An Elementary Tutor to Theoretical Aspects of Accountancy ,

  Definition A Contract conveys the right to control the use of an identified assets for a period of time in the exchange for consideration. 1.    Identified Assets The asset which is specified in the contract. The only asset which is implicitly possible to complete the terms of contract. Asset Substitution: Asset substitution should be in future date or on specific event or for repair and upgrade. If the substitution is at customer premises or any place, it costs more. substantial substitution right (This is not allowed for lease): A sset Substitution should be available to whole periods and economic benefit from it should be more than the cost of substitution in this case. (This is called substantial substitution right).   2.    Right to control Contract should have right to ·          Get economic benefit throughout the period. ·          Direct the use of asset Economic benefit throughout the year: ·          It is restr

PRINCIPLES OF ACCOUNTING Principles of Accountancy      The principles which are used in accountancy can be divided into two elements. The accounting concepts and conventions are treated as the basic two elements of principles of accountancy. Nearly eight major concepts are adopted in accountancy. Three major conventions are used in accountancy.      While recording the business transactions in books of accounts, the concepts are to be considered at appropriate situation, Concepts are first and foremost in accountancy. In English, alphabets are important. Accounting concepts are foremost in accountancy. Business Entry Concept      Business is separated from its owner. Owner is treated as a principle creditor of the business. Business owes to the owner for the amount of capital invested in business by him. Even though business is owned by the proprietor, it is a separate entity. All accounting processes are done in the point of view of business. If a transaction happens, it is tr

Users of Information of Accountancy      Accountancy is a language of a business which explains the results and financial position of business. There are many users to know the status of businesses. Accountancy is a useful communicative medium to the users to know the results and financial position of a business. Users are classified into internal users and external users. Accountancy provides necessary information that is required by the users Internal Users      Some individuals and groups are inside organization. They are called as internal users. They are 1) owners 2) Management 3) Employees. Owner       The proprietor of business requires the information of accountancy to know the profitability status of business. Accountancy provides the required information in forms of financial statements, financial reports, and statement of accounts to the owners. Management      Management requires the information of accountancy to assist in decision – making, planning, controlling,

Branches of Accounting      Techniques have improved vastly so as it effects in accounting, new methods, concepts, etc., have been introduced to accounting. Because of such improvement in techniques, accounting has created many branches to its field. Some examples of such branches are financial accounting, cost accounting, management accounting, social responsible accounting, human resources accounting. Financial accounting, cost accounting, management accountings are the standard branches of accounting. Financial Accounting      The process of identifying, recording, classifying, summersing, the transactions and events and analyzing, interpreting, the results of recorded transactions is called as financial accounting. It communicates the finalized and processed date of all financial transactions and events of business to the end users.      In journal and subsidiary books, transactions are recorded. In ledger, recorded transactions are classified and grouped under appropriate acc

Illustration 1       Mr. Pradeep has a business of selling garments. His final extracts of all accounts are stated below.       Particulars                                                    1.04.2011                     31.03.2012 Sundry Debtors                                                  30000                            37000 Stock                                                                 15000                            18000 Sundry creditors                                                 25000                            30000 Cash                                                                  10000                            12000 Machinery                                                          12000                            10800 Furniture                                                            18000                            16200       Ascertain the Opening and Closing capitals and prepare the Statement of profit or loss. Solution C