Basic Accounting Concepts:
The balance sheet gives us the financial position of the business and profit and loss
account. Accounting accounting is nothing but recording classifying and
summarizing the financial data into meaningful format that is all accounting is right
so now let 's see the accounting process. The accounting process is very simple
accounting process starts with the source document. The process from source
document till trial balance it is called bookkeeping. An asset is a resource controlled
by an entity as a result of past events and from which future economic benefits are
expected to flow to the entity that is what an asset is now previously we used to say
that asset is something that the company owns if company owns the land and
building then that 's an asset of the company'
Expenses are the cost of operations that a company incurs to generate revenue and
from which no further benefit is expected is the main difference between a certain
expenses that you know in acid we get future economic benefit but here once you
incur the expenses that means you have taken the benefit already the benefit is
already taken. so see here a present obligation of the entity to transfer an economic
resource as a result of past event there will be some past event for example you
purchase you know ten thousand worth of goods yeah and you did n't pay then you
have present obligation to pay that person pay to pay your supplier. If you owe
money to your supplier then that supplier that creditor he will have claim on your
total assets of the company. Capital is simply whatever money that is brought in by
the owners of the company that's called capital or equity share capital or preferential
capital simple as that. The technical definition would be it is the claim of owners in
the total asset of the. company after deducting all it 's liabilities. shareholders
because they 're in companies the capital is divided into small small units of shares.
Sales is our revenue and then rendering of services if it 's a service business then we
will render the services and we will get the money etc and also interest received all
these things okay other things also etc mean side interest receive rent receive
whatever it is dividend receive whatever we get that 's called running simple as that'
Let 's say you purchased a machinery to do business yeah you wanted to do some
production or something yeah so of course your cash will reduce. Now there is an
obligation that is being created that you have to pay 40,000 back to the bank is n't it
so this obligation is called a present obligation. Before you had claim on the total
assets of the company yes but now there is liability holder also outsider also outsider.
First priority goes to the liability holders and then the owners okay so these people
will have claim on total assets and also you but you will get only after deducting
liabilities okay your claim is only one lakh.
The balance sheet gives us the financial position of the business and profit and loss
account. Accounting accounting is nothing but recording classifying and
summarizing the financial data into meaningful format that is all accounting is right
so now let 's see the accounting process. The accounting process is very simple
accounting process starts with the source document. The process from source
document till trial balance it is called bookkeeping. An asset is a resource controlled
by an entity as a result of past events and from which future economic benefits are
expected to flow to the entity that is what an asset is now previously we used to say
that asset is something that the company owns if company owns the land and
building then that 's an asset of the company'
Expenses are the cost of operations that a company incurs to generate revenue and
from which no further benefit is expected is the main difference between a certain
expenses that you know in acid we get future economic benefit but here once you
incur the expenses that means you have taken the benefit already the benefit is
already taken. so see here a present obligation of the entity to transfer an economic
resource as a result of past event there will be some past event for example you
purchase you know ten thousand worth of goods yeah and you did n't pay then you
have present obligation to pay that person pay to pay your supplier. If you owe
money to your supplier then that supplier that creditor he will have claim on your
total assets of the company. Capital is simply whatever money that is brought in by
the owners of the company that's called capital or equity share capital or preferential
capital simple as that. The technical definition would be it is the claim of owners in
the total asset of the. company after deducting all it 's liabilities. shareholders
because they 're in companies the capital is divided into small small units of shares.
Sales is our revenue and then rendering of services if it 's a service business then we
will render the services and we will get the money etc and also interest received all
these things okay other things also etc mean side interest receive rent receive
whatever it is dividend receive whatever we get that 's called running simple as that'
Let 's say you purchased a machinery to do business yeah you wanted to do some
production or something yeah so of course your cash will reduce. Now there is an
obligation that is being created that you have to pay 40,000 back to the bank is n't it
so this obligation is called a present obligation. Before you had claim on the total
assets of the company yes but now there is liability holder also outsider also outsider.
First priority goes to the liability holders and then the owners okay so these people
will have claim on total assets and also you but you will get only after deducting
liabilities okay your claim is only one lakh.
