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Summary


Source Documents:
The source document means, various business documents such as, invoice, cash memos, vouchers, which is the basic evidence of a business transaction recorded in the books of account.

Accounting equation:
An accounting equation is statement of debits and credits signifying that the assets of a business are always equal to the total liabilities and capital.

ASSETS=LIABILITIES + CAPITAL.

Rules of debit and credit:
An account is divided into two sides, namely, DEBIT and CREDIT.

The rules of debit and credit depend on the nature of an account. Debit and Credit both represent either increase or decrease, depending on the nature of an account.

The rules are as follows:

Name of an account

Debit

Credit

Assets

Increase

Decrease

Liabilities

Decrease

Increase

Capital

Decrease

Increase

Revenues

Decrease

Increase

Expenses

Increase

Decrease

 

Books of Original entry: The transactions are first recorded in the journal books in chronological order. Journal is one of the books of original entry. The process of recording entries in the journal is called journalising.

Ledger: A Ledger contains all accounts to which entries are transferred from the books of original entry. Posting is process of transferring entries from the books of original entry to the ledger.




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