Introduction To Financial Accounting: Presented by Prof. (C.A.) Swati Godbole

INTRODUCTION TO
FINANCIAL ACCOUNTING
PRESENTED BY
PROF. (C.A.) SWATI GODBOLE
BACKGROUND AND
MEANING
BUSINESS IS
ALL ABOUT
MONEY
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PROF. (C.A.) SWATI
GODBOLE
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BRANCHES OF
ACCOUNTING
Process of
Communicating social
And environmental impacts
Of business actions
Accounting
For
management
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Post mortem of
Business transactions
Cost estimation,
Cost control
FINANCIAL ACCOUNTING
BASIC PRINCIPLES
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CONCEPTS
Means basic rules & regulations
Different concepts
BUSINESS AND OWNERS
Business entity
Going concern
Dual aspect
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PROF. (C.A.) SWATI
GODBOLE
ARE SEPARATE
BUSINESS = ARTIFICIAL
LEGAL ENTITY
BUSINESS HAS A LONG ,
INDEFINITE LIFE
EVERY THING OF BUSINESS HAS TWO
EQUAL SIDES / TWO EQUAL FOLD
IMPACT
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CONTD..
Standard Period of 12 Months at
Accounting period
The end of which evaluation will
Be done
Matching
Expenses are recognized in the same

accounting period when the related
revenue is recognized
Accounts only deal with items

to which a monetary value
can be attributed
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PROF. (C.A.) SWATI
GODBOLE
Money
measurement
PROF.
(C.A.) SWATI GODBOLE
6
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CONTD..
Cost
An asset is entered into the

accounting records at the price paid to acquire it.
The idea that income and expense items must

be included in financial statements
as they are earned or incurred.
Accrual
Revenue recognized only when it

realizable or earned or realized
Revenue recognition
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PROF. (C.A.) SWATI
GODBOLE
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CONVENTIONS
Means basic assumptions
to inform both current and

potential investors of the
Disclosure accounting strategies and methods
used when developing periodic
corporate
Be consistent = no change in
method
Consistency Unless forced
Play Safe
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PROF. (C.A.) SWATI
GODBOLE
relating to the
importance/significance of an
Conservatism
amount, transaction, or discrepancy.
Materiality
8
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PROF. (C.A.) SWATI
GODBOLE
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The immediate recognition of

loss is supported by the
underlying principle of
Matching
Consistency
Judgment
Conservatism
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PROF. (C.A.) SWATI
GODBOLE
10
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10
The determination of the

expenses for an accounting
period is based largely on the
application in which principle?
Cost
Consistency
Matching
Time period
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PROF. (C.A.) SWATI
GODBOLE
11
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11
The Business entity concept
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PROF. (C.A.) SWATI
GODBOLE
Refers to the name of the

company required in the heading
of the financial statements
Refers to the owners of the
entity, who must account for their
interest in the entity their
personal holdings
Indicates that the accounting unit
on which the financial reports are
based is the business itself,
separate from its owners
Holds that the business is made
12
up of
12 many separate components
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Assigning revenues to the

accounting period in which the
goods were delivered or the
services performed and
expenses to the accounting
period in which they were used
to produce revenues is known
as the
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PROF. (C.A.) SWATI
GODBOLE
Accounting period
Continuity assumption
Matching rule
13
Revenue recognition
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13
ACCOUNT
Personal
Accounts of
Individuals
And Artificial
persons
E.g. Mr. A , B , C ,
ABC Ltd. Z Ltd.
etc.
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PROF. (C.A.) SWATI
GODBOLE
14
Impersonal
Accounts of
Others i.e. those
who are not
individuals and
artificial persons.
Further classified
into two types.
Real and
Nominal
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14
REAL AND NOMINAL

Real
Accounts of things
that can be seen,
touched i.e. which
are real.
E.g. Cash ,
Furniture , Car ,
Mobile ,
Machinery etc.
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PROF. (C.A.) SWATI
GODBOLE
15
Nominal
Accounts of things
that can only be
felt, imagined but
cannot be seen or
touched.
E.g. Wages ,
Salary ,
Electricity
charges ,
Telephone
Charges etc.
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15
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PROF. (C.A.) SWATI
GODBOLE
16
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16
Classify the following into

