Assignment 03

Assignment 01
Q1: Difference between three types of accounts ?
3 Different types of accounts in accounting are Real, Personal and

Nominal Account. Accounting is a process of recording, classifying
and summarizing financial transactions in a significant manner and
interpreting results thereof. Accounting is both science and art.
For every type of entity, whether it is large in size or small in size, it

is very important to have a proper system of accounting for proper
management of an entity’s business operations. An accountant must
have a good understanding of the terms used in accounting and types
of accounts.
An account is the systematic presentation of all

the transactions related to a particular head. An account shows the
summarized records of transactions related to a concerned person or
thing.
Classification of Accounts in Accounting
 Personal Account
 Real Account
o Tangible Real Account
o Intangible Real Account
 Nominal Account
Personal Account
These accounts types are related to persons. These persons may be

natural persons like Raj’s account, Rajesh’s account, Ramesh’s
account, Suresh’s account, etc.
These persons can also be artificial persons like partnership firms,

companies, bodies corporate, an association of persons, etc.
Real Accounts
These account types are related to assets or properties. They are

further classified as Tangible real account and Intangible real
accounts.
Tangible Real Accounts

These include assets that have a physical existence and can be
touched. For example – Building A/c, cash A/c, stationery A/c,
inventory A/c, etc.
Intangible Real Accounts

These assets do not have any physical existence and cannot be
touched. However, these can be measured in terms of money and
have value. For Example – Goodwill, Patent, Copyright, Trademark,
etc.
Nominal Account
These accounts types are related to income or gains and expenses or

losses. For example: – Rent A/c, commission received A/c, salary
A/c, wages A/c, conveyance A/c, etc.
Q 2: What is the Difference Between Single Entry and Double
Entry Bookkeeping?
Bookkeeping is a part of the process of maintaining accounting records. It is divided into two
parts: a single entry system and a double-entry system. Usually, small sole proprietorship
and partnership businesses do not use a double entry bookkeeping system. Cash and credit
transactions are the only ones they need to keep track of. They will, however, want to know
the performance and financial status of their company at the end of the accounting period.
The accountants have various difficulties as a result of this. Most small firms are focused on
quickly setting up a system to pay vendors and record income and are unaware that they
must choose between single entry and double entry bookkeeping.
What is the Single Entry System in Accounting?

The single entry system in accounting is an accounting method in which each accounting
transaction is recorded with only one entry in the accounting records. It is mostly used for
entries in the income statement and is concentrated on the results of the commercial
enterprise. The term 'preparation of accounts from incomplete records' indicates the issues
that arise when accounts are prepared from incomplete transactions.
Types of Single Entry Accounting System

The various forms of single entry bookkeeping methods are listed below:
 Pure Single Entry: Only personal accounts are kept in this system, which means no
information about cash and bank balances, sales and purchases, and so on is
available. This approach exists on paper and has no practical use due to its failure to
offer even basic information like cash, etc.
 Simple Single Entry: Only personal accounts and a cash book are maintained in this
system. Even though these accounts are handled on a double-entry basis, postings
from the cash book are made only to personal accounts, with no other accounts in the
ledger. Cash collected from debtors or money paid to creditors is stated on the issued
or received bills, depending on the situation.
 Quasi Single Entry: Personal accounts, a cash book, and a few auxiliary books are
all here. Sales, Purchases, and Bills are the three primary auxiliary books handled
under this system. Discounts, which are entered into personal accounts, are not kept
in a separate record. In addition, there is some limited information about a few key
elements of expense, such as labour, rent, and rates. In reality, this is the way that is
most commonly used to replace the double-entry system.
What is Double Entry System of Bookkeeping?

The accounting system of double entry accounting, often known as double entry bookkeeping,
mandates that every company transaction or event be documented in at least two accounts.
The accounting equation is based on the same premise.
Every debit must be matched with an equal amount of credit. To put it another way, debits and
credits must be equal in each accounting transaction and totalled.
Types of Double Entry Accounting System
You need to know about various accounts if you want to master the art of double entry
bookkeeping. These sorts of accounts are the deciding factor behind the types of double-entry
accounting.
The following accounts are taken into consideration when recording transactions under the
double-entry system:
 Asset: This account keeps track of all of a company's assets. Cash, accounts
receivables, equipment, and inventory accounts are examples of asset accounts.
When there is an influx of assets, the asset account increases, and when assets are
removed, the asset account declines.
 Liability: The liabilities account reveals all of the money the company owes to other
businesses. Accounts Payable and Notes Payable are two examples of liability
accounts. Liabilities grow as a corporation borrows money and buys goods and
services on credit. In contrast, as liabilities are paid off, the account balance decreases.
 Capital: The equity account captures the owner's capital and additional investments
and profits into the business. When a corporation suffers losses, the equity account is
depleted, as is the case when the owner draws cash for personal use.
 Income: The amount earned by a firm from the sale of goods or the provision of
services is referred to as income or revenue. It also includes other sources of revenue,
such as rent, commissions, interest, dividends, and so forth.
 Expense: Expenses refer to all costs incurred or money spent by a company to
generate revenue. It's worth noting that an expense occurs when the benefits of the
money spent are depleted within a year. When a benefit lasts more than a year, it is
referred to as Expenditure.
Q 3 : What is the accounting cycle ?

