Accounting Concepts [Compatibility Mode]

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2006 Cisco Systems, Inc. All rights reserved. Cisco Public 1

Symbiosis Institute of Telecom Management

INTRODUCTION TOACCOUNTING

A.V.Chirputkar, Faculty - Finance, SITM.

M.Com. F.C.A. C.I.S.A. (USA)


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Your Issues .

How much is my net income / profit of the year?

How much is my net worth?

What is my cash position?

Next questions in you mind

How should I maximize my profit / net income?

How should I maximize wealth ?

These are the same questions for CEO of MNC /company.

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Answer to this..

Financial Accounting;

Cost Accounting;

Management Accounting;

Corporate Finance;

Financial Management.

LETS START WITH FINANCIAL ACCOUNTING

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Your Financial Transactions .

After passing M.B.A. you have undertaken followingtransactions in the year 2014-2015;

Your salary per month is Rs. 75,000

Your household expenditure per month is Rs. 10,000

You have invested in PPF Rs. 1,00,000 for year

You have purchased a car on cash basis Rs. 3,50,000

You have paid Income Tax Rs. 45,000 for the year

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Your Income Statement

Income is Rs. 9,00,000

Expenses are

Household Expenses Rs. 1,20,000

Income Tax Rs. 45,000

Your Net Income / surplus for the year Rs. 7,35,000

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Your Financial Position Balance Sheet

Assets: Car : Rs. 3,50,000

Investment : Rs. 1,00,000

Cash Balance : Rs. 2,85,000

Liabilities: Nil

Net Worth / Capital: :Rs. 7,35,000

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Financial Accounting

What we have done above indicates

Financial Accounting Process and

Financial Results Financial Statement.

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INTRODUCTION

Accounting is;

An Information System :Accounting System shouldgenerate information to meet the requirements of users

i.e. Internal management & Outsiders.

Language of business

Useful to personal and business life

Social Science


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Objectives of Accounting

To keep systematic records

To protect business properties

To ascertain operational profit / loss

To ascertain financial position

To facilitate in decision making

others

To comply with law

Disclosure to stakeholders


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Definition

Definition by American Institute of CPA:

Accounting is an art of recording, classifying & summarizing in a

significant manner & in terms of money, transactions & events

which are , in part at least, of a financial character & interpreting

the results thereof.


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Functions of Accounting

Recording

Classifying

Summarising

Deals with financial transactions

Analysis & Interpretation

Communication


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Four Phases in Accounting Process

Journalising of transactions & events;

Ledger posting & balancing;

Preparation of Trial balance; Preparation of Final Accounts.


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Accounting Elements

Assets Balance Sheet

Liabilities Balance Sheet

Equity Balance Sheet( The Balance Sheet gives you a financial position)

Income Profit & Loss Account

Expenses Profit & Loss Account

( The profit & loss account gives you profit / loss)


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Accounting Procedure

We follow double entry system of Accounting developed in 15th

century in Italy by Luca Pascioli

The basic accounting equation is;

Equity + Liabilities = Assets

The entire accounting is based on three fundamental rules of debitand credit. Every transaction has two aspects which can berecorded with the help of these rules.


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Meaning & Scope

There are four sub-parts of accounting;

Book keeping;

Financial Accounting;

Management Accounting;

Social Responsibility Accounting

( also other parts like Inflation Accounting etc)

(Book keeping is different from Accounting, Accounting relates to

other subjects like economics, law, statistics etc.)


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Cost Accounting

Know your cost;

Cost Saving;

Cost Control; Cost Reduction;

For Business Entities apart from above objectives-

Determine Selling Price, Ascertaining profit under eachactivity, assist management in decision making.

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Management Accounting

Thus we enter into subject of Management Accounting;

Use Financial Accounting and Cost Accounting data;

Apply Management Accounting Tools and techniquesfor managerial process of Formulating Strategy,

Planning, Decision making, Controlling etc.

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What Next

Now you enter into a larger domain known as Finance

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Q & A


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Thanks

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