FINANCIAL ACCOUNTING AND ANALYSIS

Unit 1

MBA/BBA/B.com /B.Tech /UGC Net

By
Dr. Anand Vyas
 Meaning and Scope of Accounting
For management to make decisions about the future of the firm they require
relevant financial information. This is where accounting steps in. It is the
language of business that records summarizes and analyzes all transactions and
events of a firm.
the system of recording and summarizing business and financial transactions
and analyzing, verifying, and reporting the results also : the principles and
procedures of this system studied accounting as a freshman.
a : work done in accounting or by accountants.
The scope of Accounting is wide and extends in business, trade, government,
financial institutions, individuals and families and every other arena. The
accounting principle is used in every step. Many think the accounting scope is
only limited to financial transactions of a business concern but in fact, it is not
true.
Evolution and Users of Accounting,
• The history of accounting or accountancy is thousands of years old and
can be traced to ancient civilizations. The early development of accounting
dates back to ancient Mesopotamia, and is closely related to
developments in writing, counting and money and early auditing systems
by the ancient Egyptians and Babylonians

• Examples of internal users are owners, managers, and employees. External

users are people outside the business entity (organization) who use
accounting information. Examples of external users are suppliers, banks,
customers, investors, potential investors, and tax authorities.

• Part of this process includes the three stages of accounting: collection,

processing and reporting.
 Basic Accounting terminologies
• Take a look at the three main rules of
accounting: Debit the receiver and credit the
giver.
• Business Entity, Money Measurement, Going
Concern, Accounting Period, Cost Concept,
Duality Aspect concept, Realisation Concept,
Accrual Concept and Matching Concept.
 Principles of Accounting
• The four basic principles in generally accepted
accounting principles are: cost, revenue,
matching and disclosure.
• accrual principle
Accounting Concepts & Conventions
 Accounting Equation
•The accounting equation states
that a company's total assets are
equal to the sum of its liabilities
and its shareholders' equity. This
straightforward number on a
company balance sheet is
considered to be the foundation
of the double-entry accounting
system.
 Deprecation Accounting
• The term depreciation refers to an accounting
method used to allocate the cost of a tangible
or physical asset over its useful life.
Depreciation represents how much of an asset's
value has been used. It allows companies to
earn revenue from the assets they own by
paying for them over a certain period of time.