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Name of Institution

AIBS
MIB, Semester 1 Accounting and Finance Luvnica Rastogi

Modules

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1. Foundation of accounting 2. Measuring and Reporting Assets, Liabilities and Shareholders Equity 3. Understanding Corporate Financial Statements and Other Financial Reports Included in Annual Reports 4. Time Value of Money, Capital Budgeting 5. Cost of Capital, Capital Structure
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Objective
In this session we will learn
Basic Concepts of Accounting

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Basic Concepts

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Accounting as an information system is the process of identifying, measuring and communicating the economic information of an organisation to its users who need the information for decision making

Activities covered under Accounting


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Identifying the transactions and events Measuring the identified transactions and events Recording Classifying Summarising Analysing Interpreting Communicating
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Accounting Information and Economic Decisions

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Decide when to buy, hold or sell an equity investment Assess the stewardship or accountability of management Assess the ability of the enterprise to pay and provide other benefits to its employees Assess the security for amounts lent to the enterprise Determine taxation policies Determine distributable profits and dividends Prepare and use national income statistics Regulate the activities of enterprises

Users of Accounting Information

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Investors Lenders Security Analysts, Rating Agencies and Other Information Specialists Managers Employees and Trade Unions Suppliers and Trade Financiers Customers Government and Regulatory Authorities The Public
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Accountancy

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It refers to a systematic knowledge of accounting. It explains why to do and how to do of various aspects of accounting It tells us why and how to prepare the books of accounts and how to summarize the accounting information and communicate it to the interested parties
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Accounting

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It refers to the actual process of preparing and presenting the accounts. It is the art of putting the academic knowledge of accountancy into practice

Book-keeping

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It is a part of accounting and is concerned with record keeping or maintenance of books of accounting which is often routine and clerical in nature

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Objectives

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To maintain accounting records To calculate the results of operations To ascertain the financial position To communicate the information to the users

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Advantages

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To replaces memory To comply with legal requirements To ascertain net result of operations To ascertain financial position To take decisions For comparative study Assists the management
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Limitations

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Ignores the qualitative elements Not free from bias Estimated positions and not real position Ignores the price-level changes in case of financial statements prepared on historical costs Danger of window dressing

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Branches
Financial Accounting Cost Accounting Management Accounting Social Responsibility Accounting

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Assumptions
Accounting Entity Money Measurement Accounting Period Going Concern

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Principles
Duality Revenue Recognition Historical Cost Matching Full Disclosure Objectivity

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Modifying Principles
Cost-benefit Materiality Consistency Comparability Conservatism Timeliness

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Accounting Standard

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It is a selected set of accounting policies or broad guidelines regarding the principles and methods to be chosen out of several alternatives Standards conform to applicable laws, customs, usage and business environment The Accounting Standards Board of ICAI formulates accounting standards
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Recap
In this session we learnt
The basic concepts of Accounting

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Next Session
In the next session we will learn
Forms of Business, Terminology

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