ACCOUNTING FOR MANAGEMENTPRINCIPLES, CONCEPTS AND ACCOUNTING EQUATION

JITHIN K THOMAS

BIMS

ACCOUNTING PRINCIPLES

They are a body of doctrine commonly associated with theory and procedures of accounting, serving a an explanation of current practices and as a guide for selecting conventions or procedures where alternatives exists.

Accounting Concepts: Basic assumptions up on which the science of accounting is based on

Accounting conventions: Customs and traditions which guide the accountant while preparing accounting statements

ACCOUNTING CONCEPTS

1. Separate Entity Concept2. Going Concern Concept3. Money Measurement Concept4. Cost Concept5. Dual Aspect Concept6. Accounting Period Concept7. Periodic Matching of Costs and Revenues

Concept8. Realisation Concept

ACCOUNTING CONVENTIONS

1. Conservatism2. Full Disclosure3. Consistency4. Materiality

SYSTEM OF BOOK KEEPING

Single entry system

Double entry system

ACCOUNTING EQUATION

Asset = Equities

Asset = Liabilities + Capital

Asset – Liabilities = Capital

ACCOUNTING EQUITATION

John starts business with a capital of Rs.100,000/-

John purchases furniture for cash worth Rs.20000.

Capital & Liabilities

Rs Asset Rs

Capital 100,000

Cash 100,000

Capital & Liabilities

Rs Asset Rs

Capital 100,000

Cash 80,000

Furniture 20,000

100,000

100,000

ACCOUNTING EQUITATION

John purchases banana from B worth Rs.50000/- on credit

Sells banana costing Rs.30000 for Rs.40000 and Rs.10000 for Rs.15000 on credit to P

John withdraws cash of Rs.1000/- and banana of Rs.2000