Financial

Accounting

Lecture # 1

What is
Accounting ?
Urdu & Hindi

By: Ghalib Hussain

What is Accounting ?
The American Institute of Certified public Accountants (AICPA) has defined the Financial Accounting
as “ the art of recording, classifying and summarizing in significant manner in terms of money
transactions and events which in part, at least of a financial character and interpreting the results thereof.”

American Accounting Association defines accounting as "the process of identifying, measuring, and
communicating economic information to permit informed judgements and decisions by users of the
information.

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What is Accounting ?

 Identification Monetary events or Money Transactions

 Recording Journalizing

 Classifying Ledgers

 Summarizing Trial Balance

 Interpreting Financial Statements

the results (Profit & Loss A/c and Balance Sheet)
thereof

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Different Types of Business Entities.
Commercial Organizations (Profit Oriented)
 Sole proprietor
 Partnership
 Limited companies

Non-Commercial Organizations (Non-Profit Oriented)

 NGO’s (Non-government Organizations)
 Trusts
 Societies

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Objectives of Bookkeeping

Record Maintenance:
One fundamental objective of bookkeeping
is to ensure the accurate and systematic
recording of financial transactions, e.g.
accurately documenting income, expenses,
assets, liabilities, and equity.

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Objectives of Bookkeeping

Financial Analysis:
By organizing and categorizing
financial information, bookkeeping
enables the calculation of key financial
ratios, such as profitability ratios,
liquidity ratios, and solvency ratios.
These ratios provide valuable insights
into the financial health and
performance of a business.

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Objectives of Bookkeeping

Facilitation of Audits:
By maintaining detailed and organized
financial records, businesses can easily
provide supporting documentation and
evidence during audit processes. Proper
bookkeeping practices enhance
credibility, and minimize audit risks.

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Objectives of Bookkeeping

Financial Decision-making:
Timely and accurate financial records
enable businesses to assess their
financial position, and identify trends.
With reliable bookkeeping data,
businesses can make informed
decisions regarding budgeting,
investment, expansion, and cost
management.

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