Accounting The Art of Recording Classifying Summarizing and Communicating the results Of business transactions
AccountingAccounting is the art of recording,classifying, summarizing andcommunicating the results of thebusiness transactions.Accounting also called the language ofbusiness
Accounting The Art of Interpreting the financial activities Measuring the financial activities Getting the results from such activities And communicating these results
Accounting The Art of interpreting, measuring and communicating the results of financial activities.
Accounting Is a process That create Useful Financial information For its users(basic purpose of Accounting)
The Purpose of AccountingThe basic purpose of Accounting is toprovide information to decision makers thatis useful in making economic decisions.
Accounting Information needed by: Management Internal Investors Creditors Government Agencies External Researchers Labor Etc
Types of Accounting Financial Accounting General Purpose (Profit, loss, assets, obligation etc) Management Accounting Helps in Planning and Control Tax Accounting Helps in preparation of Income Tax Return etc
Economic Activities Human ActivitiesNon-Economic Activities Economic Activities Profession Business
Functions of Accounting System In every Accounting System, the economic activities of the organization are Recoded in the books of accounts. Next, the recorded data are Classified in the system to accumulate sub-total for various types of economic activities. Finally, the information is Summarized in Accounting Repots i.e. designed to meet the information needs of the various decision makers.
BusinessBusiness is a legal financial activity, for whichon specific education is required and in whichreturn is also not definite
Financial Statements A set of Financial Statements consist of four related accounting reports that summarizes the financial resources, obligations, profitability and cash transaction of a business in the few pages1. Balance Sheet: Financial resources and obligations2. Income Statement: Profitability of business3. Statement of Owner’s Equity: Obligation of business to Owner4. Statement of Cash Flow: Cash Transaction of a Business.
Distinguish b/w Accounting and Book-keeping Book-keeping Accounting It refers to the daily It refers to the preparation operation of an accounting of Accounting system system i.e. Recording and classifying Recording and classifying It requires little skill of the transactions accounting Summarize the data Prepare the Final Reports It requires Professional Judgment and high skill of accountancy
GAAP: Generally Accepted Accounting Principles GAAP are the “ground rules” for financial reporting. Generally Accepted Accounting Principles provide the general frame work that determines;1. What information is to be included in the financial statements? &2. How these information are to be presented ?
Accounting Equation Assets = Equities Assets = Owner’s Equity + Liabilities This is the characteristic of the Balance Sheet that Assets always be equal to Liabilities plus Owner’s Equity
Example of Accounting Equation Mr. “A” is started the business by investing $ 100,000… Assets = O/Equity + Liabilities 100,000 = 100,000 + 0
Example of Accounting Equation Further the business borrows a loan from the bank of $ 40,000 Assets = O/Equity + Liabilities 100,000 = 100,000 + 0 40,000 = 0 + 40,000 ---------------------------------------------------- 140,000 = 100,000 + 40,000 ________________________________