INTRODUCTION TO Asst. Prof.

ACCOUNTING Rasika Naik

INTRODUCTION
Meaning of business transactions
Meaning of book-keeping
• Need of book-keeping
• Objectives of book-keeping
Define the term ‘accounting’
Branches of accounting.
BUSINESS TRANSACTION
Business transaction may be defined as:- “An exchange of goods, services, or any
other activity for money or money’s equivalent. It involves exchange of money
also.” In simple words, it includes all events and activities of business which are
financial in nature.
EXAMPLES OF TRANSACTION
 BOOK KEEPING
Book-keeping is mainly concerned with
recording of financial data relating to the
business operations in a significant and orderly
manner. Book-keeping involves the systematic
recording of the financial transactions and the
maintenance of the correct & up-to-date
financial records of the organization.
NEED OF BOOK KEEPING
i) Helps in Assessing the Financial Position
ii) Helps in making business decisions
iii) For Record for Income tax Purposes
iv) Preparing Budgets
V) Tax Assessment
OBJECTIVES OF BOOK
KEEPING
i) To show permanent record of business
ii) To know profit or loss of business
iii) To know the financial position of business
iv) To provide information of total sales and purchases of business
v) To provide information about creditors and debtors of business
vi) To know the quantity and value of stock
ACCOUNTING
Accounting has rightly been termed as the language of the business. The basic
function of a language is to serve as a means of communication.
Accounting is primarily concerned with designing the systems for recording,
classifying and summarizing the data and interpreting them for internal and external
end users.
Definition
“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
financial character and interpreting the results thereof”:
 BRANCHES OF ACCOUNTING

Branches of
Accounting

Financial Cost Management

Accounting Accounting Accounting
BRANCHES OF ACCOUNTING
There are three branches of accounting :
i) Financial Accounting : Financial Accounting is concerned with recording
financial transactions, summarizing and interpreting them and communicating the
results to users. It shows the profit or loss of a particular period & the position of the
business on a particular date.
ii) Cost Accounting :It helps in finding out the cost of production of a product
manufactured or services rendered and helps the management in decision making.
iii) Management Accounting : Management Accounting is concerned with
generating accounting information relating to funds, costs, profits etc. as it enables
the management in decision making.
OBJECTIVES OF ACCOUNTING
To keep systematic records
To ascertain the operational profit or loss
To ascertain the financial position of the business
To facilitate rational decision making
Protect Business Properties
Ascertain Financial Position of the business
Determination of Tax Liability
ADVANTAGES OF
ACCOUNTING
Replaces memory
Meets the information requirements
Assists the management in many other ways
Facilitates a comparative study
Acts as reliable evidence
Tax matters
Ascertaining value of business
LIMITATION OF ACCOUNTING
Financial accounting permits alternative treatment
Financial accounting is influenced by personal judgments
Financial accounting ignores non-monetary information
Financial accounting does not provide timely information
Basis of Book-Keeping Accounting
distinction
i) Objective The objective of Book- Accounting aims at maintaining
keeping is to maintain , business records, calculation of
records of business business income, and depiction of
transaction. financial Position and communication
of business results.

ii) Function The function of Book- The function of Accounting is

keeping to record business recording, classifying, summarizing
transactions. interpreting the business transactions
and communicating the results.
iii) Scope Book –Keeping has limited It has wider scope.
scope.
Basis of Book- Keeping Accounting
distinction
iv) Level of For, it elementary In Accounting, advance
knowledge knowledge of accounting and in depth understanding
required rules is enough. is required
v) Basis of For recording business Book keeping serves the
recording transactions, vouchers basis for accounting
and other supporting information.
documents are prepared
vi) Stage It is primary stage. It is final stage.
vii) Level of Lower level mainly Higher level mainly
person engaged account clerks. qualified accountants.
 BASIC TERMS IN
 ACCOUNTING
Business Transaction
An Economic activity that affects financial position of the business and can be
measured in terms of money e.g., expenses etc.

Business Transaction can be Credit Transactions as well as Cash Transactions.

Cash Transaction- Cash Transaction is the one where cash receipts and payments is
involved in the transaction.

