INTRODUCTION TO ACCOUNTING - BASIC CONCEPTS

Introduction to Accounting

1. Introduction of Accounting Dr.R.Ayswarya Ass.prof in B&I SRCAS

2. BOOKKEEPING The recording of financial transactions, and is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization/corporation. SINGLE ENTRY BOOK KEEPING DOUBLE ENTRY BOOK KEEPING

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

4. OBJECTIVES OF ACCOUNTING To keep a systematic record of financial transactions. To determine the results of the operation/Production. To interpret the liquidity position. To facilitate business decision-making. To comply with requirements of law.

5. FUNCTIONS OF ACCOUNTING Systematic record of business transactions Protecting the property of the business Communicating results to interested parties Compliance with legal requirements Stewardship Assistance to Management Fixing Responsibility

6. Meaning of Accounting Standards Accounting standards are written policy documents issued by the government or professional institutes or other regulatory body coverings various aspects of recognition and disclosure of accounting transactions in the financial statements

7. The significance of accounting standards 1 . Enhance comparability : By establishing uniform guidelines, accounting standards enable users to compare financial information across different companies, industries, and countries, facilitating informed decision-making. 2 . Improve transparency: Standards promote clear and concise financial reporting, ensuring that relevant information is disclosed, reducing the chances of misrepresentation or fraud. 3 . Foster accountability : By providing consistent rules for financial reporting, accounting standards hold companies accountable for their financial performance, helping stakeholders assess their stewardship and evaluate their solvency and profitability. 4. Facilitate global business operations : The existence of international accounting standards, such as the International Financial Reporting Standards (IFRS), facilitates cross-border transactions, investment decisions, and harmonization of financial reporting practices worldwide.

8. ACCOUNTING STANDARDS Accounting Standard 1 (AS 1): Disclosure of Accounting Policies - AS 1 requires entities to disclose their significant accounting policies in the financial statements. This standard ensures transparency and consistency in the presentation and disclosure of accounting policies used by an organization. Accounting Standard 2 (AS 2): Valuation of Inventories - AS 2 provides guidance on the valuation and measurement of inventories. It outlines the cost formulas, such as the weighted average cost and the FIFO (first-in, first-out) method, and emphasizes the need to recognize inventory at the lower of cost or net realizable value.

9. Accounting Standard 6 (AS 6): Depreciation Accounting - AS 6 deals with the accounting treatment of depreciation, including the determination of the depreciable amount, depreciation methods, and the useful life of assets. It provides guidelines on recognizing, measuring, and disclosing depreciation in financial statements. 4. Accounting Standard 10 (AS 10): Property, Plant and Equipment - AS 10 lays down the principles for the recognition, measurement, and disclosure of property, plant, and equipment. It provides guidance on initial recognition, subsequent measurement, depreciation, revaluation, and retirement or disposal of such assets

10. Accounting Standard 24 (AS 24): Related Party Disclosures - AS 24 requires entities to disclose any transactions, outstanding balances, and relationships with related parties that may significantly impact the financial statements. It aims to ensure transparency and prevent any potential conflicts of interest. Accounting Standard 26 (AS 26): Intangible Assets - AS 26 provides guidance on recognizing, measuring, and disclosing intangible assets. It outlines the criteria for recognition, including the identification of separable intangible assets, measurement methods, and disclosure requirements for intangible assets in the financial statements.