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Unit 1: Basic Accounting Review
Notes
After the creation of information, the developed information should be appropriately recorded.
Are there any scales/guides available for the recording of information? If yes, what are they?
They are as follows:
1. What to record: Financial Transaction is only to be recorded
2. When to record: Time relevance of the transaction at the moment of recording
3. How to record: Methodology of recording — It contains two different systems of accounting
viz. cash system and accrual system.
1.2.1 Cash System
The revenues are recognized only at the moment of realization but the expenses are recognized
at the moment of payment. For example sale of goods will be considered under this method that
only at the moment of receipt of cash out of sale of goods. The charges which were paid only will
be taken into consideration but the outstanding, not yet paid will not be considered.
Example: Rent paid only will be considered but not the outstanding of rent charges.
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