Maths For Life

Introduction to prime entry books  There may be issues in recording the business transactions in the ledger accounts directly as they take place' Hence, before the transactions are recorded in ledger accounts, they should be recorded in a separate set of books known as ''the prime entry books.''  The prime entry books are the books in which the transactions of a business are recorded at first, according to the order in which each transaction had occurred by using a generally accepted method before recording them in the ledger accounts.  Prime entry books are also named as journals, day books, and subsidiary books.  It is not suitable to record all the transactions in a single prime entry book. Hence, the transactions have to be classified and recorded based on their nature and other common characteristics. Accordingly, the transactions which are similar in nature and occur recurrently should be recorded in different prime entry books.  The following table shows ...

  Dual impact of business transactions Many transactions occur daily in a business. As a result of these transactions, the values of assets, liabilities, equity, income and expenses are changed. In accounting, these changes are identified as a dual impact of a transaction. As explained earlier, each transaction causes change to two items of the accounting equation. This is termed as the dual impact of a transaction.  Examples :-  Investing Capital           Asset (cash) increases                Equity increases  Purchase of furniture     Asset (furniture ) increases        Asset (cash) decrease  Payment of Salary         Asset (cash) decreases               Equity decreases  Because of this dual impact of each transaction, the value of each transaction should be written in two places. This ...

  Accounting equation  The assets and the ownership of those assets of a business are shown in accounting records of that business. All assets should belong to some party of the business. Therefore, assets of a business should be equal to the total ownership of those assets. To show this relationship, an equation is used, which is called as the Accounting Equation.  Construction of accounting equation  If all assets are financed by the owner of the business, the accounting equation can be presented as follows.   Assets = Equity  Example :-  Amal started a business investing Rs.500 000 in cash. Here, assets (cash) of the business is equal to Rs. 500 000 and this total amount belongs to the owner, Amal. Accordingly,   Assets = Equity   Rs. Cash 500 000 = Rs. Capital 500 000  When a business expands, the resources invested by owners would not be adequate. Therefore, the business will have to obtain resources from extern...

  Accounting  Accounting can be explained as a process of providing information required by the interested parties of a business for their decision making. Financial information is very important in decision making in a business. Accounting that mainly provides financial information is called as Financial Accounting.  Objectives and need of Accounting  As mentioned above, Accounting is needed to provide useful information to interested parties of a business for their decision making. Further, the business activities also impact various other parties. All these parties including owners and debt holders are named as interested parties (stakeholders) of a business. Owners, debt holders, investors, customers, suppliers, employees and the government are usually considered as key interested parties among other parties. Each party takes decisions in various nature and for that they require information. Accordingly, providing information for decesion making is the main objec...

  Basic information on the types of business organizations  When the population of a country increases, the process of manufacturing and distributing goods and services expands. Therefore, different types of business organizations are established in order to fulfill the needs and wants of people. A business organization generally consists of an individual or a group of individuals working together to produce goods and services required to fulfill human needs and wants.  Different parties provide funds to businesses. Owners of a business are the individuals or groups who provide funds and assume the risk by involving in business. Based on the ownership, businesses are categorized into several categories.  In addition, businesses are conducted to achieve different objectives of the businessmen. Accordingly, some businesses are carried out to earn profits whereas others are carried out for the well-being of the society.  Further, a businessman can start either a sm...

 Business environment Any business has an environment related to it. The factors within the business or outside the business affect the existence of a business either directly or indirectly. Hence, the business environment can be defined as the environment in which the factors affecting businesses are activated. The businesses require undergoing changes continuously due to the fact that environmental forces are also dynamic and businesses need to adhere to them.  For a business to be successful, it is essential to pay constant attention to its environment. New business opportunities can be identified through the changes in environmental forces and different trends arising in the environment.Therefore, successful businesses continuously study the business environment and adopt their business activities accordingly.  Classification of business environment  The business environment can be classified mainly as follows.  Internal environment  External environmen...