You are on page 1of 15

Accounting

Thesystematicrecording,

reporting,

andanalysisoffinancial transactionsof abusiness.


Thepersoninchargeof
anaccountant,

and

typicallyrequiredto
regulations,
Accounting

accounting

such

follow
as

Principles.

is

known

as

thisindividualis
asetofrules

theGenerally
Accounting

and

Accepted
allows

acompanyto analyze thefinancial performanceof


the business, and look atstatisticssuch asnet profit.
02/25/15

Rajinder kaur, Dept. of


Management Studies (MIMIT)

Accounting defined

02/25/15

The
American
Accounting
Association define accounting
as follows:
The process of identifying
measuring,
and
communicating
economic
information
to
permit
informed
judgments
and
decisions by users of the
Rajinder kaur, Dept. of
Management Studies (MIMIT)

Accounting Systems
Objectives of an accounting system:
To process the information efficiently-at low
cost
To obtain reports quickly
To ensure a high degree of accuracy
To minimize the possibility of the theft and
02/25/15

fraud

Rajinder kaur, Dept. of


Management Studies (MIMIT)

Accounting Cycle
1. Analyze transaction
2. Journalize original
entries
3. Post journal entries to
ledger
4. Identify, journalize and
post adjusting entries
5. Journalize and post
closing entries

02/25/15

6. Prepare financial
Rajinder kaur, Dept. of
statements

Management Studies (MIMIT)

Branches of Accounting
Financial

accounting-

information

gathered is intended both for internal


(e.g. managers) and external (e.g.
banks

and

government
advisers,

other

creditors,

agencies,

investment

etc.)

parties.

Information

recording is subject to certain ground


rules

internationally

Generally
02/25/15

Accepted

Rajinder kaur, Dept. of


Management Studies (MIMIT)

known

as

Accounting
5

Management Accounting
Management accounting- information gathered is
primarily for the use of internal management. Such
information is used for management planning and
control.
Management accounting or managerial accounting is
concerned with the provisions and use of accounting
information to managers within organizations, to provide
them

with

the

basis to

make

informed

business

decisions that will allow them to be better equipped in


their management and control functions
02/25/15

Rajinder kaur, Dept. of


Management Studies (MIMIT)

Cost Accounting
Cost Accounting-- a branch of accounting
dealing

with

allocation,

the

classification,

summarization

and

recording,

reporting

of

current and prospective costs and analyzing


their behaviors. Cost accounting is frequently
used to facilitate internal decision making and
provides tools with which management can
appraise performance and control costs of
doing business
02/25/15

Rajinder kaur, Dept. of


Management Studies (MIMIT)

The need of information


Information
Nonquantitative
information

Quantitative
information

Operating
informatio
n

02/25/15

Accountin
g
informatio
n
Financial
Accounti
ng

Rajinder kaur, Dept. of


Management Studies (MIMIT)

Non-accounting
information
Manageme
nt
Accountin
g
8

Operating Information
Constitutes the largest quantity of
accounting information; it provides the
basic data for both managerial and
financial accounting.

Financial Information

02/25/15

Information intended for managers and


by
external
parties,
including
shareholders, banks and other creditors,
government
agencies,
investment
advisers and the
general public.
Rajinder kaur, Dept. of
Management Studies (MIMIT)

Managerial Information
Used internally for planning,
implementation and control. This
accounting information is prepared to
aid mangers
THREE MANAGEMENT FUNCTION

1.Planning
2.Implementation
3.Control
02/25/15

Rajinder kaur, Dept. of


Management Studies (MIMIT)

10

Users of Information
Owners
Management
Creditors
Government
Prospective owners and
prospective creditors
Employees
Public

02/25/15

Rajinder kaur, Dept. of


Management Studies (MIMIT)

11

BASIC ACCOUNTING CONCEPTS

Money Measurement- An accounting record is


made only of information that can be expressed in
monetary terms
The Entity Concept- The owners of the business
are considered separate and distinct from the
business itself. Hence, accounts are kept for the
entity as distinguished from the persons associated
with the entity
The Going-Concern Concepts- unless there is
good evidence to the contrary, it is assumed that the
business will operate indefinitely
The Cost Concept- The economic resources of an
entity are called assets. An asset is ordinarily
entered in the accounting records at the price paid to
acquire it- that is, at
its cost
Rajinder kaur, Dept. of

02/25/15

Management Studies (MIMIT)

12

BASIC ACCOUNTING CONCEPTS

The Dual-Aspect Concept- Assets= Liabilities+


Owners Equity
Accounting
PeriodAccounting
measures
activities for a special time interval, usually one
accounting year
Conservatism- revenues are recognized only when
they are reasonably certain, whereas Expenses are
recognized as soon as they are reasonably possible
Realization- Revenues are usually recognized in
the period in which goods were delivered to
customers or in which services were rendered. The
amount recognized is the amount that customers
are certain to pay

02/25/15

Rajinder kaur, Dept. of


Management Studies (MIMIT)

13

BASIC ACCOUNTING CONCEPTS

Matching- when a given event affects both


revenues and expenses, the effect on each
should be recognized in the same accounting
period.
Consistency- Once an entity has decided on a
certain accounting method, it should use the
same method in all subsequent events of the
same character unless it has sound reasons to
change methods.
Materialityinsignificant
events
may
be
disregarded, but there must be full disclosure of
all important information.

02/25/15

Rajinder kaur, Dept. of


Management Studies (MIMIT)

14

Mnemonic (memory aid)


Dictionary

Sundry
(adj.)consisting of a haphazard assortment
of different kinds
Synonyms:
Assorted,miscellaneous,mixed,motley
EXAMPLE: It is Sunday you can do various
things !!
EXAMPLE: SUN can DRY different kinds of
Rajinder
Dept. of
wetkaur,stuff
02/25/15
15
Management Studies (MIMIT)