The Understanding Of Accounting
 

If we take the meaning of accounting literally, we get to know that accounting, which is often just called “accounting,” is the process of measuring, processing, and sharing financial and other information about businesses and corporations. Accounting is the processor keeping the accounting books of the financial transactions of the company.

There are various subjects for accounting, like financial accounting, financial management, economics, economic analysis, etc.

Accounting terms include liabilities, assets, transactions, debit and credit, deposit and withdrawal, and payable and receivable accounts, etc.

When a transaction is made, debit and credit are maintained in the ledger, cash book, bank statement, worksheet, etc.*

Transaction

Debit | Credit

Withdrawal | Deposit

Payable | Receivable

Liabilities are a group of items that are obligations to the business. They arise when you make a purchase or take out a loan for the business.

Here are examples of liabilities in financial statements:
bank loan, overdraft, Interest payable, Tax payable, Account payable, Noted payable, Borrowing from the parent company, Intercompany account payable, Salary payable.

Assets are the resources which the businesses use to conduct their activities. An item becomes an asset when you own it or have the right to use it.

Here are examples of assets:
Land, Buildings, Property, Computer equipment, Cash in bank, Cash on hand, Cash advance, Petty cash, Inventories, Account receivables, Prepaid expenses, Goodwill.

An accounting transaction is a business event having a monetary impact on the financial statements of a business. It is recorded in the accounting records of the business.
An instance of buying or selling something.

Debits and credits differ as money goes into a business (called credits), whereas money goes out of a business (called debits). They must be equal to keep a company’s books in balance. Debits increase the value of asset, expense, and loss accounts. Credits increase the value of liabilities, equity, revenue, and gain accounts.

A deposit is defined as money put into a bank account for safekeeping until you need it. A withdrawal is money that’s taken out of your account. A deposit goes into credit, whereas a withdrawal goes into debit.*

Accounts payable represent money that your business owes to suppliers, and accounts receivable represent money owed to your business by customers. In addition, accounts receivable are considered a current asset, whereas accounts payable are considered a current liability.

Accounts payable further delineate as goods are purchased and you have to pay money for your goods. Another instance is when any item is sold and, in the event that it is defective, is returned by the customer, becomes a payable account. Moreover, a loan is taken, and having to pay back the loan makes it payable, thereby going into debits whereas accounts receivable are defined as any item sold for which you have to charge a price and are therefore called receivable. Moreover, any loan taken, having to receive the amount of the loan, becomes receivable, and thereby receivable goes into credit.

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Shahjehan Soomro