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Accounts

Accounting is the systematic process of recording, classifying, and summarizing financial transactions for a business. The document outlines the golden rules of accounting for personal, real, and nominal accounts, as well as the distinctions between assets and liabilities. It also explains the concept of double entry bookkeeping, where each transaction affects two accounts.

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7 views2 pages

Accounts

Accounting is the systematic process of recording, classifying, and summarizing financial transactions for a business. The document outlines the golden rules of accounting for personal, real, and nominal accounts, as well as the distinctions between assets and liabilities. It also explains the concept of double entry bookkeeping, where each transaction affects two accounts.

Uploaded by

shoriyasharma10
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Accounts

What is accounting?

Accounting is a process of recording, classifying, and summarizing the financial


transactions for a business entity or organization. In simple words, accounting refers to
that process where the financial transactions are recorded systematically to keep a
chronological record of the event happenings.

 GOLDEN RULES OF ACCOUNTING?

 There are three types of accounts coming under their accounting system-
Personal, Real and Nominal
 There are three sets of golden rules of accounting applicable to the types
of accounts

For Personal Account- Debit the Receiver, credit the giver


For Real Account- Debit what comes in, Credit what goes out
For Nominal Account- Debit all expenses and losses, Credit all incomes and gains

Asset and liabilities

Asset put money in your pocket, and liabilities take money out!
 Accounts receivable: As a business, you’ll have payments due from your
customers. As these payments result in cash flow into your account, they are
current assets.

 Prepaid expenses: prepaid expenses are future expenses that are paid in
advanced example such as rent or insurance. On the balance sheet prepaid
expense are first records as an asset and the benefit of the asset are relished
over time, the amount is then recorded as an expense.

 Accrued income: accrued income which is earn but not received.


 Outstanding expenses are those expenses which is due but not paid.

 Unearned income those income which is not earned but received in advance.

Outstanding expenses  due but not paid  liabilities

Prepaid expenses  paid in advanced  assets


Accrued income  due but not receive  asset

Unearned income  received in advance  liabilities

Debtor  to whom goods and services are sold and credit are called debtor

Creditor  to whom goods and services are purchase are called creditors.

What is double entry in book keeping?

Double entry means every transaction has two effect

For example the xyz com has paid rent rs.5000 to landlord. This transaction will have
impact on two account

Rent account Debited by 5000

Cash account credit by 5000

AEL--- Asset/expenses/loss --- increase – debit

LIC--- liability /income/capital --- increase-- credit

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