Methods of Accounting

The methods of accounting there’s a few concept about it and especially in method which often used.
one of them is accounting methods can be classified into:
1. Single Entry System:
An accounting method in which transactions are recorded as a single entry, rather than as both a debit and a credit as in double-entry bookkeeping. Personal accounts are maintained i.e. Cash books, Books for Debtors and Creditors. When using single entry bookkeeping, income is just the difference between cash expenses and cash receipts over the relevant time period. Single entry accounting tends to be suitable only for small companies with simple financial statements

2. Double Entry System:
Double-entry accounting system is the standard practice for recording financial transactions. This provides the underlying foundation for a system of accounting, which accumulates and organizes the raw data into useful information. The system is based on the concept that a business can be described by a number of different variables or accounts, each describing an aspect of the business in monetary terms. Every transaction has a 'dual effect'.

This method of accounting records two aspects of each financial transaction - the Debit and the Credit (or the plus and the minus.)
Benefit receiving aspect or income aspect – known as ‘Debit’ - Due for that - ‘Dr.’
Another, benefit giving aspect or outgoing aspect - known as ‘Credit’ - Due to that - ‘Cr.’

Double entry provides checks and balances to ensure that your books are always in balance. Debits must always equal credits. Because debits equal credits,double-entry accounting prevents some common bookkeeping errors. Errors that aren't prevented are easier to find. Double-entry accounting is the basis of a true accounting system.
Advantages of Double Entry System:

1. Complete, systematic and accurate record keeping of financial transactions
2. Ascertainment of Profit or Loss of a business operations for a given period
3. Knowledge of financial position
4. Check on the accuracy of the accounts-Every debit has a corresponding credit
5. Limitations on scope for frauds and misappropriations
6. Better statutory, regulatory and tax compliances
7. Receivables (on credit sales) and Payable (on Credit purchases) management
8. Inter-firm, intra-firm comparative studies on annual results

Personal accounts are those that are related to any person or firm. For example, accounts for Customers, Suppliers, Owners, Lenders etc. A personal account would be used when anything is given or received from or to a person by way of a loan or a credit.
Accounting Rule:

* Debit the receiver
* Credit the giver

Real accounts refer to fixed and current assets such as Cash, Building, Plant & Machinery, Vehicles, Stock of Goods etc. An asset has been described as anything that is used to further the course of business. Assets have been classified into fixed and current. Although termed as ‘fixed’, this category of assets refers to long term assets (assets of which the value is derived from for more than a year.) Similarly current assets are short terms assets what are usually used within a year. For example, for a confectionary shop, the shop building owned by the business is a fixed asset whereas the stock of chocolates is an example current asset.
Accounting Rule:

* Debit what comes in
* Credit what goes out

Nominal accounts relate to Expenses and Incomes such as Rent, Electricity, Interest Received, Depreciation etc.
Accounting Rule:
Debit all expenses and losses
Credit all incomes and gains

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