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 Classification of Assets These assets may be broadly be classified as follows:  (1) Fixed Assets :  It refers to those assets which have been purchased by the enterprise for long term use and not for resale in the ordinary course of business.  The benefit from fixed assets is derived over a longperiod.  Fixed assets may be classified as follows: (a) Tangible fixed assets :  It refers to those fixed assets which can be touched and seen. These may include movable assets (such as vehicles, equipments, machinery); immovable assets (such as land and building); wasting assets (such as mines, oil wells).  (b) Intangible fixed assets:  It refers to those fixed assets which cannot be touched and seen. These are usually the rights to use, produce or provide the goods or services. For example, goodwill, patent rights, copyright, trademark, franchises etc.  (2) Current Assets :  Current assets are those assets which are held: (a) in the form of cas...

Transaction  Any exchange of goods or services for cash or on credit by the business with any other business or customer is called transaction. It is an economic activity of the business that change in an organization's flnancial position.  Classification of Transaction Transactions may be classified on different basis and modes e.g.  1) Mode of Payment involved :  On the basis of payment involved in a transaction, the transactions can be classified as :  a) Cash transaction (e.g. purchase of goods for cash, rent paid etc.)  b) Credit transaction (e.g. purchase of goods on credit)  2) Entity Involved :  An organisation of persons for achievement of a common goal is known as entity.  On the basis of entities involved in the transactions are :  a) External transaction (e.g. sale of goods to customers)  b) Internal transaction (e.g. depreciation on machinery)  3) Exchange  On the basis of exchange of value, the transactions c...

Accounting Cycle:   Accounting cycle is a complete sequence beginning with recording of transactions and ending with the preparation of final account.  The followings are some of importar steps involved in accounting cycle :  a) Recording balances of previous year balance sheet.  b) Recording of current transactions.  c) Balancing and Preparation of trial balance. d) Preparation of final account.  Is Accounting Science or an Art's ?  'Art' denotes the method of doing work in a systematic manner to attain specified objectives.  Accounting is an art as the book: of accounts are maintained on a system which is based on certain assumptions anc is subject to some limitations.  'Science‘ is a systematic body of knowledge based on certain principles which are universally acceptable.The principles of science are based upon experiments, observations, collection of data and its interpretation.  Accounting is a science because the items which are d...

SYSTEM OF RECORDING  (a) Single entry system :  Under this system both debit and credit aspects of transaction may not be recorded. In this system only cash and personal accounts are maintained.  It is known as Accounts from incomplete records. (b) Double entry system :  Double entry system is the system under which both debit and credit aspects of transactions are recorded.  It is an accounting system where every debit has a corresponding credit and vice-versa is applied.  RULES OF DOUBLE ENTRY SYSTEM Recording transactions under  Double Entry System, there are three types of accounts called :  (1) Personal accounts :  Accounts relating to persons are called personal accounts. Theses person may be customers, suppliers, money lenders, owner and banks.  (2) Real accounts :  Accounts relating to tangible and intangible properties and possession are known as real accounts.  (for e.g. cash, goods, bills receivables etc are tangible...

Accountin . Meaning: Accounting is a systematic process of identifying, measuring, recording, classifying, summarising, interpreting and communicating the financial information.  Process Functions of Accountin . 1)|dentifying financial transactions and events  2) Measuring the identified transactions 3) Recording  4) Classifying  5) Summarising  6) Analysing  7) Interpreting  8) Communicating  Branches of Accountin: 1)Financia| Accounting 2)Cost Accounting  3) Management Accounting  4)Auditing  5)Tax Accounting  6)Fund Accounting  7) Government Accounting  Users of Accountin . Information:  A. Internal users  Top, middle and lower levels executives in the organizations are the internal users.  Examples of internal users are:3) Owners,  b) Management,  0) Employees & Workers.  B. External users External users may have direct or indirect interest in accounting information 80, external u...

Debit and Credit  The left-hand side of any account is arbitrarily called debit side, and the right-hand side is called credit side.  Debit increases an asset or expense accounts or decreases equity, liability, or revenue accounts and   Credit increases equity, liability, or revenue accounts or decreases an asset or expenses account.  Debit is abbreviated as Dr. and Credit as Cr. are taken from the first and last letters of these Iatin words.  In accounting, debit and credit do not mean debtor and creditor.