Accountancy Houts/Week: 03 fomatNe Assessment Marks:40 Course Outcomes (COs): + study and understand AccoumtiN8, systems of Book, Branches of accounting advantage and limitations + know the concept of accountit® financial accounting process and Journalization + Maintenance different account ook and reconciliations + Preparations of different bill, and trial balance * Understand the basic concepts of Mathernatical reasoning, set and functions Content Hours Unit -4 Introduction: History and Development of Accounting, Meaning, Objectives and functions of Accounting, Book keeping V/s Accounting, Users of accounting data, systems of book keeping and accounting, branches of accounting, advantages and limitations of accounting 10 hours Unit -2 Accounting Concepts and Conventions ieaning, need and classification, accounting standards meaning, need and classification of Indian accounting standards. Accounting principles V/s accounting standard Financial Accounting Process: Classification of accounting transactions and accounts, rules of debit and credit as per Double Entry System. Journalization and Ledger pasting. 10 hours [unit -3 10 Preparation of Different Subsicliary Books: Purchase Day book Sales Day Book, Purchase! Returns Day Book, Sales Returns Day Book, Cash Book. Bank Reconciliation Statement: Meaning, Causes of Difference, Advantages, Preparation of Bank Reconciliation Statements. Unit -4 ‘Account Procedure: Honor of the Sill Dishonor of the Dill, Endorsement, Discounting| © Renewal, Bill for collection, Retirement Of the Bill, Accommodation Bills, Bill Receivable Book and Payabl® ®°°k. Preparation of Trial Balance: Rectification of errors and Journal Properly a eee ne d classification, Preparation of Preparation of Final Accounts: Meaning, need 9M Manufacturing, Trading, Profit and loss account and Balance ~ Sheet of saletraders and partnership firms. re Text Books: 1, S. Ramesh, B.S. Chandrashekar, A Text Book of Accountancy. V.A. Patil and 1.S. Korihalli, Book — keeping and accounting, (R. Chand and Co. Delhi). 2 3. _R.S. Singhal, Principles of Accountancy, (Nageen Prakash pvt. Lit. Meerut). 4M. B. Kadkol, Book ~ Keeping and Accountancy, (Renuka Prakashan, Hubil) 5. Vithal, Sharma:Accounting for. ~~ Management, Macmillan Publishers, Mumbai. Reference Books; 1. BS. Raman, Accountancy, (United Publishers, Mangalore). 2, Tulsian, Accouning and Finacial Management — |: Financial Accounting — Person Education.1 i INTRODUCTION TO ACCOUNTING “Meaning of Accounting: Accounting is the process of identifying, measuring, recording, classifying and summarising business transactions, analysing and interpreting the results thereof, and communicating the results of the interpretations to the end-users for decision making. Definition of Accounting: ‘The American Institute of Certified Public Accountants defined Accounting as “the art of recording, classifying and summarising, in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof”. Bierman and Derbin defined Accounting as “the identifying, measuring, recording and communicating, of financial information”.Introduction to Accounting pee _Features OR Functions of Accounting: : counting are: The essential features or functions of accounting, 1. Identifying: ; ae Pe inincss bes to identify day to day transaction like purchasing O° b90e=, selling op goods, payment of wages, electricity bills discount, etc for books. Non business transactions should be omil ted. the purpose of recording in prope, 2, Measuring: ’ All the transactions of the business should be expressed in terms of money. For instance, Payment of electricity bill 8 500 per month, purchase of machinery of ¥ 50000, ete, 3. Recording: After measuring business transactions in terms of money, it should record (in journal or in subsidiary books) in the appropriate books in a systematic way as and when it occurs. 4, Classifying: Classifying means categorizing or grouping the similar transactions under one head or in proper books. In other words, classifying means posting the entries into ledger accounts. 5, Summarising: Summarising means presenting the grouped data in a readable and understandable form. For instance, preparation of income statement like profit and loss account and balance sheet. It shows profit or loss and financial position of the business, 6. Analysis and Interpretation: Income statement and balance sheet should critically analyse and interpreted to draw meaningful conclusions regarding the profit or loss and the financial position of the business. 