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Unit I A Introduction Accouting

This document provides an introduction to accounting. It discusses the need for accounting to answer questions about business transactions, earnings, expenses, assets, and liabilities. Bookkeeping is introduced as recording financial transactions, while accounting is defined as identifying, measuring, and communicating economic information. The main objectives of accounting are maintaining records, calculating results, and communicating information to users like owners, creditors, and the government. The document outlines the basic accounting terms and concepts like the accounting equation, which states that assets must equal liabilities plus owner's equity.

Uploaded by

Gopal Krishnan
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
19 views

Unit I A Introduction Accouting

This document provides an introduction to accounting. It discusses the need for accounting to answer questions about business transactions, earnings, expenses, assets, and liabilities. Bookkeeping is introduced as recording financial transactions, while accounting is defined as identifying, measuring, and communicating economic information. The main objectives of accounting are maintaining records, calculating results, and communicating information to users like owners, creditors, and the government. The document outlines the basic accounting terms and concepts like the accounting equation, which states that assets must equal liabilities plus owner's equity.

Uploaded by

Gopal Krishnan
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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UNIT I

INTRODUCTION TO
ACCOUNTING

NEED AND IMPORTANCE
What has happened to the investment?
What is the result of the business transactions?
What are the earnings and expenses?
How much amount is receivable /Payable from/
to customers
From/To whom goods have been Purchased/ sold on
credit?
What are the nature and value of assets & Liabilities
possessed by the business concern?



BOOK-KEEPING
Is the science and art of correctly recording in the
books of account all those business transactions that
result in the transfer of money or moneys worth.
The branch of knowledge which tells us how to keep a record
of business transactions.
Advantages:
Permanent, Reliable & Arithmetical accuracy
Net Results & Ascertainment of Financial Position & Progress
Calculation of Dues, Taxation and Mgt. Decision making
Control over Assets and borrowings
Fixing the selling price & Legality issues
Identifying Dos and Donts


ACCOUNTING
American Accounting Association defines
accounting as the process of identifying,
measuring and communicating economic
information to permit informed judgements and
decision by users of the information
The systematic and comprehensive recording of
financial transactions pertaining to a business.
The process of summarizing, analyzing and
reporting these transactions.
4
OBJECTIVES
The main objectives of accounting are:
1. To maintain accounting records
2. To calculate the result of operations
3. To ascertain the financial position
4. To communicate the information to users
Business
transaction
s
(monetary
value)
Identifying
Recording
Classifying
Summarizing
Analyzing
Interpreting
Communicating

Process
Information to
Users
Output Input
PROCESS OF ACCOUNTING
USERS ACCOUNTING INFORMATION
Owners & Management
Employees & Trade Unions
Creditors, Banks & Lending Institutions
Potential Investors & Present Investors
Government & Tax Authorities
Regulatory Agencies &
Researchers
8
BRANCHES OF ACCOUNTING
Financial accounting
Recording business transactions in the books of accounts
to found the operating result(FP) for a particular period
Cost accounting
Collection, classification and ascertainment of the cost of
production or job undertaken by the firm
Management accounting
For the purpose of policy formulation, planning, control
and decision making by the management

9
BASIC ACCOUNTING TERMS
1. Cash transaction
Cash receipt or payment
2. Credit transaction
Where cash is not involved immediately but will be paid
or received later
3. Proprietor
A person who owns a business
4. Capital
Amount invested by the proprietor in the business
5. Assets
Properties belongings to the business







CONT
6. Liabilities
Financial obligations of a business.
The amounts which a business owes to
others.
7. Drawings
The amount of cash or value of goods
withdrawn from the business by the
proprietor for his personal use
CONT
8. Debtors
A person who receives a benefit without giving
money , but liable to pay in future or in due
course of time is debtor
9. creditors
A person who gives a benefit without receiving
money , but to claim in future is a creditor

CONT
10. Purchases
The amount of goods bought by a business
for resale or for use in the production.
11. Purchases return or returns outward
When goods are returned to the suppliers
due to defective quality or not as per the
terms of purchase
12.SALES
The amount of goods sold that are already
bought or manufactured by the company.
CASH SALES
Sold for Cash
CREDIT SALE
Sold but payment are not received at that time
TOTAL SALES
= Cash Sales + Credit Sales
13.SALES RETURN
14. STOCK
15. REVENUE
Amount receivables or realized from sale of
goods
Earnings from Interest, Commission, Dividend
etc.
16.EXPENSES
Amount spent in order to produce and sell the
goods and services
17. INCOME
Difference between Revenue and Expenses
= Revenue Expenses.
18. VOUCHER
19. INVOICE
20. RECEIPT
ACCOUNTING EQUATION
Fundamental Accounting Equation:
Assets = Liabilities + Owners Equity
This equation is always in balance

In order for this equation to remain in balance,
double-entry bookkeeping is employed.
That is, the recording of every transaction or event must
have at least two parts
Either an equal impact (increase or decrease) to both sides of
the equation or equal and opposite impact to one side.
The recording of every transaction must keep this equation
in balance
21

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