accounting of ppt
TRANSCRIPT
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Accounting
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Introduction
Accounting is the language of business.
It is a standard set of rules for measuring a firms financialperformance
Accounting is required in almost all activities and allorganization which require money.
Assessing a companys financial performance is important for
many groups, including:-The Firms officers (managers and employees)
-Investors (Current and potential shareholder)
-Lenders (banks)
-General public
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Objectives of Accounting
To keeping systematic record
To ascertain the results of the operation
To ascertain the financial position of thebusiness
To portray the liquidity position
To protect business properties
To facilitate rational decision-making
To satisfy the requirements of law
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Importance of Accounting
Making Corporate Decisions
Making Investment Decision
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Functions of Accounting
Record Keeping Function
Managerial Function
Legal Requirement Function
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Advantages of Accounting
It helps in having complete record of business
transaction
It provides useful information form making economic
decisions It facilitates comparatives study of current years
profit, sales, expenses etc.
It provides users with factual information abouttransaction
It helps in complying with certain legal formalities
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Limitations of Accounting
Accounting is historical in nature
Accounting is limited to monetary transactiononly
Accounting statements do not always presentcomparable data
Cost concept is found in accounting. Price
changes are not considered. Accounting statements do not show the impact
of inflation.
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Concepts and Conventions and
Principles of Accounting
Concepts of Accounting
Money Measurement Concept Entity Concept
Going Concern Concept
Cost Concept
Dual Aspect Concept
Accounting Period Concept
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Concepts and Conventions and
Principles of Accounting
Conventions and Principles of Accounting
-Matching Conventions
o Revenue aspecto Expenses aspect
Consistency Convention
Materiality Convention Objectivity Convention
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Process of Accounting
Identification of Business transaction
Recording
Classification Summarization
Interpretation
Communication
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Journal
Ledger
Trail Balance Trading and Profit & Loss A/c
Balance Sheet
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Golden Rules Of Accounting and
Journal
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PERSONAL ACCOUNTThese are accounts of partieswith whom the business is a carried on. Personal accounts may
be:
Accounts of natural or physical persons. Ex: Rama Account,Krishna Account
Accounts of artificial or legal persons. Ex: ABC & Co.
Representative personal account. Ex: O/S Expenses Account,O/S income Account, Prepaid Expenses Account, IncomeReceived in Advance.
Rules of Accounting:
Debit the Receiver
Credit the Giver
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Real Account
These are asset accounts that appear in the Balance Sheet.They are referred to as Real Account (or Permanent
Accounts) as these are owned by businesses and the
balances in these accounts at the end of an accounting
period will be carried over to the next period. Ex: CashAccount, Land Account, Building Account etc.
Rules of Accounting:Debit what comes in
Credit what goes out
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Nominal Account
These are accounts of expenses and losses which
a business incurs and income & gains which a
business earn in the course of business. Ex: Rent
Account, Interest Account.
Rules of Accounting:
Debit all expenses and losses
Credit all income and gains
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Types of Accounting
Financial Accounting
Cost Accounting
Management Accounting
Other Accounting:-
Tax Accounting Social Responsibility Accounting
L d A
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Ledger Accounts
INTRODUCTION
The recorded transactions in the journal are classified andgrouped into by preparation of accounts and the book,which contains all set of accounts, i.e., Personal, Real and
Nominal Accounts. This process is known as Ledger. The
ledger is also known as principal books of account.
FORMAT OF LEDGER ACCOUNTS
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Trial Balance
INTRODUCTION
After posting the accounts in the ledger, a statement isprepared to show the separately the debit and creditbalances. Such a statement is known as Trial Balance.
OBJECTIVE OF PREPARING TRIAL BALANCE
Trial balance helps to check the arithmetical accuracy of the
accounts. The financial statements as prepared based on the trial balance.
The trial balance serves as a summary of what is contained inthe ledger.
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METHODS
Total Method: Under this method, every ledger account is totaled
and that total amount (both credit and debit side) is transferred totrial balance. The difference of totals of each ledger account is the
balance of that particular account. This method is not commonlyused as it cannot help in the preparation of financial statements.
Balance Method: Under this method, every ledger account isbalanced and those balances only are carried forward to the trialbalance. Financial statements are commonly prepared on the basisof this method.
Total and Balance Method: As name shows it is combination ofabove two methods. Under this method, statement of trial balanceshows to balance contains the balance in both ways as explainedin the above two methods.
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From the following ledger balances, prepare a trial
balance of ABC Corporation as on 31st December 2011.
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RULES
Following are the rules to prepare trial balance from Ledger
balances: 1) The following balances must be placed in the debit side of
the trial balance:
Asset Accounts
Expenses Accounts
Losses Drawings
Cash and Bank Balances
2) The following balances must be placed in the credit side ofthe trial balance:
Liabilities Accounts
Income Accounts
Profits
Capital Account
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Balance Sheet
INTRODUCTION
The Balance Sheet may be defined as astatement which sets out all the assets and
liabilities of a firm or an institution as at
certain date. It shows the financial position of
a firm
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FORMAT OF BALANCE SHEET
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CLASSIFICATION OF ASSETS
AND LIABILITIESASSETS
Fixed Assets: The assets those are meant to be used by firm over along period of time and not sold are known as fixed assets.
Current Assets: The assets those are meant to be converted intocash as quickly as possible (ideally within one year) known ascurrent assets.
Tangible Assets: The assets those can be seen physically known as
tangible assets.
Intangible Assets: The assets which cannot be seen physicallyknown as intangible assets
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LIABILTIES
Long Term Liabilities: The liabilities those will be paid afterone year are known as long term liabilities.
Short Term Liabilities: The liabilities those will be paid
within one year are known as short term or current liabilities.
Contingent Liabilities: There are some outstanding claimspending against a firm, which may or may not be payable by
firm are known as contingent liabilities. Note: All assets and expenses have debit balance and All
Liabilities and incomes have credit balance.