 “Accounting is an art of recording, classifying and

sumersing in a significant manner, and in term of

money transactions and events which are one
part at least, of a financial character and
interpreting the result thereof”

-AICPA (American institute of Certified Public

Accountants)
Process
Identifying
Measuring
Communicating
Economic information
Permit informed judgment and decision
Users of information
 System
“A system is a collection of part that work
together harmoniously to achieve specific
goal”
 Input (3m men, material money)
 Process
 Output
 Feedback
 Control
 Financial Accounting
 Cost Accounting
 Management Accounting
 Tax Accounting
 Social Responsibility Accounting
 Other Branches of Accounting
 Purpose
 Period of Preparation
 Frequency of Preparation
 Governance
 Financial Nature
 Forecasting
 Nature of information
 Provide Information
 Information in wide range
 Accountability of management
 Profit and Loss Account
 Balance sheet
 Statement of retained earnings
 Statement of cash flow
 Understandability
 Relevance
 Comparability
 Reliability
 Faithful representation
 Substance over form
 Neutrality
 Prudence
 Completeness
 Timeliness
 Verifiability
 Maintenance of record
 Communication
 Statutory Compliance
 Protection of Assets
 Stewardship
 Assessment of Performance
 Forecast
 Decision Making
 Evaluation and Responsibility
 Control
 Useful to the Management
 Comparison
 Taxation Authorities
 Legal Evidence
 Determination of the price
 Non-monetary item ignored
 Original Cost
 Profit Basis- Not Reliable
 Based on estimates
 Rule of Consistency
 Cash Basis of Accounting
 Accrual basis of Accounting
Basis of Distinction
 Item appeared in balance sheet
 Effect of Pre-paid expenses and accrued income
 Effect of outstanding expenses and unaccrued

income
 Statutory Recognition
 Option: valuation of inventory, depreciation
 Personal Account
 Nominal Account
 Real Account
 It include the account of…
 Persons
 Business firm
 Institutional Accounts
 Local Authority
 State Authority
 Central Authority
 Personal Account

Debit : Receiver
Credit: Giver
 It include the account of…
 Income and expenses…
 Interest
 Salary
 Printing
 Stationary
 Traveling
 Audit and Director’s fees
Nominal Account

Debit : Expenses and Losses

Credit: Income and Gain
 It include the account of…
Goods
Asset
Stock
Purchase
Sale
Return of goods
 Real Account

Debit : What comes in

Credit: What goes out
 GAAP: Generally Accepted Accounting
Principles
 Salient Features of GAAP

◦ To Ensure Uniformity
◦ Not Final Statement
◦ Simple Guideline
GAAP Depends on
Relevance
Objectivity
Feasibility
 Business Entity
 Money Measurement Concept
 Going Concern Concept
 Periodic Concept
 Cost Concept
 Realisation Concept
 Accrual Concept
 Matching Concept
 Convention of Conservatism
 Convention of Consistency

◦ Vertical
◦ Horizontal
◦ Third Dimensional
Convention of Materiality
Convention of Disclosure