Fundamentals of Accounting

Fundamentals of Accounting

Example:

My Employer (Oracle) Pays salary 3000 USD for me (Ram) at the end of every month into my bank account (Bank of America)

Concept of Entity

An Entities is a business unit which can be

      individual

      Corporate

      Partnership Firm

Three Set of Books and Three Legal Entities involved in this above process

      One Individual (Ram)

      One Company (Oracle)

      One Bank (Bank of America)

      Two Business group ( Oracle and Bank of America)

Who Maintain What Account?

      I (Ram) Maintain my Bank Account (BoA), also I may maintain my Company Account (Oracle)

      My Employer have the Bank Account (BoA) also may have my Bank Account (BoA)

      The Bank (BoA) will maintain both accounts of mine and my employer

Sort of Transaction?

      Receipt of Salary is revenue for me (Ram)

      Payment of salary is expenses for my employer (Oracle)

      For the bank both employer and employee are two different customer and bank like a mediator for employee and employer. Hence in this transaction there is no revenue or expenses for bank

In my (Ram) Set of Books