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Accountancy

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Published in: Accountancy | B.Com Tuition
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Accounting Concepts & Convention And Basic Accounting Terms.

Sukhbinder S / Durgapur

9 years of teaching experience

Qualification: ICWA (The Institute of Road Transport Perunthurai Medical College,Perunthurai - 2013), B.Com (Burdwan University - 2011)

Teaches: Advanced Excel, GST Training, Tally ERP 9, CA - CPT, CMA Foundation, CMA Intermediate, CS - Foundation, Accountancy, Business Studies, Commerce Subjects, Costing, B.Com Tuition, BBA Tuition, BCA Tuition, BBA Entrance, BBA Subjects, Management Subjects

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  1. Basic Accounting Terms Here is a quick look at some important accounting terms. Accounting equation: The accounting equation, the basis for the double-entry system (see below), is written as follows: Assets = Liabilities + Stakeholders' equity This means that all the assets owned by a company have been financed from loans from creditors and from equity from investors. "Assets" here stands for cash, account receivables, inventory, etc., that a company possesses. Accounting methods: Companies choose between two methods cash accounting or accrual accounting. Under cash basis accounting, preferred by small businesses, all revenues and expenditures at the time when payments are actually received or sent are recorded. Under accrual basis accounting, income is recorded when earned and expenses are recorded when incurred. Account receivable: The sum of money owed by your customers after goods or services have been delivered and/or used. Account payable: The amount of money you owe creditors, suppliers, etc., in return for goods and/or services they have delivered. Accrual accounting: See "accounting methods." Assets (fixed and current): Current assets are assets that will be used within one year. For example, cash, inventory, and accounts receivable (see above). Fixed assets (non-current) may provide benefits to a company for more than one year for example, land and machinery. Balance sheet: A financial report that provides a gist of a company' s assets and liabilities and owner's equity at a given time. Capital: A financial asset and its value, such as cash and goods. Working capital is current assets minus current liabilities. Cash accounting: See "accounting methods." Cash flow statement: The cash flow statement of a business shows the balance between the amount of cash earned and the cash expenditure incurred. Credit and debit: A credit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account. It is entered on the right in an accounting entry. A debit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account. It is entered on the left in an accounting entry.
  2. Double-entry bookkeeping: Under double-entry bookkeeping, every transaction is recorded in at least two accounts as a credit in one account and as a debit in another. For example, an automobile repair shop that collects Rs. 10,000 in cash from a customer enters this amount in the revenue credit side and also in the cash debit side. If the customer had been given credit, "account receivable" (see above) would have been used instead of "cash." (Also see "single-entry bookkeeping," below.) Financial statement: A financial statement is a document that reveals the financial transactions of a business or a person. The three most important financial statements for businesses are the balance sheet, cash flow statement, and profit and loss statement (all three listed here alphabetically). General ledger: A complete record of financial transactions over the life of a company. Journal entry: An entry in the journal that records financial transactions in the chronological order. Profit and loss statement (income statement): A financial statement that summarises a company' s performance by reviewing revenues, costs and expenses during a specific period. Single-entry bookkeeping: Under the single-entry bookkeeping, mainly used by small or businesses, incomes and expenses are recorded through daily and monthly summaries of cash receipts and disbursements. (Also see "double-entry bookkeeping," above.) Types of accounting: Financial accounting reports information about a company's performance to investors and credits. Management accounting provides financial data to managers for business development.

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