Introduction History of development of accounting Accounting records Definition of accounting Characteristics of accounting Qualitative characteristics of financial data Objective

of keeping Accounts

Advantages Limitation Methods of Keeping Accounts Some terms of Accounting

Integral part of any business Become life blood for business Need for Accounting to everyone on routine basis Example:

Barter system was used before With the development of trade money was introduced Need of accounting also developed In India account keeping is known as desi nama or Bahikhata system In Europe In 1494, Luca Pacioli published book on mathematics In which discussed the principles of Accounting

This book was the basis of modern double entry book keeping Joint stock companies establishment Audit concept Two important branches: 1.Cost Accounting 2.Management Accounting

Concept of national income has developed Computer technology Daily basis P&L and Balance sheet can be prepared so quick decision can be taken.

Waste Book Journal Subsidiary Books Ledger Trial Balance Trading and P&L Account Balance sheet

American Institute of Certified Public Accountants has defined accounting as follows: Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in parts at least, of financial character and interpreting the results thereof

It is an art It is science Only Financial transaction Recorded in terms of money Recorded in special books Records made with particular objective Records are continuously made Continuous record Even service transactions are recorded

Reliability Understandability Comparability Relevance

To record financial effect of each transaction To give information of business transaction For valuable guidance for the future to the management To determine the tax value paid to the government It is not compulsory For comparison To know the financial position of business To know the efficiency of business

Information about business transaction, income, Expenses Gross profit and net profit is known Comparison Financial position Control over employees Useful to outsiders Useful for policy decisions Useful for evidence Useful for determining selling price

If original transaction is unclear or incomplete If records are made without proper understanding Bookkeeping can not provide protection against dishonesty It does not present true financial picture in times of Inflation Asset book value and real value are different Some are on basis of opinions It does not give future information

Deshi nama system or Indian system Single entry system Double entry system

Entry Transaction Voucher Debit Credit Account Ledger Goods Stock Revenue Bad-debts Profit loss

Purchases Sales Debtor Receivables Creditor Payables Liabilities Assets Expenditure Capital Drawing Gross profit Gross loss