8. Accounting Concepts Business Entity: Business is different from businessman. Monetary Measurement : Accounting process records only those activities that can be expressed in monetary terms.
9. Going Concern : It is assumed that the business entity for which accounts are being prepared is solvent and viable, and will continue to be in business in the foreseeable future. Dual Aspect: Every transaction in accounting have two aspects viz. giving and receiving.
10. Dual Aspect (Example) Goods purchased on credit from Mr. A Goods (received) Mr. A (creditor) Sold goods to Mr. B on credit Goods (sold) Mr. B (debtor)
11. Accrual Accrual concept is something that becomes due,especially an amount of Money, that is yet to be paid or received at the end of accounting period. Example .Salaries of 10000 for a month of december 96 paid in jan 97.
12. Periodicity Financial transactions are maintained on a periodic basis. The liabilities ,assets and capital are measured at a given point of time. Which is done atleast once on an annual basis. To do this, income needs to be measured during the intermittent period. Example. Janaury 1 to december 31
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14. Realisation THE CONCEPT STATES THAT ,AS TO WHEN REVENUE SHOULD BE RECORDED IN THE BOOKS OF ACCOUNTS. REVENUE IS SAID TO BE REALISED WHEN CASH HAS BEEN RECEIVED OR RIGHT TO RECEIVE CASH HAS BEEN ESTABLISHED ON THE SALE OF GOODS OR SERVICES. EXAMPLE. REKHA SOLD GOODS FOR RS 50,000 FOR CASH IN 1996 AND THE GOODS HAVE BEEN DELIEVERED IN THE SAME YEAR.
20. Purchase Book Each bill amount is individually posted to the credit of the Supplierโs account and the total amount is posted to the debit of the Purchases account
21. Sales bookEach invoice is individually posted to the debit of the customerโs account and the total amount is posted to the credit of the sales account
22. Purchase Return Book Each Debit note is individually posted to the debit of the Supplierโs account and the total amount is posted to the credit of the purchase return account.
23. Sales Return Book Each Credit note is individually posted to the Credit of the customerโs account and the total amount is posted to the debit of the sales return account.
24. Journal Proper It is a residuary book, in which all those transactions which cannot be recorded in any other subsidiary books, are recorded like depreciation , discounts allowed and received
25. Ledger PostingThe process of transferring the transactions recorded in the Journal to the respective accounts is called โLedger Postingโ
26. Balancing Difference between the total debit & total credit. Steps involved 1) Make debit & credit total 2) If debit side total exceeds credit side total then it called โDebit balanceโ. 3) If credit side total exceeds debit side total then it called โCredit balanceโ.
27. Trial Balance Is a statement which shows the balance of total amounts of debit items & credit items of all the accounts in the ledger & cash & bank balance. --------------------------------------------------------------------- All accounts of expenses, losses and assets have debit balances All accounts of incomes, profits and liabilities have credit balances
28. Trading Account After preparation of trial balance Matching concept Balancing figure is gross profit/loss
29. Profit and Loss A/c. Income Statement Specific period of time Balancing figure is Net profit/loss Useful for investors Two Formats
30. Balance sheet It is a statement Balance sheet is an accounting statement which shows the financial position of all assets and liabilities of the business as on particular date. Two sides Assets Liabilities
31. Marshalling of Assets and Liabilities Marshalling refers to the order in which the various assets and liabilities are shown in the balance sheet. The assets and liabilities can be shown either in the order of liquidity or in the order of permanency.
34. Adjustment Additional information provided after completion of trial balance for preparation of final accounts. Effects Items in the trial balance have only one effect For every adjustment item , double effects are given in the final accounts.
