1 / 16

Accounting-A summary

This topic will provide you the Basic meaning of accounting. The Definitions of Accounting, Transactions & Events has been discussed. The Accounting process/cycle has been explained elaborately. The accounting users, Characteristics of Accounting, its limitations & its sub fields have been discussed.

sandratakshila
Télécharger la présentation

Accounting-A summary

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Fundamentals of Accounting by CA Ashish Gupta

  2. LUCA PACIOLI: Developer of Accounting (in 1494) Oldest Accounting : Stewardship Accounting Accounting ( A Layman Introduction) Noting Down the transactions of a business entity. Reasons: • To memorize the business • To keep an evidence

  3. Transactions: Anything in financial terms. (measurable in Money) • Accounting is done for a specific business entity. Definition Accounting is an art of Recording, Classifying & Summarizing the transactions & events of a business which are of financial character & interpretation of the results there of.

  4. Analysis of Definition • Accounting is an Art : • It needs special knowledge of Accounting concepts, rules • Recording is done in a special way by passing a journal entry • Accounting is a special language of business. Note: Accounting can also be regarded a Science & a Management

  5. Accounting- a Cycle/Process • Identifying the financial transaction • Measuring the money value of the transactions • Recording the transactions • Classification of the recorded transactions • Summarizing the entire period transactions. • Interpretation /Analyses of the results. • Communicating the results to the interested users of business/accounts.

  6. Identifying / Measuring: It includes maintaining the Vouchers (a Documentary evidence) by the business Vouchers A source document / evidence maintained by a firm immediately after a transaction is occurred. From the vouchers, a journal entry is passed. Cash memo, Invoice, Debit/Credit note : examples of vouchers

  7. Transactions/Events • Transactions : Any expense, income, purchases, sales in money terms ( Salaries paid, purchases/sales of goods) • Events : The outcome/resultor a consequence of a transaction(s) is called as an event. (Closing Stock, Gross or Net Profit or Loss)

  8. Transactions as well as an Event • When transactions also resent into an outcome. • Examples: a. Bad debts : - Transaction :An expense/loss for the firm, - Event : Results in reduction of debtors. b. Purchase of asset in credit : - Transaction : Purchases of asset, - Event : Results in creation of a Liability

  9. Recording • An initial record/ noting of the business transactions (by passing Journal Entries) • Done in a book called “Journal” ( A Primary book) • Recording the entries is known as “Journalizing”. • Entries are passed in a “Chronological Sequence”

  10. Classification For ascertaining the informations relating to a specific account, it is necessary to compile all the entries related to that account in a separate ledger Account. • It is done in a Principal book called “Ledger” . • Writing of Journalized transactions into Ledger is called as “Posting”

  11. Book Keeping • Recording & Classifying :Daily routine activities. • A clerical activity maintained by Junior staff. • The accounting starts when the book keeping ends.

  12. Summarizing • After the daily book keeping, it is summarized at the period end. Firstly all the expenses ,incomes, assets & liabilities are compiled in a List of all accounts called “Trial Balance” Maintained to verify the arithmetical accuracy of the transactions entered in book keeping.

  13. Financial Statements • Trial Balance is Further segregated in two parts: Trading, Profit & Loss Account Balance Sheet (Expenses, losses, Incomes & gains) (Assets & Liabilities) Income Statement (Net Profit/loss) Position Statement Provides Result Determines Financial Position

  14. Accounting cycle

  15. Interpretation • Analysis of the accounting results & position of the business. to the various business users. • Interpretation tools like Ratio Analysis, Cash Flow statements , Comparative & Common size Statements can be used.

  16. Communication • Accounting is a financial reporting to be done to both Internal & External users. • Communication of Accounting is done by • providing all the users an annual report. • By arranging a meeting for the members (like Annual General Meeting)

More Related