{"id":11421,"date":"2023-02-14T15:36:42","date_gmt":"2023-02-14T10:06:42","guid":{"rendered":"https:\/\/razorpay.com\/blog\/?p=11421"},"modified":"2025-03-04T19:06:12","modified_gmt":"2025-03-04T13:36:12","slug":"basic-accounting","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/business-banking\/basic-accounting\/","title":{"rendered":"A Brisk Run-Down About the Basic Accounting Practices A Business Must Follow"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Any business \u2013 whether it is traditional blue-chip ones or small-scale start-ups \u2013 must practise adequate record-keeping in order to ensure a seamless and transparent transactional protocol is followed. Therefore, <\/span>basic accounting<span style=\"font-weight: 400;\"> becomes exponential in maintaining the financial discipline of an organisation.\u00a0<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d058ca33da1\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d058ca33da1\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/basic-accounting\/#What_is_Accounting\" >What is Accounting?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/basic-accounting\/#Fundamental_Notions_of_Account_Keeping\" >Fundamental Notions of Account Keeping<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/basic-accounting\/#Central_Concepts_of_Accounting\" >Central Concepts of Accounting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/basic-accounting\/#How_Can_RazorpayX_Help_Businesses_In_Basic_Accounting\" >How Can RazorpayX Help Businesses In Basic Accounting?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/basic-accounting\/#Frequently_Asked_Questions\" >Frequently Asked Questions<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Accounting\"><\/span><b>What is Accounting?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">In simple terms, <\/span>basic accounting<span style=\"font-weight: 400;\"> refers to the financial bookkeeping done by any entity in order to have a detailed record of all these fiscal undertakings. Therefore, a corporation must assess, measure, and further communicate all of these data points in order to keep a tab on its economic health.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, an accountant working for a company will remain responsible for tracking the inflows and outflows of cash, generated revenue in a stipulated time period, or the balance between profit and loss records. <\/span>Basic accounting <span style=\"font-weight: 400;\">practices are also crucial for judicial means, as it documents that an organisation is operating above the legal threshold.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Fundamental_Notions_of_Account_Keeping\"><\/span><b>Fundamental Notions of Account Keeping<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Some of the foundational aspects of account keeping have been discussed below:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h3><b>Assets<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Asset refers to any product of value that is owned by a corporation. These products can be either purchased or acquired by the owners and are capable of furthering the fiscal prospect of an organisation.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For instance, the equipment used for manufacturing purposes, the inventory maintained by the corporation, or the liquidity available to it can all be considered assets. Notably, certain assets can be used as collateral \u2013 which a company can utilise as a security measure when borrowing funds.\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h3><b>Liabilities<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Liabilities refer to the legal obligations and debts procured by a company. These debts are undertaken as such a company fundraises from third-party financial creditors for liquidity boost in order to keep its business functions operational.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Notably, liabilities are a common staple in the usual business cycle of any organisation. However, one must keep a proper balance between revenue and <a href=\"https:\/\/razorpay.com\/learn\/what-is-liability-in-accounting\/\">liability<\/a> to avoid the risk of falling into a debt trap.\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h3><b>Equity<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">A company is legally obligated to return a specific lump sum to its shareholders once all the assets are liquidated and the debts are adequately settled. This amount is referred to as equity. The formula used to calculate this sum is as follows:<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">Equity = Assets of an organisation \u2013 Liabilities of the organisation\u00a0<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">Some other crucial notions of <\/span>basic accounting <span style=\"font-weight: 400;\">include:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Expense<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Revenue<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Purchase\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Sale\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Receipt<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Balance Sheet<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Cash Flow Statement etc.\u00a0<\/span><\/li>\n<\/ul>\n<h3><b>Components of Basic Accounting<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">There are two primary components of <\/span>basic accounting<span style=\"font-weight: 400;\">, which are discussed below:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h3><b>Transactions<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Such documentation includes records of products that a company purchases for manufacturing goods or providing a service \u2013 such as tools or raw materials. Similarly, the paperwork will also show the data regarding sales made to customers or business buyers. Accordingly, proper receipts for such endeavours also have to be written down.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For instance, with the help of <\/span><a href=\"https:\/\/razorpay.com\/x\/vendor-payments\/\"><span style=\"font-weight: 400;\">RazorpayX Vendor Payment<\/span><\/a><span style=\"font-weight: 400;\">, paying off invoices in a tax-compliant manner while maintaining adequate bookkeeping measures is possible with minimal turn-around time.