Great Learning : - Basics of accounting - Accounting
Hello Friends,
Good Morning,
Today we are going to learn about some basic definitions of accounting. So lets get started !
What is accounting ?
- Art of recording, classifying and summarising transactions and reporting financial informations.
Financial Information - the reported financial information comes from business transactions.
Transaction - Events that are financial in nature.
Users of accounting informations ?
- following are the users of accounting information
- Owners - to know that their funds are used properly and if the business is generating desired returns.
-Creditor - Creditors to know the financial positions/stability of business to which they are granting credit.
-Investors - to know the profitability and safety of their investments ,
-Management - for planning, controlling andf decision making ,
- Government - for tax compliance and disclosures in public interest.
Types of accounts
Let us know in detail about types of accounts -
1. Real Accounts - Real accounts are the accounts of the properties, assets and posession of the business.
These can be of two types : -
i. Tangible real account - these are account of things that can be touched and measured, eg. furniture account , land account and cash account.
ii. Intangible real account - these are account of things that cannot be touched in physical sense , but can be measured in termed of money value . e.g trademark, copyright.
2. Nominal Accounts - Accounts which are related to expenses, losses, incomes or gains are called as nominal accounts . Nominal accounts do not exists in physical forms , but behind every nominal account money is involved. For eg. salary a/c , purchases a/c , expenses a/c, sales a/c etc.
Accounts that falls within the below category is called nominal account:-
i.income
ii.Expenses
iii.Gains,
iv.Losses
3. Personal Accounts - personal accounts are realed to person-natural or artificial or firms , these are proimarily of two types,
i. Natural Person's accounts - Accounts of real persons,
ii. Artificial Person's accounts -accounts of firms and entities that transact with the business.
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