Accounting introduction.

1. SUBBU PULLELA

2. ACCOUNTING INTRODUCTION
LET’S START WITH AN EXAMPLE…
MY FATHER GAVE ME ₹ 500 TO MEET SOME OF MY
EXPENSES. WITH THAT I MET THE FOLLOWING EXPENSES:
 TIFFIN ₹ 20
 BUS TICKET ₹ 10
 BROUGHT A RECORD BOOK ₹ 50
 BROUGHT A PEN FOR ₹ 10
 TOOK BUS PASS ₹ 350
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TOTAL ₹ 440
FINALLY I HAVE LEFT ₹ 60 WITH ME.

3. After 15 days my father asked me about my expenses, and I gave
the details as I remembered:
TIFFIN ₹ 15
 BROUGHT A RECORD BOOK ₹ 50
 BROUGHT A PEN FOR ₹ 15
 TOOK BUS PASS ₹ 350
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TOTAL ₹ 430
HE ASKED ME ABOUT THE DIFFERENCE OF ₹ 10.

4. I prepared to put all those on a paper as follows:
 Tiffin ₹ 20
 Bus ticket ₹ 10
 Brought a record book ₹ 50
 Brought a pen for ₹ 10
 Took bus pass ₹ 350
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TOTAL ₹ 440
As an individual it is ok to explain each and every record but
where as business concern it is not possible to explain each and
every record, because there is a lot of records.

5. To avoid this problem the Accounting System has been
introduced.
As I’m communicating my words using a language called
English the business can communicate it’s transactions
using a language called Accounting.
Accounting records all Business transactions in ‘Books’ or
‘Ledgers’ this is called Book-Keeping.
Book-keeping is simply keeping the records of business
transactions
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6. SUBBU PULLELA
 Accounting is a language of business, it helps
to communicate the business transactions to
the users.
 The main objective of any business is to make
profit.
 Profit is difference between the price at which
the trader purchases goods and sells the same.

7. • To know the true profit or loss of the business for a
particular period.
• To have a permanent record for all mercantile
transactions taken place in the business.
• To know the financial position of the business at any
point of time.
• To know the amounts due to suppliers from whom the
goods bought on credit.
•
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Need of Accounting :

8. • To know the amounts due from customers to whom
the goods are sold on credit.
• To keep all changes in the values Assets and
Liabilities on any date.
• To know whether the line of business is profitable or
not, if not, reasons for the same.
• To keep watch on expenses with a view to minimize
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the same.
• To provide relevant information for Legal and Tax
purpose when required.

9. ACCOUNTING DEFINITION
Accounting has been defined as
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“ The art of recording, classifying and summarizing in a
significant manner and in Terms of money transactions
and events which are of financial character and
interpreting the results ”.

10. Recording - This is first stage of accounting which is deals with recording
i.e. journalizing the transactions.
Classifying - The second stage of accounting is classifying the transactions
into Expenditure, Income, Assets and Liabilities. After
classifying the transactions the journalized entries will be
posted to th respective ledger accounts.
Summarizing - The third stage of accounting is summarizing the data into trail
balance for preparation of financial statements.
Interpreting -The last stage of accounting is interpreting the result to the users
like government, creditors, debtors, employees etc…
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Analysis of Definition:

11. Types of Accounts
Personal Account Deals with persons ( Artificial / Natural)
Real Account Deals with properties
Nominal Accounts Deals with Expenditure, Losses, Incomes an
gains
Golden Rules of Accounts
Personal Account
Debit the receiver
Credit the giver
Real Account
Debit what comes in
Credit what goes out
Nominal Account
Debit all expenses and losses
Credit all incomes and gains
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