Accounting Basic

What is Accounting:

Accounting is art of recording , classification and  summarizing of financial transaction

What is Type of Accounting:

 1.Financial Accounting

      is the field of accountancy concerned with the preparation of financial statements for
     decision makers, such as stockholders, suppliers, banks, owners and others stakeholders. 
2.Cost Accounting:

   Cost accounting establishes budget and actual cost of operations, processes, products,

   and analysis of variances.Managers use cost accounting decision making to cut a 

    company costs and improve profitability 

3.Management Accounting:

   is an internal accounting method used by managers of firms in order to help them make
   informed decision about the business they are managing.it is for internal use in a company.
 

Accounting System as transaction

1.Accrual 
  

What is the accrual basis of accounting?

Under the accrual basis of accounting, revenues are reported on the income statement when they are earned. (Under the cash basis of accounting, revenues are reported on the income statement when the cash is received.) Under the accrual basis of accounting, expenses are matched with the related revenues and/or are reported when the expense occurs, not when the cash is paid. The result of accrual accounting is an income statement that better measures the profitability of a company during a specific time period.

2.Cash
 

Cash basis accounting

Accounting method in which income is recorded when cash is received, and expenses are recorded when cash is paid out. Cash basis accounting does not conform with the provisions of GAAP and is not considered a good management tool because it leaves a time gap between recording the cause of an action (sale or purchase) and its result (payment or receipt of money). It is, however, simpler than the accrual basis accounting and quite suitable for very small firms which transact business mainly in cash.

Basic Rule Of Accounting:

Every Debit has Credit

Debit

An entry in the financial books of a firm that increases an asset or an expense or an entry that decreases a liability, owner's equity (capital) or income.

Also, an entry entered on the left side (column) of a journal or general ledger account.

Credit

An entry in the financial books of a firm that increases a liability, owner's equity (capital) or revenue, or an entry that decreases an asset or an expense.

Also, an entry entered on the right side (column) of a journal or general ledger account.

Types of Account

All the accounting heads used in an organisational accounting system are divided into three kinds/types.

• Personal Accounts

The elements or accounts which represent persons and organisations.

• Real Accounts

The elements or accounts which represent assets

In the initial stages of learning accounting, we can assume real accounts to be those related to tangible aspects.

» Tangible/Touchable

Capable of being perceived by the senses or the mind; especially capable of being handled or touched or felt.

There are assets which are intangible like the organisations Goodwill.

[At this stage of the learning process, please ignore the presence of such assets.]

• Nominal Accounts

The elements or accounts which represent expenses, losses, incomes, gains.

• An Account should be one of the three

Any element or account used in an organisational accounting system should be one of these.