What is Accounting and its Concepts?
Accounting is the storing, managing, summarizing, sorting and retrieving the information in financial transactions that may be present in various financial reports.
The different accounting concepts include money measurement concept, accounting period, matching concepts, etc.
Explain debit and Credit in Accounts?
In accounting, debit means the exit of some money in an account, which can increase the expense and asset of the account. This also decreases the equity and liability of the account. According to the account entry, it is positioned left.
A credit is considered as the entry of a certain amount of money in an account. It is an entry positioned at the right side of the account. It decreases the expense or asset account and increases the liability and equity of the account.
What is a balance sheet in accounting?
A balance sheet is a financial statement used by organizations to represent their financial situation at the end of a financial year or a certain date. It depicts the company’s liabilities, assets, and shareholder equities that help in evaluating the sales strategy.
How many types of expenses are there in accounting?
An account expense is a money spent on gathering business revenue and sales by any corporation. They are the sum of all activities that result in any profit.
The different types of expenses in accounting are:
- Operating expenses
- Costs of goods sold
- Non operating expenses
- Financial expenses
- Extraordinary expenses
What is accrual accounting and where do generally accruals appear on the balance sheet?
An accrual can be considered as the expenses that have occurred but the revenue not been billed. Such accrual is created for recording the expense on an income statement.
Companies use the accrual method to store income and expenditure as they happen, even if cash has not been exchanged in the process. An accrual can be seen in the current liabilities section or the long-term liabilities section of a balance sheet.
What is goodwill in Accounting?
Goodwill is considered to be an asset that is intangible. Here the goodwill of a company depends on its brand name, their customer base, any patented technology, and employee management. Here the purchase is higher than the sum of the tangible and intangible assets along with the liabilities.
What accounting concept is employed when using the lower-of-cost-or-market valuation?
The lower cost of the market is the rule through which the company records the cost of its inventory at the current market price or its original cost. This happens when the inventory has become obsolete and the market prices have fallen. The concept of net realizable value is applied in this situation.
What is a Ledger in Accounting?
A ledger is the primary book of accounts that has all the different monetary transactions and the ledger account information in a summarized form.
What are the types of the ledger in Accounting?
The different types of ledger in Accounting are as follows:
- General ledger
- Debtor’s ledger or Sales ledger
- Creditor’s ledger or Purchase ledger
Explain GST in accounting?
GST (Goods and Service Tax) is the tax added to all goods and services for daily consumption. It is paid by the customers and is given to the government by the companies selling those goods.
The GST value is paid along with the purchase price of the goods.
What is double-entry Accounting?
In the double-entry system of accounting, the amounts are to be recorded as credits and debits. The credit and the debit amount have to be equal.
What is tally Accounting?
Tally is a software used for financial accounting and is a standard accounting tool developed by Tally Solutions. It is used by small and medium companies for handling day to day financial transactions.
What is the difference between a single entry and double entry system of Accounting?
The difference between the single entry and double-entry system of accounting are as follows:
|Single Entry system||Double Entry system|
|It is a method of recording financial transactions in a company where a single entry is recorded that can be a debit or credit.||In this method, every transaction will be affected in two accounts that can be a credit or debit.|
|The recording type here is incomplete.||The recording type here is complete.|
|The personal accounts of the debtors and creditors, along with a cash book for handling all the transactions.||For recording the transactions, it maintains nominal accounts, real accounts, and personal accounts.|
|No specialized knowledge is required to maintain the system.||Special knowledge of bookkeeping is required to handle this system.|
|It is less costly for handling transactions.||It is costlier than the double entry system.|
What is Public and Private accounting?
In public accounting, a third party is given the responsibility of handling the financial transactions of their client companies to evaluate their financial position, cash flow to improve their overall finances.
In private accounting, all the financial assessments and evaluations are performed within the company for their betterment. A private accountant handles the business transactions, accounts payable and billings.
What is depreciation in Accounting?
Depreciation is known as the method of assigning the costs of tangible assets overtime when they will be useful and also assess the decline in their values. These assets can be buildings, machinery, furniture, vehicles like cars and trucks that will not last forever.
For tax purposes, the companies deduct the costs of these assets from their business expenses.
What is the Accounting Equation?
The accounting equation concept is based on the double-entry accounting system. It ensures that the balance sheet of a company has a corresponding entry on the credit side for each entry on the debit side.
It depicts that the company’s total assets are equal to the sum of their liabilities and owner equities. The formula is as follows:
Assets= (Liabilities+Owner’s Equity)
How to calculate turnover accounting?
The turnover ratio of a company is the measure that is used to understand how well the company manages to collect its receivables from its clients.
Accounts Receivable Turnover= Net credit sales/Average accounts receivable
How does paying a liability in cash to affect the accounting equation?
By paying a liability in cash, the liquid assets decrease and also liabilities decrease.
How to calculate accounting profit?
The formula for calculating accounting profit is as follows:
Accounting Profit = Total Revenue – (Cost of Goods Sold + Operating Expenses + Taxes)
Explain Amortization in Accounting?
It is an accounting method that is used for lowering the costs of intangible assets incrementally by scheduled charges to the income. It can also refer to the payment of debts over a specific duration through instalments.
What are the important benchmarks for preparing of Managerial Accounting Reports?
The primary criterion for the preparation of managerial accounting reports is
- To meet the requirements of the managers
- To increase the efficiency of the company.
What is the difference between zero accounting profit and zero economic profit?
In zero accounting profits, the explicit costs are covered by the revenues of the company. Zero economic profits are defined as the state of normal profits when its economic profit is equal to zero.
How to make a journal entry in accounting?
A journal entry has the information about the credits and debits made to a specific account. They are represented by separating the credits and debits into columns.