Principle of Accounts

Principles of Accounts – A Handbook is prepared mainly for the purpose of helping the grade 8 students who are new to this subject. In this book we have included all the topics to be covered in grade 8. Each topic is serially numbered. At the end of each topic, a large number of descriptive, multiple choice and gapped questions, which are related to that topic, are given. Gapped questions are included mainly for improving the students' knowledge of theory. The multiple choice and descriptive questions are given for the purpose of improving their efficiency in solving questions in the Cambridge papers. At the end of the year, the students who follow this book strictly, will have a clear idea of the Principles of accounts both theoretically and practically. We express our thanks to the Assistant Principal Mr. Adam Saeed Umar who contributed his valuable ideas for the preparation of this handbook. We hope that, the students in grade 8 will make use of this book for improving their knowledge in the Principles of Accounts course.

Prepared by: B. Sivagurunaathan K.C. Haridasan.

1.1 Definition of Accounting: The most widely used definition is that it is "the process of identifying, measuring, and communicating the economic information necessary to make judgments and decisions by the users of the information".

Users of Accounting information: The possible users of accounting information are: a) Owners of the business b) A prospective buyers of the business c) The bank (if the owner wants to borrow money for use in the business) d) Tax authorities e) A prospective partner f) Investors (The people who wish to invest their money in the business)

Definition of Book-keeping: The part of accounting that is concerned with recording data is known as Book-keeping.

1.2 Terms used in Accounting (1) Assets: Assets are resources owned by a business. Assets are classified into:

(a) Fixed assets: Fixed