The document introduces accounting, defining it as the art of recording, classifying, summarizing, and interpreting financial transactions. It outlines the functions and objectives of accounting, including the maintenance of records, profit calculation, and communication of financial positions to various stakeholders. Additionally, it distinguishes between financial accounting, management accounting, and cost accounting, highlighting the differences in their purposes and processes.

1. Business
Accounting
Module 1 :
Introduction to
Accounting

2. Content
 Accounting : Definition and Meaning
 Functions ofAccounting

3. Definition
 Accounting is an art of recording, classifying,
summarizing in a significant manner and in
terms of money, transactions and events which
are, in part at least of a financial character.
and interpreting the result thereof.
 Normal treated as language of the business

4. Business – Business transaction – Recording –Classifying –
Summarizing – Analysis and Interpretation

5. Functions of Accounting
1. Recording
2. Classifying
3. Summarizing
4. Deals with financial transaction
5. Analysis and Interpretation
6. Communicates

6. Recording
 This is the basic function of accounting.
 It is concerned with the recording of business transactions of
financial character.
 Recording is done in the book called “Journal”
 This process is called Journalizing

7. Classifying
 Classification is the systematic analysis of the recorded data
with a view to bring together items of similar nature at one
place.
 Classification is done in the book called “Ledger”
 This process is called Posting

8. Summarizing
 This is the presentation of the classified data in a way which is
understandable and useful to the internal and external users
 This is done with the help ofTrial balance and Balance sheet

9. Deals with financial transaction
 It records only those transaction and events, in terms of
money, which are of a financial character.

10. Analysis and Interpretation
 The recorded financial data are analyzed and interpreted in
such a way that the end users can make a meaningful
judgement about the financial position and operational results
of the business.

11. Communicate
 Communicate the result to the end users using
graphs ,diagrams , ratios etc….

12. Objectives of Accounting
1. To maintain records of business
2. Calculation of profit or loss
3. Depiction of financial position
4. To make information's available to various groups or users

13.  Accounting is done to keep a systematic record of
financial transactions
 Reason for maintaining records:
 Satisfy the requirements of law
 Provide strong evidence before the court of law
 Detection and prevention of errors
 Decision making
 Performance evaluation

To maintain records of business

14. Calculation of profit or loss
 Revenue > Expense = PROFIT
 Revenue <Expense = LOSS
 This is the most important objective of accounting
 This is done through preparation of Profit and Loss Account
(P/L Account)

15. Depiction of financial position
 The businessman is always interested in knowing his financial
position that is :Where he stands ,what he owes and what he
owns.
 This objective is served by Balance Sheet or Position
statement

16. To make information's available
Interested parties:
Owners
Creditors
Bankers
Government
Employees

17. TYPES OF ACCOUNTING
 Financial Accounting
 ManagementAccounting
 Cost Accounting

18. Financial Accounting
 This is the original form of accounting
 The objective of Financial accounting is to find out results of
the operation and financial position
 Records only monetary transactions

19. Management Accounting
 Management accounting is concerned with accounting
information that is useful to management.
 It draws all the financial information from financial
accounting.

20. Cost Accounting
 It is formal mechanism by which costs of product or service
are ascertained and controlled

21. Accounting and Book-keeping
 Book keeping is mainly concerned with the actual recording
of business transactions in a significant and orderly manner.
 Accounting is primarily concerned with laying down the
principles and designing the systems for recording, classifying
and summarizing the recorded data and interpret them for
internal and external users

22. Basis Accounting Book-keeping
Definition Accounting is primarily concerned with
laying down the principles and designing
the systems for recording, classifying and
summarizing the recorded data and
interpret them for internal and external
users
Book keeping is mainly
concerned with the actual
recording of business
transactions in a significant and
orderly manner.
Decision making Depending on the data provided by the
accountants, the management can take
critical business decisions
Management can't take a
decision based on the data
provided by bookkeeping
Preparation of
Financial Statements
Financial statements are prepared during
the accounting process
Financial statements are not
prepared as a part of this
process

23. Basis Accounting Book-keeping
Performance Accounting work is usually carried out by
qualified accountants
Usually performed by accounts
clerks
Skills Required Accounting requires special skills due to its
analytical and complex nature
Bookkeeping doesn't require any
special skill sets. It is generally
clerical and repetitive in nature
Objectives The objective of accounting is to find the
financial situation and further communicate
the information to the relevant authorities
The objective of bookkeeping is
to keep the records of all
financial transactions proper and
systematic

24. Advantage of Accounting
 It serves as a history of records
 It facilitate the preparation of financial statements which
depicts the results of operation and financial position of
business
 It supplies information to all those who are interested in the
business
 It helps in decision making
 Facilitates comparative study of the performance of the
business over different periods of time and with other firms
 It provides evidence in case of disputes

25. Limitations of Accounting
 Accounting is historical in nature
 It provides information about the concern as a whole .It
fails to provide information product-wise, activity-wise etc…
 Qualitative information's which are also important to
business are ignored.
 Use of different accounting methods reduces the reliability
of accounts
 Accounting records show only actual cost figure. The real
value may vary from time to time. Thus recorded costs
cannot provide correct information's