This document provides an overview of key accounting concepts including bookkeeping, accounting, financial accounting, cost accounting, management accounting, accounting cycle, accounting equation, types of accounts, rules of accounting, analysis of transactions, and journal entries. It defines accounting as the process of collecting, recording, classifying, and summarizing financial transactions. It also describes the different types of accounts (asset, liability, capital, income, expense), users of accounting information, and the steps in the accounting cycle.

1. FINANCIAL
ACCOUNTING

2. BOOK KEEPING
 Book-Keeping is the systematic recording of
transactions in the books of accounts.

3. ACCOUNTING
 Is analysis and interpretation of book-keeping
records.
 A process of collecting, recording, classifying and
summarizing the transactions and events of
financial nature.

4. ACCOUNTING AS AN INFORMATION
SYSTEM
 Accounting is said to be the language of business.
 The basic objective of accounting is to make the
necessary information available to a variety of
decision makers about financial results and
financial position of a business enterprise.
 By making such information available at the right
time it helps them in making rational and adroit
decisions.

5. USERS OF ACCOUNTING INFORMATION
INSIDERS OUTSIDERS
 Investors
 Management
 Employees
 Government and its
various agencies
 Taxation authorities
 Researchers
 Public
 Authorities dealing with
environmental issues
 Creditors
 Customers

6. BRANCHES OF ACCOUNTING
 Financial Accounting
 Management Accounting
 Cost Accounting
 Social Responsibility Accounting
 Throughput Accounting
 Human Resource Accounting
 Price level Accounting/Inflation Accounting

7. FINANCIAL ACCOUNTING
 An original form of accounting, mainly concerned with the process
of identifying, measuring, recording, classifying, summarizing,
analyzing, interpreting and communicating the financial
transactions and business events.
 The main purpose of this branch of accounting is primarily to
maintain systematic records to ascertain financial performance and
financial position and to communicate the accounting information
to the various interested parties.
 The information provided by financial accounting about financial
result and financial position is significant, but not sufficient for
smooth, orderly and efficient conduct of business.
 Management of today needs to be equipped with more information
for structured and strategic planning and effective control of the
business activities.

8. COST ACCOUNTING
 Cost accounting is the classifying, recording and appropriate allocation
of expenditure for the determination of costs of products or services,
and for the presentation of suitably arranged data for the purpose of
guidance and control.
 it deals with detailed study of cost mainly with reference to cost
ascertainment, cost reduction and cost control.

9. MANAGEMENT ACCOUNTING
 Top management needs concise but distilled information for
taking invincible decisions at the appropriate time.
 This system of accounting is an attempt to perform the function
of decision making efficiently, effectively and diligently.
 It is the application of accounting techniques for providing
information, designed to help all levels of management in
general and top level in particular, in planning and controlling
the activities of business enterprise and in decision making. It is
not only concerned with decision making but also evaluating the
impact of its decisions and actions.

10. TO SUMMARIZE
 Financial accounting is concerned with the preparation
of accounts
 Cost accounting with cost ascertainment, cost reduction
and cost control
 Management accounting with decision making based on
the interpretation and analysis of accounts.

11. TERMINOLOGY

12. ASSETS
 Economic resources owned by business & from
which future economic benefits are reaped.
 Owned Physical Objects ( Tangible)
 Rights ( Intangible)
 Eg. Land & building, Machinery, Debtors, goodwill,
Patents etc.

13. TYPES OF ASSETS
• Land & Building
• Machinery
Fixed
Assets
• Cash
• Debtors
Current
Assets
• Discount on issue of debentures
• Preliminary Expenses
Fictitious
Assets

14. LIABILITY
 Amount owing by one person ( Debtor) to another
person (Creditor)
 Financial obligations payable to outside parties.

15. • Long term loans
• Debentures
Fixed
Liability
• Creditors
• Short term loans
Current
Liability
• Guarantees undertaken
• Pending Financial Cases
Contingent
Liability

16. • Investment made by proprietor in the
business.
Capital
• Withdrawal of capital.
Drawings

17. • Articles manufactured or Purchased by
business for further sale.
Goods
• Unsold stock at the end of an accounting
period.
Stock

18. ASSETS
Capital+
Liability
Owner’s
Equity
Outsider’s
Equity

19. • Person who has taken debt or liable to
make payment or deliver goods & services.
Debtors
• Person who has given debt or has a right to
claim money or goods or avail services.
Creditors

20. ACCOUNTING CYCLE

21. THE ACCOUNTING CYCLE
 Accounting procedures are performed over a period
of time.
 Procedures are performed in a definite order in the
accounting cycle.
 The accounting period is a period of time covered
by the income statement.
 Usually this is a twelve month period.
 The accounting cycle has sequential steps to be
performed again each year.

