ACCOUNTANCYACCOUNTANCY
Provides information useful forProvides information useful for
shareholders, owners, investors, cr...
Accounting is the language of businessAccounting is the language of business
 Language has toLanguage has to
convey the s...
Basic Accounting conceptsBasic Accounting concepts
 Business entity conceptBusiness entity concept
 Money measurement co...
Generally Accepted AccountingGenerally Accepted Accounting
Principles (GAAP)Principles (GAAP) is the term used tois the te...
Financial accounting is information thatFinancial accounting is information that
must be assembled and reportedmust be as...
Many countries use or are converging onMany countries use or are converging on
the International Financial Reportingthe I...
GAAP are imposed on companies so thatGAAP are imposed on companies so that
investors have a minimum level ofinvestors have...
Basic Accounting conceptsBasic Accounting concepts
 Business entity conceptBusiness entity concept
 Money measurement co...
Accounting conventionsAccounting conventions
ConsistencyConsistency
DisclosureDisclosure
ConservatismConservatism
Mate...
Accounting Standards in IndiaAccounting Standards in India
 They are accounting rules and procedures relating toThey are ...
AS 1 – Disclosure of Accounting PoliciesAS 1 – Disclosure of Accounting Policies
Certain fundamental accounting assumption...
Give transactions for each of the following effects –Give transactions for each of the following effects –
1)1) Increase i...
Calculate the amount of capital –Calculate the amount of capital –
Cash in hand Rs.1,000; Bills payable Rs.3,000Cash in ha...
Give journal entriesGive journal entries
1)1) Started business with a capital of Rs.75,000Started business with a capital ...
11)11) Received a cheque from D Rs.12,000Received a cheque from D Rs.12,000
12)12) Purchased furniture for office use Rs.1...
2.2. Pass journal entries for the following transactions –Pass journal entries for the following transactions –
2006 Nov 1...
3. 2006 Dec 1 Sold goods to X for cash Rs.55,0003. 2006 Dec 1 Sold goods to X for cash Rs.55,000
22 Deposited Rs.50,000 in...
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Acc principles

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Acc principles

  1. 1. ACCOUNTANCYACCOUNTANCY Provides information useful forProvides information useful for shareholders, owners, investors, creditors,shareholders, owners, investors, creditors, labour, government, researchers etc.labour, government, researchers etc.  Accounting is therefore, the art of recording,Accounting is therefore, the art of recording, classifying and summarizing in a significantclassifying and summarizing in a significant manner, and in money terms, transactions andmanner, and in money terms, transactions and events which are in part at least, of a financialevents which are in part at least, of a financial nature and interpreting the resultsnature and interpreting the results..
  2. 2. Accounting is the language of businessAccounting is the language of business  Language has toLanguage has to convey the sameconvey the same meaningmeaning  Has to be understoodHas to be understood by all users ofby all users of accounting informationaccounting information AA generally accepted setgenerally accepted set of rules can thusof rules can thus provide uniformity inprovide uniformity in accounting procedureaccounting procedure and practice.and practice. Thus certain conceptsThus certain concepts have been agreed uponhave been agreed upon by accountantsby accountants
  3. 3. Basic Accounting conceptsBasic Accounting concepts  Business entity conceptBusiness entity concept  Money measurement conceptMoney measurement concept  Cost conceptCost concept  Going concern conceptGoing concern concept  Realization conceptRealization concept  Matching conceptMatching concept  Accounting period conceptAccounting period concept  Dual aspect conceptDual aspect concept
  4. 4. Generally Accepted AccountingGenerally Accepted Accounting Principles (GAAP)Principles (GAAP) is the term used tois the term used to refer to the standard framework ofrefer to the standard framework of guidelines for financial accounting used inguidelines for financial accounting used in any given jurisdiction.any given jurisdiction. GAAP includes the standards, conventions,GAAP includes the standards, conventions, and rules accountants follow in recordingand rules accountants follow in recording and summarizing transactions, and in theand summarizing transactions, and in the preparation of financial statements.preparation of financial statements.
  5. 5. Financial accounting is information thatFinancial accounting is information that must be assembled and reportedmust be assembled and reported objectively.objectively. Third-parties who must rely on suchThird-parties who must rely on such information have a right to be assured thatinformation have a right to be assured that the data are free from bias andthe data are free from bias and inconsistency, whether deliberate or not.inconsistency, whether deliberate or not. For this reason, financial accounting reliesFor this reason, financial accounting relies on certain standards or guides that areon certain standards or guides that are called "Generally Accepted Accountingcalled "Generally Accepted Accounting Principles" (GAAP).Principles" (GAAP).
  6. 6. Many countries use or are converging onMany countries use or are converging on the International Financial Reportingthe International Financial Reporting Standards (IFRS), established andStandards (IFRS), established and maintained by the International Accountingmaintained by the International Accounting Standards Board.Standards Board.
