Introduction to

ACCOUNTING AND BOOK - KEEPING

Mandeep. D Manas. K Nisha. N Deepak. G

What is ACCOUNTING ? ?
Accounting is the art of Recording Classifying Summarizing In significant manner and in terms of money. It is known as an art of RECORD KEEPING.

Significance to Accounting
Accounting, as a basic and the key framework that any business is built upon. Financial position of business can be known by accounting. Accounting as the base for any business. Accounting is essentially a measure of how well are we doing..?? Accounting when properly maintained, avoids FRAUD.

Sub-fields of Accounting
Financial accounting Managerial accounting Cost accounting Social accounting Human Resource accounting

Types of Accounting

Personal accounts
Natural persons account Artificial persons account Representative personal account

Real accounts
Tangible Intangible

Nominal Accounts

Golden Rules of Accounting

Personal Account Real Account Nominal Account
Debit the Receiver Credit the Giver

Debit what comes in Credit what goes out

Debit all the expenses Credit all the Incomes

What is Principles of Accounting??

Accounting principles are the rules of action or conduct adopted by the accountants universally while recording accounting transactions They are the norms or rules which are followed in treating various items of assets, liabilities, expenses, incomes, etc.

Need of having Accounting Principles .

Accounting is the language of the business. Financial statements communicates financial information to stakeholders for decision making. So, financial statements prepared by different organisations should be prepared on uniform basis . To have consistency over a period in making financial statements. If every accountant starts following his own norms and notions for accounting of different items then there will be an utter confusion .

GAAPs
To avoid confusion and to achieve uniformity , accounting process is applied within the conceptual framework of Generally Accepted Accounting Principles(GAAPs). GAAPs is used to descibe rules developed for the preparation of the financial statements and are called concepts , conventions ,postulates, principles etc. Accounting principles are basic norms and assumptions on which the whole accounting system has been developed and established

Concepts/Principles
Entity Concept Money Measurement Concept Periodicity Concept Accrual Concept Matching Concept Going Concern Concept Cost Concept Realisation Concept Dual Aspect Concept Consistency Materiality

Purpose of Accounting
Systematic recording of transaction. Ascertainment of profit or loss Ascertainment of the financial position of the business. Providing information to the users for rational decision making.

Advantages of accounting Advantages of Accounting

Financial information about the business. Assistance to management. Facilitates comparative study. Facilitates settlement of tax liabilities. Facilitates loans. Facilitates sale of business.

Limitations of Accounting
Accounting is not fully exact. Accounting does not indicate the reliable value. Accounting ignores the qualitative elements. Accounting ignores the effect of price level changes. Accounting may lead to window dressing.

What is Book-keeping
Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, and payments by an individual or organisation.

Types of Book-keeping
A transaction is either recorded in debit or in credit column of the same account

Single Entry

Double Entry

Two entries of each transaction are carried to ledger, one in debit column and other under credit heading.

Purpose of Book-keeping

Complete Recording of Transactions

Ascertainment of financial effect on the business

Book-keeping (1) Recording of transactions

Accounting (1) Summarizing of the recorded transactions (2) Language of the business (3) Financial statements are prepared.

(2) Base of accounting (3)Financial statement is not a part of this process (4) Managerial decisions cannot be taken (5) No sub-field (6) Financial position of the business cannot be ascertained through bookkeeping

(4) Management takes decisions on the basis of these records (5) It has several sub-fields. (6) Financial position of the business is ascertained on the basis of the accounting reports