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In this report,I have explained about accounting .manual & computerized accounti
ng & also the reasons for which computerized accounting overlaps the manual acco
unting ,which I have gained under training.
Meaning of accounting :-
Accounting is often called the language of business .The basic function of any
language is to communicate .Accounting communicates the results of the business
to the users of accounting information to enable them to make reasoned decisions
.To communicate information, accounting follows a systematic process of recordi
ng ,classifying and summarizing of numerous business transactions resulting in c
reation of financial statements.The two most important financial statements are
profit and loss a/c& Balance sheet .Profit &loss during an accounting period and
balance sheet depicts the nature and amount of assets , liabilities & capital o
f a business and indicates the financial position of the business at a particula
r date.
Definition of accounting:-
“Accounting is the art of recording ,classifying and summarizing in a significan
t manner and in terms of money ,transactions and events which are, in part atlea
st ,of a financial character , and interpreting the results thereof .”
-American Institute of Certified Public Accountants
Characteristics of Accounting :-
1. Identifying Transactions of financial Character:-
Only those transactions are recorded in accounting which is of a
financial character and which can be expressed in terms of money .
2. Recording :-
Accounting is the art of recording business transactions accordi
ng to some specifies rules .In a small business where the no. of transactions is
quite small, all transactions are first of all recorded in a book called ‘journ
al’ .But in a big business where the no. of transactions is quite large ,the jou
rnal is further subdivided into various subsidiary books such as (1) ‘cash book
‘ for recording cash transactions ;(2) ‘Purchase Book’ for recording credit purc
hase of goods ;(3)’Sales Book’ for recording credit sales of goods ;(4)’Purchase
Return Book’ for recording the return of credit purchase;(5) ‘Sales Return Book
’ for recording the return of credit sales .
3. Classifying :-
After recording the transactions in journal the transactions are
classified .Classification is the process of grouping the transactions of one n
ature at one place , in a separate account .The book in which various accounts a
re opened ‘Ledger’. Separate accounts are opened for purchases ,sales assets .Si
milarly , all expenses and incomes which are already recorded in journal are aga
in classified under separate heads in the ledger ,such as Wages A/c, Salary A/c
,and Commission A/c.
4. Summarizing :-
Summarizing is the art of presenting the classified data in a ma
nner which is understandable and useful to management and other users of such da
ta .This involves the balancing of ledger accounts and the preparation of Trial
Balance with the help of such balances .Financial Statements are prepared with t
he help of Trial Balance which includes Trading and Profit & Loss A/c and a Bala
nce Sheet.
5. Interpreting the results :-
In Accounting ,the results of the business are presenting in such a manner (i.e.
by preparing Trading and Profit & Loss A/c and Balance Sheet ) that the parties
interested in the business such as owners, managers , banks , creditors, employ
ees can have full information about the profitability and the financial position
of the business. The accounting should explain not only what has happened but a
lso (a) why it has happened , and (b) what is likely to happen in future .
6. Communicating :-
It refers to transmission of summarized and interpreted information to a
variety of users has an interest in the enterprise to enable them to make reaso
ned decisions.
Objectives or Functions of Accounting :-
Accounting Principles:-
Accounting principles are described by various terms such as assumptions ,conven
tions ,concepts ,doctrines, postulates. These principles are classified mainly i
nto two categories:-
Accounting Concepts or Assumptions:-
Accounting concepts provide a foundation for accounting process. No enterprise c
an prepare its financial statements without considering these basic concepts .Fo
llowing may be treated as basic concept :-
Accounting Conventions:-
An accounting convention may be defined as a custom or generally accepted practi
ce which is adopted either by general agreement or common consent among accounta
nts .Following are the main accounting conventions :-
Date Particulars
L.F. Amount(Dr.) Amount(Cr.)
Building A/c
Dr. 1,20,000
To Cash A/c
1,20,000
( building purchased for cash)
Furniture A/c
Dr. 30,000
To Cash A/c
30000
(furniture purchased for cash)
Purchases A/c
Dr. 2,00,000
To Cash A/c
1,50,000
To Creditors
50,000
(goods purchased including credit purchase of rs. 50,000)
Wages A/c
Dr. 20,000
To Cash A/c
20,000
(wages paid)
Salary A/c
Dr. 40,000
To Cash A/c
40,000
(salary paid)
Rent A/c
Dr. 30,000
To Cash A/c
30,000
(rent paid)
Advertisement A/c
Dr. 40,000
To Cash A/c
40,000
(advertisement expensed paid)
Cash A/c
Dr. 3,00,000
Debtors A/c
Dr. 80,000
To Sales A/c
3,80,0000
(goods sold including goods of rs. 80,000 on credit)
Stock A/c
Dr. 40,000
To Purchases A/c
40,000
(unsold stock adjusted)
Depreciation A/c
Dr. 10,000
To Machinery A/c
10,000
(depreciation provided on machinery @ 10%)
Wages A/c
Salary A
/c
Rent A/
c
Advertisement A/c
Sales A/c
Debtors
A/c
Depreciation A/c
Capital A
/c
Furniture A/c
Note - * means these account are transferred to Trading and Profitless A/c at th
e end of the year after preparing Trial Balance .
Sales A/c
Dr. 3,80,000
To Trading A/c
3,80,000
(sales transferred to trading a/c)
Trading A/c
Dr. 20,000
To Wages A/c
20,000
(wages transferred to trading a/c)
Profit & Loss A/c
Dr. 40,000
To Salary A/c
40,000
(salary transferred to pal a/c)
Profit & Loss A/c
Dr. 30,000
To Rent A/c
30,000
(rent transferred to P & L A/c)
Profit & Loss A/c
Dr. 40,000
To Advertisement A/c
40,000
(ad expenses transferred to P&L A/c)
Profit & Loss A/c
Dr. 10,000
To Depreciation
10,000
(depreciation charged from P&L A/c)
Balance Sheet of X
as on …………