1.
ACCOUNTING: Accounting is the process of recording, analyzing, and
reporting a business's financial transactions. It's also known as
accountancy.
2. MERCENTYLE SYSTEM OFM ACCOUNTING: The mercantile system
of accounting, also known as accrual accounting, records transactions
when they occur, regardless of when money is received or paid. This
method is based on the matching principle, which states that revenues
and expenses should be recognized in the same period.
3. DUAL ASPECT CONCEPT: a fundamental accounting principle that
states that every business transaction has two equal and opposite
effects.
4. GOING CONCREN CONCEPT: an accounting principle that assumes a
business will continue to operate and meet its financial obligations for
the foreseeable future.
5. MATCHING CONCEPT: an accounting principle that matches expenses
and revenues in the same accounting period.
6. DIFFERENCE BETWEEN SINGLE ENTRY AND DOUBLE ENTRY
SYSTEM: Single-entry accounting records transactions once, while
double-entry accounting records transactions twice. Double-entry
accounting is more complex and provides a more complete picture of a
company's finances.
7. JOURNAL ENTRY SYSTEM: A journal entry system is a method of
recording a business's financial transactions in a book called a journal.
8.
.THREE RULES OF JOURNAL: Debit the receiver: If a person or entity receives
something, debit it.
Credit the giver: If a person or entity gives something, credit it.
Debit what comes in, credit what goes out: This rule applies to assets.
Debit all expenses and losses, credit all incomes and gains:
9. TRADE AND CASH DISCOUNT: Trade discounts are given for bulk
purchases, while cash discounts are given to encourage faster payment .
10. LEDGER: a ledger is a record of a business's financial
transactions. It's a book or digital record that contains bookkeeping
entries for a specific account.
What does a ledger show?
The opening balance of an account
All debits and credits to the account during a period
The ending balance of an account
Detailed information about each transaction, such as the date, description,
and amount
11. COMPOUND ENTRY: an accounting entry that combines
multiple simple journal entries to record transactions that affect
more than two accounts.
12. The purchase returns account usually has a credit balance
SUSPENCE ACCOUNT: A suspense account is a temporary account used
to store transactions that are not yet clear where to put. A suspense
account is used when a transaction is unclear, such as when the payment source is
unknown.
FOUR ENTRIES IN JOURNAL PROPER: Opening entries: The first entry
recorded in a new accounting period
Closing entries: Entries that close the accounting period
Transfer entries: Entries that record the transfer of funds or assets between accounts
Adjustment entries: Entries that make changes to accounts at the end of an
accounting period
Explanation
A journal proper is used to record transactions that affect financial balances and
reports. These transactions include opening, closing, transfer, and adjustment entries.
Steps for creating a journal entry
1. Identify the transaction
2. Identify the accounts involved
3. Determine which accounts are to be debited or credited
4. Record the entry
5. Review and check the entry
Journal Proper: Balancing Accounts and Explanation - Vedantu
The Use of Journal Proper is Confined to Record the Following Transactions * Opening entries. *
Closing entries. * Transfer entri...
NAMES OF SUBSIDIARY BOOKS:
Cash book: Records cash receipts and payments
Purchase book: Records credit purchases of goods
Sales book: Records credit sales of goods
Purchase return book: Records returns of credit purchases of goods
Sales return book: Records goods returned by customers
Bills receivable book: Records bills receivable
Bills payable book: Records bills payable
Journal proper: Records transactions that are not recorded in the other
books
13. DEPARTMENTAL ACCOUNTS:
Departmental accounts are separate account books that track the
financial performance of each department in a business. This
accounting method helps management monitor the business and make
decisions
14. 2 OBJECTIVES OF DEPARTMENTAL ACCOUNTS: Two
objectives of departmental accounting are to evaluate a department's
performance and to allocate costs to departments.
15. BRANCH STOCK RESERVE: When preparing a branch stock
reserve, goods in transit are the inventory that is on its way to the
branch, and cash in transit is the physical transfer of cash or other
valuables.
16. INTER BRANCH TRANSACTIONS: An inter-branch transaction is
a transaction that occurs between different branches of a business. This
can include the transfer of money, goods, or services.
17. ACCOUNTS IN STOCK AND DEBTOR METHOD:
The main accounts prepared in the stock and debtor method are:
Branch stock account: Tracks the stock at the branch
Branch debtors account: Tracks the debtors at the branch
Branch cash account: Tracks the cash at the branch
Branch expenses account: Tracks the expenses at the branch
Branch fixed assets account: Tracks the fixed assets at the branch
Branch adjustment account: Tracks adjustments at the branch
Branch profit and loss account: Tracks the profit and loss at the branch
Branch account: Tracks the branch's profit or loss
18. BRANCH NOMINAL ACCOUNT METHOD: The branch
nominal account method is a bookkeeping system that uses a
temporary account for each branch of a company.
