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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Fundamentals of, Accounting, Glimpse of the Session, • Definition
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•, •, •, •, •, •, •, •, •, , Systems of Accounting, Functions of Accounting, Basis of Accounting, Classification of Accounts, Golden Rules of Accounting, Examples, Books of Accounts – Manual Vs Software, Financial Statements -- Meaning and contents, Reporting, , Accounting Definition, • Recording
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , • Classifying, • Summarizing, • Analyzing, • Interpreting, • Communicating, Transactions & Events in Monetary Terms
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Examples of Events/Transactions, o, o, o, o, , Received Loan from Uncle of Rs.8,00,000 through Cheque, Opened Bank Account & deposited Cheque, Purchased Land for Rs.4,00,000, Given Advance for purchase of Godown Building, Rs.75,000 o Bought a Motorcycle for Rs.50000 o Given, loan to friend Rs.1,00,000, o Started small business by investing Rs.50000 for Tables/, Chairs/Furniture o Purchased Goods, for Rs.1,00,000 o Sold 80% of those Goods, for Rs.1,20,000
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , o Friend repaid Rs.75,000 out of loan given by you within 1, month, o Paid Income Tax on Profit made during period, o Received Advance amount of Rs.50,000 from Customers, to whom you promised to supply after 1 month, , Recording, • Process in which the financial transactions, and events that are identified are recorded, in Books
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• These typically would be, – Cash Book/ Bank Book, – Purchase and Sales Books, – Bills Receivable and Bills Payable Books, – Purchase and Sales Return Books, – Journal Book (other than above), , Classifying, • Process where transactions or entries of, one or similar nature are grouped.
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , • The book containing classified information, is called “Ledger”., • For Example, there may be separate, account heads for Sales, Purchases, GST,, Salaries, Rent, Office Expenses, Taxes, Paid, Advertisement expenditure etc.,
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Summarizing, • Involves preparation and presentation of the, Classified Data in a manner useful to various, internal and external users., • Leads to the preparation of the following, financial statements, o Trial Balance o Profit, and Loss Account o, Balance Sheet o CashFlow Statement
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Analysis & Interpretation, • Includes analyzing and then interpreting, the financial data to make a meaningful, judgement of the profitability and financial, position of the business., • The financial statement should explain not, only
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– „what had happened‟ but also, – „why it happened‟ and also, – „what is likely to happen under specified, conditions‟, , Communicating, • It is concerned with the transmission of, analyzed and interpreted information to the, end-users to enable them to make rational, decisions
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , • This includes preparation and distribution of, accounting statements/Annual Reports, , Users of Financial information
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INTERNAL USERS, • Board of Directors, • Partners, • Managers, • Officers, • Employees, , EXTERNAL USERS, • Investors, • Lenders, • Suppliers, • Government, • Customers, , Functions of Accounting, Measurement, , Measures past performance of the business entity, and depicts its current financial position
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Forecasting, , Helps in forecasting future performance and financial, position of the enterprise using past data, , Decision-making, , Provides relevant information to the users of, accounts to aid rational decision making, , Comparison &, Evaluation, , Assesses performance achieved in relation to targets, which is important for predicting, comparing and evaluating the, , financial results, , Control, , Defines weaknesses of the operational system and, provides feedbacks regarding effectiveness of, measures adopted to check such weaknesses
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Govt. Regulation & Provides necessary information to the government to, Taxation exercise control on the entity as well as in collection of tax revenues
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Basis of Accounting, Cash Basis, , Accrual Basis
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Comparison of Methods, CASH BASIS, •, , •, •, , •, , Recognizes revenues when cash, is received and expenses when, they are paid., Does not recognize accounts, receivable or accounts payable, Beneficial in terms of tracking how, much cash the business actually, has at any given time, Since the transactions are not, recorded until the cash is received, or paid, the business‟s income is, not taxed until it is in the bank, , ACCRUAL BASIS, •, , •, , •, , Revenues and expenses are, recorded when the are earned, or Due, regardless of when the, money is actually is received, or paid, Gives a more realistic idea of, income and expenses during a, period of time, therefore, providing a long term picture of, the business that cash, accounting can‟t provide, Most widely followed method,, mandatory for Companies etc.,
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , DOUBLE ENTRY SYSTEM OF BOOK, KEEPING, • This is the system of Keeping the Books of, Accounts world wide and now India is also, following the same, • It is based on the principle that “every business, transaction has two accounts in opposite, directions and if a complete record is to be made, of each such transaction, it would be necessary
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to Debit one account and Credit one Account.” •, So “every Debit has corresponding Credit and, every Credit has corresponding Debit with, equal amount”, , Classification, of Accounts, Personal, , Real, , Nominal
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Personal Accounts, • Natural personal accounts: The elements or, accounts which represent persons. E.g. Kumar‟s A/c,, Asha A/c etc., • Artificial personal accounts: Personal accounts, which are created artificially by law, such as corporate, bodies and institutions, are called Artificial personal, accounts. Ex. Private Ltd Companies, LLPs, Clubs,, Societies/Schools etc.
