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Basic Accounting

1. Define accounting.
Accounting is defined as an art of recording, classifying and summarizing
transactions and events in a significant manner and in terms of money. It is
called language of business because the financial performance and the
financial position of any company need to be conveyed to the stakeholders of
any business concern. This can be done by systematically preparing the
financial statements and presenting to the interested parties.
2.Write an accounting equation. What does it signify?
An accounting equation is a statement of equality between the resources
and the sources which finance the resources and is expressed as follows:
Sources of Funds = Uses of Funds
Or
Equities = Assets
Owners equity + Outsiders liability = Assets
5.Write three principle of accounting.
The Going Concern Concept: The entity will continue to operate in the future.
The Cost Principle: Assets and services acquired should be recorded at their
actual cost.
Measurement Concept: The monetary unit is the principle means for
measuring assets and equities.

6. Write short notes on :


a. Journal
b. Ledger
A journal is defined as a book containing a chronological record of
transactions. It is the book in which transactions are recorded first of all
under double entry system.
Ledger is book which contains various accounts. Ledger is set of accounts. It
contains all accounts whether Real, Nominal or personal. It is in Two forms.
a. Bound Ledger
b. Loose Leaf Ledger

7.What is an account? State the name of different types of account.


An account is standardized format used to maintain the separate recorded
and to accumulate date for each of the individual items in order to facilitate
the preparation of periodic financial statements and to provide a continuous
check on the accuracy of the recording transaction.
Types of Accounts
1. Personal Accounts
2. Real Accounts
3. Nominal Accounts

8.How does an asset differ from Liabilities?


Assets:
It is something a company owns which has future economic value.
Land, Building, equipments, Goodwill are examples of assets.
Liabilities:
It is something a company owes.
Money
Service
Product
10.What do you mean by Owners Equity?
It is whats left of the assets after liabilities have been
deducted.
The same as net assets
The owners claim on the entitys assets

.
10. What is meant by Balance Sheet?
Balance Sheet:
A Balance Sheet, also commonly referred as statement of financial
position, is a statement of assets and liabilities of business enterprises at
a particular date. The Balance Sheet summarizes and reveals the financial
position of an enterprise on a particular date, by showing what It own and
what it owes. Because the balance sheet is a snapshot of an instant in time,
it is a status report rather than flow report.

29. Differentiate between Book-keeping and


accounting.
Accounting
1.
Actual process of
preparing &
presenting the accounts
2. Requires higher level of knowledge
3. Analytical in nature
4. Recording & classifying analyzing
&
interpreting transactions
5. Is secondary stage
6. Is to ascertain net results of
operations and financial position.

Book
Keeping

1. Is a part of accounting

2. Concerned with record Keeping


& maintenance Of accounting
records.
3. Routine & clerical in nature
4. Involves identifying, measuring
Involves summarizing
5. Is primary stage
6. Is to maintain primary records

33. What is posting? State relationship between Journal and


Ledger. Posting:Posting is the process of transferring debits and credits from the journal
and other
books of original entry to their respective account in the ledger. The aim of
posting is to make a classified and summarized record of business
transactions in appropriate accounts.

Describe

basic accounting equation?

The basic characteristics of the accounting model we use today sketch their
roots back over 500 years. Luca Pacioli, a Renaissance era monk, obtained a
method or a technique for tracking the success or failure of the trading
ventures. The foundation of that system continues to provide the modern
business world fine, and is the entrenched cornerstone of even the most
detailed computerized systems. The nucleus of that system is the concept that
a business completely can be described as a collection of resources and the
corresponding claims against those resources. The claims can be separated
into the claims of the creditors and the owners (i.e., liability and owners'
fairness). This results in rise to the fundamental accounting equation:
Assets = Liabilities + Owners' Equity
Assets

Assets are the economic resources of the unit, and comprise such items as
cash, accounts receivable (amounts owed to the firm by its customers),
inventories, equipment, buildings, land, and even intangible assets like patents
and other lawful rights and claims. Assets are presumed to entail possible
future economic benefits to the owner.
Liabilities

Liabilities are amounts unsettled to others relating to loans, extensions of


credit, and other obligations arising in the business
Owners' Equity

Owners' equity is the owner's "concern" in the business. It is now and then
called net assets, because it is equivalent to assets minus liabilities for a
related business.

66. Write short notes


on a. Journal b. Ledger
A journal is defined as a book containing a chronological record
of transactions. It is the book in which transactions are recorded
first of all under double entry system.
Ledger is book which contains various accounts. Ledger is set of
accounts. It contains all accounts whether Real, Nominal or personal. It
is in Two forms.

a. Bound Ledger
Ledger

b. Loose Leaf

12. What is meant by Balance Sheet?


Balance Sheet:
A Balance Sheet, also commonly referred as statement of financial
position, is a statement of assets and liabilities of business enterprises at
a particular date. The Balance Sheet summarizes and reveals the financial
position of an enterprise on a particular date, by showing what It own and
what it owes. Because the balance sheet is a snapshot of an instant in time,
it is a status report rather than flow report.
33. What is posting? State relationship between Journal and
Ledger. Posting:Posting is the process of transferring debits and credits from the journal
and other
books of original entry to their respective account in the ledger. The aim of
posting is to make a classified and summarized record of business
transactions in appropriate accounts.
Rules
regarding
posting:
1. Separate accounts should be opened in the ledger for the posting the
different transaction recorded in the book of original entity.
2. All the transaction pertaining to one account should be posted in the
same
Account
.
3. Two aspect of the business transaction namely- debit aspect and credit
aspect- should be posted on the debit side and credit side of the account
respectively.

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