(1) foundation course in finance and accounts

8/8/2019 (1) Foundation Course in Finance and Accounts

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Foundation Programin

Accounts and Finance

By

Rajesh Arora

B.Com.(Hons.); MBA(Finance); M.Com.; MFM;

M.Phil.(Mgmt.); Doctorate in Mgmt.;DIM; ADIM; DFM.

Member of AIMA and DMA

Life Member of Indian Society for Technical Education


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Accountancy:

It is a specialized body of knowledge

through which we learn to make and practiceAccounting.

Accounting:

It is the art of recording, classifying and

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.( As per AICPA )


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Book keeping

Identifying the transactions

Measuring the identified transactions;

Recording the measured transaction;

Classifying the recorded transactions.


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Accounting process:

1 Finding out the financial transactions;

2 Recording of the financial transactions in the books of

prime entries which are extension of Journal book;

3 Classifying the financial transactions under their

respective accounts heads in separate set of accountsbook called Ledger;

4 Summarizing the financial transactions in form of trial

balance and financial statements;

5 Analysis and interpretation of the financial results and

health of the concern.


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1 Helps the management in planning and decision making

process;

2 Helps in determining the profitability of the concern;

3 Helps in understanding the financial health of the

concern;

4 Helps in maintaining the records of the concern under thechronological sequence;

5 Helps in conducting the comparative study of the

concern;

6 Recording undertaken acts as aid to memory;

7 Acts as a legal evidence;8 Helps in determining the value of the business;

9 Projected accounting statements helps in raising loans.

Merits of accounting:


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Limitations of Accounting:

1 Does not consider human beings as an asset of theconcern;

2 Does not take into consideration non monetary

transactions;

3 Possible to draw them wrongly;

4 Wrong interpretation possible;

5 Does not take into account cash basis of recording

transactions;

6 Does not indicate the future of the concern.

7 Ignores price level changes as it is based on historical

costs;

8 Not free from personal bias;

9 Shows estimated positions but not real positions.


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Types of Accounting:

1 FinancialAccounting;

2 CostAccounting;

3 ManagementAccounting;

4 InflationAccounting;5 Social responsibilityAccounting;

6 Human ResourceAccounting.


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Parties interested in Accounting

1 Owners;

2 Investors;

3 Employees;

4 Suppliers;

5 Customers;6 Lenders;

7 Tax authorities;

8 Competitors;9 Researchers;

10 Etc.


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Basic accounting terms:Business entity;

Events economic and non economics;

Transactions business and non business;

Assets currents assets;

fixed assets ( tangible and

intangible);

Liabilities current liabilities and long term

liabilities;

Discount cash discount and trade discount;

Capital;

Drawings;

Purchases cash and credit;

Sales cash and credit;

Incomes;

Revenues;Expenses;

Debtors;

Creditors;

Stock.


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Accounting information system:

INPUT PROCESS OUTPUT

Economics Recording; Communicating

Events classifying; information

In summarizing; toFinancial analyzing; users.

Terms. Interpreting.


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Characteristics of accounting information

Reliability;

Relevance;

Understandability;

Comparatively.


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Basis of accounting

- Accrual basis of accounting;

- Cash basis of accounting.


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GAAP (Generally accepted

accounting principles)

GAAP are those rules of actions or conduct

which are derived from experience and

practice.When they are proved useful, they become

accepted as principles of accounting.

PRINCIPLES are sustainable authoritative

support which become part ofGAAPs.


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Accounting principles

These are general decision rules which

govern development of accounting

techniques.

These are guide to actions.


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ACCOUNTING CONCEPTS

- Accounting entity concept / business entity concept;

- Going concern concept;

- Accounting period concept;

- Money measurement concept;

- Consistency concept;

- Accrual concept;

- Cost concept / historical cost concept;

- Revenue concept / revenue realization concept;

- Matching concept;

- Materiality concept;- Duality concept;

- Objectivity concept.


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ACCOUNTING CONVENTIONS

Prudence / Conservatism convention;

Full disclosure convention;

Timeliness;

Industry practice;

Substance over form.


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ACCOUNTING STANDARDS:

Standardized set ofrules and principles to

reduce variations in methods used to

prepare financial statements.

Standards conform to applicable laws,

Customs, usages and business

environment.

Standards place restrictions on behavior

of affected parties.


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DEVELOPMENT OF ACCOUNTING

STANDARDS:IASC (International Accounting Standards Committee) formed

in 1970s to develop IAS (International Accounting

Standards).

IASC comprises of75 countries professional accounting

bodies.

IASC has so established around 40 IASs.

In India ICAI (Institute of Chartered Accountants of India)

constituted ASB (Accounting Standard Board) on 21stApril

1977.

ASB considers IASs and Indias environment to formulate

standards.So farASB has made 29 accounting standards.


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ACCOUNTING EQUATION:

Equities = Assets

Internal equities + External equities

= Assets

Capital + Liabilities = Assets


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Thank

You

(1) foundation course in finance and accounts

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