Financial Accounting Basic rules and types of cash books .pptx

Accounting concepts and conventions, Scope of accounting, Types of accounting, Nature of accounting standards, objectives of accounting standards, Benefits, Limitations, Principles of Accounting, Types of Accounting, Rules of accounting and Cash books.

1. DR.U.PRIYA Assistant Professor of commerce Faculty of Science and Humanitie , SRMIST, Kattankulathur Financial Accounting

2. Accounting concepts 1. Business entity concept 2. Money measurement concept 3. Cost concept 4. Going concern concept 5. Dual aspect concept 6. Accounting period concept (or) periodicity concept 7. Realization concept (or) Revenue recognition concept 8. Accrual concept

3. Accounting conventions 1. Conventions of conservations 2. Convention of consistency 3. Convention of full disclosure 4. Convention of materiality

4. Scope of accounting Reporting to shareholders Reporting to the Public Reporting to Government Reporting to employees

5. Accounting Transaction Credit sales and cash from purchases Receipt of cash from invoices The purchase of assets Payments on loans payable to a creditor Receiving money from a creditor Cash payments to suppliers

6. Types of Accounting Transactions Internal Transactions External Transactions

7. Types of Accounting Transactions: Exchange-Based Cash Transactions Non-Cash Transactions Credit Transactions

8. Types of Accounting Transactions: Objective-Based Business Transactions Non-Business Transactions Personal Transactions

9. Concept of Accounting Standards Accounting standards are the written statements consisting of rules and guidelines, issued by the accounting institutions, for the preparation of uniform and consistent financial statements and also for other disclosures affecting the different users of accounting information.

10. Nature of Accounting Standards (i) Serve as a guide to the accountants (ii) Act as a dictator (iii) Serve as a service provider (iv) Act as a harmonizer

11. Objectives of Accounting Standards (i) For bringing uniformity in accounting methods (ii) For improving the reliability of the financial statements (iii) Simplify the accounting information (iv) Prevents frauds and manipulations (v) Helps auditors

12. Benefits of Accounting Standards 1] Attains Uniformity in Accounting 2] Improves Reliability of Financial Statements 3] Prevents Frauds and Accounting Manipulations 4] Assists Auditors 5] Comparability 6] Determining Managerial Accountability

13. Limitations of Accounting Standards 1] Difficulty between Choosing Alternatives 2] Restricted Scope

14. Principles of Accounting

15. Types of Accounts

16. Golden Rules of Accounts 1. Personal Account Debit the Receiver Credit the giver 2. Real Account Debit what comes in Credit what goes out 3. Nominal Account Debit all expenses and losses and Credit all incomes and gains

17. Journal A journal may be defined as the book or original or prime entry containing a chronological record of the transactions from which posting is done to the ledger. The transactions are recorded first in the journal in the order in which they occur.

18. Ledger It is a book of final entry . it can be divided into various sub divisions from the view point of convenience and simplicity

19. Trial Balance It is a statement, which shows all debit balances in one column and all credit balances in another. It is not an account. It is prepared for checking the arithmetical accuracy.

20. Final Account Trading and Profit & Loss account - Prepared to find out profit and loss Balance Sheet – Prepared to find out the financial position of the concern.

21. Cash Book Cash transactions are straightaway recorded in the Cash Book and on the basis of such a record, ledger accounts are prepared. Therefore, the Cash Book is a subsidiary book. But the Cash Book itself serves as the cash account and the bank account; the balances are entered in the trial balance directly.

22. Kinds of cash book (i) Simple Cash Book The left-hand side records receipts of cash and the right-hand side the payments (ii) Two-column Cash Book If along with columns for amounts to record cash receipts and cash payments another column is added on each side to record the cash discount allowed or the discount received, or a column on the debit side showing bank receipts and another column on the credit side showing payments through bank. It is a double-column cash book.

23. (iii) Three-column Cash Book A firm normally keeps the bulk of its funds at a bank; money can be deposited and withdrawn at will if it is current account. Probably payments into and out of the bank are more numerous than strict cash transactions. There is only a little difference between cash in hand and money at bank. (iv)PETTY CASH BOOK In a business house a number of small payments, such as for telegrams, taxi fare, cartage, etc., have to be made. If all these payments are recorded in the cash book, it will become unnecessarily heavy. Also, the main cashier will be overburdened with work.