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Accounts - Module 1 Introduction To Accountancy
Accounts - Module 1 Introduction To Accountancy
Accounts - Module 1 Introduction To Accountancy
Module 1
Introduction to Accountancy
1
Module 1
(7 Hours)
Importance
&
scope
of
accounting,
Accounting
concepts,
conventions,
GAAPS
&
accounting
standards.
Accounting
2
Process
Output
3
IMPORTANCE OF ACCOUNTING
1. Facilitates to replace memory and comply with
legal requirements
2. Facilitates to ascertain net result of operations
and also to know the financial position
3. Facilitates the users to take effective decisions
4. It is helpful in a comparative study
5. It assists the management
6. It facilitates to have control over assets
7. It facilitates the settlement of tax liability
8. It facilitates raising of loans
9. It acts as a legal evidence
10. It facilitates ascertainment of value of business.
5
SCOPE OF ACCOUNTING
Identifying
Measuring
Recording
Classifying
Summarising
Analysing
Interpreting
Communication
6
Accounting Principles
TYPES OF ACCOUNTING
Accounting
Financial
Accounting
Cost
Accounting
Management
Accounting
Social
Responsibility
Accounting
ACCOUNTING CONCEPTS
Concept means a general notion, a theory or belief
held by person or group of persons. The term
concepts includes those basic assumptions or
conditions upon which the science of accounting is
based.
1.
2.
3.
4.
5.
6.
7.
ACCOUNTING CONVENTIONS
A convention means a custom or an established usage
formed or adopted by an agreement. The term conventions
includes those customs or traditions which guide the
accountant while preparing the accounting statements.
1.
2.
3.
4.
Convention of consistency
Convention of full disclosure
Convention of conservatism
Convention of materiality
10
Accounting Standards
The Accounting standards bring uniformity in the preparation
and presentation of financial statements and aids in
comparison of different financial statements of companies in
the same or different industries.
Procedure for framing Accounting Standards
The International Accounting Standards are issued by the
IASC
These Standards are received by ICAI assigned to ASB
The Accounting standards are issued under the authority of
the council of ICAI.
So far the ASB of ICAI has issued 28 Accounting standards
as shown below:
11
Accounting
Standard
AS-1
Title
Mandatory for
Accounting period
beginning on or after
1.4.1991
AS2(Revised)
Valuation of inventories
1.4.1999
AS3(Revised)
1.4.2001
AS4(Revised)
1.4.1995
AS5(Revised)
1.4.1996
AS6(Revised)
Depreciation Accounting
1.4.1995
AS7(Revised)
1.4.2003
12
AS-8
1.4.1991
AS-9
Revenue Recognition
1.4.1991
AS-10
1.4.1991
1.4.1995
AS-12
1.4.1994
AS-13
1.4.1995
AS-14
1.4.1994
AS-15
1.4.1995
AS-16
Borrowing costs
1.4.2000
AS-17
Segment reporting
1.4.2001
AS-11(Revised)
13
AS-18
1.4.2001
AS-19
Leases
1.4.2001
AS-20
1.4.2001
AS-21
1.4.2001
AS-22
1.4.2001
AS-23
1.4.2002
AS-24
Discounting operations
1.4.2004
AS-25
1.4.2002
AS-26
Intangible assets
1.4.2003
14
AS-27
1.4.2002
AS-28
Impairment of Assets
1.4.2004
AS-29
1-4-2004
15
Accounting equations
Meaning:
The statement of equality between debits and credits is known as
accounting equations. In other words ,statement regarding equality of
assets with its corresponding liability is termed as accounting
equations.
Accounting equations
Capitals + liabilities
Loans
Bank overdraft
Creditors
Bills payable
Outstanding expenses
Income received in advance
Assets
Buildings
Land
Machinery
Furniture
Stock in trade
Debtors
Bills receivable
Bank cash
Every business every time has some assets and liabilities. These are always
equal. So balance sheet showing the assets and liabilities is always in the form
of an equation:
17
Accounting Equations
An accounting equation is a statement of equality between the resources
and the sources that finance the resources.
Resources = Sources of finances-------------- (1)
Resources means Assets & Sources of finances means Equity. If we substitute
the above synonyms, the equation will be as under:
Total Assets = Total Equities------------ (2)
Equities means borrowed funds, which may be funds borrowed from internal
sources and those that can be from external sources. These are also called
internal equities and external equities. In that case the above equation may also be
written as under:
Assets = Internal Equity + External Equity-----------(3)
It is a known fact that Internal Equity means Capital and External Equity
means Liability. So the above equation can be written as
Assets = Capital + Liabilities---------------(4)
OR
Assets Liabilities = Capital--------------(5)
OR
Assets Capital = Liabilities------------(6)
Equations 4,5,6 are accounting equations
18
19
1. Traditional classification
Personal Accounts
Names of individuals,
firms, companies and
other entities
Real Accounts
Assets And Liabilities
Nominal Accounts
Expenses, losses and
incomes and gains
20
Debit
Credit
Personal Account
The receiver
The giver
Real Account
What comes in
Nominal Account
21
Asset
Accounts
Liabilities
Accounts
Capital
Accounts
Revenue
Accounts
Expenditure
Accounts
Debit
Credit
Asset Accounts
Increase
Decrease
Liabilities Accounts
Decrease
Increase
Capital Accounts
Decrease
Increase
Revenue Accounts
Decrease
Increase
Expenditure Accounts
Increase
Decrease
22
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