Abhipedia

PSPCL & PSTCL By Niharika Walia

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According to G.A. Lee, the accounting system has following two stages :
i) the making of routine records, in prescribed form and according to set rules, of all
events which affect the financial state of the organisation; and
ii) the summarisation from time to time of the information contained in the records, its
presentation in a significant form to interested parties, and its interpretation as an
aid to decision making by these parties.

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It involves:
•Gathering basic financial data.
•Identifying the transactions and events with the financial aspect, i.e. only
monetary transactions are to be entered in the books of accounts.
•Measuring the transactions in monetary terms.
•Keeping a record of the financial effect of the transactions, in the order in
which they arise.
•Classifying the effect of transactions
•Preparing statement, i.e. trial balance.

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It involves:
Gathering basic financial data.
Identifying the transactions and events with
the financial aspect, i.e. only monetary
transactions are to be entered in the books
of accounts.
Measuring the transactions in monetary
terms.
Keeping a record of the financial effect of
the transactions, in the order in which they
arise.
Classifying the effect of transactions
Preparing statement, i.e. trial balance.

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Objectives of Bookkeeping

To record the transactions

To ascertain financial effect

To show the correct position

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Types of Book-keeping

Manual Book-keeping

Computerized Book-keeping

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Types of Book-keeping

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System of Accounting
Single Entry System
This system is also known as pure entry system

Double Entry System

This is the more traditional and conventional system for recording transactions in
financial accounting. This is a scientific method which has some rules and principles
which must be followed.

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Basis of distinction-

Definition
Sequence
Scope
Level of management
Ends at

RELATIONSHIP OF ACCOUNTING & ACCOUNTANCY-

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Basis of Accounting

Basis of
accounting -

Cash basis Accrual Hybrid

Basis basis

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Concepts of Accounting-

In order to maintain uniformity and consistency in preparing and maintaining books
of accounts, certain rules or principles have been evolved.
 These rules/principles are classified as concepts and conventions.
These are foundations of preparing and maintaining accounting records.
Accounting concept refers to the basic assumptions and rules and principles which
work as the basis of recording of business transactions and preparing accounts.

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Concepts of Accounting-
BASIC •
•
BUSINESS ENTITY ASSUMPTION
ACCOUNTING PERIOD ASSUMPTION
ASSUMPTION OF • ASSUMPTIONS OF MONEY MEASUREMENT
• GOING CONCERN ASSUMPTION
ACCOUNTING
• DUAL ASPECT PRINCIPLE
BASIC PRINCIPLES •
•
REVENUE RECOGNITION PRINCIPLE
HISTORICAL COST PRINCIPLE
OF ACCOUNTING •
•
MATCHING PRINCIPLE
OBJECTIVITY PRINCIPLE

• CONVENTION OF FULL DISCLOSURE

CONVENTIONS OF •
•
CONVENTION OF MATERIALITY
CONVENTION OF CONSERVATISM
ACCOUNTING • CONVENTION OF CONSISTENCY

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Basic Assumptions of Accounting-

BUSINESS ENTITY ASSUMPTION –

The accounting system gives information only about the business and not
its owner(s).

ACCOUNTING PERIOD ASSUMPTION –

Some firms adopt calendar year, some others financial year of the
government.
Financial year starts from 1st April and ends on 31st March.

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Basic Assumptions of Accounting-

ASSUMPTIONS OF MONEY MEASUREMENT-

In accounting, only those facts which can be expressed in terms of money
are recorded.

GOING CONCERN ASSUMPTION-

This assumption provides a basis for the application of cost in accounting
for assets

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