BASIC ACCOUNTING : STREAMS & SYSTEM/METHODS OF ACCOUNTING

VARIOUS STREAM OF ACCOUNTING

There are three streams of accounting:

1) Financial Accounting: is the process in which business transactions are recorded systematically in the various books of accounts maintained by the organization in order to prepare financial statements. Theses financial statements are basically of two types: First is Profitability Statement or Profit and Loss Account and second is Balance Sheet.

2) Cost Accounting:is the process of classifying and recording of expenditure incurred during the operations of the organization in a systematic way, in order to ascertain the cost of a cost center with the intention to control the cost.

3) Management Accounting: is the process of analysis, interpretation and presentation of accounting information collected with the help of financial accounting and cost accounting, in order to assist management in the process of decision making, creation of policy and day to day operation of an organization. Thus, it is clear from the above that the management accounting is based on financial accounting and cost accounting.

SYSTEM OF ACCOUNTING

(1)  what  is  double  entry  system  in  accounting?
(A)  for  every  transaction  there  should  be  a  dual  effects  debit  and  credit

(2)   what  is  single  entry  system  in  accounting?

(A)  single  entry  system mostly  undertake  by  small  business  to  maintain  their cash, accounts  receivable  and  payable, and  tax  paid in  this  method, incomplete or  partial  records  of  the  business  transaction  are  recorded.  Therefore,  this  method  is  not  a  scientific  method.  This method  fail  to  give  proper information  to  the  businessmen  or  owner’s. under  this  system  only  cash  book  and  some  personal  accounts  are maintained .  this  system  has  very limited  value.


STEP INVOLVED IN DOUBLE ENTRY ACCOUNTING 

> Preparation of Journal

> Preparation of Ledger

> Trial Balance Preparation

> Preparation of Final Account