Accounting Concepts

Accounting is a systematic way to record transactions. An Account (in bookkeeping i.e. recording financial transactions) refers to assets, liabilities, income, expenses, and equity, as represented by individual ledger i.e. main book for recording transactions, to which changes in value are chronologically recorded with debit and credit entries. These entries, referred to as postings, become part of a book of final entry or ledger. Examples of common financial accounts are cash, accounts receivable, mortgages, loans, PP&E, common stock, sales, services, wages, and payroll.

A chart of accounts i.e. list of accounts used by organization; provides a listing of all financial accounts used by particular business, organization, or government agency.

The system of recording, verifying, and reporting such information is called accounting. Practitioners of accounting are called accountants

 

Computerized Accounting Systems

§Recording refers to creating Journal entry for every financial transaction with Dr & Cr amounts.

§Classifying refers to each of Dr / Cr transaction to Owner’s Equity, Assets, Liability & Expense.

§Summarizing refers to grouping the transactions of assets, liability, revenue and expenses and preparing financial statements.