BY D.

CHENNAREDDY

1
Accounting is termed as language of business. It
came into practice as an aid to human memory by
maintaining a systematic record of business
transactions. It was realized that accounting
records, containing a wide range of information ,
have potentialities of being used as the basis for
decision making.

2
Transactions
Nothing but an act of exchange of things or services
between the two parties.

Types of transactions

 Monetary Transactions

 Non-monetary Transactions

3
Business Transactions
Any transactions, dealings or events of a business which are in

part at-least, of a financial character are business transaction.

Types of Business Transactions

o Purchase or sale of goods for cash or on credit.

o Purchase of property, furniture, machine etc.. for the use of business

either in cash or on credit.

o Borrowing or lending of money.

o Incurring routine expenses like salary, wages, rent, electricity charges

etc… & earnings incomes like commission, interest etc…
4
Definition
According to “R.N.Carter” Book-keeping is
defined as the science and art of correctly
recording in books of account all those
transactions that result in the
transfer of money or money’s worth.

According to “A.H.Rosenkamph”
Book-keeping is a art of business
transaction in a systematic manner.

5
 Provides a permanent record of each transactions.
 Soundness of a firm can be assessed from the records
of asset & liabilities on a particular date.
 Entries related to incomes and expenditure of a concern
facilitate to know the profit & loss for a given period.
 It enables to prepare a list of customers & suppliers to
ascertain the amount to be received or paid.
 It is a method gives opportunities to review the
business policies in the light of past records.

6
 Business entity concept
 Money measurement concept
 Dual aspect concept
 Realization concept or Revenue
recognition concept
 Going on concept
 Matching concept
 Period concept

7
 Disclosure:-
Spent money (in & out) should be maintained so that profit
can be calculated.
 Materiality:-
Should follow a procedure produced by government which
is uniform standard.
 Conservatism:-
Everyone must be conserved or to be safer side. Loss
can be anticipated but not on profit.
 Consistency:-
should state properly and should be consistent.

8
American Institute Of Certified Public Accountants(AICPA)
which defines
accounting as “the art of
recording, classifying and
summarizing in a significant
manner and in terms of money,
transaction & events”.

9
 To keep systematic record.
 To ascertain the results of the operation.
 To ascertain the financial position of the business.
 To portray the liquidity position.
 To protect business properties.
 To facilitate rational decision-making.

10
INTERNAL USERS EXTERNAL USERS

 Management  Potential Investors

 Creditors
 Owners  Government
 Employees  Tax authorities
 Consumers
 Labour Unions
 Trade Associations
 Stock Exchanges
 Researches
 Others

11
 Record Keeping Function

 Managerial Function

 Legal requirement Function

 Language of business

12
ADVANTAGES
 helps in having complete
record of business
transaction.
 Gives information about
profit or loss
 Decision making.
 Provides comparison
study between previous
& current years.
 It helps in complying with
certain legal formalities
like filing of income tax &
sales –tax .
DISADVANTAGES
 Doesn’t reflect current
financial position.
 Transaction of non-
monetary mature do not
find place in accounting.
 Accounting do not always
present comparable data.
 Price changes are not
considered. Money value is
bound to change often from
time to time
13
14
 Business transactions are recorded in two ways

 Single Entry : It is incomplete system of recording business

transactions. The business organization maintains only cash book &
personal accounts of debtors & creditors.

 Double Entry : In this system every business transaction is having

a two fold effect of benefits giving & benefits receiving aspects.
The recording is made on the basis of both these aspects.

15
 The object of book-keeping is to keep a complete record of
all the transactions that place in the business. To achieve this
object, business transactions have been classified into three
categories as follows -

o Transactions relating to persons i.e.) Personal Account

o Transactions relating to the properties & assets i.e.) Real

Account

o Transactions relating to incomes & expenses i.e.) Nominal

Account

16
Personal Account
The rules means, if a person receives
anything from the business his account will be
debited in the books of the business, and if a
person gives anything to the business his account
will be credited.

17
Real Account
It relates to things or property. If anything is
coming into business, account of that thing is
debited & if anything is going out of the business,
account of that thing is to be credited.

18
Nominal Account
The accounts of expenses or losses of the business
are to be debited whereas the accounts of incomes or
profits are to be credited.

Dr. Nominal Account Cr.

Received
Rent, loss, bad commission,
debt, depreciation interest, discount
etc… etc…
Debit losses & Credit Incomes &
Expenses Profits

19
 The difference between book-keeping & Accounting can
be summarized on the basis of

 Transactions
 Posting
 Total & Balance
 Income statement & Balance Sheet
 Rectification of errors
 Special skill & knowledge
 Liability

20
 Book-keeping & Accountancy
By M. G. Patkar
 Financial Analysis
By G. Srinivas Rao
D. Hanumantha Rao
Muhammad Gayasuddin
 Notes
By Abby Chacko

21
22