EASY Accounts Solutions

How and why capital is a liability?

Always try to start ur carrier with a small organisation y bcoz u will hav good scope for learning

An ACCOUNTANT should be honest

Easy Rules:
When expenses and Assets increases Debit them and when decreases Credit them

When Income and Liabilities increases Credit them when decreases Debit them.

It's very simple just u should recognize 4 things they are Expenses,Assets,Income and Liabilities

Business gets income from Assets for a long period and Assets also an expenses to the business but it's long term expense.
So here every month business getting income from Asset and we match this income with an expense entry that is an adjustment entry for Depreciation.
We pass this entry by following the Matching concept of Accounting.

Matching concept of Accounting: income and expences should be matched means income and expenses should be recorded when it incurred not when it received or paid.Accrual concept also same as Matching concept.

My expereince
One student came to me i gave her some transactions may be nearly above 10 to make journal entries and surprisingly she wrote all journal entries in less than 2 min i surprised bcoz its too fast
I asked her how u did it in less time then she told my sir told when salary paid debit it and credit cash,when purchases there debit,if u see sales then credit then i asked her do u know why ru debiting one account and crediting to one account she told no i dont know then i was shocked
Sorry for a long post but dear frnds try to learn basic accounts its veryy very imp

Based on Business Entity Concept CAPITAL is a LIABILITY for the business. According to this concept owner & business both are separate.

try to learn ACCOUNTING CONCEPTS

AT ANY GIVEN TIME & GIVEN DATE THE TRIAL BALANCE SHOULD HAVE A EQUAL DEBIT & CREDIT BALANCES Y BCOZ DUE TO DUAL CONCEPT OF ACCOUNTS.

THEORETICAL KNOWLEDGE SHOULD BE CONVERTED TO PRACTICAL KNOWLEDGE THEN ONLY A COMMERCE GRADUATE OR POST GRADUATE WILL BECOME AN ACCOUNTANT.

EASY TO DIFFERENTIATE EXP & ASSETS: if an individual person purchases vegetables its expenses to him
if an individual person purchases a refrigerator its asset to him.
Bcoz that person gets benefit from vegetables for short period and he/she gets benefit from refrigerator for a long period.
same thing applies for a business.

ASSETS & EXPENSES BOTH ARE SAME

ASSETS GIVES BENEFIT TO BUSINESS FOR A LONG TIME

EXPENSES ALSO GIVES BENEFIT TO BUSINESS BUT FOR SHORT TIME

EXPENSES DIRECTLY HIT P&L A/C AND ASSETS ALSO HIT P&L A/C BUT INDIRECTLY, IN THE NAME OF DEPRECIATION A/C.