Leaning Online

According to the Rules of Debit And Credit , in a Business Transaction , there is always both Debit and Credit Accounts involved when it occurred and these Types of Accounts are written either on the Debit Side / Left Side or Credit Side / Right Side of an Account . Those accounts which are debited in the Transactions are Debit Accounts and from point of a business and such transactions are known as Debit Transactions while from the point view of other business, it is a Credit Transaction. So, such transaction is known as Credit Transaction for the other business . Credit Transactions are recorded on the Right Side or Credit Side of Credit Accounts. You Can Also Read Out, “ What is the Difference Between Debit And Credit ” Let’s us consider an example in order to understand the above point.   For Example, Mr. A Purchases Goods Worth Rs. 5000 from his supplier (Mr. B) for goods supplied to him, then, here from the point view of our Mr. A’s busi...

Dou ble E n try Ledger is prepared to record dual aspect of a Busi n ess Tra n sactio n . I n a Ledger’s Accou n t , Left side is for Debit while the right side is for Credit amou n ts alo n gwith the reaso n s why a n Accou n t is debited or credited. For Example, if Mr. A Sold Goods Worth Rs. 10000 to Mr. B for Cash, this Double Jour n al E n try is recorded i n the Cash book which is both a Jour n al a n d a Ledger as show n below:                                                               Cash a/c   10000                                                                             Sal...

Difference Between Accrued Expenses And Accounts Payable Accrued Expenses  are the expe nses  payable by the business to outsiders of the business within a year. So, these are i ncurred over a period of time and co nt i nue throughout the accounting period until fully paid by the company. Examples are Accrued Salaries , Accrued Wages, etc. while Accounts Payable are the amounts of debts due from the business to outsiders (Suppliers) usually within one (1) Mo nths but some time it goes to two (2) to three (3) months. These are more shorter period of time as compare to Accrued Expe nses. 2. Accounts Payable arise specifically only in case of Purchasing of Merchandise or Goods on Credit / Account from suppliers / vendors of the b usi ness , while Accrued Expenses are i ncurred for all others Expenses except Purchase Of Goods. Examples are Salaries still not paid to employees already delivered services or wages paid to workers for the construction still remai...

The Main Purpose of Accounting , whether it is a Financial Accounting, Cost Accounting, Managerial Accounting or any other Accounting Branch, is to record Business Transactions (collect data) during the accounting periods in order to analyze these transactions (data) for the Effective Performance ( Income Statement Or Profit And Loss Account or Performance of Management) or Financial Position or Health (Balance Sheet) of the business and finally report these results to the Users of Financial Statements / Information . In a Business Transaction, there are 5 Pillars of Accounts that recorded, analyzed and interpreted for an accounting period and then communicated to economic users in the form of Financial Statements. So, accounting serves as a language for the business daily life in the form of Expenses , Incomes / Revenues , Liabilities , Assets and Equity to show financial performance and financial position of the business during any accounting peri...

Accounting is the language of Business because every business field need books of accounts to calculate Net Profit / Net I ncome ( Revenues - Expenses ) in order to find out Financial Performance of the business’management ( Income Statement Does This Job). Also every businessmen want to know the financial position of its business’s  Assets , Liabilities And Equity (Balance Sheet Is What You Are Looking For), otherwise, successful business can not be established without knowing these important accounting findings. Either a Small Business or Sole Owner is maintaining Improper Books of Accounts ( Single Entry System ) or a Larger Business Organization which adopts Proper Books of Accounts ( Double Entry System ), accounting plays an important role in maintaining of books of accounts in order to keep an eye on Expenses and Incomes, Assets, Liabilities and Equity of the business. If a business adopts Double Entry System of Accounting, then it can easily calc...

Accounting is used in various business fields as it is the language through which events are expressed and communicated between two parties or among parties. In simple words, it is a means of recording data and then analyze that data into meaningful information in order to communicate it to the Users of Financial Statements . Most of the Small, Medium, and Larger Companies including Banks and other Financial Institutions are using Computerized Accounting System operated through Different Accounting Software such as QuickBooks . From the Definition given by the American Institute of Certified Public Accountants, we can say that: “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of monetary value of transactions which are of a financial character, and the interpretation of the results”. You Can Also Study, “ What is the Modern Definition of Accounting ” So, in accoun...

Only those are to be considered as Liabilities that are payable by the business to outsiders. Such as Accounts Payable , Accrued Expenses or Expenses Payable , Unearned Revenue , Utility Bills Payable etc. These are the rights of outsiders from whom the goods are purchased or services received on credit or on account. The business is liable to pay to the concerned parties in time or before due date. Liabilities are recorded on Balance Sheet under Liabilities & Equity Section.