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• Representative personal accounts: Accounts which, represent a certain person or a group directly or, indirectly. E.g. Outstanding expense a/c, Prepaid, expense a/c
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Golden Rule for “Personal Accounts”, Debit the Receiver, , Credit the Giver
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Example :, Paid M/s Mitra Agencies Rs.25,000 by Cheque, Accounts, Involved, , Debit/Credit, , • Mitra Agencies, A/c, , • Debit, , • To Bank a/c, , • Credit, , Rule Applied, • Personal, a/cDebit the, Receiver, • Personal, a/cCredit the, Giver
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Real Accounts, • All assets of a firm, which are tangible or intangible,, fall under the category “Real Accounts“., • Tangible real accounts are related to things that can be, touched and felt physically. Few examples of tangible real, accounts are Building, Machinery, Stock, Land etc., • Intangible real accounts are related to things that can’t, be touched and felt physically.
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Few examples of such real accounts are Goodwill,, Patents (new Invention), Trademarks (Brand Name, such as Chutneys, Chermas, Bata, Titan etc.), , Golden Rule for “Real Accounts”, Debit what comes in, , Credit what goes out
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Example :Purchased Furniture for Rs.10,000 in cash, Accounts Involved, • Furniture a/c, , • To Cash a/c, , Debit/Credit, • Debit, , • Credit, , Rule Applied, • Real a/c-Debit, what comes in, • Real a/c-Credit, what goes out
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Nominal Accounts, • Accounts which are related to expenses, losses,, incomes or gains are called Nominal accounts., • Nominal accounts do not really exist in physical form,, but behind every nominal account money is involved., E.g. Purchase A/c, Salary A/c, Sales A/c, Commission, paid A/c, Commission received A/c, • The final result of all nominal accounts is either profit, or loss which is then transferred to the capital account.
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Golden Rule for “Nominal Accounts”, Debit all expenses and losses, , Credit all incomes and gains
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Example : Paid Salaries of Rs.20,000 in cash, Accounts, Involved, , Debit/Credit, , • Salaries a/c, , • Debit, , • To Cash a/c, , • Credit, , Rule Applied, • Nominal a/cDebit all, expenses, • Real, a/cCredit, what goes, out
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Basic Accounting, Rules, ◼, , Credit, , ◼, , Debit, Expenditure, , Income, , 29
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◼, , Liability, , ◼, , Asset, , Rules of Accounting, Type of Account, Personal, , Debit, The Receiver, , Credit, The Giver, , 30
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Real, , What Comes In What goes out, , Nominal, , All Expenses & All Incomes &, Losses, Gains, , Flow of Accounting, Understanding the Transaction, , 31
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Voucher Entry, , Posting, Balancing, Trial Balance, , P & L Account, , Balance Sheet, , 32
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Financial Statements, Financial Statements are Summary-level reports, about an organization's financial results, financial, position and cash flows. Useful for:, • Determine the ability of a business to generate cash,, and the sources and uses of that cash., • Determine whether a business has the capability to, pay back its debts.
