Transcript
Accountancy
7,000 years ago in MesopotamiaHistory
Definition
Accounting is defined by the American Institute of Certified Public Accountants (AICPA) 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, and interpreting the results thereof."
Objectives of Accounting System
Timely and accurate picture of performanceTo ascertain the financial position of the business as a whole.
Generate financial reports for management, lenders, creditors
Facilitate filing of tax returns (sales and payroll taxes more important than income tax)
Prevent and detect fraud, waste and theft
Types of Accounts
Personal A/c
Impersonal A/c
Real A/c Nominal A/c
Personal A/c
1 • Natural Personal A/c
2 • Artificial Personal A/c
3 • Representative Personal A/c
Natural Personal A/cFirm Individual Persons
Ex:- Raju A/c, Ram A/c etc.
Artificial Personal A/cBusiness Business
Ex:- Bank A/c, Xyz & Co Ltd. etc
Representative Personal A/c
Outstanding Expenses
Prepaid Incomes
Rules for Personal A/cCredit the G
iverDeb
it th
e Re
ceiv
er
Types of Accounts
Personal A/c Impersonal A/c
Real A/c Nominal A/c
Real A/c
1 •Tangible Real A/c
2 •In-Tangible Real A/c
Tangible Real A/c
Properties
Buildings a/c Machinery a/c
In-Tangible Real A/c
Patents Copy Rights
Rules for Real A/c
Credit What Goes Out
Debit What Comes in
Types of Accounts
Personal A/c Impersonal A/c
Real A/c Nominal A/c
Nominal A/c
Credit all Incomes and gains
Debit all Losses and Expences
ACCOUNTING EQUATION:
Assets=Liabilities + capitalCapital=Assets-LiabilitiesLiabilities=Assets -Capital
Accounting equation is an extension of businessEntity (or) dual aspect concept.
ACCOUNTING CONCEPTS: These are basic conditions assumptions guidelines on which the accounting is based. they are:
Business entity concept: It means of separation of owner and business
Dual aspect concept: It means two, any transaction will have two aspects
Accounting period concept: The period of checking the books of accounts from the beginning to end of the financial year.
Going concern concept: It means continuously any person start a business new and should go on. To start a business with an intension to of earning more profits
Cost concept: The total amount of expenditure which is incurred in a financial year.
Money measurement concept: it means the value of every transaction should measure in terms of money
Matching concept: To measure the profits for a particular period is essential to match accurately that cost associated with revenues.
Realization concept: imaginary value should be anticipated but not a security have a greater value.
Accrual concept: costs are recognized when they are incurred when they are not paid.
Rupee value concept: it assumes that the value of a rupee constant.
Business entity concept: It means of separation of owner and business Dual aspect concept: It means two, any transaction will have two
aspects Accounting period concept: The period of checking the books of
accounts from the beginning to end of the financial year. Going concern concept: It means continuously any person start a
business new and should go on. To start a business with an intension to of earning more profits
Cost concept: The total amount of expenditure which is incurred in a financial year.
Money measurement concept: it means the value of every transaction should measure in terms of money
Matching concept: To measure the profits for a particular period is essential to match accurately that cost associated with revenues.
Realization concept: imaginary value should be anticipated but not a security have a greater value.
Accrual concept: costs are recognized when they are incurred when they are not paid.
Rupee value concept: it assumes that the value of a rupee constant.
Business Owner
Business Entity Concept
Dual Aspect Concept
Debit Credit
Accounting Period Concept
All the transactions are recorded in the books of accounts on the assumption that profits on these transactions are to be
ascertained for a specified period. This is known as accounting period concept. Thus,
this concept requires that a balance sheet and profit and loss account
should be prepared at regular intervals. This is necessary for different purposes
like, calculation of profit, ascertaining financial position, tax computation
etc.
Going Concern Concept
DepreciationFuture Profit Estimation
Investors
Cost Concept
Cost of the Machine
Before 1 Month 100000
Before 1 Month 80000
Money Measurement Concept
This concept assumes that all business transactions must be in terms ofMoney. It should not record the transactions with is not related to money.
Matching Concept
Costs Revenues
To Calculate Profit
Realization Concept
Wrong
accounting records only when it is realized
Right
Accrual Concept
costs are recognized when they are incurred when they are not paid.
Credit Sale
Rupee Value Concept
It assumes that the value of a Rupee Constant.
