According to this concept, “an asset is ordinarily entered on the accounting record at eh price paid to acquire it”.
Thursday, October 14, 2010
Revenues
It is a price of goods sold or services provided by a business to its customers. e.g. Sales, rent received etc.
Expenses
Expenses are the costs of the goods and services used up in the process of obtaining revenue e.g. Salaries, Insurance, rent etc.
Managerial Accounting
The object of this accounting is to communicate the relevant information periodically to the management of the business to enable it to take suitable decision.
Financial Accounting
The main purpose of financial accounting is to ascertain the true results (profit or loss) of the business operations during a particular period of time and to state the financial position of the business on a particular point of time.
Cost Accounting
The main object of cost accounting is to determine the cost of goods manufactured or produced by the business. It also helps the management of the business in controlling the costs by indicating avoidable losses and wastes.
Return Inwards
If a customer to whom goods have been sold finds that the goods are defective, unsatisfactory, below standard or not according to specification, he may return these goods to the seller. To the seller such return of goods is known as sales returns.
Returns Outwards
Goods once purchased may subsequently be sent back to the seller for certain reasons, i.e., goods are defective, not according to specification, damaged or below standard. Such return of goods to the seller is know as returns outwards.
Goods or Merchandises
It refers to something which has been purchased by a trader for resale purposes or anything which has been manufactured for selling purposes.
Sales
The goods are purchased for selling purposes. When theses goods are sold to customers at a specific price, it is said that sales have been made.
Purchases
In accounting language the word “Purchases” has special meaning. When saleable goods are brought in a business it is said that purchases have been made.
Trade Discount
Discount allowed by manufacturer or wholesaler at the time of selling goods to retailer as a deduction from the list price or catalogue price is called trade discount.
Realisation Concept
According to this concept, revenue should be recognized at the time when goods are sold or services are rendered.
Matching Concept
The Concept of offsetting expenses against revenue on the basis of “ Cause and effect” is called the Matching Concept.
Accounting Period Concept
According to this concept, “the life of the business is divided into a series of relatively shore accounting periods of equal lengths for studying the results shown by the business
Money Measurement Concept
According to this concept accounting records only those transactions or events, which can be measured in terms of money.
Going Concern Concept
According to this concept it is assumed that the business will continue to operate for an indefinite time period, there is no intention to liquidate the business in the foreseeable future.
Separate Entity Concept
According to this concept business is treated as a separate entity form its owners.
Drawing
The amount of cash or goods taken by the owner/owners from the business for his personal use are known as “Drawing”.
Assets
Assets are the properties and possessions of a business both tangible (having physical existence) and intangible (have no physical existence).
Cash Discount
It is a deduction of allowance given by a creditor to a debtor if the amount is paid by the debtor before the due date.
Creditors/Accounts Payable
Creditors are the persons or suppliers from whom goods have been purchased on credit basis and whom the business is to pay money in near future. These are also know as “ Accounts Payable”.
Debtors/ Accounts Receivable
Debtors are the persons or customers to whom goods have been sold on credit basis and from whom the business is to receive money in near future. These are also known as “ Accounts Receivable”.
Accountancy
Accountancy is the main subject. The word “Accountancy” is far extensive. It covers the entire body of theory and practice. E.g. Book-keeping. Accountancy, Costing, Auditing, Taxation etc.
Accrual System of Accounting
It is a system in which accounting entries are made on the basis of amount having become due for payment or receipt.
Cash System of Accounting
It is a system in which accounting entries are made only when cash is received or paid.
Book Keeping
Book-keeping is the art of recording monetary transactions in the books of accounts in a proper manner.
Accounting
Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the result thereof.
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