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By
Mr. Srinivas Methuku
Objectives of the chapter:
After completion of this chapter student should be
conversant with:
 Meaning and definition of...
Introduction:
 Introduction
 Need for accounting
 Chitragupta
 Kautilya’s Arthashashtra
 Luca De Bergo Pacilio from I...
Meaning and definition of book-
keeping
 Definition:
“The art keeping permanent record of business
transactions is book k...
Features of book-keeping
 It is the process of recording business transactions.
 Monetary transactions are only recorded...
Meaning and definition of
accounting:
 Accounting definitions:
 As per AICPA Financial accounting is “the art of
recordi...
Meaning and definition of
accounting:
 As per AAA accounting is “the process of identifying,
measuring, and communicating...
Relevant aspects of the definition
of accounting
 Economic events
 Identification
 Measurement
 Recording
 Communicat...
Features of accounting:
 Identifying the transactions and events
 It is the art of recording business transactions
 It ...
Difference b/w book-keeping and accounting:
Point of
distinction
Book-keeping Accounting
1. Objective The object of book-k...
Accounting cycle:
Identification
of
transactions
Recording of
transactions
in journal
Posting into
ledger
Preparation
of t...
Objectives of accounting:
Permanent Record
Measurement of Outcome
Creditworthiness
Efficient Use of Resources
Projections
Users of accounting:
Shareholders
Investors
Creditors
Workers/Employees
Government
Researchers
Branches of accounting:
Financial accounting
Cost accounting
Management accounting
Human resource accounting
Responsibilit...
Basis of accounting:
 Cash basis
 Accrual basis
 Mixed
Advantages of accounting:
Replacement of memory
Evidence court
Settlement of taxation liability
Comparative study
Sale of ...
Limitations of Accounting:
 Records only monetary transactions
 Effects of price level changes not consider
 No realist...
Thank you for listening !!!
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Topic 1 introduction of book keeping and accountancy

Introduction to Business Accouting

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Topic 1 introduction of book keeping and accountancy

  1. 1. By Mr. Srinivas Methuku
  2. 2. Objectives of the chapter: After completion of this chapter student should be conversant with:  Meaning and definition of book-keeping  Features of book-keeping  Meaning and definition of accounting  Features and advantages of accounting  Difference b/w book-keeping and accounting  Basis of accounting and branches of accounting  Limitations of accounting
  3. 3. Introduction:  Introduction  Need for accounting  Chitragupta  Kautilya’s Arthashashtra  Luca De Bergo Pacilio from Italy developed double entry system in the year 1494.
  4. 4. Meaning and definition of book- keeping  Definition: “The art keeping permanent record of business transactions is book keeping.”  J. R. Batliboi: “book-keeping is an art of recording business dealings in a set of books”.  R. N. Carter: “Book-keeping is the science and art of correctly recording in the books of accounts, all those business transactions that results in transfer of money’s worth”.
  5. 5. Features of book-keeping  It is the process of recording business transactions.  Monetary transactions are only recorded.  Recording is made in given set of books of accounts.  Record is prepared for a specific period but presented for future references.  It is an art of recording business transactions scientifically.
  6. 6. Meaning and definition of accounting:  Accounting definitions:  As per AICPA Financial accounting is “the art of recording classifying and summarizing in a significant manner in terms of money transactions and events which are in part, at least of a financial character and interpreting the results thereof”.
  7. 7. Meaning and definition of accounting:  As per AAA accounting is “the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information”.
  8. 8. Relevant aspects of the definition of accounting  Economic events  Identification  Measurement  Recording  Communication  Organisation  Interested users of information
  9. 9. Features of accounting:  Identifying the transactions and events  It is the art of recording business transactions  It is the art of classifying business transactions  The transactions are events of a business must be recoded in monetary terms  It is the art of summarizing financial transactions  It is an art of analysis and interpretation of these transactions  The result of such analysis must be communicated to the persons who are to make decisions
  10. 10. Difference b/w book-keeping and accounting: Point of distinction Book-keeping Accounting 1. Objective The object of book-keeping is to prepare original books of accounts, trial balance and to maintain systematic record of financial results. The object of accounting is to record, classify, summarize, analyze, and interpret the business transactions and ascertain financial results and to communicate to various parties. 2. Scope It has a limited scope It has a wider scope 3. Level of work It is restricted to clerical work It is concerned with all levels of Mgnt. 4. Mutual dependence It has to depend on accounting principles It has to depend on book-keeping 5. Results of the business It shows the net result and financial position. It analyses the operating and financial position of the business 6. Stages Book-keeping is a primary stage Accounting is secondary stage 7. Nature of job The job of book keeper is routine The job of accountant is analytical in nature 8. Knowledge required Book keeper not required to have higher level of knowledge The accountant must have higher level of knowledge 9. Staff for performing Book keeping work performed by junior staff Accounting work is performed by senior staff
  11. 11. Accounting cycle: Identification of transactions Recording of transactions in journal Posting into ledger Preparation of trail balance Passing of adjustment entries Preparation of final accounts
  12. 12. Objectives of accounting: Permanent Record Measurement of Outcome Creditworthiness Efficient Use of Resources Projections
  13. 13. Users of accounting: Shareholders Investors Creditors Workers/Employees Government Researchers
  14. 14. Branches of accounting: Financial accounting Cost accounting Management accounting Human resource accounting Responsibility accounting Inflation accounting Forensic accounting
  15. 15. Basis of accounting:  Cash basis  Accrual basis  Mixed
  16. 16. Advantages of accounting: Replacement of memory Evidence court Settlement of taxation liability Comparative study Sale of business Assistance to the insolvent person Assistance to various parties Facilities in raising loans Assistance to the government Facilitate control over assets
  17. 17. Limitations of Accounting:  Records only monetary transactions  Effects of price level changes not consider  No realistic information  Personal bias of the accountant affects the accounting statements  Permits alternative treatments  Profit no real test of managerial performance  Historical in nature  Window dressing in balance sheet
  18. 18. Thank you for listening !!!

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