Generally Accepted Principles, Balance sheet, Accounts receivable, Income statement, Debt, Liability, Double-entry bookkeeping system, Accounts payable
1- Explain the collecting, recording, classifying, summarizing, analyzing and reporting process of accounting. – Collecting:- Data obtained from various sources with the help of appropriate measures is called collection of data. – Recording:- Arranging the data into its chronological form is called recording of data. – Classifying:- Division of data according to nature of events is called classification of data. – Ledger is used for classifying transactions – Posting is the process of transferring transactions from journal to ledger.
Summarizing:- This involves presenting the classified data in a manner which is understandable and useful to the management and other interested parties. Follow statements are prepared:- – Income statement – Balance Sheet – Cash flow statement – Analyzing:- The comparison of data in a business is called analyzing of data. For example, analyzing of present data with past data, or actual data with projected data. – Reporting:- Forwarding the results to financial users like chairman, directors, managers etc.
is called reporting of data. – Discuss in detail the nature of accounts i. e. assets, expenses, liabilities, revenues and capital by giving examples. – Assets:- The resources of a business are called assets. They are of two types:- – Fixed Assets: Land, Building, Equipment, Vehicle etc. – Current Assets: Cash, cash at bank, A/c receivable, debtors, prepaid expenses. – Expenses:- The amount spent in a business with a view to gain profit in the future is called expense. Examples are rent expenses, salaries expenses, advertisement expenses etc.
The financial responsibilities of the business for which it is liable are called liabilities. They are divided into two types:- – Fixed Liabilities (Bank Loan, Bonds Payable, Mortgage Payable. ) – Current Liabilities (Notes Payable, Unearned Income, Creditors. ) – Capital:- The amount of money invested by the owner in the business is called capital. – Revenue:- The incomes and the profits earned in the business through selling are called revenues. For example, Sales, Service revenue, Interest, commission earned. – Drawings:-
The amount of money taken away by the proprietor for personal benefits is called Drawings. 3- Describe the accounting rule of debit and credit for accounts like assets, expenses, liabilities, revenues and capital. – Assets – Increase in Asset is debit. – Decrease in Asset is credit. – Liabilities – Increase in liabilities is credit. – Decrease in liabilities is debit. – Revenues – Increase in revenues is credit. – Decrease in revenues is debit. – Expenses – Increase in expense is debit. – Decrease in expense is credit. – Capital – Increase in capital is credit. – Decrease in capital is debit. – Select any twenty categories from the above and identify a transaction that will have the required effect on the business. 1- Purchased Goods on credit 25,000. 2- Gave services for cash 5,000. 3- Brought cash in business 65,000. 4- Adjusting entry of out standing salaries 9000. 5- Wages wrongly debited to Sales 400. 6- Salaries wrongly debited to Drawings 600. 7- Paid to accounts payable in cash 1500. 8- Goods returned by customer worth 650. 9- Withdrew cash for personal use 550