The document outlines the course outline for a fundamentals of accounting course. It covers key topics like the purpose and nature of accounting, the accounting equation, the accounting cycle process, financial statements, and accounting terminology. The course introduces students to the basic concepts and principles of accounting, different types of accounts, and how to record and analyze financial transactions according to generally accepted accounting principles. It provides an overview of the accounting knowledge and skills students will learn over the course of the program.

1. FUNDAMENTAL
OF
ACCOUNTING

2. COURSE OUTLINE
 PURPOSE AND NATURE OF ACCOUNTING,
 VARIOUS AREAS OF ACCOUNTING,
 FORM OF BUSINESS,
 G A A P,
 USERS OF ACCOUNTING,
 BUSINESS TRANSACTION,
 ACCOUNTING EQUATION,

3. COURSE OUTLINE
 CHANGING IN FINANCIAL POSITION,
 DOUBLE ENTRY SYSTEM,
 JOURNAL,
 LEDGER,
 TRIAL BALANCE,
 ACCOUNTING CYCLE,
 MEASURING BUSSINESS INCOME

4. COURSE OUTLINE
 ADJUSTMENT PROCESS,
 COMPLETION OF ACCOUNTING CYCLE,
 WORK SHEET,
 FINANCIAL STATEMENTS,
 ACCOUNTING FOR MERCHANDISES,
 BANK RECONCILIATION STATEMENT,
 DEPRECIATION METHODS,

5. COURSE OUTLINE
 INVENTORIES ACCOUNTING METHODS,
 CASH FLOW STATEMENTS AND THEIR
CLASSIFICATION, etc.

6. ACCOUNTING BASIC
TERMONOLOGIES

7. ACCOUNTING:
 ACCOUNTING IS SPECIALISED INFORMATION
SYSTEM THAT PROVIDES ECONOMIC
INFORMATION TO THE DIFFERENT GROUPS OF
PEOPLE

8. BRANCHES OF ACCOUNTING
 COST ACCOUNTING:
is to ascertain the cost of
product and help the
management in the control
of cost
 MANAGEMENT ACCOUNTING:
Which provides necessary
information to the management
for discharging its functions. it
enable the management to
take decision and control
activities
 FINANCIAL
ACCOUNTING
accounting is an art of
recording’classifing and
summarizing in terms of
money' transaction and
event of financial
character and
interpreting the results
to different users
ACCOUNTING
FINANCIAL COST MANAGEMENT

9.  BOOK-KEEPING:
recording of business
transaction in a systematic
way
 BUSINESS:
any activity undertaken for
the purpose of earning profit.
 PROPRIETOR:
the owner of concern, invest
capital, time and attention,
bear loss n enjoy profit.
 CAPITAL:
any thing n amount invest by
the owner.

10. TRANSACTION
 ANY DEALING BETWEEN TWO PERSON OR THINGS.
 IT MAY BE FOR CASH
 IT MAY BE ON CREDIT

11. • DRAWINGS:
good n cash taken
away by the owner.
 GOOD/MERCHANDIZ:
all thing in which
business deals
 PURCHASES:
Any thing purchase for
re sale purpose.
 ASSETS:
all the things own or
possessed by the biz.
 LIABILITIES:
any debts due by biz.
 SALES:
goods are sold for
profit.
 RETURNS:
if return by customer
its sales return and if
return to
seller/supplier its
purchases reutrn

12.  REVENUE:
Any income generating by
biz.
• DISCOUNT:
Any reduction in price.
• TRADE DISCOUNT:
Any concession in
listed/printed price,at the
spot.
 CASH DISCOUNT:
Deduction allowed by
the creditor to the
debtor for prompt
payment.
 ALLOWANCE:
Any reduction in price
due to defect.

13.  DEBTORS:
from whom the biz
receive.
 CREDITOR:
To whom the biz pay.
 EXPENDITURE/COST:
Any assets acquired.
 EXPENCES:
Used/enjoyed benefit
of expenditure
 STOCK/INVENTORY:
Unsold goods.
 ACCOUNT:
Brief record of
transaction; about
person or things.
 EQUITY:
Part, share or investment

14. ACCOUNTING CYCLE
TRANSACTION
JOURNAL
LEDGER
TRIAL BALANCE
PROFIT/LOSS STATMENT
BALANCE SHEET

15. GROUPS
OF
ACCOUNTING USERS

16. OWNER
MANAGEMENT
LABOUR/EMPLOYEE
CREDITORS
SUPPLIER
CUSTOMER
GOVERNMENT

17. G A A P

18. GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES(GAAP)
ACCOUNTING
CONVENTIONS:
 DISCLOSURE
 MATERIALITY
 CONSISTENCY
 CONSERVATISM
ACCOUNTING
CONCEPTS:
• BIZNESS ENTITY
• GOING CONCERN
• MONEY
MEASUREMENT
• COST
• DUAL ASPECT
• ACCOUNTING PERIOD
• MATCHING
• REALISATION

19. ACCOUNTING
CONCEPTS

20. BUSINESS ENTITY CONCEPT
 Business and business man/owner both are
separate entities accounting deals and
concerned with only business, financial matters.
in short we done our work of accounting with
business point of view.

