Escolar Documentos
Profissional Documentos
Cultura Documentos
1. Understanding Meaning and Significance 2. Book-keeping and Distinction of accounting with book-keeping 3. Evolutionary process of accounting as a social science 4. Sub-fields of accounting 5. Identification of user groups 6. Functions or purposes of accounting data
DEFINITIONS
The Committee on Terminology set up by the American Institute of Certified Public Accountants formulated the following definition of accounting in 1961: 1. Accounting is the art of recording, classifying and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the result thereof.
DEFINITIONS
2. The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of accounts. In 1970, the Accounting Principles Board (APB) of American Institute of Certified Public Accountants (AICPA) enumerated the functions of accounting as follows: 3. The function of accounting is to provide quantitative information, primarily of financial nature, about economic entities, that is needed to be useful in making economic decisions.
DEFINITIONS - SUMMARY
Thus, accounting may be defined as the process of recording, classifying, summarising, analysing and interpreting the financial transactions and communicating the results thereof to the persons interested in such information.
PROCEDURAL ASPECTS
1. On the basis of the above definitions, procedures of accounting can be basically divided into two parts: Generating financial information Using the financial information
Procedure of Accounting Generating Financial Information Using the Financial Information
Recording
Classifying
Summarising
Analysing
Interpreting
Communicating
OBJECTIVES OF ACCOUNTING
1. Systematic recording of transactions 2. Ascertainment of results of above recorded transactions 3. Ascertainment of the financial position of the business 4. Providing information to the users of rational decision making 5. To know the Solvency position.
FUNCTIONS OF ACCOUNTING
1. 2. 3. 4. 5. 6. Measurement Forecasting Decision making Comparison and Evaluation Control Government Regulation and Taxation.
BOOK - KEEPING
Book keeping is an activity concerned with the recording of financial data relating to business operation in a significant manner. OBJECTIVES OF BOOK KEEPING: i. Complete Recording of Transactions ii. Ascertainment of Financial Effect on the Business.
SUB-FIELDS OF ACCOUNTING
1. 2. 3. 4. 5. Financial Accounting Management Accounting Cost Accounting Social Responsibility Accounting Human Resource Accounting
LIMITATIONS
1. The factors which may be relevant in assessing the worth of the enterprise dont find place in the accounts as they cannot be measured in terms of money.
2. Balance sheet shows the position of the business on the day of its preparation and not on the future date.
3. Accounting ignores changes in some money factors like inflation
LIMITATIONS
4. Certain accounting estimates depend on the sheer personal judgment of the accountant. 5. Financial Statements only consider those assets which can be expressed in monetary terms. 6. Different accounting policies for the treatment of same item adds to the probability of manipulation. 7. In nutshell, language of accounting has certain limitations and the financial statements should be interpreted carefully keeping in mind all various factors influencing the true picture.
AREAS OF SERVICE
1. 2. 3. 4. 5. Maintenance of Books of Accounts Statutory Audit Internal Audit Taxation Management Accounting and Consultancy Services 6. Financial advice 7. Other Services Secretarial work, Share Registration work, Company formation, Receiverships, Liquidations, Arbitrations, etc.
CONCEPTS
1. 2. 3. 4. 5. 6. Entity concept Money measurement concept Periodicity concept Accrual concept Matching concept Going concern concept
CONCEPTS
7. Cost concept 8. Realisation concept 9. Dual aspect concept 10.Conservatism 11.Consistency 12.materiality
3. Accrual
ACCOUNTING POLCIES
1. Meaning of Accounting Polices. 2. Familiarise with the situations under which selection from different accounting policies is required. 3. Grasp the conditions where change in accounting policies is required.
MEANING
1. Accounting policies refer to specific accounting principles and methods of applying these principles adopted by the enterprise in the preparation and presentation of financial statements. 2. Frequently encountered Accounting policies: Methods of depreciation, depletion and amortisation Valuation of inventories Treatment of goodwill Valuation of inventories Valuation of fixed assets. 3. This is not exhaustive but is only illustrative.
Prudence
Materiality
MEANING OF MEASUREMENT
1. Measurement is vital aspect of accounting. Primarily transactions and events are measured in terms of money. 2. The three elements of measurements are: Identification of objects, and events to be measured; Selection of standard or scale to be used; Evaluation of dimension of measurement standard or scale.
VALUATION PRINCIPLES
VALUATION PRINCIPLES
Historical cost
Current cost
Realisable value
Present value
ACCOUNTING ESTIMATES
An estimate may require revision if changes occur regarding circumstances on which the estimate was based, or as a result of new information, more experience or subsequent developments. Change in accounting estimate means difference arises between certain parameters estimated earlier and re-estimated during the current period or actual result achieved during the current period.