One day a shopkeeper came across a young boy who had come to his shop to make a phone call.

The boy dialed a number and said Good morning madam. I want to offer my services to mow your lawn. The lady replied I am sorry. But I already have someone who does this for me

The boy said. Madam, I can mow lawns better than anybody else in this whole village. Please give me a chance to mow your lawns

The lady patiently replied, No son. Thank you. I am happy with the boy who mows my lawn
The boy still insisted, Madam I will charge you half of the price you are currently paying The lady replied I am really sorry son; but I am very happy with the boy who mows my lawn and I do not want to change

The boy put down the phone with a sweet satisfied smile.

The shopkeeper was perplexed seeing him smile and thought that he was putting on a brave face. He felt sorry for the young boy and offered him a job at the shop.

But the boy smiled and said, No. Thank you. I already have a job.
I was checking on myself! That was my employer I was calling! MEASURING HIS PERFORMANCE

What does the word measure bring to your mind The dictionary meaning of Measure is to find out the size, amount or degree of something by comparing it with a standard; its an indication of the extent or quality of something; its like a rank that you give a performance When you want to check performance you measure. What you cannot measure , you cannot control!

What are the things that you normally measure

How much marks has he got as compared to me How much pocket money is left?
How are you going to manage this month?

For a business man.. What is the profit this month?

Can I invest in another machine in my factory?

Will the bank give me a loan?

The basis of comparing and understanding a business is by understanding accounting

FINANCIAL ACCOUNTING

The term financial accounting brings to mind

Money

Figures

Control

Income

Expenses Reports

Accounts

Genesis of Accounting

Accounting is an ancient art, as old as money itself though in a very rudimentary form
Chanakya in his book ARTHSHASTRA mentions the need for proper audit and accounting! The modern system of accounting however owes its origin to Pacioli, an Italian in the 15th century

REQUIREMENTS

Hard work

Commitment to learning

Attendance & Punctuality

Cheerful disposition

What is accounting Accounting is defined as the process of identifying, measuring and communicating economic information to enable decision making. Accounting is the language of business According to AICPA, Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are of financial nature and interpreting the results thereof. This accounting process continues as financial statements and reports that are provided to users.

What is the need for financial accounting?

A business man would be interested in knowing whether he has earned a profit or loss in business
He would also like to know periodically the status or position of his business The important functions of management; decision making, planning & controlling cannot be executed without correct and timely information. So, whats the relationship between Accounting and information?

Solve this?
Mr. A starts a Company called M/s. Jyoti & Company with a cash investment of Rs. 1,00,000 on 15th November He buys office building space for Rs. 50,000 and furniture of Rs. 25,000 in cash on 20th November He purchase 1000 pens for Rs. 10,000 on 25th November and sells the pens for Rs. 15,000 on 29th November He pays for advertising expenses Rs. 1900 and buys office stationery for Rs. 1000 on 22nd November He pays salary to staff of Rs. 2000 on 30th November He pays for water Rs.500 and Rs.600 for electricity on 30th November What is the profit as on 30th November What is the value of his business on 30th November

Need for financial accountingcontd. Volume and complexities of business calls for a foolproof and sophisticated system which can provide the required information The purpose of accounting is to provide all required information on financial transactions by maintaining certain records, books of account and preparing certain statements. Accounting is the basis of recording the events that happen in day to day business. Once you record events, ie. Measure it, you can manage it!

Accounting Cycle

Recording of financial transactions

Classifying is required to get information on different transactions individually which is not available in the original book of entry where it is recorded. The book of account used for classification is called is called Ledger Summarizing - Once classified information is available in the ledger, it is used to make summaries in the form of Income Statement & Balance Sheet. ie. Financial result and financial position

Branches of Accounting The three branches of accounting are: Financial Accounting Cost Accounting

Management Accounting
Financial Accounting refers to accounting for revenues, expenses, assets & liabilities. It involves basic accounting processes of recording, classifying and summarizing transactions. It deals with past events.

