Accounting For Accounting For ManagersManagers

ObjectivesObjectives

Finance is the back bone of any Finance is the back bone of any organizationorganization

Every business man is interested to know Every business man is interested to know the income and expenditure of the the income and expenditure of the organization as well the financial health organization as well the financial health of the firmof the firm

Here in this course we will learn about Here in this course we will learn about the collection of the financial data the collection of the financial data classifying the data and extract the classifying the data and extract the valuable information from the datavaluable information from the data

The information will be useful for The information will be useful for internal and external parties of the internal and external parties of the organizationorganization

We can take the better decision in We can take the better decision in the light of related informationthe light of related information

Definition of AccountingDefinition of Accounting

ldquoldquoThe art of recording classifying and The art of recording classifying and summarizing in a significant manner and in the summarizing in a significant manner and in the terms of money transactions and events which terms of money transactions and events which are in part at least of financial character and are in part at least of financial character and interpreting the result thereofinterpreting the result thereofrdquordquo

--The American Institute of Certified The American Institute of Certified

Public Accounts-Public Accounts-

ldquoldquoAccounting is the process of identifying Accounting is the process of identifying measuring and communicating economic measuring and communicating economic information to permit informed judgments information to permit informed judgments and decisions by user of the informationand decisions by user of the informationrdquordquo

The American Accounting Association The American Accounting Association

ldquoldquoAccounting is a service activity Its function is Accounting is a service activity Its function is to provide quantitative information primarily to provide quantitative information primarily financial in nature and about economic financial in nature and about economic activities that is intended to be useful in activities that is intended to be useful in making economic decisionrdquomaking economic decisionrdquo

AICPA of USAICPA of US

Main function of a Main function of a managermanager

Decision MakingDecision Making

Financial AccountingndashEvolution

bull Evidence of recording of economic transactions in ancient civilizations

bull Franciscan Monk FraLuca Pacioli(1445-1515) known as the father of modern accounting

bull His Summa de Arithmetica Geometria Proportioniet is considered as the first text on accounting

bull Accountant as a historian ndashkeeps records But with a difference

-gtRespects the facts-gtBring into focus all known

and knowable relevant facts

-gtFinally provide an interpretation of the history proposed

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

ObjectivesObjectives

Finance is the back bone of any Finance is the back bone of any organizationorganization

Every business man is interested to know Every business man is interested to know the income and expenditure of the the income and expenditure of the organization as well the financial health organization as well the financial health of the firmof the firm

Here in this course we will learn about Here in this course we will learn about the collection of the financial data the collection of the financial data classifying the data and extract the classifying the data and extract the valuable information from the datavaluable information from the data

The information will be useful for The information will be useful for internal and external parties of the internal and external parties of the organizationorganization

We can take the better decision in We can take the better decision in the light of related informationthe light of related information

Definition of AccountingDefinition of Accounting

ldquoldquoThe art of recording classifying and The art of recording classifying and summarizing in a significant manner and in the summarizing in a significant manner and in the terms of money transactions and events which terms of money transactions and events which are in part at least of financial character and are in part at least of financial character and interpreting the result thereofinterpreting the result thereofrdquordquo

--The American Institute of Certified The American Institute of Certified

Public Accounts-Public Accounts-

ldquoldquoAccounting is the process of identifying Accounting is the process of identifying measuring and communicating economic measuring and communicating economic information to permit informed judgments information to permit informed judgments and decisions by user of the informationand decisions by user of the informationrdquordquo

The American Accounting Association The American Accounting Association

ldquoldquoAccounting is a service activity Its function is Accounting is a service activity Its function is to provide quantitative information primarily to provide quantitative information primarily financial in nature and about economic financial in nature and about economic activities that is intended to be useful in activities that is intended to be useful in making economic decisionrdquomaking economic decisionrdquo

AICPA of USAICPA of US

Main function of a Main function of a managermanager

Decision MakingDecision Making

Financial AccountingndashEvolution

bull Evidence of recording of economic transactions in ancient civilizations

bull Franciscan Monk FraLuca Pacioli(1445-1515) known as the father of modern accounting

bull His Summa de Arithmetica Geometria Proportioniet is considered as the first text on accounting

bull Accountant as a historian ndashkeeps records But with a difference

-gtRespects the facts-gtBring into focus all known

and knowable relevant facts

-gtFinally provide an interpretation of the history proposed

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

The information will be useful for The information will be useful for internal and external parties of the internal and external parties of the organizationorganization

We can take the better decision in We can take the better decision in the light of related informationthe light of related information

Definition of AccountingDefinition of Accounting

ldquoldquoThe art of recording classifying and The art of recording classifying and summarizing in a significant manner and in the summarizing in a significant manner and in the terms of money transactions and events which terms of money transactions and events which are in part at least of financial character and are in part at least of financial character and interpreting the result thereofinterpreting the result thereofrdquordquo

