Introduction to Accounting

1. OVERVIEW OF ACCOUNTING

2. Topics to be presented
 Accounting: Concept
Branches
Importance
 Users and Uses of Accounting Information
 Accounting Concepts
 Accounting Conventions
 Accounting Standards Meaning
Objectives
Process
 Need for Global Standards in India
 IFRS

3.  Accounting may be defined as the process of recording,
classifying, summarizing, analysing and interpreting the
financial transactions and communicating the results.
There of to the persons interested in such information.
 AICPA defines Accounting as “The process of identifying,
measuring and communicating economic information to
permit; informed judgement and decisions by the uses of
accounts”.

4. BRANCHES OF ACCOUNTING

5.  Financial Accounting It is concerned with
record keeping directed towards the reparation
of Trial balance, profit and loss account and
balance sheet.
 Cost Accounting Cost Accounting is the
process of accounting for costs. It shows
classification and analysis of cost on the basis
of functions process, products etc.

6.  Management Accounting It deals with the
processing of data sentenced in financial
accounting and cost accounting for
managerial decision making.
 Tax Accounting This branch of accounting is
becoming important because of complex tax
laws governing income-tax, Excise duty,
value added tax etc.

7. IMPORTANCE OF ACCOUNTING
 systematic recording
 It records income and expenses in such a manner that net
result of any period can be determined
 tax assessment easy
 It records assets and liability in such a way that financial
position of the entity can be judged.
 monitor and evaluate organizations performance
 reliable and timely information for decision making.
 a basis for estimation and projection
 enables preparation of budgets.

8. USERS OF ACCOUNTING INFORMATION

9. CLASSIFICATION OF ACCOUNTING
PRINCIPLES
CONCEPTS
Separate Entity
Accounting Period
Money Measurement
Going Concern
Cost Concept
Matching Concept
Accrual Basis of Accounting
Dual Aspect
CONVENTIONS
Conservatism
Consistency
Materiality
disclosure

10. SEPARATE ENTITY

11. ACCOUNTING PERIOD

12. MONEY MEASUREMENT

13. GOING CONCERN

14. COST CONCEPT

16. ACCRUAL BASIS OF ACCOUNTING

17. DUAL ASPECT

18. CONVENTIONS OF ACCOUNTING
CONSERVATISM CONSISTENSY
MATERIALITY DISCLOSURE

19.  CONSERVATISM  CONSISTENCY

20.  MATERIALITY  DISCLOSURE or
TRANSPERENCY

21.  Accounting is considered as the language of
business.
 Similarly accounting has certain rules to be
observed by the accountants so that it is
understood by all in the same sense.
 Thus accounting standards are certain set of rules
and guidance based on the principles and methods
of accounting to be followed to have uniformity in
terminology approach and presentation of results

22.  Accounting Standards in India are issued By the
Institute of Chartered Accountants of India (ICAI).
 At present there are 31 Accounting Standards
issued by ICAI.
 In India, issued by ICAI on 21st April,1977
Initiated by Kumar Mangalam Birla, chairman
committee of Corporate Governance for Financial
Disclosures

23. OBJECTIVES AND FUNCTIONS OF AS
 Standardize the diverse accounting policies
 Add the reliability to the financial statement
 Eradicate puzzling variation in treatment of accounting
aspects
 Facilitate inter-firm and intra-firm comparison
 To provide interpretations and guidance on AS, time to
time

24. Identification of
Broad Areas
Constitution of
Study Group
Revision of
Preliminary Draft
Circulation of
Revised Draft
Meeting with
specified outside
bodies
Finalization of
exposure draft of
proposed AS
Issuance of
exposure draft
Consideration of
comments and
finalization of the
draft by ASB
Modification of the
draft, if necessary
Issuance of AS
FORMULATION
OF AS

25. NEED FOR GLOBAL STANDARDS IN INDIA
 Expanding world trade
 Proliferation of multinational corporations
 Increasing role of global capital markets
 Increased foreign direct investment
 Growth of multinational political organizations
 A way to minimize costs
 IFRS convergence will result in improved disclosure
by Indian companies in line with global best
practices.

26.  INTERNATIONAL FINANCIAL REPORTING STANDARDS
 It is unique, high quality, easily understandable global
accounting standards.
 IFRSs are the accounting standards published by the
International Accounting Standards Board (IASB).
 The IASB was established in 2001 by its forerunner, the
International Accounting Standards Committee, which
itself was established in 1973.

28. Key Problems that Cause Resistance to
IFRSs
 Agreeing on who will create the rules
 How different the rules will be from current
national GAAP
 Costs of changing GAAPs
 National dominance