Personal, Real and Nominal.
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PROF. (C.A.) SWATI
GODBOLE
Stationery Account
Cash Account
Goodwill Account
Capital Account
Freight Account
Rent Account
Interest Account
Account of Govind, a customer
Bank Loan Account
Depreciation
17
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17
THREE GOLDEN RULES FOR

DEBIT AND CREDIT
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18
18
Example
Received cash Rs.500 from Mr. A

Mr. A a Personal account
A is the giver of the money
So As account will be credited.
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PROF. (C.A.) SWATI
GODBOLE
19
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19
Contd.
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20
20
Contd. The same example

Cash is a real account
Cash is coming in the business
Cash will be debited applying the
rule.
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PROF. (C.A.) SWATI
GODBOLE
21
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21
Contd.
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22
22
Example
Received cash from Mr. A as
Commission
Here commission is a nominal
account
In the given transaction
Commission is Income
Applying the rule commission
will be credited.
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PROF. (C.A.) SWATI
GODBOLE
23
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23
Business transactions
In order to record the business
transactions we follow certain
steps
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PROF. (C.A.) SWATI
GODBOLE
Identify the nature of transaction

i.e. Cash or Credit
If Cash transaction then one
account getting affected is Cash
or Bank (Cheque)
Next question WHY?
If no answer to the previous
question
then next question
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24
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WHOM?
Contd.
In case of Credit Transaction
One account getting affected is
Personal account
Next question WHY?
Example
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PROF. (C.A.) SWATI
GODBOLE
25
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25
Example
Purchased Furniture from
Furniturewala and Sons
Rs.20000
Credit Transaction as no money
coming in or going out
So Furniturewala and Sons
Account getting affected
WHY = Purchase of Furniture
Second account getting affected
is Furniture
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PROF. (C.A.) SWATI
GODBOLE
26
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PROF. (C.A.) SWATI
GODBOLE
27
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27
Point out the accounts which

will be debited and credited for
each one of the following
transactions
Cash received from X
Cash paid to Y
Credit sale to Z.
Salary paid to clerk by means of
cheque.
Payment of cash to Landlord for
Rent.
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PROF. (C.A.) SWATI
GODBOLE
28
10/15/16
28

Introduction To Financial Accounting: Presented by Prof. (C.A.) Swati Godbole

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Introduction To Financial Accounting: Presented by Prof. (C.A.) Swati Godbole

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INTRODUCTION TO

PROF. (C.A.) SWATI GODBOLE

PROF. (C.A.) SWATI GODBOLE

PROF. (C.A.) SWATI GODBOLE

PROF. (C.A.) SWATI GODBOLE

Expenses are recognized in the same

Accounts only deal with items

An asset is entered into the

The idea that income and expense items must

Revenue recognized only when it

to inform both current and

PROF. (C.A.) SWATI GODBOLE

The immediate recognition of

PROF. (C.A.) SWATI GODBOLE

The determination of the

PROF. (C.A.) SWATI GODBOLE

The Business entity concept

Refers to the name of the

Assigning revenues to the

PROF. (C.A.) SWATI GODBOLE

REAL AND NOMINAL

PROF. (C.A.) SWATI GODBOLE

PROF. (C.A.) SWATI GODBOLE

Classify the following into

THREE GOLDEN RULES FOR

PROF. (C.A.) SWATI GODBOLE

Received cash Rs.500 from Mr. A

PROF. (C.A.) SWATI GODBOLE

PROF. (C.A.) SWATI GODBOLE

Contd. The same example

PROF. (C.A.) SWATI GODBOLE

PROF. (C.A.) SWATI GODBOLE

PROF. (C.A.) SWATI GODBOLE

Identify the nature of transaction

PROF. (C.A.) SWATI GODBOLE

PROF. (C.A.) SWATI GODBOLE

PROF. (C.A.) SWATI GODBOLE

Point out the accounts which

PROF. (C.A.) SWATI GODBOLE

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