21. GOING CONCERN CONCEPT
 It shows that the business will exist for a long time
to come.

22. MONEY MEASUREMENT
CONCEPT
 Accounting records only those transaction which
can be expressed in terms of money. transaction
or event which can not be expressed in money
do not place in books of accounts.

23. (HISTORICAL)COST CONCEPT
recording of an assets at there purchasing price.

24. ACCOUNTING PERIOD
CONCEPT
 The life of the business is divided into equal
segments, for studying the results after each
segments.
 The time/duration of business period is
twelve(12)months or a year.

25. MATCHING CONCEPT
 Compare business expense of a particular
period with its relevant period’s revenue.
 Match the expenses with revenue

26. REALISATION CONCEPT
 Record the revenue at the time of delivering of
product to the customer.

27. DUAL ASPECT CONCEPT
 Every transaction has two aspect.
 One what benefit business is receiving and other
what benefit business is giving.

28. ACCOUNTING
CONVENTIONS

29. CONVENTION OF DISCLOSURE
 Disclose all the significant information.
 All the material information is clearly
show/disclose, which are in the interest of its
users.

30. CONVENTION OF MATERIALITY
 Relevant importance of an item or event.
 Simply, expensive transaction have place as well
as relatively important one.

31. CONVENTION OF
CONSISTENCY
 The accounting practice remain unchanged
from one year to another.

32. CONVENTION OF
CONSERVATISM
 CAUTION APPROACH
 POLICY OF “PLAY SAFE”
 IGNORE ANTICIPATED PROFIT AND ACCOUNT
FOR ALL POSSIBLE LOSSES

33. BASIS OF ACCOUNTING
 ACCRUALS BASIS OF
ACCOUNTING:
It’s a system in which
entries are made
when they occur.
 CASH BASIS OF
ACCOUNTING
Its a system in which
entries/recording
are made only when
cash/cheque is
received or paid.

34. FINANCIAL REPORTING PROCESS
Provide information for;
 Decision making
 Sources and resources
 Financial performance
 In and out flow of cash

35. KIND OF FINANCIAL STATMENTS
 BALANCE SHEET
 INCOME STATEMENT
 CASH FLOW STATEMENT
 CHANGE IN EQUITY STATEMENTS
 NOTES

36. Most businesses prepare the following financial
statements to report accounting information:
1. Income Statement
2. Balance Sheet
3. Statement of Cash Flows
4. Statement of Stockholders’ Equity
5. Statement of Retained Earnings
Overview of Financial StatementsOverview of Financial StatementsOverview of Financial StatementsOverview of Financial Statements

37. A Balance Sheet (Statement of
Financial Condition) identifies
a company’s assets and claims
to those assets by creditors and
owners at a specific date.
(A = L + SE) (a snapshot)
A Balance Sheet (Statement of
Financial Condition) identifies
a company’s assets and claims
to those assets by creditors and
owners at a specific date.
(A = L + SE) (a snapshot)
Overview of Financial StatementsOverview of Financial StatementsOverview of Financial StatementsOverview of Financial Statements

38. Company XYZZ
Balance Sheet
At December 31, 2006
Assets
Current assets:
Cash $ 12,600
Accounts receivable 9,600
Merchandise inventory 22,000
Supplies 800
Prepaid rent 1,000
Total current assets $ 46,000
Long-term (Fixed) Assets:
Property and equipment, at cost 300,000
Less Accumulated depreciation (60,000)
Total Long-term (Fixed) Assets $240,000
Total assets $286,000
ContinuedContinuedContinuedContinued

39. Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 8,500
Unearned revenue 3,800
Interest payable 700
Notes payable, current portion 4,000
Total current liabilities $ 17,000
Long-term liabilities:
Notes payable, long-term 80,000
Total liabilities $ 97,000
Stockholders’ equity:
Common stock 150,000
Retained earnings 39,000
Total stockholders’ equity $189,000
Total liabilities and stockholders’ equity $286,000

40. BALANCE SHEET
 Any properties & possessions
of the business.
 CURRENT ASSETS:whose
benefits are for/in one
year.e.g.cash,bank,A/R,B/R,
N/R,STOCK etc.
 FIXED ASSETS:whose benefits
are for more than one
year.e.g.
plant,machinery,furniture,fixt
ure,fittings,vehicles,building,l
and etc.
 A lists of ASSETS,
LIABILITY and
OWNER’S EQUITY
of bizness as of a
specific date,usually
at the close of the last
day of a month or
year.

