Welcome to all of you..

Dr. Suresh Kumar Sahoo

Associate Professor, FMS , SSU
 To the World of…..

Financial Accounting
Dictionary Meaning :
As per Chambers Dictionary

Account – A description or report or record of money

received and spent.

&

Accounting – The skills or practice of preparing or

keeping the financial records of a business.
But Why to learn
Accounting?
Three reasons can be the answers:

• Personal

• Professional

• Universal
 Answering in detail
• Personal

Every one of us is part of the economy and so also the

business world. If you want to understand business then you
have to learn the language of business i.e.
Accounting.

• Professional

As you are going to become managers of business enterprises

the strategic decision relating to the economic resources of
business will be demanding. The efficient managerial decision
regarding the operational efficiency and financial viability of
business is facilitated by the knowledge of accounting.
 Continue…

• Universal

In all activities (whether business or non-business

activities) and in all organisations (whether business
organisations like a manufacturing unit, a bank or non-
business organisations like schools colleges) which require
money and other economic resources (can be measured in
terms of money) accounting is required to account for these
resources.
In other words , wherever money is evolved, accounting is
required to account for it.
 Evolution of Accounting
The origin of accounting as a social study can be
traced back to very ancient days. Indeed, it is as old
as the beginning and use of money itself. But the
genesis of present form of accounting ( sometimes
called as modern accounting) can be traced back to
15 th century.

Fra Luca Pacioli (1445 b.c – 1520b.c) an Italian

Mathematician and philosopher is regarded as Father
of accounting for his substantial contribution in the
field of accounting.
 A Common Man’s Story:
As w e have said that Accounting developed as a social study. Its very basic
concepts must be derived from the society itself i.e. from the individuals.

Here is story of a person having Rs. 150 to spend in the market for his day to
day use in family.
Whenever he purchased something in order to remember and further reference
he used to write all the facts on a paper.
He purchased following things :

Vegetables Rs. 05
Soap Rs. 08
Beauty cream Rs. 12
food oil Rs.10
Garment Rs. 50
Grocery Rs. 05
VCD Rs. 25
Kid T- shirt RS.10
Banana Rs.10

He decided to visit the temple at evening. The man also thinking about to pay
his daughter’s school fees Rs. 50. While returning to home he met his friend
and shared some light moments . At the end of the day the person wants to
know h o w much he expended and h o w much is the saving .
 Continue:

Step -1

Identified the transactions and events

Measure them in terms of money.

 Continue:

Step – 2
Recording
Vegetables Rs.05
Soap Rs.08
Beauty cream Rs. 12 RECORDIN G
food oil Rs.10
Garment Rs. 50
Grocery Rs. 05
VCD Rs.25
Kid T- shirt RS. 10
Banana Rs.10
 Continue:

Step – 3
Classifying

Food items:
Vegetables Rs.05
food oil Rs.10
Grocery Rs. 05
Banana Rs.10
Beauty products: CLASSIFICATION
Beauty cream Rs. 12
Soap Rs.08
Dress material:
Garment Rs. 50
Kid T- shirt RS. 10
Entertainment
VCD Rs.25
 Continue:

Step – 4
Summarising

Food items: Rs.30

Beauty products: Rs.20
SUMMARISING
Dress material: Rs.60
Entertainment: Rs.25
 Continue:

Step – 6
Analysis

Money Rs.150
Less:
Expenses
Food items Rs.30
Beauty products Rs.20
IDENTIFY RESULT
Dress material Rs.60
Entertainment Rs.25
Total expenses Rs.135
 Continue:

Step – 6
Identify Result

Money Rs.150
Less:
Expenses
Food items Rs.30
Beauty products Rs.20 IDENTIFY RESULT

Dress material Rs.60

Entertainment Rs.25
Total expenses Rs.135
Saving Rs.15
The common man:

The steps followed by the common man:

• Identified the transactions and events

• Measure them in terms of money
• Recording
• Classifying
• Summarising
• Analysis
• Identify the Result
Definition of Financial Accounting

Financial Accounting is the process of

recording , classifying and summarising in a
significant manner and in terms of money
transactions and events which are in part at
least of a financial character and
identifying the results there of.
 Continue:

As an information system Accounting is the

process of collecting, recording, summarising
and communicating financial information (i.e.
financial position and performance) of business
to interested parties. Since Accounting serves
the means of communication it is often called
as the language of business.
Objectives of Accounting

1. To maintain Records of business

transactions
2. To Calculate the Results of Operation
3. To Ascertain the Financial Position
4. To Communicate the Information to users
 Accounting Process
Identify the Business Transactions and events

Record the Transactions in terms of Money [Journal Book]

Classifying the Transactions in different accounts [ Ledger Book ]

Summaries The Transactions [ Trial Balance] Analysis of Financial

Information [Profit & Loss a/c, Balance sheet] Interpreting the

Results [ Financial performance and Position]

Communicating/Publishing the Results [ Annual Report]

Basic Accounting Activities
• Identifying the transactions and events

• Measuring the identified transactions Book keeping

and events

• Recording (Journalising)
• Classifying (Ledger posting) Accountancy

• Summarising (Trial balance preparation)

• Analysing (Profit and loss Account) Accounting

• Interpreting

• Communicating (Annual Report)

Book keeping,Accounting &Accountancy

Book keeping:- Book keeping is recording of the financial transactions

of a business in a systematic manner so that the information
relating to business transactions can be availed for decision making.
The objective of book keeping is to prepare original books of
account.

Accounting :-Accounting in addition to book keeping involves-

summarising the classified transactions, analysing the information,
interpreting and communicating the results.

Accountancy:- Accountancy is the entire body of knowledge of

accounting principles and practice for the effective analysis and
interpretation of business information.
Book keeping, Accounting & Accountancy

Ther efor e, Book –keeping is a part of accounting and accounting

is a part ofaccountancy.

Accountancy Accounting Book Keeping

 Accounting Process
Accounting is called as a process because as a
process it has both input and output. Accounting is
also called as an information system because the
output of accounting process are the information
regarding the financial performance and position of
the business.

INPU T ACCOUNTING PROCESS OUTPUT

Economic events and Recording, Communicating

transactions Classifying, Summarising, Information
Measured in Financial Terms Analysing ,Interpreting To Users
Thank You….