Accounting Basics and Definitions

Accounting is the part of recording, classifying and Summarizing financial transactions in the Preparation of Financial Statements.

Trial Balance is not Financial statement , it is a summary of all debit and credit transactions.

Classification of Accounts

Asset:

Properties and Investments which can be converted / Convertible to Cash (Balance Sheet Item).

Liability:

Amount Payable to Owners (Providers of Capital) and Creditors (Supplier of Material or Loan) (Balance Sheet Item).

Revenue / Income:

Amount Earned through Sales or any other Mode ( Profit and Loss Item or Income and Expenditure Item)

Expenses:

Amount incurred / spent or expenses to earn the income. ( Profit and Loss Item or Income and Expenditure Item)