Basics Of Accounting

Accounting-Definition
According

to American Institute of Certified Public Accountants defined accounting as the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are ,in part at least ,of financial character, an interpreting the results thereof

Objectives of Accounting

Ascertain Operating results of the company To reveal the Financial Position To have better Control

USERS OF ACCOUNTING INFORMATION

Owners Management Creditors Regulatory Agencies Government Potential Investors Employees Researchers

PRINCIPLES OF ACCOUNTING
Principles of Accounting Accounting Concepts Accounting Conventions

Accounting Concepts
Business Entity Concept
Going Concern Concept
Dual Aspect Concept

Cost Concept

Money measurement Concept Realization Concept Accrual Concept Matching Concept

Accounting Conventions Convention of Conservatism Convention of Consistency Convention of Material Disclosure

LIMITATIONS OF FINANCIL ACCOUNTING

Qualitative Information Ignored Historical Nature of Accounting Personal Judgments influence Financial Statements

At a GLANCE.
Definition Objectives of Accounting Users of Accounting Accounting Principles

Steps in Accounting

Business Transactions

Journal

Ledger

Trial Balance

Final Accounts P & L Account Balance Sheet

Systems of Accounting
Cash System of Accounting Mercantile System or Accrual system of Accounting

Systems of Book Keeping Single-entry System Double Entry System

Terms Used in Accountancy

Book Keeping Transactions Entry Debtor Creditor Goods Account

Types of Accounts

Personal Accounts Real Accounts or Property Accounts Nominal accounts

Examples
1.

Karthik commenced business with capital of Rs.1,00,000 Purchased Furniture for Rs.5,000 Paid Salaries Rs.10,000 Paid o/s expenses Rs.900

2. 3. 4.

Rules of Double Entry

Personal Account: Debit the receiver Credit the giver Real Account: Debit what comes in Credit what goes out

Nominal Accounts: Debit all Expenses and Losses Credit all incomes and Gains

Examples
1.

2.
3. 4. 5.

6.

Sold Goods For Cash Sold Goods to Raj for Rs.20,000 Purchased goods from Ram for cash Rs.2000 Commission Received Rs.5000 Purchased Land for Rs 200000 Paid Interest on Loan Rs.10000

Examples
Rent Paid Salaries Paid Interest Received Dividends Received Machinery purchased for Cash Furniture sold Telephone charges paid Paid To Suresh Received from Mohan (the Proprietor)

Examples

Ajith started business with cash Rs.40,000 He Paid in to bank Rs.2,000 He purchased goods for cash Rs.15,000 He Sold goods for cash Rs.6,000 He purchased furniture and paid by Cheque Rs.5,000 He sold goods to Aravind Rs.4,000 He withdrew goods for personal use Rs.1,000

At a GLANCE.

Accounting Cycle Systems of accounting/Book Keeping Types of Accounts Rules of Double entry

JOURNAL

Book Containing Chronological Record of Transactions

Date Particulars L.F Debit Credit