Accounting Concepts,Conventions

& Principles
• Business Entity • Realisation concept
concept
• Principle of accrual
• Money Measurement
Concept • Dual aspect
• Cost Concept concept
• Consistency • Principle of
• Conservatism disclosure
• Going Concern concept • Principle of
materiality
Meaning & Fundamentals of
Double Entry Book Keeping
• Double entry book-keeping is a system of
recording two fold effect of business transaction
in proper set of books.It is the most
scientific,systematic and accurate system of
maintaining the accounts of business
• Two fold aspect of every transaction need to be
recorded for the giver of the benefit and the
other for receiver of benefit
 System of Double Entry Book Keeping

A business transaction has two effects

Therefore it affects two accounts

1. Receiver 2. Giver

Both are affected equally

One account has to be debited and the other account has to be credited

Double entry book-keeping method

Ravi sold goods to Rajesh worth Rs.10000 for cash

Effects Ravi Rajesh

Receipt of cash Rs.10000 Payment of cash Rs.10000

Dual
effect Dispatching or handing over
of Receipt of goods worth
of goods worth Rs.10000 Rs.10000
transac
tion
Advantages of Double entry book-
keeping system

1. Complete record
2. Arithmetical accuracy
3. Errors tapped
4. Frauds detected and evidence available
5. Preparation of financial statements
6. Historical accounting leads to future
business trends
Fundamentals of Double Entry
book-keeping

i. Every business transaction is split up into two

aspects viz.debit and credit aspect
ii. Minimum two parties are required to
complete a business transaction
iii. One party is receiver of the benefit and the
other is giver of the benefit
iv. Every debit has corresponding credit of equal
amount
Types of Accounts

1) Personal Accounts : Classified further as

a) Natural Personal Account
b) Artificial persons or Body of persons or legal
persons accounts
c) Representative personal account
2) Impersonal Accounts :
a) Real account – Further classified as
i) Tangible real account
ii) Intangible real account
b) Nominal account
Basic accounting rules for Debit/Credit

 Personal Account : Debit the receiver

Credit the giver

 Real Account : Debit what comes in

Credit what goes out

 Nominal Account : Debit the expenses & losses

Credit the incomes & gains
 Personal Debit the receiver or who owes
Credit the giver or to whom owed

Accounts Debit what comes in or increase in the value of an asset or

Decrease in the value of liability or
Decrease in the value of Capital or owners equity
Real
Credit what goes out or
Decrease in the value of asset or
Increase in the value of liability or
Increase in the value of Capital

Nominal Debit the expenses and losses

Debit decreases revenue

Credit the incomes and gains

Credit increase revenue
Classify the following
accounts
1. Cash a/c 14. Cricket club of india a/c
2. Bank Overdraft a/c 15. Gavaskar a/c
3. Bank of India a/c 16. Bad debts recovered a/c
17. Repairs & Maintenance a/c
4. Salary a/c
18. Furniture a/c
5. Furniture a/c 19. Stock Destroyed a/c
6. P’s Drawings a/c 20. Bad Debts a/c
7. Discount Received a/c 21. Carriage Inward a/c
8. Interest on deposit a/c 22. P’s Capital a/c
9. Printing & Stationery a/c 23. Commission Paid a/c
10. Investment a/c 24. Building a/c
11. Salary a/c 25. Interest Received a/c
26. Rent a/c
12. Land & Building a/c
13. Indsearch a/c