4. FINANCIAL
• Financial means related to finance.
• Financial comes from the word ‘ finance’.
• Finance means money or money worth.
• Money is a medium of exchange of goods and services.
• Barter system was replaced by money.
• Money worth means a thing which can be converted into money.
• Business finance: The money put into business.
6. Statement
• It comes from the word “ state” which means:
• To set forth in words; to express or present in
non-verbal way.
STATEMENT:
• Act of stating.
• Abstract.
13. • ACCOUNTING
• It comes from the ‘ word’ count.
• Accounting means : Systematic
recording,classifying, summarizing, analyzing
and reporting of business transactions.
20. Manufacturing business: Goods are made or
manufactured in an industry and sold.
Trading business: Goods are not manufactured
by the seller. He gets goods from the
manufacturer in bulk and sells.
Service business: In such business, services are
sold instead of goods: Insurance, banking;
telephone, consultancy service, repair service,
etc…..
22. BUSINESS AND NON-BUSINESS DEALINGS
Business Dealings:
• It involves reciprocity of monetary interests or
other benefits.
• Money or money worth comes or goes.
Non-business dealings:
• Reciprocity of monetary interests is not involved
in it.
23. Business or non-business dealings
Mr. A has purchased a car from ABC car
dealer.
Mr. B has gifted a car to his nephew.
Mr. A is a lawyer and obtained fees from B in
a case.
Mr. A gave Rs 1000/- to a bagger.
28. Risk
• Risk is the effect of uncertainty.
• Business always involves a risk.
• Businessman earns profit through risk
management.
• More risk more profit or loss.
• Loss can be avoided or minimized through risk
management.
29. RISK MANAGEMENT :
i. Identification, assessment, and prioritization of
risks;
ii. Then by coordinated and economical application
of resources to minimize the risks;
iii. And to maximize the profit.
• Risk Management is not possible without
Accounting.
30. BUSINESS TRANSACTIONS.
• Business transaction is a business event.
• Business event is an event involving monetary
implication.
• Any thing purchased or sold for business is a business
event.
• Any expense incurred for business is a business event.
• Any investment made in business is a business event.
• Any loan obtained is a business event, etc…..
32. DEFINITION OF ACCOUNTING
• ACCOUNTING IS AN ART OF SYSTEMATIC:
i- Recording;
ii-Classifying;
iii- Summarizing and
iv- Analyzing and Reporting of business
transactions.
33. On 01-01-10 ,I sold goods of Rs.3000/-on credit
to A and on same day I purchased material
from B for Rs 2,000/- On 02-03-10 I sold
goods for Rs.1500/- on cash……………………
IS IT RECORDING OR SYSTEMATIC RECORDING ?
34. ACCOUNTING EDUCATION
• Accounting education means learning the art of
systematic recording of the business transactions.
• This art is a product of the businessmen wisdom
developed all over the world after a long period of
time.
• With the introduction of electronic aids, the field of
Accounting (systematic recording) has further
developed but this art in substance has not changed
yet.
35. RECORDING
• Every thing happening in the business is to be in
written form( be made a part of record).
• Recording is required due to the problem of
memory capacity of human being.
Examples
• Sales to be recorded.
• Purchases to be recorded.
• Employees salaries to be recorded.
36. CLASSIFYING
• Recorded information needs to be classified.
• For recording, classes of income and expenses
to be made.
• Classes of income may be : sales; dividend;
interests on deposits etc..
• Classes of expenses: wages; purchases; utility
expenses; marketing expense etc….
37. SUMMARIZING
• After making classification it is required to sum
up the income and expenses.
• All sales to be summed up .
• All purchases to be summed up.
• All utility expenses to be summed up.
• Then to work out profit or loss for a given period
of time.
• Preparation of the financial statements come
under the summarizing.
38. ANALYZING
• On the basis of accounting information,
progress of the various departments of
business is analyzed.
39. REPORTING
• Accountants are to present all desired
accounting statements to the directors/
owners of the business.
• Reporting is required to review things and to
take future business decisions.
41. FINANCIAL ACCOUNTING
• Recording of business transaction in a day book called
.. Journal entries.
• Transferring these entries in to accounts…… ledger
accounts.
• Preparation of Trial Balance.
• Preparation of Trading Account and Profit and Loss
Account.
• Preparation of Balance Sheet.
• Preparation of mandatory financial statements under
taxation laws.
42. COST ACCOUNTING.
• Unit cost of the goods manufactured is
calculated.
• On unit cost basis sale price is fixed.
43. MANAGEMENT ACCOUNTING
• Use of accounting information for business
decision making.
• Analyzing accounting information for internal
control and future planning.
44. BOOK-KEEPING AND ACCOUNTING
• “Book-keeping” and “Accounting’ are often used
synonymously.
• Book-keeping is related to recording business
transactions in different books.
• 1st stage is Book-keeping and the next is Accounting.
• Book-keeping is a clerical activity.
• Accounting functions are related to preparation of
Financial Statements and their analysis/
communication too.
45. WHY ACCOUNTING?
i. It provides useful information to the owner
for making economic decisions.
ii. Financial statements reflect principal
information about the business economic
health/ activities which are requiring to the
lending agencies and investors.
iii. Preparation of accounting statements is
required under certain laws.
48. HAVE A CIVIL SERVANT ANY ROLE IN
ECONOMIC DECISION MAKING AND
MANAGEMENT?
49. ACCOUNTING AND PUBLIC SECTOR
• Public sector means Government sector.
• Govt.Departments can not function without
money.
• Money is needed to pay salaries; to pay utility
bills; for office furniture; for stationeries, etc….
• For each rupee, incharge of the office is
accountable.
• A successful officer needs to have a reasonable
grip on financial matters.
50. ACCOUNTING AND PUBLIC SECTOR CORPORATIONS
• Civil servants are to serve in various public
sector corporations.
• In public sector corporation, officer can not
perform without having sound knowledge of
accounting.
52. IMPORTANT ACCOUNTING TERMS
• Capital.
• Liabilities.
• Assets.
• Inventory.
• Drawing.
• Accounts receivable.
• Accounts payable.
• Current Assets.
• Current Liabilities.
• Good will.
• Depreciation.
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