DEFINITION• Accounting is an art of recording,
classifying and summarizing in terms of money transactions and events of a financial character and interpreting the results thereof.
FUNCTIONS OF ACCOUNTING
• Recording• Classification• Summarizing• Deals with financial transactions• Interprets
Types Of Accounting Information
• Financial Accounting• Cost Accounting• Management Accounting• Tax Accounting
Financial AccountingFinancial AccountingFinancial AccountingFinancial AccountingFinancial Accounting refers to Financial Accounting refers to
information describing the financial information describing the financial resources, obligations and activities resources, obligations and activities
of an economic entity.of an economic entity.
Cost AccountingCost AccountingCost AccountingCost AccountingFunction of cost accounting is to Function of cost accounting is to
ascertain the cost of a product and to ascertain the cost of a product and to help the management in the control help the management in the control
of cost.of cost.
Management Management AccountingAccounting
Management Management AccountingAccounting
It is accounting for the management It is accounting for the management i.e, accounting which provides i.e, accounting which provides necessary information to the necessary information to the
management for discharging its management for discharging its functions. It is the reproduction of functions. It is the reproduction of
financial accounts in such a way as financial accounts in such a way as will enable the management to take will enable the management to take decisions and to control activities.decisions and to control activities.
Tax AccountingTax AccountingTax AccountingTax AccountingThe preparation of income tax returns The preparation of income tax returns
is a specialized field within is a specialized field within accounting. To a great extent, tax accounting. To a great extent, tax
returns are based on financial returns are based on financial accounting information. However the accounting information. However the
information often is adjusted or information often is adjusted or reorganized to confirm with income reorganized to confirm with income
tax reporting requirementstax reporting requirements..
AssetsAssetsAssetsAssetsAssets means the resources of the Assets means the resources of the
business or the commodities business or the commodities possessed by the business. E.g: land, possessed by the business. E.g: land, building, cash, stock or inventory etc.building, cash, stock or inventory etc.
Liabilities Liabilities Liabilities Liabilities Liabilities mean the claims of the Liabilities mean the claims of the
suppliers of cash or commodities on suppliers of cash or commodities on credit up to his/her balance due on credit up to his/her balance due on
the date. E.g: suppliers of goods and the date. E.g: suppliers of goods and cash.cash.
Owner’s equityOwner’s equityOwner’s equityOwner’s equityIt means the claims of owner of the It means the claims of owner of the
business for his interest up to his/her business for his interest up to his/her investment after finalizing the investment after finalizing the
expenses and revenue up to the date. expenses and revenue up to the date. E.g: capital invested by the owner.E.g: capital invested by the owner.
Revenue Revenue Revenue Revenue Revenue means any type of income Revenue means any type of income directly or indirectly of the business. directly or indirectly of the business. E.g: interest received, sale of goods, E.g: interest received, sale of goods,
dividend received.dividend received.
Expenses Expenses Expenses Expenses Expenses means any type of Expenses means any type of
expenses directly or indirectly of the expenses directly or indirectly of the business. E.g: rent expense, salary business. E.g: rent expense, salary
expense etc.expense etc.
ACCONTING TERMINOLOGIES
• TRANSACTIONS• BUSINESS• PROPERIETOR• CAPITAL• DRAWINGS• PURCHASES• PURCHASES RETURNS• SALES• SALES RETURNS• TRADE DISCOUNT• CASH DISCOUNT• COMMISSION• EXPENDITURE• EXPANSE
ACCOUNTING TERMINOLOGIES
• ACCOUNT• DEBTOR (ACCOUNT RECEIVABLE)• CREDITOR (ACCOUNT PAYABLE)• ASSETS• LIABILITIES• VOUCHER• GOODS (MERCHANDISE)• STOCK (INVENTORY)• EQUITY
TransactionAny dealing between two persons or
things is a transaction. It may relate to purchase e.g sale of goods, receipt and payment of cash etc
• Cash transactions• Credit transactions
Business
It includes any activity undertaken for the purpose of earning profit e.g banking business, insurance business etc
ProprietorHe is the owner of the business.
He invests capital in it, gives his time & attention. He is entitled to receive the profit or bear loss arising.
CapitalThe amount with which the trader
starts his business or the amount which is actually invested in the business at any given time.
Purchases ReturnsIf goods purchased are found
defective or unsatisfactory, they are returned to the persons from whome they were purchased or to suppliers.
Sales returnIf a person to whome goods have
been sold finds that they are defective or unsatisfactory & returns them are called sales return or returns inward.
Trade DiscountIt is rebate or allowance from the
scheduled price granted by the seller to the buyer.
AssetsThese are the things of value
possessed by a trader such as building, land, machinery, furniyure etc
Goods (Merchandise)It includes all merchandise
commodities which are purchased by a business for selling.
Stock (Inventory)Goods or merchandise on hand,
that is goods remaining unsold is called stock, stack in trade or inventory.