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    Basic Accounting With Terms

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    Tanjot Kaur
    The document provides an overview of accounting concepts and terms. It discusses what accounting is, the accounting process, accounting information and users, and the purpose of accounting. It also defines key accounting terms like assets, expenses, liability, capital, income, and expenditure.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Basic Accounting With Terms

    Uploaded by

    Tanjot Kaur
    38 views41 pages
    The document provides an overview of accounting concepts and terms. It discusses what accounting is, the accounting process, accounting information and users, and the purpose of accounting. It also defines key accounting terms like assets, expenses, liability, capital, income, and expenditure.

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    account notes

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    The document provides an overview of accounting concepts and terms. It discusses what accounting is, the accounting process, accounting information and users, and the purpose of accounting. It also defines key accounting terms like assets, expenses, liability, capital, income, and expenditure.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    38 views41 pages

    Basic Accounting With Terms

    Uploaded by

    Tanjot Kaur
    The document provides an overview of accounting concepts and terms. It discusses what accounting is, the accounting process, accounting information and users, and the purpose of accounting. It also defines key accounting terms like assets, expenses, liability, capital, income, and expenditure.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 41

    BUSINESS ACTIVITIES

    SELL/ BUY PRODUCT/SERVICE KEEPING TRACK


    IF YOU SELL ANYTHING...
    • MOBILE
    • SOFTWARE
    • Goods and Services
    • LAND
    • OR ANYTHING...
    Accounting For ME???
    • SALES • ACCOUNTING...IS MOST
    • PRODUCT IMP.
    DEVELOPMENT
    • TECHNOLOGY
    • PEOPLE
    WHAT ACCOUNTING DOES?
    Unders
    tanding
    busines
    s better
    Avoid any Improve
    fraud decision

    Keep track of Reduce


    money dependen
    cy
    Can business people and managers
    really ignore accounting?
    ABOUT THIS COURSE..
    • Teach you how to speak language of
    accounting.
    • Help you understand how accounting is done
    in a business
    • Complement your talent with the knowledge
    of accounting.
    ACCOUNTING CONCEPTS
    • WHAT IS ACCOUNTING??
    ACCOUNTING IS..
    • Keeping a track record of all the monetary
    transactions
    • To know various things like..
    • Profit/ loss incurred.
    • Expenses paid
    • Amount of sales/ purchase done
    • Money introduced, spent, left...
    SALES
    INCOME

    PURCHASE

    FINANCIAL STATEMENTS
    MORE PRECISELY..
    • Accounting is beyond recording.

    • It involves recording, classifying,


    summarizing, analysis and interpretation of
    financial transactions in significant manner
    and communicating the same to the users.
    • Recording- keeping track of all financial
    transactions...
    WHERE?
    IN JOURNAL
    IT IS A BOOK OF ACCOUNT WHERE
    TRANSACTIONS ARE RECORDED FOR FIRST
    TIME.
    • CLASSIFYING- Finding out the total affect of all
    transactions in particular account.
    • Eg: All sales done during one month are
    classified under one head ‘SALE’.
    WHERE???
    IN LEDGER- A book in which all the accounts are
    classified.
    Prepared after journal.
    • Summarising- ascertaining the summary of all
    accounts i.e knowing balance.
    • Eg: Balance of sales for the month.
    • EG: knowing profit/loss

    WHERE??
    • IN TRIAL BALANCE- records balances of all
    accounts.
    • IN FINAL ACOUNTS- PROFIT & LOSS
    BALANCE SHEET.
    • FINANCIAL TRANSACTION: ALL TRANSACTION
    WHICH INVOLVE MONEY. (only they are
    recorded)

    • SYSTAMATIC MANNER: In the manner


    prescribed by laws.
    • ANALYSIS AND INTERPRETATION : Finding
    relationships between various accounts
    evaluating past performance and making
    sound decisions.

    WHERE?
    In the managers mind!!!!
    • COMMUNICATING TO USERS- All such
    information should be provided to the users of
    accounting so that they can make a better
    decision.

    WHO ARE THE USERS?


    MORE PRECISELY..
    • Accounting is beyond recording.

    • It involves recording, classifying,


    summarizing, analysis and interpretation of
    financial transactions in significant manner
    and communicating the same to the users.
    THUS..
    • Accounting is system that: IDENTIFY

    RECORDS

    COMMUNICATE
    Books prepared in Accounting
    Users of accounting information
    • Users are the persons who are directly or
    indirectly interested in financial performance
    of a business enterprise.

    • They can be internal or external.


