BBS first

Basic Understanding of Accounting

Business:

Business is an organization established to provide goods and services to the  society so as to earn profit. It is a legally organized

 entity to provide goods and services to individual, business, government and other nongovernmental organizations.

Forms of Business Organization:

1. Sole Trading Concern: Business organization owned, managed, and controlled by a single individual is

    known as sole trading concern. It is also known as sole proprietorship business.

2. Partnership Firm: Business organization owned by two or more individuals agreeing to share investment

    and profit and being under the partnership  deed is known as partnership firm.

3. Company: Business organization owned by large number of shareholders is known as company. 

   The capital of a company is divided into  large number of transferable shares. 

Business Activities:

1. Operating Activities: Business activities related to generation of revenue is known as operating activities.

    It consists of day to day activities like purchase, sales, payment of salary etc.

2. Investing Activities: The business activities related to expansion and contraction of business is known as

    investing activities. It includes purchase of fixed assets and long-term investment.

3. Financing Activities: Business activities related to management of funds for the business is known as

    financing activities. It includes issue of share capital, long term loan taken and repayment of loan etc.

Branches of Accounting:

1. Financial Accounting: Financial accounting is a branch of accounting which is concern with recording

    financial transactions, preparation of financial statements to show profitability  and  financial position 

   of the business and reporting the results shown to different users.

2. Cost Accounting: Cost accounting is another branch of accounting which is concern with recording,

    analyzing, controlling and reporting cost related information of an organization.

3. Management Accounting: Management accounting is that branch of accounting which is  concerned with

    providing financial information to the management for decision purpose.

4. Human Resource Accounting: Human resource accounting is that branch of accounting which is 

   concerned with indifying, measuring, analyzing and reporting data related  with human resources.

5. Social Accounting: Social accounting is another branch of accounting which is concern with 

   communicating environmental and social effect of a business organization.