ACCOUNTANCY

Accountancy is the process of communicating financial information about a business entity

to users such as share holder,manager,owners,government etc...Accountancy refers to a
systematic knowledge of accounting. It explain 'why to do' and 'How to do' various aspects
of accounting.
DEFINITION
The "Americana institute of certified public accountants"[AICPA] defines accountancy as 'the
art of recording,classifying and summarizing in a significant manner and events which are.in
part at least.of financial character and interpreting the results thereof.
BOOK-KEEPING
Book keeping is the recording of financial transaction. Transaction includes sales, purchase,
income, receipts and payment by an individual or organization.
ACCOUNTING CYCLE.
1. JOURNAL.
2. LEDGER POSTING.
3. BALANCING.
4. TRIAL BALANCE.
5. TRADING AND PROFIT AND LOSS ACCOUNT.
BRANCHES OF ACCOUNTING.
1. FINANCIAL ACCOUNTING.
2. COST ACCOUNTING.
3. MANAGEMENT ACCOUNTING.
DEBITS AND CREDITS.
In accountancy the receiving the benefits is referred as debit aspect and giving the benefit is
called credit. The term 'Debit' means 'to owe'. A company having debit to its name means
that it owes to others. Similarly, a company having 'credit' to its name means that others
owe to it.
Debit & Credit example:
You can learn to understand to identify the two basic components of each transaction:
1. what did you get?
2. where did it come from?
The debit is what you got
and
The credit is the source of the item you received.
Let's imagine that you purchase a computer with your credit card. Since the computer is
what you received it's going to result in a debit to the asset account for your computer. The
credit will be applied to the credit card liability account for the same amount.
The banks tend to confuse us because they are telling us the entry to their liability account.
When you deposit money in the bank their liability to you increases. Since liabilities are
credit accounts they are crediting our account. When they reduce their liability to us, they
are debiting their liability account.
So, if you can identify what you received and where it came from in every transaction you
have debits and credits mastered.
Debit

"Enter in the left column of"

Credit

"Enter in the right column of"



Debit must
be equal to Credit

Play debit and credit.flv

Balance Sheet Accounts
Assets (Debits increase, Credits decrease)
Liabilities (Credits increase, Debits decrease)
Capital (Credits increase, Debits decrease)
Profit and Loss Classifications
Sales (Credits increase, Debits decrease)
Cost of Goods Sold (Debits increase, Credits decrease)
Expenses (Debits increase, Credits decrease)
Assets = Liabilities + Owner's Equity


Cash

Debit

+

Credit

-



A/P

Debit

-

Credit

+



Retained Earnings

Debit

-

Credit

+

Expense

Debit

+

Credit

-

Revenue

Debit

-

Credit

+