FEATURES / CHARACTRTERSTICES of accounting

Content type

User Generated

Subject

Accounting

Type

Note

Uploaded By

ehaare

Pages

BASICS

Meaning of Accounting: According to American Accounting Association Accounting is

“the process of identifying, measuring and communicating information to permit

judgment and decisions by the users of accounts”.

Users of Accounts: Generally 2 types. 1. Internal management.

2. External users or Outsiders- Investors, Employees, Lenders, Customers,

Government and other agencies, Public.

Sub-fields of Accounting:

 Book-keeping: It covers procedural aspects of accounting work and embraces

record keeping function.

 Financial accounting: It covers the preparation and interpretation of financial

statements.

 Management accounting: It covers the generation of accounting information for

management decisions.

 Social responsibility accounting: It covers the accounting of social costs incurred

by the enterprise.

Fundamental Accounting equation:

Assets = Capital+ Liabilities.

Capital = Assets - Liabilities.

Accounting elements: The elements directly related to the measurement of financial

position i.e., for the preparation of balance sheet are Assets, Liabilities and Equity. The

elements directly related to the measurements of performance in the profit & loss

account are income and expenses.

Four phases of accounting process:

 Journalisation of transactions

 Ledger positioning and balancing

 Preparation of trail balance

 Preparation of final accounts.

Book keeping: It is an activity, related to the recording of financial data, relating to

business operations in an orderly manner. The main purpose of accounting for business

is to as certain profit or loss for the accounting period.

Accounting: It is an activity of analasis and interpretation of the book-keeping records.

Journal: Recording each transaction of the business.

Ledger: It is a book where similar transactions relating to a person or thing are

recorded.

Types: Debtors ledger

Creditor’s ledger

General ledger

Concepts: Concepts are necessary assumptions and conditions upon which

accounting is based.

 Business entity concept: In accounting, business is treated as separate entity

from its owners.While recording the transactions in books, it should be noted that

business and owners are separate entities.In the transactions of business, personal

transactions of the owners should not be mixed.

For example: - Insurance premium of the owner etc...

 Going concern concept: Accounts are recorded and assumed that the business

will continue for a long time. It is useful for assessment of goodwill.

 Consistency concept: It means that same accounting policies are followed from

one period to another.

 Accrual concept: It means that financial statements are prepared on

merchantile system only.

Types of Accounts: Basically accounts are three types,

 Personal account: Accounts which show transactions with persons are called

personal account. It includes accounts in the name of persons, firms, companies.

In this: Debit the reciver

Credit the giver.

For example: - Naresh a/c, Naresh&co a/c etc…

 Real account: Accounts relating to assets is known as real accounts. A separate

account is maintained for each asset owned by the business.

End of Preview - Want to read all 52 pages?

Access Now

Unformatted Attachment Preview

BASICS Meaning of Accounting: According to American Accounting Association Accounting is “the process of identifying, measuring and communicating information to permit judgment and decisions by the users of accounts”. Users of Accounts: Generally 2 types. 1. Internal management. 2. External users or Outsiders- Investors, Employees, Lenders, Customers, Government and other agencies, Public. Sub-fields of Accounting: Book-keeping: It covers procedural aspects of accounting work and embraces record keeping function. Financial accounting: It covers the preparation and interpretation of financial statements. Management accounting: It covers the generation of accounting information for management decisions. Social responsibility accounting: It covers the accounting of social costs incurred by the enterprise. Fundamental Accounting equation: Assets = Capital+ Liabilities. Capital = Assets - Liabilities. Accounting elements: The elements directly related to the measurement of financial position i.e., for the preparation of balance sheet are Assets, Liabilities and Equity. The elements directly related to the measurements of performance in the profit & loss account are income and expenses. Four phases of accounting process: Journalisation of transactions Ledger positioning and balancing Preparation of trail balance Preparation of final accounts. Book keeping: It is an activity, related to the recording of financial data, re ...
Purchase document to see full attachment