DAY 01 | ACCOUNTANCY | I PUC | INTRODUCTION TO ACCOUNTANCY | L1

Accountancy serves as a vital skill for commerce students, focusing on core concepts like debit, credit, income, expenditure, and liabilities. Correct classification of financial elements lays the groundwork for distinguishing personal expenses from business obligations. A parallel is drawn with obtaining a learning license, emphasizing the importance of mastering fundamental rules before addressing more complex problems. Introducing essential terminology and the purpose behind accounting establishes a clear framework for further study and practical application.

Accounting distinguishes transactions by applying debit to record debts, expenses, assets, and losses, while credit captures gains, income, reserves, liabilities, and share capital. For instance, a bank account credited with an incoming sum or debited due to payment underscores these contrasting roles. A mnemonic—'DEAL' for debtors, expenses, assets, and losses—simplifies the recall of debit elements, with a similar logical approach used for credit. These categorizations and memory aids form the essential foundation for understanding accountancy processes.

Accounting is a structured process for identifying, recording, measuring, classifying, verifying, summarizing, integrating, and communicating financial transactions. It establishes an orderly record of business operations, enabling the identification of profit or loss and the assessment of a company’s financial health through its assets, liabilities, and owner’s equity. This comprehensive approach ensures that essential financial information is provided to various stakeholders and supports strategic management decisions.

Accounting is defined by a systematic process that involves identifying, measuring, recording, classifying, summarizing, analyzing, and communicating financial transactions. In a business setting, this method efficiently tracks operational costs such as rent, salary, utility bills, and purchases, ensuring every expense and income is accurately recorded. Managing both business transactions and routine personal expenditures like house expenses, school fees, and food expenses provides clear financial oversight and supports informed decision-making.

Accounting starts by distinguishing business-related transactions from personal ones, ensuring expenses like salaries, business electricity, and purchase costs are recognized while discarding non-business expenses such as household spending, school fees, and personal food costs. The process requires identifying only the transactions that impact the business, laying a clear groundwork for subsequent financial recording. Once these transactions are isolated, each is measured accurately in monetary terms, forming a reliable basis for recording, classifying, analyzing, and communicating financial data.

The accounting process begins by identifying and measuring business transactions solely in monetary terms while excluding personal expenses. Every transaction is recorded meticulously—whether on paper or digitally—and then classified as either an expense or income. Totals are computed to summarize financial figures, allowing for the calculation of profit by subtracting expenditures from income. Finally, the derived financial data is communicated clearly among partners, establishing a robust basis for further accountancy concepts.