Accountancy- BasicsProf. Saptarshi Mukherjee

Introduction to Accounting The American Accounting Association defines accounting as follows:

"The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.

Definition of Accountancy

The process of recording, classifying, summarizing and Interpretation of financial data and operations in terms of time and money.

Basic Accounting concepts

1. The Accounting Entity or Business Entity 2. Accounting Period 3. Monetary Concept 4. The Going Concern 5. The Historical Cost

The Accounting EntityOr Business Entityconcept

Accounting Period

The life of a business is divided into many equal and fixed periods of time. Eg one year

Monetary Concept

Monetary ConceptTo be measured by Money. Interpretation possible when measured in monetary terms.

Going Concern

Imagine you just set up a new company.Do you think you want to sell off your business next year?

Assumption: The business entity will continue to operate and it will not close down.

All assets owned by the business are assumed to be used into the unknown future.

Historical Cost

Doctrines Doctrine of MaterialityDoctrine of ConservatismDoctrine of Full DisclosureDoctrine of Consistency

Need of AccountancyAccountingprovidesinformation on the (1)resourcesavailableto a firm, (2) themeansemployedto financethose resources, and (3) theresultsachieved through their use.

Branches of AccountingFinancial AccountingManagement AccountingCost AccountingTax Accounting

Financial Accounting

Financial AccountingFinancial accountingPrimarily prepared for users external to the company.Revenues, assets, etc.

Financial accounting is the field of accountancy concerned with the preparation of financial statements for decision makers.

Management Accounting

Management AccountingManagement Accounting is The process of identification, measurement, accumulation, analysis, preparation, interpretation & communication of information used by management to plan, evaluate & control within an entity & to assure use of & accountability for its resources. What is management Accounting?

Management Accounting

The object of this accounting is to communicate the relevant information periodically to the management of the business to enable it to take suitable decisions.

Core Purpose:

Focus of Management Accounting

Thus main focus of managerial accounting is to help the managers for making better decisions.

Contrast of Financial & Management Accounting

Managerial Accounting Benefits:Determining performance Dropping or managing costs Examining the prices for products and services Choosing to approve, change or suspend a plan or action

Cost Accounting

Cost Accounting.Introduction:Cost accounting deals with the recording, classification, allocation, and reporting of current and prospective costs.

Cost AccountingPurpose:The main object of cost accounting is to determine the cost of goods manufactured or produced by the business. It helps the management of the business in controlling the costs by indicating avoidable losses and wastage

Cost Accounting BenefitsAnalyze costs relevant to your business and business modelPowerful allocation schemes matching your business modelPlan and calculate future cost based on budgets and forecasts

Tax accounting

Tax accounting Tax accounting is the branch of accounting relating to the preparation and filing of tax forms with the government agencies.

Part IIFinancial Accounting Recording of Transactions

Real Account

Personal Account

Nominal Account

Source Documents(originals)Books of Prime Entry(Journal Entries)LedgersTrial BalanceAdjustmentsReportsCan you link??

Doctrine of Consistency, Full Disclosure, Conservatism, Materiality.*