Briefly describe the followings in your own words:accounting?

Question

1. Money Measurement Concept.
2. Dual Aspect Concept.
3. Single Entry System.
4. Double Entry System.
5. Cash Accounting.
6. Accrual Accounting

Answer 1

1. Money Measurement Concept.

Economic activity is measured in monetary units (e.g. dollars), and only transactions that can be expressed in monetary units are recorded. Because of this basic accounting principle, it is assumed that the dollar's purchasing power has not changed over time. As a result accountants ignore the effect of inflation on recorded amounts. For example, dollars from a 1960 transaction are combined (or shown with) dollars from a 2007 transaction.

2. Dual Aspect Concept.
The dual aspect concept is summarized by a simple equation that is the foundation for the balance sheet. This equation, assets = liabilities + equities, indicates that everything that is owned by a firm (its assets) is claimed by someone, either its creditors (whose claims are called liabilities) or its owners (whose claims are called owner’s equity). This concept is common sense; all of a firm’s possessions must belong to someone. An important corollary to the dual aspect concept is that every financial transaction of a business must impact at least two accounts of the firm. For the dual aspect equation to remain true, when a transaction increases an asset account, then either another asset account must decrease or an equity or liability account must increase. Accountants use a system of debits and credits to keep the asset and equity aspects of a firm’s financial accounts in balance. For every transaction, the total of debit entries must equal the total of credit entries.

3. Single Entry System.
The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. A single-entry system is based on the income statement (profit or loss statement). It can be a simple and practical system if you are starting a small business. The system records the flow of income and expenses through the use of:
(1) A daily summary of cash receipts, and
(2) Monthly summaries of cash receipts and disbursements.
It is an accounting method in which transactions are recorded as a single entry, rather than as both a debit and a credit as in double-entry bookkeeping. When using single entry bookkeeping, taxable income is just the difference between cash expenses and cash receipts over the relevant time period. Single entry accounting tends to be suitable only for small companies with simple financial statements.

4. Double Entry System.
A double-entry bookkeeping system uses journals and ledgers. Transactions are first entered in a journal and then posted to ledger accounts. These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). You close income and expense accounts at the end of each tax year. You keep asset, liability, and net worth accounts open on a permanent basis.

In the double-entry system, each account has a left side for debits and a right side for credits. It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. If the amounts do not balance, you have made an error and you must find and correct it.

5. Cash Accounting.
Cash-basis accounting is a method of bookkeeping that records financial events based on cash flows and cash position. Revenue is recognized when cash is received and expense is recognized when cash is paid. In cash-basis accounting, revenues and expenses are also called cash receipts and cash payments.

Cash-basis accounting does not recognize promises to pay or expectations to receive money or service in the future, such as payables, receivables, and prepaid expenses.

This is simpler for individuals and organizations that do not have significant amounts of these transactions, or when the time lag between the initiation of the transaction and the cash flow is very short.

6. Accrual Accounting
An accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur. The general idea is that economic events are recognized by matching revenues to expenses (the matching principle) at the time in which the transaction occurs rather than when payment is made (or received). This method allows the current cash inflows/outflows to be combined with future expected cash inflows/outflows to give a more accurate picture of a company's current financial condition.

Accrual accounting is considered to be the standard accounting practice for most companies, with the exception of very small operations. This method provides a more accurate picture of the company's current condition, but its relative complexity makes it more expensive to implement. This is the opposite of cash accounting, which recognizes transactions only when there is an exchange of cash.