19. CO-INSAURANCE: Coinsurance is a cost-sharing agreement
between an insurance company and an insured person.
20. SALVAGE STOCK: Salvage stock is a term used to
describe stock that is no longer suitable for its original use and has been
sent to liquidation.
21. CONSEQUENTIONAL LOSS INSAURANCE:
Consequential loss insurance is a type of business insurance that
covers indirect losses that occur after damage to a business's property
or equipment.
2 REASONS OF INCOMPLETENESS OF INCOMPLETE
RECORDS: Theft of records.
Natural calamities like floods, earthquakes etc.
Due to catching fire.
22. INCOMPLETE RECORDS: Incomplete records
are accounting records that don't follow the double-entry
bookkeeping system.
23. BONUS AND WRIPTURES:
A bonus is a financial reward or compensation that is given in
addition to an employee's regular pay.
24. HIRE PURCHASE SYSTEM: A hire purchase (HP) system
is a credit agreement that allows a buyer to purchase an item by making a
down payment and paying the remaining balance in installments
25. DIFFERNCE BETWEEN HIRE PURCHASE AND INSTALLMENT
SYSTEM: Hire purchase
The buyer does not take ownership of the asset until the final installment is paid. The
buyer makes a down payment and then pays the remaining balance in
installments. The asset serves as security for the loan.
Installment system
The buyer takes ownership of the asset immediately after signing the contract and
agrees to pay the total price in installments.
26. The main difference between a financial lease and an operating
lease is ownership. In a financial lease, the lessee takes on the risks
and rewards of ownership, while in an operating lease, the lessee does
not.
Explanation
Financial lease
Also called a capital lease, the lessee is responsible for maintenance costs
and may have the option to purchase the asset at the end of the lease. The
lessee is considered the owner of the asset for accounting purposes and can
depreciate it for tax purposes.
Operating lease
The lessee does not own the asset and must return it at the end of the
lease. The lessor is responsible for maintenance and running costs. The
lease is treated as an expense for accounting purposes
Bookkeeping is the process of recording financial transactions, while
accounting is the process of analyzing and reporting on that data.
Bookkeeping
Focus: Recording and organizing financial transactions
Tasks: Data entry, maintaining ledgers, tracking accounts payable and
receivable, payroll processing
Goal: Ensure that all financial transactions are accurately recorded and
organized
Accounting
Focus: Analyzing and reporting on financial data
Tasks: Preparing financial statements, analyzing financial reports, tax
planning, budgeting, offering strategic advice
Goal: Provide strategic insights into a business's financial health
PARTIES INTRESTED IN ACCOUNTING INFORMATION:
Internal users
Owners: Assess the profitability of their investment
Managers: Use financial statements to make decisions, plan, and control
costs
Employees: Use financial statements to know their wages and salaries, and
to demand a raise
External users
Investors: Use accounting information to assess the financial health of a
business
Lenders: Use accounting information to assess the creditworthiness of a
business and decide whether to extend loans
Suppliers: Use accounting information to assess the financial health of a
business
Customers: Use accounting information to assess the financial health of a
business
Tax authorities: Use accounting information to assess compliance
Government agencies: Use accounting information to assess compliance
Auditors: Use accounting information to assess compliance
General public: Use accounting information to assess the social benefits and
costs of a business
27. TYPES OF ACCOUNTING: There are several types of
accounting, including financial, managerial, cost, tax, forensic, and
governmental accounting
28. :
ACCOUTING CONVENTION Accounting conventions
are guidelines that help accountants record and present
financial information. They are not legally binding, but they
are generally accepted by accounting bodies.
29. TRIAL BALANCE: A trial balance is a financial
statement that lists the final balances of a company's ledger
accounts. It's prepared to ensure that all bookkeeping entries
are accurate and to help identify errors
30. PETTY CASHBOOK: A petty cash book is a ledger
that records a business's small, daily cash expenses. It is a
subsidiary book that helps businesses manage their petty
cash fund.
31. DR NOTE AND CR NOTE:
A credit note is a document that a seller issues to a buyer to
reduce the amount the buyer owes, while a debit note is a
document that a buyer issues to a seller to increase the
amount the buyer owes.
32. INTER- DEPARTMENTAL: existing, exchanged, or
carried on between two or more departments (as of an
organization) or their members.