--The American Institute of Certified The American Institute of Certified

Public Accounts-Public Accounts-

ldquoldquoAccounting is the process of identifying Accounting is the process of identifying measuring and communicating economic measuring and communicating economic information to permit informed judgments information to permit informed judgments and decisions by user of the informationand decisions by user of the informationrdquordquo

The American Accounting Association The American Accounting Association

ldquoldquoAccounting is a service activity Its function is Accounting is a service activity Its function is to provide quantitative information primarily to provide quantitative information primarily financial in nature and about economic financial in nature and about economic activities that is intended to be useful in activities that is intended to be useful in making economic decisionrdquomaking economic decisionrdquo

AICPA of USAICPA of US

Main function of a Main function of a managermanager

Decision MakingDecision Making

Financial AccountingndashEvolution

bull Evidence of recording of economic transactions in ancient civilizations

bull Franciscan Monk FraLuca Pacioli(1445-1515) known as the father of modern accounting

bull His Summa de Arithmetica Geometria Proportioniet is considered as the first text on accounting

bull Accountant as a historian ndashkeeps records But with a difference

-gtRespects the facts-gtBring into focus all known

and knowable relevant facts

-gtFinally provide an interpretation of the history proposed

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

Definition of AccountingDefinition of Accounting

ldquoldquoThe art of recording classifying and The art of recording classifying and summarizing in a significant manner and in the summarizing in a significant manner and in the terms of money transactions and events which terms of money transactions and events which are in part at least of financial character and are in part at least of financial character and interpreting the result thereofinterpreting the result thereofrdquordquo

--The American Institute of Certified The American Institute of Certified

Public Accounts-Public Accounts-

ldquoldquoAccounting is the process of identifying Accounting is the process of identifying measuring and communicating economic measuring and communicating economic information to permit informed judgments information to permit informed judgments and decisions by user of the informationand decisions by user of the informationrdquordquo

The American Accounting Association The American Accounting Association

ldquoldquoAccounting is a service activity Its function is Accounting is a service activity Its function is to provide quantitative information primarily to provide quantitative information primarily financial in nature and about economic financial in nature and about economic activities that is intended to be useful in activities that is intended to be useful in making economic decisionrdquomaking economic decisionrdquo

AICPA of USAICPA of US

Main function of a Main function of a managermanager

Decision MakingDecision Making

Financial AccountingndashEvolution

bull Evidence of recording of economic transactions in ancient civilizations

bull Franciscan Monk FraLuca Pacioli(1445-1515) known as the father of modern accounting

bull His Summa de Arithmetica Geometria Proportioniet is considered as the first text on accounting

bull Accountant as a historian ndashkeeps records But with a difference

-gtRespects the facts-gtBring into focus all known

and knowable relevant facts

-gtFinally provide an interpretation of the history proposed

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

ldquoldquoAccounting is the process of identifying Accounting is the process of identifying measuring and communicating economic measuring and communicating economic information to permit informed judgments information to permit informed judgments and decisions by user of the informationand decisions by user of the informationrdquordquo

The American Accounting Association The American Accounting Association

ldquoldquoAccounting is a service activity Its function is Accounting is a service activity Its function is to provide quantitative information primarily to provide quantitative information primarily financial in nature and about economic financial in nature and about economic activities that is intended to be useful in activities that is intended to be useful in making economic decisionrdquomaking economic decisionrdquo

AICPA of USAICPA of US

Main function of a Main function of a managermanager

Decision MakingDecision Making

Financial AccountingndashEvolution

bull Evidence of recording of economic transactions in ancient civilizations

bull Franciscan Monk FraLuca Pacioli(1445-1515) known as the father of modern accounting

bull His Summa de Arithmetica Geometria Proportioniet is considered as the first text on accounting

bull Accountant as a historian ndashkeeps records But with a difference

-gtRespects the facts-gtBring into focus all known

and knowable relevant facts

-gtFinally provide an interpretation of the history proposed

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

ldquoldquoAccounting is a service activity Its function is Accounting is a service activity Its function is to provide quantitative information primarily to provide quantitative information primarily financial in nature and about economic financial in nature and about economic activities that is intended to be useful in activities that is intended to be useful in making economic decisionrdquomaking economic decisionrdquo

AICPA of USAICPA of US

Main function of a Main function of a managermanager

Decision MakingDecision Making

Financial AccountingndashEvolution

bull Evidence of recording of economic transactions in ancient civilizations

bull Franciscan Monk FraLuca Pacioli(1445-1515) known as the father of modern accounting

bull His Summa de Arithmetica Geometria Proportioniet is considered as the first text on accounting

bull Accountant as a historian ndashkeeps records But with a difference

-gtRespects the facts-gtBring into focus all known

and knowable relevant facts

-gtFinally provide an interpretation of the history proposed

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

Main function of a Main function of a managermanager

Decision MakingDecision Making

Financial AccountingndashEvolution

bull Evidence of recording of economic transactions in ancient civilizations

bull Franciscan Monk FraLuca Pacioli(1445-1515) known as the father of modern accounting

bull His Summa de Arithmetica Geometria Proportioniet is considered as the first text on accounting

