Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.



Published on

  • Be the first to comment


  1. 1. 1 Introduction to Accounting
  2. 2. Contents of the Lecture <ul><li>What is Accounting? </li></ul><ul><li>Functions of Accounting </li></ul><ul><li>Branches of Accounting </li></ul><ul><li>Accounting Cycle </li></ul><ul><li>Users of Accounting Information </li></ul><ul><li>Objectives of Accounting </li></ul><ul><li>Advantages of Accounting </li></ul><ul><li>Limitations of Accounting </li></ul>
  3. 3. What is Accounting ? <ul><li>Accounting may be defined as the process of recording, classifying, summarizing and interpreting the financial transactions and communicating the results thereof to the persons interested in such information. </li></ul><ul><li>Accounting as an information system is the process of identifying, measuring and communicating the economic information of an organization to its users who need the information. </li></ul>
  4. 4. Functions of Accounting <ul><li>Identifying </li></ul><ul><li>Measuring </li></ul><ul><li>Recording </li></ul><ul><li>Classifying </li></ul><ul><li>Summarising </li></ul><ul><li>Analysing </li></ul><ul><li>Interpretation </li></ul><ul><li>Communication </li></ul>
  5. 5. ACCOUNTANCY, ACCOUNTING AND BOOK-KEEPING <ul><li>ACCOUNTANCY: systematic knowledge of accounting. It explains ‘why to do’ and ‘how to do’ of various aspects of accounting. </li></ul><ul><li>ACCOUNTING: actual process of preparing and presenting the accounts. It is the art of putting the academic knowledge of accountancy into practice. </li></ul><ul><li>BOOK-KEEPING: recording of daily business transactions in a systematic manner. </li></ul>
  6. 6. BRANCHES OF ACCOUNTING <ul><li>Financial Accounting </li></ul><ul><li>Cost Accounting </li></ul><ul><li>Management Accounting </li></ul>
  7. 7. ACCOUNTING CYCLE <ul><li>Sequential steps involved in an Accounting Cycle: </li></ul><ul><li>Journalising </li></ul><ul><li>Posting </li></ul><ul><li>Balancing </li></ul><ul><li>Trial Balance </li></ul><ul><li>Income Statement </li></ul><ul><li>Position Statement </li></ul>
  8. 8. USERS OF ACCOUNTING INFORMATION <ul><li>Short-term Creditors </li></ul><ul><li>Long-term Creditors </li></ul><ul><li>Present Investors </li></ul><ul><li>Potential Investors </li></ul><ul><li>Management </li></ul><ul><li>Employees </li></ul><ul><li>Tax Authorities </li></ul><ul><li>Customers </li></ul><ul><li>Government and their agencies </li></ul><ul><li>Public </li></ul>
  9. 9. OBJECTIVES OF ACCOUNTING <ul><li>To maintain records of business. </li></ul><ul><li>To calculate the results of operations. </li></ul><ul><li>To ascertain the financial position. </li></ul><ul><li>To communicate the information to the users. </li></ul><ul><li>To file tax return </li></ul><ul><li>To portray the liquidity position </li></ul>
  10. 10. ADVANTAGES OF ACCOUNTING <ul><li>Facilitates to replace memory </li></ul><ul><li>Facilitates to comply with legal requirements </li></ul><ul><li>Facilitates to ascertain net result of operations </li></ul><ul><li>Facilitates to ascertain financial position </li></ul><ul><li>Facilitates the users to take decisions </li></ul><ul><li>Facilitates a comparative study </li></ul>
  11. 11. Advantages contd…… <ul><li>Assists the management </li></ul><ul><li>Facilitates control over assets </li></ul><ul><li>Facilitates the settlement of tax liability </li></ul><ul><li>Facilitates the ascertainment of value of business </li></ul><ul><li>Facilitates raising loans </li></ul><ul><li>Acts as legal evidence </li></ul>
  12. 12. LIMITATIONS OF ACCOUNTING <ul><li>Ignores the qualitative elements </li></ul><ul><li>Not free from bias </li></ul><ul><li>Estimated position and not real position </li></ul><ul><li>Ignores the price-level changes </li></ul><ul><li>Danger of window dressing </li></ul>
  13. 13. End of Chapter 1