INTRODUCTION

■ Introduction
■ Application of Accounting
■ Why are we learning this subject in Term I?
■ Accounting Cycle
■ What is Accounting?
■ Difference between Accounting and Accountancy
■ Branches of Accounting
■ Users of Accounting Information
 APPLICATION OF ACCOUNTING

Everyone uses accounting in their own way like

individuals may use accounting to maintain their personal
budget, reconcile their monthly credits, and balance their
checkbooks for future consistency.
Pocket Money Accounting ( For a Month)
Particulars Pocket money Spendings Balance

Pocket money 5000

Other 1000

Mobile recharges 200

Purchased gadgets 2000

Loan repayment to 1500

Friend

Balance 2300
 APPLICATION OF ACCOUNTING

Business entity may use accounting methodologies to

analyze its income and expense items and to determine its
financial position and performance throughout the
period/s.
Business Accounting ( For a Month)
Particulars Income Expenses Balance
Profit from business 5000
Other income 1000
Mobile recharges 200
Purchased gadgets 2000

Loan repayment to 1500

bank

Balance 2300
Why are we learning this subject in Term
I?
Have you thought about the financial
position all of this brands or food
chains & their value in market in
terms of money?
Worldwide brand value
■ McDonald's: $130.4 billion
■ Starbucks: $45.9 billion
■ KFC: $17.2 billion
■ Subway: $17.1 billion
■ Domino's Pizza: $9.6 billion
■ Pizza Hut: $7.6 billion
■ Burger King: $7.1 billion

Source: Financial times 2020

Which company is Best for Investments?

Company A Company B
Income - 800000 Income - 600000

Expenses - 500000 Expenses - 20000

Balance - 300000 Balance - 580000

 Business Financial Transactions
Purchases Sales Expenses Income
Purchase of raw Sales of goods and Wages, Salaries Income from sales
materials services
Purchases of Land Sales of old Land Day to Day Expenses, Income from other
Building, Patents, Copy Building, Patents, Copy Transportations, sources
rights, Vehicles, rights, Vehicles, Advertising cost
Machinery et Machinery et

Purchases of Semi Sales of semi finished Registration, stationary, Interest on Investments

Finished Goods goods food,
Purchases of other Payment of Loan,
properties Interest on Business
Loan
 TOP VIEWED POSTS FROM BUSINESS FINANCE DURING
COVID 19 PANDEMIC

1. Titan : How are financial statements impacted when Titan’s operating

CASH FLOW was negative in the last two months due to virtually zero
sales in the first six weeks of lockdown.
2. Nagarjuna Agritech: The company said its LIQUIDITY POSITION is not
adequate and it has been difficult at this stage to assess REVENUE and
PROFTABILITY for the whole year of FY21.
3. Cadbury: When the chocolate used in Cadbury cream eggs was changed to
less expensive chocolate what VARIANCES would have been impacted
4. Which CONTINGENT LIABILITIES resulting form the Volkswagen
emission cheating scandals would be recognized or disclosed in Volkswagen
financial statements.
5. How ZERO BASED BUDGETING beneficial for Unilever ?
 Accounting begins the moment you enter a
business transaction or financial transactions.
 ACCOUNTING CYCLE

Prepare
Financial Transaction
Statements

We are going to learn

ADM from this stage

Prepare Record of
Trial journal
Balance entries

Post Entries
to Ledger Posting
Accounts
 WHAT IS ACCOUNTING?

• Accounting is a discipline which Records, classifies, summaries and

interprets business transactions.

• Accounting is the science of recording and classifying business

transactions and events, primarily of a financial character, and the art
of making significant summaries, analyses and interpretations of
those transactions and events and communicating the results to the
persons who must take decisions or form judgment.
 DIFFERENCE BETWEEN
ACCOUNTING AND ACCOUNTANCY

• The term Accountancy is used for the profession of accountants – one who
does the work of accounting whereas,

• Accounting is the systematic process of recording all business transactions

and translating all intangible reports for its intended use by the user.
 BRANCHES OF ACCOUNTING

• Financial accounting. The object of financial accounting is to ascertain the results

(profit or loss) of business operations during the particular period and to state the
financial position (balance sheet) as on a date at the end of the period.
• Cost accounting. The object of cost accounting is to find out the cost of goods produced
or services rendered by a business. It also helps the business in controlling the costs by
indicating avoidable losses and wastes.
• Management accounting. The object of management accounting is to supply relevant
information at appropriate time to the management to enable it to take decisions and
effect control
 STAR PVT LTD HAVING FOLLOWING FINANCIAL INFORMATION FOR THE MONTH JULY 2021

Information about Financial Information about Cost control, Information about overall
transaction costs, cost reduction per unit Performance to Internal /
External users for Decision
Making
Total purchases Administration overheads - 3 Lacs Profit from sales – 12 Lacs
Building – 5 Lacs Selling & Distribution over heads – Total profit Before Tax 9 Lacs
4 Lacs
Raw materials – 3 lacs Direct labour - 1lacs Total Profit after paying Tax is 7
Lacs
Total Sales Cost of Sales per unit –Rs 450 Loss from sale of Building 2 Lacs
Sales of Semi finished goods – 7
lacs
Salary – 2 lacs
Financial Accounting Cost Accounting Managerial Accounting