It's very useful to accounting knowledge

1. Fundamental of Accounting
 What is accounting ?
Accounting is the systematic process of
Identifying, Measuring, Recording, Classifying,
summarizing Interpreting and Communicating
financial information.
(AAA- AMERICAN ACCOUNTING ASSOCIATION)
EVOLUTION
• 23 centuries
ago
OF
• Records of Debit
and Credit were
found in 12th
century itself.
ACCOUNTING
• 1494 Double
entry book
keeping system.

2. BALANCE
SHEET
TRANSACTION
JOURNALISING
POSTING AND
BALACING
(LEDGER)
TRIAL
BALANCE
TRADING
ACCOUNT
PROFIT AND
LOSS ACCOUNT
ACCOUNTING CYCLE

3. ACCOUNTING CYCLE
 Accounting cycle starts with the identification
and recording of financial transaction of an
organization and ends with the preparation of
final accounts for the accounting year.
 The cycle continue for the next accounting year
with the opening balance of assets and liabilities.

4. Transaction
 Transaction involves transfer of money
or money’s worth(Goods or Services or
Ideas) from one person to another.
 Identifying the financial transactions of
a business.
 Transaction are two types:
Cash transaction
Bank transaction

5. Journal
 Journal means Day-to-Day or Daily
 Transactions are first recorded in
the journal it is called Book of
Original Entry or Prime Entry or
Primary Entry or First Entry.

6. LEDGER (POSTING AND BALANCING)
 LEDGER: In the leger Entries are made in each account after classifying
them under each common heads.
 POSTING: Transferring the entries from the journal to the leger is called
posting.
 BALANCING: Finding the difference between the total of debit column
and credit column of all the ledger accounts is called balancing.

7. TRIAL BALANCE
 Trial Balance is a statement containing
the Debit and Credit balances of all
ledger accounts on a particular date
 The list of ledger balance namely trial
balance is prepared as the next step.

8. TRADING ACCOUNT
Trading refer to Buying and selling of
goods with the intention of making
profit.
The trading account is a nominal
account. Which shows the result of
buying and selling of goods for an
accounting period.

9. PROFIT AND LOSS ACCOUNT
 Profit and loss account is the second part of
income statement. It is nominal accounting in
nature.
 Profit and loss account is prepared to ascertain
the net profit and net loss during the year.
 Profit and loss account contains all the items of
indirect expenses and losses and indirect
incomes.

10. BALANCE SHEET
 Balance sheet is a statement prepared with a
view to measure the exact financial position of
a business on a certain fixed date.
 Assets are the resources owned by the business.
 Liabilities are the claims against the business.

11. GOLDEN RULES OF DOUBLE ENTRY SYSTEM
NOMINAL ACCOUNT
DEBIT ALL EXPENSES AND LOSSES CREDIT ALL INCOMES AND GAINS
REAL ACCOUNT
DEBIT WHAT COMES IN CREDIT WHAT GOES OUT
PERSONAL ACCOUNT
DEBIT THE RECEIVER CREDIT THE GIVER

12. CLASSIFICATION OF ACCOUNTS
IMPERSONAL
ACCOUNT
PERSONAL
ACCOUNT

13. PERSONAL ACCOUNT
Account relating to person is called personal account.
Personal accounts three types are:
✓ Natural Person’s Account(Eg: Name of a person)
✓ Artificial Person’s Account(Eg: Bank account,
Company name)
✓ Representative Personal Account(outstanding
salaries account , Prepaid rent account.)

14. IMPERSONAL PERSONAL ACCOUNT
 REAL ACCOUNT(Assets , cash)
 NOMINAL ACCOUNT(Expenses & Income)
REAL ACCCOUNT
✓ Tangible real accounts(Plant Machinery, Building,
Furniture, Stock)
✓ Intangible real accounts(Goodwill, copyrights)
NOMINAL ACCOUNT
The accounts relating to expenses, losses, revenues
and gains.

15. FINANCIAL
ACCOUNTING
COST
ACCOUNTING
MANAGEMENT
ACCOUNTING
SOCIAL
RESPONSIBILIT
YACCOUNTING
HUMAN
RESOURCES
ACCOUNTING
BRANCHES OF ACCOUNTING

16. FINANCIAL ACCOUNTING
 It provides financial information to the users for taking decisions. It is
concerned with identification, recording, classifying and summarising of
financial transactions.
 Financial statements, namely trading and profit and loss account or income
statement and balance sheet.
COST ACCOUNTING
It involves the collection, recording
classification of expenditure for the determination of the cost of
products or service.

17. MANAGEMENT ACCOUNTING
 Management in decision making and in the day-to-day operation of an
enterprise.
SOCIAL RESPONSIBILITY ACCOUNTING
It is concerned with presentation accounting information by business
entities such as social benefits.
HUMAN RESOURCES ACCOUNTING
It is concerned with identification, quantification and reporting of
investments made in human resources.

18. USERS OF ACCOUNTING INFORMATION
 INTERNAL
1. Owners
2. Management
3. Employees
• EXTERNAL
1. creditors and financial institutions
2. Investors
3. Customers
4. Tax authorities and regulatory bodies
5. Government
6. Researchers
7. General public

19. WORKING CAPITAL
 Working capital also known as NET WORKING CAPITAL(NWC) is the difference
between a company’s current assents and current liabilities. And also day-to-
day transactions.
 CURRENT: current refers to a time period of one year or less.
 CURRENT ASSETS: Available within in 12 months.
 CURRENT LIABILITIES: Due within 12 months.
 WORKING CAPITAL=Current Assets-Current Liabilities

20. SUSPENSE ACCOUNT
 A suspense account is an account used temporarily to carry doubtful entries.
BAD DEBTS
Customer(debtor) to whom goods were sold on credit cannot be
recovered or irrecoverable debts are called bad debts.

21. ACCOUNTING EQUATION APPROACH
Assets= Capital + Liabilities
(A=C+L)

22. THANK YOU