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Introduction to accountig.pptx
- 1. Meaning of Accounting Recording “Accounting is the art of - ✔recording, ✔classifying and ✔summarising in a signified manner and in term of money, transactions and events, which are, in part at least, of financial character, and interpreting the result thereof.” Summarising Classifying – American Institute of Certified Public Accounting (AICPA) in 1941
- 2. Meaning of Accounting Recording • Accounting is the process of recording, classifying, analysing & interpreting the business transactions which can be measured in terms of money. • Accounting keeps a permanent record of all business transactions. Analysing Classifying Interpreting
- 3. Accounting as a source of information Investors Lenders Creditors Customers Employee Government • Remuneration • Employment • Retirement benefits • Activities • Taxation policy • National income • Continuity • Stability • Involvement • Safety • Decision • Determination • Ability • Past performance • Decision • Ability • Past performance • Maintain
- 4. Objectives of Accounting Maintain Systematic Accounting Records Ascertain Financial Position Ascertain Financial Performance Communicate Information To Users
- 6. Objectives of Accounting If the transactions are more, human brain would not be able to remind all the transactions. In order to remind all the entries a systematic record is maintained. Maintain Systematic Accounting Records Ascertain Financial Position Ascertain Financial Performance Communicate Information To Users
- 7. For a particular accounting period an income statement (profit and loss account) is prepared based on the systematic record. Objectives of Accounting Maintain Systematic Accounting Records Ascertain Financial Position Ascertain Financial Performance Communicate Information To Users
- 8. To know what the business owes to other and what it owns. A systematic position of assets and liabilities is answered by position statement. Objectives of Accounting Maintain Systematic Accounting Records Ascertain Financial Position Ascertain Financial Performance Communicate Information To Users
- 9. It communicate information to the internal as well as external users. Information is required at all levels of the management. Objectives of Accounting Maintain Systematic Accounting Records Ascertain Financial Position Ascertain Financial Performance Communicate Information To Users
- 10. Role of Accounting Process Recording Classifying Summarising Interpretation Output Information to users Input Economic events measured in financial terms
- 11. Basic Terms In Accounting Term Explanation Entity Entity is economics unit that is accounted for separately. Events Events are happening of consequence to an entity. Assets Assets are Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Current Assets Current asset is an asset on the balance sheet which can either be converted to cash or used to pay current liabilities within 12 months. Fixed Assets Fixed assets is a term used in accounting for assets and property which cannot easily be converted into cash. Liabilities Liabilities are the financial obligation of an enterprise other than owner’s fund. Current Liability Current liabilities are often understood as all liabilities of the business that are to be settled in
- 12. Basic Terms In Accounting Entity Entity is economics unit that is accounted for separately. Events Events are happening of consequence to an entity. Assets Assets are Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Current Assets Current asset is an asset on the balance sheet which can either be converted to cash or used to pay current liabilities within 12 months. Fixed Assets Fixed assets is a term used in accounting for assets and property which cannot easily be converted into cash.
- 13. Basic Terms In Accounting Liabilities Liabilities are the financial obligation of an enterprise other than owner’s fund. Current Liabilities Current liabilities are often understood as all liabilities of the business that are to be settled in cash within the fiscal year or the operating cycle of a given firm. Long-term Liabilities Long-term liabilities are those liabilities which do not fall due for payment in a relatively short period. Capital Capital means that amount or asset which is invested in business by businessman or owner of business. Drawings Drawings is any money taken out of the business for the owners own personal use.
- 14. Purchases Purchases are total amount of goods obtained by an enterprise for resale or for use in production of goods in the normal course of business. Basic Terms In Accounting Sales Sales are total amount of goods which are sold and services are rendered. Debtors Debtors are the person from whom the amount are due for goods sold or services rendered on credit basis. Creditors Creditors are the person to whom the amount are due for goods purchased or services rendered on credit basis.