Financial Accounting Tutorials for Beginners

 General Ledger Ledger is the main book or principle book of the account . The entries in the ledger pass through the path of the journal and subsidiary books .  The ledger includes all accounts viz. Assets , Liabilities , Income or Profit , Expense or Loss , Owner's Capital , and Owner's Equity . The ledger is the book of the final entry and is therefore a permanent record. A systematic way in which transactions are posted in a ledger . Once the transaction is posted for an accounting period, the ledger accounts are balanced (i.e. the difference between the debit side and the credit side is calculated).  These balances are eventually used to prepare financial statements such as profit and loss A / C and balance sheets.  The ledger can also be divided into general ledgers and sub-ledgers . While all ledgers in General Ledger will be ledger accounts , the sub-Leaders will have individual accounts of customers and suppliers. If there are 15 parties, the g...

Examples relating to the Double Entry System & Golden Rules of Accounting   :  Illustrations 1: Determined the debit and credit from the following particulars Under the American Approach/ Modern Approach: The business started with capital. Bought goods for cash. Sold goods for cash. Paid salary. Received Interest on Investment. Bought goods on credit from Mr. Y Paid Rent out of Personal cash. Illustrations 2: Determined the debit and credit from the following particulars Under the  British Approach/ Traditional Approach/ Double Entry System  ( golden rules of accounting ):- We will see the following example to understand the application of the rules of debit and credit. Consider the following transactions: 1.Mr. Shanker and Mrs. Aditi who are husband and wife started offering consultancy services, by investing cash of Rs. 5,00,000 and Rs. 2,50,000 respectively. Solution:- From a business point of view, the two effects of this transaction are: first, the cash ...

DOUBLE ENTRY SYSTEM In this section describing the double entry system , golden rules of accounting . So the first question arises in our mind that what is the double entry system and its advantages? In 1494, Luca Pacioli the Italian mathematician first published his comprehensive treatise on the principles of Double Entry System. The use of the principles of the  double entry system  made it possible to record not only cash but also all sorts of Mercantile transactions. It had created a clever impact on auditing too because it increases the duties of an auditor to a considerable extent. Features of Double Entry System : Every activity has two-fold aspects, i.e., one party giving the benefit and the other receiving the benefit. Every activity is divided into two aspects, Debit and Credit. One account is to be debited and the other account is to be credited. Every debit side must have its corresponding and equal credit side. These are the advantages and disadvantages of Doub...

  ACCOUNTING CONVENTIONS: In this session, explain What is  Accounting Conventions  and its importance and limitation.  What is  Accounting Conventions: Accounting conventions are strategies or procedures which are widely accepted. When transactions are recorded or interpreted, they observe the conventions. On many occasions, however, the terms-principles, concepts, and conventions are used interchangeably. Professional Accounting Bodies have published statements of these concepts. Over years, many of those concepts are being challenged as outlived.  Yet, no main deviations have been made as yet. Path-breaking ideas have emerged and the accounting standards of modern days do require firms to record and report transactions that may not be necessary based on concepts that are in vogue for long.  It is important to study accounting from the basic levels and perceive these concepts in entirety. There are different types of Accounting Conventions which a...

Basic Principles of Accounting and Concepts  On this page, define the  basic  Principles of Accounting  and Concepts :                                                        So, first What is Generally Accepted Accounting Principles (GAAP) : Generally accepted accounting principles  or GAAP , A broadly accepted algorithm, conventions, requirements, and procedures for reporting monetary data, as established by the Financial Accounting Standards Board are called Generally Accepted Accounting Principles (GAAP) .  These are the widespread set of accounting rules , requirements, and procedures that firms use to compile their monetary statements.  GAAP is a mixture of requirements (set by policy boards) and easily the generally accepted methods of recording and reporting accounting info.  GAAP is to be adopted ...