As explained, it is also very important for those who keep books of account to understand accounting concepts. By understanding such accounting concepts, it will then reinforce the skills of the bookkeepers.
Append below are some True Or False Questions on Accounting Concepts:-
True
False
1.
The business entity concept does not apply to a sole proprietorship concern
2.
If economic event [...]
CONCEPT OF AN ASSET
Resource controlled by the enterprise
Past event
Inflow of future economic benefits (probable)
CONCEPT OF A LIABILITY
Obligation of the enterprise
Past events
Outflow of future economic benefits (probable)
CONCEPT OF EQUITY
Residual interest
Assets – Liabilities = Equity
CONCEPT OF INCOME
Increase in economic benefits, inflows and enhancements of asset values, decreases in liabilities
Corresponding recognition of increases in assets and decreases in [...]
Continue reading about Definition Of Asset, Liability, Equity, Income And Expenses
Earlier articles have discussed almost all concepts/ principles, however there is yet another very important one which is Substance Over Form concept which basically is to ensure that the financial statements reflects the complete, relevant and accurate picture of the transactions and events.
Append below an article which explains the meaning of this concept and given [...]
Continue reading about Substance Over Form Concept-What Is It & Illustrations
Along the way, when we keep the books of account, there is a certain bookkeeping term called Contra account. Do we know what is this? In simple term, contra account is actually an opposite account to another account.
The following are some of the examples of using a contra account:
As bookkeepers, we need to at least understand the following:
ACCOUNTING ASSUMPTIONS:
Economic Entity concept:- also known as Separate Business Entity Principle where a business is accounted SEPARATELY from other business entities, including its owner. The business records should be separated and distinct from personal records of business owner.
For example, Mr A is the owner of a [...]
Continue reading about Accounting Assumptions, Principles/Concepts And Constraints
Earlier, the accrual concept has been illustrated in details. It is very vital that in order to keep proper books of accounts, we need to know how to differentiate between the cash basis accounting method and the accrual method.
Append below, in tabulated form, the characteristic of both methods and some salient points to understand the [...]
Continue reading about Cash Basis Accounting Versus The Accrual Method/Concept (Part 2of2)
Earlier, the accounting period has been mentioned. Besides this concept, there is yet another equally important concept which is called the:
Continue reading about Accruals Concept-Its Importance(Part 1 of 2)
Accounting cycle is the basically the processes where the bookkeepers will strive to complete within each accounting period’s deadline/timeline. Hence, what’s in the accounting cycle must be fully grasped and executed.
Append below is what we usually called the usual steps involved in the Accounting Cycle. This Accounting cycle is always repeating itself. When we closed [...]
There are some major accounting convention/principles. However, one extremely crucial convention is the Accounting Period Concept. Bookkeepers need to adhere to this accounting period otherwise penalty or fine might be imposed by authorities ( particularly in public listed companies where the books of accounts need to be properly kept and closed consistently and then financial [...]
For those unfamiliar,the term “accounting” and “bookkeeping” are often used interchangeably. However, for those unfamiliar, append below some of the difference:
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