Author: Mohit

Accounting – Accounting Concepts

Accounting – Accounting Concepts We wrote about four basic concept of accounting, i.e. going concern, business entity, money measurement, cost concept, the dual-entry concept and the realization concept. http://faoblog.com/accounting-accounting-concepts-2/ http://faoblog.com/accounting-accounting-concepts-3/ http://faoblog.com/accounting-accounting-concepts-4/ http://faoblog.com/accounting-accounting-concepts-5/ http://faoblog.com/accounting-accounting-concepts-6/ http://faoblog.com/accounting-accounting-concepts-7/ The seventh concept is the Accrual – If money has not been realized, it should be capable of being accrued as payable / receivable This by far is one critical concept of accounting. What is accounting supposed to provide? A true and fair view of the business for a certain period, clearly reflecting the profit or loss for that period and the net worth of the...

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Accounting – Accounting Concepts

Accounting – Accounting Concepts Did you download the free paper on AP automation? http://faoblog.com/6-steps-automation-success-2/ We wrote about four basic concept of accounting, i.e. going concern, business entity, money measurement and the cost concept. http://faoblog.com/accounting-accounting-concepts-2/ http://faoblog.com/accounting-accounting-concepts-3/ http://faoblog.com/accounting-accounting-concepts-4/ http://faoblog.com/accounting-accounting-concepts-5/ The fifth concept is the Dual-Entry concept– The records should consider both the aspects of a transaction. Some accounting propounders even call this the dual-aspect concept. The premise behind this concept is that each transaction will surely have at least two aspects to it. This concept leads to multiple equations or components which equate. To start with, the total of all debits...

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Accounting – Accounting Concepts

Accounting – Accounting Concepts We wrote about two basic concept of accounting, i.e. going concern and business entity. http://faoblog.com/accounting-accounting-concepts-2/ http://faoblog.com/accounting-accounting-concepts-3/ http://faoblog.com/accounting-accounting-concepts-4/ The fourth basic concept is “Cost concept”. All transactions considered at cost (the value actually transacted in) So, a transaction may actually be of a higher value, but needs to be recorded at the value it has been transacted in. This concepts restricts arbitrary values being assigned to transactions. This becomes critical in arenas where capital transactions are entered into, especially those which result in acquisition of assets. Thus this ensures that the transacted value is recorded in...

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Accounting – Accounting Concepts

Accounting – Accounting Concepts We wrote about two basic concept of accounting, i.e. going concern and business entity. http://faoblog.com/accounting-accounting-concepts-2/ http://faoblog.com/accounting-accounting-concepts-3/ The third is “Monetary measurement” – Should be measurable in money. You can record a transaction in accounting books only if it is measurable in terms of money. This essentially implies that mostly tangible things or services, that can be quantified in money terms can only be recorded. Sometimes, non-tangible stuff, like knowhow or the knowledge of a research is also recorded, but then with a basic principle – record it in money terms, either through a justified analysis...

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Accounting – Accounting Concepts

Accounting – Accounting Concepts You read about the first basic concept of accounting, i.e. going concern. http://faoblog.com/accounting-accounting-concepts-2/ Let us look at the 2nd one today Business Entity – The business is treated as an entity separate from its owners Most of the accounting gurus treat this as the most critical concept. The owners of a business are treated as a separate entity. If you do not do this, you will not be able to record transactions between the owner and the business. Ideally, the transactions booked in the business should relate to the business only. If we do not...

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Accounting – Accounting Concepts

Accounting – Accounting Concepts In our last post on accounting, we talked about the seven basic concepts of accounting. http://faoblog.com/accounting-accounting-concepts/ Let us talk about these in more detail. The first accounting concept was Going Concern – The business entity is in business as usual  mode. Although the authors of accounting books do not classify this as the top level concept, but I personally feel this is the most important concept, as it indicates normal accounting. This concept states that the business is currently ongoing, and will continue to be in this state for a reasonably long period of time....

