Financial Accounting

Ms.Poonam Namjoshi

Principles , Concepts and Conventions

Book Keeping and Accounting Accounting Principles, concepts and conventions.

Accounting Polices
Accounting a Measure of Discipline Lesson Summary

Ms.Poonam Namjoshi

Book Keeping and Accounting

Book Keeping and accounting are not synonymous Book Keeping is concerned with recording the financial data relating to the business operations in significant and orderly manner. Book Keepers work is of clerical nature and more routine which can be accomplished without knowledge the accounting principles.

Ms.Poonam Namjoshi

Book Keeping (i) It is concerned with the recording of transactions (ii) The work of book-keeping is mainly routine and clerical in nature and is increasingly being done by computers. (iii) Book-keeping constitute the base for accounting. (iv) Book-keeping is done in accordance with basic accounting concepts and conventions. (v) Financial statements do not form part of book-keeping. (vi) Financial position of the business cannot be ascertained through bookkeeping records.

Accounting It is concerned with the summarizing of the recorded transactions. The work of accountant requires higher level of knowledge, conceptual understanding and analytical skill. Accounting is considered as the language of business. The methods and procedures for accounting for analysis and interpretations for financial reports may vary from firm to firm. Financial statements are prepared from the book-keeping records. Financial position of the business is ascertained on the basis of accounting reports.

Ms.Poonam Namjoshi

Accounting Principles
Accounting Principles are classified into

Accounting concepts: Basic assumptions and conditions on which the science of accounting is based
Accounting Conventions: Customs and tradition which guide the accountant while preparing the accounting statements

Ms.Poonam Namjoshi

Accounting Concepts
Separate entity: Business is separate from its proprietor

Going Concern: Business will continue for fairly long time

Money Measurement: Records only monetary transactions Cost concept: Assets will be recorded at cost

Dual Aspect: Every transaction has two effects

Accounting Period: Life of the business is divided into appropriate segments for studying the results of the business after each segment. Periodic matching of cost and revenue concept: Business objective is to earn profit therefore revenues need to be matched with costs (expenses) Realisation Concept: Revenues will be recorded when realised.

Ms.Poonam Namjoshi

Accounting Conventions
1. 2. 3. 4. Conservatism. Full Disclosure Consistency Materiality

Ms.Poonam Namjoshi

Accounting Policy
Refers to Specific accounting principles and methods of applying those principles adopted by an enterprise. Ex. US GAAP Accounting Standards etc

Ms.Poonam Namjoshi

Accounting as a measurement Discipline

Historical Cost: Acquisition price Current Cost Realisable value: Valued price Present value: Discounted value.

Ms.Poonam Namjoshi

Lesson Summary
Book Keeping and accounting are not synonymous Accounting Principles are classified into-Accounting concepts and Accounting Conventions Accounting policy refers to specific accounting principles and methods of applying those principles adopted by an enterprise. Ex. US GAAP Accounting Standards etc Accounting as a measurement discipline deals with monetary measurement of inputs

Ms.Poonam Namjoshi