Elements of Accounts

Basic Elements of Accounts

Accounting - An Introduction

Due to limited human memory, since ancient times, this saying has been coming from the "first write and forget paper". It is even more important for traders to keep a full account of economic (monetary) practices, Because there are thousands of transactions or transactions happening in them daily. If a complete account of these business dealings is not maintained then even a skilled and efficient businessman cannot know that his How much has been increased or decreased in the capital invested by the business, and how much money is to be taken and given by whom or from which person. These things can be known only when he maintains a complete account of the business dealings. For keeping books of books or books in your office or shop, keeping books of accounts is very necessary for the orderly operation of the business.


Elements of Accounts




Meaning and Definition of Accounting

Accounting transactions and financial nature events in a significant way and entry as currency, classified, summarized and results. Results are the art or science of analysis.


    Or

Accounting is a science and art of writing mutual logistic (money) transactions of businesses by an individual or business organizations based on certain legal principles in the accounting books. Knowing the profit or loss caused by the business in due time. To go and have knowledge of the economic condition of the business.

 Objectives of Accountancy

The following are the main objectives of accounting.

1. Profit and Loss information, a Profit and Loss Account is created for it, such as Income Tax

2 . Information about economic status: For this we have to prepare balance-sheet.

3. To find out the position of the debtors.

4. To find out the position of creditors. DEBTORS: Those who borrow money, from whom to take money. CREDITORS: People who have to give money to borrowed goods.

5. Recording Economic Transaction

6. Determination of Profit & Loss

7. Depiction of Financial Position

8. Effective control over the business

9. Providing information to parties having interest in business.

10. Preparation of Details Regarding Tax

11. Providing of necessary information to financial institutions

To know 

12. future plans.

Advantages of Accounting

1. Fulfillment in the absence of memory.
2 . Different types of information regarding the institute.
3. Evidence in court.
4. Facility to borrow money (bank market etc.).
5. Tax assessment (income tax, sales tax VAT etc.).
6. Assist in decision making (purchase and endorsement).
7. Correct pricing of goods (sales price).
8. Valuation of the business.

9. Trick - Stop fraud (embezzlement and mistake).
10. Damage from insurance company - Completion.
11. Assistant at partner's entry.
12. Assistant when declared bankrupt.

 Process of Step of Accounting

(1) Recording / Journlising of Transaction: First of all the Entries (entries) in Journal (starting books), in the same order. In the order in which events in business are decreasing.

(2) Ledger Posting: After Entries (Entries) in Journal (Initial Books), all accounts have to be classified and made separate accounts.

(3) Ledger Balancing: After that accounts have to be ledger Balancing.

(4) Creating Trial Balance: This is a list of accounts. Which is helpful in creating the last account.

(5) Creating Final Account:

 (I) Manufacturing Account

(II) Trading Account (trading account).

(III) Profit and Loss Account (Profit and Loss Account)

(IV) Balance Sheet

Elements of Accounts

It has five basic elements.

(1). ASSETS (Property): like Cash, Bank Balance, Stock, Debtors. Properties Furniture, Plant, Machine, Good will, Patent etc. Debotors: Those to whom borrowed goods are sold, and from whom money is to be taken.

(2). LIBILITY (obligation): The claim of external parties on the business side is called liability. Such as Creditors, Bank Loan etc. Creditors: Borrowed goods from which to be bought and paid.

(3) CAPITAL (Capital): The amount of money put by the businessman in the business is called capital. It comes out of subtracting the total liability from the total assets. Eg Assets = 100000 / -, Liabilities = 30, 000 / - then Capital = 70, 000.

(4) REVENU (INCOME) or income: It is the value of selling goods, giving service. This includes other income, such as commission. (Brokerage), Interest (interest), Dividend (dividend) etc. are also included. 

(A) Sales (Sales): There are two types of sales, cash and credit. 

(B) Service Charges (Service Charges) 

(C) Other Income: Dividend (Dividend) Profit + Share (Share or Share) Dividend - The share in profit received by the Commission, Interest. It is called Revenu (Income).

(5) EXPENSES (expenses): The income that is spent to earn income. They are called Expenses. Such as Electricity Bill, Rent, Telephone, Salary, Goods, Purchases (Purchase) etc.