7. Communicating: Interpreted conclusion or outcome has to communicate to the end users for decision making. The end users like management, owner, creditor, customers, employees, government, etc. Meaning of Accountancy: Accountancy is a body of knowledge, recommending the principle or rules governing the recording, summarising and analysing transactions of the business,Introduction to Accounting red Definitions of Accountancy: Eric Kohler defined “Ace i Accountancy is the theory and practice of accounting” _ Importance OR Need OR Objectivesof Accounting: The importance or need or objectives of accounting are 1, Accounting acts like a mirror of the business, The main objectiv cet 2, The objective of accounting is to maintain proper and complete records of business transactions in a systematic way With the help of accounting, organisation can easily ascertain the profit or loss. 4. panes. helps to ascertain the financial position of the business by preparing the balance sheet. Balance sheet shows the assets and liabilities data of the business. 5. Accounting shows to whom the business is liable and who is liable to business. 6. Through accounting owners or managers can easily prevent the errors and frauds in business. 7. Accounting satisfy all the legal requiremer*s like Companies Act, Sales Tax Act, Income Tax Act, etc 8. Accounting information helps the manger to control the overall performance of the business 9, At the end, financial information like profit / loss and financial position of the business has to communicate to the end users like owners, mangers, creditors, suppliers, government, etc for decision making, _ Advantages of Accountin 1, Proper maintenance of business transactions: Records of all the business transactions for a pa rticular period in the book of accounts. 2. Preparation of Financial Statements: Financial statements like Profit and loss account, and Balance Sheets are prepared with the recorded transactions. 3. Comparison of Results: The financial statements facilitate the comparison ‘of business results from one year to another year. 4. Decision Making: End users of accounting can take the decisioi becomes easier for the decision-making authorities tom n regarding investment and also it ake a decision or plan forIntroduction to Accouny, ' Fe 1.4 | ng 5, Evidence in Legal Matters: ments records will become evidence o Related Parties: make financia in the court of law if requireq Financial state i formation t 6. Provides Info | information available for the ow, records Wer, Proper Accounting : ernment ete. employees, customers, £0 7, Helps in Taxation Matters: overnment to calculate and collect the accurate j,, ‘Accounting information helps the g from the business concem. g, Valuation of Business: “Accounting information helps in measuring the value of the business in case of sale. ~ Disadvantages of Accounting 1, Records in Terms of Money: Only monetary business transactions are recorded in the books of accounts and all non. monetary business transactions are ignored or not taken into consideration. 2, Records Based on Estimates: ‘Some data are recorded in the books of accounts based on estimates and the accuracy of records may not be possible. 3, Records at the book value: The balance sheet may not disclose the exact financial status of the business due to the difference between the book value and market value due to the various aspects. 4. Manipulation of Accounts: The accountant may manipulate the financial statements of the business, 5. Changes in Value of Money: Since the value of money keeps changing, the accounting information will not show the true economic position of the company “End Users of Accounting Information: The following are the end users of accounting information, 1. Owners: ‘Owner is a person who invest the capital to start the business So, owner is interested to » know how the capital is utilising i i ; i in the business 5 a and also wants to know the profitability andE_"— Introduction to Accounting 2. Management: The financial information is useful to the ness activities, for taking correct decision f Managers / management to plan the future nus and controlling, the performance of the business. 3, Financial Institutions: Financial institutions grant loans to the business concem after analysing the repayment capacity like short-term solvency andl Jong.te . z +m solvency of the business, 4, Investors: Financial and profit ability position of the business is nee prospective sharel cessary to the investors like holders or debenture holders to invest their hard -camed money 5. Investment agencies: Investment agencies collect and Sive the financial position of the business to their clients to | invest their savings. 