A Brief Presentation on Accounting

Accounting
Accounting is the art of collecting, arranging, summarising facts & figures in terms of money, transaction and events which are in part of a financial character. In other words we can say it as keeping track of records & figures related to financial statements. Accounting plays a vital role in our life for e.g depositing money in bank is related to financial matter that gets added up in the savings passbook & the final statement of transaction is prepared, the whole process can be termed here as Accounting.

Why do we need accounting?

Studying accounting helps to serve for various purpose: It helps to keep systematic record of business transaction is considered to be the main objective of accounting. As we encounter that bank transaction are recorded & updated on daily basis. To calculate net profit earned or loss suffered on account of business transaction of a particular period. For e.g profit & loss occurred in a business firm or in an MNC. To prevent and detect errors and frauds so that any anonymous person cant misinterpret with

Book-keeping
With the word Accounting there arises various synonymous(similar words) & Book-keeping is considered as one of such words. Book-keeping is mainly concerned with maintaining systematic record of financial transaction. It is considered as the primary stage of accounting.

Accounting Principles
It is defined as set of principles, assumptions & concepts that are laid down to evaluate accounting in a particular manner. Accounting principles can be subdivided into two categories: 1. Accounting Concepts 2. Accounting Convention

Accounting Concepts
Any of the general assumptions on which accounts are prepared based on accounting concept. They are of various types:1. Basic Entity Concept 2. Dual Aspect Concept 3. Money Measurement Concept 4. Cost Concept 5. Going Concern Concept 6. Realization Concept

Business Entity As Assumption per this assumption the owner of a

business is always considered distinct separate from the business he owns.

Dual Aspect Concept

Each transaction has two aspects, that is, the receiving benefit by one party and the giving benefit by the other which is considered to be one of the core principle of accountancy. Thus, the dual aspect can be expressed as under Capital + Liabilities = Assets or

Money Measurement Concept

In this concept we record only those transaction which are expressed in monetary terms.

Cost Concept

Transactions are entered in the books of accounts at the amount actually involved. Suppose a commodity is purchased at Rs 8,000/- the real value of which is Rs 10,000/-, the purchase will be recorded as Rs 10,000/- and not any more, it helps us to prevents arbitrary values being put on transactions entry.

Going Concern Concept

According to this concept, it is assumed that the business will exist for a long time and transactions are recorded on this basis. This concept forms the basis for the distinction between expenditure that will yield benefit over a long period of time and short period of time.

Realization Concept
It is considered as one of the basic concepts of accounting. Realization means that the money has exchanged hands, or been realized. For e.g if a person things of purchasing a car then there is no realization but when he exchange money with whomever he/she has purchased the car then realization takes place.

Accounting Convention
It refers to signify customs and traditions as a guide to the presentation of accounting statements. There are three kinds of convention in accounting:1. Convention of Consistency 2. Convention of Disclosure 3. Convention of Conservation

Convention of Consistency
It is essential that accounting practices and methods remain unchanged from one accounting period to another. The comparison of one accounting period with that of another is possible only when the convention of consistency is followed.

Convention of Disclosure

This convention implies that accounts must be honestly prepared and all material information must be disclosed therein.

Convention of Conservation
Financial statements are always drawn up on rather a conservative basis. In other words, secret reserves are not permitted.

Limitations of accounting
Based on Accounting concepts & convention:- Accounts are prepared on the basis of a number of accounting concepts & convention. So there lies some difference for e.g fixed assets are shown in their cost and not at their market value. Unsuitable for forecasting:- Financial accounts are only a record of past events. As such, the financial analysis based on past events may not be of

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