Basic of Account

Account is maintain your business books like ledgers, profit and loss, balance sheet and all transaction that you make to bank, suppliers, buyers, government and self. Its helps suppliers, customers, employees, banks, lenders and owners types.There are three types of Accounts.

Real Accounts

Properties and assets belong to Real Accounts like Land, building, Goodwill, and Purchase.

Personal Accounts

Personal Accounts belong to Personal accounts like Customers, Suppliers, and Lenders.

Nominal Accounts

Income and Expenses belong to Nominal Accounts like Salary Accounts, Interest account, Wages Accounts.

All three Accounts classified in Assets, Liabilities, Income and Expenses.
We Can see Assets and liabilities in Balance sheet and Income And Expenses Accounts In Profit And Loss Accounts.

Real Accounts

Debit	Credit
What Comes in	What Goes out

Personal Accounts

Debit	Credit
The Receiver	The Giver

Nominal Accounts

Debit	Credit
Expenses & losses	Incomes & Gains

Accounting Principles, Concepts and Conventions

Basis for how business transactions are recorded. A number of principles, concepts and conventions are developed to ensure that accounting information is presented accurately and consistently. Let’s See…

Revenue Realisation

Revenue is considered as the income earned on the date, when it is realized, unearned or unrealized revenue is not taken in to account. It reduces the possibilities of inflation incomes and profits.

Matching Concept

Matching of the revenues earned during an accounting period with the cost associated with the respective period to ascertain the result of the business concern is carried out. The concept server as the basis for finding accurate profit for a period which can be distributed to the owners.

Accrual

The transactions are recorded when earned or incurred rather when collected or paid. Example, a seller bills the buyer at the time of sales and treats the bill amounts as revenue, even though the payment may be received late. Accrual used only in select situation such as for very small business. The cash basis of accounting look at actually received rather than it is earn and expenses are actually paid, rather than when incurred.

Going Concern

The business will exist for a long period and transaction are recorded form this point of view.

Accounting Period

Business need financial statements required periodical reports to ascertain the operational and the financial position of the business. For this account close at regular period i.e. 365 days or 52 weeks or 1 years.

Money Measurement

Only business transactions and events of financial nature are recorded. Only transactions that can be expressed in terms of money are recorded.

Double Entry Book Keeping

All the transactions take place in two aspects. Debit (Receiving) and Credit (giving). For example buy goods Rs.500/- good receiving and pays cash(giving).This accounting technique records each transaction as debit and credit, every debit has a corresponding credit and vice versa.
Double Entry helps to business to know financial position by preparation of Profit and loss, and trial balance. Its help to make decision to take sufficient information and help to minimizes the possibilities of fraud due to its systematic and scientific recording of business.

Keyword which use in Account

Voucher

A voucher is a document in support of a business transaction, containing the details of such action. Voucher is evidence of transaction. Its support every journal entry.

Receipt

When a trader receives cash form a customer against goods sold by him, issues a receipt containing the name of such customer, details of amount receive with date.

Invoice or Bill

When a trader sells goods to a buyer, he prepares a sales invoice containing the details of name and address of buyer, name of goods, amount and terms of payments and so on. Similarly, When the trader purchases goods on credit receives a invoice/bill form the supplier.

Journals and Ledgers

A journal is a record in which all business transactions are entered in a chronological order. A single business transaction is called a journal entry.

Account

An account is a statement of transactions affection any particular asset, liability expense or income.

Ledger

A ledger is a book which contains all the accounts whether personal, real or nominal, which are entered in journal or subsidiary books.

Posting

It’s the process of transferring the entries recorded in the journal or subsidiary books to the respective accounts opened in the ledger.

Accounting Period

The financial statements are generated for a regular period such as a quarter or a year, for timely and accurate ascertainment of operating and financial position of the organization.

Trial Balance

Trial balance is a statement which shows debit balances and credit balances of all ledger accounts.

Transactions

A transaction is a financial event that takes places in the course or furtherance of business and effects the financial position of the company. For example, when you deposit cash in the bank, your cash balance reduces and bank balance increases or when you sell goods for cash, your cash balance increases and your stock reduces.

Transactions can be classified as follows :

Receipts – cash or bank

Payments – cash or bank

Purchases

Sales

Financial Statements

Financial Statements are final result of accounting of accounting work done during the accounting period. It is represent financial position of the business and other thing.
Financial Statements normally include Trading A/c, Profit and loss A/c(Income and Expense) and Balance sheet.

Trading Account

Trading refers to buying and selling of goods. The Trading account displays the transaction pertaining to buying and selling of goods. Trading Account indicates either Gross Profit or Gross Loss.

“Gross Profit = Net Sales – Cost of Sales”

Profit and Loss Account

The profit and loss account helps to ascertain the net profit earned or net loss suffered during a particular period. After considering all other incomes and expenses incurred over a period. This helps the company to monitor and control the costs incurred and improve its efficiency. It is show performance of the company in terms of profit or losses over Accounting Period.

Net Profit = (Gross Profit = Net Sales – Cost of Sales) – (Selling and Administrative Expenses + Depreciation + Interest + text + Other Expenses)

Balance Sheet

The balance sheet is a statement that summarizes the assets and liabilities of a business. The Excess of assets over liabilities is the net worth of a business. The balance sheet provides information that helps in assessing
A company’s Long-term financial strength
A company’s Efficient day-to-day working capital management
A company’s Asset portfolio
A company’s Sustainable long-term performance
The balances of all the real, personal and nominal (capital in nature) accounts are transferred from trial balance to balance sheet and grouped under the major heads of assets and liabilities. The balance sheet is complete when the net profit/ loss is transferred from the Profit and Loss account.

Business goes through all this place and persons.

1. Owner who Start Business, Owner are Partners or Individual
2. Financier/Lenders that finance business or firms
3. Employees who work for business and in all department
4. Bank, with whom accounts are maintained
5. Suppliers who provides good and raw-material
6. Customers who buy goods or service
7. Investors who invest money in business