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A Trading Account is an essential financial statement that helps calculate the Gross Profit or Gross Loss of a business over a specific accounting period. It is part of the final accounts and focuses on core trading activities such as purchases, sales, and dir...

A Profit and Loss Account (P&L Account) is a financial statement that shows a company’s net profit or loss over a specific accounting period. It summarizes all revenues, costs, and expenses incurred, ultimately reflecting whether the company has earned a profi...

A Balance Sheet is a financial statement that shows the financial position of a business at a specific point in time. For a Sole Trading Concern, the balance sheet lists the assets, liabilities, and capital of the business, providing a snapshot of the business...

Subsidiary books are a set of specialized books used in accounting to manage and simplify the process of recording frequently occurring transactions. They help reduce the workload of the general journal by allowing specific types of transactions to be recorded...

The Sales Book is a specialized accounting book used to record all credit sales of goods. It only includes sales made on credit, and cash sales are not recorded here as they are directly recorded in the cash book. Key Features: Records Credit Sales: Only sal...

The Sales Return Book, also known as the Return Inward Book, records the return of goods previously sold on credit. It helps track goods that customers return due to issues like defects or incorrect deliveries. Key Features: Records Goods Returned by Custome...

The Purchase Book is a specialized accounting book used to record all credit purchases of goods or materials. It excludes cash purchases, which are recorded in the cash book. Key Features: Records Credit Purchases: Only purchases made on credit are recorded ...

The Purchase Book is a specialized accounting book used to record all credit purchases of goods or materials. It excludes cash purchases, which are recorded in the cash book. Key Features: Records Credit Purchases: Only purchases made on credit are recorded ...

A Cash Book is a financial record used to track all cash-related transactions of a business. It records payments made in cash, receipts from customers, payments to creditors, cash deposited into the bank, and withdrawals of cash for office use. Examples of cas...

The Single Column Cash Book is a basic type of cash book used to record all cash transactions of a business. It functions similarly to a ledger account, meaning there is no need to open a separate cash account in the ledger. The balance from the cash book is d...

The Double Column Cash Book is an extension of the single column cash book, with an additional column for discounts on both the debit and credit sides. This allows businesses to track both cash transactions and discount amounts offered or received during the p...

A Three Column Cash Book is an extension of the double column cash book, with an additional bank column on both the debit and credit sides. This allows the business to record cash transactions, discounts, and bank transactions in a single cash book, eliminatin...

Accounting Concepts: Accounting Concepts can be described as the basic assumptions or fundamental ideas that underpin the practice of accounting. These concepts act as the framework that helps in the preparation of consistent and understandable financial state...

Accounting conventions denote customs or traditions that are used as a guide in the preparation of financial statements. They help ensure consistency, reliability, and comparability in financial reporting. What are Accounting Conventions? Accounting convention...

Understanding Accounting Practice Accounting practice refers to the process of recording and managing the daily financial activities of a business. These activities are crucial for generating the legally required annual financial statements that provide insigh...

GAAP (Generally Accepted Accounting Principles) is a comprehensive set of accounting rules and procedures that companies in the United States must follow when preparing financial statements. It is the standard used by publicly traded companies and businesses ...

Accounting, at its core, is a function that aims to accumulate and communicate information essential for understanding the financial activities of an entity. It serves as an abstraction of real-world economic events, making it possible to analyze and interpret...

Accounting Equation The accounting equation represents the relationship between the assets, liabilities, and capital (owner’s equity) of a business. It is one of the most fundamental concepts in accounting and serves as the foundation for preparing a balance s...

There are two main systems of accounting used to record business transactions. These are the Single Entry System and the Double Entry System. 1. Single Entry System The Single Entry System is a simple method of bookkeeping where only personal accounts (with o...

The accounting cycle is an essential, standardized process that follows eight steps to track, record, and analyze all financial activity within a business. It begins when a financial transaction occurs and ends with the issuance of financial statements and the...