FATHER
OF ACCOUNTANCY:
LUKAA
PASHIALL.
MEANING OF ACCOUNTING: According
to American accounting association accounting is “The process of identifying ,
measuring and communicating information to permit judgment and decisions by the
users of accounts”.
USER
OF ACCOUNTS:
Generally 2 types. 1. Internal
management, 2. External users or Outsiders- Investors, Employees, Lenders,
Customers, Gov.t and other agencies,
Public.
SUB-FIELDS
OF ACCOUNTING:
ü Book-keeping: It
covers procedural aspects of accounting work and embraces record keeping
function.
ü Financial accounting: It
covers the preparation and interpretation of financial statement.
ü Management accounting: It
coverse the generation of accounting information for management decision.
ü Social responsibility
accounting: It coverse the accounting of
social costs in curred by the enterprise.
FUNDAMENTAL ACCONTING EQUATION:
Assets =
Capital + liabilities.
Capital =
Assets – liabilities.
Accounting elements: The
elements directly related to the measurement of financial position i.e. ., for
the preparation of balance sheet are assets, liabilities and equity. The elements directly related
to the measurments of performance in the profit and loss account are income
and expenses.
Four steps(phases)of accounting process:
ü Journalisation
of transations
ü Ledger
positioning and balancing
ü Preparation
of trail balance
ü Preparation
of final accounting.
Book
keeping:
It is an activity, related to the recording of financial data, relating to
business in an orderly manner. The main purpose of accounting for businesses is
to as certain profit or loss of the accounting period.
Accounting:
it is an activity of analysis and interpretation off the book keeping records.
Journal: Recording
each transaction of the business.
Ledger:
It is a book where similar transactions relating to a person or thing are
recorded.
Types of ledger: Debtors
ledger
Creditor’s ledger
General
ledger.
Concepts:
Concepts are necessary assumptions and conditions upon which accounting is
based.
ü Business entity
concept: In accounting, business is treated as
separate entity from its owners. While recording the transaction in books, it should
be noted that business and owners are separate entities. In the transaction of
business, personal transactions of the owners should not be mixed.
For example:- Insurance premium of the
owner etc………………
ü Going concern concept: Accounts
are recorded and assumed that the business will continue for a long time. It is
useful for assessment of goodwill.
ü Consistency concept: It
means that same accounting policies are followed from one period to another.
ü Accrual concept: It
means that financial statements are prepared on mercantile system only.
Types
of Accounts:
Basically accounts are three types
ü Personal Account:
Accounts which show transactions with persons are called personal account. It
includes accounts in the name of persons, firms, companies.
In
this: Debit the receiver
Credit the giver.
For example:- Marsh a/c,
Karuna&co a/c, Maharnika a/c etc…..
ü Real Account: Accounts
relating to assets is known as real accounts. A separate account is maintained
for each asset owned by the business.
In
this: Debit what comes in
Credit what
goes out.
For example:- Cash a/c, Machinary a/c
etc……
ü Nominal Account: Accounts
relating to expenses, losses, incomes and gains are known as nominal account.
In this: Debit expenses and
loses
Credit
incomes and gains.
For example:- Wages a/c, Salaries a/c,
commission recived a/c etc…..
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