Accounting Basics and Regulations

The process of recording and classifying financial data related to business operations in the order they occur.

The science and art of correctly recording business transactions involving money or its worth in books of accounts.

The output of bookkeeping provides the raw data used in accounting.

To maintain systematic records of financial transactions and events in order of occurrence.

To analyze operating activities and report the financial strength of a business.

The foundation upon which accounting builds.

Bookkeeping is carried out by junior staff, while accounting is done by senior staff with analytical skills.

Accounting involves analyzing and interpreting financial information for decision-making, while bookkeeping only summarizes financial transactions.

The amount of money a business has left after paying off all its short-term debts. It's a measure of a company's ability to meet its immediate financial obligations.

A potential debt or obligation that might arise depending on the outcome of a future event.

The total amount of money invested in a business by its owners. It's like the initial stake they put in.

The amount of money, goods, or other assets that an owner takes out of a business for personal use. It reduces the owner's capital.

The difference between a business's total assets and its total liabilities. It represents the owners' equity in the business.

Investments that are held for a period longer than the current accounting period. They are not intended for quick sale or disposal.

The process of recording, classifying, and summarizing financial information in monetary terms, then interpreting the results. It involves tracking financial transactions and events, ultimately providing insights into a business's financial health.

Focuses on the use of financial and cost accounting information to help managers make informed business decisions. It provides insights for planning, controlling, and improving business operations.

The application of costing and cost accounting principles, methods, and techniques to control costs, determine profitability, and provide information for decision-making.

A method of recording transactions where revenue, costs, assets, and liabilities are reflected in the accounting periods they occur. It takes into account things like deferrals, allocations, depreciation, and amortization.

A method of recording transactions where revenue, costs, assets, and liabilities are recorded in the accounting period when the actual cash is received or paid out.

In the Balance Sheet, there are prepaid and accrued expenses, as well as accrued and unaccrued incomes.

There are no prepaid and accrued expenses or accrued and unaccrued incomes in the Balance Sheet.

Accrual Basis of Accounting records revenue and expenses when they are incurred, regardless of when cash is exchanged. Cash Basis records transactions only when cash is received or paid out.

A financial statement that summarizes a business's assets, liabilities, and equity at a specific point in time.

This statement shows the revenue earned and expenses incurred during a specific accounting period, revealing the overall profit or loss.

A discount offered to encourage prompt payment by a customer, calculated after any trade discounts.

A discount given by a wholesaler to a retailer on the list price of goods. This is not recorded in the books of accounts.

A set of rules, conventions, and standards used for reporting financial information, ensuring consistency and transparency.

Revenue recognition occurs when the sale is complete, regardless of when payment is received.

Capital receipts are shown on the liability side of the balance sheet because they represent funds that the business owes to external parties.

Whitewashing expenses are revenue expenditures because they are incurred to maintain the existing operations of a business, not to expand or improve it.

Overhauling machinery is a capital expenditure because it increases the life or efficiency of the machinery, which is an asset.

Repairs are considered revenue expenditures because they maintain the existing condition of the machinery, not its future capability.

Inauguration expenses are revenue expenditures because they are related to the opening of a new unit, which is an operational expense.

Subsidies received for working capital are considered revenue receipts because they are received for the ongoing operations of the business.

Capital profits are profits that arise from the sale of fixed assets or investments.

A summarized record of transactions related to a specific person, entity, or thing. It helps track financial activity and activity related to assets.

The left side of an account; records increases in assets and decreases in liabilities and equity.

The right side of an account; records decreases in assets and increases in liabilities and equity.

Accounts related to individuals, companies, or organizations.

Accounts representing tangible assets like land, buildings, and equipment, or intangible assets like brand value or trademarks.

Accounts related to income, expenses, and profit or loss.

A financial record that represents the balance of a particular item or individual.

A record of all the accounts and their balances at a specific point in time. Used to verify the accuracy of the accounting system.