Credit Transaction- Credit Transaction is the one where cash is not involved
immediately but will be paid or received later.
ACCOUNT : ACCOUNT REFERS TO A SUMMARIZED RECORD
OF RELEVANT TRANSACTIONS OF PARTICULAR HEAD AT
ONE PLACE. ALL ACCOUNTS ARE DIVIDED INTO TWO SIDES.
THE LEFT SIDE OF AN ACCOUNT IS CALLED DEBIT SIDE AND
THE RIGHT SIDE OF AN ACCOUNT IS CALLED CREDIT SIDE.
CAPITAL: AMOUNT INVESTED BY THE OWNER IN THE FIRM
IS KNOWN AS CAPITAL. IT MAY BE BROUGHT IN THE FORM
OF CASH OR ASSETS BY THE OWNER.
 Drawings: The money or goods or both withdrawn by owner from business for
personal use, is known as drawings.
 Example: Purchase of car for wife by withdrawing money from business.

ASSETS: ASSETS ARE VALUABLE AND ECONOMIC
RESOURCES OF AN ENTERPRISE USEFUL IN ITS
OPERATIONS
1. Current Assets: Current Assets are those assets which are held for short
period and can be converted into cash within one year. For example: Debtors,
stock etc.
 2. Non-Current Assets: Non-Current Assets are those
assets which are hold for long period and used for normal
business operation. For example: Land, Building, Machinery
etc. They are further classified into:
 (A) TANGIBLE ASSETS: TANGIBLE ASSETS ARE
THOSE ASSETS WHICH HAVE PHYSICAL EXISTENCE
AND CAN BE SEEN AND TOUCHED. FOR EXAMPLE:
FURNITURE, MACHINERY ETC.
(B) INTANGIBLE ASSETS: INTANGIBLE ASSETS ARE
THOSE ASSETS WHICH HAVE NO PHYSICAL
EXISTENCE AND CAN BE FELT BY OPERATION. FOR
EXAMPLE: GOODWILL, PATENT, TRADE MARK ETC.
 Liabilities: Liabilities are obligations or debts that an enterprise has to pay after
some time in the future.
 Liabilities can be classified as:

 1. Current Liabilities: Current Liabilities are obligations or debts that are payable
within a period of one year. For Example: Creditors, Bill Payable etc.
 2. Non-Current Liabilities: Non-Current Liabilities are those obligations or debts
that are payable after a period of one year. Example: Bank Loan, Debentures etc.
EXAMPLES OF LIABILITY
EXPENSES: COSTS INCURRED BY A BUSINESS FOR
EARNING REVENUE ARE KNOWN AS EXPENSES. FOR
EXAMPLE: RENT, WAGES, SALARIES, INTEREST ETC.
Expenditure: Spending money or incurring a liability for acquiring
assets, goods or services is called expenditure.

Types of Expenditure
Revenue Expenditure
Deferred Revenue Expenditure
Capital Expenditure
1. REVENUE EXPENDITURE: It Is The Amount Spent To
Purchase Goods And Services That Are Used During An
Accounting Period Is Called Revenue Expenditure. For
Example: Rent, Interest etc.
2. CAPITAL EXPENDITURE: If Benefit Of Expenditure Is
Received For More Than One Year, It Is Called Capital
Expenditure. Example: Purchase Of Machinery.
3.DEFERRED REVENUE EXPENDITURE: There Are
Certain Expenditures Which Are Revenue In Nature But
Benefit Of Which Is Derived Over Number Of Years. For
Example: Huge Advertisement Expenditure.
PROFIT : The Excess Of Revenues Over Its Related Expenses During
An Accounting Year Is Profit.
Profit = Revenue – Expenses
LOSS: THE EXCESS OF EXPENSES OF A PERIOD OVER ITS RELATED
REVENUES IS TERMED AS LOSS.              
   LOSS = EXPENSES – REVENUE
 Goods: The Products In Which The Business Deal In. The
Items That Are Purchased For The Purpose Of Resale And
.
Not For Use In The Business Are Called Goods
THANK YOU
https://youtu.be/_F3u0ncJWOA
https://youtu.be/
RPkBmOYCGSM