Credit Management & Control

Categories: Accounting
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About Course

Accounting is a business language. We can use this language to communicate financial transactions and their results. Accounting is a comprehensive system to collect, analyze, and communicate financial information.

Before you start proceeding with this tutorial, we assume that you have a basic understanding of commerce.

What Will You Learn?

  • To keep systematic records - Accounting is done to keep systematic record of financial transactions. The primary objective of accounting is to help us collect financial data and to record it systematically to derive correct and useful results of financial statements.
  • To ascertain profitability - With the help of accounting, we can evaluate the profits and losses incurred during a specific accounting period. With the help of a Trading and Profit & Loss Account, we can easily determine the profit or loss of a firm.
  • To ascertain the financial position of the business - A balance sheet or a statement of affairs indicates the financial position of a company as on a particular date. A properly drawn balance sheet gives us an indication of the class and value of assets, the nature and value of liability, and also the capital position of the firm. With the help of that, we can easily ascertain the soundness of any business entity.

Course Content

Business Entity Concept (Copy 1) (Copy 1) (Copy 1) (Copy 1)
According to this concept, the business and the owner of the business are two different entities. In other words, I and my business are separate. For example, Mr A starts a new business in the name and style of M/s Independent Trading Company and introduced a capital of Rs 2,000,000 in cash. It means the cash balance of M/s Independent Trading Company will increase by a sum of Rs 2,000,000/-. At the same time, the liability of M/s Independent Trading Company in the form of capital will also increase. It means M/s Independent Trading Company is liable to pay Rs 2,000,000 to Mr A.

  • Business Entity Concept Tutorial For Beginners (Copy 1) (Copy 1) (Copy 1) (Copy 1)
    00:14
  • Going Concern Concept (Copy 1) (Copy 1) (Copy 1) (Copy 1)
    00:00
  • Going Concern Concept (Copy 1) (Copy 1) (Copy 1) (Copy 1)

Convention of Consistency (Copy 1) (Copy 1) (Copy 1) (Copy 1)
To compare the results of different years, it is necessary that accounting rules, principles, conventions and accounting concepts for similar transactions are followed consistently and continuously. Reliability of financial statements may be lost, if frequent changes are observed in accounting treatment. For example, if a firm chooses cost or market price whichever is lower method for stock valuation and written down value method for depreciation to fixed assets, it should be followed consistently and continuously. Consistency also states that if a change becomes necessary, the change and its effects on profit or loss and on the financial position of the company should be clearly mentioned.

Accounting – Classification of Accounts (Copy 1) (Copy 1) (Copy 1) (Copy 1)
It is necessary to know the classification of accounts and their treatment in double entry system of accounts. Broadly, the accounts are classified into three categories: Personal accounts Real accounts Tangible accounts Intangible accounts Let us go through them each of them one by one.

Accounting – Systems (Copy 1) (Copy 1) (Copy 1) (Copy 1)
Single Entry System Single entry system is an incomplete system of accounting, followed by small businessmen, where the number of transactions is very less. In this system of accounting, only personal accounts are opened and maintained by a business owner. Sometimes subsidiary books are maintained and sometimes not. Since real and nominal accounts are not opened by the business owner, preparation of profit & loss account and balance sheet is not possible to ascertain the correct position of profit or loss or financial position of business entity.

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