Introduction to Accounting

Entity means a reality that has a definite individual existence. Business entity means a specifically identifiable business enterprise like Super Bazaar, Hire Jewellers, ITC Limited, etc. An accounting system is always devised for a specific business entity (also called accounting entity). A event involving some value between two or more entities.

It can be a purchase of goods, receipt of money, payment to a creditor, incurring expenses, etc. It can be a cash transaction or a credit transaction. Assets are economic resources of an enterprise that can be usefully expressed in monetary terms. Assets are items of value used by the business in its operations.

For example, Super Bazar owns a fleet of trucks, which is used by it for delivering foodstuffs; the trucks, thus, provide economic benefit to the enterprise. This item will be shown on the asset side of the balance sheet of Super Bazaar. Assets can be broadly classified into two types: Fixed Assets and Current Assets. Fixed Assets are assets held on a long-term basis, such as land, buildings, machinery, plant, furniture and fixtures.

These assets are used for the normal operations of the business. Current Assets are assets held on a short-term basis such as debtors(accounts receivable), bills receivable (notes receivable), stock (inventory), temporary marketable securities, cash and bank balances.