Book-keeping: Accounting Equation Approach
What is book keeping?
Book-keeping is mainly concerned with the recording of financial data relating to business operations in a significant and orderly manner. It is that branch of knowledge which guides us how to keep a record of financial transactions. The need for maintaining a record of income and expenditure in a significant and systematic manner has given birth to the subject of book-keeping. It is difficult for a businessman to remember all receipts and payments that take place during a particular period of time.
So book-keeping is an art and science of correctly recording business transaction in a-systematic and chronological order. Book-keeping may be described as the science of recording transactions in money or money's worth in such a manner that, at any subsequent date, their nature and effect may be clearly understood and that, when required a combined statement of their results may be prepared. Book-keeping and accounting are not synonymous terms, but are very different from each other. Book-keeping is concerned only with the recording of financial transactions in a systematic manner. Book-keeping is of clerical nature, whereas accounting relates to an advanced stage. Accounting includes recording, classifying, summarizing, analyzing and interpreting the financial data.
Define accounting equation approach for book-keeping
In order to keep books in balance, you need to carefully track all these different items in the right place.
The accounting equation for balancing the books is Assets = Liabilities + Equity
In other words everything your business owns is balanced against claims against those items owned. Vendors and lenders, who account for most of your liabilities, have claims against the assets for the money you owe them. Owners of the business have claims against the remaining assets.
What are assets and liabilities?
Assets: In accounting an asset is regarded as being
Book-keeping is mainly concerned with the recording of financial data relating to business operations in a significant and orderly manner. It is that branch of knowledge which guides us how to keep a record of financial transactions. The need for maintaining a record of income and expenditure in a significant and systematic manner has given birth to the subject of book-keeping. It is difficult for a businessman to remember all receipts and payments that take place during a particular period of time.
So book-keeping is an art and science of correctly recording business transaction in a-systematic and chronological order. Book-keeping may be described as the science of recording transactions in money or money's worth in such a manner that, at any subsequent date, their nature and effect may be clearly understood and that, when required a combined statement of their results may be prepared. Book-keeping and accounting are not synonymous terms, but are very different from each other. Book-keeping is concerned only with the recording of financial transactions in a systematic manner. Book-keeping is of clerical nature, whereas accounting relates to an advanced stage. Accounting includes recording, classifying, summarizing, analyzing and interpreting the financial data.
Define accounting equation approach for book-keeping
In order to keep books in balance, you need to carefully track all these different items in the right place.
The accounting equation for balancing the books is Assets = Liabilities + Equity
In other words everything your business owns is balanced against claims against those items owned. Vendors and lenders, who account for most of your liabilities, have claims against the assets for the money you owe them. Owners of the business have claims against the remaining assets.
What are assets and liabilities?
Assets: In accounting an asset is regarded as being