Accounting and its Environment

MSME’S-Micro Small Medium Enterprises

Assets No. of Works

Micro 3 Million 1-9

Small over 3 million to 9 Million 10-99

Medium over 9 million to 100 million 100-199

Activities in Business Organization

*Financing

1. Sources
2. Uses of capital, Ex. Borrowing/loans/insurance

*Investing

1. Buying
2. Selling assets and properties

*Operating

Selling, Trading, Merchandising, Manufacturing

Fundamental Concepts

 Entity Concept- Financial accounting is based on the premise that the transactions and
balances of a business entity are to be accounted for separately from its owners. The
business entity is therefore considered to be distinct from its owners for the purpose of
accounting.
Example: ABC Bakers is a partnership concern owned and operated by Mr. X and Mr. Y. How
should the following transactions be reflected in the books of ABC Bakers?

ABC Bakers is a partnership concern owned and operated by Mr. X and Mr. Y. How should the
following transactions be reflected in the books of ABC Bakers?

Mr. X paid his house rent from the business bank account

Mr. Y purchased an oven for the bakery using his personal credit card
- See more at: http://accounting-simplified.com/financial-accounting/accounting-concepts-and-
principles/business-entity-concept.html#sthash.yrU5QnL9.dpuf
Mr. X paid his house rent from the business bank account

Mr. Y purchased an oven for the bakery using his personal credit card
 Period Concept
 Stable Monetary Concept