INTRODUCTION TO

ACCOUNTING
ACCOUNTANCY: is a systematic knowledge of accounting i.e it educates
how to maintain the books of accounts.
• Book- Keeping: an art
• DEFINITION: “ Book Keeping is an art of recording in the books of
accounts all those business transactions that result in the transfer of
money or money’s worth.

• ART—Because all the books are kept in a systematic manner.

• Business Transactions- buying and selling.
• Money and Money’s worth- without money the thing becomes a gift.
• “ Book Keeping is an art of recording business dealings in a set of
books”. J.R Batliboi.
• Meaning of Book Keeping:
• 1. Identifying financial transactions and events.
• 2. Measuring them in terms of money.
• 3. Recording the identified financial transactions in the books of
accounts and
• 4. Classifying recorded transactions and posting in the proper books
of accounts.
MEANING AND DEFINITION OF ACCOUNTING
“Accounting is the art of recording, classifying and 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.”

ACCOUNTANCY: explains how to deal with various aspects of

accounting. It educates us how to maintain the books of accounts and
how to summarise the accounting information and communicate it to
the users.
ACCOUNTING AND ACCOUNTANCY
• Accountancy is knowledge of accounting and Accounting is the
application of accountancy.
FEATURES OF ACCOUNTING

• 1.Identification of Financial Transactions- Done with the help of receipts

and bills.
2. Measuring the Identified Transactions: In terms of money.
3. Recording: in the books of prime entry i.e Journal.
4. Classifying: Transactions of a similar nature i.e
Cash transactions, transactions of a particular person etc.
5. Summarising: Presenting the classified data so that it is understood by the
users
6. Analysis and Interpretation: so that planning for the future can be done.
7. Communicating : with the users of the data so that decisions can be taken
on time.
OBJECTIVES OF ACCOUNTING
• 1. Record of Financial Transactions.
• 2. Determine Profit or Loss.
• 3. Determine Financial Position.
• 4. Assisting the Management.
• 5. Communicating Accounting Information to Users.
• 6. Protecting Business Assets: by maintaining record of assets owned
by the business.
IS ACCOUNTING A SCIENCE OR AN ART
• It is an ART as we record the transactions in a systematic manner.
• SCIENCE as it is an organized knowledge based on certain basic
principles.
USERS OF ACCOUNTING INFORMATION
• INTERNAL USERS:
• A) Owners: as they are interested in knowing the profit earned or loss
suffered by the business.
• B) Management: To be able to make decisions on time.
• C) Employees and Workers: To know if their salaries will increase or they
will get bonus etc.
EXTERNAL USERS:
1.Banks and Financial Institutions- For getting loans for the business
2.Investors and Potential Investors- How much they will get back on their
investment and how safe is their investment.
• 3. Creditors: are the people who sell the goods on credit( Udhar).
They want to be assured that they will get their payment on time.
• 4.Consumers: Are interested in knowing whether the prices of goods
will decrease.
• 5. Public: If the business will gain profit then it will contribute to the
society.
• Public parks, water facilities in different places etc.
SYSTEMS OF ACCOUNTING:
1. Double Entry system
2. Single Entry System
• Double Entry System:
• This system recognizes and records both aspects of a transaction i. e Debit
and Credit.
• This system has proved to be a Scientific and complete system of
accounting.
• FEATURES:
• 1. It maintains a complete record of each transaction.
• 2. The two-fold aspect of each transaction is given value.
• 3. The rules of DEBIT and CREDIT are followed.
• 4. Arithmetical accuracy is maintained in this system.
Single Entry System
• This is an incomplete system of recording transactions in the books of
accounts.
• In some transactions both aspects are recorded whereas in few
transactions only one aspect is recorded.
• A few Personal Accounts and Cash Book is maintained in this system.
BRANCHES OF ACCOUNTING
• A. Financial Accounting: is mainly concerned with the preparation of
Financial statements like:
• Profit & Loss A/C; Balance Sheet

• B. Cost Accounting: This branch of accounting is helpful to ascertain

the cost of a product
• Also helps in decision making.

• C.Management Accounting: concerned with generating accounting

information relating to profits, costs etc.