Basic Accounting Concepts Explanation on all accounting terms plus It also include Principles of Accounting and Rules. The written notes for Accounting concept will be helpful for students who is working with computerised accounting in tally ERP 9. The accounting concept include Debit and Credit concept so that they can apply the concept in more meaning full way in tally erp 9. So learn accounting basic in more simple way with easy step by step guide included in the website. The beginning of this tutorial is starting from this chapter of basic concept of the accounting. This article includes principles / rules of Debit and Credit for basic accounting and 3 Golden Rules of accounting with examples.
Basic Accounting Concepts and Accounting Rules
It is an art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are of a financial character and interpreting the results thereof.
A business transaction is “The movement of money and money’s worth form one person to another”. Or exchange of values between two parties is also known as “Business Transaction”.
A purchase means goods purchased by a businessman from suppliers.
Sales are goods sold by a businessman to his customers.
Purchase Return or Rejection in or Outward Invoice:
Purchase return means the return of the full or a part of goods purchased by the businessman to his suppliers.
Sales Return or Rejection out or Inward Invoice:
Sales return means the return of the full or a part of the goods sold by the customer to the businessman.
Assets are the things and properties possessed by a businessman not for resale but for the use in the business.
All the amounts payable by a business concern to outsiders are called liabilities.
Capital is the amount invested in starting a business by a person.
The debtor is the person who owes amounts to the businessman.
The creditor is the person to whom amounts are owed by the businessman.
The receiving aspect of a transaction is called debit or Dr.
The giving aspect of a transaction is called credit or Cr.
Drawings are the amounts withdrawn (taken back) by the businessman from his business for his personal, private and domestic purpose. Drawings may be made in the form cash, goods and assets of the business.
It is a document issued by the receiver of cash to the giver of cash acknowledging the cash received voucher.
The account is a summarized record of all the transactions relating to every person, everything or property and every type of service.
Ledger: The book of final entry where accounts lie.
A daily record of the transaction.
It is a statement of all the ledger account balances prepared at the end of a particular period to verify the accuracy of the entries made in books of accounts.
Excess of credit side over debit side.
Profit and loss account:
It is prepared to ascertain actual profit or loss of the business.
To ascertain the financial position of the business. It is a statement of assets and liabilities.
For Creating a journal Entries we always required to Look and study st the Golden Rules for Better Result and Understanding. Such Rules in Accounting Standard is called Golden Rules or Accounting Rules The Rules Include Personal Accounts, Real Accounts and Nominal Account. The Goldenr Rules Concept is Helpful to Keep Complex book-keeping rules into well formed defined principles
So Here it Comes The 3 Basic Rules in Accounting
Types of Accounts | Golden Rules
1. Personal account:
Personal accounts are the accounts of persons, firms, concerns and institutions which the businessmen deal.
Ex. Firm, Company Name, Name of a person, Credit
DR – Debit the receiver
CR – Credit the giver
2. Real Account:
These are the accounts of things, materials, assets & properties. It has a physical existence which can be seen & touch.
Ex. Cash, Sale, Purchase, Furniture, Investment etc.
DR – Debit what comes in
CR – Credit what goes out
3. Nominal account:
Nominal account is the account of services received (expenses and Losses) and services given (income and gain)
Ex. Salary, Rent, Wages, Stationery etc.
DR – Debit all expense/losses
CR – Credit all income/ gains
Tally is a complete business solution for any kind of Business Enterprise. It is a full-fledged accounting software. Please Find Next Chapter to start with Tally ERP 9 Tutorials.
Must Read: How to Pass Journal Entries In Tally ERP 9