Accounting basics for class 12 mathemathics pptx

Accounting basics concepts

1. Business Accounting Module 1 : Introduction to Accounting

2. Content Accounting : Definition and Meaning Functions of Accounting

3. Definition Accounting is an art of recording, classifying, 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 result thereof. Normal treated as language of the business

4. Business – Business transaction – Recording –Classifying –Summarizing – Analysis and Interpretation

5. Functions of Accounting Recording Classifying Summarizing Deals with financial transaction Analysis and Interpretation Communicates

6. Recording This is the basic function of accounting. It is concerned with the recording of business transactions of financial character. Recording is done in the book called “Journal” This process is called Journalizing

7. Classifying Classification is the systematic analysis of the recorded data with a view to bring together items of similar nature at one place. Classification is done in the book called “Ledger” This process is called Posting

8. Summarizing This is the presentation of the classified data in a way which is understandable and useful to the internal and external users This is done with the help of Trial balance and Balance sheet

9. Deals with financial transaction It records only those transaction and events, in terms of money, which are of a financial character.

10. Analysis and Interpretation The recorded financial data are analyzed and interpreted in such a way that the end users can make a meaningful judgement about the financial position and operational results of the business.

11. Communicate Communicate the result to the end users using graphs ,diagrams , ratios etc….

12. Objectives of Accounting To maintain records of business Calculation of profit or loss Depiction of financial position To make information's available to various groups or users

13. Accounting is done to keep a systematic record of financial transactions Reason for maintaining records: Satisfy the requirements of law Provide strong evidence before the court of law Detection and prevention of errors Decision making Performance evaluation To maintain records of business

14. Calculation of profit or loss Revenue > Expense = PROFIT Revenue <Expense = LOSS This is the most important objective of accounting This is done through preparation of Profit and Loss Account (P/L Account)

15. Depiction of financial position The businessman is always interested in knowing his financial position that is : Where he stands ,what he owes and what he owns. This objective is served by Balance Sheet or Position statement

16. To make information's available Interested parties: Owners Creditors Bankers Government Employees

17. TYPES OF ACCOUNTING Financial Accounting Management Accounting Cost Accounting

18. Financial Accounting This is the original form of accounting The objective of Financial accounting is to find out results of the operation and financial position Records only monetary transactions

19. Management Accounting Management accounting is concerned with accounting information that is useful to management. It draws all the financial information from financial accounting.

20. Cost Accounting It is formal mechanism by which costs of product or service are ascertained and controlled

21. Accounting and Book-keeping Book keeping is mainly concerned with the actual recording of business transactions in a significant and orderly manner. Accounting is primarily concerned with laying down the principles and designing the systems for recording, classifying and summarizing the recorded data and interpret them for internal and external users

22. Basis Accounting Book-keeping Definition Accounting is primarily concerned with laying down the principles and designing the systems for recording, classifying and summarizing the recorded data and interpret them for internal and external users Book keeping is mainly concerned with the actual recording of business transactions in a significant and orderly manner. Decision making Depending on the data provided by the accountants, the management can take critical business decisions Management can't take a decision based on the data provided by bookkeeping Preparation of Financial Statements Financial statements are prepared during the accounting process Financial statements are not prepared as a part of this process

23. Basis Accounting Book-keeping Performance Accounting work is usually carried out by qualified accountants Usually performed by accounts clerks Skills Required Accounting requires special skills due to its analytical and complex nature Bookkeeping doesn't require any special skill sets. It is generally clerical and repetitive in nature Objectives The objective of accounting is to find the financial situation and further communicate the information to the relevant authorities The objective of bookkeeping is to keep the records of all financial transactions proper and systematic

24. Advantage of Accounting It serves as a history of records It facilitate the preparation of financial statements which depicts the results of operation and financial position of business It supplies information to all those who are interested in the business It helps in decision making Facilitates comparative study of the performance of the business over different periods of time and with other firms It provides evidence in case of disputes

25. Limitations of Accounting Accounting is historical in nature It provides information about the concern as a whole .It fails to provide information product-wise, activity-wise etc… Qualitative information's which are also important to business are ignored. Use of different accounting methods reduces the reliability of accounts Accounting records show only actual cost figure. The real value may vary from time to time. Thus recorded costs cannot provide correct information's