Friday, December 19, 2014

Basic Accounting Concept

Accounting: accounting is an information system and this information is provide to the interested user or 3rd party. Accounting is an information system that identifies, records and communicate the economic events of an organization to the interested users.
Book keeping: a part of accounting that involves only records of economic events.
Financial accounting: the field of accounting that provides economic and financial information investor, creditor and other external user.
Accounting Equation: A=L+P.
                             Asset = that resources owned by business 
                                Liability = creditor ship claim on total asset
                                             Proprietorship = the ownership claim on total asset.
Internal user of accounting: internal user of accounting information are manager who plan organize and run the business. Example- marketing manager, production supervisor, finance director and company officer.
External user of accounting: govt, regulatory body, investor, shareholder, tax authority, etc are use accounting information for decision making.
Balance sheet: a financial statement that reports the asset, liability and owners equity at a specific date.
Account: a record of increase and decrease in specific asset liability and owners equity 
Classification of account
Traditional Method Chart as follows

Modern method Chart:

On the basis of permanency:

I tried to give you some basic concept and classification of accounting. Thanks 
Article by Azizul Islam Shahin
Department of Accounting Dhaka Commerce College