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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.
• Accounting is often called the “language of business”– People who perform accounting procedures speak the
language of debits and credits.
• The process of accounting provides useful information that describe specific things about a company’s financial position.
Three Activities
What is Accounting?What is Accounting?
The accounting process includes the bookkeeping function.
DIFFERENCE BETWEEN ACCOUNTANY AND
BOOKKEEPING.
• Book keeping is merely recording the business transactions in books and ledgers. It is part of Accounting. It is often routine and clerical in nature
• Accounting is a wider concept: Compilation of accounts in such a way that one is in a position to understand state of affairs of business
• ACCOUNTING BEGINS WHERE BOOK-KEEPING ENDS
Accounting and Book-Keeping
Financial Accounting
• Financial accounting - focuses on the specific needs of decision makers external to the organization, such as stockholders, suppliers, banks, and government agencies
Users of Financial Information
InvestorsCommunity
Board of DirectorsManagement
EmployeesSuppliers
Creditors
Customers
Government
Internal UsersExternal Users
BRANCHES OF ACCOUNTING
• Financial Accounting
• Management Accounting
• Cost Accounting
• Social responsibility Accounting
• Human Resource Accounting
BRANCHES OF ACCOUNTING• Financial Accounting: It includes Book keeping and the
preparation of Financial Statements.
• Management Accounting: It is a system to assemble and furnish the useful material and summarized accounting information to the management.
• Cost Accounting: It deals with the cost of production and its various constituents.
• Social responsibility Accounting: It is the study of social effects in addition with the economic effects.
• Human Resource Accounting: is the process of identifying and measuring data about human resource and communicating this information to interested parties.
Objectives of Accounting• To maintain systematic records• To ascertain the operational profit or loss• To ascertain financial position• To satisfy requirements of law, Govt.& other
interested parties• To facilitate rational & futuristic decision making• To Provide remedial measures devices for the
deviations of the actual from the budgeted performance
Functions Of Accounting• Performance measurement
• Forecasting
• Government Regulation and Taxation
• Evaluation and Control
• Decision Making
• Fixing Responsibility
Significance of Accounting
IdentifiesIdentifies
RecordsRecords
CommunicatesCommunicatesRelevantRelevant
ReliableReliable
ComparableComparable
AccountingAccounting is a
system that
information
that is
to help users make better decisions.
to help users make better decisions.
LIMITATIONS OF ACCOUNTING
• Danger of window dressing
• Ignorance about the present value of business
• Influenced by personal judgments
• Ignores important non-monetary information
• Does not provide timely information