COST ACCOUNTING & FINANCIAL ACCOUNTING

PRESENTED BY

MANESH KUMAR AHUJA

FINANCIAL ACCOUNTING…

• Financial Accounting is defi ned as, ‘Art and science of classifying, analyzing and recording business transactions in a systematic manner in order to prepare a summary at the end of the year to fi nd out the results of the concerned accounting year

DEFINITION HOW DEFINE

• The definition given above is self explanatory, however for understanding clearly, the following terms are explained below.

• A Business transactions :-

A transaction means an activity, a business transaction means any activity which createssome kind of legal relationship. For example, purchase and sale of goods, appointing an employee and paying hissalary, payment of various expenses, purchase of assets etc.

B Classification of transactions :-

Before recording any transaction, it is essential that it is to be classified. A transaction can beclassified as cash transaction and credit transaction. Similarly transactions of receiving income and payment ofexpenditure can be segregated. Even in case of expenditure, transactions involving revenue expenditure andcapital expenditure can be segregated.

C Recording of transactions :-

The essence of fi nancial accounting is recording of transaction. In accounting language, recording of the transaction is known as entry. There are well defi ned rules for recording various transactions in books of accounts. As per the rules of fi nancial accounting, each and every transaction is recorded at two places and hence it is called as ‘Double Entry’ system of accounting.

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