Manual Accounting Accounting It is the language of business.

A committee of the American Institute of Certified Public Accounts has defined accounting as: Accounting is the art of recording, classifying and summarising 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 result thereof. Accounting 1. Recording 2. Classifying 3. Summarizing 4. Interpreting Financial Events 5. Information to facilitate decision making. Need for Accounting A person running a business needs to know : . What he owns? . What he owes? . Business n profit or loss? . Financial position: Will he be able to meet commitments in near future?

Types of Accounts

Accounting Principles or Standards These are rules of action which are adopted by accountants all through the world while recording financial transactions. These principles can be classified into two categories: . Accounting Concepts . Accounting Conventions Accounting Concepts a) Separate Entity Concept: Every business is a separate entity from the proprietor. Business & owners are distinct.

Accounting Conventions a) Conservatism: An accountant must be conservative or prudent. He should not anticipate any profit but he should provide for all possible losses. So inventory should be valued at cost or market price whichever s low and all bad debts anticipated must be provided for. b) Materiality: An accountant should disclose all material facts and should ignore insignificant details. He should not hide any fact which can effect the decision of the user of Final Accounts. c) Substance Over Legal Form: If the substance is a material which can effect decision making then it should be disclosed as a foot note, whether it legally belongs to business or not.