its a introduction of accounts and its accounting principals and conventions with so many examples its carrying so many catchy images for the sake of student interest
2. Accounting can be defined as the process
of identifying, measuring, recording and
communicating the economic events of an
organization to the interested users of the
information.
3. RECORDING OF FINANCIAL TRANSACTIONS
ONLY.
RECORDING(CASH BOOK,SALES BOOK ETC.)
CLASSIFYING
SUMMARISING
RECORDING IN TERMS OF MONEY
INTERPRETATION OF THE RESULTS
5. a. TO KEEP SYSTEMATIC RECORD OF BUSINESS
TRANSACTIONS.
b. TO CALCULATE PROFIT & LOSS
c. TO KNOW THE EXACT REASONS LEADING TOO NET
PROFIT OR NET LOSS.
d. TO ASCERTAIN THE FINANCIAL POSITION OF THE
BUSINESS.
e. TO ASCERTAIN THE PROGESS OF THE BUSINESS
FROM YEAR TO YEAR.
f. TO PREVENT & DETECT ERRORS & FRAUDS.
g. TO PROVIDE INFORMATION TO VARIOUS PARTIES.
9. Accounting principles can be subdivided into
two categories
• Accounting Concepts; and
• Accounting Conventions.
11. • Accounting Concepts
• Accounting Conventions
The term ‘concept’ is used to connote
accounting postulates, that is necessary
assumptions and conditions upon which
accounting is based. The term ‘convention’
is used to signify customs and traditions as
a guide to the presentation of accounting
statements.
14. Business is treated as a separate entity or
unit apart from its owner and others. All the
transactions of the business are recorded in
the books of business from the point of view
of the business as an entity and even the
owner is treated as a creditor to the extent
of his/her capital.
15. In accounting, we record only those
transactions which are expressed in terms
of money. In other words, a fact which can
not be expressed in monetary terms, is not
recorded in the books of accounts.
16. Transactions are entered in the books of
accounts at the amount actually involved.
Suppose a company purchases a car for
Rs.1,50,000/- the real value of which is
Rs.2,00,000/-, the purchase will be recorded
as Rs.1,50,000/- and not any more. This is
one of the most important concept and it
prevents arbitrary values being put on
transactions.
17. It is persuaded that the business will exists
for a long time and transactions are
recorded from this point of view.
18. Each transaction has two aspects, that is,
the receiving benefit by one party and the
giving benefit by the other. This principle is
the core of accountancy.
19. Thus, the dual aspect can be expressed as
under
Capital + Liabilities = Assets
or
Capital = Assets – Liabilities
20. For example, the proprietor of a business
starts his business with Cash
Rs.1,00,000/-, Machinery of Rs.50,000/-
and Building of Rs.30,000/-, then this fact
is recorded at two places. That is Assets
account (Cash, Machinery & Building) and
Capital accounts. The capital of the
business is equal to the assets of the
business.
21. Strictly speaking, the net income can be measured
by comparing the assets of the business existing
at the time of its liquidation. But as the life of the
business is assumed to be infinite, the
measurement of income according to the above
concept is not possible. So a twelve month period
is normally adopted for this purpose. This time
interval is called accounting period.
22. It provide more appropriate information about the
performance of business enterprise as compared
to cash basis Accural concept implies equally to
revenues
And expenses.In accrual concept revenue is
recorded when sales are made or services are
rendered and it is immateria; whether cash is
24. Accounting Conventions:
The term ‘convention’ is used to signify
customs and traditions as a guide to the
presentation of accounting statements.
25. In order to enable the management to draw
important conclusions regarding the working of the
company over a few years, it is essential that
accounting practices and methods remain
unchanged from one accounting period to another.
The comparison of one accounting period with that
of another is possible only when the convention of
consistency is followed.
26. This principle implies that accounts must be
honestly prepared and all material
information must be disclosed therein. The
contents of Balance Sheet and Profit and
Loss Account are prescribed by law. These
are designed to make disclosure of all
material facts compulsory.
27. Financial statements are always drawn up
on rather a conservative basis. That is,
showing a position better than what it is, not
permitted. It is also not proper to show a
position worse than what it is. In other
words, secret reserves are not permitted.
28. This convention is an exception to the convention of
full disclosure.according to this convention,items
having an insignificant effect or being irrelevent to
the user need not be disclosed.these unimportant
items are either leftout or merged with other
items,otherwise accounting statements will be
unnecessarily overburdened.