    Users of accounting information
    Purpose of accounting
    • To prepare financial statements and
    communicate to users.

    To find • Profit & loss


    income • Shows profitability
    position

    To find • Financial soundness.


    financial • Amount own >
    amount owe.
    position
    Accounting information
    • Accounting provides meaningful information
    about a business enterprise to the persons
    • who are directly and indirectly interested in
    • the performance and financial position of
    business.

    Financial Statements
    Users which are
    communicated
    Financial statements
    • Statement that shows the income position
    and financial position of a business.

    Tells about profit


    and loss incurred

    Tells about what a firm


    owes and owns.
    Identify who is this??
    • I have lend my money and want my money
    with interest from company.
    • I am analyzing the organization's performance
    and position and taking appropriate measures
    to improve the company results.
    • I want to see how my salary will increase with
    company performance.
    Identify who is this??
    • I want to make sure that the company can
    earn a reasonable return on their investment
    before I commit any financial resources to the
    company.
    • I want to see the financial statements, to see
    whether the company has done the
    accounting as per the laws.
    • I want to tax this company.
    Advantages of accounting
    • Replacement of human memory
    • Evidence in court
    • Settlement of tax liability: a business has to pay
    various taxes, which it can assess through
    accounting.
    • Comparative study: Business can compare with
    its competitors and its previous years.
    • Helpful to various users
    • Helpful to insolvent persons.
    Limitations of accounting
    • Records only monetary transactions
    • No consideration to price level changes
    • No realistic information: asset in books may
    not be realisable.
    • Personal bias
    • Different methods give different results
    • Profit is not the real tester of business.
    Evaluation
    • What is accounting?
    • What is the accounting process?
    • What is accounting information?
    • Who are the users of accounting information?
    • What is the purpose of accounting?
    • What are the advantages and disadvantages
    of accounting?
    BASIC TERMS IN ACCOUNTING
    • ASSET: Any item of economic value owned by an
    individual or corporation, especially that which
    could be converted to cash.

    • Examples: Cash, securities, accounts receivable


    (debtors), inventory, office equipment, real
    estate, a car, and other property
    Expenses
    • Expense is a kind of expenditure whose
    benefit is enjoyed or finished immediately.
    • Short term expense.
    • Money spent or cost incurred in
    an organization's efforts to generate revenue.
    Types of Asset

    Current asset

    Fixed asset

    Deffered asset
    Types of asset
    • From an accounting perspective, assets are
    divided into the following categories:
    • Current assets: Held for short time (cash and
    other liquid items like securities, bank balance)
    • fixed asset: Held for long period of time. long-
    term assets (real estate, plant, equipment),
    • Prepaid and deferred assets)
    (expenditures for future costs such
    as insurance, rent, interest), and
    • Intangible
    assets (trademarks, patents, copyrights, goodwill
    .
    Debtor

    A SOLD GOODS TO B ON CREDIT

    Mr.A
    Mr.B
    CREDITOR
    • A PURCHASED GOODS FROM B ON CREDIT

    Mr.A
    Mr.B
    DEBTOR & CREDITOR
    • A PERSON WHO OWES MONEY (AMOUNT
    RECIEVABLES)

    • A PERSON TO WHOM MONEY IS OWED


    (AMOUNT PAYABLE).
    CAPITAL
    • THE OWNER’S FINANCIAL HOLDING IN
    BUSINESS.

    OWNER’S
    •CASH
    FUND •ASSET

    BORROWED •CASH
    FUNDS
    •ASSET
    EQUITY
    • CLAIM AGAINST ASSET.

    • EQUITY OF OWNER----------CAPITAL
    • EQUITY OF CREDITOR-------LIABILITY.
    INCOME & EXPENDITURE
    • INCOME-----POSITIVE CHANGE IN OWNER’S
    EQUITY
    ( EARNINGS) . INFLOW OF MONEY.

    EXPENDITURE-----TAKES PLACE WHEN SOME ASSET


    IS ACQUIRED.
    EXPENSES-----BENEFIT IS ENJOYED IMMEDIATELY.
    OUTFLOW OF MONEY.
    LIABILITY
    • AMOUNT WHICH IS OWED BY BUSINESS.
    • WHAT A BUSINESS HAS TO PAY.
    • TYPES
    SHORT TERM
    LIABILITY

    LONG TERM
    LIABILITY
    OTHER TERMS..
    • DRAWINGS
    • DEPRECIATION
    • TURNOVER
    • LOSS
    • PROFIT
    • GAIN

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