OBJECTS & CONCEPT DETAILS

OBJECTS OF ACCOUNTING
Financial information is necessary in order to run a business in an efficient manner. Reliable information will be available only through keeping proper books of accounts.
Proper accounting is essential, if money is to be borrowed for the purpose of business. The lender will only agree to lend money when he is satisfied as to the solvency of the borrower. Information ivailable from books of accounts is the means of measuring such solvency.
Cash in hand can be verified and any defalcation can be detected, if proper books of accounts are maintained.
Payment of sales tax and income tax is only possible if books of accounts are maintained.
In case of any dispute, books of accounts can be produced in the court of law as a documentary evidence.
Government fixes up fair prices, formulates industrial policy, prepares economic plans, decides import-export quotas and does many other functions on the basis of accounting information available from books of accounts.
IMPORTANT ACCOUNTING TERMS AND CONCEPTS
BUSINESS ENTITY:
Profit making organisations are known as businesses. There are three main types of businesses;• . _• L-ervkvs (such as dr\ cleaners. Motor works.ru'p.s. Beauty :-;i!ons, airlines etc.); those selling
poo such as food sellers, automobile dealers etc.); those manufacturing goods (such as automobile ••ribcxurers, fans industries, sugar mills etc.).
business entity is an economic unit which enters into business transactions that must be
wearaec summarised and reported, The entity (organisation) is regarded as separate from its owner or
-j entity owns its own properly and has its own debts. The purpose of accounting is to provide
•etu ^formation about an organisation (an entity) to people who need such information but not about the
•cko&l affairs of the owner or owners. So it should be remembered that accounting is done for business
«ncs (what is happening in the business organisation) and it is not concerned with the personal or
imc miners of the owner. For example, the owner purchases furniture for business use(this is a business
tf tad it should be recorded in books of accounts. But if he purchases furniture for his domestic use, it
•nil xi r< considered as a business activity and will not be recorded in books of accounts. In the same
•« owner may have a personal bank account, a car, a house, and other property, but since these things
t part of the business, they are not included in the record of the business unit. So, each organisation
• ch accounting is done is an independent entity, separate from its owners, managers, customers,
•BriKrs. 2nd all other persons and entities with which it deals.
FORMS OF BUSINESS ORGANISATION
There are three main forms of business organisation;
Stogie or sole proprietorship:
The simplest form of business organisation "to organise and operate" is a single or sole IMneunhip. This is the most common form of ownership and is found in business such as small retail •m». *er.-.ce stations etc. The owner is the only one in control and makes all management decisions.