41. KINDS OF FIXED ASSETS
 INTANGIBLE ASSETS:
THOSE WHICH HAVE NO
PHYSICAL
EXISTANCE,e.g.goodw
ill,patents,right,trade
mark,copy right etc.
 TANGIBLE ASSETS:
THOSE WHICH HAVE
PHYSICAL
EXISTENCE,PROOF
WITH FIVE SENCES.

42. LIABILITIES
 FIXED LIABILITIES:
FOR MORE THAN ONE
YEAR.e.g.loan,mortga
ge,capital.etc.
Any debts and
obligation of the
business.
 CURRENT LIABILITIES:
FOR ONE
YEAR;e.g.credit,B/P,N/
P,creditors,b.o.d etc.

43. INCOME STATMENT
 A summary of the REVENUE and EXPENSES of a
biz. For a specific period of time,such a month or
a year.

44. The Income Statement (Statement
of Earnings) reports revenues and
expenses for an accounting period
as a means of determining how well
a company has performed in
generating profits for its owners.
The Income Statement (Statement
of Earnings) reports revenues and
expenses for an accounting period
as a means of determining how well
a company has performed in
generating profits for its owners.
Overview of Financial StatementsOverview of Financial StatementsOverview of Financial StatementsOverview of Financial Statements

45. Company XYZZ
Income Statement
For the Year Ended December 31, 2006
Sales revenue $700,500
Cost of goods sold (450,200)
Gross profit 250,300
Depreciation Expense (60,000)
Selling, general, & administrative exp. (90,300)
Operating income 100,000
Interest expense (5,000)
Pretax income 95,000
Income taxes (40% tax rate) (38,000)
Net income $ 57,000
Earnings per share
Average number of common shares 4,000
$ 14.25

46. STATEMENT OF CASH FLOW
 A summary of CASH RECIEPT and CASH
PAYMENTS,i.e.operating,investing and financing
activities.of business for specific date,month or a
year.

47. STATEMENT OF OWNER’S EQUITY
 A summary of the changes in owner's equity of a
biz. That have occurred during a specific period
of time,month or a year.

48. NOTES
 ANY DETAIL OR EXPLATION OF ANY ACCOUNT OR
ITEMS ARE DENOTED WITH NUMBERS IN ANNUAL
REPORT,IT IS QUALITATIVE DATA.

49. AssetsAssets = LiabilitiesLiabilities
Stock-
holders’
Equity
Stock-
holders’
Equity
+
The Financial Obligations or
Debts of a Business
The Basic Accounting EquationThe Basic Accounting EquationThe Basic Accounting EquationThe Basic Accounting Equation
Economic Resources
Owned by a Business
Owners’ Claims on the
Assets of a Business

50. ACCOUNTING EQUATION
 Like balance sheet but in form of equation.
 RESOURCES = SOURCES
 ASSETS = EQUTIES(LIABILITIES)
 ASSETS = LIABILITIES + CAPITAL
A = L + O

51. DIFFERENT PROCEDURE FOR
ACCOUNTING EQUATION
 A = L + O
 L = A - O
 O = A - L
 EXPESES ARE ALWAYS LESS IN OWNER’S EQUITY
 REVENUE ARE ALAYS ADD IN OWNER’S EQUITY

52. SINGLE ENTRY BOOK-KEEPING
 In single entry book keeping system, as is clear from the
name, only one aspect of the transaction is recorded.
 This actually is not a system but is a procedure by which
small business concerns, like retailers and small shopkeepers,
keep record of their sale / income.
 In this system there are usually two to three registers “Khata”.
In one register cash received from customers is recorded
whereas the other one is a person-wise record of goods sold
on credit “Udhar Khata”. There may or may not be a
register of suppliers to whom money is payable.
 Which means that only one aspect of transaction i.e. either
cash receipt or the fact that money is receivable from
someone is recorded.

