Basic of account​

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basic accounting

Basic accounting

Account

An account refers to a record of financial transactions for a particular individual or organization. This could include things like deposits, withdrawals, and balances.

Accounting

Accounting is the process of recording, summarizing, analyzing, and interpreting financial transactions to help businesses, organizations, and individuals make better financial decisions.

Process of Accounting

  • Transaction
  • Recording
  • Classification
  • Summarizing
  • Interpretation

5 Types of accounts

Although businesses have many accounts in their books, every account falls under one of the following five categories:

Debit and Credit in Accounting

Each deal which can be estimated in financial terms tracks down a spot in the bookkeeping exchanges of a firm. To record such exchanges, an arrangement of debit and credit has been conceived, which records such occasions through two different records.

The net impact of these bookkeeping entries is the same in terms of quantity. In any case, by debiting and crediting two unique records, the right and able bookkeeping treatment can be portrayed. In a ledger account, normally the charge section is on the left and the credit segment is on the right.

A debit is a bookkeeping entry that either increases an asset or expense account. Or on the other hand diminishes a risk or value account. It is situated on the left in a bookkeeping section.
A credit is a bookkeeping section that increments either a responsibility or value account. Or on the other hand diminishes a resource or business ledger. It is situated on the squarely in a bookkeeping entry.

Golden Rules of Accounting

Coming up next are the principles of charge and credit which guide the arrangement of records, they are known as the Golden Rules of accountancy:

Rule No. 1

First: Debit what comes in, Credit what goes out.

Rule No. 2

Second: Debit all costs and misfortunes, Credit all incomes and gains.

Rule No. 3

Third: Debit the receiver, Credit the giver.

Modern Accounting Rules

While traditional rules revolved around three accounts – real, personal, and nominal, the modern version classifies the accounts into six types, making the transactions split into these categories, affecting the debit and credit sides. These accounts include asset, liability, revenue, expense, capital, and withdrawal.

Modern Accounting Rules

Basic accounting terms used in accounting (in details)

Assets

Assets are economic resources which will enable the firm to get cash or benifit in future . they are classified into two types. READ MORE

Capital

investment by the owners for the use of firm is called as capital. it is equal to total assets minus total external liabilities.(capital=assets-liabilities) READ MORE

Income(Revenue)

it is the inflow of the assets which results in an increase in the owner’s equity. for e.g. -income,rent, sale of goods etc. READ MORE

liabilities

Liabilities are financial obligations or debts that an individual, person, or association owes to other people, like credits, creditor liabilities, compensations payable, and other obligations that require future payment or performance READ MORE

Expense

Expenses refer to the costs incurred by a business or individual to generate revenue or operate a business. Expenses can include various items such as salaries, rent, utilities, supplies, advertising, and taxes.
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