INTRODUCTION TO ACCOUNTANCY

MEANING, BRANCHES AND IMPORTANCE

ACCOUNTING CONCEPTS
CONVENTIONS & ASSUMPTIONS

KEY IMPORTANT TERMS IN ACCOUNTING

ACCOUNTING TRAIL

ACCOUNTING EQUATION
GROUND RULES OF JOURNALISATION

MEANING:
MEANING & DEFINATION OF ACCOUNTING: ACCOUNTING IS THE LANGUAGE OF BUSINESS. IT MEANS RECORDING THE TRANSACTIONS WHICH ARE OF FINANCIAL IN NATURE AND CLASSIFYING THEM AND SUMMARISING AND THEROF INTERPREATED. THE ABOVE STATEMENT CLEARLY BRINGS OUT THE FOLLOWING FEATURES OF ACCOUNTING: IDENTIFYING FINANCIAL TRANSACTION RECORDING CLASSIFYING SUMMARISING ANALYSIS AND INTERPRETATION DEFINITION:-ACCORDING TO AICPA 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 THEROF.

BRANCHES OF ACCOUNTING:
FINANCIAL ACCOUNTING COST ACCOUNTING MANAGEMENT ACCOUNTING HUMAN RESOURSE ACCOUNTING TAX ACCOUNTING

Difference between Book-Keeping, Accounting, and Accountancy.

BOOK KEEPING
ACCOUNTING ACCOUNTANCY

IMPORTANCES OF ACCOUNTING COMPLETE RECORDS ASSISTANCE TO MANAGEMENT HELPS IN COMPARATIVE STUDY HELPS IN FILING OF INCOME TAX & SALES TAX RETURNS.

ACCOUNTING CONCEPTS OR ASSUMPTIONS

ACCOUNTNG ENTITY ASSUMPTIONS GOING CONCERN ASSUMPTIONS

MONEY MEASUREMENT ASSUMPTIONS

ACCOUNTING PERIOD ASSUMPTIONS

PRINCIPLES OR CONVENTIONS OF ACCOUNTING

MATERIALITY:-An item should be regarded as material if there is
reason to believe that knowledge of it would influence the decisions of informed investor. Deciding what is material in accounting is a matter of exercising judgment, not of applying specific rules.

CONSISTENCY:-The consistency principle holds that valuation

basis and method or practices should remain the same from one year to another.

CONSERVATISM:-The essence of this principle is anticipate no

profit, and provide for all losses. Eg: Valuing stock at cost / market price whichever is low.

FULL DISCLOSURES:- All the relevant information must be

disclosed in its full aspect so as to have a true and fair view of the financial statements.

KEY IMPORTANT TERMS

ASSETS LIABILITIES SALE PURCHASE DEBTOR CREDITOR BALANCE SHEET REVENUE / INCOME

ACCOUNTING TRAIL
PASSING JOURNAL ENTRIES POSTING THEM INTO RESPECTIVE LEDGER ACCOUNTS PREPARING TRIAL BALANCE PREPARING FINAL ACCOUNTS (WHICH
INCLUDES TRADING A/C, PROFIT/LOSS A/C AND BALANCE SHEET)

ACCOUNTING EQUATION
RULES OF DEBIT AND CREDIT:
ASSETS = CAPITAL + LIABILITY OR FIXED ASSETS + CURRENT ASSETS (Dr) = CAPITAL + LONGTERM LIABILITY + CURRENT LIABILITY (Cr)

ACCORDING TO BASIC RULES OF ACCOUNTING

REAL A/C- DEBIT WHAT COMES IN AND CREDIT WHAT GOES OUT PERSONNEL A/C: DEBIT THE RECEIVER AND CREDIT THE GIVER NOMINAL A/C: DEBIT ALL EXPENSES AND LOSSES AND CREDIT ALL INCOME AND GAINS

FEW CLASSIFICATION(S)
PURCHASES REAL CASH REAL WAGES NOMINAL BUILDING REAL CALCUTTA TRAM WAY CO. A/C PERS. EAST BENGAL CLUB A/C PERS. RENT A/C NOMINAL CAPITAL A/C PERS. DRAWING A/C PERS. INTEREST A/C NOMINAL TRADE MARK REAL DIVIDEND NOMINAL LAND A/C GOODWILL A/C PATENT A/C BAD DEBT BANK A/C DISCOUNT ALLOWED INCOME RECEIVED SALES REAL REAL REAL NOMINAL REAL NOMINAL NOMINAL REAL

Steps in the Recording Process

1. Analyze each transaction into its debit and credit parts. 2. Enter each transaction into a journal (book of original entry). 3. Transfer (post) journal information to the appropriate accounts in the general ledger (book of accounts).

The Journal
Transactions are initially recorded in chronological order in a journal before being transferred to the accounts.

Every journal contains: * Spaces for dates * Account titles and explanations * References * Two amount columns (debit and credit)

Journalizing a Transaction
Separate journal entries are made for each transaction A complete entry consists of: 1. The date of the transaction 2. The accounts and amounts to be debited and credited 3. Brief explanation of the transactions.

Financial Statements
Prepared in this order from summarized accounting data (identified, recorded, summarized):

1. Income Statement
2. Retained Earnings Statement 3. balance sheet

Income Statement
Presents net income or loss for a specific period of time. REVENUE EXPENSES = NET INCOME or NET LOSS
Revenue > Expenses = Net Income Revenue < Expenses = Net Loss

Retained Earnings Statement

Summarizes the changes in retained earnings for a specific period of time Beginning retained earnings balance + Net income or Net Loss - Dividends Ending retained earnings balance

BALANCE SHEET
Reports the assets, liabilities, and stockholders equity of a business ON a specific date
ASSETS LIABILITIES = STOCKHOLDERS EQUITY