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7/31/2019 Accounting Concepts [Compatibility Mode]
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Symbiosis Institute of Telecom Management
INTRODUCTION TOACCOUNTING
A.V.Chirputkar, Faculty - Finance, SITM.
M.Com. F.C.A. C.I.S.A. (USA)
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Your Issues .
How much is my net income / profit of the year?
How much is my net worth?
What is my cash position?
Next questions in you mind
How should I maximize my profit / net income?
How should I maximize wealth ?
These are the same questions for CEO of MNC /company.
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Answer to this..
Financial Accounting;
Cost Accounting;
Management Accounting;
Corporate Finance;
Financial Management.
LETS START WITH FINANCIAL ACCOUNTING
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Your Financial Transactions .
After passing M.B.A. you have undertaken followingtransactions in the year 2014-2015;
Your salary per month is Rs. 75,000
Your household expenditure per month is Rs. 10,000
You have invested in PPF Rs. 1,00,000 for year
You have purchased a car on cash basis Rs. 3,50,000
You have paid Income Tax Rs. 45,000 for the year
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Your Income Statement
Income is Rs. 9,00,000
Expenses are
Household Expenses Rs. 1,20,000
Income Tax Rs. 45,000
Your Net Income / surplus for the year Rs. 7,35,000
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Your Financial Position Balance Sheet
Assets: Car : Rs. 3,50,000
Investment : Rs. 1,00,000
Cash Balance : Rs. 2,85,000
Liabilities: Nil
Net Worth / Capital: :Rs. 7,35,000
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Financial Accounting
What we have done above indicates
Financial Accounting Process and
Financial Results Financial Statement.
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INTRODUCTION
Accounting is;
An Information System :Accounting System shouldgenerate information to meet the requirements of users
i.e. Internal management & Outsiders.
Language of business
Useful to personal and business life
Social Science
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Objectives of Accounting
To keep systematic records
To protect business properties
To ascertain operational profit / loss
To ascertain financial position
To facilitate in decision making
others
To comply with law
Disclosure to stakeholders
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Definition
Definition by American Institute of CPA:
Accounting is an art of recording, classifying & summarizing in a
significant manner & in terms of money, transactions & events
which are , in part at least, of a financial character & interpreting
the results thereof.
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Functions of Accounting
Recording
Classifying
Summarising
Deals with financial transactions
Analysis & Interpretation
Communication
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Four Phases in Accounting Process
Journalising of transactions & events;
Ledger posting & balancing;
Preparation of Trial balance; Preparation of Final Accounts.
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Accounting Elements
Assets Balance Sheet
Liabilities Balance Sheet
Equity Balance Sheet( The Balance Sheet gives you a financial position)
Income Profit & Loss Account
Expenses Profit & Loss Account
( The profit & loss account gives you profit / loss)
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Accounting Procedure
We follow double entry system of Accounting developed in 15th
century in Italy by Luca Pascioli
The basic accounting equation is;
Equity + Liabilities = Assets
The entire accounting is based on three fundamental rules of debitand credit. Every transaction has two aspects which can berecorded with the help of these rules.
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Meaning & Scope
There are four sub-parts of accounting;
Book keeping;
Financial Accounting;
Management Accounting;
Social Responsibility Accounting
( also other parts like Inflation Accounting etc)
(Book keeping is different from Accounting, Accounting relates to
other subjects like economics, law, statistics etc.)
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Cost Accounting
Know your cost;
Cost Saving;
Cost Control; Cost Reduction;
For Business Entities apart from above objectives-
Determine Selling Price, Ascertaining profit under eachactivity, assist management in decision making.
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Management Accounting
Thus we enter into subject of Management Accounting;
Use Financial Accounting and Cost Accounting data;
Apply Management Accounting Tools and techniquesfor managerial process of Formulating Strategy,
Planning, Decision making, Controlling etc.
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What Next
Now you enter into a larger domain known as Finance
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Q & A
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Thanks