Bookkeeping is the process of systematically recording, organizing, and managing all financial transactions of a business or individual. It serves as the foundation for accounting by ensuring accurate and up-to-date records of income, expenses, assets, and liabilities. Key aspects of bookkeeping include: Recording Transactions: Every financial activity, such as sales, purchases, payments, and receipts, is […]

Objectives of Accounting 1. To provide information about the business activities to the owners, stakeholders or investors and creditors facilitating them to take decisions oninvestment and lending.2. To effectively manage the material resources available.3. To facilitate social functions and control.4. To provide information regarding accounting policies. Accounting may be defined as the art of recording, classifying […]

1. Business entity conceptThe transactions of a business are to be kept separate from those of its owners. By doing so, there is no intermingling of personal and business transactions in a company’s financial statements. 2. Going concern conceptFinancial statements are prepared on the assumption that the business will remain in operation in future periods. […]

1. Convention of DisclosureThis convention requires that accounting statements should be honestly prepared and all significant information should be disclosed therein. That is, while making accountancy records, care should be taken to disclose all material information. Here the emphasis is only on material information and not on immaterial information. 2. Convention of ConsistencyRules and practices […]

Accountants tend to specialize in various types of accounting work and this has resulted in the development of different branches of accounting. Some of these divisions of accounting are given as: (i) Financial Accounting : Accounting designed for outsiders (persons other than owners and managers) is known as financial accounting. It is concerned with the recording […]

(i) Assistance to management: The accounting information helps the management to plan its future activities by preparing budgets in respect of sales, production, expenses, cash, etc. Accounting helps in coordination of various activities in different departments by providing financial details of each department. The managerial control is achieved by analyzing in money terms the departures from […]

(i) Maintaining systematic records: Business transactions are properly recorded, classified under appropriate accounts and summarized into financial statements– income statement and the balance sheet.(ii) Communicating the financial results: Accounting is used to communicate financial information in respect of net profits (or loss), assets, liabilities etc., to the interested parties.(iii) Meeting legal needs: The provisions of various laws such […]

(i) Accounting information is expressed in terms of money. Non-monetary events or transactions, however important they may be, are completely omitted. (ii) Fixed assets are recorded in the accounting records at the original cost, that is, the actual amount spent on them plus, of course, a incidental charges. In this way the effect of inflation […]

Financial accounting is primarily concerned with preparation of accounting information for the outsiders who do not have direct excess to the accounting records. They obtain accounting information of business enterprises from their annual reports, data published by Government departments and information published in financial newspapers, e.g., the Economic Times, Financial Express etc., or business magazines […]

The general acceptance of an accounting principle or practice depends on its capacity to meetthe criteria of relevance, objectivity and feasibility. An accounting principle should be relevant, i.e. the use of it should result in information that is meaningful and useful to the financial statement users. In other words only those accounting rules which increase the utility of the business […]