Assesment-3 Essay Example | Topics and Well Written Essays - 2000 words

Assesment-3 - Essay Example For the purpose of recording a transaction an account is maintained like Cash A/C, Depreciation A/C etc. An â€Å"account† can be defined as the summarized record of the transactions. To obtain any information it is not possible to go through all the transactions. So, one can refer to the respective account and find out the details. An â€Å"account† is divided into two sides - debit and credit. The right hand side is the â€Å"credit† side and the left hand side is the â€Å"debit† side. The term â€Å"debit† represents all the expenses, losses etc. and â€Å"credit† all the incomes and gains. The net of the debit and the credit side gives the balance at the end of the year. At the end of the year, a statement ascertaining the profit and loss is prepared called the Profit and Loss A/c. It is prepared after closing all the accounts and posting the balances in the Profit and loss A/C. If the total of the credit side is more than the total of t he debit side there is a profit and if the debit side total is more than the credit side total there is a loss. An account is opened as follows – The process of allocation of the cost of the asset is called â€Å"depreciation†. In other words, the reduction in the value of assets over its useful life is called depreciation. It does not involve any cash outflow but is only a record in the books (National Productivity Council Of India, Pg no 1). In the books of account every year an amount is recorded as an expense and charged as depreciation in the statement of profit and loss. In accountancy, there are two aspects of recording a transaction – debit and credit. The debit side represents all the expenses, losses etc and the credit side represents the incomes, gains, etc. Depreciation is an expense to the firm and hence recorded on the debit side of the statement. This helps in finding out the true profit or loss of the business operations. The most