Facilitator V. A.

Banerjee

 Objectives

of Accounting Types of Transactions Terminologies in Accounting Accounting Principles Accounting Concepts Accounting Conventions Systems of Accounting Accounting Equations Classification of Accounts

 Maintenance

of Business Records Ascertainment of Profit & Loss Ascertainment of Financial Position Facilitating Management Control Providing Accounting information to users

Based on Relationship
Internal

Based of Nature
Simple

Based on settlement
Cash

Based on Visibility
Physical NonPhysical

External

Compound

Credit

Complex

Paper

 Goods

Purchase,Purchase Returns, Sales & Sales Returns

Profit Assets

/ Loss

Property owned by person or company - L & Bldg. Amounts due from a business to others Creditors

Liabilities

Net

Worth=Capital+ Reserves Contingent Liability

Liability that is likely to arise in future on happening of certain events.

 Capital

= Assets Liabilities

Amount invested by a proprietor in business Amount withdrawn from business by proprietor

Drawings

Capital Expenditure Purchase of Machinery Revenue Expenditure Purchase of materials Deferred Revenue Exp.Heavy Legal Expenses Cash Discount (recorded, LP-TD=DP-CD=AP) Trade Discount (not recorded, (LP-TD=AP) Solvent & Insolvent

 Accounting

year 01/04/2010 to 31/03/2011 Assessment year 01/04/2011 to 31/03/2012 Trading Account Goodwill

Intangible fixed asset having realizable value

Manufacturing

Account

 Accounting

principles are set of rule of action or conduct which are adopted by accountants universally while recording accounting transactions

Accounting Principles

Accounting Concepts (Basic Assumptions)

Accounting Conventions (outcome of A/cg practices)

 Business

Entity Concept

Business is a separate entity

Money

Measurement Concept

Everything is recorded in terms of money

Cost

Concept

Recorded at the price paid to acquire an asset

Consistency

Follow a stable method of recording and accounting

Matching

Concept

Every expenses incurred should match with associated revenue generated

 Going

Concern Concept
Concept

Business will continue for a long period Anticipate no profits but provide for all losses

Conservatism

Realisation
Accrual

Concept

Profits to be accounted only when it is realised

Concept

Accruing Revenue or expenses for an activity is considered

Dual

Aspect Concept

Every transactions have to have a dual effect (debit and credit)

 Convention

of Full Disclosure

Complete and understandable reporting on the financial statements

Convention

of Materiality

Material information that can influence the decision of the user.

Accounting System Indian System English System

Cash System

Single Entry System

Double Entry System

Conventional Method Modern Method

 Accounting

equations is a formula of accounting which shows the assets and liabilities of a firm as equal
Assets = Equities (Owners Capital) Assets = Liabilities + Capital Liabilities = Assets - Capital Capital = Assets - Liabilities

Accounts Personal Accounts Debtors Impersonal Accounts Real Accounts Nominal Accounts Expenses & Losses Incomes & Gains

Creditors

Account Personal Real Nominal

Debit Receiver What comes in Expenses & Losses

Credit Giver

Remarks w.r.t. Debtors & Creditors

What goes w.r.t. tangible & intangible out assets Incomes & w.r.t. income or loss Gains

STEPS FOR RECORDING ENTRIES Transactions Two Accounts involved Types of Accounts How each aspect is affected Rule applicable Account to be debited Account to be credited