Fandamental of accounting Learners Academy CHANDBALI

1. WEL COME
to
LEARNERS
ACADEMYThis Presentation
DEDICATED
to
A.P.J Abdul Kalam Sahab
- Anup Gupta

2. Let’s
We Learn About

3. 1.0 Aims and Objectives
1.1 Introduction
1.2 Book- Keeping
1.2.1 Meaning
1.2.2 Definition
1.2.3 Objectives
1.3 Accounting
1.3.1 Meaning
1.3.2 Definition
1.3.3 Objectives
1.3.4 Importance
1.3.5 Functions
1.3.6 Advantages
1.3.7 Limitations
1.4 Methods of Accounting
1.4.1 Single Entry
1.4.2 Double Entry
1.4.3 Steps involved in double entry system
1.4.4 Advantages of double entry system
1.5 Meaning of Debit and Credit
1.6 Types of Accounts and its rules
1.6.1 Personal Accounts
1.6.2 Real Accounts
1.6.3 Nominal Accounts
1.7 Distinction between Book Keeping
and Accounting
1.8 Branches of Accounting
1.8.1 Financial Accounting
1.8.2 Cost Accounting
1.8.3 Management Accounting
Contents

4. 1.0 Aims and Objectivesflý Cùgý
To know the Meaning ,Definition and objective of Book-
Keeping .
To study the objectives, functions, importance and
limitations of accounting .
To understand the methods of Accounting, kinds of
accounts and accounting rules .
To study the difference between Book- keeping and
accounting to study the various branches of Accounting .

5. 1.2.3 Objectives of Book- keepingù÷÷^òKLûZûI LZò@û^e Cùgý
*To have permanent record of all the business transactions.
*To keep records of income and expenses in such a way that the net
profit or net loss may be calculated.
*To keep records of assets and liabilities in such a way that the
financial position of the business may be ascertained.
*To keep control on expenses with a view to minimise the same in
order to maximise profit.
*To know the names of the customers and the amount due from
them.
*To know the names of suppliers and the amount due to them.
*To have important information for legal and tax purposes.

6. 1.1 INTRODUCTIONC_Kâc
*All organizations (whether business
organizations like a manufacturing entity ,
Trading entity or Non-business organizations
like schools, colleges, hospitals, libraries
clubs, temples, political parties) which
require money and other economic
resources, accounting is required to account
for these resources .

7. 1.2. MEANING AND DEFINITION OF BOOK-
KEEPING.
ù÷÷^òKLûZûI
LZò@û^
*Book-keeping is that branch of knowledge which tells us how to keep a
record of business transactions. It is often routine and clerical in nature.
*It is important to note that only those transactions related to business
which can be expressed in terms of money are recorded.
*The activities of book-keeping include recording in the journal, posting to
the ledger and balancing of accounts
Definition.
“Book- keeping is the art of recording business transactions in a systematic
manner”. A.H.Rosenkamph.
_eòbûiû /iõTû

8. 1.3 ACCOUNTING
1.3.1 Meaning of Accounting
*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
for decision making.
*Book-keeping does not present a clear financial
picture of the state of affairs of a business.
jòiûa

9. 1.3.2 Definition of Accounting
American Institute of Certified Public
Accountants (AICPA) which 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”.

10. 1.3.3 Objective of Accounting
*To keeping systematic record:
It is very difficult to remember all the business transactions that take place.
Accounting helps to record all the transaction in the books of account.
*To ascertain the results of the operation:
Accounting helps in ascertaining result i.e., profit earned or loss suffered in
business during a particular period.
*To ascertain the financial position of the business:
In addition to profit, a businessman must know his financial position that is
availability of cash, position of assets and liabilities etc.
*To protect business properties:
Accounting provides up to date information about the various assets that the
firm possesses and the liabilities the firm owes, so that nobody can claim a
payment which is not due to him.

11. 1.3.4 Importance of Accounting For these persons
Owners
always want to know how much profit or loss during a year . Management of the
business is greatly interested in knowing the position of the firm.
Creditors
The persons who supply goods on credit, or bankers or lenders of money. It is
usual that these groups are interested to know the financial soundness before
granting credit.
Employees
Payment of bonus depends upon the size of profit earned by the firm. The
demand for wage rise, bonus, better working conditions etc. depend upon the
profitability of the firm and in turn depends upon financial position.

12. Government
The state and central Governments are interested in the financial
statements to know the earnings for the purpose of taxation.
Investors
The prospective investors, who want to invest their money in a
Firm. before investing their amount, by going through the
financial statements of the firm.
Consumers
These groups are interested in getting the goods at reduced price.
Therefore, they wish to know the establishment of a proper
accounting control.

13. 1.3.5 Functions of Accounting
*Record Keeping Function
*Managerial Function
*Legal Requirement function
*Language of Business

14. 1.3.6 Advantages of Accounting
*It helps in having complete record of business transactions.
*It gives information about the profit or loss made by the
business at the close of a year and its financial conditions.
*It provides useful information form making economic decisions.
*It facilitates comparative study of current year’s profit, sales,
expenses etc., with those of the previous years.
*It helps in complying with certain legal formalities like filing of
income-tax and sales-tax returns.

15. 1.3.7 Limitations of Accounting
*Accounting is historical in nature: It does not reflect the
current financial position or worth of a business.
*Transactions of non-monetary mature do not find place
in accounting. Accounting is limited to monetary
transactions only.
*Accounting does not Indicate the Realisable value.
*Accounting statements do not show the impact of
inflation.

