INTRODUCTION TO ACCOUNTING

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atch?v=yYX4bvQSqbo

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LEARNING OBJECTIVES:
The students will be able to:
 Describe the meaning, significance, objectives, advantages and limitations of accounting in
the modem economic environment with varied types of business and non-business economic
entities.
 Identify / recognise the individual(s) and entities that use accounting information for serving
their needs of decision making.
 Explain the various terms used in accounting.
 Differentiate between different related terms like current and non-current, capital and
revenue.
 Give examples of terms like business transaction, liabilities, assets, expenditure and
purchases.
 Explain that sales/ purchases include both cash and credit sales/ purchases relating to the
accounting year.
 Differentiate among income, profits and gains.
 State the meaning of fundamental accounting assumptions and their relevance in accounting.
 Describe the meaning of accounting assumptions and the situation in which an assumption is
applied during the accounting process.
 Explain the meaning, applicability, objectives, advantages and limitations of accounting
standards.
 Double entry system
 Explain the meaning, advantages and characteristic of GST.
•ACCOUNTING is an art of recording,
classifying & summarizing 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 results thereof.
• American Institute of Certified Public Accountants
CHARACTERISTICS/ATTRIBUTES OF ACCOUNTING
6. Protecting Business Assets – it keeps records of the assets owned by the business.
Accounting maintains record of assets owned by the business which enables the
management to protect them & exercise control.
Functions of Accounting
• Maintaining Systematic accounting Records
• Preparation of Financial Statements
• Meeting legal requirements
• Communicating the financial information
• Assistance to management
Advantages of Accounting
Contd/-
10. Assistance in the event of insolvency – insolvency proceedings
involve explaining many transactions that have taken place in the past.
Systematic accounting records assist a great deal in such situation.

11. Helpful in Partnership Accounts – at the time of admission or

retirement or death of a partner or in case of dissolution of the firm,
the accounting record is of vital importance & use as it provides the
basis to reach a settlement.
Limitations of accounting
Role of Accounting in Business
• Maintenance of Systematic Records – it is the primary role, to ascertain the profit
or loss for the accounting period & the financial position as on a particular date.
• Assistance to Management – for effective functioning & taking rational decisions.
• Facilitates comparative study – compare one year’s results with those of other
years & locate significant reasons leading to changes, if any.
• Evidence in Court – they are accepted by the courts
• Others
• it obviates the necessity to remember the business transactions
• Facilitates raising loans
• Helps in ascertaining the purchase price during sale of the business
• Facilitates in settlement of tax liabilities
Accounting Process
Branches of Accounting
Book keeping, Accounting & Accountancy
Accounting Information
Qualitative characteristics of Accounting
Information
Users of Accounting Information
https://www.youtube.com/watch?v=VYNTBWBqncU

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The modern system of accounting owes its origin to Luca Pacioli
(Father of Accounting)

an Italian who first published his book on double entry system

of accounting in 1494.
Systems of Accounting