Businesses maintain a petty cash book to record petty cash transactions except recording all the cash transactions in the cash book. Petty cash transactions refer to the transactions with small values that occur frequently. Petty cash transactions involve small cash Read more…
The Cash book performs as a ledger account as well as a prime entry book. Therefore, it performs a dual function. We record cash receipts and cash payments in the cash book. The source documents of the cash book are Read more…
Source documents are the documents that provide information on the transactions to record in the prime entry books. Therefore, we call a source document as an original document since it contains the original details of the transaction. Moreover, it is Read more…
Prime entry books are accounting books. We use a prime entry book to record a transaction at first before recording it in the ledger accounts. If a business records all the transactions in the ledger, the ledger accounts will become Read more…
It is necessary to find the balance of each ledger account at the end of an accounting period. Usually, at the end of a month, businesses balance accounts. Then, the business can prepare the trial balance using these balances of Read more…
An expense is simply a cost to the business. According to accounting, an expense is a reduction in equity except due to drawings. Even drawings by the owners lead to a decrease in equity. But, the expense is a reduction Read more…
In simple terms, the income is the money that a business receives from its business activities. Therefore, income includes a business’s earnings. Other names for income are revenue and turnover. In accounting, we define income as an increase in equity Read more…
Introduction to ledger accounts We use ledger accounts to record transactions in accounting. Transactions lead to change accounting elements. Accounting elements are the assets, equity, liabilities, income, and expenses. A change can be an increase or a decrease. Therefore, we Read more…
What is Accounting? Accounting is the process of providing information to the interested parties of a business (business stakeholders) for their decision making. Owners, employees, customers, debtors, investors, and the government are the key interested parties among other interested parties. Read more…
If a business has liabilities, the business will have to use a part of its assets to settle those liabilities. Once the business uses its assets to settle its liabilities, the residual/remaining is called equity. Therefore, equity is the Read more…