16. 1.4 Methods of Accounting
Business transactions are recorded in
two different ways.
Single Entry Double Entry
SYSTEM

17. 1.4.1. Single Entry System
*It is incomplete system of recording business
transactions.
*The business organization maintains only cash
book and personal accounts of debtors and
creditors.
*So the complete recording of transactions cannot
be made and trail balance cannot be prepared.

18. 1.4.1. Double Entry System
*It is the complete system of recording business
transactions.
*It this system every business transaction is having two
fold effect of benefits giving and benefit receiving aspects.
*The recording is made on the basis of both these aspects.
*Double Entry is an accounting system that records the
effects of transactions and other events in at least two
accounts with equal debits and credits .

19. 1.4.3 Steps involved in Double entry system
(a) Preparation of Journal: Journal is called the book of
original entry. It records the effect of all transactions for the
first time. Here the job of recording takes place.
(b) Preparation of Ledger: Ledger is the collection of all
accounts used by a business. Here the grouping of accounts is
performed. Journal is posted to ledger.
(c) Trial Balance preparation: Summarizing. It is a summary
of ledge balances prepared in the form of a list.
(d) Preparation of Final Account: At the end of the
accounting period to know the achievements of the
organization and its financial state of affairs, the final accounts
are prepared.

20. 1.4.4 Advantages of Double Entry System
i) Scientific system: This system is the only scientific
system of recording business transactions in a set of
accounting records. It helps to attain the objectives of
accounting.
ii) Complete record of transactions: This system
maintains a complete record of all business transactions.
iii) A check on the accuracy of accounts: By use of
this system the accuracy of accounting book can be
established through the device called a Trail balance.

21. 1.4.4 Advantages of Double Entry System
iv) Ascertainment of profit or loss: The profit
earned or loss suffered during a period can be
ascertained together with details by the preparation of
Profit and Loss Account.
v) Knowledge of the financial position of the
business: The financial position of the firm can be
ascertained at the end of each period preparation ,
through the of balance sheet.

22. 1.5 Meaning of Debit and Credit
*Recording of transactions require a
thorough understanding of the rules
of debit and credit relating to
accounts.
*Both debit and credit may represent
either increase or decrease, depending
upon the nature of account

23. 1.6 Types of Accounting
*Transactions relating to persons.
*Transactions relating to properties and assets.
*Transactions relating to incomes and expenses
types of accounts…………………………………

24. ACCOUNTS
IMPERSONALPERSONAL
PERSONAL
A/C
ARTIFICAL
A/C
Representative
A/C
REAL
A/C
NOMINAL
A/C
ExpenseRevenueIntangibleTangible

25. *Natural Persons/Account : Accounts which relate to
individuals or person. For example, Mohan’s A/c, Shyam’s
A/c etc.
*Artificial persons : Accounts which relate to a group of
persons or firms or institutions. For example, HMT Ltd.,
Indian Overseas Bank, Life Insurance Corporation of
India, Cosmopolitan club etc.
*Representative Persons: Accounts which represent a
particular person or group of persons. For example,
outstanding salary account, prepaid insurance account, etc.
The rule for personal accounts is: Debit the receiver
Credit the giver
1.6.1 Personal Accounts: Accounts recording transactions with a
person or group of persons are known as personal accounts.

26. *Real Accounts: Accounts relating to properties and assets which are owned
by the business concern. Real accounts include tangible and intangible
accounts. For example, Land, Building, Goodwill, Purchases, etc.
(a) Tangible Real Accounts: These accounts represent assets and
properties which can be seen, touched, felt, measured, purchased and sold.
e.g. Machinery account Cash account, Furniture account, stock account etc.
(b) Intangible Real Accounts: These accounts represent assets and
properties which cannot be seen, touched or felt but they can be measured in
terms of money. e.g., Goodwill accounts, patents account, Trademarks
account, Copyrights account, etc.
The rule for Real accounts is: Debit what comes in
Credit what goes out
Impersonal Accounts: All those accounts which are not personal
accounts. This is further divided into two types viz. Real and Nominal
accounts.

27. *Nominal Accounts: These accounts do not have any
existence, form or shape. They relate to incomes and
expenses and gains and losses of a business concern. For
example, Salary Account, Dividend Account, etc.
The rule for Nominal accounts is:
Debit all expenses and losses
Credit all incomes and gains
Impersonal Accounts: All those accounts which are not personal
accounts. This is further divided into two types viz. Real and Nominal
accounts.

28. The branches of accounting are;
*Financial Accounting
*Cost Accounting
*Management Accounting.
1.8 BRANCHES OF ACCOUNTING

29. *The accounting system concerned only with the financial state of
affairs and financial results of operations is known as Financial
accounting.
*It is the original from of accounting.
*It is mainly concerned with the preparation of financial
statements for the use of outsiders like creditors, debenture
holders, investors and financial institutions.
*The financial statements i.e., the profit and loss account and the
balance sheet
Financial Accounting

30. *In view of the limitations of financial accounting in respect
of information relating to the cost of individual products, cost
accounting was developed.
*Cost accounting seeks to ascertain the cost of unit produced
and sold .
*The process of cost accounting based on the data provided
by the financial accounting.
Cost Accounting

31. *It is an accounting for the management i.e.,
accounting which provides necessary
information to the management for discharging
its functions.
*It is an accounting for the management i.e.,
accounting which provides necessary
information to the management for discharging
its functions.
Management Accounting

32. Your next part is
ACCOUNTING
TEIMINOLODGY
THANK YOU