An Elementary Tutor to Theoretical Aspects 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 treated as a trans...

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 – mak...

   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 gr...

There are two basis of accounting. One is accrued basis and another one is cash basis. They are otherwise called merchandise basis and cash basis of accounting. Accrual Basis      Revenue, expenses, and transactions are recorded in books of accounts, when they arise or accrue under accrual basis. It follows accrual concept to record transactions in books of accounts. The payment or receipt of cash may have done or not but revenue, expenses, and transactions are recorded in the books of accounts, when it becomes due. “Time never waits for human” as like the sentence revenue, expenses, transactions never wait for its cash consideration. When they become due, it is recorded in the books of accounts. Outstanding expenses, prepaid expenses, accrued income, income received in advance accounts are maintained in accrual basis of accounting only.      Under Companies Act, 1956, all companies must prepare its accounts under accrual basis of accounti...

Debit equalized Credit      Every credit has its equaling and corresponding debit in double entry system. Every transaction or event has two accounts in double entry system. One transaction is split into debit and credit accounts and then recorded in dual aspect concept by following golden rules. All debit accounts are matched and tallied with all credit accounts then only the accuracy of accounts are ascertained and accounting process is completed.      Luca (friar) pacioli emphasized that a person should not sleep at night unlit the debit equalized the credit. The primary rule of double entry system is every debit has equal amount of credit.     Under double entry system, accounts are categoriesed into five type, as per equation approach of double entry system. They are assets, liabilities, capital, incomes, and expenses. An equation is formed to compare the debit account with credit accounts. So all debit accounts are com...

STATEMENT OF AFFAIRS OF MY.X  AS ON 31.03.2012 or 1.04.2011 LIABILITIES RS. ASSETS RS. Sundry Creditors Bills Payable Capital (opening or closing) B/F Xxxx Xxxx xxxx Sundry Debtors Stock Cash in Hand Cash at Bank Fixed Assets Bills Receivable Xxxx Xxxx Xxxx Xxxx Xxxx xxxx Total Xxxx Total xxxx STATEMENT OF PROFIT OR LOSS OF MR.X DURING THE YEAR 2011-12 Closing Capital                                                                           ...