Introduction to principles of Accounting
In todays world Principle of accounting is very important subject which each and every one of us should learn.Without having a basic knowledge of accounting our life is extremely difficult in a modern society regardless of the kind of job we have. If you do not have basic knowledge of principles of accounting we make it easy for you to learn basic principles of accounting. In this website there are several topics of principle of accounting in very a easy to understand words with simple examples and exercises.
We provide principles of accounting notes and we explain what are the principles of accounting in this website in a simple words. In order to study basic principles of accounting you should first you should understand basic terms used in principles of accounting. Below are the some of the basic terms used in principles of accounting.
What is a transaction?
Transaction refers to any business event or activity that affects financial condition of an organization. Transactions typically involve an exchange of resources between the firm and other parties.
For example, purchasing equipment with cash is a transaction.
Difference between Accounting and Book-keeping:
|Accounting||The process of recording, summarizing, reporting, analyzing and interpretation of financial information relating to an organization.|
|Book-keeping||The accurate and systematic recording of transactions according to set rules. It is therefore just one part of the accounting process.|
One important role of accounting is to communicate financial information to various interested parties. The information provided can help them make financial decisions and take necessary actions.
Accounting Equation is derived on the basis of the accounting entity assumption. The business is assumed to be a distinct entity having its own assets and the Accounting Equation expresses the fact that everything the business owns has been provided by the owners (capital) and by external sources (liabilities).
Capital is sometimes referred to as owner’s equity.
Creditors (trade payables): People to whom the business owes money for the goods or services supplied by them.
Debtors (trade receivables): People who owe money to the business for the goods or services supplied to them.
The above are some of the basic terminologies used in basic accounting. You must be now familiar with those basic terms.To learn further basic principles of accounting select the topics in the navigation menu and learn one by one be smarter in accounting.
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