Accounting In Business

Rough book.

Explanation

All the daily business transactions are recorded in the rough book. It gives an idea of which account is to be debited or credited.

Nominal

Explanation

The businessmen have to maintain separate accounts for the profit and losses of the business. Like the salary a/c, interest a/c.

Double-entry

Explanation

The modern and scientific method of maintaining accounts is called Double-entry system of book keeping. In a two aspects business transaction, one aspect gives the benefit and others receive the benefit. In every aspect, there is an account in the ledger. Every ledger account there is two sides; one receives benefit and other gives. While tracking down the aspects, we dot down both on the opposite sides of the book. This system is known as Double-entry system of book keeping.

balance of the account.

Explanation

Credit refers to the amount entered in the account while debit refers to the money taken out (spent) from the account. The difference between the two gives the net balance of the account.

Real account and Nominal account.

Explanation

Real account refers to the ledger account that records the assets that the firm possess. Nominal account refers to the accounts meant for the separate profit and losses accounts of the business. So these two accounts are totally concerned for business purposes.

Profit and loss

Explanation

Profit and loss account contains the Gross Profit or Gross loss incurred by the firm brought down from the trading account and contains the profit or loss of the non-trading items.

Depreciation.

Explanation

The permanent assets of the firm lose its value every year. This is known as depreciation. So it is deducted from the assets and shown as a loss.

capital.

Explanation

The trial balance the capital amount is shown as the Capital. It is the difference between assets and liabilities of a trade.

The full particulars of the transactions are noted first in the journal, which is known as the book of original entry in accounting.

It is known as the book of original entry as transactions are recorded in the journey on a daily basis.

The various types of accounts are as follows:-

• Personal Account- These are accounts which are owned and maintained by any individual person. The transactions are done by that person from his/her account. Example- Mr. X’s a/c in Y bank.

• Real Account- The ledger accounts that are maintained by the business concerns to records the assets that the firm possess. Example building a/c., car a/c., Furniture a/c.

• Nominal Accounts- Two separate accounts are meant for keeping the profits or losses of a business and are maintained by the business owners. This is called Nominal account. Example- salaries a/c, commission a/c.

When a business is set up, a need for accounting is there. It helps to track down all the incomes, expenditures due to the purchase of goods and transportation, and dues remaining. It keeps each and every record and helps to analyse the input and output of the firm and the gross profit or loss of the firm.

The modern and scientific method of maintaining accounts is called Double-entry system of book keeping. In a two aspects business transaction, one aspect gives the benefit and other receive the benefit. In every aspect, there is an account in the ledger. Every ledger account there is two sides; one receives benefit and other gives. While tracking down the aspects, we dot down both on the opposite sides of the book. This system is known as Double-entry system of book keeping.

Final accounts are financial statements which ascertain the arithmetical accuracy of ledger accounts.

As the Profit and loss accounts are examined, they give the Gross Profit or Gross loss of the firm.

There is a trading account which gives details regarding the resultant balance after buying and selling. It accounts for all the transactions of buying and selling, which therefore calculates the Gross Profit or Gross Loss. And the Profit and Loss account contain all the expenses and gains of non-trading items. Therefore there is no need to find out the balance of the goods sold account and goods purchases account. They are done altogether in a simpler way.

The permanent assets of the firm lose its value every year. This is known as depreciation. So it is deducted from the assets and shown as a loss. And it accounts for the Gross Loss of the firm.