In Accounting, below topics have discussed
Methods of Keeping Accounts:-
There are three methods of keeping accounts:
1) Deshi Nama System:-
2) Single Entry System:-
3) Double Entry System:-
Deshi Nama System:-
• It is traditional accounting system followed and discovered in India.
• It follows Indian calendar year from Kartak to Aso into the consideration.
• The Concept of Godess laxmi puja on the day of Diwali came from this system as Aso Vad Amas is the last day of Indian calendar and next day new year will begin.
• It is also known as bahi-khata system.
• There are two main books like rojmel and ledger.
Single Entry System:-
• Under this method, sometimes only one aspect is recorded or sometime no aspects of transactions is recorded in the books.
• As a general rule under the single entry practice only the personal aspects of the transactions are recorded and the nominal and real aspects are omitted altogether.
• For example small traders do not keep all transaction recorded but they keep records according to their requirement.
Double Entry System :-
• The double entry theory of bookkeeping can be defined as the system of recording transactions having two fundamental aspects.
• One involving the receiving of a benefit and the other to giving the benefit in the same set of books.
• For example, Prashant Joshi Every transaction involves two fold aspects, One who receives is a debtor (Dr.) and one who gives is a creditor (Cr.).
• Every debit must have corresponding credit and vice versa and on any particular day the total of the debit entries and the credit entries on the various accounts must be equal.
Branches of Accounting:-
There are three main branches of accounting
1) Financial Accounting
2) Cost Accounting
3) Management Accounting
Financial Accounting:-
• Accounting is a system of recording financial transactions of business in book of account for specified period.
• To preparing profit and loss account at the end of year to show result of trading activities.
Cost Accounting:-
• Cost accounting has developed to determine the cost of production per unit of goods
manufactured.
• This system is useful not only in determining the cost of production but also in reducing the cost.
Management Accounting:-
• It is that branch of accounting, which presents the accounting information before
management so as to guide them in policy making and its implementation.
• The accounting data is presented at regular intervals and in a prescribed form before the management.
Subsidiary book:-
• Subsidiary book is a part of journal or is a division of journal.
• In subsidiary book recording all transactions of accounting and summarized or classified copy of the transactions in another sheet and used day by day to performed accounting activities.
There are eight type of subsidiary books:
1. Purchase Book
2. Sales Book
3. Purchase Return Book
4. Sales Return Book
5. Bills Payable Book
6. Bills Receivable Book
7. The Cash Book
8. Journal Book
Purchase Book:-
• All credit purchase of goods are written in this book.
• Cash purchase of goods and credit purchase of assets are not recorded in this book.
• Other names of purchase book are purchase day book, purchase journal, bought journal, inward invoice book etc.
Sales Book:-
• All sales of goods are written in this book.
• Cash sale of goods and credit sale of assets are not recorded in this book.
• Other names of Sales Book are Sales Day Book, Sales Journal, Sold book, Outward Invoice Book etc.
Purchase Return Book:-
• It may be necessary to return some goods that the firm has bought on credit for a variety of reasons.
• All returns of such goods are recorded primarily in Return Outward Book.
• This book is also known as Purchase Return Book.
Sales Return Book:-
• Goods may be returned by the customers for a variety of reasons.
• All goods returned from customers are recorded in Sales Return Book.
• This book is also known as Return Inward Book.
Bills Payable Book:-
• When credit purchases are made by a firm it gives a guarantee to the seller to make payment in future in the form of a bill.
• This bill is said to be Bills Payable for the firm as he will pay for the bill in future.
• A Bills Payable Book is opened to record all such bills.
Bills Receivable Book:-
• When credit sales of goods are made the purchaser gives his guarantee to make payment in future in the form of bill.
• When the seller receives such bill, it is Bill Receivable for him as he will receive payment in future against such bill. In case a business house receives a number of bills,
• A Bills Receivable Book is maintained to record all such bills.
The Cash Book:-
• Transactions held in cash or by cheque are recorded in this book.
• There are two sides in a cash book.
• In the left hand side all cash receipts are recorded and in the right hand side all cash payments are recorded.
Cash Book is of five types:
• Single column cash book,
• Double column cash book,
• Triple column cash book,
• Bank cash book
• Petty cash book.
• In the single column cash book only receipt of cash and payment of cash are recorded.
Journal Book:-
• It is a subsidiary book maintained to record the transaction which cannot be recorded in other special subsidiary books.
• Usually the transactions of uncommon character are recorded in the journal proper.
• The entries like adjustment entries, opening entries, closing entries, transfer entries, purchase and sale of assets on credit, interest on capital, interest of drawing etc. are recorded in journal proper.
Users of Accounting System
There are two type of Users of Accounting System
1) Internal Users
– Management
– Employees
– Owners
2) External Users
– Creditors
– Government
– Investor
– Customers
– Regulatory Authorities
Internal Users :-There are three type of internal users:
Management:- For analyzing the organization's performance and position and taking appropriate measures to improve the company results.
Employees:- For assessing company's profitability and its concern on their future remuneration and job security.
Owners:- For analyzing the viability and profitability of their investment and determining any future course of action.
External Users : There are following external Users:
Creditors:- For determining the credit worth of the organization. Terms of credit are set by creditors according to the assessment of their customers' financial health. Creditors include suppliers as well as investors of finance such as banks.
Government:- Government keeps an eyes on the firm. They are interested to know the earnings for the purpose of taxation.
Investor:- For analyzing the feasibility of investing in the company.
Investors want to make sure they can earn a reasonable return on their investment before they commit any financial resources to the company.
Customers:- For assessing the financial position of its suppliers which is necessary for them to maintain a stable source of supply in the long term.
Regulatory Authorities:- For ensuring that the company's disclosure of accounting information is in agreement with the rules and regulations set in order to protect the interests of the stakeholders who rely on such information in forming their decisions.
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