22. ACCOUNTING CYCLE
Identify &
measure
the
transaction
Record the
transaction
(JOURNAL)
Classify
the
transaction
(Ledger)
Summarize
the classified
transactions
(Trial
balance)
Analysis
and
Interpretati
on
(Financial
statements

23. Rules of different accounts and basics of making an
entry
GOLDEN RULES OF
ACCOUNTING

24. These are the accounts of persons with whom
the business deals. There are three categories of
personal accounts:
 Natural personal accounts
 Artificial personal accounts
 Representative personal accounts
TYPES OF ACCOUNTS
PERSONAL ACCOUNTS:

25. Debit : The
receiver,
Credit: The giver
RULE

26.  These are the accounts of property, assets and
goods etc. These accounts may be classified
into:
 Tangible real accounts
 Intangible real accounts
REAL ACCOUNTS

27. Debit : What
comes in
Credit: What goes
out
RULE

28.  These are the accounts of expenses,
losses, incomes and gains etc. These
accounts are opened to explain the nature
of transactions.
NOMINAL ACCOUNTS

29. Debit : All
expenses
&
Losses
Credit: All
incomes
&
gains
RULE

30. CLASSIFY THE ACCOUNTS AS PER THEIR NATURE
 Wages
 Hyderabad Club
 Discount allowed
 Discount received
 Unexpired insurance
 Interest received
 Sales
 Stock
 Drawing
 Salary
 Nominal
 Artificial personal
 Nominal
 Nominal
 Rep. Personal
 Nominal
 Tangible Real
 Tangible Real
 Rep. Personal
 Nominal

31. CLASSIFY THE ACCOUNTS AS PER THEIR
NATURE
 Goodwill
 Bills payable
 Bad debts
 Trade marks
 Capital
 Bad debts recovered
 Sanjay
 Infosys
 land
 Stationary
 Intangible Real
 Tangible Real
 Nominal
 Intangible real
 Rep. personal
 Nominal
 Real personal
 Art. Personal
 Tangible real
 Nominal

32. ANALYSIS OF TRANSACTIONS
 Read the transactions carefully.
 Find out the two accounts involved in it.
 Determine the nature of accounts i.e. real, personal
or nominal.
 Analyze effect of transaction on business.
 Apply rules

33. QUESTION FOR ACCOUNTING EQUATION
 Amul started business with cash Rs. 60,000
 Bought furniture for cash Rs. 2,000
 We bought goods on credit from X for Rs. 10,000
 Paid rent in advance Rs. 1,000
 Sold goods on credit for Rs. 4,000
 Paid to X 6,000 on account.
 Received Rs. 2,000 from debtors.
 Paid salary Rs. 1,200.
 Withdraw for private use Rs. 2,000.

34. IMPORTANT POINTS
 Capital Account
 Drawings Account
 Interest on Capital
 Interest on drawings
 Trade discount
 Cash discount
 Bad debts
 Depreciation
 Expenses on acquiring or installation of fixed assets

35. OPENING ENTRY
 Ramesh has following assets and liabilities as on
April 1, 2016
 Cash in hand Rs.5,000
 Cash at bank Rs.7,500
 Stock of goods Rs.2,500
 Sundry debtors Rs.8,000
 Land & building Rs.20,000
 Bills receivables Rs.2,000
 Sundry creditors Rs.2,000
 Bills payable Rs.3,000
 Bank loan Rs.5,000
Pass necessary opening entry

36. PRACTICE QUESTION FOR JOURNAL
 Capital invested Rs.50,000 in cash and a building
worth Rs.80,000.
 Paid wages for construction of building Rs.1,500.
 Booked an order with Mr. Rakesh for Rs.4,000.
 Goods given as charity worth Rs.500
 Received commission from Harish Rs.100
 Rs.200 owing by Mr. Mongia written of as bad debt
 Rent due to the landlord Rs.500
 Allow interest on capital @ 6% on capital of
Rs.50,000
 Charge interest on drawings Rs.200

37. ASSIGNMENT QUESTION NO.1
 Cash in hand Rs.2,000
 Cash at bank Rs.8,000
 Advances from customer Rs.2,500
 Bills receivables Rs.2,000
 Amount due from X Rs.4,000
 Stock of goods Rs.3,000
 Machinery Rs.4,000
 Amount due to Z Rs.1,000
 Goodwill Rs.1,500
 Pass opening entry in books of account.

38. ASSIGNMENT QUESTION NO.2
 Capital invested in cash Rs.4,00,000.
 At the time of investment owner brings furniture to
the business worth Rs.1,00,000
 Goods given as free samples for advertisement
worth Rs.2,000.
 Depreciation charged on furniture Rs.1,500.
 Wages due but not paid Rs.1,200.
 Received cash from Aamir Rs.1,450 and allowed
him discount Rs.50.
 Provide interest on capital Rs. 4,000
 Jacob bought goods on credit worth Rs.1,000.

39. THANK YOU
QUESTIONS
……….???????