Business Students
PREPARATION FOR NTS, CTS, FPSC, PPSC JOBS FOR BUSINESS STUDENTSNTS PAST PAPERS MCQsNTS PAPERS PREPARATION FOR PUNJAB FOOD AUTHORITY JOB 2019PUNJAB FOOD AUTHORITY PAPERS PREPARATION
Branches of Accounting
There are three Branches of Accounting.
1. Financial Accounting?
The Purpose of Financial Accounting to
calculate profit & Loss by the business during the specific period of time.
It is preparation of financial statements for the use of outsiders like
creditors, banks and financial institutions etc.
The main function of cost accounting is to
ascertain the cost of a product and to help the management in the control of
cost.
It is provides necessary information to the
management for discharging its functions. It helps the management to take
decisions and to control activities.
System of Accounting
1.
Cash System of Accounting?
Cash
system is in which accounting entries are made only when cash is paid or
received. No entry is passed when a payment or receipt is due.
2.
Accrual System of Accounting?
In
this accrual system of accounting, the entries are made when the transaction of
goods or services are occurred.
 |
| Accounting Cycle |
Traditional
Rules of Debit and Credit
There are
three rules of Debit and Credit.
1. Personal Account?
It
is relating to persons or firms are called Personal Account such as Kamal’s
Account, Sundar’s Account etc.
2.
Real Account?
It
is relate to the properties or things owned by a business Accounts. Examples
are Land, Building, and Machinery etc.
3.
Nominal Account?
It
is related to the gains or losses such as salaries, rent and sales accounts
etc.
How to
Apply these Rules
In Personal Account, Debit the account
of the person receiving and credit the account of that going out.
In Real Account, Debit the account of
property or thing coming in and credit the account of that going out.
In Nominal Account, Debit the account
of all expenses and losses and Credit the account of all gains.
Rules of
Debit and Credit (Equation Based)
This
debit and credit approach is called American & British approach. According
to this approach the accounts are classified into five categories.
1.
Assets?
Its
means the commodities possessed by the business such as building land, cash
etc.
2.
Liabilities?
It
is the claims of the suppliers of cash or commodities on credit up to his
balance due on the date.
3.
Owners Equities?
It
means the claims of the owner of the business for his interest up to his
investment after finalizing the expenses and revenue up to the date such as
capital.
4.
Revenue?
Its
means any type of income directly or indirectly of the business, e.g. interest
received, sales of goods and dividend received.
5. Its
means any type of expenses directly or indirectly of the business, e.g. rent,
salary, wages etc.
 |
| Basic Accounting Terms |
How to Apply these Rules (Equation Based).
Asset Account: Increase in an asset is
debit
Decrease
in an asset is credit
Liability Account: Decrease in a
liability account is debit
Increase
in a liability account is credit
Equity Account: Decrease in Equity
account is debit
Increase
in a liability account is credit
Revenue Account: Decrease in revenue
account is debit
Increase
in revenue account is credit
Expense Account: Increase in expense
account is debit
Decrease
in expense account is credit
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