ACCOUNTING FOR MANAGEMENT

Rashmi Tripathi
Lecturer
E-mail:- rashmi.0906@gmail.com
ACCOUNTING- AN INTROUCTION

*Accounting is known as the language of the business.

*Accounting is a process of recording the financial

transactions, summarizing them and communicating the
financial information to its users, i.e. the proprietor,
creditors, investors, government agencies etc.
 NEED OF ACCOUNTING
Accounting makes communication to the parties
interested in business. It is a media of communication of
business information. In business the owner wants to know-
What he owns (Assets)
What he owes (Liabilities)

It is not only in case of business but everyone like to know-

The Sources of funds
Application of funds

And difference between inflow and outflow of funds

DEFINITIONS OF ACCOUNTING

*According to American Institute of Certified Public

Accountants, “ Accounting is the art of recording, classifying and
summarizing in a significant manner and in terms of money;
transactions and events which are, in part at least, of a financial
character, and interpreting the results thereof.”

*According to R.N.Anthony, “ An accounting system is a means

of collecting, summarizing, analyzing and reporting in monetary
terms, information about the business.”
ORIGIN OF ACCOUNTING
 Accounting is based
on Double Entry
System which was
developed in 15th
century in Italy by
Lucas Pacioli.
 Lucas Pacioli is
known as the “father
of accounting.”
NATURE/ FEATURES/ CHARACTERISTICS OF
ACCOUNTING
 Accounting is an art as well as science.
Accounting records only monetary events and

transactions.
Accounting records the transactions by expressing or

converting them in terms of money.

Accounting is a service activity.

Accounting is not useful for business alone but also for

the Not-for-Profit organizations or in fact for any kind of

organization.
 FUNCTIONS OF ACCOUNTING
Identifying and Recording the transactions

Classifying the transactions

Summarization of transactions---Trial Balance, Trading and Profit &

Loss A/C, Balance Sheet

Analysis and Interpretation

Communicating the results to its users---Owners, management,

employees, banks and financial institutions, investors, creditors,
government, researchers, society etc.
BOOK-KEEPING, ACCOUNTING & ACCOUNTANCY
Book- Keeping:- It is only concerned with recording of
transactions in the books of accounts.

Accounting:- It is an art of recording, classifying and

summarizing the financial data and interpreting the results
thereof. Book-keeping is only a part of accounting.

Accountancy:- It refers to a systematic knowledge of accounting

concerning the principles and techniques which are applied in
accounting. It is entire body of theory and practice of accounting.
BRANCHES OF ACCOUNTING
Financial Accounting


Cost Accounting


Management Accounting


Tax Accounting


Auditing


Human Resource Accounting


 ACCOUNTING POLICIES
What Does Accounting Policies Mean?

The specific policies, rules and procedures used by a company to prepare its
financial statements. These include any methods, measurement systems and
procedures for presenting disclosures.

Accounting policies deal specifically with matters such as consolidation of

accounts, depreciation methods, goodwill, inventory pricing, and research and
development cost. Accounting policies must be disclosed in the annual financial
statements.

Accounting policies differ from accounting principles in that the principles are
the rules and the policies are a company's way of adhering to the rules.
 OBJECTIVES OF ACCOUNTING
Maintenance of Business Records

Ascertaining Profit and Loss

Ascertaining Financial Position

Facilitating rational decision-making and Management Control

Providing Accounting Information to Users

 ADVANTAGES OF ACCOUNTING
oFinancial Information about Business
oAssistance to Management

oReplaces Memory

oFacilitates Comparative Study

oFacilitates settlement of Tax Liabilities

oFacilitates Loans

oEvidence in Court

oFacilitates Sale of Business

oAssistance in the Event of Solvency

 LIMITATIONS OF ACCOUNTING

oRecords only Monetary Transactions

oHistorical in Nature

oNo Realistic Information

oEffect of Price Level Changes are not Considered.

oPersonal Bias of Accountant affects the Accounting Statement.

oPermits alternative treatments.

oNo real test of Managerial Performance

oIgnores the Qualitative Elements

oLeads to Window Dressing

 ACCOUNTING PRINCIPLES

 Accounting Concepts  Accounting Conventions

 Business Entity Concept  Convention of Conservatism

 Money Measurement Concept  Convention of Full Disclosure
 Dual Aspect Concept  Convention of Consistency
 Going Concern Concept  Convention of Materiality
 Accounting Period Concept
 Cost Concept
 Revenue Recognition Concept
 Realisation Concept
 TYPES OF ACCOUNTS

Real Accounts
Personal Accounts
Nominal Accounts
GOLDEN RULES OF RECORDING
Real Accounts
Debit what comes in
Credit What goes out
Personal Accounts
Debit the receiver
Credit the giver
Nominal Accounts
Exp. & losses debit
Incomes & Gains Credit
THANK YOU