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Accountancy

History

Definition
Accounting is defined by the American Institute of Certified Public Accountants (AICPA) as "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 financial character, and interpreting the results thereof."

Timely and accurate picture of performance To ascertain the financial position of the business as a whole. Generate financial reports for management, lenders, creditors Facilitate filing of tax returns
(sales and payroll taxes more important than income tax)

Prevent and detect fraud, waste and theft

Types of Accounts

Personal A/c

Impersonal A/c

Real A/c

Nominal A/c

Personal A/c
1

Natural Personal A/c


Artificial Personal A/c Representative Personal A/c

Natural Personal A/c


Firm

Individual Persons

Ex:- Raju A/c, Ram A/c etc.

Artificial Personal A/c


Business Business

Ex:- Bank A/c, Xyz & Co Ltd. etc

Representative Personal A/c Outstanding Expenses

Prepaid Incomes

Rules for Personal A/c


Debit the Receiver Credit the Giver

Types of Accounts

Personal A/c

Impersonal A/c

Real A/c

Nominal A/c

Real A/c

Tangible Real A/c

In-Tangible Real A/c

Tangible Real A/c


Properties
Buildings a/c
Machinery a/c

In-Tangible Real A/c


Patents Copy Rights

Rules for Real A/c

Debit What Comes in

Credit What Goes Out

Types of Accounts

Personal A/c

Impersonal A/c

Real A/c

Nominal A/c

Nominal A/c
Debit all Losses and Expences

Credit all Incomes and gains

ACCOUNTING EQUATION:
Accounting equation is an extension of business Entity (or) dual aspect concept.

Assets=Liabilities + capital Capital=Assets-Liabilities Liabilities=Assets -Capital

Business entity concept: It means of separation of owner and business Dual aspect concept: It means two, any transaction will have two aspects Accounting period concept: The period of checking the books of accounts from the beginning to end of the financial year. Going concern concept: It means continuously any person start a business new and should go on. To start a business with an intension to of earning more profits Cost concept: The total amount of expenditure which is incurred in a financial year. Money measurement concept: it means the value of every transaction should measure in terms of money Matching concept: To measure the profits for a particular period is essential to match accurately that cost associated with revenues. Realization concept: imaginary value should be anticipated but not a security have a greater value. Accrual concept: costs are recognized when they are incurred when they are not paid. Rupee value concept: it assumes that the value of a rupee constant.

ACCOUNTING CONCEPTS:

Business entity concept: It means of separation of owner and business Dual aspect concept: It means two, any transaction will have two aspects Accounting period concept: The period of checking the books of accounts from the beginning to end of the financial year. Going concern concept: It means continuously any person start a business new and should go on. To start a business with an intension to of earning more profits Cost concept: The total amount of expenditure which is incurred in a financial year. Money measurement concept: it means the value of every transaction should measure in terms of money Matching concept: To measure the profits for a particular period is essential to match accurately that cost associated with revenues. Realization concept: imaginary value should be anticipated but not a security have a greater value. Accrual concept: costs are recognized when they are incurred when they are not paid. Rupee value concept: it assumes that the value of a rupee constant.

Business Entity Concept

Business

Owner

Dual Aspect Concept

Debit

Credit

Accounting Period Concept


All the transactions are recorded in the books of accounts on the assumption that profits on these transactions are to be ascertained for a specified period. This is known as accounting period concept. Thus, this concept requires that a balance sheet and profit and loss account should be prepared at regular intervals. This is necessary for different purposes like, calculation of profit, ascertaining financial position, tax computation etc.

Going Concern Concept


Depreciation Future Profit Estimation Investors

Cost Concept Cost of the Machine


Before 1 Month 100000 Before 1 Month 80000

Money Measurement Concept


This concept assumes that all business transactions must be in terms of Money. It should not record the transactions with is not related to money.

Matching Concept

To Calculate Profit

Costs

Revenues

Realization Concept accounting records only when it is realized

Wrong

Right

Accrual Concept costs are recognized when they are incurred when they are not paid.

Credit Sale

Rupee Value Concept

It assumes that the value of a Rupee Constant.

There are 5 important conventions are follow under:o Convention of consistency: the formats and forum ales procedures are not changing till long period of time. o Convention of disclosure: every transaction should be recorded and nothing should be hidden o Convention of materiallity.: there must be heading and terms related to the heading can be taken at one place. o Convention of conservetism.: play safe means taking necessary steps to safeguard the cash flow. o Convention of feasability.: minimizing the expenditure and wastage should be avoided.

ACCOUNTING CONVENTIONS:

There are 5 important conventions are follow under:oConvention of consistency: the formats and forum ales procedures are not changing till long period of time. oConvention of disclosure: every transaction should be recorded and nothing should be hidden oConvention of materiallity.: there must be heading and terms related to the heading can be taken at one place. oConvention of conservetism.: play safe means taking necessary steps to safeguard the cash flow. oConvention of feasability.: minimizing the expenditure and wastage should be avoided.

ACCOUNTING CYCLE

8. Preparing The financial statement


7. Adjusting Trial balance 6.Adjusting entries

9. Closing The entries 1.Identifying the transaction

Accounting AAAomiomi Cycle

2.Analyse the transaction


3.journalise

5. Prepare the Trial balance

4.Ledger And posting

1.Identifying the transaction

Transaction: Cash Received from Raju Analyse:Cash related to Real Account

2.Analyse the transaction

Raju Related to Personal Account


The Rules of that accounts should be applied.

Journals
Date Jan 1 2011 Particulars Cash A/c L.F Debit Credit No Amount Amount Dr XXXXX

To Raju A/c
(Being Cash Received From Raju

XXXXX

3.journalise

Dr
Date Particulars J.F No

Cash A/c
Amount Date Particulars J.F No

Cr
Amount

Jan 1

To Raju A/c

XXXXX

Jan 31 By Balance C/d

XXXXX

XXXXX
Feb 1 To balance b/d XXXXX

XXXXX

Dr
Date Particulars J.F No

Raju A/c
Amount Date Particulars J.F No

Cr
Amount

Jan 31

To balance c/d

XXXXX

Jan 1 By Cash A/c

XXXXX

4.Ledger And posting

XXXXX
Feb 1

XXXXX
by balance b/d XXXXX

Trial Balance
S.NO Particulars Debit Amount Credit Amount

1
2

Cash A/c
Raju A/c

XXXXX
XXXXX

5. Prepare the Trial balance

XXXXX

XXXXX

Adjusting Entries are journal entries that are made at the end of the accounting period, to adjust expenses and revenues to the accounting period where they actually occurred.

6.Adjusting entries

Accrued revenues

Revenues already earned but not yet paid or recorded.


Unearned revenues

Revenues received in cash and recorded as liabilities prior to being earned.


Accrued expenses expenses already incurred but not yet paid or recorded.
Prepaid expenses expenses paid in cash and recorded as assets prior to being used. Other adjusting entries include depreciation of fixed assets, allowances for bad debts, and inventory adjustments.

Telephone Expense
Depreciation Expense Interest Expense Dividend Total

1,494 1,100
150 5,000 $217,014


$217,014

7. Adjusting Trial balance

1.Trading Account 2.Profit and Loss A/c 3.Balance Sheet


8. Preparing The financial statement

ACCOUNTING CYCLE

8. Preparing The financial statement


7. Adjusting Trial balance 6.Adjusting entries

9. Closing The entries 1.Identifying the transaction

Accounting AAAomiomi Cycle

2.Analyse the transaction


3.journalise

5. Prepare the Trial balance

4.Ledger And posting

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