Financial Accounting Unit I

Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040

(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Course : BBA LLB

Semester : I Semester
Name of the Subject : Financial Accounting
Subject Code : BBA LLB 119
FACULTY NAME: Ms. Vandna Munjal

Assistant Professor, SoL
Introduction
Financial accounting is a useful tool to management and to external users such

as shareholders, potential owners, creditors, customers, employees and
government. It provides information regarding the results of its operations and
the financial status of the business.
Functions
•Dealing with financial transactions
•Recording of information
•Classification of Data
•Making Summaries
•Analyzing
•Interpreting the financial information
•Communicating the results

Scope of Financial Accounting
• Records Financial Transactions
• Classify And Summarize Information
• Prepares Financial Statements
• Interprets Financial Information
• Communicates All Outcomes
• Determines And Maintains Financial Position

Nature of Financial Accounting
•Accounting Is First Step

•Accounting Is An Art And Science:
•Accounting Is A Process
•Accounting Deals With Financial Transactions Only
•Historic In Nature Records Actual Cost

Objectives of Financial Accounting
•Maintaining Systematic Records Of Transactions

•Ascertaining Profit Or Loss
•Ascertaining Financial Position
•Assisting The Management
•Provide Accounting Information To Users

Importance of Financial Accounting
•Recording financial transactions

• Comparing and analyzing financial data
• Communicating information to internal parties
• Communicating information to external parties
• Knowledge of Financial Position
•Helpful in Raising Loan
•Helpful in Comparative Study

Accounting Concepts
• Money Measurement Concept
• Business Entity Concept
• Going Concern Concept
• Cost Concept
• Dual Aspect Concept (Accounting Equation Concept)
• Accounting Period Concept Matching Concept
• Realization Concept
• Objectivity Concept
• Accrual Concept

Bookkeeping
Bookkeeping is the process of recording your company’s
financial transactions into organized accounts on a daily basis.
It can also refer to the different recording techniques businesses
can use. Bookkeeping is an essential part of your accounting
process for a few reasons. When you keep transaction records
updated, you can generate accurate financial reports that help
measure business performance. Detailed records will also be
handy in the event of a tax audit.

Methods of bookkeeping
•Single-entry bookkeeping
•Double-entry bookkeeping
•Cash-based or accrual-based

How to record entries in bookkeeping
•Cash registers
•The journal
•The ledger
•Trial balance
•Financial statements
•The cash flow statement
•The balance sheet
•The income statement
•Bank reconciliation

Interrelationship of accounting with other
disciplines
Accounting as a subject is very dynamic. Although it is an independent
study, it has a strong relationship with other subjects in other fields.
•Accounting and management

•Accounting and economics
•Accounting and mathematics
•Accounting and computer science
•Accounting and statistics
•Accounting and law
•Accounting and political science
•Accounting and engineering

Meaning of GAAP
Generally accepted accounting principles (GAAP) refer to a common set of
accounting rules, standards, and procedures issued by the Financial
Accounting Standards Board (FASB). Public companies in the U.S. must
follow GAAP when their accountants compile their financial statements.
GAAP is guided by ten key tenets and is a rules-based set of standards. It is
often compared with the International Financial Reporting Standards
(IFRS), which is considered more of a principles-based standard. IFRS is a
more international standard, and there have been recent efforts to transition
GAAP reporting to IFRS.

10 Key Principles of GAAP
•Principle of Regularity
•Principle of Consistency
•Principle of Sincerity
•. Principle of Permanence of Methods
•Principle of Non-Compensation
•Principle of Prudence
•Principle of Continuity
•. Principle of Periodicity
•Principle of Materiality
•Principle of Utmost Good Faith

Accounting standards laid down by ICAI
In India, the Accounting Standards for non-corporate entities including
Small and Medium sized Enterprises (SMEs), are issued by the Accounting
Standards Board (ASB) of ICAI, to establish uniform standards for
preparation of financial statements, in accordance with the Indian GAAP
(Generally Accepted Accounting Practices), for better understanding of the
users. However, in the case of Corporate entities, the Accounting Standards
notified by the MCA are applicable.
These standards are mandatory on the dates specified either in the
respective document or as may be notified by the ICAI/ MCA.

Thank you


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Chanderprabhu Jain College of Higher Studies & School of Law

Plot No. OCF, Sector A-8, Narela, New Delhi – 110040

Course : BBA LLB

FACULTY NAME: Ms. Vandna Munjal

Financial accounting is a useful tool to management and to external users such

Chanderprabhu Jain College of Higher Studies & School of Law

• Records Financial Transactions

• Classify And Summarize Information

• Prepares Financial Statements

• Interprets Financial Information

• Communicates All Outcomes

• Determines And Maintains Financial Position

Chanderprabhu Jain College of Higher Studies & School of Law

•Accounting Is First Step

Chanderprabhu Jain College of Higher Studies & School of Law

•Maintaining Systematic Records Of Transactions

Chanderprabhu Jain College of Higher Studies & School of Law

•Recording financial transactions

Chanderprabhu Jain College of Higher Studies & School of Law

• Business Entity Concept

• Going Concern Concept

• Dual Aspect Concept (Accounting Equation Concept)

• Accounting Period Concept Matching Concept

Chanderprabhu Jain College of Higher Studies & School of Law

Chanderprabhu Jain College of Higher Studies & School of Law

Chanderprabhu Jain College of Higher Studies & School of Law

Chanderprabhu Jain College of Higher Studies & School of Law

•Accounting and management

Chanderprabhu Jain College of Higher Studies & School of Law

Chanderprabhu Jain College of Higher Studies & School of Law

Chanderprabhu Jain College of Higher Studies & School of Law

Chanderprabhu Jain College of Higher Studies & School of Law

Chanderprabhu Jain College of Higher Studies & School of Law

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