Even if you are a proprietor of a small business concern you need to maintain accounting records accurately and carefully. You need not belong to the commerce streamline or be an accounting expert. But you must have thorough knowledge about the fundamentals of book keeping. Anybody can learn it!

Do not confuse between the two terms book keeping and accountancy. Book keeping is the record of the routine transactions that take place during the working hours. A set of books is maintained for various transactions. For example, a sales register is retained to record all the sales transactions that happen during a specified period. It is to be clearly remembered that the accounting year begins on the 1st April and ends on the 31st march every year. The transactions must be systematically recorded in the register and the date, invoice number, name of the party to whom it is sold and the total amount must be accurately specified.

Accounting includes preparation of final accounts such as profit & loss accounts and balance sheet. It is prepared at the end of the year to determine the financial position of the business.

Some of the books must be compulsorily maintained as per the rules of Income tax.

General Ledger: It is a summary of all the transactions recorded in the cashbook and journal. It is not an independent record but all the transactions are derived from the cashbook and ledger. It records the balances of accounts held at the end of the accounting year. For example, if you have incurred $ 100 for the purchase of stationery material, then a special account called printing and stationery would be maintained showing the net balance as $100 and similarly this figure would be added in the statement of Profit and Loss Accounts under the heading of Expenses.

Cash Book: it records all the cash transactions during the year, which is divided into two distinct columns Receipts and Payments. The cash balance is carried forward to the asset side of the balance sheet under the heading Current assets.

Subsidiary Books: they include books like sales register, purchase register and journal. Journal book includes those entries that do not belong to either cashbook, sales register and purchase register. For example if the proprietor purchases machinery on credit basis then it is neither a cash transaction nor purchase or sales.

Basic terms and concepts: accounting language is based on the principal of double entry system. All transactions have dual aspect ie. Credit aspect and debit aspect. The concept of debit and credit is a potential confusion for a common man. The rules of debit and credit mean differently to three types of accounts. The account types are divided into three main categories: a) Personal Accounts b) Real Accounts c) Nominal Accounts.

The personal accounts generally include names of persons or organization. it deals with accounts of individuals like creditors, debtors, bank etc. it represents the balance due to these individuals or due from them on a particular date. The term credit according to personal accounts mean to give and debit means receive.

Eg 1. if A sells goods to B on credit basis worth $5, then in the books of A, Bs account is debited as he has received from A.

2. if A lends loan to B worth $100, then in the books of B, As account is credited because he has lent the amount.

Real accounts include assets like plant, machinery or land and building and cash of the business. The principle of debit and credit is as follows for real accounts. When the asset is bought for the business purpose it is treated as a debit item and if the asset flows out of the business it is credited.

For eg: when machinery is purchased for the business, the asset is a debit and when it is sold it is treated as credit.

Nominal accounts: they are intangible accounts like salary or wages paid to employees, expenses incurred, income gained from interest on investment etc. the expenses are normally treated as credit and the income is considered debit in this case. When money is paid for the freight purpose it is a expense incurred to the business and therefore it is debited.

Trial balance: when the ledger accounts are tabulated in a summary form it is known as trial balance. Trial balance reveals the arithmetic accuracy of the accounting records. Even if the statement of trial balance tallies, it does not mean that the accounting records are accurate. There may be still omissions in entries while posting it into the books of ledger.

Profit and Loss Statement: it is a summary of total expenses and total income incurred to the business during the year. This statement considers only those expenses or gains that are routine in nature. If the total income exceeds total expenses during the year the firm declares profit and vice-versa.

Balance sheets: it displays the financial position of the business during the period as it shows what an organization owes to the business and what it owns at any point of time.

Deprecation: the value of the asset purchased for business purpose drops every year as the quality of the asset deteriorates due to wear and tear, passage of time, technological obsolescence, etc. Depreciation is charged to the business to determine the present value of the asset. The percentage of depreciation is to be charged every year as specified under Income tax rules. If machinery is purchased on the 1st of April at worth $1000 and the rate of deprication is charged 10%, then the value of the asset at the end of the year would be $1000 minus 10% on $1000, which is equal to $900.

Amortization: they are the intangible assets of the business that are yield revenue to the growth of the business. They finance your business at the time of unexpected events when the company really needs it.

Financial accounting involves recording, classifying and summarizing of financial events during the year.

Besides you need to gather knowledge about the intellectual skills required to function the business smoothly. The growth of sales is very slow at the start. You must have the knack to attract customers by involving in various promotional activities. The skills of communication are also very vital that help you survive in the business field. If you know anybody among your relatives or friends who are successful businessman, then encounter them to know about their practical experiences. Knowledge inscribed in the textbooks is just for reference but not the end. You must finally learn more tips though your own work experience.