Commercial Accounting
aAccurate reflection of business transacted can only be obtained if both cash and credit transactions are recorded in such a manner that there is no duplication and yet the transactions are completely recorded. This is possible only under Commercial Accounting.It is done through a system that is known as Double entry book keeping.
There are two types of accounting: Single Entry and Double Entry Accounting
Single entry accounting/Cash accounting.
- This system records only cash movement of transactions and that too up to the extent of recording one aspect of the transactions.
- This means that only receipt or payment of cash is recorded and no separate record is maintained (about the source of receipt and payment) as to from whom the cash was received or to whom it was paid.
Double entry book keeping/Commercial accounting.
- Double entry or commercial accounting system records both aspects of transaction i.e. receipt or payment and source of receipt or payment.
- It also records credit transactions. Example of Electricity Bill
- in cash accounting date of receipt / payment of actual cash is important
- in commercial accounting the date on which the expense is caused, whether paid or not, as well as the spreading of the cost of certain items over their useful life becomes important.
Other important Concepts, you should know before finishing this lessen:
Capital ,Money Value of Time, Goodwill, Budget ,Is Cash in Hand Our Profit?
(I will explain these later, do not worry now, just read the difinitions for now.)
