Accounting

Accounting is the art of recording, classifying and summarizing transactions and events in terms of money, in a significant manner and interpreting the results thereof.

Objective of Accounting

Main Object

1. The know profit and loss of the business.
2. To know the worth of Assets liabilities of the business at a particular date.
3. To know about the progress down fall of the business.
4. To know as to what around is to be paid a particular person or what amount is to be received from a certain person on a particular date.
5. In the case of the companies to company the position of the companies at 1956 as under this act. It is necessary for the company to mention accounting recorder.

Other object

1. To know about the position of stock.
2. To know the position of cash.
3. To know about the erase and frauds of the employees.
4. To have details information about capital employees in the business.
5. To certify the taxation authorized.
6. To know the financial and others requirement of business at a particular period of time.

Definition of Important word use in Accounting

1. Assets              The cash goods or properties which is waned by the business entry. Its name is called Assets.
2.  Business         Any activity is service or work which is carried which the object of mapping profit is called business.
3. Drawing         Any amount of money are goods which is with draw from business by the proprietor of business for personal assets is called drawing.
4. Capital            Any amount of money is good which business is commenced is called Capital.
5. Liabilities        What ever amount is payable by the business is the liabilities of the business.
6. Debater          A person to whom goods are services have been sold on credit is called debater.
7. Creditor         A person from whom goods are services have been   purchased on debit is called creditors.
8. Voucher         Documentary advance of a transaction is called a Voucher.

Accounts can be broadly classified under the following five groups.

1. Assets:        Valuable things owned by a business that can be expressed in monetary terms.

2. Liabilities:  The obligations or debts payable by a business in future in the form of money or goods.

3. Capital:      Equity interest of the owner in the business that is the difference between Asset and Liability, also called equity or net worth.

4. Revenue:    The amount realized or receivable from the sale of goods.

5. Expenses:   The costs incurred by the business in the process of earning revenues.

Assets, liabilities and capital are taken to the balance sheet. Revenue and Expenditure accounts are shown in the profit and loss statement.

Double Entry System  

Double entry accounting is a system of recording transactions in a manner that maintains the equality of the accounting equation. This accounting technique records each transaction as a debit and a credit, where every debit has a corresponding credit and vice versa.

The following chart explains the way in which accounting transactions are recorded in the double entry system and financial statements are prepared.

Rules of Accounting

Journals         A journal is a book in which business transactions are entered in chronological order. A record of a single business transaction is called a journal entry. Every journal entry is supported by a voucher, evidencing the related transaction.

Voucher         A voucher is a document containing the details of a financial transaction. Examples include sales invoice, purchase invoice, pay slip and rent receipt and so on.