Definition of Accounting

Accounting is an art of recording, classifying and summarizing in terms of money transactions and events of financial characteristics and interpreting the results thereof. Accounting is also called the language of business.

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Distinction between Financial accounting and Cost and Management accounting

S.No Financial accounting Cost and Management accounting 1 It is primarily for external purpose It is primarily for internal purpose 2 It provides information about the financial performance and financial position of the business It provides information of ascertainment of cost to control cost and for decision making about the cost. 3 It classified records, presents and interprets transaction in terms of money It classifies, records, presents and interprets in a significant manner the material, labour and overheads cost 4 It shows the profit or loss of the organization It provides the details of cost and profit of each product, process etc 5 Financial statements are prepared for a definite period, usually a year Its reports and statements are prepared as and when required. ...

Define Ledger. Also write down the list of “sub-division of Ledger”

The ledger is a book which contains a classified record of all similar transactions of the business, brought from the journal or from books of original entry. Note: the record kept in ledger is called “classified record” or “condensed record”. Types of ledger Ledger accounts can be prepared in the following two ways: 1- “T” accounts form/Traditional/Standard/Conventional form (British) 2- Running Balance Form/Modern Form (American) Different names of ledger Ø Secondary book Ø Book of final entry Note: ledger is King of all books of accounts. Sub-division of Ledger: 1. Debtors’ Ledger or customers’ Ledger or sales Ledger. 2. Creditors’ Ledger or Suppliers’ Ledger or purchase Ledger 3. General Ledger or nominal Ledger.

Distinction between Book-keeping and Accounting

S.No Book-keeping Accounting 1 It is the recording phase of an accounting system It is the summarizing phase of an accounting system 2 It s the basis of accounting It s the basis for business language 3 Persons responsible for bookkeeping are called book-keeper Persons responsible for accounting are called accountants 4 It does not require any special skill or knowledge It requires special skill and knowledge 5 Personal judgments of the bookkeeper is not required Personal judgments of the accountant is essential 6 Financial statements are not prepared from bookkeeping records Financial statements are prepared from accounting records. 7 It does not give the complete picture of the financial condition of the business unit It gives the complete e...

Accounting Knowledge

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