Accounting Concepts and Introduction to GL
When a person starts a business his main aim is to earn profit. He receives money from certainsources like sale of goods, Interest from bank deposits etc. He has to spend money on certainitems like purchase of goods, salary, rent etc. These activities take place during the normalcourse of his business. Business transactions are numerous, that it is not possible to remember all those transactions and recall as to how the money had been earned and spent. If he hadnoted down his incomes and expenses he can get the required information easily. Hence itbecomes necessary to record activities, which have monetary effect, in a clear, and a systematicmanner to get answers for the following questions1.What has happened to his investment?2. What is the result of the business transactions?3.What are the earnings and expenses?4.How much amount is receivable from customers to whom goods have been sold oncredit?5.How much amount is payable to suppliers on account of credit purchases?6.What are the nature and value of assets possessed by the business concern?7.What are the nature and value of liabilities of the business concern?These and several other questions are answered with the help of accounting.
Accounting is nothing but recording a set of business transaction in the books of accounts. Anyfinancial transaction or non-financial transaction like (cash or non cash) even depreciation,goodwill etc has to be recorded.The purpose of accounting is to provide the information that is needed for sound economicdecision making. The main purpose of financial accounting is to prepare financial reports thatprovide information about a firm's performance during a period to external parties such asinvestors, creditors, and tax authorities and the financial position of the firm as on a particular date
Branches of Accounting
is concerned with recording of business transactions in the books of accounts in such a way that operating result of a particular period and financial position on aparticular date can be known. It deals with preparation of financial statement like profit & lossaccount, balance sheet etc. which is used by all types of companies.
relates to collection, classification and ascertainment of the cost of productionor job undertaken by a firm. It is used by only manufacturing companies. This deals withpreparation of various cost based statements to fix the selling price for a product, break-evenanalysis, etc.ISSI3