Basic Accounting

ACCOUNTING INTRODUCTION

Accounting came into practice as a help to human memory by maintaining a systematic record of business transaction. Accounting rightly termed as the language of business.

Definition

In simple term, “accounting is the art of recording, classifying, summarizing, analyzing and interpreting the financial transactions and communicating the result there off to the persons interested interested in such information”.

According to American Institute of Certified public Accounts(AICPA), “Accounting is the art of recording, classifying and summarizing in significant manner in terms of money, transactions and events which are in part at least of financial character and interpreting the result there off”.

Objectives

The basic objective of accounting is to provide information to the interested users to enable them to make business decisions. Following are the important objectives of accounting.

1. To maintain records of business.
2. Calculation of profit or loss
3. Depiction of financial position
4. To provide information to the users

BASIC TERMS

1. ASSEST  :- Assts are things or properties used and owned by the business. Assets are mainly classified into two.
1. Fixed Assets :- These are used for long term purpose. Eg:- Furniture, Machinery, etc.
2. Current Assets:- These are used for a short period. Eg:- Cash, Stock, etc.
2. Liability :- Liabilities are the obligations and debts of the business towards the outsiders. It is also divided into two.
1. Long term or Fixed liabilities) :-Liabilities that are repayable after a long period are termed as long term liabilities. Eg:- Long term loan. Debenture.
2. Short term or current liabilities) :- These are the obligations that are repayable with in a short period. Eg:- Bills payable, Bank overdraft