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ACCOUNTING
ACCOUNTING - AN
INTRODUCTION
Whenever your mother asks you to go to the
nearby grocery store to buy stuff . you need not
pay for these items immediately.
When you buy these items, the store owner
immediately make note on your fathers name
He records the value of items purchased.
At the end of the month, your father pays to him.
Similarly every business keeps the record of the
business transactions.
Recording of transactions by a businessman in
proper books and in a systematic manner is
known as accounting.
Accounting
Recording of Transactions
Classification
Summarization
Interpretation
Communicating
Prof. Mahendra Patel
SEARCH FOR
Small Lesson
Evolution of Accounting
is
limited.
and
BRANCHES OF ACCOUNTING
Financial Accounting
Cost Accounting
Branches
of
Accountin
g
Management Accounting
Human Resource Accounting
Tax Accounting
Social Accounting
National Resource Accounting
OBJECTIVES OF FINANCIAL
ACCOUNTING
The main objectives of financial accounting
are as under :
1.Finding out various balances
2.Providing knowledge of transactions
3.Ascertaining net profit or loss
4.Depicting financial position
5.Information to all interested users
6.Fulfilling legal obligations
Prof. Mahendra Patel
FUNCTIONS OF ACCOUNTING
Functions of accounting
1.Maintaining systematic records
2.Communicating the financial results
3.Meeting Legal Requirements
4.Fixing responsibility
5.Decision making
LIMITATIONS OF ACCOUNTING
Limitations of Accounting
1.Accounting information is expressed in terms of
Money
2.Fixed assets are recorded in the accounting
records at the original cost
3.Accounting information is sometimes based on
estimates
4.Accounting information cannot be used as the only
test of managerial performance on the basis of
mere profits
5.Accounting information is not neutral or unbiased
Prof. Mahendra Patel
TRANSACTION
Transactions
1. Cash Transaction
2. Credit Transaction
ACCOUNTING TERMS
1.
2.
3.
4.
5.
6.
7.
8.
9.
Business entity
Transaction
Purchases
Sundry creditors
Sales
Sundry debtors
Revenue (Sales)
Expenses
Income
Prof. Mahendra Patel
ACCOUNTING TERMS
10. Gain
11.Loss
12.Profit
13.Expenditure
14.Drawings
15.Capital
16.Assets
17.Non-current assets
18.Liability
Prof. Mahendra Patel
USER OF ACCOUNTING
(PA RT IE S I N T E RE ST ED I N AC C O U N T IN G
IN F OR MATI O N )
I. Internal users: Internal users are those individuals or
groups who are within the organisation like owners,
management, employees and trade unions.
II. External users: External users are those individuals or
groups who are outside the organisation like creditors,
investors, banks and other lending institutions, present and
potential investors, Government, tax authorities, regulatory
agencies and researchers The following are the various
parties interested in the financial statements:
1.
2.
3.
4.
5.
Ow ners/Shareholders
Management (Managers)
Prospective Investors
Lenders
Customers
6.
7.
8.
9.
10.
Creditors (Suppliers)
Government
Employees
Researchers
Citizen