Financial Accounting Paper1

INTRODUCTION:These day economic activities are done every where. To ascertain the fact of profit or loss of the activities, one should maintain the records of the business to classify and summarize. So, recording, classifying and summarizing the business transactions are called accounting.

Objectives: To ascertain the profit or loss To ascertain financial position

Branches of accounting: I Financial Accounting:

The object of the financial accounting is to ascertain the results of the business operations during the particular period and to state the financial position on that date.

II Cost Accounting:

This accounting helps in ascertaining the cost incurred for

carrying out various activities.

III Management Accounting:

and control over the organization.

This helps the management in decision making

BASIC TERMS
DEBIT: An entry on the left side of an account - increases assets or decreases liabilities CREDIT: An entry on the right side of an account - decreases assets or increases liabilities. DEBTOR: Person who owes money to the business.

CREDITOR: Person to whom the money is payable by the business is called creditor. GOODS: Goods include all merchandise commodities which are purchased by the business for selling.

BASIC CONCEPTS:Accounts are categorized as personal accounts and impersonal accounts. Later personal accounts are divided into there accounts Viz., Personal A/Cs, Artificial personal A/Cs and Representative personal A/Cs. And Impersonal Accounts divided into two accounts Viz., Real A/C, Nominal A/C.

ACCOUNTS
PERSONAL ACCOUNTS
IMPERSONAL ACCOUNTS

Personal A/c
Artificial Personal A/c
Representative Personal A/c

Real A/c Nominal A/c

One way Accounts are based on three pillars. Viz., personal accounts, real accounts, nominal accounts.

Personal accounts: indicate the real persons as well as artificial persons.

Rules:

Debit the receiver. Credit the Giver.

Real accounts indicate the asset and all valuable items.

Rules: Debit what comes in.

Credit what goes out.

Nominal account indicate all expenses, loses, incomes, and gains.

Rules: Debit all expenses and losses.

Credit all incomes and gains

Double Entry System

Every business transactions have two aspects i.e. when we receive something we give something else in return. For example when we purchase goods for cash, we receive goods and gives cash in return. Entering both receiving and giving aspects in books of accounts is known as double entry system.

ACCOUNTING PROCESS:
JOURNAL

LEDGER

TRAIL BALANCE

FINAL ACCOUNTS