Accountancy

Every business transaction affects at least two accounts, our accounting system is known as a double-entry system.

Commercial accounting is based on Double entry book keeping. Commercial accounting is something about providing right informatin to right people on right time. In commercial accounting, the system is maintained by the business organizations. The main objective of commercial accounting is to know the profit or loss and the financial position of any business.

Fixed asset are shown at written down value in Balance sheet. If the asset is not impaired and the company operates under GAAP, then the cost model must be used.

The revenue recognition principle dictates that all types of incomes should be recorded or recognized when they are earned. The revenue recognition principle, a combination of accrual accounting and the matching principle, stipulates that revenues are recognized when realized and earned, not necessarily when received.

In the calculation of depreciation, all of the following items are actually estimates except Historical cost. A historical cost is a measure of value used in accounting in which the price of an asset on the balance sheet is based on its nominal or original cost when acquired by the company.

Listed company is quoted company. The CA 2006 definition of ‘quoted company’ in s. 385 refers to companies listed on ‘regulated markets’ including the Main Market, but not AIM.

The normal balance of liability account is Credit balance. Normal balance is the side where the balance of the account is normally found. Asset accounts normally have debit balances, while liabilities and capital normally have credit balances. Income has a normal credit balance since it increases capital .

Land on lease should be shown in Blance sheet contrary to the fact that the company does not own that piece of land is the implementation of Substance over form concept.

A debit balance in the bank statement indicates Bank overdraft. Overdrafts are where the bank account becomes negative and the businesses in effect have borrowed from the bank.