Accounting concepts are the foundation of the accounts, they lays down set of rules that have to be adopted though out the process. This concepts helps to moderate and understand the accounting treatments of various accounts.
The accounting principles are formed based on the accounting concepts. The following are the most important accounting concepts :
1. Money Measurement concept
2. Business Entity concept
3. Going Concern concept
4. Matching concept
5. Accounting Period concept
6. Duality or Double Entry concept
7. Cost concept
An account is a homogeneous deal for recording financial information. In a standard accounting system, there exists a different accounts for each asset, each liability, and each type of proprietors equity, each item of revenue and expense.
Any account is like a coin which has two sides, namely, debit and credit side. In the ‘T-account format’ the Debit holds the left side and credit on right side. In accounting the two different terms ‘debit’ and ‘credit’ have their own treatments and they will not replicate each other but existence of corresponding entries will be there.
The entire accounts of the enterprise is broadly classified into two categories i.e. Personal accounts and Impersonal Accounts. Impersonal accounts further classified into two, they are Real and Nominal account. The treatments of these accounts are called as accounting principles.
Personal Accounts: Personal Accounts is an account which deals with a due balance either to or from these individuals on a particular period. It is an account normally reveals the outstanding balance of the firm to individuals. All the accounts which falls under this category have same kind of treatment and that is, "Debit the Receiver, Credit the Giver."
Real Account: It is a most important classification which highlights the real worth of the assets. This is the account principally deals with the movement of assets. It is an account which reveals the value and movement of the assets taking place in between the firm and also other parties due to any transactions.
The movement of the assets can be classified into two categories, i.e. the assets which are going out of the firm and the assets which are coming into the firm. The accounting treatment for this account is, "Debit what comes in, Credit what goes out."
Nominal Account: This account deals with the amount of incomes earned or expenses incurred. It takes in all expenses and losses as well as incomes and gains of the enterprise. Nominal account records the expenses and incomes which are not carried forwarded to near future. The accounting treatment for this account is, "Debit all the expenses and losses, Credit all incomes and gains"
In addition to the accounting principle we have the following rules:
• Debits are always equal to credits
• Assets are always equal to liabilities and owners equity
Abridged Prospectus’ is a shorter description of the prospectus and contains all the prominent features of a Prospectus. It go together with the application form of public issues. In other words it is executive summary of prospectus.
Read Full post!Inflation is the rate at which the cost of living increases.
The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or a service in the future as it does now or did in the past.
For example, if there was a 10% inflation rate for the next year, a
Rs. 100 purchase today would cost Rs. 110 in a year.
This is why it is important to consider inflation as a factor in any long-term investment strategy. Remember to look at an investment's 'real' rate of return, which is the return after inflation. The aim of investments should be to provide a return above the inflation rate to ensure that the investment does not decrease in value.
For example, if the annual inflation rate is 10%, then the investment will need to earn more than 10% to ensure it increases in value. If the after-tax return on your investment is less than the inflation rate, then your assets have actually decreased in value; that is, they won't buy as much today as they did last year.
Financial Management is concerned with the duties of the financial manager in the business firm.
Read Full post!Financial Service is concerned with design and delivery of advice and financial products to individuals, business and governments.
Read Full post!Investment means "Sacrifice for future returns"
The money you earn is partly spent and the rest saved for meeting future
expenses. Instead of keeping the savings idle you may like to use savings in
order to get return on it in the future. This is called Investment.
One needs to invest to:
1. Earn return on your idle resources
2. Generate a specified sum of money for a specific goal in life
3. Make a provision for an uncertain future
One of the important reasons why one needs to invest wisely is to meet the
cost of Inflation.
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