bull Accountant as a historian ndashkeeps records But with a difference

-gtRespects the facts-gtBring into focus all known

and knowable relevant facts

-gtFinally provide an interpretation of the history proposed

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

Decision MakingDecision Making

Financial AccountingndashEvolution

bull Evidence of recording of economic transactions in ancient civilizations

bull Franciscan Monk FraLuca Pacioli(1445-1515) known as the father of modern accounting

bull His Summa de Arithmetica Geometria Proportioniet is considered as the first text on accounting

bull Accountant as a historian ndashkeeps records But with a difference

-gtRespects the facts-gtBring into focus all known

and knowable relevant facts

-gtFinally provide an interpretation of the history proposed

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

Financial AccountingndashEvolution

bull Evidence of recording of economic transactions in ancient civilizations

bull Franciscan Monk FraLuca Pacioli(1445-1515) known as the father of modern accounting

bull His Summa de Arithmetica Geometria Proportioniet is considered as the first text on accounting

bull Accountant as a historian ndashkeeps records But with a difference

-gtRespects the facts-gtBring into focus all known

and knowable relevant facts

-gtFinally provide an interpretation of the history proposed

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

bull Accountant as a historian ndashkeeps records But with a difference

-gtRespects the facts-gtBring into focus all known

and knowable relevant facts

-gtFinally provide an interpretation of the history proposed

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

bull Product of economic environmentbull Gradually evolved as a profession with the

development of economic activitybull especially hellipIndustrial Revolutionbull Scope and nature of accounting is closely

associated with the gradual changes in the field of organization and management of organizations

bull In the modern IT era accounting is getting integrated into software packages and constantly adapting itself

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

bull The Need For Accounting The Need For Accounting

Let us suppose you have a small book store You have sold Let us suppose you have a small book store You have sold some books to your customer say X who has given you the some books to your customer say X who has given you the full amount in return This is a transaction that took place full amount in return This is a transaction that took place between you and X Now suppose you deposit all the money between you and X Now suppose you deposit all the money received from X in the bank This is another transaction received from X in the bank This is another transaction between you and the bank You can very easily remember between you and the bank You can very easily remember these transactions and need not write them anywhere these transactions and need not write them anywhere But what if there were a large number of customers say 100 But what if there were a large number of customers say 100 or even more and most of them have not given you the full or even more and most of them have not given you the full amount due This is what really happens in a business In amount due This is what really happens in a business In such a case you will have to memorize all the details such a case you will have to memorize all the details regarding each and every customer ie details of the amount regarding each and every customer ie details of the amount received from them the amount due from them etc which is received from them the amount due from them etc which is nearly impossible for anybody nearly impossible for anybody So what you can do is to prepare an account of each and every So what you can do is to prepare an account of each and every customer in order to record the details of the transactions with customer in order to record the details of the transactions with them This means you have to prepare a large number of them This means you have to prepare a large number of accounts ie one account for each customer accounts ie one account for each customer

bull For example suppose you have sold books worth Rs100 to X For example suppose you have sold books worth Rs100 to X and books worth Rs1000 to Y X has given you only Rs50 and and books worth Rs1000 to Y X has given you only Rs50 and Y has given you Rs750 To remember the balance due from X Y has given you Rs750 To remember the balance due from X and Y you can record these transactions by preparing Xs and Y you can record these transactions by preparing Xs Account Ys Account as well as your own Cash Account Account Ys Account as well as your own Cash Account

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

Objectives of Accounting

bull Income determinationFor rational economic decision-making

bull Financial reportingSummarized as all those things of

value owned by the entity and all the claims against these possessions

bull DisclosureAll the relevant amp pertinent

information is supplied to the information users

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

Purposes Of Accounting Information

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

Accounting amp Management Control

bull Control means the process of keeping the organization in course1048708This involves measurement through the control system1048708The controller (accountant) and managers obtain information which enables them to diagnose the situation

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

Accounting Information users

bull Stakeholders are the ones who have an interest in what happens as a result of the entities activities

bull Stakeholders classified as 1048708Internal users viz managers 1048708External users viz creditors and equity investors government society

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

Parties Interested in Parties Interested in CompaniesCompanies

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

Types of AccountsTypes of Accounts

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability

limited liability

bull The defining feature of a corporation is its legal The defining feature of a corporation is its legal independence from the people who create it If independence from the people who create it If a corporation fails shareholders normally only a corporation fails shareholders normally only stand to lose their investment (and possibly in stand to lose their investment (and possibly in the unusual case where the shares are not fully the unusual case where the shares are not fully paid up any amount outstanding on them - and paid up any amount outstanding on them - and not even that in the case of a not even that in the case of a No liability company) and employees will lose ) and employees will lose their jobs but neither will be further liable for their jobs but neither will be further liable for debts that remain owing to the corporations debts that remain owing to the corporations creditors unless they have separately varied creditors unless they have separately varied this eg with personal guarantees This rule is this eg with personal guarantees This rule is called called limited liability