4. Accounting
The Art of
Recording
Classifying
Summarizing and
Communicating the results
Of business transactions
5. Accounting
Accounting is the art of recording,
classifying, summarizing and
communicating the results of the
business transactions.
Accounting also called the language of
business
6. Accounting
The Art of
Interpreting the financial activities
Measuring the financial activities
Getting the results from such activities
And communicating these results
7. Accounting
The Art of interpreting, measuring
and communicating the results of
financial activities.
8. Accounting
Is a process
That create
Useful
Financial information
For its users
(basic purpose of Accounting)
9. The Purpose of Accounting
The basic purpose of Accounting is to
provide information to decision makers that
is useful in making economic decisions.
11. 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
13. 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.
14. Business
Business is a legal financial activity, for which
on specific education is required and in which
return is also not definite
15. 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 pages
1. Balance Sheet: Financial resources and obligations
2. Income Statement: Profitability of business
3. Statement of Owner’s Equity: Obligation of business
to Owner
4. Statement of Cash Flow: Cash Transaction of a
Business.
16. Distinguish b/w Accounting and
Book-keeping
Book-keeping
It refers to the daily
operation of an accounting
system i.e. Recording and
classifying
It requires little skill of
accounting
Accounting
It refers to the preparation
of Accounting system
Recording and classifying
the transactions
Summarize the data
Prepare the Final Reports
It requires Professional
Judgment and high skill of
accountancy
17. 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 ?
19. 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
20. Example of Accounting Equation
Mr. “A” is started the business by investing $ 100,000…
Assets = O/Equity + Liabilities
100,000 = 100,000 + 0
21. 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
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