OPTIONAL I: COMMERCE AND ACCOUNTANCY OPTIONAL II: COMMERCE AND ACCOUNTANCY

INTRODUCTION TO ACCOUNTING

Accounting is as old as money itself since in early ages commercial activities were based on barter system, record keeping was not a necessity.

NEED AND IMPORTANCE OF ACCOUNT

Business transactions are numerous that it is not possible to recall his memory as to how the money ha been earned and spent.

BOOK KEEPING

Book keeping is that branch of knowledge which tells us how to keep a record of business transactions it is often routine and clerical in nature.

DEFINITION

R.N Carter says Book keeping is the science and

art of correctly recording in the books of account all

those business transactions that result in the

transfer to moneys worth.

OBJECTIVES
To have permanent record of all the business transactions. Too keep records of income and expenses in such a way that the net profit or net loss may be calculated. To keep records of assets and liabilities in such a way that the financial position of the business may be ascertained.

To know the names of the customers and the amount due from them.
To know the names of suppliers and the amount due to.

To have important information for legal and tax purpose.

ADVANTAGES
Permanent and reliable record.
Arithmetical accuracy of the accounts Net result of Business operations Ascertainment of financial position

Ascertainment the progress of business

Calculation of dues

Control over assets

 Control over Borrowings

Identifying dos and donts

Fixing the selling price

Taxation Management decision making Legal requirement

ACCOUNTING

Accounting is considered as a system which

collects and processes financial information of a

business. These information's are reported to the

users to enable to make appropriate decisions.

DEFINITION

American Accounting Association defines accounting as the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.

OBJECTIVES

To maintain accounting records

To calculate the result of operations

To ascertain the financial position

To communicate the information to users

PROCESS

The process of accounting as per the above definition is given below: Input
Business transactions cmonetary value

Process
Identifying recording, classifying, summarizing, analyzing, interpreting, communicating.

Output
Information to Users

FUNCTIONS
Identifying
Recording Classifying Summarizing Analyzing Interpreting Communicating

MEANING OF ACCOUNTING CYCLE

An accounting cycle is a that begins sequence

of accounting process, that begins with the recording

of business transactions and end with the

preparation of final accounts.

ACCOUNTING CYCLE

Balance sheet [closing] Profit & Loss Account Transac tions

Balance sheet [opening] Trading Account

Journal

Trial Balance

Ledger


Users of Accounting Information:
1. Internal Users 2. External Users

INTERNAL USERS

Owners Management Employees and Trade Unions

EXTERNAL USERS

lending institutions Creditors, Banks and other

Present investors

Potential investors
Government and Tax Authorities

Regulatory agencies
Researchers

USERS OF ACCOUNTING INFORMATION

Owners

Researchers
Regulatory Agencies

Management

Accounting Information

Employees and Trade unions Creditors, Banks & Lending Institution

Govt. and Tax Authorities Potential investors

Present Investors


BRANCHES OF ACCOUNTING

Financial Accounting

Cost Accounting

Management Accounting