ACCOUNTING CONVENTIONS: These are the rules and regulations,customs,usages,which are followed inorder to record the transactions in financial accounting.
There are 5 important conventions are follow under:-
o Convention of consistency: the formats and forum ales procedures are not changing till long period of time.
o Convention of disclosure: every transaction should be recorded and nothing should be hidden
o Convention of materiallity.: there must be heading and terms related to the heading can be taken at one place.
o Convention of conservetism.: play safe means taking necessary steps to safeguard the cash flow.
o Convention of feasability.: minimizing the expenditure and wastage should be avoided.
There are 5 important conventions are follow under:-oConvention of consistency: the formats and forum ales
procedures are not changing till long period of time.oConvention of disclosure: every transaction should be
recorded and nothing should be hiddenoConvention of materiallity.: there must be heading and
terms related to the heading can be taken at one place.oConvention of conservetism.: play safe means taking
necessary steps to safeguard the cash flow.oConvention of feasability.: minimizing the expenditure
and wastage should be avoided.
AAAomiomiAccounting
Cycle
1.Identifyingthe transaction
2.Analyse the transaction
3.journalise
4.Ledger And posting
5. Prepare the Trial balance
6.Adjustingentries
7. AdjustingTrial balance
8. Preparing The financialstatement
9. Closing The entries
ACCOUNTING CYCLE
1.Identifyingthe transaction
2.Analyse the transaction
Transaction:Cash Received from Raju
Analyse:-
Cash related to Real Account
Raju Related to Personal Account
The Rules of that accounts should be applied.
3.journalise
Date Particulars L.F No
Debit Amount
Credit Amount
Jan 1 2011
Cash A/c Dr
To Raju A/c
(Being Cash Received From Raju
XXXXX
XXXXX
Journals
4.Ledger And posting
Date Particulars J.F No
Amount Date Particulars J.F No
Amount
Jan 1 To Raju A/c XXXXX Jan 31 By Balance C/d XXXXX
Date Particulars J.F No
Amount Date Particulars J.F No
Amount
Jan 31 To balance c/d XXXXX Jan 1 By Cash A/c XXXXX
Dr
Dr
Cr
CrCash A/c
XXXXX XXXXX
Feb 1 To balance b/d XXXXX
XXXXX XXXXX
Feb 1 by balance b/d XXXXX
Raju A/c
5. Prepare the Trial balance
S.NO Particulars Debit Amount
Credit Amount
12
Cash A/c Raju A/c
XXXXX
XXXXX
XXXXXXXXXX
Trial Balance
6.Adjustingentries
Adjusting Entries are journal entries that are made at the end of the accounting period, to adjust expenses and revenues to the accounting period where they actually occurred.
Accrued revenues Revenues already earned but not yet paid or recorded.
Unearned revenues Revenues received in cash and recorded as liabilities prior to being earned.
Accrued expenses expenses already incurred but not yet paid or recorded.
Prepaid expensesexpenses paid in cash and recorded as assets prior to being used.Other adjusting entries include depreciation of fixed assets, allowances for bad debts, and inventory adjustments.
7. AdjustingTrial balance
7. AdjustingTrial balance
Adjusted Trial BalanceJanuary 31, 2010
Debit CreditCash $20,430 −Accounts Receivable 5,900 −
Office Supplies 4,320 −Prepaid Rent 24,000 −Equipment 80,000 −Accumulated Depreciation − $1,100
Accounts Payable − 5,200
Utilities Payable − 3,964
Unearned Revenue − 1,000
Interest Payable − 150
Notes Payable − 20,000Common Stock − 100,000
Service Revenue − 85,600
Wages Expense 38,200 −
Supplies Expense 18,480 −
Rent Expense 12,000 −Miscellaneous Expense 3,470 −
Electricity Expense 2,470 −
Telephone Expense 1,494 −
Depreciation Expense 1,100 −
Interest Expense 150 −
Dividend 5,000 −Total $217,014 $217,014
8. Preparing The financialstatement
1.Trading Account2.Profit and Loss A/c3.Balance Sheet
AAAomiomiAccounting
Cycle
1.Identifyingthe transaction
2.Analyse the transaction
3.journalise
4.Ledger And posting
5. Prepare the Trial balance
6.Adjustingentries
7. AdjustingTrial balance
8. Preparing The financialstatement
9. Closing The entries
ACCOUNTING CYCLE
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