Accounts gr 1

OVERVIEW OF ACCOUNTING

Topics to be presentedAccounting: Concept Branches ImportanceUsers and Uses of Accounting InformationAccounting ConceptsAccounting ConventionsAccounting Standards Meaning Objectives ProcessNeed for Global Standards in IndiaIFRS

Accounting may be defined as the process of recording,

classifying, summarizing, analysing and interpreting the

financial transactions and communicating the results.

There of to the persons interested in such information.

AICPA defines Accounting as “The process of identifying,

measuring and communicating economic information to

permit; informed judgement and decisions by the uses

of accounts”.

BRANCHES OF ACCOUNTING

Financial Accounting It is concerned with

record keeping directed towards the reparation of Trial balance, profit and loss account and balance sheet.

Cost Accounting Cost Accounting is the

process of accounting for costs. It shows classification and analysis of cost on the basis of functions process, products etc.

Management Accounting It deals with the processing of data sentenced in financial accounting and cost accounting for managerial decision making.

Tax Accounting This branch of accounting is becoming important because of complex tax laws governing income-tax, Excise duty, value added tax etc.

IMPORTANCE OF ACCOUNTING

systematic recording

It records income and expenses in such a manner that

net result of any period can be determined

tax assessment easy

It records assets and liability in such a way that

financial position of the entity can be judged.

monitor and evaluate organizations performance

reliable and timely information for decision making.

a basis for estimation and projection

enables preparation of budgets.

USERS OF ACCOUNTING INFORMATION

CLASSIFICATION OF ACCOUNTING PRINCIPLES

CONCEPTS

Separate Entity

Accounting Period

Money Measurement

Going Concern

Cost Concept

Matching Concept

Accrual Basis of Accounting

Dual Aspect

SEPARATE ENTITY

ACCOUNTING PERIOD

MONEY MEASUREMENT

GOING CONCERN

COST CONCEPT

ACCRUAL BASIS OF ACCOUNTING

DUAL ASPECT

CONVENTIONS OF ACCOUNTING

CONSERVATISM

CONSISTENSY

MATERIALITY

DISCLOSURE

CONSERVATISM CONSISTENCY

MATERIALITY DISCLOSURE or TRANSPERENCY

Accounting is considered as the language of business.

Similarly accounting has certain rules to be observed

by the accountants so that it is understood by all in

the same sense.

Thus accounting standards are certain set of rules

and guidance based on the principles and methods of

accounting to be followed to have uniformity in

terminology approach and presentation of results

Accounting Standards in India are issued By the

Institute of Chartered Accountants of India (ICAI).

At present there are 31 Accounting Standards

issued by ICAI.

In India, issued by ICAI on 21st April,1977

Initiated by Kumar Mangalam Birla, chairman

committee of Corporate Governance for Financial

Disclosures

OBJECTIVES AND FUNCTIONS OF AS

Standardize the diverse accounting policies

Add the reliability to the financial statement

Eradicate puzzling variation in treatment of accounting

aspects

Facilitate inter-firm and intra-firm comparison

To provide interpretations and guidance on AS, time to

time

Identification of Broad Areas

Constitution of Study Group

Revision of Preliminary

Draft

Circulation of Revised Draft

Meeting with specified

outside bodiesFinalization of exposure draft of proposed AS

Issuance of exposure draft

Consideration of comments

and finalization of the draft by

ASB

Modification of the draft, if necessary

Issuance of AS

FORMULATION OF AS

NEED FOR GLOBAL STANDARDS IN INDIA

Expanding world trade

Proliferation of multinational corporations

Increasing role of global capital markets

Increased foreign direct investment

Growth of multinational political organizations

A way to minimize costs

IFRS convergence will result in improved

disclosure by Indian companies in line with

global best practices.

INTERNATIONAL FINANCIAL REPORTING

STANDARDS

It is unique, high quality, easily understandable

global accounting standards.

IFRSs are the accounting standards published by the

International Accounting Standards Board (IASB).

The IASB was established in 2001 by its forerunner,

the International Accounting Standards Committee,

which itself was established in 1973.

Key Problems that Cause Resistance to IFRSs

Agreeing on who will create the rules

How different the rules will be from current

national GAAP

Costs of changing GAAPs

National dominance