In the business and finance world, accounting is a huge area of focus. Learning the accounting fundamentals provides you with useful information whether you want to be an accountant, grow your own business or just see how money is managed. In terms of the common sequence students are exposed to while studying resources, you have more people in commerce courses — like those pursuing a Best B.Com Girls College in Jaipur.
People find accounting difficult with reason being it holds numbers and calculations. But once you grasp the basics of accounting, it is none too daunting. This guide to accounting is written in beginner-friendly language, so readers can learn how the subject works without any misunderstandings.
What is Accounting?
It is an analysis of how the finances of a business or organization are recorded, organized and summarized in the form of accounting. It helps businesses monitor income, expenses, profits and financial position.
In other words accounting is a language of business. It describes how much a business owner earns, spends, saves or pays off.
If a shop owner stores products worth ₹10,000 and sells them for ₹15,000, accounting is used to keep track of these transactions and compute the profit earned.
Why is Accounting Important?
It has a huge part in business management with accounting. If there is no accounting, businesses will be unable to know in what condition the business is running and whether it is making profits or losses.
The important reasons why accounting is essential are as follows:
- Helps track income and expenses
- Assists in decision-making
- Helps prepare tax reports
- Maintains transparency and accountability
- Supports business growth and planning
The concepts learnt during these courses allows students to establish strong fertile grounds for building their careers in finance, banking, taxation and business management.Course structure of commerce is specifically designed with this aim at Best B.Com girls college Jaipur.
Basic Accounting Terms Every Beginner Should Know
Before diving deep into accounting, it is best to know some of the commonly used account terminology.
- Assets
Assets are the things that an organisation owns, and which have some kind of value.
Examples:
Cash
Buildings
Furniture
Machinery
Vehicles
Assets are those things used to generate income flows and facilitate the functioning of a business.
- Liabilities
Liabilities — Liabilities are amounts a business owes others.
Examples:
Bank loans
Unpaid bills
Credit purchases
Liabilities are creditors to future payments.
- Capital
Capital: It is the amount of money which an owner invests in business.
For instance, if a person has put in ₹1,00,000 to start a business then that amount comes under capital.
- Revenue
1)Revenue = Revenue is the income we earn from doing business.
Examples:
Sales of products
Service fees
Rental income
An increase in revenue is a boost for the earnings of a business.
- Expenses
Expenses are the costs faced when doing business.
Examples:
Rent
Electricity bills
Salaries
Advertising costs
Expenses reduce business profits.
- Profit
Profit: the amount remaining after revenue has been used to pay expenses
Profit = Revenue – Expenses
Consider if you do a revenue of ₹50,000 and your expenses are ₹35,000, then you have a profit as.
What is Bookkeeping?
The first thing you do in accounting is bookkeeping. It is the accurate recording of daily financial transactions.
Some examples of transactions recorded in bookkeeping include:
- Sales
- Purchases
- Payments
- Receipts
Bookkeeping helps keep all accounts areas up to date.
The Accounting Cycle
An accounting cycle is a sequence of steps to keep a record and manage financial transactions.
Step 1: Identify Transactions
All the business transactions in which either the buyer or seller consists of cash are marked out.
Example:
- Buying inventory
- Paying rent
- Receiving customer payments
Step 2: Record Transactions
Transactions are recorded in journals.
Step 3: Post to Ledger
Ledger balance given from the journal entries.
Step 4: Prepare Trial Balance
Trial balance examines if the numbers of debit and credit entries are equal.
Step 5: Prepare Financial Statements
Financial reports are created to evaluate business performance.
Step 6: Closing Entries
Temporary accounts are closed at the end of the accounting period.
Understanding this cycle helps students build strong accounting knowledge and practical skills.
Understanding Debit and Credit
These are two main words used in accounting.
For complete beginners, such terms often trip them up, but soon become second nature with repetition.