53. DOUBLE ENTRY BOOK-KEEPING
 The concept of double entry is based on the fact that every
transaction has two aspects i.e. receiving a benefit and
giving a benefit.
 The accounting system that records both the aspects of
transaction in the same books of accounts is called double
entry system.
 The account that receives the benefit is debited and the
account that provides the benefit is credited.
 ‘Debit’ and ‘Credit’ are denoted by ‘Dr’ and ‘Cr’
respectively.
 The ultimate result of the system is that for every Debit (Dr)
there is an equal Credit (Cr).

54. HISTORY OF DR. AND CR.
 Debit and credit are formal bookkeeping and accounting
terms that have opposite meanings and come from Latin.
Debit comes from debere, which means "to owe". The Latin
debitum means "debt". Credit comes from the Latin word
credere, which means "to believe".
 It is more common to use the terms in the plural, Debits and
Credits.
 DEBIT is abbreviated as Dr., while credit is abbreviated as Cr

55. DEBIT AND CREDIT
 But we can develop an understanding as to what
does these terms stand for.
DEBIT
 It signifies the receiving of benefit. In simple words
it is the left hand side.
CREDIT
 It signifies the providing of a benefit. In simple
words it is the right hand side.
Debit and Credit will be explained in details and
with examples in our future discussions.

56. BASIC PRINCIPLE OF DOUBLE
ENTRY
 We can devise the basic principle of double
entry book-keeping from our discussion to this
point.
 “Every Debit has a Credit” which means that “All
Debits are always equal to All Credits”.

57. ACCOUNT
 An accounting system keeps separate record of
each item like assets, liabilities, etc. For example
a separate record is kept for cash that shows
increase and decrease in it.
 This record that summarizes movement in an
individual item is called an Account.

58. CLASSIFICATION OF ACCOUNTS
 We have to date studied following classification
of accounts:
 Assets,
 Liabilities,
 Income,
 Expenses
 Expenses can be further divided into capital
and revenue expenses.
 We have already studied about these
classifications in different lectures but to refresh
your memory we will gather them at one place.

59. ASSETS, LIABILITIES
ASSETS
 Assets are the properties and possessions of the
business.
LIABILITIES
 Liabilities are the debts and obligations of the
business.
 Liability is the obligation of the business to
provide a benefit or asset on a future date.
Asset is a right to receive and liability an
obligation to pay, therefore these are opposite
to each other.

60. RULES OF DEBIT AND CREDIT
Any account that obtains a benefit is Debit.
OR
Anything that will provide benefit to the business
is Debit.
 Both these statements may look different but in
fact if we consider that whenever an account
benefits as a result of a transaction it will have to
return that benefit to the business then both the
statements will look like different sides of the same
picture.

61. RULES OF DEBIT AND CREDIT
 For credit
Any account that provides a benefit is Credit.
OR
Anything to which the business has a responsibility
to return a benefit in future is Credit.
 As explained in the case of Debit, whenever an
account provides benefit to the business the
business will have a responsibility to return that
benefit at some time in future and so it is Credit.

62. RULES OF DEBIT & CREDIT FOR ASSETS
 Similarly we have established that whenever a
business transfers a value / benefit to an account
and as a result creates some thing that will
provide future benefit; the ‘thing’ is termed as
Asset.
 When an asset is created or purchased, value / benefit is transferred
to that account so it is Debited
i. Increase in Asset is Debit
 if the asset is sold, which is termed as disposing off, Therefore, the
asset account is debit
ii. Decrease in Asset is Credit

63. RULES OF DEBIT & CREDIT FOR LIABILITIES
 When a liability is created the benefit is provided to business by
that account so it is Credited
iii. Increase in Liability is Credit
 When the business returns the benefit or repays the liability, the
liability account benefits form the business so it is Debited
iv. Decrease in Liability is Debit

64. RULES OF DEBIT & CREDIT FOR EXPENSES
 the benefit from expenses is for a short run.
 Therefore Expenditure is just like Asset but for a short run.
 Now we can lay down our rule for Expenditure:
i. Increase in Expenditure is Debit
 Reversing the above situation if return any item that we had
purchased we will receive cash in return. Cash account will receive
benefit from that Expenditure account. Therefore Expenditure
account will be credited
ii. Decrease in Expenditure is Credit

65. RULES OF DEBIT AND CREDIT FOR
INCOME/CAPITAL
 Income accounts are exactly opposite to
expense accounts just as liabilities are opposite
to that of assets.
 Therefore using the same principle we can draw
our rules of Debit and Credit for Income
iii. Increase in Income is Credit
iv. Decrease in Income is Debit

66. NORMAL BALANCES
 DEBIT FOR ASSETS AND
EXPENSES
 CREDIT FOR
INCOME,CAPITAL AND
LIABILITY