Summary of the basic concepts of Accounting.

1. INTRODUCTION TO
ACCOUNTING
CHAPTER SUMMARY
Pankaj Saikia
Modern English
School

2. Meaning of Accounting
• Accounting is the process of Identifying,
Measuring, Classifying, Recording,
Summarising, Analysing, Interpreting
all the transactions or events which have
financial impact on a business and
Reporting the impact of such
transaction or events to the users of such
information.
P.SAIKIA-2020.

3. Features of Accounting
• Recording financial transaction only. (Any
transaction or event with no economic
impact are not recorded)
• All transactions are recorded in terms of
Money.
• Identify and Classify transactions in to groups
to record separately.
• Summaries and Interpret business
information.
• Communicating the results to the users.
P.SAIKIA-2020.

4. Importance of Accounting
• To maintain record of business
transaction systematically.
• To maintain records of Assets and
liabilities of an entity.
• To ascertain the profit or loss in business.
• To ascertain the financial position of a
business time to time.
• Communicating the business information
to its stakeholders.
P.SAIKIA-2020.

5. Branches of Accounting
• Financial Accounting.
• Cost Accounting.
• Management Accounting.
• Taxation or Tax Accounting.
• Corporate Social Responsibility
(CSR) Accounting.
• Auditing.
P.SAIKIA-2020.

6. Two Parts of Accounting
• Book Keeping:- Associated with
Identifying, Measuring, Classifying and
Recording business transactions.
• Accounting:- Associated with
Summarizing, Analyzing, Interpreting and
Reporting business or financial
information.
P.SAIKIA-2020.

7. Book Keeping VS Accounting
P.SAIKIA-2020.

8. Objectives of Accounting
• Maintaining systematic record of business
transactions.
• Ascertainment of profit or loss.
• Determination of financial position.
• Facilitating management.
• Maintaining records of receivables and
payables.
• Providing accounting information to its users..
P.SAIKIA-2020.

9. Functions of Accounting
• Maintaining systematic record of
business transactions.
• Preparation of financial statements.
• Protection of business assets.
• Meeting legal requirements.
• Communicating the financial results.
• Facilitating decision making.
P.SAIKIA-2020.

10. Advantages of Accounting
• Helps Management in Decision making.
• Provide information about profitability.
• Inform about financial position.
• Facilitates comparative study.
• Helps in assessing tax liability.
• Helps in realising / collecting debts.
• Act as proof in the court of Law.
• Helps in controlling cost and resource allocation
P.SAIKIA-2020.

11. Accounting Information
Accounting information refers
to quantitative information
about the effects of business
transactions, the position of
the business and its financial
relation with outsiders of a
business. P.SAIKIA-2020.

12. Users of Accounting Information
P.SAIKIA-2020.
INTERNAL USERS
Owner/ Shareholders
Management
Employee or Workers
EXTERNAL USERS
Present and Potential investors
Creditors
Government
Public
Researchars

13. Qualities of Accounting Information
Accounting information must carry
following qualities to be considered as
useful---
• Reliability. ( Unbiased and Faithful)
• Relevance. (Material to users)
• Understandability. (Based on users
ability)
• Comparability. (Consistency and clear)
P.SAIKIA-2020.

14. Tools for sharing Accounting Information
Accounting information are shared
through--
• Balance Sheet.
• Statement of Profit and Loss.
• Cash Flow Statement.
• Fund Flow Statement.
• Accounting Ratios.
P.SAIKIA-2020.