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Accounting – Accounting Concepts

Accounting – Accounting Concepts We listed the three golden rules in the last post http://faoblog.com/accounting-definition-debits-credits-2/ Coming to the accounting concepts, there are primarily seven concepts which are critical. Accounting is related to business, and recording, classification, summarization and presentation of the affairs of a business. Let me define this in one sentence – We record all transactions of an ongoing business, as distinct from the individuals conducting it, measurable in monetary terms, at cost, using a double entry mechanism, at the point of realization or accrual. How does this translate into seven concepts? Going Concern – The business entity...

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Accounting – Definition – Debits n Credits

Accounting – Definition – Debits n Credits You read about the dictionary definition of a debit and credit, which did not seem to help. http://faoblog.com/accounting-definition-debits-credits/ Double entry accounting is based on three fundamental rules, known as the “three golden rules” of accounting, which ultimately apply to each and every parts of any transaction you can think of. What are these rules? Debit what comes in, credit what goes out Debit all expenses and losses, credit all incomes and gains Debit the receiver, credit the giver After reading this, do you think, we need to dig deeper into the definition of...

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Accounting – Definition – Debits n Credits

Accounting – Definition – Debits n Credits We shared if the ERP systems were based on the double entry system http://faoblog.com/accounting-definition-4/ I covered the concept of a double entry system in an earlier post http://faoblog.com/accounting-definition-3/ A double entry system is the standard and established method of recording accounting or financial transactions. This system is accepted worldwide. Each entry will be constructed in a manner that the total of all gives and  takes will be equal. This system takes into account both the sides of an accounting transaction. I had referred to the give and take as the Debit and...

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Accounting – Definition

Accounting – Definition In the previous post, I covered the concept of a double entry system and left you with a question.. http://faoblog.com/accounting-definition-3/ The question was: “Are ERP systems based on the double entry?” – A simple answer is yes… As the business volumes grow, accounting systems become bulkier. The simpler applications of accounting start becoming cumbersome, and with the larger number of users, extension to multiple geographies, mobile usage etc., really pose a challenge. Also, as a worldwide trend, specialization is key. Some bodies like “The Accounts Payable Network”  and other similar bodies run specialized courses for specific...

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Accounting – Definition

Accounting – Definition We talked about a single entry system and a basic accounting definition in the last post. http://faoblog.com/accounting-definition-2/ Before I elaborate, the single entry system, let me give you a concept of the double entry system. When we do any transaction, it is always associated with two sides, just like a coin. Some examples are given below: You go to store to buy groceries, you give money and take groceries You provide services to a client, you give services and receive money So, it is a give and take. In some cases, though you give, but you...

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Accounting – Definition

Accounting – Definition What is accounting? I see a lot of people really get perplexed by this term “Accounting”. It is referred to as some extra-terrestrial by non-accounting professional, to the extent that a training module like “Accounting for non-accounting professional” is really a well-attended program. But then again, is accounting that complex? Accounting simply means maintaining a record of your financial / money based activities and transactions. Don’t we all do it? As children, we get pocket money, we retain some and spend some. In a notebook we write what we got and what we spent, and get...

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Accounting – Introduction

Hi readers, my name is Mohit Gupta. I am a chartered accountant, a law graduate, with a wide 25 years of work experience, as a Chartered Accountant (CA) – similar to a CPA in the US, an entrepreneur and in the industry, managing processes as well. You must be wondering why I picked up this topic, and what do I wish to cover in this blog. A few years back, I was doing some loan processing work for a premium bank, where a CA firm certified the income of an “individual” by adding shares from 4 HUFs (Hindu Undivided Family)....

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Procrastination

Procrastination is a word, well recognized by the industry at large, the art of delaying things. There is a nice article that I wish to share with the readers of this blog, which featured on linked in sometime back, on how to conquer this weakness. 10 Tips To Stop Procrastinating and …….. Ever find yourself in a state where you’re avoiding the completion of a list of relatively simple tasks? In fact, are you procrastinating right now by reading this article? The tendency to procrastinate isn’t new to this century, although distractions in a highly digital work environment aren’t...

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