  7. 7. GAAP are imposed on companies so thatGAAP are imposed on companies so that investors have a minimum level ofinvestors have a minimum level of consistency in the financial statementsconsistency in the financial statements they use when analyzing companies forthey use when analyzing companies for investment purposes.investment purposes. GAAP cover such things as revenueGAAP cover such things as revenue recognition, balance sheet itemrecognition, balance sheet item classification and outstanding shareclassification and outstanding share measurements.measurements. Companies are expected to follow GAAPCompanies are expected to follow GAAP rules when reporting their financial datarules when reporting their financial data via financial statements.via financial statements.
  8. 8. Basic Accounting conceptsBasic Accounting concepts  Business entity conceptBusiness entity concept  Money measurement conceptMoney measurement concept  Cost conceptCost concept  Going concern conceptGoing concern concept  Realization conceptRealization concept  Matching conceptMatching concept  Accounting period conceptAccounting period concept  Dual aspect conceptDual aspect concept
  9. 9. Accounting conventionsAccounting conventions ConsistencyConsistency DisclosureDisclosure ConservatismConservatism MaterialityMateriality
  10. 10. Accounting Standards in IndiaAccounting Standards in India  They are accounting rules and procedures relating toThey are accounting rules and procedures relating to measurement, valuation and disclosure, issued bymeasurement, valuation and disclosure, issued by The Institute of Chartered Accountants of India.The Institute of Chartered Accountants of India.  Accounting standards are mandatory as regards theAccounting standards are mandatory as regards the published accounts of limited companies.published accounts of limited companies.  Certain accounting standards such as AS-1, AS-3Certain accounting standards such as AS-1, AS-3 are mandatory for all concerns.are mandatory for all concerns.  For other concerns, accounting standards areFor other concerns, accounting standards are mandatory when they are required to be audited.mandatory when they are required to be audited.
  11. 11. AS 1 – Disclosure of Accounting PoliciesAS 1 – Disclosure of Accounting Policies Certain fundamental accounting assumptions underlieCertain fundamental accounting assumptions underlie the preparation and presentation of financialthe preparation and presentation of financial statements. They are usually not specifically statedstatements. They are usually not specifically stated because their acceptance and use are assumed.because their acceptance and use are assumed. They are going concern, consistency and accrual. InThey are going concern, consistency and accrual. In case any of the above fundamental assumptions arecase any of the above fundamental assumptions are not followed, the fact should be disclosed in thenot followed, the fact should be disclosed in the financial statements along with reasons.financial statements along with reasons. Accounting policies are specific accounting principlesAccounting policies are specific accounting principles and methods adopted by enterprises. Differentand methods adopted by enterprises. Different enterprises operating under diverse and complexenterprises operating under diverse and complex economic activities may adopt different policies ineconomic activities may adopt different policies in areas like depreciation, treatment of retirementareas like depreciation, treatment of retirement benefits, valuation of investments, recognition ofbenefits, valuation of investments, recognition of profit on long-term contracts, treatment of contingentprofit on long-term contracts, treatment of contingent liabilities etc.liabilities etc.
  12. 12. Give transactions for each of the following effects –Give transactions for each of the following effects – 1)1) Increase in asset and increase in liabilityIncrease in asset and increase in liability 2)2) Increase in asset and decrease in another assetIncrease in asset and decrease in another asset 3)3) Decrease in asset and decrease in capitalDecrease in asset and decrease in capital 4)4) Decrease in asset and decrease in liabilityDecrease in asset and decrease in liability 5)5) Increase in capital and increase in assetIncrease in capital and increase in asset 6)6) Increase in capital, decrease in asset and decreaseIncrease in capital, decrease in asset and decrease in liabilityin liability 7)7) Increase in asset, decrease in another asset andIncrease in asset, decrease in another asset and increase in liabilityincrease in liability 8)8) Increase in asset, increase in capital and decreaseIncrease in asset, increase in capital and decrease in another assetin another asset