\u00a0\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h3><b>Record Keeping<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">This aspect of accounting takes into consideration maintaining a ledger of matters such as:<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Utility bills paid<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Wages paid to employees<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Accounts receivables\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Consumed assets, etc.\u00a0<\/span><\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"Central_Concepts_of_Accounting\"><\/span><b>Central Concepts of Accounting<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">There are three quintessential concepts that a business must be aware of regarding its <\/span>basic accounting practices:<\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Going Concern Concept<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Under this practice, it is assumed that a business will continue to be optimally functioning in the foreseeable future. Accordingly, the upcoming proceedings are planned with the notion that the current assets available to the entity will be usable for future obligations down the line.\u00a0\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Accruals Concept<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">A business may recognise a profit or loss without the necessity of cash value exchange. Therefore, any record kept of such revenue generation or losses faced for <\/span>basic accounting<span style=\"font-weight: 400;\"> measures is done on the basis of the accruals concept. Notably, such records especially come in handy when a company is undergoing auditing.\u00a0\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Economic Entity Concept<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">As per this notion, the expenditures of a business have to be set apart from the ones of its owners. Intermingling personal and commercial expenses can lead to legal issues for a company during the audit period.\u00a0<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"How_Can_RazorpayX_Help_Businesses_In_Basic_Accounting\"><\/span><b>How Can RazorpayX Help Businesses In Basic Accounting?\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><a href=\"https:\/\/razorpay.com\/x\/\"><span style=\"font-weight: 400;\">RazorpayX<\/span><\/a><span style=\"font-weight: 400;\">,\u00a0 has completely reshaped the start-up sector in India. The platform also has the potential to aid the <\/span><b>basic accounting <\/b><span style=\"font-weight: 400;\">needs of businesses that bring in foreign direct investments.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To elaborate, <\/span><a href=\"https:\/\/razorpay.com\/x\/forex\/home\"><span style=\"font-weight: 400;\">forex funding by RazorpayX<\/span><\/a><span style=\"font-weight: 400;\"> allows your business to acquire funding from foreign investors without the usual hassles of red tape.\u00a0 Using the facility, you can remain compliant with the rules and regulations while transferring funds. You can also opt for thorough guidance from market experts to make more informed decisions in this regard. This way, your organisation will be able to maintain adequate accounting records so that there are no unwarranted obstacles during the audit period.<\/span><\/p>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/?r=blog_cta_business_banking_basic_accounting&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Explore RazorpayX<\/a><\/div>\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div id=\"rank-math-rich-snippet-wrapper\"><div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-1\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \"> Which documents are crucial for a business to maintain proper basic accounting practices?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Some of the documents a business must keep a track of to ensure a transparent bookkeeping practice includes,<br \/>\nInvoices<br \/>\nPayment vouchers<br \/>\nTax payment slips<br \/>\nLabour documents<br \/>\nContracts, etc. <\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-2\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What is the time of statutory audits in India? <\/h3>\n<div class=\"rank-math-answer \">\n\n<p>In this country, statutory annual audits are done as per the financial year. <\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-3\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">Does RazorpayX Vendor Payment help a business in its basic accounting endeavours? <\/h3>\n<div class=\"rank-math-answer \">\n\n<p>With Vendor Payment, RazorpayX allows you to limit the time spent for accounting purposes - leading to improved resource allocation capabilities. For instance, with this facility, you can enable your Chartered Accountant to get a hold of the necessary invoices and challans in a matter of minutes. <\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Any business \u2013 whether it is traditional blue-chip ones or small-scale start-ups \u2013 must practise adequate record-keeping in order to ensure a seamless and transparent transactional protocol is followed. Therefore, basic accounting becomes exponential in maintaining the financial discipline of an organisation.\u00a0 What is Accounting? In simple terms, basic accounting refers to the financial bookkeeping<\/p>\n","protected":false},"author":102,"featured_media":11422,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[27],"tags":[436],"class_list":{"0":"post-11421","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-banking","8":"tag-basic-accounting"},"_links":{"self":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11421","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/users\/102"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/comments?post=11421"}],"version-history":[{"count":1,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11421\/revisions"}],"predecessor-version":[{"id":21122,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/11421\/revisions\/21122"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media\/11422"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media?parent=11421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/categories?post=11421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/tags?post=11421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}