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Accounting

In: Business and Management

Submitted By ja90da
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Accounting is a formalised information system of recording economic events in the company that helps to obtain, process and present information as well as supports decision-making.
Main reasons why it is necessary for the company to keep accounting records is to identify how much profit or loss the business has made, how much money the firm owe to someone else and how wealthy they company is. Nevertheless, the fundamental objective of accounting is to provide information for decision-making.

Double-entry system
Accountant to record the dual effects of each transaction uses double-entry system. As every transaction affects two items it is necessary to show these effects when recording each transaction.
This stage is known as bookkeeping and the process is called double entry. Particular method follows the rule of accounting equation and maintains that every debit has a corresponding credit entry. Source documents
Source documents are the original evidences in which all the information about business transactions are documented. The examples of this kind of documents are listed below.






Sales invoices

Cash receipts

Credit notes

Deposit slip

Original books of entry
All data from the source documents is recorded in the prime or original books of entry.

1

Books of prime enter are the journals in which we first record transactions. There are separate records for each kind of transaction that can be find below.








Sales

Purchases

Cash

Returns inwards

Returns outwards

General journal for other items

"T-account"
All transactions of a similar item are recorder in the book called Ledger account that use the Taccount format to display the balances in each account. T account has two sides, left column is for
Debit transactions and right side is for Credit transactions. On the top of...

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