What Is Accounting? Features of Accounting? Book Keeping & Accounting Users of Financial Statements Branches of Accounting Objective And Limitation of Accountancy Terms in Accounting

1. Introduction
To
Accounting
Rida Zaman

2. Sub-Topics
What Is Accounting?1
Features of Accounting?2
Book Keeping & Accounting3
Users of Financial Statements4
Branches of Accounting5
Objective And Limitation of Accountancy6
Terms in Accounting7

3. What Is Accounting?
• It is a language of the business
• It is a technique of financial reporting of the economic activities.
• To communicate the matters relating to business operations
• Communicate to whom?
• To various individuals and institutions who are directly or
indirectly interested in the activities of business

4. Meaning of Accounting?
The American Institute of Certified Public Accountants
defines accounting as
“the art of recording, classifying and summarizing in a
significant manner and in terms of money transactions
and events which are, in part at least, of a financial
character and interpreting the results thereof”.
IN SIMPLE WORDS ACCOUNTING MEANS
RECOUNTING

5. Recording Classifying Summarizing Interpreting
Recording of all cash
and credit transaction
Done in journal and
other subsidiary books
Grouping of entries of like
nature. All transaction under
individual account head is
posted All transactions from
journal and subsidiary books
are posted into a book of final
entry called Ledger.
The balances or totals
of all accounts are
shown in a statement
called Trial Balance
used to prepare profit
and loss a/c and
Balance sheet
Used to make
judgment of the
profitability , liquidity
and solvency of the
business
Features of Accounting

6. Book Keeping & Accounting
PRESENTATION
• Book keeping is the science and art of
correctly recording in books of accounts all
those business transactions that result in
the transfer of money or money’s worth.
• Summarization analysis and interpretation is
called as accounting

7. SYSTEM OF
BOOK
KEEPING
Simple And Economic
01
02
03
04
05
06
Single Entry System
Complete record of both aspects is not
recorded but only one aspect is
recorded.
Double Entry System
It records both the aspects of a
transaction
Unscientific And Unreliable
Only on aspect of a
transaction is recorded
Arithmetical accuracy
cannot be checked
True profit and financial
position cannot be known
Involves less clericalwork
Difficult and costly
Both aspects of a
transaction is recorded
Arithmetical accuracy can
be checked
True profit and financial
position can be known
Involves more clericalwork
Scientific and Reliable
Single Entry System Double Entry System

8. Users of Financial Statements
Internal Users
• Management
• Shareholders
• Employees
Parties Interested
External Users
• Creditors/Lenders
• Government
• Consumers
• Public
• Researcher

9. Branches of Accounting
Financial
Accounting
To ascertain the
profit or loss during
a period and find the
financial status of
business to give
information on the
activities of business
Cost
Accounting
To ascertain the cost
and control
cost for planning
and controlling the
operations
Management
Accounting
Accounting data
collected from
financial and cost
accounting is used
for profit
maximization
and loss minimization
at different levels of
management

10. Objectives of Accounting
1. It is a means of recording the monetary transactions and events.
2. It required to ascertain the earnings of the company, which is
achieved by preparation of Profit and Loss account.
3. It is required to identify the obligations (liabilities) and resources
(asset) of the organization.
4. Accounting records are required to be maintained statutorily by
certain government and regulatory bodies.
5. Accounting records are also required by the management for
taking the financial decisions.
6. Generally, investors and certain lenders also require the
preparation of financial statements.

11. Limitation of Accounting
Accounting transactions are
recorded at cost hence does not
account for changes in prices
It is historical in nature
Only transactions measurable in
monetary terms are recorded
Chances of manipulation are higher

12. Terms in Accounting
1
2
3
4
Activity which involves transfer of money
or money’s worth
Transaction
Person who owes money to the business
Debtor
Amount due from a person or business
Debt
Person To Whom Money Is Payable
Creditors
5
6
7
8
Properties Or The Rights Owned By
Business. It Can Be Current Or Fixed ,
Tangible Or Intangible Or Fictitious
Assets
Unsold goods at a given period . opening stock
is unsold goods at the beginning of a period
and closing stock is at the end.
Stock
Claim against the assets of the firm . liability
is an amount which a business is liable to pay
for some benefit.
Equities
An amount incurred in return for some benefit
of revenue nature. Expenditure is an amount
to acquire an asset.
Expense

13. Terms in Accounting
9 12
10 13
it is a source of revenue due to its
operations which increases owner’s
equity
Income Purchase & Sale
It is the amount or goods withdrawn
by proprietor for personal use
Drawing
Summary of various business transactions
relating to a particularperson
Account
11 Amount invested by the owner in the business
Capital
14 Amount lost without any benefit.
Loss

14. Accounting Equation
Total Liabilities = Total Assets
Or
Owners’ Equity + Outside Liability = Assets

15. Accounting
• All the business transactions have twofold effect.
Recording of both aspects of a transaction is called
Double Entry system of bookkeeping.
• Under the duality concept, that sources of funds must
always equal to uses of funds and from this equality was
derived.

16. Symbols and Sources
and Uses
• The accepted symbol for sources is Cr. and that for uses is Dr.
• The symbol Cr. is commonly pronounced as ‘CREDIT’ and
the symbol Dr. as ‘DEBIT’.
• Increase in liabilities, revenues or profits being sources of funds
are all called ‘Cr’ items.
• Similarly, increase in assets, expenses and losses being uses
of funds are all called ‘Dr’ items.

17. Symbols and Sources
and Uses
Increase Decrease
Liability, Revenue and Profit CR = Source DR = Use
Asset, Expense and Loss DR = Use CR = Source

18. Nature of Credit & Debit
Inflow of
resources

19. Types of Account

20. Rules of Debit and Credit
Rules of Debit and Credit
Personal
Accounts
Nominal
Accounts
The
Receiver
All expenses
and losses
The Giver All incomes
and gains
Real Accounts
What
Comes in
What goes
out
Debit
Credit

21. Thank You