reliable as
entry from the records
of journal is simply
posted here.
The
process
of The
process
of
recording transactions recording transactions
is
termed
as in the ledger is called as
journalizing
Posting.
Objective
Item covered
Preparation
Use
Trial Balance
It is a statement
containing
various
ledger balances on a
particular date
Balance Sheet
It is a statement of
various
assets
and
liabilities
of
the
business on a particular
date.
It is to check the The objective is to
arithmetical accuracy of ascertain the financial
the books of account of position of the business
the business
It contains all items It incorporates only
relating to incomes, assets and liabilities.
expenses, assets and
liabilities
It is prepared before It is prepared not only
preparation
of
the on the basis of trial
balance sheet
balance but also of any
additional information
which may not have
been incorporated in
trial balance.
It is meant only for A balance is prepared
internal use
FUNDS FLOW
STATEMENT
It deals with the
financial resources
required for running the
business activities. it
explains how were the
funds obtained and how
were they used
INCOME
STATEMENT
IT DISCLOSES THE
RESULTS OF THE
BUSINESS
ACTIVITIES. IE HOW
MUCH HAS BEEN
EARNED AND HOW
IT HAS BEEN SPENT
MATCHING
SOURCES
An income statement
which discloses the
results of operations
cannot even accurately
tell about the funds
from operations alone
because of non-fund
item being included
therein.
Point of difference
Position
Record
It is merely a record of
cash receiptsand
disbursements.
Periodicity
Book Keeping
It is a mere recording of
business transactions in
appropriate account
books.
Scope
Narrow scope
Accounting
It denotes the recording
of business transactions
in proper books of
accounts as well as the
preparation and analysis
and interpretation of
financial statements
Wider scope
Maintenance of
accounts
Base
Purpose
Nature of work
Person in charge
Assets
It refer to things with which a
business deals
It is meant for use in the business
The scope of the term assets is wider
than that of the term goods and
includes goods
Assets may be tangible and
intangible
Assets are the items of balance sheet
Liabilities
Liabilities refer to amounts due from
a business to others.
Liabilities are a burden to a business
All liabilities make a business
indebted to others
Creditors
An creditor is a person to whom the
business owes money
A person becomes a creditor of a
business when he has given some
benefit to the business
Creditors constitute liabilities for a
business
Accounts of creditors show credit
balances.
Debit
It refers to the amount of charge
given to an account for some benefit
received by that account
Debit is given to an account when
that account has received some
benefit
The entry for the debit given to an
account is made on the left-hand side
of that account
Debit results in increase in the
amount of an asset, decrease in the
amount of liability, decrease in the
amount of owners capital, and
increase in the amount of an expense
or decrease in the amount of an
income.
Credit
It refers to the amount of discharge
or reward given to an account for
some benefit given by that account
Credit is given to an account when
that account has given some benefit
The entry for the Credit given to an
account is made on the right-hand
side of that account
Credit results in decrease in the
amount of an asset, increase in the
amount of liability ,increase in the
amount of owners capital, decrease
in the amount of an expense or
increase in the amount of an income
Ledger
It is a book of final entry as the
transactions are recorded finally in
the ledger
It is a principal book of accounts
because it is from this book that a
trader can obtain final information
relating to this business.
A ledger is the permanent record of
various accounts
But posting from the journal to the
ledger is done periodically; say,
weekly, fortnightly, monthly or
quarterly according to the
convenience and requirements of the
business concern.
In journal the information relating to In ledger it is found in one place
a particular account is not found in
one place
Journal does not provide full
Ledger provides full information
information about a person, an asset, about a person,an asset,an expense or
an expense or an income
an income.
The unit of entries in the journal is a The unit of entries in the ledger is an
transaction
account
As legal evidence journal has greater Considered as a secondary document
weight than ledger
only
Recording of transactions in the
Recording of transactions in the
journal is called journalizing
ledger is called posting
Each entry in the journal shows both Each entry in a ledger account shows
the aspects of a transaction
only one aspect of a transaction
Narration is written in the journal
No narration is written in the ledger
Vouchers, receipts, invoices and
Journal helps the recording of
debit and credit notes help the
transactions in the ledger
recording of transactions in the
journal
Journal may be avoided by a
Ledger is a must for every business
business concern
concern.
Journal is totalled but not balanced
A ledger is balanced
Journal has debit and credit columns
it does not have debit and credit
sides.
In the journal, ledger folio is written
A trial balance cannot be prepared
from the entries in the journal
Final accounts cannot be prepared
from the journal entries
Posting
It means recording a transaction in
the journal
Journalizing is the first stage of
recording a transaction
It is done then and there that is soon
after a transaction has taken place
Journalizing of transactions is done
in the order of dates without any
other considerations
It is made in one place
It is done with the help of vouchers,
receipts, invoices, debit notes and
credit notes
the ledger
Posting is the second stage of
recording a transaction
Posting is generally not made then
and there
Posting is made according to the
nature of the transactions
Posting of an entry in the journal is
made in two different places in the
ledger.
