Fundamentals-of-accounting (1) (1)

Owner's equity is increased by the amount of revenue income.

A transaction in which money or money’s worth is involved.

Cost accounting provides detailed information on costs of individual products, while financial accounting focuses on overall financial results.

The presentation of accounting information to assist management in policy creation and day-to-day operations.

A company may use mercantile accounting for exports but record government subsidies on a cash basis.

Revenue is recognized when realized, and costs are recognized when incurred, not when paid.

Personal Accounts, Real Accounts, and Nominal Accounts.

Records only monetary transactions.

Debit the receiver & Credit the giver.

It requires that all transactions be supported by objective evidence, such as invoices or receipts.

It is credited.

Financial accounting, Cost accounting, and Management accounting.

It emphasizes caution by accounting for possible losses but not potential profits.

Only significant transactions are recorded; insignificant transactions are not detailed.

Entries are recorded only when cash is received or paid, not when transactions are due.

It is the difference between incomes earned and expenses incurred, irrespective of cash flow.

Properties owned by a business.

Into internal equity (owner's equity) and external equity (creditor's equity).

It states that assets should be recorded at their cost, which is a fundamental principle in accounting.

Debit all expenses and losses & Credit all incomes and gains.

Trading and Profit and Loss account or Income and Expenditure account.

How an enterprise obtains and spends cash, its borrowing and repayment, and factors affecting liquidity and solvency.

When certain items of revenue or expenditure are recorded on cash basis and others on mercantile basis.

Assets = Equities.

It implies that the business unit is separate and distinct from the persons who provide the required capital to it.

It provides information about profit or loss at the end of the year.

Accounts recording transactions with a person or group of persons.

It states that revenue should only be recognized when it is earned and realizable.

Debit what comes in & Credit what goes out.

It is debited.

To know the achievements of the organization and its financial state of affairs at the end of the accounting period.

By establishing accuracy through the device called a Trial Balance.

It denotes accounting postulates, which are basic assumptions or conditions upon which the accounting super-structure is based.

All events and transactions are recorded in terms of money, which serves as a common denominator.

Sharma’s A/c, Anand’s A/c, Firm’s A/c, Bank A/c, Company A/c.

Wages account, Rent account, Commission account, Interest received account.

Accounting is the art of recording, classifying, and summarizing transactions and events of a financial character.

Normally a year.

Cash basis, Accrual (or Mercantile) basis, and Mixed (or Hybrid) basis.

Recording, classification, and summary of financial transactions.

It helps maintain a complete record of business transactions.

Personal Accounts, Real Accounts, and Nominal Accounts.

Single Entry System and Double Entry System.

Tangible and Intangible Real Accounts.

Accounts relating to income, revenue, gains, expenses, and losses.

Owner's equity is decreased by the amount of revenue expenses.

By identifying, measuring, and communicating economic information to users for decision making.

An accounting system that records the effects of transactions in at least two accounts with equal debits and credits.

A collection of all accounts used by a business, where grouping of accounts is performed.

Owners, management, creditors, employees, investors, government, and research scholars.

To study the merits and demerits of business activity and determine profitability.

All transactions must be supported by verifiable documents to ensure objectivity.

It segments the life of the business into different periods to ascertain the results of each period.

Because they do not represent any tangible asset.

To account for money and other economic resources.

The importance of providing accurate, full, and reliable information that is of material interest to users.

To keep a systematic record of business transactions.

Income Statement and Balance Sheet.

All costs associated with a period should be compared with revenues of the same period to determine net income.

It provides necessary information that helps avoid misleading decisions.

The progress and prosperity of the firm before investing their money.

Rights to properties, including liabilities and capital.

It serves as a mirror of the financial performance of a business organization.

It is an incomplete system that only maintains cash books and personal accounts.

Accounts representing assets that can be seen, touched, or measured.

They are debited.

To ascertain whether the business operations have been profitable or not.

Preparation of Journal, which records the effect of all transactions for the first time.

By providing up-to-date information about assets and liabilities to prevent unauthorized claims.

It provides a complete record of all business transactions.

To assess the financial soundness of a business before granting credit.

To know the earnings of firms for taxation purposes.

Assets = Liabilities + Capital.

The increase is debited in the assets account.

Goodwill accounts, Patents account, Trademarks account, Copyrights account.

Because it serves as a means of communication regarding financial information.

The financial state of affairs and financial results of operations.

To understand the availability of cash, position of assets and liabilities, and overall financial strength.

Accrual basis of accounting.

To know whether the business is being conducted soundly and if the capital is being employed properly.

One aspect is debited and the other is credited.

Accounting.

It refers to matching expenses with the revenues they help to generate in the same accounting period.

Machinery account, Cash account, Furniture account, Stock account.

Bookkeeping is the art of recording business transactions in a systematic manner.

To ascertain the cost of units produced and sold or services rendered, and to exercise control over these costs.

To provide necessary information to management for decision-making and operational functions.

Transactions are recorded at the amounts involved, reflecting the price paid to acquire an asset.

When a sale is made and ownership is transferred.

Auditing is compulsory for registered firms and relies on accounting records.

It assumes that the business will exist for a longer period of time and not be liquidated.

Outsider's equities are credited.

It implies that transactions are recorded when they occur, regardless of when cash is exchanged.

Recording of journal, posting in ledgers, and balancing of accounts.

It prescribes formats for the preparation of financial statements.

It may lead to the creation of secret reserves, opposing the convention of full disclosure.

It summarizes the ledger balances prepared in the form of a list.

Entries are made based on amounts due for payment or receipt, regardless of cash transactions.

The profit earned or loss suffered during a period.

Accounting rules and practices are applied consistently over time for meaningful comparisons.

To keep a complete record of all transactions that take place in the business.

Every transaction has a two-fold aspect: giving certain benefits and receiving certain benefits, leading to the principle of double entry.

Accounts relating to properties or assets.

Accounts representing assets that cannot be seen or touched but can be measured in money.