Symbiosis Institute of Telecom Management

ACCOUNTING CONCEPTS - II

A.V.Chirputkar, Faculty - Finance, SITM.

M.Com. F.C.A. C.I.S.A. (USA)

2006 Cisco Systems, Inc. All rights reserved.

Cisco Public

Accounting Elements
Assets Balance Sheet Liabilities Balance Sheet Equity Balance Sheet ( The Balance Sheet gives you a financial position) Income Profit & Loss Account

Expenses Profit & Loss Account

( The profit & loss account gives you profit / loss)

SITM
2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Accounting Equation
We follow double entry system of Accounting developed in 15th century in Italy by Luca Pascioli The basic accounting equation is;

Equity + Liabilities = Assets

The entire accounting is based on three fundamental rules of debit and credit. Every transaction has two aspects which can be recorded with the help of these rules.

Three types of Accounts Personal, Real, Nominal

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2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Four Phases in Accounting Process

Journalising of transactions & events; Ledger posting & balancing;

Preparation of Trial balance;

Preparation of Final Accounts.

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2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Systems of Book Keeping

Single Entry System : It is an incomplete double entry system. All the records are not kept, only essential transactions related to cash and personal are recorded.

Double entry System: It is a system in which two fold aspects of transactions are recorded. ( Dual aspect concept). It recognises that every transaction has two fold effects.

SITM
2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Systems of Accounting
Cash System of Accounting: It is a system of accounting in which accounting entries are made when cash is received or paid.

Accrual / Mercantile System of Accounting: It is a system in which accounting entries are made on the basis of amount becomes due for receipt or payment.

SITM
2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Ideal System
Double Entry System of Book keeping; Accrual System of Accounting.

Recognition of system of book keeping and accounting under different laws like Companies Act, Income Tax Act and various laws as such.

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2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Distinction Between Capital and Revenue

Why distinction is necessary? Meaning of Capital and Revenue;

Matching Concept
Effect on Revenue and financial position

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2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Distinction Between Capital & Revenue Income

Capital Income / Capital Gains; Revenue Income;

Other Income;
Income of exceptional and non-recurring nature.

Effect of above on financial statements of company.

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2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Distinction Between Capital & Revenue Expenditure

Capital Expenditure; Capital WIP; Revenue Expenditure; Deferred Revenue Expenditure;

a) Prepaid Expenses

b) Amounts representing losses i.e. fictitious assests

c) Preliminary Expenses

SITM
2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Classification of Receipts
Capital Receipts: Sale of fixed assets, capital raising activity etc. Revenue Receipt: Receipts other than capital receipts. The distinction is based on nature of industry rather than nature of assets.

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2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Q&A

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2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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Thanks

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2006 Cisco Systems, Inc. All rights reserved. Cisco Public

28-Jul-12

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