In order for businesses to look back on how they did in the past, they
need to follow a certain set of steps to verify that their financials are
accurate. These steps are commonly referred to as the accounting
cycle because, after each accounting period has ended, businesses
repeat the same basic steps.
Accounting Cycle Steps
Depending on who you ask, there can be anywhere from six to nine steps in the
accounting cycle. Some prefer to consolidate a few steps into one, but it’s really a
matter of personal preference. For simplicity’s sake, we’ll start by showing you the
long version of the accounting cycle, with each step broken out clearly.
1. Identify Transactions
Step one: gather together all the information you have on every transaction that took
place during the period. Hopefully you or your bookkeeper are doing this throughout
the period instead of waiting until the month ends and scrambling to find receipts.
2. Record Transactions
In the old days, recording a transaction meant writing down the transaction in the
appropriate journals. These journals, or “books,” are how bookkeeping got its name.
According to double-entry accounting, each transaction should be recorded as both
a credit and debit in separate journals.
3. Post to General Ledger

Another hallmark of bygone days is the general ledger. The general ledger was a
master list of all transactions. If a fire broke out in your back office, this would be the
thing to save. After recording a transaction in the appropriate journals, you would
also add it to the general ledger
4. Calculate Unadjusted Trial Balance
The first three steps of the accounting cycle can (and should) take place throughout
the accounting period. Calculating the unadjusted trial balance is the first step that
can only take place once the period has ended and all transactions have been
identified, recorded, and posted to the general ledger.
5. Make Adjusting Journal Entries
This step simply resolves any anomalies that are found. First, you identify what is
causing the debits and credits to be misaligned. Then you make journal entries to fix
them.
6. Create an Adjusted Trial Balance
Next up, time to double check your work one last time with the help of an adjusted trial
balance. This table shows your unadjusted trial balance, your adjusting entries, and
your adjusted amounts. It’s the final step before creating financial statements, so it’s
worth triple checking everything
7. Create Financial Statements
Your financial statements are the biggest deliverable you’ll receive as a result of the
accounting cycle. The income statement and balance sheet are accurate records of what
happened in your business over the last accounting cycle. (The cash flow statement
isn’t mandatory, but we recommend making one of those, too.)
8. Make Closing Entries
The last step in the accounting cycle is making closing entries and preparing your
business for the upcoming accounting cycle. This means closing out temporary
accounts like revenue and expenses and folding them into permanent accounts, like
retained earnings
Q 4: What is accounting ?
Accounting is a term that describes the process of consolidating

financial information to make it clear and understandable for
all stakeholders and shareholders. The main goal of accounting is
to record and report a company’s financial transactions, financial
performance, and cash flows.
Accounting standards improve the reliability of financial statements.

The financial statements include the income statement, the balance
sheet, the cash flow statement, and the statement of retained earnings.
The standardized reporting allows all stakeholders and shareholders to
assess the performance of a business. Financial statements need to be
transparent, reliable, and accurate.

Assignment 03

Uploaded by

Copyright:

Available Formats

Assignment 03

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Assignment 03

Uploaded by

Copyright:

Available Formats

Assignment 01

Q1: Difference between three types of accounts ?

3 Different types of accounts in accounting are Real, Personal and

For every type of entity, whether it is large in size or small in size, it

An account is the systematic presentation of all

Classification of Accounts in Accounting

These accounts types are related to persons. These persons may be

These persons can also be artificial persons like partnership firms,

These account types are related to assets or properties. They are

Tangible Real Accounts

Intangible Real Accounts

These accounts types are related to income or gains and expenses or

What is the Single Entry System in Accounting?

Types of Single Entry Accounting System

What is Double Entry System of Bookkeeping?

Q 3 : What is the accounting cycle ?

3. Post to General Ledger

4. Calculate Unadjusted Trial Balance

5. Make Adjusting Journal Entries

6. Create an Adjusted Trial Balance

7. Create Financial Statements

8. Make Closing Entries

Accounting is a term that describes the process of consolidating

Accounting standards improve the reliability of financial statements.

You might also like