The process of recording voucher details of a transaction in a Journal is called Journalizing and the record thus created is called a journal entry. Transactions are recorded in the Journal according to the type of accounts involved. For example, a journal entry can be made for a cash sale in the Cash Receipts Journal [...]
Continue reading → Consider the scenario, Larry Williams has identified the accounts that are to be either debited or credited. He needs to record this information in the books of accounts by creating journal entries. In practice, the books of accounts include the Subsidiary books or the Books of Original Entry i.e Purchase Book, Sales Book and the [...]
Continue reading → Consider the scenario, Larry Williams, the accountant, has identified the accounts involved in different transactions. He needs to apply the golden rules of accounting to identify, which account is debited and which account is credited. There are three golden rules or guidelines to be followed while recording a transaction. Each rule applies to a single [...]
Continue reading → All monetary transactions that occur while running a business must have accurate, accessible and periodically updated records. Monetary transactions include the payment of a supplier’s invoice, payment to an employee and receipt of payment from a customer. For easy transaction recording, it is advisable to use a company’s chart of accounts. This chart provides codes [...]
Continue reading → The business transactions can be grouped under three types of accounts : Personal accounts Real accounts Nominal accounts Personal Accounts Personal accounts are the accounts of persons or firms that the business deals with. These are primarily of three types : Natural person’s account : These are accounts of real persons who transact with the [...]
Continue reading → The accounting cycle defines the sequence of the stages to be followed in financial accounting. It starts from identifying the financial transactions and ends with the preparation of financial statements. Thereafter, the statements are analyzed and interpreted by different users to meet their requirements. The stages of the accounting cycle are : Identifying financial transactions [...]
Continue reading → Accounting is a business language used to communicate the various financial accounting information of the business to the people concerned. Accounting is based on certain assumptions or conditions, which are called concepts in financial accounting. The accounting concepts can be listed as: Entity Concept Dual Aspect Concept Money Measurement Concept Realization Concept Going Concern Concept [...]
Continue reading → Business decisions are a set of results arrived at after studying a set of comprehensive business reports generated by considering all financial transactions. Thus, automating the finance and accounting system ensures accurate calculation and analyses for the organization. The numbers generated by the automated system will help with better management of the financial process and [...]
Continue reading → As business evolve and business decisions become complex, the necessity to devise strategies and their implementation requires a higher level of data nitration and organizational collaboration. Historically, a finance departments were often the only departments with access to accurate information about a company’s financial results. However, this information was usually at an aggregated level and [...]
Continue reading → The accounts payable system helps an organization to increase its control over purchases, improve cash flow and provide effective management of its current liabilities. Important outputs of the accounts payable system are the checks to suppliers for materials and services. Input from the purchase order system provides a record to the accounts payable application that [...]
Continue reading → The account receivable system allows organizations to manage each flow by keeping track of the money owed on charges for gods sold and services delivered. For example, when goods are shipped to a customer, the company’s account in the accounts receivable system is updated to reflect the entry of the customer’s purchase order. Next, the [...]
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