CHAPTER:1

INTRODUCTION OF
ACCONTING
 DEFINATION OF BOOKEEPING AND
ACCOUNTING
• BOOK KEEPING: • ACCOUNTING:
• BOOK KEEPING IS THE • RECORDIING
ART OF CORRECTLY IDENTIFYING
RECORDING IN BOOKS MEASURING AND
OF ACCOUNTS ALL COMMUNICATING OF
THOSE TRANSACTIONS FINANCIAL
IN THE TRANSFER OF INFORMATION
MONEY
 OBJECTIVES OF ACCOUNTING
• Maintance of recordes of business
transactions
• Calculations of profit and loss
• Depiction of financial position
• Providing accounting information to ts users
 FUNCTIONS OF ACCOUNTING
• KEEPING SYSTEMATIC RECORDS:
THIS FUNCTION EMBRACES RECORDING
TRANSACTIONS in journal and subsidiray
books like cash books and sales book etc
posting them to ledger accounts and
ultimately preparing the financial statements
 COMMUNICATING THE RESULTS:

The second main function of accounting is to

communicate the financial facts of enterprise
to the various parties like owners , investors
etc
MEETING THE LEGAL REQUIREMENTS:
Accounting aims at fulfilling the legal
requriments especially of the tax authorities
and regulators of the bussines
PROTECTING THE PROPERTIES OF THE
BUSINESS:
Accounting helps protecting the property of
the business
PLANING AND CONTROLING THE BUSINESS
ACTIVITIES:
Acounting also helps planing future activites
of an enterprise and controlling its day to day
operations
DIFFERENCE BETWEEN BOOKKEEPING
AND ACCOUNTING
BOOK KEEPING
• The object of bookkeeping
is to prepare origianl books
of accounts ,trail balance
and financial accounts and
to maintain systematic
records of financial results
• Bookkeping is a primary
stage
• Bookkeeping work is
performed by junior staff
ACCOUNTING
• The object of accounting is t
recording ,identifying
,measuring ,communicating
of financial information
• Accountig is secondary
stage
• Accounting work is done by
the senior staff
 ADVANTAGES OF ACOUNTING
• Replacement of memorey
• Evidence in court
• Settlement of taxation liability
• Comparative study
• Sale of business
• Facilitate in rasinig loans
• Facilitate control over assets
 LIMITATIONS OF ACCOUNTING
• Records only monetary transactions
• Effect of price level changes not considered
• No realistic information
• Historical in nature
• Window dressing in balance sheet
 DIFFERENCE BETWEEN ACCURAL AND
CASH BASIS OF ACCOUNTING
ACCURAL BASIS
• Under this there may be the
outstanding expenses prepaid
expenses and accured income
and income recived in advance
in balance sheet
• This basis is recognised under
the companies act, 1956
• Enterpries with cash and credit
transactions prefer this basis
of accounting
CASH BASIS
• Under this there may be no
outstanding expenses prepaid
incomes accured income and
income recived in advance in
balance sheet
• This basis is recognised under
the companies act, 1956
• Enterpries with mostly cash
transactions prefer this basis
of accounting
ACCOUNTING CONCEPTS AND
CONVECTIONS
1.CONCEPTS:
 CONCEPTS
BUSINESS ENTITY CONCEPT:
A business and its owner should be
treated separately as far as their
financial transactions are concerned.
MONEYMEASUREMENT:
This concept records only those transactions
which are measured in terms of money
 DUAL ASPECT:
For every credit, a corresponding debit is made. The
recording of a transaction is complete only with this
dual aspect.
MATCINGCONCEPT:
This principle dictates that for every entry of revenue
recorded in a given accounting period, an equal
expense entry has to be recorded for correctly
calculating profit or loss in a given period.
 ACCOUNTINGPERIOD:
Each business chooses a specific time period to
complete a cycle of the accounting process—for
example, monthly, quarterly, or annually—as per a
fiscal or a calendar year.

