When a firm/account holder withdraws excess amount over the available bank balance, then the account runs a negative bank balance. The negative balance is called a bank overdraft. In other words, bank overdraft is the excess of withdrawals over deposits.

Accounting can be defined as a process of reporting, recording, interpreting and summarising economic data. The introduction of accounting helps the decision-makers of a company to make effective choices, by providing information on the financial status of the business.

Accounting can be defined as a process of reporting, recording, interpreting and summarising economic data. ... Economic Events- It is a consequence of a company has to undergo when the number of monetary transactions is involved.

Accounting is the art of recording, classifying, summarizing in a significant manner, transactions and events which are of financial character, and interpreting the results thereof.

Branches of Accounting: 
 There are basically 3 branches of accounting:

FINANCIAL ACCOUNTING - deals with the recording of financial transactions, events, summarising and interpreting them & in the end communicating them to the interested parties. Its role is confined to preparation of financial statements i.e: Profit/Loss Account and Balance Sheets.
COST ACCOUNTING -   deals with the ascertainment of cost of the manufactured products or services rendered and helps the management in Decision Making & exercising control.
MANAGEMENT ACCOUNTING - deals with preparation of management reports and accounts that give accurate and timely financial and statistical information required by managers to make day - to - day and short-term decisions.

1. A cash book consists of first entries or original entries whereas a cash account is a ledger account and posts here are originally entered somewhere else.
2. Cash books contain narration that comes after entry but in a cash account, there is no need for narration.
3. A cash book is a subsidiary book whereas a cash account is a ledger account.
4. In terms of folios, cash books have ledger folios while cash accounts have journal folios. Cash books have a ledger folio which stands for the page number of a ledger account from where a transaction was posted.
5. Cash accounts have a journal folio which stands for the page number from where the transaction was posted.

Internal liability:- it is the amount payable to the owner by the business. It appears as capital in balance sheet.
External liability:- liability which are payable to outsiders. External liability arrives because of credit purchases or loans raised or taken. eg:-creditors, bank loan, bills payable etc.

Generally Accepted Accounting Principles is the accounting standard adopted by the U.S. Securities and Exchange Commission. Generally accepted accounting principles, or GAAP, are a set of rules that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.

Accounting principles, concepts and conventions are known as Generally Accepted Accounting Principles (GAAP). These principles are the base of Accounting. Generally Accepted Accounting Principles (GAAP) refers to the rules or guidelines adopted for recording and reporting of business transactions, in order to bring uniformity and consistency in the preparation and the presentation of financial statements.

These principles have evolved over a long period of time on the basis of experiences of the accountants, customs, legal decisions etc., and which are generally accepted by the accounting professionals.

In double entry mechanism, every transaction affects and recorded in two accounts. While recording the transactions in double entry, it is ensured that the total amount debited equals to the total amount credited

A schedule showing the items of difference between the bank statement and the bank column of Cash Book is known as Bank Reconciliation Statement.

Date PARTICULAR. RS.
1.4.2014. COST OF MACHINERY. 50000

31.3.2015. LESS : DEPRECIATION.
50000×10÷100. 5000

1.4.2015. BOOK VALUE. 45000

31.3.2016. LESS : DEPRECIATION.
45000×10÷100. 4500

1.4.2016. BOOK VALUE. 40500

31.3.2017. LESS : DEPRECIATION.
40500×10÷100. 4050

1.4.2017. BOOK VALUE. 36450

30.6.2017. LESS : DEPRECIATION
36450×10÷100×3÷12. 911.25

30.6.2017. BOOK VALUE. 35539(it's 35538.75)

Book value=35539
selling price=20000
since BOOK VALUE is greater than the SELLING PRICE IT'S LOSS.

LOSS ON SALE OF MACHINERY=35539-20000=15539


Furniture account

Debit: Date. particulars. RS. Date. particulars. RS
1.4.2014. To bank. 50000. 31.3.2015. By depreciation. 5000
31.3.2015. By balance c/d. 45000

Total 50000 Total. 50000


1.4.2015. To balance b/d. 45000. 31.3.2016. By depreciation. 4500
31.3.2016. By balance c/d. 40500

Total. 45000. Total. 45000

1.4.2016. To balance b/d. 40500. 31.3.2017. By depreciation. 4050
31.3.2017. By balance c/d. 36450

Total. 40500. Total. 40500

1.4.2017. To balance b/d. 36450. 30.6.2017. By depreciation. 911.25
30.6.2017. By Bank. 20000

30.6.2017. By profit and loss. 15539

Total. 36450. Total. 36450(it's 36450.25)

Prepare an Accounting Equation from the following:
i. Started business with cash Rs.1,00,000.
ii. Purchased goods for cash Rs.20,000 and on credit Rs.30,000.
iii. Sold goods for cash costing Rs.10,000 and on credit costing Rs.15,000 both at a profit of 20%.
Solution:

 

'Matching concept ' is one of the fundamental assumptions and has a significance in accounting. It entails that expenses should be matched with the income of that accounting period in order to obtain/ascertain the financial result of that period.....So for this purpose..we will match expenses with revenue of that period...

Given Revenue= 21000
Expenses = 15000

Income will be = revenue - expenses= 21000 - 15000 = 6000

The going concern concept

• It is one of the most fundamental concepts
• It forms the assumption on which all accounting operations are carried out
• According to this concept all accounting transactions must be recorded and reported  with the assumption that the business will continue to operate for the foreseeable future
• It is assumed that the business will keep Fixed Assets and Current Assets as well as
• Liabilities
• it is assumed that the entity will realize its assets and settle its obligations in the normal course of the business
• If this changes assets should be recorded at their Net realizable value instead of at cost

The consistency concept

• Due to the nature that a number of transactions can be treated in a number of alternative ways
• It is possible to constantly create a favorable set of financial statements simply by changing the way these items are created
• For example depreciation can be accounted for using either the straight line and reducing balance method
• A business may be tempted hop from method to method depending on which method enhances it’s profit for example
• The consistency concept prevents this from happening
• It dictates that once the business adopts an accounting principle or method, it must continue to follow it consistently in future accounting periods
• Any change in accounting policies/principles must be disclosed
• This ensures consistent accounting records are comparable from period to period

Debits and credits are used to monitor incoming and outgoing money in your business account. In a simple system, a debit is money going out of the account, whereas a credit is money coming in. 

Debits are money going out of the account; they increase the balance of dividends, expenses, assets and losses. Credits are money coming into the account; they increase the balance of gains, income, revenues, liabilities, and shareholder equity.

Every Business transaction which is to be considered for accounting i.e. every Accounting transaction, has its effect on the fundamental accounting equation.

Each transaction alters the expressions forming the equation in such a way that the accounting equation is satisfied after every such alteration.

The values forming the various terms of the expressions within the equation are altered in such a way that the basic fact, rule or equation, Capital + Liabilities = Assets is always satisfied.