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Introduction to Accounting

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Aditya Kapoor
Aditya Kapoor

This document provides a brief introduction to accounting. It defines accounting as recording, classifying, and summarizing financial transactions and events in terms of money. Accounting is necessary for businesses to track their finances and is useful for various stakeholders like owners, investors, creditors, employees and the government. The document outlines the accounting process, including books of original entry, ledger, trial balance, financial statements, and the accounting cycle. It describes accounting as both an art and a science, and discusses the objectives and functions of accounting for businesses.

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A Brief Introduction to Accounting SUBMITTED BY Aditya kapoor Maharishi Markandeshwar University, mullana
What is Accounting ?
Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character and interpreting the results thereof. “ ” ----------------------------------------------------- American Institute of Certified Public Accountants (AICPA)
Need For Accounting ! • We need accounting because it is the backbone of business finances. It was created in response to the development of trade in medieval times. The first recorded source of accounting entries was in Italy in 1494 by Luca Pacioli, a Franciscan monk. • It is simply not for providing information to tax authorities and government agencies but to identify and record all the activities that impact an organization in a financial manner. • It is also useful for the employees and customers in order to know the condition of the business entity.
Users of Accounting Owners Users of Accounting Potential Investors Creditors Employees Public Those who want to invest in an enterprise. Who supply goods or services on credit. To assess ability of business to pay higher wages and bonuses. To know trend of employment, helps in making various decisions. Who wants to make in-depth study of financial operations. Researchers For assessment of income tax, sales tax, excise duty etc. government
Journal Ledger Trial Balance Transaction Trading, Profit & Loss A/c and Balance Sheet Books of Original Entry • Cash Book • Purchase Book • Sales Book • Purchase return Book • Sales return Book • Bill receivable Book • Bills Payable Book • Journal Proper Accounting Cycle
Characteristics of Accounting
 Accounting is an art as well as a science. • Accounting is an art of recording, classifying and summarising financial transactions. It helps us in achieving our objective of maintaining proper accounts, i.e. , to know the profitability and financial position of the business. • Any organised knowledge is based on certain basic principles in a 'science'. Accounting is also a science. It is an organised knowledge based on certain basic principles. Art Science
 Recording of Financial transactions only • Only those transactions and events are recorded which are of a financial character. • There are a lot of transactions in the business which are very important for business but which cant be measured and expressed in terms of money.  Recording in Terms of Money • Each transaction is recorded in the books in the terms of money only.  Communicating • Includes the communication of financial data to the users who analyse them.
 Classifying • Classification is concerned with the systematic analysis of the recorded data, with a view to group transactions or entries of one nature at one place. The work of classification is done in the book termed as "Ledger".  Summarizing (1) Trial Balance, (2) Income statement (3) Balance sheet.
What Are the Objectives of Accounting ?
To keep systematic records : ----------------------------------------------------------------------------------------------------------------------------- To ascertain the financial position of business : ------------------------------------------------------------------------------------------------------------------------------ To Provide Information to the Users : • In the absence of accounting there would have been terrific burden on human memory which in most cases would have been impossible to bear. • The profit and loss account gives the amount of profit or loss made by the business during a particular period? • The officers and staff of an enterprise need useful and timely information for making different types of business decisions.
Some other Objectives • To know the exact reasons leading to net profit or net loss. • To ascertain the financial position of the business from year to year. • To prevent and detect errors and frauds.
Functions of Accounting
Functions of Accounting Maintaining Complete & Systematic Records Functions Communicating the Financial Results to various Parties Protecting the Assets of Business Compliance of Legal needs Trusteeship
Conclusion Significance
Importance Helpful in Decision Making Helpful in Planning Enables Comparative Study Helpful in Raising Loss Helpful in Preventing & Detecting Errors & frauds
Thank You.

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Introduction to Accounting

  • 1. A Brief Introduction to Accounting SUBMITTED BY Aditya kapoor Maharishi Markandeshwar University, mullana
  • 3. Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character and interpreting the results thereof. “ ” ----------------------------------------------------- American Institute of Certified Public Accountants (AICPA)
  • 4. Need For Accounting ! • We need accounting because it is the backbone of business finances. It was created in response to the development of trade in medieval times. The first recorded source of accounting entries was in Italy in 1494 by Luca Pacioli, a Franciscan monk. • It is simply not for providing information to tax authorities and government agencies but to identify and record all the activities that impact an organization in a financial manner. • It is also useful for the employees and customers in order to know the condition of the business entity.
  • 5. Users of Accounting Owners Users of Accounting Potential Investors Creditors Employees Public Those who want to invest in an enterprise. Who supply goods or services on credit. To assess ability of business to pay higher wages and bonuses. To know trend of employment, helps in making various decisions. Who wants to make in-depth study of financial operations. Researchers For assessment of income tax, sales tax, excise duty etc. government
  • 6. Journal Ledger Trial Balance Transaction Trading, Profit & Loss A/c and Balance Sheet Books of Original Entry • Cash Book • Purchase Book • Sales Book • Purchase return Book • Sales return Book • Bill receivable Book • Bills Payable Book • Journal Proper Accounting Cycle
  • 8.  Accounting is an art as well as a science. • Accounting is an art of recording, classifying and summarising financial transactions. It helps us in achieving our objective of maintaining proper accounts, i.e. , to know the profitability and financial position of the business. • Any organised knowledge is based on certain basic principles in a 'science'. Accounting is also a science. It is an organised knowledge based on certain basic principles. Art Science
  • 9.  Recording of Financial transactions only • Only those transactions and events are recorded which are of a financial character. • There are a lot of transactions in the business which are very important for business but which cant be measured and expressed in terms of money.  Recording in Terms of Money • Each transaction is recorded in the books in the terms of money only.  Communicating • Includes the communication of financial data to the users who analyse them.
  • 10.  Classifying • Classification is concerned with the systematic analysis of the recorded data, with a view to group transactions or entries of one nature at one place. The work of classification is done in the book termed as "Ledger".  Summarizing (1) Trial Balance, (2) Income statement (3) Balance sheet.
  • 11. What Are the Objectives of Accounting ?
  • 12. To keep systematic records : ----------------------------------------------------------------------------------------------------------------------------- To ascertain the financial position of business : ------------------------------------------------------------------------------------------------------------------------------ To Provide Information to the Users : • In the absence of accounting there would have been terrific burden on human memory which in most cases would have been impossible to bear. • The profit and loss account gives the amount of profit or loss made by the business during a particular period? • The officers and staff of an enterprise need useful and timely information for making different types of business decisions.
  • 13. Some other Objectives • To know the exact reasons leading to net profit or net loss. • To ascertain the financial position of the business from year to year. • To prevent and detect errors and frauds.
  • 15. Functions of Accounting Maintaining Complete & Systematic Records Functions Communicating the Financial Results to various Parties Protecting the Assets of Business Compliance of Legal needs Trusteeship
  • 17. Importance Helpful in Decision Making Helpful in Planning Enables Comparative Study Helpful in Raising Loss Helpful in Preventing & Detecting Errors & frauds