Basics of Accounting Session 1 for Beginners

Basics of Accounting, Session 1 for Beginners

1. B asics of A c coun t ing

2. What is a B usiness …. Meaning of Business Literary meaning Technical meaning

3. Meaning of Business Literary meaning In literary sense, the term business means being busy. Technical meaning Technically it means all commercial and industrial activities that provide goods and services to the people for the sake of profit making 3

4. OBJECTIVES OF BUSINESS OBJECTIVES Econ o mics O bjectives Social O bjectives Human O bjectiv e s

5. Economics objectives Earning the P rofit The main purpose of business is to earn profit . Creation of M arket Every businessman creates is own consumer for its products, the more customer created the wider will market. Innovation If a business want to stay in the market the best possible use of resources and continually make innovation, bring new product to the market .

6. Social O bjectives More Employment opportunities A business provides employment to the people, its increase the standard of living of peoples Avoidances of anti-social practices Its not fair that a businessman produce doing anti-social actives such as hoarding, smuggling, overcharging ect. Supply of quality product The social responsibility of business is product good quality products to the market .

7. Human Objectives Utilizing human power in a potential way A healthy condition must be provide to the workers Job satisfaction of workers

8. Major Resources of Business MEN MONEY MATERIAL MACHINARY METHODS MARKET

9. ACCOUNTING Accounting is a Language which Say about the business Financial Status… It records all the business financial transaction, summarize the accounting information and communicate it to interested parties.

10. DEFINITION OF ACCOUNTING American Accounting Association Define accounting as “The process of identifying, measuring and communicating information to permit judgment and decision by users of accounts”. It is a tool for recording, reporting and evaluating, in monetary terms, the transactions, events and situations that effect an enterprise.

11. Accounting function consists of following five type of activities: Collection and recording of data. Classification of data Processing of data including calculating and summarizing Maintenance or storage of results Reporting of results

12. Users of Accounting Information

13. ACCOUNTING SYSTEM

14. Single entry system is an incomplete form of recording financial transactions. It is the system , which does not record two aspects or accounts of all the financial transactions. It is the system , which has no fixed set of rules to record the financial transactions of the business. SINGLE ENTRY SYSTEM

15. DOUBLE ENTRY SYSTEM The double entry system of accounting means every entry to an account requires a corresponding and opposite entry to a different account.

16. Relationship Between

17. Book- Keeping Book keeping is the science & art of correctly recording in the books of accounts all those business transaction that results in the transfer of money or money worth

18. Accounting Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business, and it also refers to the process of summarizing, analyzing and reporting these transactions to oversight agencies and tax collection entities .

19. It refers to a systematic knowledge.it explains why to do & how to do of various aspects of accounting. It tells why to prepare the books of accounts and summarizing the accounting information. Accountancy

20. What Are the Objectives of Accounting ?

21. To keep systematic records : To ascertain the financial position of business : To Provide Information to the Users : In the absence of accounting there would have been terrific burden on human memory which in most cases would have been impossible to bear. The profit and loss account gives the amount of profit or loss made by the business during a particular period? The officers and staff of an enterprise need useful and timely information for making different types of business decisions. ----------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------

22. Some other Objectives To know the exact reasons leading to net profit or net loss. To ascertain the financial position of the business from year to year. To prevent and detect errors and frauds.

23. Accounting is an art as well as a science . Recording of Financial transactions only Recording in Terms of Money Communicating Classifying Communicating A rt Science Characteristics of Accounting

24. Importa nce Helpful in Planning Helpful in Decision Making Enables C o mpa r a t iv e Study Helpful in Raising Loss Helpful in Preventing & Detecting Errors & frauds

25. Functions of Accounting Functions Maintaining Complete & Systematic Records Communicating the Financial Results to various Parties Protecting the Assets of Business Trusteeship Compliance of Legal needs

26. TRANSACTIONS

27. Traditional Classification of Accounts

28. PERSONAL ACCOUNT The account which relate to person, artificial person or representative. Example: An Individuals, Group, Firm . ( Mr.Babu , Babu & Co, etc,.)

29. REAL ACCOUNT Accounting relating to properties and assets which are owned by the business concern Tangible & Intangible

30. NOMINAL ACCOUNT These account do not have any existence , form (or) shape. They relate to income and expenses or gain and loss of business concern.

31. GOLD RULES OF ACCOUNTING

32. BRANCHES OF ACCOUNTING

33. Basic Accounting Terms Business Transaction Voucher Entry Assets Liabilities Capital Drawings Purchases Sales Stock Trade Debtors Trade Creditors Receivables Payable Expenditure Income Profit Loss

34. G generally A accepted A accounting P principles G.A.A.P

35. What is G.A.A.P? Generally Accepted Accounting Principles are the set of rules and regulations through firms and corporations prepare and present their assets and liabilities and all incomes and expenses in financial statements.

36. Why these principles are necessary to follow? These principles are necessary to follow because it helps a lot in making long term decisions, financial decisions and maintaining records. It makes easy to compare financial statements of different companies.

37. Third Party Satisfaction Third parties like creditors, banks, share holders etc must have to rely on reported financial statements so it must be free of errors, inconsistency and bias .It could only be possible by following G.A.A.P.