Branches & Systems of Accounting.contd

Cost Accounting refers to recording classifying allocating and reporting current and prospective costs. The main purpose is to help control operations. Management Accounting refers to providing information to various management levels as a basis for management decisions. Auditing refers to reviewing and evaluating documents , records and controls systems

Systems of Accounting

The two systems of accounting are:

Cash basis Accrual basis

Cash basis A financial transaction is recorded in the books of account only when it is settled in cash. There is no place for credit transactions under this system of accounting. This is mostly followed by non profit service organizations like schools, colleges etc. Accrual basis A financial transaction is recorded in the books of account without considering whether it has been settled in cash or not. This is followed by business organizations.

Forms of business organization

Sole Proprietorship - one person owns the business

Partnership firms business run by 2 or more persons. Capital is brought in by the partners based on an agreement Corporations or Companies Largest form of business organization; provided by the public (shareholders) capital

Users of financial reports

Shareholders
Board of Directors Government Employees Creditors Bankers

Recap
What is accounting & accounting cycle?
Recording, classifying & summarizing transactions Branches of accounting

Financial, cost & management accounting

Systems of accounting Cash system & Accrual system

Forms of business organization

Sole Proprietorship, Partnership & Company

Recap The three branches of accounting are: Financial Accounting Cost Accounting

Management Accounting
The two systems of accounting are:

Cash basis
Accrual basis

Accounting Concepts & Standards

Accounting is the language of business and it is used to communicate financial information.

In order for that information to make sense, accounting is based on 11 fundamental concepts. These fundamental concepts form the basis for all of the Generally Accepted Accounting Principles (GAAP). People who rely on financial information have a right to be assured that the data are free from bias and inconsistency, whether deliberate or not.

Eleven GAAP

Accounting Period Concept

Money-Measurement Cost Concept Matching Principle Going Concern

Eleven GAAP

Business Entity Concept

Realization Concept

Conservatism
Materiality Concept

Consistency
Dual Aspect Concept

Role of Financial Accounting in business This can be best understood by understanding the role of the finance department in an organization To ensure efficient management of cash flow maintenance of accurate accounts making and reviewing policies & procedures, control income and expenses guide all departments

by providing accurate and timely information for decision making in order to maximize profitability

Recap
What is accounting & need for the same Accounting cycle Branches of accounting

Systems of accounting
Forms of business organization Users of financial reports Role of finance dept in an organization 11 GAAP

Thank you!

Thought for the Semester

One day all the employees reached the office and they saw a big notice on the door on which it was written:
'Yesterday the person who has been hindering your growth in this company passed away. We invite you to join the funeral in the room that has been prepared in the gym'.

In the beginning, they were all sad about the death of one of their colleagues, but after a while they started getting curious.

They wanted to know who was that man who hindered their growth of his colleagues and the company itself. The excitement in the gym was such that security agents were ordered to control the crowd within the room. The more people reached the coffin, the more the excitement heated up. Everyone thought: 'Who is this guy who was hindering my progress? Well, at least he died!'

One by one the employees got closer to the coffin.

When they looked inside it, they suddenly became speechless. They stood nearby the coffin, shocked and in silence, as if someone had touched the deepest part of their soul. Because, there was a mirror inside the coffin: everyone who looked inside it could see himself. There was also a sign next to the mirror that said:

'There is only one person, who is capable to set limits to your growth: IT IS YOU. You are the ONLY person who can revolutionize your life influence your happiness and your success. You are the ONLY person who can help YOURSELF.

LEARNINGS..

Your life changes when YOU change, when you go beyond your limited beliefs, when you realize that you are the ONLY one responsible for your life. Examine yourself. Watch yourself. Work hard.
Don't be afraid of difficulties, impossibilities and losses.

Be a WINNER, Build Yourself and SUCCESS will be yours.

Thank you!