Introduction+to+accounting
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This document provides an introduction to accounting. It defines accounting as the process of identifying, classifying, recording, summarizing and interpreting business transactions of a financial nature. The key aspects covered include the difference between accounting, accountancy and bookkeeping, the accounting process, importance of accounting to internal and external users, basic accounting terminology like assets, liabilities, capital, and an overview of basic accounting concepts.
Introduction+to+accounting
- 1. Introduction to Accounting By Moinuddin hasan
- 2. Introduction to Accounting Human activities can be classified in two categories: Economic activity Non-economic activity Activity that generates money is called economic activity Activity performed a social service motive. Accounting deals with making the records of Economic activities
- 3. What is Accounting? Accounting is a systematic recorded presentation of the financial activities of the business. What are financial activities? •Activities that adds to the profitability of the business •Activities which can be measured in terms of money •Activities which reflect the financial position of the business
- 4. Difference between Accountancy, Accounting and Accounts. 1. Accountancy: It is the art and science of studying the accounting and accounts of a business. 2. Accounting: It is the art of identifying, classifying, recording, summarizing and interpreting the business transaction of financial nature. 3. Accounts: This involves recording of transaction pertaining to one person or thing under one head.
- 5. What is book-keeping? 1. Book-keeping is a proper and systematic keeping of books of accounts. 2. It starts with the identifying and recording of the accounting transactions systematically in the proper books of accounts. 3. It lays the base for accounting. 4. Book-keeping involves two steps: • Identifying the financial activity • Recording it properly.
- 6. What is Accounting? Accounting: It is the art of identifying, classifying, recording, summarizing and interpreting the business transaction of financial nature. Accounting Process Identification Classification Recording Summarizing Interpretation
- 7. Importance Of Accountancy • Importance of accounting depends on the requirement of the users. Types of users Internal users External Users Businessman Employees Investors Creditors CompetitorsGovernment
- 8. Terminology 1. Business: A set-up designed with a view to earn profits in called business. 2. Profession: It involves the set-up which requires the special mental or physical exercise under special training is called profession. 3. Debtors: It represents the group of persons or parties to whom the goods have been sold on credit by the company. They owe to the company. 4. Creditor: It represents the group of persons or parties from whom the goods have been purchased on credit by the company. The company owes to them. 5. Proprietor: The owner of the business is known as the proprietor.
- 9. 6. Drawings: Amount or goods taken out or withdrawn by the proprietor for personal use is called drawings. 7. Sales: Goods sold by the company whether on cash basis or credit basis, they are in total called as sales. 8. Purchases: Goods bought by the company on cash basis or credit basis, they are in total called as purchases. 9. Bad Debts: The debtors who defaults in making the payment for goods taken by him on credit are called as bad debts. 10. Entry: It is the systematic recording of the business transaction in the books of accounts. 11. Accounting Year: Books of accounts are closed annually. Every company records the transactions pertaining to one year of its working for the evaluation. The choice of accounting period (12 months) depends upon the company.
- 10. 12. Assets: The valuable things owned by the business is known as assets. They help in generating profits and can be expressed in terms of money. Types of Assets Fixed Assets Fictitious Assets Liquid Assets Floating Assets Intangible Assets
- 11. 13. Capital: It is the part of the wealth which is used for further production and thus capital consists of all current & fixed liabilities. Types of capital Fixed capital: The amount invested in acquiring the fixed assets. Working capital: The part of the capital available for meeting day-to day working of the business is known as working capital Floating capital: The amount invested in buying assets with the intention of sales
- 12. 14. Liabilities: These are the obligations or debts to be paid by the company in the future which can be measured in the terms of money. It is the proprietor’s and creditors claim against the assets of the business.. Types of liabilities Liability towards the creditors Liability towards the owner Creditors for goods Creditors for loans Creditors for expenses
- 13. 15. Goods: Items or articles purchased for sale by the business or for use in the manufacturing of certain other goods as raw material are called as goods. 16. Purchase returns or Return outwards: When purchased goods are returned on account of any damage or they are not as per the specifications given at the time of placing order, these are termed as purchase return. 17. Sales Returns or Returns Inwards: When the goods sold on credit are returned to the company on account of any damage or they are not as per the specifications given at the time of placing order, these are termed as purchase return. 18. Stock: The unsold goods remaining on a particular date or during a particular period, is called stock. The stock in the beginning of the accounting year is called Opening Stock. The stock at the end of the accounting period is known as Closing Stock.
- 14. 19. Transaction: Exchange or dealing of goods, money or services in the business is called transaction. Transactions can be cash or credit. 20. Discount: Any concession or allowance granted to a customer is called as Discount. Types of Discount Trade Discount Cash Discount Discount given to the customer on the invoice price in order to induce the buyer to purchase in large quantity. Trade discount is not recorded in Journal. Discount given to the customer on the amount to be paid,in order to invoke prompt. Cash discount is not recorded in Journal.
- 15. 21. Insolvent or Bankrupt: A businessman who is unable to pay his creditors and an order has been issued by the court against him to sell-off his property in order to discharge his liabilities. 22. Debit: An entry made in the debit column of the journal or account is called as Debit. 23. Credit: An entry made in the credit column of the journal or account is called as Credit.