financial accounting copy

8/4/2019 Financial Accounting Copy

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FINANCIAL

ACCOUNTINGBase for your MBA


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MEANINGOFACCOUNTING

Accounting is an art of correctly recording the day-to-day business transactions. It is a science ofkeeping the business records in a regular and mostsystematic manner so as to know the business

results and position of business with minimumtrouble.

Therefore, it is said to be a statistical procedure forthe collection, classification and summarization offinancial information.

Thus, accounting is an art of recording, classifyingand summarizing financial transactions in asystematic manner and communicating the result tothe interested parties.


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ACCOUNTING

Accounting is defined as an art of

recording, classifying and summarizing

in a significant manner in terms ofmoney, transactions and events of

financial character and interpreting the

results there of. American Institute of

Certified Public Accountanta-1941.


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FEATURESOF ACCOUNTING

Recording transactions in terms of money.

Accounting is an art of Recording.

Classifying business transactions.(cash account)

Summarizing transactions. Historical in nature.


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BRANCHES OF ACCOUNTING

1. Financial Accounting

2. Cost Accounting

3. Management Accounting


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Objective for AccountingO To know the Profit or loss from

operation

O To determine the financial positionof the firm

O To maintain records in systematicmanner.

O To provide information for decisionmaking


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Event

Materials arepurchasedon account.

Criterion Is the financial position (assets, liabilities, orShareholders equity) of the company changed?

An employeeis hired. Dividends are

paid to

Shareholders.

Record/Dont Record

Transactions


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Types of Accounts

PersonalAccount

All human

beings, soletrading,partnershipfirm,company,club,

association,hospital,University,institution,Government

etc..

RealAccount

Cash, Stock,Land &

Building,Furniture &

Fittings,Vehicles,Plant &

machinery,

NominalAccountRent, wages,

salaries,discount ,commissionpaid,depreciation,

fees,transportation, Power,water,electricity,

etc..


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Golden Rules of accounts

PersonalAccount

RealAccount

NominalAccount

Debit the receiverCredit The giver

Debit what comes inCredit what goes out

Debit all expenses & losses

Credit all income & gains


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Assets Liabilitie

s

Capital= +

The Basic Accounting Equation


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Capital

Cash

`150000

1. He invested `150000 as his capital

Assets = Liabilities +

Simple problem on Accounting Equation

Mr. A Commences business on April2010

= + `150000


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4. Purchased Goods worth ` 35000 on credit

Assets = Liabilities + Capital

Cash 25000Bank 55000Machinery 50000Furniture 20000Stock 35000 = 35000(Creditors) + 150000 (As Capital )

financial accounting copy

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