Accounting is a system that calls for a number of methods that are essential for recording business transactions that are made. For ensuring recording in a proper manner, there are three bases that are followed.
It is on the basis of these accounting systems that business transactions are recorded.
In this accounting basisboth cash and credit transactions can be taken into account and can be well followed by non-trading concerns. Apart from actual transactions, entries are made for those payments that are due and hence exhibit actual profit and loss in a company during a specific period.
Most trading companies in order to check out immediate gain or loss that a company is undergoing make use of this process to record transactions.
This is a record of cash transactions that are carried on within a company. In this record, actual cash payment and actual cash received are recorded and every recording is made after complete collection of cash.
In case of non-trading organizations as charitable institutions as well as clubs, and professionals as lawyers, doctors and chartered accountant, total recording of transactions is done basing on this format.
This is a combination of both the above-mentioned formats of accounting. Whereas certain accounts are maintained via cash basis format, others are recorded via mercantile basis.
In case of normal recording process, generally two types are applied:
Thus, details of these process are to be taken into account by a student.