Amity School of Business

FINANCIAL ACCOUNTING

Module I

Introduction to Accounting

Introduction to Accounting
Meaning Nature Functions Branches Accounting Equation Accounting Concepts GAAP Difference between GAAP & US GAAP

What is Accounting?
Accounting is defined as: The art of recording, classifying & summarizing in a significant manner and in terms of money, transactions and events, which are in part at least, of a financial character and interpreting the results thereof.

DIFFERENCE BETWEEN ACCOUNTANY AND BOOKKEEPING.

Financial Accounting

Basic Terms in Accounting

Proprietor :Drawings :Goods :Transaction Entry :Entity :-

Basic Terms in Accounting

Assets :Liability :Profit:-

Capital Revenue Balance Sheet Sundry Debtor Sundry Creditors Expense Purchases Sale Stock
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Users of Financial Information

BRANCHES OF ACCOUNTING
Financial Accounting Management Accounting Cost Accounting Social responsibility Accounting Human Resource Accounting

Objectives of Accounting

Functions Of Accounting

Significance of Accounting
Accounting
is a system that Identifies

Records
Relevant information that is Communicates

Reliable
Comparable

to help users make better decisions.

LIMITATIONS OF ACCOUNTING

The Financial Accounting Process

Generally Accepted Accounting Principles and Basic Concepts

Generally accepted accounting principles (GAAP) - a term that applies to the broad concepts or guidelines and detailed practices in accounting, including all the conventions, rules, and procedures that make up accepted accounting practice at a given time

REGULATION OF THE ACCOUNTING PROFESSION

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Standard Setting Bodies

Standard Setting Bodies

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Standard Setting Bodies

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ACCOUNTING PRINCIPLES
These principles can be classified into two categories

Accounting Concepts

Accounting Conventions

List of Concepts
Separate Entity Concept Going Concern Concept Money Measurement Concept Accounting Period Concept Historical Cost Concept Dual aspect Concept Realization Concept Matching Concept

List of Accounting Conventions

1. 2. 3. 4.

Convention of Full Disclosure Convention of Consistency Convention of Prudence/Conservatism Convention of Materiality

Separate Entity Concept

GOING CONCERN CONCEPT

Money Measurement Concept

Historical Cost Concept

Dual Aspect Concept

Matching Concept

Matching Concept

ACCOUNTING PERIOD CONCEPT

Realization Concept

ACCOUNTING CONVENTIONS

Convention of Full Disclosure

Convention of Consistency

Convention of Prudence/Conservatism

Materiality Concept

Difference Between GAAP and US GAAP

1. Underlying

assumptions :

Difference Between GAAP and US GAAP

2.Cash flow statement:

Difference Between GAAP and US GAAP

3. Consolidation of subsidiary accounts: .

Difference Between GAAP and US GAAP

4. Format/ Presentation of financial statements

BASIC ACCOUNTING EQUATION

Assets

Liabilities

Stockholders Equity

Accounting Information System

TAX ACCOUNTING SUB-SYSTEM MANAGEMENT INFORMATION SYSTEM SALES & RECEIVABLE SUBSYSTEM

BUDGET

CASH SUB-SYTEM

FINAL ACCOUNTS SUB-SYSTEM

ACCOUNTING INFORMATION SYSTEM

PURCHASE &ACCOUNTS PAYABLE SUB-SYTEM

COSTING SUB-SYSTEM

INVENTORY ACCOUNTING SUBSYSTEM

EXPENSE ACCOUNTING SUB-SYSTEM

FIXED ASSET ACCOUNTING SUBSYSTEM PAYROLL ACCOUNTING SUB-SYSTEM