Accounting

• accounting is an art of recording, arranging, and summarizing financial information.
• assets are the resources of a business which help make revenue and income.
• there are two types of assets, current assets and non-current assets
• non current assets are those assets which can give benefit to the business for more than one year i.e land n building, plant n machinery, furniture n fixture, office equipment, motor vehicles
• current assets are those assets which can give benefit to the business for less than one year i.e inventory, trade receivable, cash at bank and cash in hand.
• capital is the amount of money invested in the business by its owner.
• liabilities is the amount of something which is borrowed by the business from others, there are two types of liabilities.
• non current liabilities are those which can give benefit for more than one year.
• current liabilities are those which can give benefit for less than one year i.e trade payable, bank overdraft.
• expenses are running the day to day tasks of the business i.e rent, salaries n wages, electricity, heating n lighting, insurance, discount allowed, general expenses and sundry expenses.
• income or revenue can be earned by selling goods or services, cost+profit=income/sales
• drawings are when the owner of a business takes something from the business for his own personal use.
• accounting equation is ASSETS=CAPITAL+LIABILITIES
• basic accounting cycles is a sequence in which business transactions are recorded in the books of accounts: double entry / t-accounts / balancing off / trial balance / income statement / balance sheet
• double entry is a method to record the business transactions in the book of accounts in the form of debit and credit
• rules of debit and credit

  heads of accs increase decrease

  asset debit credit

  capital credit debit

  liabilities credit debit

  expense debit credit

  income/revenue credit debit

  drawings debit no effect
• Nature

  assets - debit

  capital - credit

  liabilities - credit

  expenses - debit

  income/revenue - credit

  drawings - debit