Accounting provides economic information to allow informed judgements and decisions. It has four fields: financial, management, auditing, and tax accounting. Accounting identifies, measures, and communicates transactions to understand a business's financial health, do planning and budgeting, calculate tax liability, and provide financial reports. It involves analyzing transactions, recording them in journals, posting to ledgers, preparing trial balances, recording adjustments, and generating financial statements like income statements, statements of retained earnings, and balance sheets. These statements are used by investors, employees, lenders, suppliers, customers, and governments to understand the business.

1. ACCOUNTING FORACCOUNTING FOR
ENTREPRENEURSENTREPRENEURS
Presented byPresented by
CA.B. Francis Amal GeorgeCA.B. Francis Amal George

2. What is Accounting?What is Accounting?
““The process of identifying , measuring and communicatingThe process of identifying , measuring and communicating
economic information to permitinformed judgements and decisionseconomic information to permitinformed judgements and decisions
by users of the information.”-The American Accounting Association.by users of the information.”-The American Accounting Association.
Four Fields of AccountingFour Fields of Accounting
Financial AccountingFinancial Accounting
 Management AccountingManagement Accounting
AuditingAuditing
Tax AccountingTax Accounting
Why do we need Accounting?Why do we need Accounting?
1.1.Financial HealthFinancial Health
2.2.Financial PlanningFinancial Planning
3.3.BudgetingBudgeting
4.4.Calculating Tax LiabilityCalculating Tax Liability
5.5.Financial ReportingFinancial Reporting
6.6.Need for FinancingNeed for Financing

3.  The Elements of Accounting Assets, Items with money value thatThe Elements of Accounting Assets, Items with money value that
are owned by a Business and Items that generate future benefitsare owned by a Business and Items that generate future benefits
and repaymentsand repayments
Eg: Cash, Building, Office supplies, Accounts Receivables etcEg: Cash, Building, Office supplies, Accounts Receivables etc
 The Elements of Accounting (Cont’d) Liabilities are debts owed byThe Elements of Accounting (Cont’d) Liabilities are debts owed by
the business and items that represent economic future sacrifices.the business and items that represent economic future sacrifices.
Ex Loans, Accounts, Payable..etcEx Loans, Accounts, Payable..etc
 The Elements of Accounting (Cont’d) Owner’s Equity Capital,The Elements of Accounting (Cont’d) Owner’s Equity Capital,
proprietorship or net worthproprietorship or net worth
 The Accounting Equation (Cont’d) Owner’s Assets =Liabilities +The Accounting Equation (Cont’d) Owner’s Assets =Liabilities +
Equity . This Equation must always balance!Equity . This Equation must always balance!
 The Accounting Cycle: Definition Transaction; A Transaction isThe Accounting Cycle: Definition Transaction; A Transaction is
any activity that changes the value of a firm’s assets, liabilities, orany activity that changes the value of a firm’s assets, liabilities, or
owner’s equity. Account is an individual record or form to recordowner’s equity. Account is an individual record or form to record
and summarize information for each asset, liability, or owner’sand summarize information for each asset, liability, or owner’s
equity transaction.Double entry accounting means that there willequity transaction.Double entry accounting means that there will
be atleast two accounts affected by each transaction.be atleast two accounts affected by each transaction.

4.  The Accounting Cycle Definitions. Journal diary of information ofThe Accounting Cycle Definitions. Journal diary of information of
day-to-day transaction. Ledger individual accounts that helpday-to-day transaction. Ledger individual accounts that help
summarize activity and obtain balances of accounts.summarize activity and obtain balances of accounts.
 Trial balance a statement listing on a certain date that shows allTrial balance a statement listing on a certain date that shows all
accounts and their balances. This usually occurs at the end of theaccounts and their balances. This usually occurs at the end of the
month, but it could be any time.month, but it could be any time.
 The Accounting Cycle.The Accounting Cycle.
 Analyze transactions(Debit or Credit).Analyze transactions(Debit or Credit).
 Record in a journal(Record)Record in a journal(Record)
 Post from the journal to the ledger. (Summarize)Post from the journal to the ledger. (Summarize)
 Prepare an unadjusted trial balance.Prepare an unadjusted trial balance.
 Record adjusting entriesRecord adjusting entries
 Prepare adjusted trial balancePrepare adjusted trial balance
 Prepare Financial StatementsPrepare Financial Statements

