ACCOUNTING

Process- identifying, measuring, communicating infjudgment & decision- users of a/c OBJECTIVES OF ACCOUNTING To keep systematic records of financial transactions and events To ascertain the P&L To ascertain the financial position of the business To provide information to the users for taking decisions To keep the solvency position To protect the business properties
1

FUNCTIONS OF ACCOUNTING
Recording Classifying Summarizing Analyzing and interpretating Communicating Meeting legal requirements

ADVANTAGES OF ACCOUNTING
Complete record of transactions Ascertainment of operational profit & loss Ascertainment of the financial position of the business Providing information to the users for taking decision To know the solvency position Efficiency of the business can be measured Legal evidence Facilitates raising of loans Helps in distributing dividend to the SH Proper utilization of funds
3

DISADVANTAGES OF ACCOUNTING
Recording only monetary transactions Provides only historical data Possibility of manipulation of a/c Accounting is done for the business as a whole ( product or process wise)

ACCOUNTING CONCEPTS
Business Entry Concepts
bs unit & person separate a/c prepared point of business & owner Only bs transaction recorded Personal transaction not recorded Contribution capital, goods pur for bs- recorded accept only sole proprietorship , partnership

ACCOUNTING CONCEPTS
Money Measurement concepts
transaction- money

Going Concern concept

continue- forever FA recorded original cost- dep deducted no realizable value recorded Assets & Liabilities are classified

Classification of Assets & Liabilities

Assets & Liabilities

Assets

Liabilities

CA

CL FL
7

FA

ACCOUNTING CONCEPTS
Cost concept Dual Aspect Concept
financial transaction- has- 2 fold effect receiving a benefit, giving a benefit equation is formed, Capital = A- L

A/cing Period Concept Realization Concept Objective Evidence Concept

8

CLASSIFICATION OF ACCOUNT
Accounts

Personal Accounts Natural Real Artificial (XYZ ltd)

Impersonal Accounts

Nominal

Representatives (Salary o/t, Prepaid exp) Tangible

Intangible

ACCOUNTING CYCLE
Journal Posting Balancing dr,cr Preparing TB Preparing Trading, P&L

Preparing B/S
10

JOURNAL
Prime entry Book of original entry Details of dr & cr side Entered 2 a/c Parts Of Journal Date Column Dr close- particular column Cr second - dr column Narration brief Lf page no of ledger
11

RULES OF JOURNAL ENTRY

Types of Account Debit
Personal Account Real Account Nominal Account The Receiver What comes in All expenses and losses The Giver What goes out All income and gains

Rules Credit

Compound Entry
Transaction- Similar nature
12

DIFFERENCE BETWEEN JOURNAL AND LEDGER

Basis of Difference
Object

JOURNAL
Transaction- recordedchronological order Book- original entry

LEDGER
Transaction- recordedledger order
Book- secondary entry

Nature of Book

Stage of recording

Recording- first stage

Recording- second stage

Name of the Process

Recording in journal Journalizing

Recording in ledger posting

Basis for preparation of final a/c

It not serve as a basis

It serve as a basis

13

LEDGER
Principal book of account Collection of journal USES All transaction- record Final effect- glance Prepare TB Prepare Final A/c Gives correct statistical figure
14

SUB- DIVISIONS OF LEDGER

The General Ledger Y, Exp, drawings, - other than dr & cr The Debtor Ledger Sold ledger (or) customer ledger, enter sold, cash received The Customer Ledger Bought ledger(or) suppliers ledger, enter purchase, cash paid

15

PARTS OF LEDGER
Date Particulars relates- transaction JF Amount

16

TRIAL BALANCE
Balance- standing- ledger a/c and cash book

Advantages
verify the arithmetical accuracy Prepare trading, P& L, B/S

Parts of Trial Balance

Name of the a/c LF Debit Credit
17

FINAL ACCOUNTS
FINAL ACCOUNTS

Trading & Profit & Loss

Balance Sheet

18

TRADING ACCOUNT
Buying & selling of goods Find- difference bet- SP & Cost Price Direct exp-Opening stock, Factory exp, Closing stock GP

PROFIT & LOSS A/C

Indirect exp Office exp NP
19

BALANCE SHEET
Set A&L to ascertain financial position firm

Objectives
show accurate financial position Gist of various transaction Show P&L

Equation of B/S

C= A-L L=A-C A=L+C

20

Difference between TB &B/S

Trial Balance
Show- balance all ledger

Balance Sheet
Show- bal personal & real a/c Prepared after- completion of Trading , P&L Object- check- financial position

Prepared after completion of ledger Object- check- arithmetical accuracy

Items- not in order

Shows- opening bal Heading- debit & credit

Order
Closing balance A&L

21