1

Unit 1 & 2
Basic Concepts in Accounting
& Journal
 Shareholders 2

Researchers Investors

Users of
Financial
Statements

Government Creditors

Labour
 3
Accounting Concepts and Principles

 To convey the same meaning to all people, as far as practicable and to make it
meaningful
Business
Entity
Concept 4
Accounting Concepts
 Money 5
Accounting Concepts
Measurement
Concept
 6
Accounting Concepts
Cost Control
 7
Accounting Concepts

Going
Concern
Concept
 8
Accounting Concepts

Dual
Aspect
Concept
 9
Accounting Concepts

Realisation
Concept
 10
Accounting Concepts

Accrual
Concept
 11
Accounting Conventions

Consistency

Disclosure

Conservatism
 12
Accounting Cycle

Financial
Input Throughput Analysis
Statements

Recording
Vouchers or P&L Statement Trend Analysis
Classification
Supporting Balance Sheet Common Size
Documents Balancing
Cash Flow Statment Ratio Analysis
Trial Balance
 13
Accounting Process

Recording of Classification of Financial

Summarization
Transactions Transactions Statements

Balancing of Profit & Loss

Accounts Statement
Journal Entries Ledger Posting
Trial Balance Balance Sheet
 14
Types of Accounts

Personal Accounts Real Accounts Nominal Accounts

• Accounts • Assets owned by the • All expenses and

Receivables and enterprise losses
Payables / • All incomes and
individuals gains
• Loans from banks
• O/s expenses
 15

Personal • Debit the receiver

Accounts • Credit the receiver

• Debit what comes in

Real Accounts • Credit what goes out

Nominal • Debit all expenses and losses

Accounts • Credit all incomes and gains
 16
Summary of Debit and Credit Rules

Type of Account Normal Balance Increase with a Decrease with a

Asset Debit Balance Debit Credit
Liability Credit Balance Credit Debit
Income Credit Balance Credit Debit
Expense Debit Balance Debit Credit
Equity Credit Balance Credit Debit