Accounting introduction

1. SUBBU PULLELA

2.  Accounting is a language of business, it helps
to communicate the business transactions to
the users.
 The main objective of any business is to make
profit.
 Profit is difference between the price at which
the trader purchases goods and sells the same.
SUBBU PULLELA

3. Need of Accounting :
• To know the true profit or loss of the business for a particular period.
• To have a permanent record for all mercantile transactions taken place
in the business.
• To know the financial position of the business at any point of time.
• To know the amounts due to suppliers from whom the goods bought
on credit.
• To know the amounts due from customers to whom the goods are sold
on credit.
• To keep all changes in the values Assets and Liabilities on any date.
• To know whether the line of business is profitable or not, if not, reasons
for the same.
• To keep watch on expenses with a view to minimize the same.
• To provide relevant information for Legal and Tax purpose when
required.
SUBBU PULLELA

4. ACCOUNTING DEFINITION
Accounting has been defined as
“The art of recording, classifying and summarizing in a significant manner and
in Terms of money transactions and events which are of financial character and
interpreting the results”.
Analysis of Definition:
Recording - This is first stage of accounting which is deals with recording i.e. journalizing
the transactions.
Classifying - The second stage of accounting is classifying the transactions into Expenditure,
Income, Assets and Liabilities. After classifying the transactions the journalized entries will
be posted to the respective ledger accounts.
Summarizing -The third stage of accounting is summarizing the data into trail balance for
preparation of financial statements.
Interpreting -The last stage of accounting is interpreting the result to the users like government,
creditors, debtors, employees etc…
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5. Types of Accounts
Personal Account Deals with persons ( Artificial / Natural)
Real Account Deals with properties
Nominal Accounts Deals with Expenditure, Losses, Incomes an
gains
Golden Rules of Accounts
Personal Account
Debit the receiver
Credit the giver
Real Account
Debit what comes in
Credit what goes out
Nominal Account
Debit all expenses and losses
Credit all incomes and gains
SUBBU PULLELA