Introduction to Accounting

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Business is a monetary action attempted with the rationale of procuring benefits and to boost the riches for the proprietors. the business action is completed by individuals meeting up with a reason to serve a typical reason.

Definition of Accounting

American Institute of Certified Public Accountants in 1961:

Accounting is the art of recording, classifying and summarizing 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

American Accounting Association in 1966:

The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of accounting.

Objectives of Accounting

  • Providing Information to the Users for Rational Decision-making
  • Systematic Recording of Transactions
  • Ascertainment of Results of above Transactions
  • Ascertain the Financial Position of Business
  • To Know the Solvency Position

 

Functions of Accounting

  • Measurement
  • Forecasting
  • Decision-making
  • Comparison & Evaluation
  • Control
  • Government Regulation and Taxation

Sub field of the accounting

  • Financial accounting

Deciding the money related outcomes for the period and the situation on the most recent day the bookkeeping time frame

  • Cost Accounting

Chartered Institute of Management Accountants (CIMA) defines the cost accounting as the “application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability as well as the presentation of information for the purpose of managerial decision-making.” . in nutshell this means the Data age for Controlling tasks with the end goal of amplifying proficiency and benefit.

  • Management Accounting

Bookkeeping to help the board in arranging and dynamic . The management  Accounting is worried about the utilization of Financial and Cost Accounting data to directors inside associations, to furnish them with the premise in settling on educated business choices that would permit them to be better prepared in their administration and control capacities.

Difference between Management Accounting and Financial Accounting

Financial Accounting Management Accounting
Financial Accounting depends on the money related exchanges of the undertaking. The management accounting is principally founded on the information accessible from Financial Accounting.
Financial Accounting focus on recording and arranging money related exchanges in the books of records and planning of money related  explanations toward the finish of each bookkeeping enough said. It gives important data to the management to help them all the while of arranging, controlling, performance assessment and dynamic.
Reports according to Financial Accounting are

implied for the administration just as for

Investors and creditors of the worry.

Reports arranged in Management bookkeeping are intended for the executives what’s more, according to the board prerequisite.
Reports ought to consistently be upheld by important figures and it accentuates on the objectivity of information. Reports may contain both subjective and target figures.

 

Key words of accounting 

  • Accrual: Recognition of revenues and costs as they are earned or incurred. It includes recognition of transaction relating to assets and liabilities as they occur irrespective of the actual receipts or payment.
  • Cost: The amount of expenditure incurred on or attributable to a specified article, product or activity.
  • Expenses: A cost relating to the operations of an accounting period.
  • Revenue: Total amount received from sales of goods/services.
  • Income: Excess of revenue over expenses.
  • Loss: Excess of expenses over revenue.
  • Capital: Generally refers to the amount invested in an enterprise by its owner.
  • Fund: An account usually of the nature of a reserve or provision which is represented by specifically Ear Market Assets.
  • Gain: A monetary benefit, profit or advantage resulting from a transaction or group of transactions. Investment: Expenditure on assets held to earn interest, income, profit or other benefits.
  • Liability:                                                                                                                                                                                  The financial obligation of an enterprise other than owners’ funds. Net Profit: The excess of revenue over expenses during a particular accounting period.

What is book keeping 

According to Carter, “Book-keeping is a science and art of correctly recording in books-of accounts all those business transactions that result in transfer of money or money’s worth”.

Book-keeping is an activity concerned with recording and classifying financial data related to business operation in order of its occurrence

Book-keeping is a mechanical task which involves

  • Collection of basic financial information.
  • Identification of events and transactions with financial character i.e., economic transactions.
  • Measurement of economic transactions in terms of money.

FUNDAMENTALS OF ACCOUNTING

  • Recording financial effects of economic transactions in order of its occurrence.
  • Classifying effects of economic transactions.
  • Preparing organized statement known as trial balance
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