REALISATION CONCEPT:
According to this concept, profit is recognised only
when it is earned. An advance or fee paid is not
considered a profit until the goods or services have
been delivered to the buyer.
 CONVECTIONS
CONSERVATISM:
is the convention by which, when two values of a
transaction are available, the lower-value transaction
is recorded. By this convention, profit should never
be overestimated, and there should always be a
provision for losses.
MATERIALITY:
means that all material facts should be recorded in
accounting. Accountants should record important
data and leave out insignificant information.
 CONSISTENCY:
It is the convention by which, when two values of a
transaction are available, the lower-value transaction is
recorded. By this convention, profit should never be
overestimated, and there should always be a provision
for losses.
FULL DISCLOSURE:
Entails the revelation of all information, both favourable
and detrimental to a business enterprise, and which are
of material value to creditors and debtors.
JOURNAL

Jouranal entry
 DEFINATION
ENTRY:
• Recording a transaction in the appropriate place of the concerned
book of account is called entry. Entry may be of the following two
types:
JOURNAL ENTRY:
• Recording a transaction in a journal is called journal
entry or journalizing.
LEDGER ENTRY:
• Recording a transaction from journal to the concerned account
in the ledger is called ledger entry. It is also known as ledger
posting.
• A short explanation of each transaction is written under each
entry called naration
 CHARACTERISTICS
• Journal has the following features:
• Journal is the first successful step of the double entry system. A
transaction is recorded first of all in the journal. So, journal is called
the book of original entry.
• A transaction is recorded on the same day it takes place. So, journal
is also called a day book.
• Transactions are recorded chronologically. So, journal is
called chronological book.
• For each transaction the names of the two concerned accounts
indicating which is debited and which is credited, are clearly written
into consecutive lines. This makes ledger - posting easy. That is why
journal is called "assistant to ledger" or "subsidiary book".
• Narration is written below each entry.
• The amount is written in the last two columns - debit amount in
debit column and credit amount in credit column.
 ADVANTAGES
• The following are the advantages of journal:
• Each transaction is recorded as soon as it takes place. So there is no
possibility of any transaction being omitted from the books of
account.
• Since the transactions are kept recorded in journal chronologically
with narration, it can be easily ascertained when and why a
transaction has taken place.
• For each and every transaction which of the two concerned
accounts will be debited and which account credited, are clearly
written in journal. So, there is no possibility of committing any
mistake in writing the ledger.
• Journal shows the complete story of a transaction in one entry.
• Any mistake in ledger can be easily detected with the help of
journal.
 FORMAT
DATE PATICULARS LF DEBIT CREDIT
Account to be debited XXX
.............................Dr.
[a] Account to be
credited XXX
(Narration) [b[
 POINTS TO BE REMEBER
COLUMN 1:
THE date of the transaction on which it takes palce is written
in this column
COLUMN 2:
In this column,the name of the accountant to be debited is
written first and is close to the line marke[a].The word “dr” is
written near to the line marked[b] and in next line account to
be credit is written preceded by the word “to”
COLUMN 3:
Lf means ledger folio which means page of the ledger
 Column 4:
In this column ,the amount to be debited against
the “Dr”.
column 5:
In this column the amount to be credited aganist
the “cr”.
 TRAIL BALANCE:

May be defined as an informal accounting

schedule or statement that lists the ledger
account balances at a point in time
compares the total of debit balance with the
total of credit balance.
 PURPOSES OF TRAIL BALANCE
The trial balance serves two main purposes.
These are as under:
• To check the equality of debits and credits - an
arithmetical or mathematical test of accuracy.
• To provide information for use in preparing
final accounts.
 METHDOS OF PREPARING TRAIL
BALANCE
TOTAL METHOD:
• In this method ,the debit and credit totals of cash
account are shown in the two amount columns
[one for debit and other for credit total]
BALANCE METHOD:
• In this method the difference of each amount is
extract if debit side of account is bigger in
amount than the credit side is put in the debit
column of the trail balance
THANK YOU