33. KEEPING BRANCH ACCOUNT: The main objectives of
keeping branch accounts are to track the financial performance of
each branch of a company, and to ensure accountability and
control.
34. STOCK RESERVE: Stock reserve is the amount of
inventory a company keeps in excess of its normal operating
needs. It's also known as buffer stock or safety stock
35. DEPENDENT AND INTERDEPENDENT BRANCH:
The main difference between a dependent branch and an
independent branch is that a dependent branch is controlled
by the head office, while an independent branch has more
autonomy.
36. CLAUSE UNDER INSAURANCE: The average clause in
insurance is a provision that applies when your property is
undervalued or underinsured at the time of policy purchase
37. STEPS IN CALCULATING INSAURANCE:
➢ Insurance Co. ...
➢Short Sales:- Reduction in sales than the normal sales during the period of indemnity
called short sales. ...
Calculation of Short Sales:- Amount (Rs.) ...
Calculation of Gross Profit Rate G/P Rate = ...
G/P of sales during 12 months upto date of fire. ...
Calculation of Loss to be claimed to insurance company.
More items...
38. DOUBLE ENTRY AND INCOMPLETE RECORDS:
The double-entry system is a bookkeeping method that
records every transaction in at least two accounts, while
incomplete records, also known as the single-entry system,
only records transactions in one account.
39. CUM INTREST AND EX- INTREST: Cum-interest is
the price of a security that includes the interest that has
accrued since the last interest payment. Ex-interest is the
price of a security that does not include accrued interest.
40. STOCK AND DEBTOR METHOD:
The stock and debtor method and the debtor method are
both used in branch accounting to calculate a branch's profit
and loss. The nominal method is a group brainstorming
technique.
41. FAIR VALUE OF INVESTMEMT:
Fair value refers to the actual value of an asset – a product,
stock, or security – that is agreed upon by both the seller and the
buyer.
42. PRE-ACQUISTING DIVIDENDS: 1. In case of cum interest
quoted price includes the interest accrued up to the date of
purchase whereas this is not included in case of ex interest.
2. In case of cum interest nothing is payable for interest accrued
in addition to the quoted price whereas it is payable in case of ex
interest.
43. ACCOUNTING STANDARD FOR INVESTMENT:
Accounting standards for investments are guidelines that
dictate how investments are recorded, measured, and
reported in financial statements. They ensure that financial
reporting is transparent, comparable, and reliable
HIRE PURCHASE SYSTEM:
Installment payments: The buyer pays the seller in installments over a
set period of time.
Immediate possession: The buyer receives the item immediately after the
purchase.
Retained ownership: The seller retains ownership of the item until the
buyer pays the final installment.
Repossession: The seller can repossess the item if the buyer defaults on
payments
44. INTREST SUSPENCE ACCOUNT: An interest suspense
account is a temporary holding place for interest payments or income
that are uncertain, disputed, or uncollectible. It's used to ensure that
interest is paid or collected accurately and that accounting records
are accurate.
45. MINIMUM LEASE PAYMENT: Minimum lease payments
are rental payments over the lease term including the amount of
any bargain purchase option, premium, and any guaranteed
residual value, and excluding any rental relating to costs to be
met by the lessor and any contingent rentals
ACCOUNTING CONCEPTS AND CONVENTIONS:
Accounting concepts and conventions are the principles and practices that
guide how financial statements are prepared and reported.
Accounting concepts
Going concern: Assumes a business will continue to operate for the
foreseeable future
Money measurement: Only records transactions that can be expressed in
monetary terms
Dual aspect: Every transaction affects two accounts on opposite sides
Matching: Includes all revenues and expenses in the same accounting
period
Accrual: Recognizes revenues and costs as they are received or spent
Business entity: A business is a separate entity from its owners
Conservatism: Records expenses as soon as possible, but only records
revenues when they are realized
Realization: An asset is recorded at cost until its realizable value is achieved
Accounting period: Divides accounting records into specific periods
46. OUTSTANDING EXPENSES: An expense is the cost
of operations that a company incurs to generate revenue.
Businesses can write off tax-deductible expenses on their
income tax returns, provided that they meet the IRS' guidelines.
Accountants record expenses through one of two accounting
methods: cash basis or accrual basis.
47. ACCRUDE INCOME: Accrued income is income that a
company will recognize and record in its journal entries when it
has been earned – but before cash payment has been received
48. PREPAID EXPENSES: A prepaid expense is an
expense that is paid for in advance. Recurring expenses such as
insurance and rent can be paid for with one payment that covers
the cost of the expense for several months or even a year.
