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Basics Of Accounting

Published in: Accountancy
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  • 1
    Basic of Accounting Accounting is the branch of knowledge which should learn everybody because it is the language of business. It means to collect, to summarize, to analyze and to report of different business transactions. In other words, accounting is the science of recording and classifying the business transactions and events, primarily of a financial character, and the art of making significant summaries, analysis and interpretations of those transactions and events and communicating the results to persons who must make decisions or form judgment. In the accounting subject, we study the meaning of accounting, the history of accounting, branches of accounting, objectives of accounting, uses of accounting, features of accounting and limitation of accounting. Accountant, chartered accountant or account manager are the key people who maintains the accounting records. Meaning of Accounting You can ask the meaning of accounting with following ways. Q:- 1. What is accounting? It is the science to record the transactions. It is also art to transfer the values from bill, vouchers, invoices, receipts and cash memo to day book. We can explain accounting as the system of scientific recording which is used for calculating the net profit from all the transaction. Whole accounting system is worked on the following accounting equation. Assets = Capital + Liability. Q:-2. What is the definition of Accounting? Ans. To record financial transaction is accounting. Q:-3. What can you say about Accounting? Ans. I can say only that accounting is the book of accounts, transaction, their record, profit and loss account and balance sheet and their analysis.
  • 2
    Fundamental Accounting Assumptions Fundamental accounting assumptions are basic points which are accepted all the accountants which are necessary for making financial statements. Some knows these points as accounting concepts. Whatever you know it but it is useful for explaining the language of accounting to all the people who are interested in accounting information. 1. Going Concern Assumption As per this assumption, business will continuing doing work for long period. This assumption is very helpful to all interested parties. Business takes and gives loan because they have trust in this assumption. When creditor fears, business will stop within two days, he will never give his goods on credit but thanks to this assumption, creditor thinks that business's life is long than the life of businessman. He becomes fearless and give goods without any tension. 2. Consistency Assumption As per this assumption, accounting information is collected from constant resources. It means, accountant will not change any method of recording transactions. If there will any change, its notice will given before changes. Consistency assumption is helpful to compare two or more years' financial statements. If there is any change without notice, accountant must show the footnote below the financial statement. Other interested parties can change the figure before comparing through getting knowledge from this footnote. 3. Accrual Assumption As per this assumption, business's financial performance is measured on basis of both cash and non- cash revenues and expenditures. Both outside expenses and incomes are added in regular cash incomes and expenses when we make income statement. It will help to get true net profit or net loss.


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