Its a detailed document that

1. COC PROJECT
BY,
MANISH JANGID T
24BIB024
ACCOUNTING FUNDAMENTALS

2. Introduction to fundamentals of
accounting
Accounting, the language of business, is a system
for recording, summarizing, and reporting financial
information to help stakeholders make informed
decisions. It involves identifying, recording,
classifying, summarizing, analyzing, interpreting,
and communicating financial information.
the primary purpose of accounting is to provide
accurate and reliable financial information to
stakeholders, enabling them to make informed
decisions.

3. ACCOUNTING CONCEPTS
Fundamental assumptions that support accounting practices
1. Entity Concept – A business is treated as separate from its owners.
2. Money Measurement Concept – Only financial transactions measurable in
monetary terms are recorded.
3. Dual Aspect Concept – Every transaction affects two accounts (debit and
credit).
4. Historical Cost Concept – Assets are recorded at their original purchase
price.
5. Realization Concept – Revenue is recognized when earned, not necessarily
when cash is received.

4. 1. Income Statement (Profit & Loss Statement) – Shows revenues, expenses,
and net profit or loss over a period.
Revenue – Expenses = Net Profit/Loss
2. Balance Sheet (Statement of Financial Position) – Represents the financial
position of a business at a specific date.
Assets = Liabilities + Equity
3. Cash Flow Statement – Summarizes cash inflows and outflows under
operating, investing, and financing activities.
FINANCIAL
STATEMENTS

5. ACCOUNTING
CYCLE
ACCOUNTING CYCLE STAGES
1. Identify transactions
2. Record journal entries
3. Post to ledger accounts
4. Prepare a trial balance
5. Adjust entries
6. Prepare financial statements
7. Close accounts

6. TYPES OF ACCOUNTS AND RULES
1. Personal Accounts – Related to individuals, companies, banks.
Rule: Debit the receiver, credit the giver.
2. Real Accounts – Related to assets and properties.
Rule: Debit what comes in, credit what goes out.
3. Nominal Accounts – Related to expenses, losses, revenues, and gains.
Rule: Debit all expenses and losses, credit all incomes and gains.

7. KEY FINANCIAL RATIOS
Key Financial Ratios
1. Liquidity Ratios – Measure short-term financial stability.
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
2. Profitability Ratios – Measure profitability performance.
Gross Profit Margin = (Gross Profit / Revenue) × 100
Net Profit Margin = (Net Profit / Revenue) × 100
3. Leverage Ratios – Measure financial leverage and debt levels.
Debt-to-Equity Ratio = Total Liabilities / Shareholders’ Equity
4. Efficiency Ratios – Measure how effectively assets are utilized.
Inventory Turnover = Cost of Goods Sold / Average Inventory

8. ACCOUNTING STANDARDS AND
REGULATORY BODIES
GAAP (Generally Accepted Accounting Principles) –
Standardized accounting guidelines used in many countries.
IFRS (International Financial Reporting Standards) – Global
accounting standards.
FASB (Financial Accounting Standards Board) – US regulatory
body for accounting standards.
IASB (International Accounting Standards Board) – Develops
IFRS standards.

9. CONCLUSI0N
Accounting is essential for tracking financial transactions, ensuring compliance,
and guiding business decisions. A strong understanding of accounting principles, financial
statements, and ethical considerations helps businesses operate effectively and transparently.
Financial accounting helps organizations with accurate recordkeeping, which is key to creating
financial statements that meet accounting standards and legal guidelines. Organizations
following accounting best practices evaluate and optimize their performance more efficiently

10. Thank You