Role of Finance and Accounts

Objectives
To give knowledge about
Basics of accounting and finance Accounting Equation Concepts and Conventions Double Entry Book Keeping System Journals Cash Book Bank Reconciliation Statements

We are neither hunters nor gatherers. We are accountants

Earlier Days

To be honest, Im not sure that accounting can be taught

Meaning
Accounting is a language of business which helps the business man to record, classify, summarize and communicate the financial information.

The Need for Accounting

Managers, investors, and other internal groups want the answers to two important questions: How well did the organization perform?

Where does the organization stand?

The Need for Accounting

Accountants answer these questions with three major financial statements: Income statement Statement of cash flows Balance sheet

Accounting Process

Accounting Cycle

Types of Accounting

Transactions

Nature of Transactions

Important accounting concepts

Dual Entity Money Measurement Concept Accounting Period Concept Going Concern Concept Conservatism Concept Consistency Concept Matching Concept

The Need for Accounting

A transaction is any event that affects the financial position of an organization and requires recording.

Revenues
Revenues are increases in ownership claims arising from the delivery of goods or services. Revenues must be earned. Revenues must be realized.

Expenses
Expenses are decreases in ownership claims arising from delivering goods or services or using up assets.

Profits
Profits (or earnings or income) are the excess of revenues over expenses.

Income Statement

The income statement measures the performance of an organization by matching its accomplishments (revenue from customers, which is usually called sales) and its efforts (cost of goods sold and other expenses).

Balance Sheet
The balance sheet (also called statement of financial position or statement of financial condition) is a snapshot of the financial status of an organization at a point in time.

Accounting Equation
Assets are economic resources that are expected to benefit future activities of the organization. Liabilities are the entitys economic obligations to nonowners. Owners equity is the excess of the assets over the liabilities.

Continues
Shareholders equity

Paid-in capital

Retained earnings

Golden Rules in Accounting

To identify the effect of a transaction on a account there are rules:
For Personal Account:
Debit: Credit: the receiver the giver

-For Real Account:

Debit: Credit: what comes in what goes out

-For Nominal Account:

Debit: Credit: all expenses and loses all incomes and gains

Cash Book

Bank Reconciliation Statement