6. Creditors or Suppliers of goods on Credit: Creditor is a person who supplies goods on credit. Before supplying goods on credit, they should know the ability of the business to repay the money. So, ereditors are interested to know the liquidity position of the business, 7, Employees: Employees are important asset of the business. They are interested in knowing the financial Position of the business where they are working to demand for higher wages / salaries, bonus, good working atmosphere, etc. 8, Government: ‘The main source of revenue to the government is tax. Accounting information is required to collect tax and also to control monopoly in the country. 9. Researchers: Now a days, number of researches is increasing, For doing research accounting information (like profit and loss account, and balance sheet) is required for researchers. 10, Economists: Economists analyse the economic condition of the country by evaluating the accounting information of the businesses.Introduction to Acc eae “ Mg (0) if consistency: ged from one accounting year ‘hang! ) to Noth, Convention 0 les, practices, procedures }, oul Consistency means uniformity or unc of consistency means accoun fe from one accounting, ‘one accounting period to a tices, procedures, the company needs to ewlain nd ncial statements. Convention ting, princip! ar to another. in uniform or NO changt year to yy inconsistency from les, pract for change in the final remail . nother due to th he chang, If there is an of the accounting principl disclose clearly the reason Convention of full disclosure: Full disclosure means transparency in company’ profit and loss account and balance sheet), so that there i end users of accounting. Financial statements should disclose important and sufficien, information including accounting procedures used in preparing the financig statements, change in accounting procedures, etc. s financial statements (trading and is no chance of misleading i, 5 Meaning of certain basic terms: vy |. Transaction: Each and every financial change which happens in business is a transaction. For example: Purchase of Machinery of & 50,000, which means there is a financial decrease of & 50,000. . Account: a account refers to a summarised record of all the business transactions relates to person, asset, liabilities or service which have taken place for a particular period : For example: Payment of wages to workers, Purchase of Asset, etc. Assets: ; An asset refers to tangibl i ible assets and intangible assets, an na ts, as owned by the business. For Example: Land and een fixed assets and current fotor Car, goodwill, copy rights, etc. ling, Plant and Machinery, Liabilities refers to lon, liabilities iab: to \g-term liabilities and sh« ti 6s : short-term liabiliti i : : eugene : a esate from a busine: nother person. For Example: Share Capital, Debentures, Creditors, etc, . Expenses: Expenses refers to Fi cost like wages, fae ae : ;, factory rent, frei ‘ounting period. Loss: Loss refers spending money without getting any benefit in retu im. in an accounting t be i inti;aE a 16. AZ: 18. 19. 20. 21. 26. 2. y not rest ation that may or may not result in changes,» ge of coins to the currency % a Event: Anevent refers to financial position. the business trans For instance, exch ae sts money oF money's worth for ing, e business as capital. Owner enjoy, . Proprietor or owner is a per yn who inve’ or or owner is a person W! she business. : aera ichinery, etc. into ic of goods, furniture, machinery Be oe of the business and bears all the losses « Capital: Capital refers to the money or ; et etc. invested by the owner or proprieto of the instigation of business. yr instance stock of goods, furniture oney’s worth fo pony, rin to his / her business at the time Drawings: When an owner or proprietor withdrew cash or goods fror personal use is called as drawings. m his/ her business for their Solvent: When a businessman is able to pay all his / her liabilities in full is called to be solvent, In solvent: When a businessman is not able to pay his / her liabilities in full is called to be insolvent. Debtor: A debtor is a person who owes (has to give) money to the business because he has received some benefit from the business. Debt: Debt refers to the amount of a transaction in the business due from a debtor to the business. Bad debt: Abad debt refers to the debt which is not tecoverable. Doubtful debt: A doubtful debt refers to the realisation of debt is doubtful or indefinite Creditor: ; A creditor is a person to whom the busi given some benefit to the business. Goods: Products, uness owes (has to give) money, because he has commodities or things in which a trader deal is called goods.