Accounting of Ppt

7/28/2019 Accounting of Ppt

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Accounting


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Introduction

Accounting is the language of business.

It is a standard set of rules for measuring a firms financialperformance

Accounting is required in almost all activities and allorganization which require money.

Assessing a companys financial performance is important for

many groups, including:-The Firms officers (managers and employees)

-Investors (Current and potential shareholder)

-Lenders (banks)

-General public


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Objectives of Accounting

To keeping systematic record

To ascertain the results of the operation

To ascertain the financial position of thebusiness

To portray the liquidity position

To protect business properties

To facilitate rational decision-making

To satisfy the requirements of law


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Importance of Accounting

Making Corporate Decisions

Making Investment Decision


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Functions of Accounting

Record Keeping Function

Managerial Function

Legal Requirement Function


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Advantages of Accounting

It helps in having complete record of business

transaction

It provides useful information form making economic

decisions It facilitates comparatives study of current years

profit, sales, expenses etc.

It provides users with factual information abouttransaction

It helps in complying with certain legal formalities


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Limitations of Accounting

Accounting is historical in nature

Accounting is limited to monetary transactiononly

Accounting statements do not always presentcomparable data

Cost concept is found in accounting. Price

changes are not considered. Accounting statements do not show the impact

of inflation.


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Concepts and Conventions and

Principles of Accounting

Concepts of Accounting

Money Measurement Concept Entity Concept

Going Concern Concept

Cost Concept

Dual Aspect Concept

Accounting Period Concept


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Concepts and Conventions and

Principles of Accounting

Conventions and Principles of Accounting

-Matching Conventions

o Revenue aspecto Expenses aspect

Consistency Convention

Materiality Convention Objectivity Convention


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Process of Accounting

Identification of Business transaction

Recording

Classification Summarization

Interpretation

Communication


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Journal

Ledger

Trail Balance Trading and Profit & Loss A/c

Balance Sheet


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Golden Rules Of Accounting and

Journal
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PERSONAL ACCOUNTThese are accounts of partieswith whom the business is a carried on. Personal accounts may

be:

Accounts of natural or physical persons. Ex: Rama Account,Krishna Account

Accounts of artificial or legal persons. Ex: ABC & Co.

Representative personal account. Ex: O/S Expenses Account,O/S income Account, Prepaid Expenses Account, IncomeReceived in Advance.

Rules of Accounting:

Debit the Receiver

Credit the Giver


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Real Account

These are asset accounts that appear in the Balance Sheet.They are referred to as Real Account (or Permanent

Accounts) as these are owned by businesses and the

balances in these accounts at the end of an accounting

period will be carried over to the next period. Ex: CashAccount, Land Account, Building Account etc.

Rules of Accounting:Debit what comes in

Credit what goes out


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Nominal Account

These are accounts of expenses and losses which

a business incurs and income & gains which a

business earn in the course of business. Ex: Rent

Account, Interest Account.

Rules of Accounting:

Debit all expenses and losses

Credit all income and gains


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Types of Accounting

Financial Accounting

Cost Accounting

Management Accounting

Other Accounting:-

Tax Accounting Social Responsibility Accounting

L d A
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Ledger Accounts

INTRODUCTION

The recorded transactions in the journal are classified andgrouped into by preparation of accounts and the book,which contains all set of accounts, i.e., Personal, Real and

Nominal Accounts. This process is known as Ledger. The

ledger is also known as principal books of account.

FORMAT OF LEDGER ACCOUNTS
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Trial Balance

INTRODUCTION

After posting the accounts in the ledger, a statement isprepared to show the separately the debit and creditbalances. Such a statement is known as Trial Balance.

OBJECTIVE OF PREPARING TRIAL BALANCE

Trial balance helps to check the arithmetical accuracy of the

accounts. The financial statements as prepared based on the trial balance.

The trial balance serves as a summary of what is contained inthe ledger.
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METHODS

Total Method: Under this method, every ledger account is totaled

and that total amount (both credit and debit side) is transferred totrial balance. The difference of totals of each ledger account is the

balance of that particular account. This method is not commonlyused as it cannot help in the preparation of financial statements.

Balance Method: Under this method, every ledger account isbalanced and those balances only are carried forward to the trialbalance. Financial statements are commonly prepared on the basisof this method.

Total and Balance Method: As name shows it is combination ofabove two methods. Under this method, statement of trial balanceshows to balance contains the balance in both ways as explainedin the above two methods.


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From the following ledger balances, prepare a trial

balance of ABC Corporation as on 31st December 2011.


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RULES

Following are the rules to prepare trial balance from Ledger

balances: 1) The following balances must be placed in the debit side of

the trial balance:

Asset Accounts

Expenses Accounts

Losses Drawings

Cash and Bank Balances

2) The following balances must be placed in the credit side ofthe trial balance:

Liabilities Accounts

Income Accounts

Profits

Capital Account


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Balance Sheet

INTRODUCTION

The Balance Sheet may be defined as astatement which sets out all the assets and

liabilities of a firm or an institution as at

certain date. It shows the financial position of

a firm
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FORMAT OF BALANCE SHEET


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CLASSIFICATION OF ASSETS

AND LIABILITIESASSETS

Fixed Assets: The assets those are meant to be used by firm over along period of time and not sold are known as fixed assets.

Current Assets: The assets those are meant to be converted intocash as quickly as possible (ideally within one year) known ascurrent assets.

Tangible Assets: The assets those can be seen physically known as

tangible assets.

Intangible Assets: The assets which cannot be seen physicallyknown as intangible assets


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LIABILTIES

Long Term Liabilities: The liabilities those will be paid afterone year are known as long term liabilities.

Short Term Liabilities: The liabilities those will be paid

within one year are known as short term or current liabilities.

Contingent Liabilities: There are some outstanding claimspending against a firm, which may or may not be payable by

firm are known as contingent liabilities. Note: All assets and expenses have debit balance and All

Liabilities and incomes have credit balance.

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