9/16/2020

Financial Accounting

Dr. Puran Singh

1.1: Introduction to Financial

Accounting

Contents

1.1.1 Definition of accounting

1.1.2 Course contents

1.1.3 Preparation of Financial Statements: Accounting cycle

1.1.4 Decision making using financial statements

1.1.5 Accounting: An art or a science?

1.1.6 Environment of financial reporting

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1.1.1 Definition of accounting

• “Accounting is the art of

recording, classifying and

summarizing, in a significant

manner, and in term of money,

transactions and events which

are in part at least of a financial

character, and interpreting the

results thereof.”

Definition given by ‘American Institute of Certified Public Accountants’

1.1.2 Course contents

Financial Accounting

Preparation of Decision Making using

Financial Statements Financial Statements

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1.1.2 Course contents

Financial Accounting

Preparation of Decision Making using

Financial Statements Financial Statements

Principles of Accounting

Books of Accounting

Financial Statements

1.1.2 Course contents

Financial Accounting

Preparation of Decision Making using

Financial Statements Financial Statements

Principles of Accounting Financial Statement Analysis

Books of Accounting Cost Volume Profit Analysis

Financial Statements Inventory Control

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1.1.3 Preparation of Financial Statements: Accounting cycle

Journal

Adjustments Ledger

Final
Trial Balance
Accounts

1.1.3 Preparation of Financial Statements: Accounting cycle

Recording: Every transaction is

noted down

Journal

Adjustments Ledger

Final
Trial Balance
Accounts

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1.1.3 Preparation of Financial Statements: Accounting cycle

Recording: Every transaction is

noted down

Journal
Classifying: Transactions are
classified based on nature

Adjustments Ledger

Final
Trial Balance
Accounts

1.1.3 Preparation of Financial Statements: Accounting cycle

Recording: Every transaction is

noted down

Journal
Classifying: Transactions are
classified based on nature

Adjustments Ledger

Final
Trial Balance
Accounts

Summarizing: An
overview of all
transactions is provided

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1.1.3 Preparation of Financial Statements: Accounting cycle

Recording: Every transaction is

noted down

Journal
Classifying: Transactions are
classified based on nature

Adjustments Ledger

Final
Trial Balance
Accounts

Results: Financial Summarizing: An

statements are overview of all
prepared transactions is provided

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1.1.3 Preparation of Financial Statements: Accounting cycle

Recording: Every transaction is

noted down

Journal
Classifying: Transactions are
classified based on nature

Adjustments Ledger

Editing: Financial
statements are
edited

Final
Trial Balance
Accounts

Results: Financial Summarizing: An

statements are overview of all
prepared transactions is provided

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1.1.4 Decision making using financial statements

Financial Statement
Financial health of the company
Analysis

Cost Volume Profit

Analysis Operational decision making

Inventory Management
and Control
Optimizing stock levels

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1.1.5 Accounting: An art or a science?

• Science

• Double entry system

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1.1.5 Accounting: An art or a science?

• Science

• Double entry system

• Art

• Subjective calls

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1.1.6 Environment of financial reporting

Board

Management
External Auditor
Finance Dept

Internal Auditor

Company

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1.1.6 Environment of financial reporting

Companies Act 2013

Board

Management
External Auditor
Finance Dept

Internal Auditor

Company

Indian Accounting Generally Accepted

Standards Accounting Principles

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Done!!

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