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ACCOUNTANCY

Accountancy is the process of communicating financial information about a business entity

to users such as share holder,manager,owners,government etc...Accountancy refers to a

systematic knowledge of accounting. It explain 'why to do' and 'How to do' various aspects

of accounting.

DEFINITION

The "Americana institute of certified public accountants"[AICPA] defines accountancy as 'the

art of recording,classifying and summarizing in a significant manner and events which are.in

part at least.of financial character and interpreting the results thereof.

BOOK-KEEPING

Book keeping is the recording of financial transaction. Transaction includes sales, purchase,income, receipts and payment by an individual or organization.

ACCOUNTING CYCLE.

1. JOURNAL.

2. LEDGER POSTING.

3. BALANCING.

4. TRIAL BALANCE.

5. TRADING AND PROFIT AND LOSS ACCOUNT.

BRANCHES OF ACCOUNTING.

1. FINANCIAL ACCOUNTING.

2. COST ACCOUNTING.

3. MANAGEMENT ACCOUNTING.

DEBITS AND CREDITS.

In accountancy the receiving the benefits is referred as debit aspect and giving the benefit is

called credit. The term 'Debit' means 'to owe'. A company having debit to its name means

that it owes to others. Similarly, a company having 'credit' to its name means that others

owe to it.

Debit & Credit example:

You can learn to understand to identify the two basic components of each transaction:

1. what did you get?

2. where did it come from?

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The debit is what you got

and

The credit is the source of the item you received.

Let's imagine that you purchase a computer with your credit card. Since the computer is

what you received it's going to result in a debit to the asset account for your computer. Thecredit will be applied to the credit card liability account for the same amount.

The banks tend to confuse us because they are telling us the entry to their liability account.

When you deposit money in the bank their liability to you increases. Since liabilities are

credit accounts they are crediting our account. When they reduce their liability to us, they

are debiting their liability account.

So, if you can identify what you received and where it came from in every transaction you

have debits and credits mastered.

Debit

"Enter in the leftcolumn of"

Credit

"Enter in the rightcolumn of"

Debit mustbe equal to Credit

Play debit and credit.flv

Balance Sheet Accounts

Assets (Debits increase, Credits decrease)

Liabilities (Credits increase, Debits decrease)

Capital (Credits increase, Debits decrease)

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Profit and Loss Classifications

Sales (Credits increase, Debits decrease)

Cost of Goods Sold (Debits increase, Credits decrease)

Expenses (Debits increase, Credits decrease)

Assets = Liabilities + Owner's Equity

Cash

Debit

+

Credit

-

A/P

Debit

-

Credit

+

Retained Earnings

Debit

-

Credit

+

ExpenseDebit

+

Credit

-

RevenueDebit

-

Credit

+