5. Analyze Transactions Involves taking a decision on whether aAnalyze Transactions Involves taking a decision on whether a
particular business event has an economic effect on the assets,particular business event has an economic effect on the assets,
liabilities or equity of the business. It also involves ascertaining theliabilities or equity of the business. It also involves ascertaining the
magnitude of the transaction.magnitude of the transaction.
Analyzing Transactions Asset and Expenses An increase isAnalyzing Transactions Asset and Expenses An increase is
recorded as debit ( left side) . A decrease is recorded as credit(rightrecorded as debit ( left side) . A decrease is recorded as credit(right
side) .Liabilities, Equities and Revenues . A decrease is recorded asside) .Liabilities, Equities and Revenues . A decrease is recorded as
debit( left side) . An increase is recorded as credit(right side)debit( left side) . An increase is recorded as credit(right side)
Practical Example:Practical Example:
The owner brings cash from his personal account into the businessThe owner brings cash from his personal account into the business
Analysis. Cash ( an asset) is increased thus debit Cash OwnerAnalysis. Cash ( an asset) is increased thus debit Cash Owner
Capital ( an equity) is increased thus credit Owners Capital. OfficeCapital ( an equity) is increased thus credit Owners Capital. Office
supplies are purchased on account Analysis: Office Supplies ( ansupplies are purchased on account Analysis: Office Supplies ( an
asset) is increased thus debit Office Supplies Account Payable ( aasset) is increased thus debit Office Supplies Account Payable ( a
liability) is increased thus Account Payable. Wages payable are paidliability) is increased thus Account Payable. Wages payable are paid
analysis. Wages Payable ( a liability) is decreased thus debit wagesanalysis. Wages Payable ( a liability) is decreased thus debit wages
Payable Cash ( an asset) is decreased thus credit Cash.Payable Cash ( an asset) is decreased thus credit Cash.

6. Revenue is earned but not yet received Analysis: AccountsRevenue is earned but not yet received Analysis: Accounts
Recievable ( an asset) is increased thus debit accounts ReceivableRecievable ( an asset) is increased thus debit accounts Receivable
( an asset )is increased thus debit Accounts Receivable Revenue ( a( an asset )is increased thus debit Accounts Receivable Revenue ( a
revenue) is increased thus credit Revenuerevenue) is increased thus credit Revenue
Recording Transaction in Journal Entries( practical example)Recording Transaction in Journal Entries( practical example)
Posting from Journal to LedgerPosting from Journal to Ledger
Prepare Unadjusted Trial balancePrepare Unadjusted Trial balance
Record Adjusting Entries Accurals: These include revenues not yetRecord Adjusting Entries Accurals: These include revenues not yet
received nor recorded and expenses not yet paid nor recorded. Forreceived nor recorded and expenses not yet paid nor recorded. For
example, interest expenses on loan accured in the current period butexample, interest expenses on loan accured in the current period but
not yet paid. Prepayments : These are revenues received in advancenot yet paid. Prepayments : These are revenues received in advance
and recorded as assets, to be recorded as expense. For exampleand recorded as assets, to be recorded as expense. For example
adjustments to unearned revenue, prepaid insurance, office supplies,adjustments to unearned revenue, prepaid insurance, office supplies,
prepaid rent etc, Non- cash: These adjusting entries record non-prepaid rent etc, Non- cash: These adjusting entries record non-
cash items such as depreciation expense, allowance for doubtfulcash items such as depreciation expense, allowance for doubtful
debts etc.debts etc.

7. Record Adjusting EntriesRecord Adjusting Entries
Prepare Adjusted Trial BalancePrepare Adjusted Trial Balance
Financial Statements 1. Income Statement (contains only revenueFinancial Statements 1. Income Statement (contains only revenue
and expenses and show net gain or loss)and expenses and show net gain or loss)
2. Statement of Retained Earnings ( summarizes the changes during2. Statement of Retained Earnings ( summarizes the changes during
the accounting period)the accounting period)
3. Balance Sheet( lists a firm’s assets, liabilities, and owner’s equity)3. Balance Sheet( lists a firm’s assets, liabilities, and owner’s equity)
Income StatementIncome Statement
Statement of Retained EarningsStatement of Retained Earnings
Balance SheetBalance Sheet
Users and Their Information NeedsUsers and Their Information Needs
1.Investors1.Investors
2.Emplyees2.Emplyees
3.Lenders3.Lenders

8. 4. Suppliers and other trade creditors4. Suppliers and other trade creditors
5. Customers5. Customers
6. Governments and their agencies6. Governments and their agencies
7. Public7. Public
Advantages of Financial RatiosAdvantages of Financial Ratios
It simplifies the financial statements.It simplifies the financial statements.
It helps in comparing companies of different size with each otherIt helps in comparing companies of different size with each other
It helps in trend analysis which involves comparing a singleIt helps in trend analysis which involves comparing a single
company over a periodcompany over a period
It highlights important information in simple form quicklyIt highlights important information in simple form quickly
A user can judge a company by just looking at few numbersA user can judge a company by just looking at few numbers
instead of reading the whole financial statementinstead of reading the whole financial statement

9. Limitation of Financial RatiosLimitation of Financial Ratios
Different companies operate in different industries each havingDifferent companies operate in different industries each having
different environmental condition, such as Regulation, Marketdifferent environmental condition, such as Regulation, Market
structure etcstructure etc
Financial accounting information is affected by estimates andFinancial accounting information is affected by estimates and
assumptions.assumptions.
Accounting standards allow different accounting policies whichAccounting standards allow different accounting policies which
impairs comparability and hence ratio analysis is less useful in suchimpairs comparability and hence ratio analysis is less useful in such
situations.situations.
Ratio analysis explains relationship between past information whileRatio analysis explains relationship between past information while
users are more concerned about current and future informationusers are more concerned about current and future information

10. THANK YOU !THANK YOU !