Accounting is defined by the American Institute of Certified Public Accountants (AICPA) as "the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof." “Accounting a business Language”
Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user and is reliable
What is Debit and Credit?
Debit and Credit are noun. In Accounting the left hand side of an account is called Debit and the right hand side is called Credit.
What are the pillars/head of Account?
There are 5 heads of Accounts.
1) Assets 2) Expence
Separate Entity Concept:
Accounts are kept for entities, as distinguished from the persons who associated with these In recording events in accounting, the important question is: "How do these events affect the '-How they affect the persons who own, operate, or otherwise are associated with the entity is For example, when a person invests Rs.200,000 into business it will be deemed that the owner given that money to the business which will be shown as a 'liability' hi the books of the* business. In tie owner withdraws Rs.30,000 from'the business, it will change the position and the net amount by the business to the owner will be shown only as Rs. 170,000. The concept of separate entity is applicable to all forms of business organizations. For example, in of a sole proprietorship or partnership business, though the, sole proprietor or partners are not as separate entities in the eyes of law, but for accounting purposes they will be considered as entities. Going Concern Concept:
According to this concept it is assumed that an entity is a going concern — that it will continue to for an indefinite time period it here is no intention to liquidate the particular business venture in the lie future. On account of this concept, the accountant while valuing the asset does not take into the sale value of assets. Moreover, he charges depreciation on fixed assets on the basis of their life rather than on their market values.
For example, suppose that a company has just purchased a three-year insurance policy for If we assume that the business will continue in operation for three years or more. We will . the Rs.45000 cost of insurance as an asset which provides services to the business over a three-period. On (he other hand, if we assume that the business is likely to terminate in the near future, the policy should be reported at its cancellation value i,e. the amount refundable upon cancellation. Moreover, the concept applies to the business as a whole. When an enterprise liquidates a branch segment of its operations, the ability of the enterprise to continue as a going-concern is not impaired ly. The enterprise wilt not be considered as a going-concern when it has gone into liquidation. Money Measurement Concept:
In financial accounting, a record is made only of those information that can be expressed in terms. In .other words, no accounting is possible for an event or transaction which is not tble in terms of money, e.g. passing an examination, delivering lecture in a meeting, winning a prize These are events no doubt, but since these are not measurable in terms of money, there is no question of accounting. Measurement of business events in money helps in understanding the state of affairs of business in better way. For example. If a business owns, 1500 kg of stock, one car, 1500 square feet of building etc. these amounts cannot be added to produce a meaningful total of what the business owns. sver, if a these items are expressed in monetary terms such as stock Rs.24000, car...
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