Accounting Principles and Practices

Income and Expenditure account prepared by non-trading concerns is very much like the profit and loss account prepared by trading concerns. Both accounts show the expenditure incurred and income earned during the year. In the end balance is calculated. In Income and Expenditure account balance is termed surplus or deficit and in Profit and loss account it is termed "Net Profit" or "Net Loss".

Income and Expenditure account prepared by non trading concerns is very much like the profit and loss account prepared by trading concerns. Both account shows the expenditure incurred and income earned during the year. In the end balance is calculated. In Income and Expenditure account balance is termed surplus or deficit and in Profit and loss account it is termed "Net Profit" or "Net Loss".

Salary Account opened with a bank is a form of savings account. It is generally as 'Zero balance' account. It encourages savings among salaried people.

In a manual system of accounting, the preparation of financial statements pre-supposes the availability of trial balance. However, in computerised accounting, there is no such requirement.

In a manual accounting system, transactions recorded in the books of original entry are further classified by posting into ledger accounts. This results in transaction data duplicity. In computerised accounting, no such data duplication is made to cause classification of transactions.

A computerised accounting system is an accounting information system that processes the financial transactions and events as per Generally Accepted Accounting Principles (GAAP) to produce reports as per user requirements. Every accounting system, manual or computerised, has two aspects.

In a manual accounting system Adjusting entries are recorded to match the expenses of the accounting period with the revenues generated by them.

When there is no double entry system of accounting is followed, the profits are calculated on the basis of comparing the opening and closing of capital/assets by giving the effect of drawings.

The Statement of Affairs Method: takes the difference of opening and closing capitals for calculation of profit or loss under Single Entry System
The Conversion Method of single entry system: tries to convert the records from single entry to double entry system to find the Profit or loss earned by the business.

Paying rent in advance is a cash outflow. Cash outflows are recorded on the payment (credit) side of the cash book.

The business firm prepares a trial balance on the basis of the balances shown in its books of accounts. The balance as shown in bank pass book and as shown in the Bank column of cash book may differ due to time differences. 

Petty cash is a small amount of cash held on hand for minor expenses; it is considered a current asset of the business.

Single-entry accounting is a form of bookkeeping and accounting in which each financial transaction is a single entry in a journal or transaction log. As a result, the accounting system is called, not surprisingly, a single-entry system. And, the approach is also known as single-entry bookkeeping.

A Trial Balance is a statement that states the closing balances of all the accounts at the end of the accounting period. Thus, similar to all the other accounts, the closing balance of cash and bank only appears in the Trial Balance.

 Compound journal entries are those in which more than two accounts are affected. A compound entry may require that two or more accounts be debited or two or more accounts be credited. Suppose a business borrows money to purchase an asset, such as a building.