Accounting system intro and accounting system of reliance industries
The systematic recording, reporting, and analysis of
financial transactions of a business.
The person in charge of accounting is known as an
accountant, and this individual is typically required to
follow a set of rules and regulations, such as the
Generally Accepted Accounting Principles.
Accounting allows a company to analyze the financial
performance of the business, and look at statistics such as
Accountancy is the process of communicating
financial information about a business entity to users
such as shareholders and managers. The
communication is generally in the form of financial
statements that show in money terms the economic
resources under the control of management.
The art lies in selecting the information that is relevant
to the user and is reliable.
The name given to the collective process of recording and
processing the accounting events of a company. The series of steps
begin when a transaction occurs and end with its inclusion in the
financial statements. The nine steps of the accounting cycle are:
Collecting and analyzing data from transactions and events.
Putting transactions into the general journal.
Posting entries to the general ledger.
Preparing an unadjusted trial balance.
Adjusting entries appropriately.
Preparing an adjusted trial balance.
Organizing the accounts into the financial statements.
Closing the books.
Preparing a post-closing trial balance to check the accounts.
The general journal is where
double entry book keeping
entries are recorded by debiting
one or more accounts and
crediting another one or more
accounts with the same total
amount. The total amount
debited and the total amount
credited should always be
equal, thereby ensuring the
The final destination of all entries made in the journal is the ledger as
they are all subsequently transferred to it. The ledger is the most
important book under the double-entry system. Ledger is a permanent
book of record, which contains all accounts relating to the financial
transactions of a business. Therefore, it is also called the book of
An account contained in the ledger book is called ledger account. A
ledger account is a statement shaped liked an English alphabet 'T' that
systematically contains all financial transactions relating to either a
particular person or thing for a certain period of time.
۶ TRIAL BALANCE
A book keeping worksheet, in which the balances of all ledgers are
compiled into debit and credit columns.
A company prepares a trial balance periodically, usually at the end of
every reporting period.
The general purpose of producing a trial balance is to ensure the
entries in a company's bookkeeping system are mathematically
The aggregate of all debit and credit balances at the end of an
Shows if the general ledger is in balance (total debits equal total
credits) before making closing entries.
ii. Serves as a worksheet for making closing entries, and
iii. Provides the basis for making draft financial statements.
۶ FINAL ACCOUNTS
Final accounts is done at the end of the year to find whether the
company status is in profit or loss.
Initially Companies prepare trading and profit & loss accounts and
then if required ledgers and individual accounts, which shows the
monetary transactions of company and then the last step will be
preparation of balance sheet.
PROFIT ‘n’ LOSS STATEMENT
A financial statement that summarizes the revenues, costs and
expenses incurred during a specific period of time - usually a fiscal
quarter or year. These records provide information that shows the
ability of a company to generate profit by increasing revenue and
reducing costs. The P&L statement is also known as a "statement of
profit and loss", an "income statement" or an "income and expense
• BALANCE SHEET
A financial statement that summarizes a company's assets, liabilities
and shareholders' equity at a specific point in time. These three
balance sheet segments give investors an idea as to what the company
owns and owes, as well as the amount invested by the shareholders.
Assets = Liabilities + Shareholders' Equity
Reliance Industries Limited (RIL) is an
Company, headquartered in Mumbai, Maharashtra.
The company operates in five major segments: Exploration &
Production, Refining & Marketing, Petrochemicals, Retail
RIL is the second-largest Publicly traded company in India
and also the second largest company in India by revenue after
Indian Oil Corporation.
The company is ranked 107th on Fortune Global 500 list of
the world's biggest corporations for the year 2013.
It contributes to approx. 14% of total exports of India.
Basis of Preparation of Financial Statements
The financial statements are prepared under the historical cost
convention, except for certain fixed assets which are revalued, in
accordance with the generally accepted accounting principles in
India and the provisions of the Companies Act, 1956.
Use of Estimates
The preparation of financial statements requires estimates and
assumptions to be made that affect the reported amount of assets
and liabilities on the date of the financial statements and the
reported amount of revenues and expenses during the reporting
period. Difference between the actual results and estimates are
recognized in the period in which the results are known.
All costs, including financing costs till commencement of
commercial production, net charges on foreign exchange contracts
and adjustments arising from exchange rate variations attributable
to the intangible assets are capitalized.
Depreciation on fixed assets is provided to the extent of
depreciable amount on written down value method (WDV) at the
rates and in the manner prescribed in Schedule XIV to the
Companies Act, 1956 over their useful life except, on fixed assets
pertaining to refining segment.
Foreign Currency Transactions
Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction or that
approximates the actual rate at the date of the transaction.
Current investments are carried at lower of cost and quoted/fair
value, computed category wise. Long Term Investments are stated
Revenue is recognized only when it can be reliably measured and
it is reasonable to expect ultimate collection. Revenue from
operations includes sale of goods, services, sales tax, service
tax, excise duty and sales during trial run period, adjusted for
discounts (net), Value Added Tax (VAT) and gain / loss on
corresponding hedge contracts.
Dividend income is recognized when right to receive is
Interest income is recognized on time proportion basis taking into
account the amount outstanding and rate applicable.
Provisions, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognized but are disclosed in the
Contingent Assets are neither recognized nor disclosed in the
(i) Short-term employee benefits are recognized as an expense at the
undiscounted amount in the Profit and Loss account of the year in
which the related service is rendered.
(ii) Post employment and other long term employee benefits are
recognized as an expense in the Profit and Loss account for the year
in which the employee has rendered services. Actuarial gains and
losses in respect of post employment and other long term benefits are
charged to the Profit and Loss account.
Mar ' 13
Mar ' 12
Mar ' 11
Mar ' 10
Mar ' 09
Sources of funds
Equity share capital
Reserves & surplus
Uses of funds
Less : revaluation
Less : accumulated
Less : current liabilities &
Total net current assets
Book value of unquoted
Market value of quoted
Number of equity
Net current assets
Current assets, loans &
How accounting information is useful
to the company
Many factors affect the structure of the accounting system within a
particular organization. Among the most important are (1) the
company’s needs for accounting information and (2) the resources
available for operation of the system.
Uses of accounting system in the company:
To keep a systematic record.
To ascertain the operational profit and loss.
To protect business properties.
To ascertain the financial position of the company.
Replacement of memory.
Evidence in the court.
In developing information about the activities of a business, every
accounting system performs the following basic functions:
Interpret and record the effects of business transactions.
Classify the effects of similar transactions in a manner that
permits determination of the various totals and subtotals useful
to management and used in accounting reports.
Summarize and communicate the information contained in the
system to decision makers.
Why study Accounting?
• Accounting provides information for decision making.
• Almost every business and organization needs accountants to
measure performance and provide information for decisions.
What will you Learn?
• You will learn how to present financial statements that can be used
to assist business planning and decision making.
• You will also learn financial analysis techniques.
• At postgraduate level, you will cover more advanced subjects and
methods to enable you to further develop your skills, knowledge,
and career options.
Areas of Study
There are two areas of study:
Financial Accounting and Management Accounting.
• Financial accounting involves consideration of the presentation of
financial statements and techniques for their analysis.
• Management accounting explores the use of accounting data for
managerial planning, decision making, and control.