Financial Accounting Tutorials for Beginners

DOUBLE ENTRY SYSTEM , BOOKS OF PRIME ENTRY, SUBSIDIARY BOOKS: What is double entry system ?  In 1494, Luca Pacioli the Italian mathematician first published his comprehensive treatise on the principles of the 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. Click on to Read More... Books of Prime Entry Or Books of Original Entry:- What is Journal in Accounting? A Journal in Accounting is often referred to as a book of prime entry or a book of original entry . In this book, transactions are recorded in their chronological order.  The process of recording transactions in a  Journal in Accounting  is called 'journalization'. The entry made in books of prime entry or books of original entry is called the 'journal entry'.  Entries in a  Journal in Accounting  are used to create a general account that is then used to create the financial statements of a business

Financial Accounting Terminology:- To understand the basic accounting terms and definitions clearly, you must grasp the following common financial accounting terminology that is always used in business accounting.  The main point here is to enable the student to understand  basic accounting terms  often used concepts before we take off on accounting procedures and rules.  This financial accounting terminology  can be applied to any type of business activity with the same connotation. Transaction:  It means an event or business activity involving the exchange of money or money between parties. The event can be determined in terms of money and changes the financial position of a person e.g. purchase of goods would involve receiving material and making a payment or creating an obligation to pay to the supplier at a future date.  The transaction may be in a cash transaction or a credit transaction.  When the parties make payment immediately in cash or by cheque, it is called a cash tran

  Accrual Basis Accounting and Cash Basis of Accounting : What is the Accrual Basis of Accounting: The Accrual Basis of Accounting is a manner of recording transactions by which revenue, costs, assets, and liabilities are reflected in the accounts for the period in which they accrue.  This basis includes consideration relating to deferrals, allocations, depreciation , and amortization.  This  Accrual Basis of Accounting  is also referred to as a mercantile basis of accounting.  Under the Companies Act 1956, all companies need to maintain the books of accounts according to the accrual basis of accounting. What is the Cash Basis of Accounting: The Cash Basis of Accounting is a manner of recording transactions by which revenues, costs, assets, and liabilities are reflected in the accounts for the period in which actual receipts or actual payments are made. The distinction between Accrual Basis of Accounting and Cash Basis of Accounting. The accrual basis of accounting differs from