Acc0101. Meaning and Scope of Accounting

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Acc0101. Meaning and Scope of Accounting

  1. 1. CPTSuccess<br />Revision Notes – Fundamentals of Accounting<br />Chapter 1. Accounting an Introduction<br />Unit 1: Meaning and Scope of Accounting<br />
  2. 2. Chapter 1. Accounting an Introduction<br />Unit 1: Meaning and Scope of Accounting<br />Transaction denotes “a business, performance of an act, an agreement”, while Event is used to mean “a happening, as a consequence of a transaction, a result”. Events are the end results of transactions<br />Accounting is defined as the art of recording, classifying, summarizing, analyzing, interpreting and communicating the results of transactions and events which are of financial character. <br />Hence, it includes preparation of final accounts, ascertainment of profit or loss and its communication to users. <br />©<br />Revision Notes - Fundamentals of Accounting<br />CPTSuccess<br />www.cptsuccess.com<br />
  3. 3. Chapter 1. Accounting an Introduction<br />Unit 1: Meaning and Scope of Accounting<br />Procedure of accounting includes:<br /><ul><li>Generating financial information
  4. 4. Recording – i.e. making journal entries
  5. 5. Classifying – i.e. under different accounts in Ledger
  6. 6. Summarizing – preparation of trial balance, P&L account, Balance sheet and Cash flow statement
  7. 7. Analyzing
  8. 8. Interpreting
  9. 9. Communicating
  10. 10. Using the financial information
  11. 11. Internal users – Board of directors, Partners, Managers, Officers
  12. 12. External users – Investors, Lenders, Suppliers, Government agencies, Employees and Customers</li></ul>©<br />Revision Notes - Fundamentals of Accounting<br />CPTSuccess<br />www.cptsuccess.com<br />
  13. 13. Chapter 1. Accounting an Introduction<br />Unit 1: Meaning and Scope of Accounting<br />Accounting cycle consists of <br /><ul><li>Recording the transactions in the books of original entry
  14. 14. Posting to ledger
  15. 15. Preparation of trial balance
  16. 16. Preparation of final accounts</li></ul>Management accounting is concerned with internal reporting to the managers of a business unit. The different ways of grouping information and preparing reports as desired by managers for discharging their functions are referred to as management accounting. It is not accounting for future, although it is based on historical data<br />©<br />Revision Notes - Fundamentals of Accounting<br />CPTSuccess<br />www.cptsuccess.com<br />
  17. 17. Chapter 1. Accounting an Introduction<br />Unit 1: Meaning and Scope of Accounting<br /><ul><li>Objectives of accounting includes:
  18. 18. Systematic recording of transactions – Book keeping i.e. journal, ledger and trial balance
  19. 19. Ascertainment of results of above recorded transactions – making Manufacturing, Trading and P&L account
  20. 20. Ascertainment of financial position of the business – making balance sheet
  21. 21. Providing information to the users for rational decision making – preparing financial reports
  22. 22. To know the solvency position – through balance sheet</li></ul>©<br />Revision Notes - Fundamentals of Accounting<br />CPTSuccess<br />www.cptsuccess.com<br />
  23. 23. Chapter 1. Accounting an Introduction<br />Unit 1: Meaning and Scope of Accounting<br /><ul><li> In 1970, the Accounting Principles Board (APB) of American Institute of Certified Public Accountants (AICPA) enumerated the functions of accounting.
  24. 24. Functions of Accounting are as follows:
  25. 25. Measurement of past performance
  26. 26. Forecastingfuture performance
  27. 27. Decision making by providing relevant information to the users of accounts
  28. 28. Comparison and Evaluation through assessing performance and evaluating financial results
  29. 29. Control by identifying weaknesses of operational system and providing feedback
  30. 30. Government regulation and taxation by providing necessary information</li></ul>©<br />Revision Notes - Fundamentals of Accounting<br />CPTSuccess<br />www.cptsuccess.com<br />
  31. 31. Chapter 1. Accounting an Introduction<br />Unit 1: Meaning and Scope of Accounting<br /><ul><li>Book keeping is concerned with complete and permanent record of all transactions and to obtain the combined effect of all such transactions on the financial position of the business as a whole. It does not include analysis and interpretation of the data. </li></ul>©<br />Revision Notes - Fundamentals of Accounting<br />CPTSuccess<br />www.cptsuccess.com<br />
  32. 32. Chapter 1. Accounting an Introduction<br />Unit 1: Meaning and Scope of Accounting<br /><ul><li>Sub-fields of Accounting are:
  33. 33. Financial accounting
  34. 34. Management accounting
  35. 35. Cost accounting
  36. 36. Social responsibility accounting
  37. 37. Human resource accounting</li></ul>©<br />Revision Notes - Fundamentals of Accounting<br />CPTSuccess<br />www.cptsuccess.com<br />
  38. 38. Chapter 1. Accounting an Introduction<br />Unit 1: Meaning and Scope of Accounting<br /><ul><li>Areas of service of Accountants in the society are:
  39. 39. Maintenance of books of accounts
  40. 40. Statutory audit
  41. 41. Internal audit
  42. 42. Taxation
  43. 43. Management accounting and consultancy services
  44. 44. Financial advice – Investments, Insurance, Business expansion, investigations, pension schemes
  45. 45. Other services – secretarial work, share registration, company formation, receiverships, liquidation, arbitration, accountant and information services, cost accounting.</li></ul>©<br />Revision Notes - Fundamentals of Accounting<br />CPTSuccess<br />www.cptsuccess.com<br />
  46. 46. CPTSuccess<br />

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