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Branches of Accounting
Process of communicating social and environmental impacts of business actions
FINANCIAL ACCOUNTING
SOCIAL ACCOUNTING
ACCOUNTING
COST ACCOUNTING
MANAGEMENT ACCOUNTING
CONCEPTS
CONVENTIONS
Concepts
It means basic rules and regulations. Different Concepts
Business and owners are separate
Business = artificial legal entity
- Business Entity
Every thing of business has two equal sides/ two equal fold impact
- Accounting Period
- Matching
Expenses are recognized in the same accounting period when the related revenue is recognized.
- Money Measurement
Accounts only deal with items to which a monetary value can be attributed.
- Cost
An asset is entered into the accounting records at the price paid to acquire it.
- Accrual
The idea that income and expense items must be included in financial statements as they are earned or incurred
- Revenue Recognition
Conventions
It means basic assumptions.
- Disclosure
To inform both current and potential investors of the accounting strategies and methods used when developing periodic corporate Be consistent = no change in method unless forced Play safe Relating to the importance/ significance of an amount, transaction or discrepancy.
MCQs
The immediate recognition of loss is supported
which the goods were delivered or the services performed and expenses to the accounting period in which they were used to produce revenues is known as the:
- Accounting period - Continuity assumption - Matching rule - Revenue recognition
Account
Personal - Accounts of individuals and
artificial persons. E.g. Mr. A , B , C , ABC Ltd. Z Ltd. etc. Impersonal - Accounts of Others i.e. those who are not individuals and artificial persons. Further classified into two types. - Real - Nominal
Question
Classify the following into Personal, Real and Nominal
Account: - Stationery Account - Cash Account - Goodwill Account - Capital Account - Freight Account - Rent Account - Interest Account - Account of Govind, a customer - Bank Loan Account - Depreciation
Example
Received cash Rs.500 from Mr. A
- Mr. A, a Personal account - A is the giver of the money - So As account will be credited.
REAL
NOMINAL
Example
Received cash from Mr. A as Commission
- Here commission is a nominal account - In the given transaction Commission is Income - Applying the rule commission will be credited.
Business transactions
In order to record the business transactions we
follow certain steps: - Identify the nature of transaction i.e. Cash or Credit - If it is a Cash transaction, then one account getting affected is Cash or Bank (Cheque) - Next question WHY? - If no answer to the previous question then next question WHOM?
- In case of Credit Transaction, one account getting affected is Personal account. - Next question WHY - Example Purchased Furniture from Furniturewala and Sons Rs.20000 - Credit Transaction as no money is coming in or going out - So Furniturewala and Sons Account getting affected - WHY = Purchase of Furniture - Second account getting affected is Furniture
Question
Point out the accounts which will be debited
and credited for each one of the following transactions. 1. Cash received from X 2. Cash paid to Y 3. Credit sale to Z 4. Salary paid to clerk by means of cheque. 5. Payment of cash to Landlord for Rent.