Introduction to Accounting.ppt

7/23/2019 Introduction to Accounting.ppt

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Introduction


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Definition of Accounting

The art of recording, classifying andsummarising, in a significant manner,

and in terms of money, transactions

and events which are, in part at least,of a financial character, and

interpreting the results thereof


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Features of Accounting

Recording

Classifying

ummarisingAnalysis and Interpretation


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!ranches of Accounting

Financial Accounting

Cost Accounting

"anagement Accounting


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ACC#$%TI%& 'R#C(

)* R(C#RDI%& +#$R%A-.

/* C-AIF0I%& +-(D&(R.1* TRIA- !A-A%C( +$""ARII%&.

2* TRADI%& 3'R#FIT3-#

ACC#$%T 3 !A-A%C(4((T


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I"'#RTA%T ACC#$%TI%& T(R"

Debtor

Creditors

Capital

Assets

Liabilities

Stock

Purchases

Sales

Outstanding Expenses Accrued expenses

Prepaid Expenses

Prepaid Income


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I"'#RTA%T ACC#$%TI%&

T(R"'urchase return or return outwardsales return or return inwards

DrawingsDe5t

!oo6 de5t

olvent

Revenue or Income


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T(R"(7penses-oss

olvent Insolvent

De5it

Credit!oo6s of Account


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T(R" ournalu5sidiary 5oo6s

-edger8oucher

Receipt

C9F!9F


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Definition of Accounting

ConceptsAccounting concepts are defined as theassumptions upon which accounting is

5ased


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Accounting Concepts

"oney "easurement Concept:

#nly monetary transactions which can 5e

e7pressed in terms of money are recorded*

%on monetary aspects will not 5e recorded

Diverse items li6e assets, lia5ilities, etc* can 5e

e7pressed in a common denominator of money

The ma;or limitation is that since non monetarytransactions are not recorded, accounting

records do not give full picture


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Accounting Concepts

!usiness (ntity Concept:

The 5usiness is considered as a distinct

entity from the persons who own it*

The 5usiness affairs are 6ept separate from

the personal affairs

Financial position of the 5usiness isascertained properly


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Accounting Concepts

&oing Concern Concept:

The 5usiness is considered that it will

continue for a fairly long time

Distinction 5etween capital and revenue

items can 5e made

8aluation of fi7ed assets are made#utstanding e7penses and income and

accrued e7penses and income are considered


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Accounting Concepts

Cost Concept:

An asset ac


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Accounting Concepts

Dual Aspect Concept:

(very 5usiness transaction always results in

receiving some 5enefits of value and giving

of some other 5enefits of e


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ACC#$%TI%& (=$ATI#%

A(T>-IA!I-ITI( ?CA'ITA-


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Accounting Concepts

Accounting 'eriod Concept:

For measuring the financial results of the

5usiness, the wor6ing of the 5usiness is

split in to convenient periods of time 6nown

as accounting periods

Accounting year


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Accounting Concepts

#5;ective (vidence Concept:

Accounting entries should 5e evidenced and

supported 5y documents

8ouchers, invoices


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Accounting Concepts

"atching Concept:

For measurement of profit or loss, revenues

and e7penses are matched and compared

The net profit or loss is determined 5y

matching the e7penses and losses with

revenues


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Accounting Concepts

Revenue Recognition Concept:

Revenue is recognised as 5eing earned on

the date on which it is realised, not when

the goods are manufactured, contract signed

or order received

The date is when the goods are transferred

to customers and he 5ecomes lia5le to pay


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Accounting Concepts

Accrual Concept:

Accrual concept recognises 5oth revenue

and e7penses

All transactions must 5e 5rought to record

whether they are settled or not


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Accounting Conventions

Convention of Conservatism:

Caution, prudence and playing safe

'rovide for all possi5le losses 5ut anticipateno profits


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-egal Aspect Convention:

Accounting records and 5oo6s should

reflect the legal position of the 5usiness


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Convention of "ateriality:

A detailed record is made only of those

5usiness transactions which are material

and important

%o detailed record are made of insignificant

transactions


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Convention of Consistency:

Accounting practices and methods should

remain consistent


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Convention of Full Disclosure:

All material facts must 5e disclosed in the

financial statements


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CHARACERISICS O!

ACCO"I#$ I#!OR%AIO#

Understandability

Relevance

ConsistencyComparability

Reliability

Objectivity


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T0'( #F ACC#$%T

N a t u r a l

e g : r a m , s h y a m e t c

A r t i f i c i a l

e g ; b a n k , c l u b e t c

R e p r e s e n a t i v e

e g : P r e p a i d r e n t e t c

P E R S O N A

! a n g i b l e s

e g : c a r , P l a n t e t c

" n t a n g i b l e s

e g : p a t e n t e t c

R E A N O # " N A

" # P E R S O N A

A $ $ O % N ! S


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'ersonal Accounts

Accounts of natural or physical

persons+Ravi@s account, A65ar@s account.

Accounts of artificial or legal

persons+accountsof firms, companies, clu5s,

associations, 5an6s, schools, colleges.

Representative personal accounts+outstanding

e7penses account, accrued e7penses account,prepaid account.


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Rule for 'ersonal Accounts

De5it the receiver

Credit the giver

Received from Ravi /,'aid &anesh B


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Real Accounts

Accounts of tangi5le assets

Accounts of Intangi5le assets


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Rule for Real Accounts

De5it what comes in

Credit what goes out

'aid "r* A /old "achinery to Ra; for B


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%ominal Accounts

Revenue accounts

(7penses account


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Rule for %ominal Accounts

De5it all e7penses and -osses

Credit all incomes and gains

'aid rent BReceived commission /

Introduction to Accounting.ppt

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