MEANING OF ACCOUNTING

 Art of recording and classifying the business

transactions and event that includes – receipt and
payment of cash, purchase and sale of goods on
credit etc.
 The transactions must be in monetary terms
 Art of marking summaries, analysis and interpretation
of business transactions
 Communication to the external and internal
stakeholders for decision making

ACCOUNTING AS SCIENCE AND ART

As science
 An accountant finalizer the economic results by
identifying, analyzing, classifying using the method
of double-entry bool keeping accounting system.
 So, accounting is a science that includes comprises
of rules, principles, concepts, conventions and
standards in science.
As art
1 It presents the financial findings by followings and
Implementing a universally accepted method
(GAAP).
2 The established rule and principle of accounting
applied in booking process of and economic entity.

BRANCHES OF ACCOUNTING

1) Financial accounting
2) Cost accounting
3) Management accounting

 FINANCIAL ACCOUNTING
 Record transactions & determine
financial position & profit or loss
 Concerned with historical data
 Governed by GAAP
 Qualitative aspects are not recorded
 Monetary transactions Only
 Accounts are prepared to meet the legal
requirements.
  COST ACCOUNTING

 Ascertainment, allocation, accumulation

and accounting for cost
 Concerned with both past and present
recorded (historical in nature)
 certain principles followed for recording
costs.
 Only quantitative aspect is recorded.
 Both monetary and non-monetary
information.
 These are generally kept voluntarily to
meet the requirements of the
management.

 MANAGEMENT ACCOUNTING

 To assist the management in decision-

making and policy formulation.
 Deals with projection of data for the
future (futuristic in nature)
 No set principles are followed in it.
 Uses both quantitative and qualitative
concepts.
 Both monetary and non-monetary
information.
 These are generally kept voluntarily to
meet the requirements of the
management.

ACCOUNTING CONCEPTS

 Economic entity: The company is seen

as a separate legal entity different from
its owners.
 Economic measurement: Transaction
should be recognized, measured and
reports in a monetary unit.
 Periodicity: Transaction should be
recognized and reported in the period in
which it occurred.
 Going concern: The business is expected
to continue in a foreseeable future
without a threat to its extinction.
 Matching concept: The transaction
should be linked to the related event or
counterparty.
 RECORDING A TRANSACTION-
DOUBLE ENTRY

Double entry recording: Transactions

have to actions- giving and receiving.
Increase or decrease. When one side is
debited, the other is credited to ensure
the transaction is balanced.

RECORDNG A TRANSACTION-
SINGLE ENTRY

 Rules don’t apply in recording of

transactions using the single-entry
method.
 Transactions are recorded as a
memorandum of income and expense.
 Accounting information are maintained
in books of original entry – sales day
book, purchase day book, cash book etc.
 Single entry recording is the simplest
and widely adopted by small
enterprises.

ACCOUNTING METHOD
Accrual method: Transactions are
recognized at the point it is complete
not the time payment is made. Revenue
is recognized the time related service is
performed. Expense is recognized when
is occurred.

Cash method: Transactions are

recognized as they occur and at the
point the payment is made.

ACCOUNTING CYLCE

 Analysis of business transactions

 Make journal entries
 Post to ledger account
 Prepare trial balance
 Make adjusting entries
 Adjusted trial balance
 Prepare financial statement
 Close account
 Post-closing trial balance

CONCLUSION
 Accounting remains the only
recognized language of a business.
The process involves the
recognition, recording, analyzing
and reporting of financial
information for decision purpose.

 Business that does not have

adequate system of book keeping
and accounting controls are
exposed to the risk of collapse