SOURCE DOCUMENT 
These are the basis of accounting. They give detailed information about any transaction, and are proof of entry made in books. .

Such as:
(I) Purchase Bill
(II) Bank Paying Sleep (Receipt for depositing money in the bank)
(III) Sales Bill
(IV) Receipt Issued
(V) Telephone Bill
(VI) Salary Voucheretc.

Source Document come from within the business or from outside the business.

Methods of Accounting
There are four types of Accounting Systems in operation in India.

(I) Single Entry System
(II) Cash System (Cash method)

(III) In Indian System of Accounts or Mahajani Bahi Khata (Indian ledger or Mahajani book ledger system.

(IV) Double Entry System

1. Single Entry System

The more appropriate name of this method is incomplete accounting method. Because under it, a lot of commercial deals were done. Goes, some is done incomplete accounting, and some is not audited at all. There are no rules and principles of this method. The accounting done under this depends on the wishes of the business owner. Hence this method is adopted by small businessmen. is . Accordingly, profit or loss cannot be a true determination, and can only be estimated.

This method may vary from one institution to another according to their own requirements, as no rules are followed.

2 . Cash System

There are some entities which do not do business but there are cash transactions. This method is adopted, such as colleges, clubs, libraries, dispensaries, etc. This method can take the form of a complete method if the lending behavior is not there at all. But even if lending behavior happens. And the article is only used for cash transactions. So this method will also be an incomplete method.

3. Mahajani Bahi - Khata System

In our country, the Mahajani book ledger is practiced for thousands of years. This method is also called the Indian method of accounting. Because it originated in India only. Most of the old traders of our country keep their accounts under this method only. This party is one of the oldest practices in the world. In this method, Hindi or others in the books of Saladar books with long folded books. . It is written in Indian languages ​​such as: Marwadi, Gurumukhi, Marathi, Sindhi, Oriya, Gujarati etc. This method is based on leaflet accounting method. Therefore, the information displayed by it is complete and reliable. The profit or loss or economic condition of the business is less reliable than any other method.

4. Double Entry System

This method is based on the fact that every financial transaction or transaction has to be done in two accounts, one account is debited (name) and the other account is credited (credited) to the financial transaction or transaction. There are sides, and the practice of each behavior is based on the principle that in every transaction one party pays taxes. And the second sail is therefore recorded on both sides of each transaction, and this is why this method is called, and this is why this method is called double accounting method. This in itself. Purna is such a best and scientific method, which has its own definite rules and principles. Dohra Lekha Pranala was born in Itala. Hence, it is also called Italian system. Its parent Lucas Pasayala (Lucas Pakioli) in India

Meaning of double entry system

Each business transaction has two initiatives. If one receives a turtle, the other is a taker. remember . If there is a buyer, the other must be the seller. If an object or property comes to someone, then it must pass from someone else. Thus if there is some expenditure for one businessman then it will be income for another. This dual aspect of the business transaction book. In I, the process of writing systematically, systematically and systematically is called double accounting method.

Principles of Double Entry System

1. Two sides to each behavior.

2 Practices on both sides.

3. Accounts on both sides.

Advantages of double entry system.

1. Accounting on a complete and scientific basis.

2. Accounting on a global basis

3. Profit - Loss information.

4. Knowledge of the economic situation.

5. Easy access to information.

6. Low probability of fraud and forgery.

7. comparative study .

8. Statutory recognition.

Limitations or Demerits of Double Entry System.

The dual method of accounting is a full statutory method. Nevertheless it has some limitations.

1. There is no effect when the articles are omitted.

2 . Even after writing the wrong amount, the mistake is not detected.

3. Hard to find compensatory impurities.

4. No effect of Khatauni (writing) in right side of wrong account.

5. Expensive system.

6. Requirement of qualified and trained persons.
It is true that rose plants also have cottages. So even a good thing is absolutely innocent, it is not necessary.

Various Basic of Accounting of Accounting
1. Cash Basis
2 . Accrual Basis
3. Hybrid Basis

Various Stages of Double Entry System
1. Original Entries
2 . Classification and Posting
3. Summary of Preparation of Final Accounts.

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