Basics of Accounting, Accounting Concepts and Conventions

Basics of Accounting, Accounting Concepts and Conventions

1. ACCOUNTANCY UNIT 1

2. NEED FOR ACCOUNTING: A business man invests capital with the objective of making profit and thereby increasing his resources. He may involve in acquiring more properties and assets like building, machinery to generate revenues. Also he may incur various expenses for the daily running if the business and sale his goods. Effective running of the business requires control over expenses to reduce the cost of operation and to make the business profitable. Accounting is essential if you want to be able to grow your business in a way that can be measured and predicted. Having a system of tracking your business' assets, liabilities, and income lets you to make smart, informed business decisions based on the past performance and present financial health of your company.

3. DEFINITION According to the American Institute of Certified Public Accountants (AICPA), “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money transactions and events which are of financial character and interpreting the results thereof.”

4. BOOK KEEPING Book keeping is concerned with the recording of business transactions in a systematic manner. This work is mechanical and repetitive in nature. It does not need specialised skill and knowledge. It is usually entrusted to the junior level employees of the accounts department who are known as Book keepers.

5. OBJECTIVES OF ACCOUNTING Maintenance of accounting records Ascertainment of Profit or loss Depiction of financial position Providing Information

6. SCOPE OF ACCOUNTING Accounting is important to- Companies & Corporates Government Institutions Non Government Organizations Individual for personal life.

7. ACCOUNTING CONCEPTS Business Entity Concept Going Concern Concept Money Measurement Concept Dual Aspect Concept accounting period

8. ACCOUNTING CONCEPTS Realisation concept Cost concept Accrual concept Matching concept Objective evidence concept

9. ACCOUNTING CONVENTIONS Convention of full disclosure Convention of conservatism Convention of materiality Convention of consistency