CHAPTER 1.pptx - CHAPTER 1 Introduction to Accounting MEANING AND SCOPE OF ACCOUNTING Accounting is the language of business The main objectives of

CHAPTER 1.pptx - CHAPTER 1 Introduction to Accounting...

This preview shows page 1 - 8 out of 41 pages.

CHAPTER 1 Introduction to Accounting
Image of page 1
MEANING AND SCOPE OF ACCOUNTING Accounting is the language of business. The main objectives of Accounting is to safeguard the interests of the business, its proprietors and others connected with the business transactions.
Image of page 2
DEFINITION OF ACCOUNTING According to AICPA (American Institute of Certified Public Accountants) it is defined as "the art of recording, classifying and summarizing 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 result thereof.“ The American Accounting Association defines accounting as "the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of the information."
Image of page 3
STEPS OF ACCOUNTING The following are the important steps to be adopted in the accounting process: Recording: Recording all the transactions in subsidiary books for purpose of future record or reference. It is referred to as "Journal." Classifying: All recorded transactions in subsidiary books are classified and posted to the main book of accounts. It is known as "Ledger.“ Summarizing: All recorded transactions in main books will be summarized for the preparation of Trail Balance, Profit and Loss Account and Balance Sheet. Interpreting: Interpreting refers to the explanation of the meaning and significance of the result of final accounts and balance sheet so that parties concerned with business can determine the future earnings, ability to pay interest, liquidity and profitability of a sound dividend policy.
Image of page 4
FUNCTIONS OF ACCOUNTING From the definition and analysis of the above the main functions of accounting can be summarized as: i. Keeping systematic record of business transactions. ii. Protecting properties of the business. iii. Communicating the results to various parties interested in or connected with the business. iv. Meeting legal requirements
Image of page 5
OBJECTIVES OF ACCOUNTING Providing suitable information with an aim of safeguarding the interest of the business and its proprietors and others connected with it. To emphasis on the ascertainment and exhibition of profits earned or losses incurred in the business. To ascertain the financial position of the business as a whole. To ensure accounts are prepared according to some accepted accounting concepts and conventions.
Image of page 6
BOOKKEEPING AND ACCOUNTING Bookkeeping may be defined as "the art of recording the business transactions in the books of accounts in a systematic manner." A person who is responsible for and who maintains and keeps a record of the business transactions is known as Bookkeeper. His work is primarily clerical in nature. On the other hand, Accounting is primarily concerned with the recording, classifying, summarizing, interpreting the financial data and communicating the information disclosed by the accounting records to those persons interested in the accounting information relating to the business.
Image of page 7
Image of page 8

You've reached the end of your free preview.

Want to read all 41 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture