Preparatory 1

BASICS OF ACCOUNTING
Preparatory Session Thursday, March 11, 2021
 Assume that your parents are going out of town for a

month to attain some personal engagement.
 For the whole period you will be the in-charge of your
house.
 Your parents handed over you cash Rs.10,000 for
meeting expenses of that month.
 They also instructed you to keep proper record without
any mistake and error.
2
 After a month when your parents will be back

to home.
 Which question they will ask you first?
Most probably
 Show how did you spend that money which
was given to you?
 In short they want to see or check the book in
which you have recorded all the your
transactions for that month.
3
 While inspecting your book in which you have

recorded all those transactions of a month, they
observed that you have made some mistake and
not recorded entire transactions for the period.
 What they will do?
Either Scold you
OR
Will tell you to do the work properly in future.
4
NOW WHAT WILL HAPPEN? IF….

 Instead of your parents if your boss has given you
the charge of his business for a month and you do
the same mistake what you did at home.
 Then ?????????????
 Don’t worry nothing will happen…. Only …
5
You are Clean Bold ! And Out !!!
6
 In case, if you are a boss will you take same

action what your boss has taken a moment
before..
 I think, YES
7
MORAL OF THE STORY

 Matters related money are very important and
one has to understand and treat it very carefully.
 And hence one thing should always be
remembered by everyone that, if you don’t
understand the accounting (which is primarily
related with money matters), someone else will
make money from your pocket.
8
 So let’s first understand the accounting

and then we will do some business.
→ Now we are not here to become an
accountant,
→ We are here to become a manager or an
entrepreneur.
→ Rather a smart manager or entrepreneur,
who can check the moves of his
accountants.
9
So let’s start
studying
Accounting
10
TRANSACTION
 Transaction is an exchange of money or money’s
worth between two parties.
At Home: At Business:
Purchase of food grains, Purchase of Raw Material,
Payment of wages to made Payment of Wages and Salary
servant to employees.
Payment of electricity Payment of Electricity bill,
Receipt of salary Sales proceed.
11
BOOK KEEPING
 Art of recording business transaction in
the books of accounts.
 This is a continuous activity.
 It is an art because the record is kept in

such manner that it will facilitate further
processing and report of financial
information to all stakeholders
12
IMPORTANT ACCOUNTING GLOSSARY
13
CAPITAL
Total amount invested in business by

businessman.
14
DRAWINGS
 Total cash/ goods or any other assets withdrawn

by businessman from the business for his
personal expenses
15
ASSET:
 It is a resource own by the business with the

purpose of using it for generating future profit.
16
LIABILITY
 It represent amount of money that the business

owes to other parties.
17
GOODS
 Commodities in which a business deals.
18
EXPENSES
 The amount spend by business to earn revenue

(income) are termed as expenses.
19
TYPES OF EXPENSES
 Revenue Expenses: Expenses which are
recurring (repetitive) in nature.
20
TYPES OF EXPENSES
 Capital Expenses: Expenses which are of
permanent or long term nature. These are not
incurred for long time once it is incurred.
21
INCOME
 The total amount of money received by the
company from its business activity
22
TYPES OF INCOME
 Revenue Income: Income which is recurring in
nature
23
TYPES OF INCOME
 Capital Income: Income which is incurred once
in its life time and not of recurring in nature.
24
LOSS
 Excess of expenditure over income
25
PROFIT
 Excess of income over expenditure
26
COST
 It is an expense for creation of goods and

services.
27
DEBTORS
 The money receivable from customers against
supply of goods is called debtor.
28
CREDITORS
 The money payable to the supplier against

purchase of goods is called creditor
29
WHY TO MAINTAIN BOOKS OF ACCOUNTS
Objectives
Primary objective: Secondary Objects: Ancillary objectives:
A. To know Profit & A. To know creditors A. To review the progress
Loss B. To know debtors B. To prevents errors and
B. To know financial frauds
C. To know capital
position
invested C. To keep a check on
C. To have a systematic D. To understand cash property
record and stocks. D. To provide valuable
information for decision
making
30

Preparatory 1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Preparatory 1

Uploaded by

Copyright:

Available Formats

BASICS OF ACCOUNTING

Preparatory Session Thursday, March 11, 2021

 Assume that your parents are going out of town for a

 After a month when your parents will be back

 While inspecting your book in which you have

Either Scold you

NOW WHAT WILL HAPPEN? IF….

 Don’t worry nothing will happen…. Only …

You are Clean Bold ! And Out !!!

 In case, if you are a boss will you take same

MORAL OF THE STORY

 So let’s first understand the accounting

 This is a continuous activity.

 It is an art because the record is kept in

IMPORTANT ACCOUNTING GLOSSARY

Total amount invested in business by

 Total cash/ goods or any other assets withdrawn

 It is a resource own by the business with the

 It represent amount of money that the business

 The amount spend by business to earn revenue

 It is an expense for creation of goods and

 The money payable to the supplier against

WHY TO MAINTAIN BOOKS OF ACCOUNTS

You might also like