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Book Keeping:
A knowledge that educates us to maintain the financial records.
It is the part of accounting.
Recording of financial data in the books of accounts.
Identifying financial transactions and events.
Measuring them in terms of money.
Classifying recorded transactions and events, i.e posting them into ledger accounts.
Accountancy:
Accountancy is a systematic knowledge of accounting. It explain how to deal with
Various aspects of accounting.
It educate us
(i) How to maintain the books of accounts
(ii) How to summarise the accounting information.
(iii) How to comunicate it to the users:
Objectives of accounting:
1. Record of financial transactions and events:
2. Determine profit or loss.
3. Determine financial position
4. Assisting the management
5. Communicating accounting information to users
6. Protecting Bussiness assets:
Users of Accounting Informations:
1) Internal or Primary Users: of accounting information:
(i) Management: For analyzing the organization's performance and position and
taking appropriate measures to improve the company results.
(ii) Employees: for assessing company's profitability and its consequence on their
future remuneration and job security.
(iii) Owners: for analyzing the viability and profitability of their investment and
determining any future course of action.
(2) External users (Secondary Users) of accounting information:
(i) Creditors: for determining the credit worthiness of the organization.
(ii) Tax Authourities: for determining the credibility of the tax returns filed on behalf
of the company.
(iii) Investors: for analyzing the feasibility of investing in the company. Investors
want to make sure they can earn a reasonable return on their investment before they
commit any financial resources to the company.
(iv) Customers: for knowing the financial position of its suppliers which is necessary
for them to maintain a stable source of supply in the long term.
(v) Regulatory Authorities: for ensuring that the company's disclosure of accounting
information is in accordance with the rules and regulations set in order to protect the
interests of the stakeholders who rely on such information in forming their decisions.
Functions of Accounting:
www.atpeducatioAccounting Informations
1. Information rellating to profit:
2. Information Relating to financial position.
3. Cash flow statement
Ussers of Accounting information
(1) Internal Users
a. Owners
b. Management
(2) External Users
a. Banks and financial Institutes
b. Investors and potencial Investors
c. Creditors
d. Governments and its authority
e. Emplyees and Workers
f. Researchers
g. Society
Basic Terms in Accounting
(1) Entity: Entity means a reality that has a definite individual existence.
Business entity: It means a specifically identifiable business enterprise like Super
Bazaar, Hira Jewellers, ITC Limited, etc. An accounting system is always devised for
a specific business entity (also called accounting entity).
(2) Transaction: A event involving some value between two or more entities or
parties. The financial transaction is made or recorded in the books of accounts in the
term of money. It can be a purchase of goods, receipt of money, payment to a creditor,
incurring expenses, etc. It can be a cash transaction or a credit transaction.
(3) Capital : Amount invested by the owner and partner in the firm is known as
capital. Which may be in the form of money or assets having monetary value.
(4) Account: Account is summarised record of financial expenditures and receipts
or transactions relating to a particular period or purpose at one place.
(5) Drawings: The money which is withdrawn by owner for personal uses is known
as drawings.
(6) Assets : Assets are valuable or economic resources of an enterprise that can be
usefully expresses in monetary terms. Assets are items of value used by the business
in its operations. Examples: land, building, machinery, stock, bill recievable,
furniture, goods etc.
Assets can be classified into three parts:
(i) Non-current Assets : Non current Assets are those assets which are made by a
bussiness firm for a long-term of view.
(ii) Current Assets
(iii) Fictitious Assets
(7) Banking: Continuing financial relationship between a customer and a bank in the
term of money or a special kind of asset within a framework of established rules and
procedures by making deposits and debts.
(8) Commerce: It is a accounting term which is used for going contractual
relationship between a buyer and a seller whereby payment is made for goods
received within a time period.
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