Scribd
Upload
3 views

Notes (1)

tally notes

Uploaded by

faizannnkhan05
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
3 views

Notes (1)

tally notes

Uploaded by

faizannnkhan05
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

Users of Accounting Data-Systems of Book-Keeping and Accounting:

1. Internal Users:

 Management: For decision-making, planning, and controlling operations.


 Employees: To evaluate job security, compensation, and growth opportunities.
 Owners/Shareholders: To assess the profitability and financial health of the
business.

2. External Users:

 Investors: To assess the viability of investing in the business.


 Creditors: To evaluate the company’s ability to repay loans.
 Regulatory Authorities: To ensure compliance with legal and tax obligations.
 Customers: To understand the financial stability of a company.
 Suppliers: To assess the company’s financial health and ability to pay for
goods/services.

Branches of Accounting:

1. Financial Accounting:
o Focuses on recording, summarizing, and reporting financial transactions.
o Produces financial statements like balance sheets and income statements.
2. Cost Accounting:
o Helps in determining the cost of production, operational efficiency, and
control of costs.
o Provides cost analysis for decision-making.
3. Management Accounting:
o Involves analyzing financial data for managerial decision-making.
o Aids in budgeting, forecasting, and performance evaluation.
4. Tax Accounting:
o Deals with taxation rules and the preparation of tax returns.
o Ensures compliance with tax laws and regulations.
5. Forensic Accounting:
o Investigates financial frauds, embezzlement, or any financial discrepancies.
o Focuses on gathering evidence for legal purposes.
Advantages of Accounting:

1. Organized Financial Information: Provides a clear and organized record of


financial transactions.
2. Decision-Making Support: Helps management and stakeholders make informed
decisions.
3. Compliance and Taxation: Ensures adherence to legal and tax regulations.
4. Financial Control: Aids in monitoring and controlling financial performance.
5. Historical Financial Data: Facilitates future financial planning based on past
records.
6. Performance Evaluation: Enables the assessment of profitability, liquidity, and
solvency.

Limitations of Accounting:

1. Historical Cost Principle: Accounts are based on historical costs, which may not
reflect current market value.
2. Non-Financial Aspects: Does not capture non-financial factors like employee morale
or customer satisfaction.
3. Limited by Accounting Standards: Can only present information as per specific
standards, which may not cover all aspects of business performance.
4. Manipulation Risk: Subject to errors or intentional manipulation by those preparing
the accounts.
5. No Forward-Looking Analysis: Accounting primarily deals with past data and does
not predict future trends.

Accounting Concepts and Conventions:

Meaning, Need, and Classification of Accounting Concepts:

 Accounting Concepts: The basic assumptions and principles that form the foundation
of accounting practices.
 Need: Ensures consistency, reliability, and comparability in accounting records.
 Classification:
1. Business Entity Concept: Business and owner are separate entities.
2. Money Measurement Concept: Only transactions that can be measured in
monetary terms are recorded.
3. Going Concern Concept: Assumes the business will continue its operations
indefinitely.
4. Accrual Concept: Revenues and expenses are recognized when incurred, not
when cash is received or paid.
5. Consistency Concept: Consistent accounting methods should be used across
periods.
6. Periodicity Concept: Financial statements are prepared for a specific period
(usually a year).
Need for Accounting Conventions:

 To guide the preparation of financial statements.


 To maintain consistency and reliability in financial reporting.

Classification of Accounting Conventions:

1. Conservatism: Recognizing expenses and liabilities as soon as possible, but revenues


only when they are reasonably certain.
2. Full Disclosure: All relevant financial information should be disclosed.
3. Materiality: Only significant financial information should be reported.
4. Consistency: The same accounting principles should be applied throughout the
periods.

Accounting Standards:

Meaning:

 Accounting standards are authoritative guidelines or frameworks set by recognized


accounting bodies to ensure uniformity, transparency, and accuracy in financial
reporting.

Need:

 Uniformity: To ensure that financial statements are comparable across different


businesses and countries.
 Transparency: To provide clear, understandable, and reliable financial information
to users.
 Regulation: To set standards for accurate reporting and compliance with legal
requirements.
 Investor Protection: To prevent misleading financial information and protect
investors.

Classification of Indian Accounting Standards (Ind AS):

 Ind AS 1 to Ind AS 41: Covers all aspects of financial reporting, from general
principles to specific transactions.
 Ind AS 101: First-time adoption of Ind AS.
 Ind AS 110: Consolidation of financial statements.
 Ind AS 115: Revenue from contracts with customers.

Accounting Principles vs. Accounting Standards:

 Accounting Principles: Fundamental rules or concepts that guide the preparation of


financial statements, like accrual, consistency, and going concern.
 Accounting Standards: Specific, formalized rules that provide detailed guidelines on
how to apply accounting principles in practice.
 Difference: Accounting principles are more general and abstract, while accounting
standards are specific and provide detailed instructions for recording and reporting
transactions.

You might also like