Art & Science Identifying Measuring Recording Classifying Summarizing Significant manner Interpretation of results Communicating

You cannot manage what you cannot measure Language of Business Communication of financial data. Legal Requirements. Tax ascertainment Performance measurement. For proper management For availing credit facility Other needs.

Management Employees

Share Holders Creditors Banks Investors Prospective Investors Tax Authorities Government Researchers Students Competitors Others

Financial Accounting

Cost Accounting

Management Accounting

Accounting Principles

Concepts

Conventions

Separate Entity Going Concern Money Measurement Cost Dual Aspect Accounting Period Periodic Matching of Cost & Revenue Realisation

Conservatism Full Disclosure Consistency Materiality

To protect the interests of various stakeholders by: Provisions to avoid any misrepresentations. Creating comparability among financial statements of various companies. Trying to match the global standards. Ensuring the availability of relevant information for making informed decisions. Ease for auditors, statutory bodies, etc.

Institute of Chartered Accountants of India established Accounting Standards Board on April 22, 1977 to formulate accounting standards which will be established by the council of the Institute of Chartered Accountants. At the time of standard formulation ASB will give due consideration to the International Accounting Standards and try to integrate them to the extent possible.

Sr. No. 2. AS 2 Valuation of Inventories 3. AS 3 Cash Flow Statement

Title

1. AS 1 Disclosure of Accounting Policies

4. AS 4 Contingencies & Events Occurring after Balance Sheet Date 5. AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies

6. AS 6 Depreciation Accounting
7. AS 7 Construction Contracts 8. AS 8 Research & Development 9. AS 9 Revenue Recognition 10. AS 10 Accounting for Fixed Assets 11. AS 11 The Effect of Changes in Foreign Exchange Rates

Contd..

Sr. No.

Title

12. AS 12 Accounting for Government Grants 13. AS 13 Accounting for Investments 14. AS 14 Accounting for Amalgamations

15. AS 15 Employee Benefits 16. AS 16 Borrowing Costs

17. AS 17 Segment Reporting 18. AS 18 Related Party Disclosures 19. AS 19 Leases 20. AS 20 Earnings Per Share 21. AS 21 Consolidated Financial Statements 22. AS 22 Accounting for Taxes on Income 23. AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

Contd..

Sr. No.

Title

24. AS 24 Discontinuing Operations

25. AS 25 Interim Financial Reporting 26. AS 26 Intangible Assets 27. AS 27 Financial Reporting for Interests in Joint Ventures 28. AS 28 Impairment of Assets 29. AS 29 Provisions, Contingent Liabilities and Contingent Assets 30. AS 30 Financial Instruments: Recognition and Measurement 31. AS 31 Financial Instruments: Presentations 32. AS 32 Financial Instruments: Disclosures

A set of financial reporting standards issued by International Accounting Standards Board. It consists of: 1. International Financial Reporting Standards 2. International Accounting Standards 3. Interpretations originated by the International Financial Reporting Interpretation Committee (IFRIC) 4. Interpretations issued by the former Standing Interpretations Committee (SIC)

TRADITIONAL APPROACH

MODERN APPROACH

Personal Accounts Real Accounts Nominal Accounts

Assets Liabilities Income Expenditure Capital

Step 1 Identification of transactions & events for record keeping & creation of resource document. Step 2 Analyzing the transaction & events, identifying the accounts which are affected by such transactions & events & which A/C is Dr. and which A/C is Cr. Step 3 Journalisation: recording the transactions & events in a journal which is also called Day Book or Book of Primary Entry.
Contd..

Step 4 Ledger posting & Balancing: A/C wise classification of transactions & events into main books of A/C & periodically balancing the A/C to determine the balances. Step 5 Trial Balance: periodic compilation of A/C balances to verify whether aggregate Dr. balances are equal to aggregate Cr. Balances. Step 6 End of the period adjustments: Accruals & deferrals are identified & accounted for at the end of each accounting period.
Contd..

Step 7 Preparation of Final Accounts: Income Statement, Balance Sheet, Statement of Changes in Shareholders Equity & Statement of Cash Flows are prepared.

Purchase Day Book

Profit & Loss Account

Purchase Return Book Transactions & Events Ledger Accounts Statement of Change in Equity

Sales Day Book

Trial Balance

Sales Return Book

Balance Sheet

Cash Book Bank Reconciliation Journal Proper Other End of the Accounting Period Adjustments Rectification of Errors

Illustration Accounting Equation

Income Statement

Journal

Ledger

Trial Balance

Balance Sheet

Ledger Trial Balance Profit & Loss A/C Balance Sheet

Personal Accounts Credit the Giver, Debit the Receiver Real Accounts Debit what comes in, Credit what goes out. Nominal Accounts Debit all expenses & losses, Credit all incomes & gains

Assets Dr. the Increase; Cr. the Decrease. Liabilities Cr. the Increase; Dr. the Decrease. Incomes Cr. the Increase; Dr. the Decrease. Expenses Dr. the Increase; Cr. the Decrease. Capital Cr. the Increase; Dr. the Decrease.

Journal of M/S XXXXXXXXX for the Month of January 2011

Date Jan 1. Particulars Bank A/C Dr. To Capital A/C (Being business is started with a capital of Rs. 5,00,000) L/F 35 27 Amount (Dr.) 500000 Amount (Cr.) 500000

Jan 2.