Few accounting concept: Business entity concept, Money measurement concept, Cost concept, Continuity concept, Materiality concept

Few important accounting concepts are discussed briefly these are business entity concept, money measurement concept,, cost concept, continuity concept, materiality concept, etc. Business entity concepts separate business owner from enterprise in accounting record. The personal bank balance of business owner is not included in enterprises accounting record. Money measurement concept explains every thing as it's monetary value. In accounting and financial statement everything is recorded as money value. Continuity concept of accounting indicates the continuity of the organization. It is also called the going concern concept of accounting. This accounting concept assures that company is not about to liquidate. In cost concept of accounting the assets are recorded as cost incurred. Assets are recorded as the purchasing price. In materiality concept of accounting material that is insignificanse in terms of monetary value in a given period of time considered as expanse.

Concept of debit and credit in a financial statement

In a financial statment, the term debit and credit indicates the account entries in left and right respectively. Simply debit expresses as Dr and credit expresses as Cr in a financial statement in order to account the financial position of a company. Generally the concept of debit is entering the account as reciept that increases the net cash balance. On the other hand entering accounts in right side of the financial statement as payable that decreases the cash account is credit. Debiting is the entering of reciepts. By debiting process positive items of financial statement enters in left side. But in crediting process the negative items enter into right side. In a financial statement the negative item is is the accounts that have to pay. Positive items are the accounts that have to receive.

Balance sheet

Balance sheet is a financial statement about a organization that express and make a balace of the financial statement of a company. A balance sheet make a balance between asset and liabitiy of the company. In a balance sheet the assets are recorded in one side and the liabilities are recorded into another side of the financial statement. One side is called debit and another side is called credit. In a balance sheet credit are listed in right side and debit are listed in left side.

Difference between revenue and expanse

Revenue is the gross increase in owner equity. Revenue is the inflow of resource that added in owners equity. Opposite manner, expanse is the decreasing of owner equity. Exact definition of expanse is the cost of assets to earn revenue. Following example of revenue and expanse can give a clear conception and an apporiate difference between revenue and expanse. Selling of a furniture is the revenue, because the sold price will added to the total asset and ultimately increase the asset. On the other hand the labour price, cost of wood, other materials and marketing cost of the good is termed as expanses. Because these costs are due to earn revenue. The clear differentiation between revenue and expanse is helpful for the accountant for a complete financial statement.

Accounting equation state the relationship among the variables assets, liabities and owner equities

The relationship among the variables, assets, liabilites and owner equities is called accounting equation. This relationship is expressed as assets as the sum of liabilities and owner equities. Now let us discuss about  meanings of assets, liabilities and owner equities. Two things may have in an organization. That is organization owned and owed. The claims on organizations existing resourses is asset. In the resource of any organization two things may be included. One is owned by the organization and other is owed by the organization. The organization owed resources from others and others can can  claim on that resources to return him is called liabilities. The resources owned by the organization is called owner equities. The relationship of asset, liability and owner equity is important in accounting. The characteristics of asset is it can provide future benefit. Liability is the claim agaist asset. All types of payable, such as accounts payable, note payable are liabilities. Owner equity can find by asset minus liability. It is also called residual equity. Mathematically accounting equation express as Asset = Liabilities + Owner equities

Why accounting is important for a company?

What is happening in organizations financial condition? To know this it is important to know accounting and accounting process. Accounting performs few valueable tasks for organization. The major activities of accounting classified into three groups. These are identifying, organizing and communication. Knowledge of accounting identifies, organizes and communicates the various economic and financial event..In a business accountant first identifies the economic events that is related with the business. The example of economic event of a company is selling of the product. Sales of a brand car in this case a suitable example of economic events.The second activity of accountant is to record the information. This recording  includes summring, organizing and classifying the events. The third accounting activity is communicating the accounting information. The communicating of an accounting event includes analysis and interpretation. The record of accounting activity are done systematically and chronologically. Analsis of the data includes ratio analysing, percentage calculation, graphs, etc. On the other hand interpretatio includes explanation, meaning and limitation.HHence, in every activity of bussiness the knowledge of accounting is important.