DEVARAJ presentation
- 2. “In general accounting may be called the systematic record of business transactions to know the result of the business.”
- 3. The American Institute of Certified Public Accounts (AICPA) defined accounting as “the art of recoding, 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 results there off ”
- 4. “the process of identifying, measuring and communicating economic information to permit informed judgments' and decisions by users of the information”
- 5. 1. Accounting is both a science and an art. It is science because it has certain definite methods and regulations. It is an art because it follows certain methods to fulfill the objectives. 2. Accounting identifies the business transactions 3. Accounting shows the value of business transactions in terms of money.
- 6. 4. Accounting classifies the business transactions and records them in their respective accounts. 5. Accounting briefs the business transactions and after getting required information from ledger prepares, final accounts, namely trading and profit and loss account and balance sheet. 6. Accounting helps the business to take necessary decisions by showing the result of the business.
- 7. Accounting records of a business concern are the permanent records of transactions relating to its income and expenditure. Accounting records provide full information about business transactions. Accounting helps a business concern to compare results of the business from year to year.
- 8. Accounting helps to ascertain the financial position of a business concern. Accounting helps a business concern to know the amount due to others and amount due from others. Accounting records and reports help the management of a concern in its future planning and decision making process.
- 9. “Debit and credit play a very important role in accounting. The art of recording the debit and credit aspects in account of books is termed as Book- keeping.”
- 10. There are two systems of Book-keeping 1. Double - Entry System. 2. Single - Entry System.
- 11. “Every ledger account has two sides one account receives the benefit and another account gives the benefit. While entering the aspects we enter two aspects on opposite sides. This system is called Double entry system.”
- 12. “Some aspects are recorded in two accounts, some are recorded in one side and some aspects are not recorded at all.”
- 13. 1) The day to-day business transactions are entered in Rough book as and when they take place. 2) The transactions entered in rough book are analyzed so as to which account has to be debited and which account has to be credited.
- 14. Date Particulars LF Debit Amount Credit Amount 12-10-2018 ............ Dr ............. Cr (Particular of the Transaction .............) --- --- --- * * * * * * * * * *
- 15. 3) The Journal entries are then transferred to the respective ledger accounts. 4) After a particular period or when ever required the balance of ledger accounts is found out. The balance of account is the difference between Debit and Credit side. 5) The list of all the balances of all the accounts is prepared. It is called Trial Balance. 6) After the preparation of Trial balance, final accounts are prepared.
- 16. a) Trading Account. b) Profit and Loss account. c) Balance sheet : The recoding of all the transactions is called Accounting cycle.
- 18. Accounts are classified into three types. They are : 1. Personal Accounts 2. Real Accounts 3. Nominal Accounts
- 19. The ledger accounts which are maintained to record the transactions carried out with persons or firms are called Personal Accounts. Ex : Suresh’s a/c, x co’s a/c. etc., Bank a/c.
- 20. “The ledger accounts that are maintained by the business concerns to record the assets which the firm possesses.” ex : Building’s a/c, Cash a/c, Furniture a/c, Machinery a/c. etc
- 21. “The business concerns have to maintain separate accounts for the profits or incomes it earns and for losses or expenses it incurs. These accounts are called Nominal Accounts.” Ex : Rent a/c, Salaries a/c, Interest a/c, commission a/c, Rates & Taxes a/c, etc..
- 22. Personal Account : “Debit the receiver and credit the giver.” Debit the benefit receiver’s a/c and credit the benefit giver’s account.
- 23. “Debit what comes in and credit what goes out.” If asset comes in Debit to that asset account and if any asset goes out credit to that asset account.
- 24. “Debit all losses or expenses and Credit all profits or gains.” Debit the account which incurs loss or expenditure and Credit the account which receives any profit or income.