Beruflich Dokumente
Kultur Dokumente
ACCOUNTING - I
FOCUS
ACCOUNTING
ENVIRONMENT
BRANCHES
OF
ACCOUNTING
Financial
Accounting
Finding the profit / loss
Determining the financial position
Cost
Accounting
Cost ascertainment , and
Cost control
MANAGEMENT ACCOUNTING
Management Accounting is the process of using the accounting
information for managerial decision-making.
Internal in nature
CAPITAL
Owners Contribution /
Shareholders Funds
ASSETS
Non-Current Assets/
Fixed Assets
Current Assets
Stock / Inventory
- Raw material
Investments
- Work-in-Progress
Goodwill
- Finished Goods
LIABILITIES
Non-Current Liabilities/
Long-Term
Liabilities
Current
Liabilities
Accounts Payable/
Creditors
Bank Overdraft
Short-term Loans
Contingent Liabilities
- Liabilities that may or may not be incurred by a company
and which depend on the outcome of say a forthcoming
event e.g. a court case.
REVENUE /
INCOME
Operating Income
Sales and services
Non- operating
Income
Financial income
- Interest income
- Dividend income
Gain on sale of fixed assets
EXPENSES
Operating Expenses
Wages
Salaries
Rent of office
Electricity
Selling &Distribution
Non- operating
Expenses
Financial Expenses
- Interest on Loan
Exercise I
Identify the items as assets, liabilities, capital, revenue and expenses:
(i) Machinery
- Fixed Asset
(ii) Raw material purchased
- Purchases
(iii) Shares issued by GAIL
- Capital (Share capital)
(iv) Sales
- Revenue / Income (Operating)
(v) Borrowings from IDBI
- Liability (Long-term loan)
(vi) Cash
- Current Asset
(vii) Debtors
- Current Asset
(viii) Rent
- Operating Expense
BASIS OF ACCOUNTING
Example
During 2007-08, Ram & Bros. had cash sales of Rs. 3,90,000 and credit sales of
Rs.1,60,000.Their expenses for the year were Rs. 2,70,000 out of which Rs. 80,000 is still
to be paid. Commission received in the current year, due of last year of Rs. 5,000 . Interest
due on investments for the current year, Rs. 10,000.
Find out their Profit/Loss for 2007-08 as per: (i) Cash Basis of Accounting, (ii) Accrual
Basis of Accounting
1. Profit/Loss as per Cash Basis
Revenue (Cash Inflow or Cash Sales)
Add: Commission received
Rs. 3,90,000
5,000
Rs. 1,90,000
Rs.
Rs.2,05,000
5,50,000
10,000
Rs. 2,70,000
Rs. 2,90,000
Example
1. Issue of Shares Rs. 10,00,000
2. Purchase of Raw material on credit Rs. 10,000
3. Machine purchased for cash, Rs. 1,00,000
Solution
1. Share Capital A/c
10,00,000
Cash A/c
2. Purchases A/c
10,000
Creditors A/c
3. Machine A/c
10,00,000
10,000
1,00,000
Cash A/c
1,00,000
ACCOUNTING PROCESS
Recording
Classifying
Summarising
Into Statements:
(i) Trial Balance, (ii) Profit and Loss Account,
and (ii) Balance Sheet.