Page 44 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes Self Assessment

Fill in the blanks:
9. The expenditure incurred for acquiring a fixed asset or which results in increasing the
earning capacity of the business is known as …………………….

10. An expenditure incurred in the course of regular business a transaction of a concern is
availed during the same accounting year is known as …………………….
11. The receipts which do not arise out of normal course of business are known as
…………………….
12. The receipts which arise out of normal course of a business are known as ……..………….

2.4 Summary

 Accounting is the process of recording, classifying, summarizing in a significant manner
of transactions which are in financial character and finally results are interpreted.
 The revenues are recognized only at the moment of realization but the expenses are
recognized at the moment of payment.
 The charges which were paid only are taken into consideration but the outstanding, not
yet paid is not considered.
 The revenues are recognized only at the time of occurrence and expenses are recognized
only at the moment of incurring.

 The financial statements are found to be more useful to many people immediately after
presentation only in order to study the financial status of the enterprise in the angle of
their own objectives.
 The entire accounting system is governed by the practice of accountancy.
 The accountancy is being practiced through the universal principles which are wholly led
by the concepts and conventions.
 Money measurement concept tunes the system of accounting as fruitful in recording the
transactions and events of the enterprise only in terms of money.

 Business entity concept treats the owner as totally a different entity from the business.
 Going concern concept deals with the quality of long lasting status of the business enterprise
irrespective of the owners’ status, whether he is alive or not.

 Matching concept only makes the entire accounting system as meaningful to determine
the volume of earnings or losses of the firm at every level of transaction.
 Duality or Double entry accounting concept is the only concept which portrays the two
sides of a single transaction.
2.5 Keywords

Accrual System: The revenues are recognized only at the time of occurrence and expenses are
recognized only at the moment of incurring.

Assets: The economic resources of an entity. They include such items as cash, accounts receivable
(amounts owed to a firm by its customers), inventories, land, buildings, equipment, and even

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