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Foundation course II
Course Introduction
• Definition
The process of identifying, measuring and communicating
economic information to permit informed judgments and
decisions.
• Management
• Finance
• Accounting
• None of the given options
Quiz time
Management Accounting
The process of identification, measurement, accumulation,
analysis, preparation, interpretation, and communication of
information used by management to plan, evaluate and control
within an entity and to assure appropriate use of and
accountability for its resources.
Accounting principles It follows the Generally Accepted It is not bound to follow the
Accounting Principles (GAAP) or Generally Accepted Accounting
International Financial Reporting Standards Principles (GAAP)
(IFRS).
Audit Independent Auditors certifies and There are no independent audits
expresses their opinion on the FS. verifying the information.
• Financial accounting
• Management Accounting
• Cost Accounting
• None of the given option
Financial Accounting and Cost Accounting
Points Financial Accounting Cost Accounting
Primary users of information investors, creditors, credit rating management
agencies and regulatory agencies.
• Patent
• Copyright
• Cost
• Financial accounting
Basic Accounting Concepts/Assumptions
Basic Accounting Concepts/Assumptions
Concept Defined As
Separate Entity A business is treated as a separate unit or entity from the owners or the
Concept stakeholders.
Cash and In cash basis of accounting, revenue is recognised when cash is received,
Accrual Concept whereas the expense is recognised when cash is paid.
Concept Defined As
Matching The expenses incurred on earning the revenues should be recognised
during the accounting period in that time period and not in the next or
Concept
previous time period in order to reach accurate net income figure.
Double Entry According to this concept, there are the two aspects of every business
Accounting transaction, namely Debit (Dr) and Credit (Cr) entries.
System
Basic Accounting Concepts/Assumptions
Concept Defined As
Money Measurement Only those transactions and events would be recorded in the
books of accounting that are financial or monetary in nature.
Going Concern Going concern concept is based upon the assumption that an
organisation would not be ceased or liquidated in the immediate
future, and continues to operate for an indefinite period.
Basic Accounting Concepts
Concept Defined As
Historical Cost According to the historical cost concept, the assets are measured
as per the price paid (cost incurred) to acquire them.
Accounting Period Accounting period refers to the period for which an organisation
evaluates its financial position. It covers the profit earned or loss
incurred by the organisation for a particular duration that is
represented in the income statement.
Basic Accounting Concepts
Concept Defined As
Conservatism Financial transactions are recorded in the books of accounting by taking into
consideration all prospective losses and ignoring all prospective profits. This
concept is based on the conservative approach.
Realisation This concept states that an organisation should determine the time when
revenues are earned and expenses are incurred. The accountant should
record the business transactions only when it is realised.
Consistency According to this concept, the practices and methods of accounting remain
constant in different accounting periods. Therefore, the financial information
of one period can be compared to another.
Materiality According to this concept, the main basis of accounting should be material
facts. It emphasises the inclusion of only the important details of the material
and ignoring the insignificant details
Quiz time
• Entity Concept
• Going Concern Concept
• Accrual Concept
• None of the given option
Quiz time
• Cash concept
• Going Concern Concept
• Accrual Concept
• None of the given option
Quiz time
• Cash concept
• Going Concern Concept
• Accrual Concept
• None of the given option
Quiz time
• Accrual concept
• Historical cost concept
• Matching Concept
• None of the given option
Advantages of Financial Accounting
Comparing results
Providing information to
interested groups
Providing legal evidences
• charging depreciation
• Recognising credit sales
• taking into account foreseeable loss
Questions
Thank You