Golden Rules of Accounting : Here you will easily understand about Golden Rules Of Accounting, what is 3 golden rules of accounting, if you know golden rules of accounting it is very easy for further accounting. I request you to go through the golden rules of accounting example which i explain Below and further i will explain accounting interview question and answer. Those who searching accounting jobs apply naukri.com as well as timesjobs.com
The Golden Rules Of Accounting :
|Personal Account||The Receiver||The Giver|
|Real Account||What Comes in||What Goes out|
|Nominal Account||All Expenses and losses||All Income and Gains (Profit)|
Rule of 3 Golden Rules Of Accounting
If increasing the asset, you debit ; if decreasing the asset, you credit ;
And opposite apply to liability and capital . If increase the liability or capital account, you credit.
And decreasing liability or capital account, you debit. Expense are debited when incurred and income is credited if earned.
Table to summarize the Golden Rules of accounting :
|Accounting Element||To Increase||To Decrease|
Golden Rules Of Accounting – Let us see what each type of account mean :
1. Personal Account :
The names suggesting these accounts relating to persons are.
(a) These persons could be natural persons like Rahul A/c, Raheem A/c, Iqbal A/c etc.
(B) The persons could also be artificial person like companies, bodies corporate or association of person or partnerships etc. Accordingly, we could have Reliance Industries A/c, Infosys Technology A/c, Charitable Trust A/c, Ali and Sons trading A/c, ABC bank A/c etc.
(c) There are indicate personal accounts as well. Although the individual identity of person relate to these is known, the convention is to reflect them as collective accounts. E.g. at the point when compensation is payable to representatives, we realize what amount is payable to every one of them, yet all things considered the record is called as ‘salary payable A/c’. some cases are rent payable, insurance prepaid, commission received. The student should be careful to have clarity on this type and the chances of error are more here.
2. Real Accounts :
Real accounts is basically related to properties and assets. As physical existence or otherwise, we have classified below.
(a) Tangible Real Account – Assets that have physical existence and can be see, and touched. Example : Machinery A/c, Stock A/c, Cash A/c , Vehicle A/c and the like.
(B) Intangible Real Account – These represent possession of properties that have on physical existence but can be measured in terms of money and have value attached to them. Example : Goodwill A/c, Trade mark A/c, Patents and copy right A/c. Intellectual Property right A/c and like.
3. Nominal Account
Nominal accounts is related to expenses or loss and gains or income. Example : Salary A/c , and wages A/c, Rent of Rates A/c, Traveling Expenses A/c, Commission received A/c, loss by fire A/c etc.
Please go through Basic Accounting Terms , you will easily understand what is accounting and definition of accounting.
The Accrual concept Of Accounting :
The accrual concept is based on recognition of both cash and credit transaction. Accrual are needed to ensure that all revenues and expenses are recognized within the correct reporting period, irrespective of the timing of the related cash flows. Without accruals, the amount of revenue, expenses and profit or loss in period will not necessarily reflect eh actual level of economic activity within a business.
Accrual Basic of Accounting is a method of recording transaction by which revenue, costs, assets and liabilities are reflected in the accounts for the period in which they accrue. This basis included consideration relating to deferral, allocation , depreciation and amortization. The basis is also referred to as mercantile basis of accounting.
Accruals are a key part of the closing process used to create financial statements under the accrual basis of accounting; without accrual, financial statements are considerable less accurate.
Lets understand difference between mercantile system and cash system of accounting :
In mercantile system, expenses are considered as expenses during the period to which they pertain.. Similarly, incomes are considered to be incomes during the period to which the pertain. System of accounting is measured supreme. On the hand, in cash system, expenses are considered to be expenses are considered to be expenses only when they are paid for and the incomes are considered to be income when they are actually received. System of accounting is mostly used from organizations established not earning the profits.
What is contingent liabilities ?
Contingent liability is an obligation , relating to past transaction or other event or condition, that may arise in consequence, as a future event no deemed possible but not probable. Thus such liability as may arise in future are called contingent liability.
For example : Guarantee to a bank for loan advance to a third party, possible penalties, fines and penalties payable to the government or income tax authorities etc. Future losses form natural calamities are not contingent liabilities. They are not record in books of accounts. They don not appear on the liabilities side of the balance sheet. They are shown by way on footnote at the bottom of thee balance sheet.
Explain convention of materiality ?
This convention proposes that while accounting for the various transaction, only those transaction will be considered which have material impact on profitability or financial status of the organization and the other insignificant transaction will be ignore. In care with the standard of materiality, insignificant items are either let out or merged with other items. Sometimes, such items are shows as footnotes or in parentheses according to their relative importance.