INTRODUCTION TO ACCOUNTING, Accounting Information System, Accounting Transaction, Accounting Transactions andaccounting equations, Double Entry System, Journal - The Book of Original Entry, Ledger & Trial Balance.

1. ACCOUNTING FOR
MANAGERS
SUBMITTED TO: SUBMITTED BY:
DR. SUNIL VERMA KAMAL GOYAL
FACULTY OF COMMERCE & MANAGEMENT, SGT UNIVERSITY GURUGRAM….MBA(1st SEM)

2. INTRODUCTION TO ACCOUNTING
• Accountancy is the process of communicating financial information about a
business entity to users such as shareholders and managers.

3. Accounting Information System
• Accounting information system is the system that identifies, records,
summarized, and communicates the various transactions of a company.

4. Accounting Transaction
• Any economic events that affects
company’s assets, liabilities or
equity at the time of the event.
• Examples of accounting transactions are:
• Sale in cash to a customer
• Sale on credit to a customer
• Receive cash in payment of an invoice owed
by a customer
• Receive cash in payment of an invoice owed
by a customer
• Record the depreciation of a fixed asset over
time
• Purchase consumable supplies from a
supplier
• Investment in another business
• Investment in marketable securities
• Borrow funds from a lender
• Sale of assets to a third party

5. Accounting Transactions
and
accounting equations
Assets = Liabilities + Equity

6. EXAMPLE OF ACCOUNTING
TRANSACTION
• Transaction #1: After incorporating, circle films issues 5000 shares of common stock to
investors for Rs 25000 cash. Circle films received cash of Rs 25000, assets increases. Its equity
also increases because investors have contributed cash for an ownership interest in the company.
More specifically, circle Films’ common stock increases.
• Assets = Liabilities + Equity
• Cash = + Common Stock
• Pre Bal 0 = + 0
• #1 +25000 = +25000
• Net Bal 25000 = 25000

7. Double Entry System
Locus Pacioli, Italian wrote first book on double entry system in 1494.
Accounting information is based on the double entry system.
An account is an arrangement of transactions affecting a given asset, liability
or other element.
Under this system, the two-sided effect of a transaction is recorded in the
appropriate accounts.
The recording is done by means of a “debit-credit” convention (set of rules)
applying to all accounts.

8. Successive Processes of the Double
Entry System
• Following are the successive processes of the double entry system :
• Journal
• Ledger
• Trial Balance
• Final Accounts

9. Journal - The Book of Original Entry
• The word journal has been derived from the French word "Jour" Jour means
day. So, journal means daily.
• Detailed account that records all the financial transactions of a business on
daily basis.
• It is a physical record or digital document kept as a book, spreadsheet or
within accounting software.
• Recording a transaction in a journal is called journal entry or journalizing.

10. Characteristics
• First successful step of double entry system.
• Transaction is recorded on the same day it takes place. So it is also called day
book.
• transactions are recorded chronologically.
• Narration is written below each entry.
• Amount is written in last two columns- debit and credit.

11. Advantages
• Records of all transactions in one place on the time and date basis.
• Minimum chances to avoid any particular transaction.
• It is the basis of posting in ledger accounts.
• Any mistake in ledger can be easily detected.
• It shows complete story of a transaction in one entry.

12. EXAMPLE

20. Ledger
• Collection of entire group of similar accounts in double entry book keeping.
• Also called book of final entry.
• It records classified and summarized financial information from journals.
• It consists of interlinked digital files.
• Follows same accounting principles as the manual system.

21. Characteristics of Ledger Account
• It is used to classify information.
• It contains all accounts.
• It provides summary of closing balance.
• It facilitates speedy tracking of mistakes.
• It facilitates payment & collection.

34. Trial Balance
• Statement showing the summary of balances of all the accounts in ledger.
• Important statement in the accounting process.
• Shows final position of all accounts.
• Helps in preparing final statements.
• Prepared at the end of the year.

35. Purposes of Trial Balance
• The trial balance serves two main purposes.
• These are as under:
• To check the equality of debits and credits – an arithmetical or mathematical
test of accuracy.
• To provide information for use in preparing final accounts.

36. Advantages of Trial balance
1. It presents to the businessman a consolidated list of all ledger balances.
2. 2. It is the shortest method of verifying the arithmetical accuracy of entries
made in the ledger.
3. 3. If the total of debit side/column is equal to the total of credit
side/column, the trial balance is said to agree. Otherwise, it is implied that
some errors have been committed in the preparation of accounts.
4. 4. It helps in the preparation of the final accounts i.e., Trading a/c. Profit
and loss a/c and Balance Sheet.

37. Trial Balance
S. No. ACCOUNT NAME DEBIT CREDIT
1 Cash Account 607000 207000
2 Capital Account 500000
3 Purchase Account 130000 11000
4 Sales Account 125000
5 XYZ Co Pvt Ltd
Account
6 ABC Co Pvt Ltd
Account
7 Sales Return Account 15000

38. 8 Purchase Return
Account
10000
9 Discount Allowed Account 5000
10 Discount Received
Amount
6000
11 Drawing Account 11000
12 Salary Account 8000
13 Rent Account 5000
14 Bank Account 225000 48000
15 Bank Loan Account 200000
16 Sales Promotion Account 4000
17 Loss Due To Fire Account 7000
18 Machinery Account 75000 625
19 Fixes Deposit Account 15000
20 Depreciation Account
TOTAL =
625
1,107,625 1,107,625