Wednesday 01 December, 2021 |

The core concept of accounting

The core concept of accounting
The core concept of accounting - Shakur Ahamed Talukd

Accounting is a royal subject there is no doubt. Because every emperors of ancient period are directly involve this subject. It is the 21th hardest subject in academic syllabus around the world. This subject emphasis on the business environment. That’s why students of the current world are greatly involved this subject day by day. But problem is that they can’t get the main concept from the beginning stage. They have to burn a lot of fuel to get core concept accounting in their long academic period.



A question is arrived who am I? 

Answer is I am the sufferer of current situation of education system. After a long period of involving this subject, I have got only two factors of this subject those are “increase and decrease”. Every accounting transaction is based on those factors. Now I explain of accounting by using a clear water glass-

When I fill up this glass by water the level of water of the glass is increased. And same way reduce the water from the glass the level of water is decreased. This is accounting core concept.

Accounting system can be explained by using four water glass-

  1. Water glass one is named Asset and its primary sign is Dr.
  2. Water glass two is named Liability and its primary sign is Cr.
  3. Water glass three is named Expense and its primary sign is Dr.
  4. Water glass four is named Income and its primary sign is Cr.

Now I try to explain these four glasses in a simple way -

1.Water glass one for Asset. 

# Example: $1000 is invested in business. Here cash named asset is increased. For this journal entry is-

Cash Dr      $1000 

       Capital Cr      $1000

# Example: $1000 is paidforrent. Here cash named asset is decreased. For this journal entry is-

Rent Dr      $1000 

      Cash Cr         $1000

 

2.Water glass two for Liability.      

# Example: Product purchase on account $1000. Here Accounts payable named liability is increased. For this journal entry is-

Purchase  Dr                  $1000 



     Accounts payable   Cr          $1000

# Example: $1000 is paidto accounts payable. Here Accounts payable named liabilityis decreased. For this journal entry is-

Account payable  Dr     $1000 

      Cash  Cr                           $1000

 

3.Water glass three for Expense.      

# Example: Product purchase on account $1000. Here Purchase named expense is increased. For this journal entry is-

Purchase  Dr                $1000 

       Accounts payable  Cr       $1000

# Example: Purchase return to account payable amount $100. Here Purchasenamed expense is decreased. As well as Accounts payable is also decreased.  For this journal entry is-

Accounts payable   Dr              $100

        Purchases return   Cr                  $100

 



4.Water glass four for Income.      

# Example: Product sales$1000. Here Sales named income is increased. For this journal entry is-

Cash  Dr       $1000 

       Sales   Cr        $1000

# Example: Product sales return to customer$100. Here Salesnamed income is decreased.As well as Cash is also decreased.  For this journal entry is-

Sales return  Dr     $100

      Cash Cr                  $100

I thing journal entry is the pillar of the Accounting system. So everyone should emphasis on journal entries. But core concept keeps in mind.