Posting to the ledger is done with the
help of the entries in the journal.
Credit note
It is prepared by the person who
receives the goods returned and is
sent to the buyer of the goods.
It serves as intimation for the receipt
of the goods returned.
It indicates that the account of the
person by whom the goods are
returned is credited.
A credit note is prepared after the
receipt of the debit note.
It serves as the basis for the entries in It serves as the basis for the entries in
the purchases returns book of the
the sales returns book of the receiver
sender of the goods.
of goods.
Capital expenditure
It is incurred for acquiring fixed
assets intended for use in the
business and not for resale.
It is incurred for extending or
improving the existing fixed assets
It adds to the revenue-earning
capacity of a concern
It will increase the value of net assets
The benefit of capital expenditure
extends to more than one year.
It is not a loss to the concern
It will go to the balance sheet.
Revenue expenditure
It is incurred for acquiring or
producing goods meant for sale.
It is incurred for maintaining the
fixed assets in a good working order
It does not add to the revenueearning capacity of a concern
It will decrease the value of the net
assets
The benefit of revenue expenditure is
confined to only one year.
It is a loss to the concern
It will go the trading account or
profit and loss account.
Revenue receipts
It represents the incomes, such as
sale proceeds of goods, interest
received, commission received etc.
Legal compulsion
3. to know the exact reasons leading to the net profit or the net loss
4. To ascertain what amounts are due to the business and from whom the
amounts are due.
5. To ascertain what amounts are due from the business and to whom the
amounts are due.
6. To know the exact financial position of the business as on a particular
date.
7. To know the progress of the business from year to year.
8. To minimize errors and frauds by facilitating their quick detection.
9. To keep control over the properties and the activities of the business.
10. to have valuable information for legal and tax purposes
11.To have necessary information for future planning.
Is book keeping an art or a science?
An art, generally, refers to action or actual doing. Book keeping involves
actual doing ( i.e. the actual recording of business transaction in account
books). So, book keeping is an art. A Science, usually, refers to any subject
which has a set of accepted principles or rules for application in practice.
Book-keeping has a set of accepted principles or rules for application while
recording the business transactions. So, book keeping is also a science.
Definition and meaning of Accounting
The American Institute of Certified Public Accountants has defined
accounting as the art of recording, classifying and summarizing, in a
significant manner, and in terms of money, transactions and events which
are, in pat at least, of a financial character, and interpreting the results
thereof.
In short, accounting is the recording, classifying and summarizing of
business transactions and interpreting the results thereof.
Essential aspects or features of accounting:
1. Recording: it is the first essential aspect of accounting. it refers to the
entering of business transactions as and when they occur either in a
single book called the journal or in several books called the subsidiary
books or special journals.
Branches of Accounting
In order to satisfy the needs of different groups of people interested in the
accounting information, different branches of accounting has been evolved.
There are three branches of accounting. They are:
1. Financial accounting
2. Cost Accounting
3. Management accounting
Financial Accounting:
It is concerned with the recording of business transactions in a set of books
and the periodic presentation of the financial data recorded in the books of
accounts, through financial statement s like the profit and loss account and
balance sheet to outsiders like creditors, shareholders, employees etc.
Cost Accounting:
It is that branch of accounting which is mainly concerned with costing
information which is useful to the management for purpose of cost
ascertainment and cost control.
transferred to the customer and the customer become legally liable to pay for
them.
10.Accrual Concept:
The accrual concept suggests that when a transaction has been
entered into its consequences will certainly follow. So all the transactions
must be brought into record, whether they are settled in cash or not. It
suggests that an accountant is required to treat as revenues all that items for
which there are the legal right to receive although cash might not have been
received for them. That means, if revenue is earned, but no payment is
received the same should be recorded as revenue.
11.Legal Aspect concept:
This concept means that the accounting records and books should
reflect the legal position. This concept also means that the accounting
records and statements should conform to legal requirements. That is, the
accounting records should be kept and the statements should be prepared in
the manner provided by law. That is by the relevant acts.
Accounting Conventions:
It refers to the customs, traditions, usages or practices followed by the
accountants as a guide in the preparation of financial statements. They are
adopted to make the financial statements clear and meaningful.
Convention of Materiality:
This convention means that a detailed record is made only of those business
transactions which are material (i.e. important). No detailed record is made
of transactions which are trivial (insignificant), as the work of recording the
minute details of such transactions is not justified by the usefulness of the
result.
Convention of Conservatism:
The convention of conservatism means the convention of caution, prudence
or the policy of playing safe. In other words, it means that, in the accounting
records and the financial statements of a business. All the prospective losses,
risks and uncertainties should be taken note of and provided for, but