Download Amity School of Business FINANCIAL ACCOUNTING

Amity School of Business
FINANCIAL ACCOUNTING
Module I
Introduction to Accounting
Introduction to Accounting
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Meaning
Nature
Functions
Branches
Accounting Equation
Accounting Concepts
GAAP
Difference between GAAP & US GAAP
What is Accounting?
Accounting is defined as:
The art of recording, classifying & 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 results thereof.
• Accounting is often called the “language of business”
– People who perform accounting procedures speak the
language of debits and credits.
• The process of accounting provides useful information that
describe specific things about a company’s financial
position.
What is Accounting?
Three Activities
The accounting process includes
the bookkeeping function.
DIFFERENCE BETWEEN
ACCOUNTANY AND
BOOKKEEPING.
Accounting and Book-Keeping
• Book keeping is merely recording the business
transactions in books and ledgers. It is part of
Accounting. It is often routine and clerical in
nature
• Accounting is a wider concept: Compilation of
accounts in such a way that one is in a position
to understand state of affairs of business
• ACCOUNTING BEGINS WHERE BOOKKEEPING ENDS
Financial Accounting
• Financial accounting - focuses on the
specific needs of decision makers external
to the organization, such as stockholders,
suppliers, banks, and government
agencies
Users of Financial Information
External Users
Internal Users
Government
Customers
Investors
Community
Board of Directors
Management
Employees
Creditors
Suppliers
BRANCHES OF ACCOUNTING
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Financial Accounting
Management Accounting
Cost Accounting
Social responsibility Accounting
Human Resource Accounting
BRANCHES OF ACCOUNTING
• Financial Accounting: It includes Book keeping and the
preparation of Financial Statements.
• Management Accounting: It is a system to assemble and
furnish the useful material and summarized accounting
information to the management.
• Cost Accounting: It deals with the cost of production and its
various constituents.
• Social responsibility Accounting: It is the study of social
effects in addition with the economic effects.
• Human Resource Accounting: is the process of identifying
and measuring data about human resource and communicating
this information to interested parties.
Objectives of Accounting
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To maintain systematic records
To ascertain the operational profit or loss
To ascertain financial position
To satisfy requirements of law, Govt.& other
interested parties
• To facilitate rational & futuristic decision making
• To Provide remedial measures devices for the
deviations of the actual from the budgeted
performance
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Functions Of Accounting
Performance measurement
Forecasting
Government Regulation and Taxation
Evaluation and Control
Decision Making
Fixing Responsibility
Significance of Accounting
Accounting
is a
system that
Identifies
Records
information
Relevant
that is
Communicates
Reliable
Comparable
to help users make
better decisions.
LIMITATIONS OF ACCOUNTING
• Danger of window dressing
• Ignorance about the present value of
business
• Influenced by personal judgments
• Ignores important non-monetary information
• Does not provide timely information