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 Journal and Ledger

S.No Journal Ledger 1 Journal is the book of first entry ( original entry) Ledger is the book of second entry 2 Journal is the book for chronological record Ledger is the book for analytical record 3 The unit of classification of data within Journal is the transaction The unit of classification of data within Ledger is the account 4 The process of recording in Journal is called Journalizing or Journalization. The process of recording in Ledger is called posting 5 Journal as a book of source entry ordinarily has greater weight as legal evidence than the Ledger. Q. What is meant by Posting The process of recording information from journal to ledger is called posting.

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...

Define the term Balance, Balancing Debit balance and Credit Balance

The difference between the totals of two sides of an account is its balance. The balance is written of the lesser side to make the two sides equal. For example: Total of Dr. Side Rs.20000 Total of Cr. Side Rs.15000 Balance Rs.5000 1. Balancing The process of equalizing the two sides of an account is known as balancing. 2. Debit balance While finding the balance if total of debit side is greater than that of credit side, the difference is named as debit balance. For example: Total of Dr. Side of an account Rs.80000 Total of Cr. Side of an account Rs.70000 Balance (Debit balance) Rs.10000 3. Credit balance While finding the balance if total of credit side is greater than that of debit side, the difference is named as credit balance. For example: Total of Dr. Side of an account Rs.35000 Total of Cr. Side of an account Rs.50000 Balance (Credit Balance) Rs.15000

Accounting Knowledge

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