Accounting Fundamentals

  Q-1 What is book keeping? Define the book keeping system.

ANS…Book keeping means to record business transaction in term of money in some of specified books.

THESE BOOKS ARE AS FOLLOWS

      1)     Cash book
2)     Purchase book
3)     Sales receivable
4)     Sales return
5)     Purchase return
6)     Bills receivable book
7)     Bills payable
8)     Journal proper

THERE ARE TWO METHODS OF BOOK KEEPING

   1.   SINGLE ENTRY SYSTEM: -it is an incomplete form of recording financial transactions

 

     2.  DOUBLE ENTRY SYSTEM OF BOOKKEEPING: -The double entry system of bookkeeping owes its origin to an Italian merchant named Lucas Piccioli who wrote the first book on double entry bookkeeping entitled "Decomposes et Scriptures". It was published in Venice in 1544. All modern methods of accounting are simply adaptation of the system invented by that ancient pioneer. 

DEFINITION AND EXPLANATION:

The double entry theory of bookkeeping can be defined as the system of recording transactions having two fundamental aspects - one involving the receiving of a benefit and the other to giving the benefit - in the same set of books. IN this theory, as the two-fold aspects of each transaction are recorded, the name "double entry" has been given to this system. Every transaction involves two-fold aspects e.g., an aspect of receiving and an aspect of giving. One who receives is a debtor (DR.) and one who gives is a creditor (Cr). Under the double entry system, both the aspects of giving and receiving are recorded in terms of accounts. The account which receives the benefit is debited and the account which gives the benefit is credited. It is the ultimate result of this system that every debit must have corresponding credit and vice versa and on any particular day the total of the debit entries and the credit entries on the various accounts must be equal.

                             

  Q.1 WHAT IS ACCOUNTS?  DEFINE ITS TYPE.

ANS...  Accounts mean the books in which all the transaction of business dealings is noted.  Or it a classified statement of transaction relating to a person or a thing or any other subject.

 

TYPES OF ACCOUNT

1)     Personal Accounts

2)     Impersonal accounts

        a)      Real accounts
  b)     Nominal accounts

 

PERSONAL ACCOUNTS:	In which the transactions directly indicate the natural persons. E.g. Ram, Sharma DEBIT THE RECEIVER                 CREDIT THE GIVER
REAL ACCOUNTS:	For general operating of the firm, it requires some assets like fixed assets and current assets.  These types of assets are classified under this head. E.g. Furniture, fixtures, inventory DEBIT WHAT COMES IN                CREDIT WHAT GOES OUT
NOMINAL ACCOUNTS:	The expense incurred for the operating of the firm, will be classified under this head. E.g. Wages, Salaries (depending on the transactions) ALL EXPENSES AND LOSSES DEBIT                   ALL INCOMES AND GAINS CREDIT

Q.2        WHAT IS ACCOUNTING?

ANS.      Accounting means the process to record the data in books. The systematic recording, reporting, and analysis of financial transactions of a business. The person in charge of accounting is known as an accountant, and this individual is typically required to follow a set of rules and regulations, such as the Generally Accepted Accounting Principles. Accounting allows a company to analyze the financial performance of the business, and look at statistics such as net profit.

THERE ARE MAINLY THREE STEPS OF ACCOUNTING: -

1)     Recording

2)     Classifying

3)     Summarizing

 

1.     RECORDING: - In this section first of all data recorded in journal proper (day book) in term  of money.

2.    CLASSIFYING: in this section all data classifying in separate books known as ledgers. Which  is defined in upper section.

3.     SUMMARIZING: that is the final section of accounting in this section first of all make total of  all ledgers and then prepare trail balance and then after from trail balance   trading and  profit a/c created and in the very final section balance sheet created.