  13. 13. Calculate the amount of capital –Calculate the amount of capital – Cash in hand Rs.1,000; Bills payable Rs.3,000Cash in hand Rs.1,000; Bills payable Rs.3,000 Plant and machinery Rs.10,000; Creditors Rs.3,000Plant and machinery Rs.10,000; Creditors Rs.3,000 Stock Rs.8,000; Goodwill Rs.6,000Stock Rs.8,000; Goodwill Rs.6,000 Debtors Rs.5,000; Cash at bank Rs.4,000Debtors Rs.5,000; Cash at bank Rs.4,000 Loan taken Rs.1,000; Loan to Mr. Y Rs.5,000Loan taken Rs.1,000; Loan to Mr. Y Rs.5,000 Capital = Assets – LiabilitiesCapital = Assets – Liabilities = (Cash 1,000 + P&M 10,000 + Stock 8,000 + G/W= (Cash 1,000 + P&M 10,000 + Stock 8,000 + G/W 6,000 + Debtors 5,000 + Bank 4,000 + Loan to Y 5,000)6,000 + Debtors 5,000 + Bank 4,000 + Loan to Y 5,000) – (B/P 3,000 + Creditors 3,000 + Loan taken 1,000)– (B/P 3,000 + Creditors 3,000 + Loan taken 1,000) Capital = Rs.32,000Capital = Rs.32,000
  14. 14. Give journal entriesGive journal entries 1)1) Started business with a capital of Rs.75,000Started business with a capital of Rs.75,000 2)2) Opened a bank account with SBI for Rs.40,000Opened a bank account with SBI for Rs.40,000 3)3) Purchased goods from K & Co for Rs.10,000Purchased goods from K & Co for Rs.10,000 4)4) Purchased goods from Mr.Z on credit Rs.25,000Purchased goods from Mr.Z on credit Rs.25,000 5)5) Paid rent to landlord Rs.500 by cashPaid rent to landlord Rs.500 by cash 6)6) Goods returned to Mr.Z Rs.2,500Goods returned to Mr.Z Rs.2,500 7)7) Withdrew cash for household expenses Rs.600Withdrew cash for household expenses Rs.600 8)8) Sold goods to Mr. L for cash Rs.12,000Sold goods to Mr. L for cash Rs.12,000 9)9) Sold goods to D on credit Rs.15,000Sold goods to D on credit Rs.15,000 10)10) Goods returned by D Rs.500Goods returned by D Rs.500
  15. 15. 11)11) Received a cheque from D Rs.12,000Received a cheque from D Rs.12,000 12)12) Purchased furniture for office use Rs.12,000 byPurchased furniture for office use Rs.12,000 by chequecheque 13)13) Paid Rs.1,000 for advertisement by chequePaid Rs.1,000 for advertisement by cheque 14)14) Withdrew from bank Rs.1,500 for office use.Withdrew from bank Rs.1,500 for office use. 15)15) Paid salaries Rs.12,000 by cash.Paid salaries Rs.12,000 by cash.
  16. 16. 2.2. Pass journal entries for the following transactions –Pass journal entries for the following transactions – 2006 Nov 1 Cash deposited into bank Rs.1,00,0002006 Nov 1 Cash deposited into bank Rs.1,00,000 5   Paid Rs.30,000 for equipment by cheque5   Paid Rs.30,000 for equipment by cheque 8   Received as commission Rs.5,000 by cheque8   Received as commission Rs.5,000 by cheque 9   Withdrew Rs.10,000 as personal expenses from bank9   Withdrew Rs.10,000 as personal expenses from bank 14    Purchased stationery by cheque Rs.80014    Purchased stationery by cheque Rs.800 17    Paid sales tax by cheque Rs.5,00017    Paid sales tax by cheque Rs.5,000 20    20     Insurance premium paid by cheque Rs.5,000Insurance premium paid by cheque Rs.5,000 20   20    Purchased goods from Basu on credit Rs.55,000Purchased goods from Basu on credit Rs.55,000 21   21    Returned goods to Basu Rs.8,000Returned goods to Basu Rs.8,000 22   22    Sold goods for cash Rs.12,000Sold goods for cash Rs.12,000 23   23    Sold goods to A on credit Rs.40,000Sold goods to A on credit Rs.40,000 24   24    Deposited into bank Rs.7,000Deposited into bank Rs.7,000 25   25    A returned goods worth Rs.5,000A returned goods worth Rs.5,000 26   26    Received interest Rs.1,200Received interest Rs.1,200 27   27    Purchase furniture by cheque Rs.3,500Purchase furniture by cheque Rs.3,500   
  17. 17. 3. 2006 Dec 1 Sold goods to X for cash Rs.55,0003. 2006 Dec 1 Sold goods to X for cash Rs.55,000 22 Deposited Rs.50,000 into bankDeposited Rs.50,000 into bank 3 Purchased stationery Rs.4003 Purchased stationery Rs.400 4 Purchased goods from Sen on credit4 Purchased goods from Sen on credit Rs.2,00,000Rs.2,00,000 8 Purchased a computer from Banerjee Rs.15,0008 Purchased a computer from Banerjee Rs.15,000 11 Paid advertisement expenses by cheque Rs.7,00011 Paid advertisement expenses by cheque Rs.7,000 15 Paid rent by cheque Rs.5,00015 Paid rent by cheque Rs.5,000 18 Sold goods to Ram on credit Rs.1,20,00018 Sold goods to Ram on credit Rs.1,20,000 20 Ram paid on account Rs.50,00020 Ram paid on account Rs.50,000 21 Paid Sen on account Rs.30,00021 Paid Sen on account Rs.30,000 22 Returned goods to Sen Rs.15,00022 Returned goods to Sen Rs.15,000 24 Paid wages Rs.4,000 by cash24 Paid wages Rs.4,000 by cash 27 Paid commission Rs.1,20027 Paid commission Rs.1,200 29 Withdrew for personal use in cash Rs,1,50029 Withdrew for personal use in cash Rs,1,500 30 Paid salary to office staff by cheque Rs.12,00030 Paid salary to office staff by cheque Rs.12,000   

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