Fundamentals-of-accounting (1) (1)

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

It is credited.

It is debited.

To account for money and other economic resources.

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

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

They are debited.

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

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

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

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

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

Financial accounting, Cost accounting, and Management accounting.

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

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

The financial state of affairs and financial results of operations.

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

It prescribes formats for the preparation of financial statements.

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

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

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

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

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

To keep a systematic record of business transactions.

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

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

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

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

Normally a year.

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

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

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

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

Income Statement and Balance Sheet.

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

Accrual basis of accounting.

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

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

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

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

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

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

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

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

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

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

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

It provides a complete record of all business transactions.

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

Recording, classification, and summary of financial transactions.

When a sale is made and ownership is transferred.

Assets = Equities.

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

By establishing accuracy through the device called a Trial Balance.

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

It provides necessary information that helps avoid misleading decisions.

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

One aspect is debited and the other is credited.

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

The profit earned or loss suffered during a period.

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

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

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

Properties owned by a business.

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

Personal Accounts, Real Accounts, and Nominal Accounts.

Accounting.

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

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

Rights to properties, including liabilities and capital.

To know the earnings of firms for taxation purposes.

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

It helps maintain a complete record of business transactions.

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

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

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

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

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

Assets = Liabilities + Capital.

Personal Accounts, Real Accounts, and Nominal Accounts.

Records only monetary transactions.

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

The increase is debited in the assets account.

Accounts recording transactions with a person or group of persons.

Single Entry System and Double Entry System.

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

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

Outsider's equities are credited.

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

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

Debit the receiver & Credit the giver.

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

Accounts relating to properties or assets.

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

Tangible and Intangible Real Accounts.

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

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

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

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

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

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

Debit what comes in & Credit what goes out.

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

Because they do not represent any tangible asset.