Debit (Dr)
A debit entry generally:
- Increases assets
- Increases expenses
- Decreases liabilities
Credit (Cr)
A credit entry generally:
- Increases liabilities
- Increases revenue
- Decreases assets
For every record, total debit should be equal to total credit.
This is the principle of the Double Entry System.
What is the Double Entry System?
The double entry accounting system forms the basis for contemporary accounting practice.
This system states that at a minimum, every transaction will affect two accounts.
Example
The business buys furniture for ₹20,000 cash.
Two accounts are affected:
Furniture Account (Asset increases)
Cash Account (Asset decreases)
The accounting entry will be:
Debit Furniture Account ₹20,000
Credit Cash Account ₹20,000
It strengthens the accuracy and minimizes errors in financial records.
Types of Accounts
In Accounting, accounts are usually divided into 3 types.
Personal Account
Personal accounts are associated with an individual, a corporation or organizations
Examples:
- Customer accounts
- Supplier accounts
- Bank accounts
- Real Account
Real Account
Relative Accounts are property, and they have a real account.
Examples:
- Cash
- Building
- Machinery
Nominal Account
Nominal accounts relate to expenses, losses, income and gains.
Examples:
- Rent
- Salary
- Commission
- Interest received
Different account types are used by students to record their transactions.
Financial Statements in Accounting
Financial statements are just the summary report of financial activities of a business.
Income Statement
An income statement shows:
- Revenue
- Expenses
- Profit or Loss
It aids in establishing where the profit of the business is.
Balance Sheet
A balance sheet shows:
- Assets
- Liabilities
- Owner’s Equity
It provides a snapshot of a company’s financial position at one point in time.
3. Cash Flow Statement
First, cash flow statements are the fundamental measures that track the movement of cash coming in and going out of a business.
Keeps assistance in controlling liquidity and availability of cash for an enterprise institution.
Career Opportunities in Accounting
Career3510538120153032154 author Alan Slight accounting3510 November 28, 2021 You are readingWhy Choose Accounting?
Some popular accounting careers include:
Chartered Accountant (CA)
Chartered Accountant is suitable for tax, auditing, financial reporting and advisory.
Accountant
Accountants create financial records and reports.
Auditor
Auditors audit the financial statements and accuracy of a company.
Tax Consultant
Tax consultants some are qualified professionals and others have experience which help individuals & businesses comply with tax regulations.
Financial Analyst
Financial analysts analyze financial data and help guide business decisions.
Banking Professional
Finances and operational roles in banking industries are also offered to accounting graduates.
Career Options After B.Com for the Best B.Com Girls College in Jaipur Perhaps, with distinguished accounting knowledge B.Com students can opt for these career paths.
Tips for Beginners to Learn Accounting
Here are a few tips for you if you are new to accounting:
Start with Basic Concepts
Start with the basics like assets, liabilities, capital, revenue and expenses before progressing to the more advanced topics.
Practice Journal Entries
After solving this for a while, one gets an understanding of the rules of debit and credit.
Use Real-Life Examples
Connect accounting theories to practical business engagements.
Learn Accounting Software
Popular software tools include:
- Tally
- QuickBooks
- Zoho Books
Revise Regularly
Concepts of accounting are interlinked with one another, so proper revision is a must.
Solve Practice Problems
Confidence builds with the solving of challenges.
Conclusion
Accounting is a discipline that enables people and companies to track their finances. A beginner would need to understand concepts such as the above assets, liabilities, revenue, expenses, debit & credit and financial statements to build a strong foundation in accounting.
This topic may sound a bit tough initially, but it is way easier to understand with learning and practice. Accounting is the window for numerous professions related to banking, commerce, and finance fully available for students.
Now, you know that accounting is the first step in your journey towards being financially knowledgeable and ultimately successful professionally as a Chartered Accountant, Financial Analyst or otherwise as an entrepreneur. The basics of accounting will be particularly helpful for girl students at the Best B.Com Girls College in Jaipur as these principles are pivotal to further studies in commerce as well as career prospects.