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• Track financial results on a trend line to spot any, profitability issues., • Investigate the details of certain business transactions, , Standard contents of a set of financial statements:, • Balance Sheet : Shows the entity's assets, liabilities, and, shareholders' equity as of the report date., • Income Statement : Shows the results of the entity's, operations and financial activities for the reporting period., It includes revenues, expenses, gains, and losses.
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , • Statement of Cash Flows : Shows changes in the entity's, cash flows during the reporting period., • Supplementary Notes : Includes explanations of various, activities, additional detail on some accounts, and other, items as mandated by the applicable accounting, framework, worldwide, , Structure of Accounting, Ledger Accounts
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Credit, Liability, , Debit, , Income, , Expenditure, , Asset, , P & L Account, Balance Sheet, , 30
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Ledger Grouping, Income Groups, , Expenditure, Groups, , Liability Group, , Asset Group, 37
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Profit and Loss Account(P&L), • Financial statement that summarizes the revenues,, costs, and expenses incurred during a specified, period, usually a year or even Quarterly (for Stock, Exchange Listed Companies)., • This Statement provide information about a, company's ability or inability to generate profit by, increasing revenue, reducing costs, or both.
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , • P&L Management refers to how a company, handles its Profit or Loss through revenue and cost, management, by taking suitable decisions., , Profit & Loss Account Group, Income, Direct Income, Indirect Income, Sales Accounts, , Expenditure, Direct Expenses, Indirect Expenses, Purchase Accounts, 39
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Balance Sheet, •, , A balance sheet is a financial statement that, reports a company's assets, liabilities and, shareholders' equity at a specific point in time,, and provides a basis for computing rates of, return and evaluating its capital structure., , •, , It is a financial statement that provides a, snapshot of what a company owns and owes,, as well as the amount invested by, shareholders.
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Balance Sheet Group, Liabilities :, Capital, Reserves & Surplus, Loans (Liability), • Secured Loans, • Unsecured Loans, Current Liabilities, , •, , Bank OCC/Bank, OD, • Provisions, • Sundry Creditors, Assets :, Fixed Assets, Investments, Current Assets, 41
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– Bank Accounts, – Cash in Hand, – Sundry Debtors, , – Deposit (Assets), – Loans & Advances, (Asset), , Computerization of Accounts, • Like all functions which are being automated now,, Accounting is also automated through, Computerization & Specific Accounting Softwares, • Computerized Accounting System is Accounting, Information System which processes financial, transactions and events as per Generally
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , Accepted Accounting Principles (which we saw, earlier) to produce Reports as per User, Requirement, • Based on the size of organization, there may be, „Single User‟ software or there may be a „Server, having Software‟ with number of users, • „Tally‟ and „Focus‟ are most widely used, Softwares in India, , 43
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Manual Accounting, • It is a system of accounting, that uses physical account, books for keeping financial, records., • All, the, calculation, performed manually., , is, , •, Entries are made in Book of, Original Entry.
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , • The final result is to provide, the Financial Statements at, the end of the year., , Computerized Accounting, •, , It is a system of accounting that, uses an accounting software for, recording financial transactions, , electronically, , • Only data input is required, the calculations are performed by, computer system., , • Entries are recorded in software like Tally, Focus, Quick Books etc.
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• The final result is to provide Financial Statements at any time given, in a year., , Cash Flow Statement, • Cash Flow Statement summarizes the amount, of cash and cash equivalents entering and, leaving a company during a particular period, of time
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•, •, •, , To join our Demo Class Click here RAGHVI TUTORIALS FOR COMPETITIVE EXAMS, To visit our website, Click here, To download our Mobile App, Click here, , • The cash flow statement (CFS) measures how, well a company generates cash to pay its debt, obligations and fund its operating expenses., , Annual Report, • An annual report is a publication that public corporations, must provide annually to shareholders to describe their, operations and financial conditions and contains detailed, financial and operational information.
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• The intent of the required annual report is to provide, public disclosure of a company's corporate activities over, the past year., • The report is typically issued to shareholders and other, stakeholders who use it to evaluate the firm's financial, performance.
