Accounting
Accounting is broader than book keeping. It is the systematic process of recording, classifying, summarizing, interpreting and communicating the financial information of a business for making financial decisions. This note has information about account and debiting and crediting rules.
Summary
Accounting is broader than book keeping. It is the systematic process of recording, classifying, summarizing, interpreting and communicating the financial information of a business for making financial decisions. This note has information about account and debiting and crediting rules.
Things to Remember
- Accounting is the systematic process of recording, classifying, summarizing, interpreting and communicating the financial information of a business for making financial decisions.
- Every transaction is recorded in two accounts under double entry system. These are known as debit and credit accounts.
- Recording on debit account means entering the amount of the transaction on debit side of the account.
- Recording on credit account means entering the amount of the transaction on credit side of the account.
- The debit side is denoted by the word ‘Dr.’ and the credit side is denoted by the word ‘Cr.’
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Accounting
Accounting
Accounting is a broader concept than book keeping. Book-keeping is only a part of accounting which is concerned only with the systematic record of financial transactions. But, accounting is concerned with the act of recording, classifying and summarizing the financial transactions of a business to know the actual financial position i.e. profit or loss. It is also related to the act of communicating the operating results and financial position to all concerned parties of the business.
Some of the main definitions of accounting are as follows:
"An accounting system is a means of collecting, summarizing, analyzing and reporting in monetary terms, information about the business," -R. N. Anthony
"Accounting may be seen as consisting of recording, classification, presentation and interpretation of financial information," -Lewis and Gillespie
From the above definition, we can conclude that accounting is the systematic process that is concerned with the act of recording, classifying and summarizing the financial transactions of a business which help to know the operating results and financial position and along with communicating such operating results and financial position to all the concerned parties.
Debit and Credit
Under double entry book-keeping system, every financial transaction is recorded into two account heads basically known as debit and credit accounts. One account head is recorded as a debit account and is denoted by the word 'Dr.' and another account is recorded as credit account and is denoted by the word 'Cr.'. Recording on debit account means entering the amount of the transaction on the debit side of the account. Similarly, recording on credit account means entering the amount of the transaction on the credit side of the account. The left-hand side of the account refers to the debit side and right-hand side of the account refers to the credit side. In every account, there involve two sides which are commonly known as debit and credit.
The rules for debit and credit for various types of accounts are as follows:
| Accounts | Rules for Debit | Rules for Credit |
| Personal account | The receiver | The giver |
| Real account | What comes in | What goes out |
| Nominal account | All expenses and losses | All incomes and profits |
Lesson
Book Keeping
Subject
Accountancy
Grade
Grade 8
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