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Chapter 1
Introduction to Accountings
Introduction to Accounting
Learning Objectives
This Chapter would enable you to understand:
Definitions of Accounting
Meaning of Accounting
Attributes of Accounting
Accounting Process
Branches of Accounting
Book Keeping, Accounting and Accountancy
Difference between Book Keeping and Accounting
Introduction to Accounting
Learning Objectives
Objectives of Accounting
Functions of Accounting
Advantages of Accounting
Limitations of Accounting
Accounting Information and its' Types
Users of Accounting Information
Systems of Accounting
Introduction to Accounting
DEFINITION OF ACCOUNTING
"Accounting is the art of recording, classifying and
Introduction to Accounting
DEFINITION OF ACCOUNTING
"Accounting is the science of recording
classifying
business
transactions
and
and
events,
significant
summaries,
analysis
and
Introduction to Accounting
DEFINITION OF ACCOUNTING
"Accounting is the process of identifying, measuring
Introduction to Accounting
Meaning of Accounting
Thus, accounting is a process of
collecting,
recording,
summarising and
communicating financial information to the users
for decision-making.
Introduction to Accounting
ATTRIBUTES (CHARACTERISTICS) OF
ACCOUNTING
Introduction to Accounting
ACCOUNTING PROCESS
Communicating to the
Users
Summarizing
Trial Balance
Trading and Profit and Loss
Account
Balance Sheet.
Financial Transactions
or Events
1.
2.
3.
4.
5.
6.
7.
8.
Journal
Cash Book
Purchase Book
Sales Book
Purchases Return
Book
Sales Return Book
Bills Payable Book
Bills Receivable
Book
Journal Proper
Recording
Classifying (Posting
into Ledger)
Introduction to Accounting
BRANCHES OF ACCOUNTING
Branches of
Accounting
Financial
Accounting
Cost
Accounting
Management
Accounting
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Introduction to Accounting
Financial Accounting
Financial Accounting is that branch of accounting,
which records financial transactions and events,
summarises and interprets them and communicates
the results to the users.
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Introduction to Accounting
Cost Accounting
The limitation of Financial Accounting in respect of
information relating to the cost of products or
services led to the development of a specialised
branch, i.e., Cost Accounting.
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Introduction to Accounting
Management Accounting
Management Accounting is the
developed branch of accounting.
most recently
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Introduction to Accounting
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Introduction to Accounting
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Introduction to Accounting
Accounting
Accounting is an art of
recording,
classifying and
summarising the financial data and interpreting the
results thereof.
Accounting is a wider concept than Book Keeping.
It starts where Book Keeping ends. In other words,
Book Keeping is a part of accounting.
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Introduction to Accounting
Basis
Book Keeping
Accounting
2. Stage
3.
Objective
is concerned
with
summarising
the
recorded
transactions,
interpreting
them
and
communicating the results.
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Introduction to Accounting
6. Relation
7. Special
Skills
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Introduction to Accounting
BOOK KEEPING, ACCOUNTING AND ACCOUNTANCY
Accountancy
Accountancy refers to a systematic knowledge of
accounting.
It explains how to deal with various aspects of
accounting.
It educates us why and how to maintain the books of
accounts and how to summarise the accounting
information and communicate it to the users.
In the words of Kohler, accountancy refers to the
entire body of the theory and practice of accounting
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Introduction to Accounting
BOOK KEEPING, ACCOUNTING AND ACCOUNTANCY
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Introduction to Accounting
OBJECTIVES OF ACCOUNTING
The objectives or functions of accounting are:
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Introduction to Accounting
FUNCTIONS OF ACCOUNTING
The functions of accounting are:
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Introduction to Accounting
ADVANTAGES OF ACCOUNTING
Followings are the advantages of Accounting
Financial Information about Business
Assistance to Management
Replaces Memory
Facilitates Comparative Study
Facilitates Settlement of Tax Liabilities
Facilitates Loans
Evidence in Court
Facilitates Sale of Business
Assistance in the Event of Insolvency
Helpful in Partnership Accounts
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Introduction to Accounting
LIMITATIONS OF ACCOUNTING
Followings are the limitations of accounting
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Introduction to Accounting
ACCOUNTING INFORMATION
"Accounting is a service activity. Its function is to
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Introduction to Accounting
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Introduction to Accounting
External Users
Banks and Financial Institutions
Investors and Potential Investors
Creditors
Government and its Authorities
Researchers
Consumers
Public
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Introduction to Accounting
1. Reliability
2. Relevance
3. Understandability
4. Comparability
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Introduction to Accounting
SYSTEMS OF ACCOUNTING
The systems of recording transactions in the
books of accounts are two namely:
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