It is one of the principles of Generally Accepted Accounting Principles (GAAP) . It is actually a Accounting Concept which states that Only those Business Transactions are recorded in the Books of Accounts that are expressed in terms of monetary value i.e., that is written in terms of money value in an event. For Example Mr. A sold goods worth Rs. 5000 for Cash is a monetary event as there is an exchange of Cash of Rs. 5000 for goods, but achieving good performance or getting good marks in an examination is not a monetary event as we can not express these kinds of events in terms of money for exchange. According to this concept, there is always a change or update in the monetary value of Different Kinds of Accounts whichever is involved in a business transaction. So, only those transaction are recorded in the financial records of the business that is related to Quantitative Change and not Qualitative Change. For Example, we paid Salaries for cash...

The format of Single Entry Ledger is the same as it is used for Double Entry Ledger but from the point view of recording aspects, Single Entry Ledger shows either only one side of a double entry or complete Journal Entry or complete omission of entries. We prepare proper Journal Entries in order to find the mission figures. For Example N et Credit Purchases and N et Credit Sales are calculated by preparing Accounts Receivable Ledger or Accounts Payable Ledger or T-Accounts . You Ca n Also Study, " What is Double Entry Ledger In Accounting "" Example: Suppose, Mr. A is a sole trader. He maintains Single Entry System or Bookkeeping . From the accounting records of his business, the Opening Accounts Receivable for the current accounting year, 2017 is Rs. 15000 and Ending Accounts Receivable is Rs. 33000.                                 ...

Prior Period Adjustments means those Adjustments which are made to correct the prior accounting period’s errors or mistakes made due to the some different reasons i.e., human mistakes such as undercasting, overcasting, wrongly posted, Treating Capital Expenditure As Revenue Expenditure , etc., changes in the standards and other reasons. For Example, if the company treats the Capital Expenditure of Rs. 5000 as Revenue Expenditure , then it is added back to the previous year Retained Earning by Rs. 5000 under statement of retained Earnings. The Adjusted Entry is credited the Retained Earnings account and debited the revenue expenditure account as shown below:                                           Revenue Expenditure a/c    5000                               ...

Cash Payment Journal or  Cash Disbursement Journal  is a Special Journal as it records only Cash Payments paid by the company usually to its suppliers. Cash Payments are credited on Cash Payment Journal as when we paid cash, it decreases and also as it is going out of the business, so we credit it according to the Rules of Debit And Credit . You Can Also Study, “ Cash Receipts Journal ” Cash Payments Journal Entry For Example, when a company paid Cash Rs. 5000 to its suppliers for the goods purchased, then the Journal Entry is made with the debit of Supplier Account ( Accounts Payable ) and Credit of Cash Account. So, we can say that a cash payment journal is used to record cash payments only.

There is no difference between Equity And Capital as capital is used in case of Sole Proprietorship or Partnership while Equity or Capital Stock is used in case of companies or a corporations’ businesses. Equity shows the ow nership of owners or stockholders who invested in the company or corporation while capital is the amount of Cash or Goods invested by the Proprietor Sole Owner or Partners in the business. Statement of Changes In Equity is prepared to find out Equity while Statement of Owner’s Equity is prepared to find out the value of Ending Capital or Owner’s Equity. It is to be noted that Both of these are shown on Balance Sheet on Liabilities & Owners’Equity Side.

1. Due to the implementation of GAAP , the true & fair representation of Financial Statements are reliably presented and reported to the Users of Financial Statements as the organization follows those Universally Accounting Standards that are understandable and provide a meaningful information of a business. For Example, Matching Concept helps in meeting Revenues with Expenses in order to provide true information about the real revenue earned by utilizing relevant expenses incurred in earning that revenue.   2. As Generally Accepted Accounting Principles (GAAP) are universally accepted i.e., these are globally accepted in all over the world, so uniform accounting information is obtained.

Fi nancial Statements show financial information of Monetary or Business Transactions   of the business occurred and recorded in the Books of Accounts during the accounting period.  Financial Statements are prepared at the end of accounting period and these are reported to the Users of Financial Statements . These include Income Statement or Statement of Comprehensive Income , Balance Sheet or Statement of Financial Position, Statement of Cash Flows , Statement of Retained Earnings and Statement of Changes In Equity . These Statements show financial performance, financial position, movement of cash flows, changes in equity over period of time, profitable activities of the management and shareholders for the accounting period. All of the (five) 5 types of Financial Statements are included in the Financial Reports that are reported Quarterly, Semi-Annually or Annually to the users of fi n a ncial information. ...