Accounting for
Managers
st
(1
session)
Prof. Amit De
MEANING OF ACCOUNTING
Activities Covered under Accounting
Identifying
Measuring
Summarising Analysing
Recording Classifying
Interpreting
Communication
Branches of Accounting
Financial
Accounting
Management
Accounting
Cost
Accounting
Human Resource
Accounting
Social Responsibility
Accounting
MEANING OF ‘GENERALLY
ACCEPTED ACCOUNTING
PRINCIPLES’ (GAAP)
The general acceptance of the accounting
principles or practices depends upon how
well they meet the following three criteria:
(a)
Relevance
(b)
Objectivity
(c)
Feasibility
 ACCOUNTING ENTITY
(OR BUSINESS ENTITY PRINCIPLE)
 M0NEY MEASUREMENT PRINCIPLE
 ACCOUNTING PERIOD PRINCIPLE
(PERIODICITY PRINCIPLE)
 GOING CONCERN PRINCIPLE
 ACCRUAL PRINCIPLE [ REVENUE
RECOGNITION PRINCIPLE ]
 CONSISTENCY PRINCIPLE

PRUDENCE PRINCIPLE
( OR CONSERVATISM PRINCIPLE )

FULL DISCLOSURE PRINCIPLE

MATERIALITY PRINCIPLE

HISTORICAL COST PRINCIPLE

MATCHING PRINCIPLE

DUALITY PRINCIPLE
Classification of Accounts according
to the Traditional Approach
Types of
Accounts
Meaning
These accounts relate to
(a) Personal
natural persons, artificial
Accounts persons and representative persons.
b) Real
Accounts
Examples
Natural – Ram’s A/c.
Artificial-Ram & Co’s A/c
Representative –
Outstanding salary A/c.
These accounts relate to Tangible – Land A/c
the tangible or intangible Intangible –goodwill A/c
real assets.
Expenses-Purchases A/c
These
accounts
relate
to
(c) Nominal
Loss –Loss by Fire A/c
expenses,
losses,
profits
Accounts
Profits & Gains-Sales A/c
and gains.
Discount Received A/c
NEED FOR SUB-DIVISION OF
THE JOURNAL
When the number of transactions is
large, it is practically
record
impossible
all the transactions through
one journal.
to
Types of Cash Book
Single
column book
Cash Book with
bank and discount
column
Cash Book with
Discount column
Petty
Cash Book

PURCHASES BOOK

SALES BOOK

PURCHASE RETURNS BOOK

SALES RETURNS BOOK

BILLS RECEIVABLE BOOK

BILLS PAYABLE BOOK

JOURNAL PROPER
Distinction between Capital
Expenditure and Revenue Expenditure
Basis of
Distinction
Meaning
Capital Expenditure
It is an expenditure
which is incurred:
Revenue Expenditure
It is an expenditure
which is incurred:
(a) To acquire or bring (a) To maintain the
into existence an asset, productivity or earning
or
capacity of a business, or
(b) To acquire or bring
into existence an
advantage or benefit of
an enduring nature, or
(c) To increase the
productivity or earning
capacity.
(b) To carry out
operating activities in
the normal course of
business.
MEANING OF TRIAL BLANCE
Trial Balance is a statement which
shows either the
balance
or
amounts of debit
items
and
items
of
ledger
and
balances.
all accounts
the
in
total
credit
the
Cash and bank
OBJECTIVES OF A TRIAL
BALANCE
 To ascertain the arithmetical accuracy
of ledger accounts.
 To help in locating errors.
 To facilitate the preparation of
financial statements.
MEANING OF FINANCIAL
STATEMENTS

Balance Sheet (or Position Statement)
Which shows the financial position of an
enterprise at a particular point of time,

Trading and Profit and Loss Account
(or Income Statement)
Which shows the financial performance of
business operations during an accounting
period.
FORMAT OF A TRADING ACCOUNT
Dr.
Trading Account of … For the period ending on……
Particulars
To Opening Stock
To purchases
xxx
Less Returns outward xxx
To Direct Expenses
To Wages and Salaries
To Freight Inward
To Carriage Inward
To Cartage Inward
To *Gross Profit transferred to P & L A/c
Rs.
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Particulars
By Sales
xxx
Less Return Inwards xxx
By Closing Stock
By Abnormal Loss of Stock
By *Gross Loss transferred
to P & L A/c
Cr.
Rs.
xxx
xxx
xxx
xxx
xxx
PROFIT AND LOSS ACCOUNT
Net Profit :
Net Profit means the excess of all
revenue ( Whether operating or nonoperating )
over
expenses & losses
( whether operating or non-operating ).
Items of Balance Sheet
Items to be shown
on the Assets side
Fixed
Assets
Investments
Items to be shown
on the Liabilities side
Current
Assets
Tangible Fixed
Assets
Intangible Fixed
Assets
Liabilities
Long – term
Liability
Capital
Current
Liability