Accounts basic

ACCOUNTING PRINCIPALS

Accounting concept Money measuring concept.only concept. only those transaction or events which can be measured and expressed in terms of  money . Separate entity concept This concepts also mean that as that as the business and the proprietors are two separate entities. Going concern concept =the concept does not mean permanent continuance Cost concept= concept=that that an asset acquired by a concern is recorded in the books of account Dual aspect concept A transaction is made of all the dual or two aspects of each transaction. Benefits of Dual aspect concept 1.it forma the very basis for recording every transaction in the book of a business concern. 2.the accounting equation is ASSETS=LIABILITIES+CAPITAL 3.Every debit has the corresponding credit and vice versa Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS

Accounting period concept •

Accounting period concept means that ,for measuring the financial results of a business periodically.

Benefits Accounting period concept 1.the Accounting period concept is responsible for the prepartion of the financial statements of a business enterprise annually 2.It aims at the disclosing the periodical for financial results

Objective evidence concept This concept means that all accounting entries should be evidenced and supported by source document or business documents such as invoices vouchers etc . . Benefits of Objective evidence concept 1.has contributed to objective and true accounting records and financial statements 2.accounting records and the financial statements of business concern will be accepted by various groups of people interested in business Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS 3.this concept reduces the scope for manipulation of accounts 4.reduces the scope for the personal judgments of the accountants

Accrual concept •

The accrual concept means that when a transaction has been entered into , its consequences will certainly follow. So, all transaction must be brought into record whether , they are settled in cash or not •

The accrual concept is concerned with the recognition of  revenues and expenses

Matching concept •

It may be noted that the matching concept implies appropriate association of related revenues and expenses •

•

 Accounting conventions

Accounting conventions are the customs or practices which have been in force for a long period and which guide the accountants while preparing financial statements like profit and loss account & balance sheet. Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS •

They are the customs usage or practices following by the accountants as a guide in the preparation of financial statements.

•

•

Important accounting conventions

•

1.Convention of materiality

•

2.Convention of conservatism

•

3.Convention of consistency

•

4.Convention of full disclosure

•

•

1.Convention of materiality: Convention of materiality means that in accounting a detailed record is made only of those business transactions which are material to the users of accounting information

•

•

2.Convention of conservatism: Convention of conservatism means the convention of caution prudence or the policy of playing safe.

•

•

3.Convention of consistency: the Convention of consistency means that the accounting practices and methods should remain consistent

•

•

4.Convention of full disclosure: the convention of full means that the material facts must be disclosed in the financial statement with sufficient details.

Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS

Accounting cycle Business transaction Journal Ledger Trial balance Final accounts Business transaction Accounting equations The accounting equations may be stated as a statement of equation between resources and source of finance. Resource=source of finance Assets= Liabilities + owner’s capital Capital=Assets-liabilities Liabilities= Assets-capital

 Accounting principles Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS 1.Personal account Debit the receiver Credit the giver. 2.Real account Debit what comes in Credit what goes out. 3.Nominal account Debit all expenses and loss Credit all incomes and gains.

1.Assets Debit increases in an asset Credit decreases in an asset 2.Liabilities Debit decreases in liabilities Credit increases in a liabilitie 3.capital Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS Debit decreases in capital Credit increases in capital 4. incomes and gains Debit decreases in an income Credit increases in an income 5. expenses and losses Debit decreases in an expense Credit increases in an expense

Accounting terminology Entity =a person having separate business or existence. Capital = an amount which is invested by the owner for his business at the time of commencement. Equity=the claims against the asset of an enterprise or rights in the assets of an enterprise 1.owners Equity. 2.outsiders Equity. Net worth=net value of assets that belongs to the business Drawings=any cash or goods with drawn by the owner for his personal use Assets=literally assets means enough or sufficient economic resources owned by a business concern for caring on the business. Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS Liabilities= Liabilities are outsiders equity Debtors= Debtors the person who owes money to the business 1.trade Debtors 2.a loan Debtors 3. Debtors for asset sold on credit 4. Debtors for the service rendered on credit Debt=the amount of a business transaction due from a person to the business Book debt= Book debt is the amount due to the business from a Debtor as per the book of account Good debt=means the amount which can be collected in full Bad debt=a debt which is irrecoverable. Doubtful debt=the realization or recovery is doubtful or uncertain Creditor=a Creditor is a person who business owes money 1.trade Creditor 2.a loan Creditor 3.a Creditor for an asset purchased on credit 4.an expenses Creditor Solvent=a business man who can pay his liability in full Insolvent=a business man who not able to pay his liability in full Goods= Goods refers to any commodities, products which bought for sale. Purchases= goods Purchased from a business man for the purpose of sale. Sale=goods sold from a business man are called sales Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS Sales returns=goods returned by the customers to the business Purchases returns=goods returned by the business to the suppliers Inventory=the total stock of finished goods held for sale in the ordinary course of business Expenses= Expenses are cost incurred in connection with the earning of revenue Loss= Loss refers to money or money’s worth given up without getting any benefit in return

Gain=the amount which is not generated by the routine of business Profit= the amount which is generated by the routine of business Manufacturing cost- selling price Debit =the amount owned by or due from the account. The indicate the effect of a transaction on the amount on the value of an asset on the amount of a liability or on the amount of  owner’s capital.

Credit=the amount owned to on account for the benefit of given by the account. Account= Account means is a summary of the transaction affecting one person one kind of property or one class of gain or loss.

sBank reconciliation statement 

Bank reconciliation statement merely detects the mistakes but does not rectify the mistake in any of the two books Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS The bank balance shown by the cash book is called the bank balance as per the cash book Bank reconciliation statement is a statement prepared to reconcile the balance as per cash book and balance as per pass book

Bills of exchange

Bill of exchange means is a written order for payment issued by a creditor to his debtor Written order for payment is called the bill of exchange 1.drawer 2.drawee 3.payee

Cash book Cash book is used for recording the receipts and payments of money whether in coins notes cheques postal orders. Simple Cash book Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS Two column Cash book Three column Cash book Cash book with discount and bank column

Depreciation Decrease in the value of an asset. methods of charging Depreciation 1. Straight line method 2. Diminishing balance method 3. Annuity method 4. Revaluation method Straight line method= cost-scrap/life of an asset Diminishing balance method= charged on remaining balance of the asset’s value Annuity method=with on interest Revaluation method=the amount which has been revalued. Final accounts

Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]

ACCOUNTING PRINCIPALS Final statements are mirrors which reflect the business results and the state of affairs of a business concern Final accounts are the summaries of ledger account organized in such a manner as to show the profit or loss of the business for the accounting year and financial position of the at the end of accounting year. Trading account. Profit and loss account. Balance sheet. Trading account. The Trading account is an account which shows merely the result of trading called gross profit of gross profit. It is the account which shows merely the result of buying and selling of goods

Shashwath.A.M Accounts Tutor, Soft skills Trainer Chikamagalur

Talk at+91951524406 [email protected]