FINANCIAL
ACCOUNTING
Unit 1: Introduction to Accounting
Unit 2: Principles of Accounting
Unit 3: Accounting Standards
Unit 4: Accounting Equation and Accounting Cycle
Unit 5: Preparation of Journal, Ledger and Balancing
Unit 6: Subsidiary Books
Unit 7: Trial Balance
Unit 8; Financial Statements
Unit 9: Analysis and Interpretation of Financial Statements
Unit 10: Accounting and Depreciation for Fixed Assets
Unit 11: Bank Reconciliation Statement
Unit 12: Corporate Financial Statements
Unit 13: Computerised Accounting
Unit 14: Introduction to Tally
1
,Unit 1: Introduction to Accounting
CONTENTS
1.1 Meaning and Definition of Accounting
1.1.1 Characteristics of Accounting
1.1.2 Objectives of Accounting
1.1.3 Need of Financial Accounting
1.1.4 Scope of Accounting
1.1.5 Users of Accounting Information
1.1.6 Importance and Advantages of Accounting
1.1.7 Limitation of Accounting
1.2 Process of Accounting
1.2.1 Cash System
1.2.2 Accrual System
1.2.3 Values
1.3 Book-keeping
1.3.1 Definition
1.3.2 Importance of Book-keeping
1.3.3 Difference between Book-keeping and Accounting
1.4 Methods of Accounting
1.4.1 Single Entry
1.4.2 Double Entry
1.5 Types of Accounts
1.5.1 Personal Accounts
1.5.2 Real Accounts
1.5.3 Nominal Accounts
1.6 Accounting Terminology
1.7 Accounting Cycle
1.7.1 Distinction between Book-keeping and Accounting
1.8 Summary
1.9 Keywords
1.11 Review Questions
1.11 Further Readings
2
, 1.1 Meaning and Definition of Accounting
Accounting is treated as the language of business.
It records all the transactions which can be measured in money and
have occurred in a particular period.
Accounts of a business provide useful information to its users.
There are many definitions of accounting. Some of the most important
definitions are given Notes
below:
1. As per Robert N. Anthony – “Accounting system is a means of
collecting, summarizing, analyzing and reporting, in monetary terms,
information about the business”.
2. The American Accounting Association (AAA) has defined accounting
as, “the process of identifying, measuring and communicating economic
information to permit informal judgments and decisions by users of
information”.
3. The Committee on Terminology of American Institute of Certified
Public Accountants gave a generally accepted definition of accounting –
“Accounting 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.”
On the basis of above definitions we conclude that accounting is a
science as well as an art of recording of activities of the business which
can be measured in money and analyzing and interpreting them.
3
ACCOUNTING
Unit 1: Introduction to Accounting
Unit 2: Principles of Accounting
Unit 3: Accounting Standards
Unit 4: Accounting Equation and Accounting Cycle
Unit 5: Preparation of Journal, Ledger and Balancing
Unit 6: Subsidiary Books
Unit 7: Trial Balance
Unit 8; Financial Statements
Unit 9: Analysis and Interpretation of Financial Statements
Unit 10: Accounting and Depreciation for Fixed Assets
Unit 11: Bank Reconciliation Statement
Unit 12: Corporate Financial Statements
Unit 13: Computerised Accounting
Unit 14: Introduction to Tally
1
,Unit 1: Introduction to Accounting
CONTENTS
1.1 Meaning and Definition of Accounting
1.1.1 Characteristics of Accounting
1.1.2 Objectives of Accounting
1.1.3 Need of Financial Accounting
1.1.4 Scope of Accounting
1.1.5 Users of Accounting Information
1.1.6 Importance and Advantages of Accounting
1.1.7 Limitation of Accounting
1.2 Process of Accounting
1.2.1 Cash System
1.2.2 Accrual System
1.2.3 Values
1.3 Book-keeping
1.3.1 Definition
1.3.2 Importance of Book-keeping
1.3.3 Difference between Book-keeping and Accounting
1.4 Methods of Accounting
1.4.1 Single Entry
1.4.2 Double Entry
1.5 Types of Accounts
1.5.1 Personal Accounts
1.5.2 Real Accounts
1.5.3 Nominal Accounts
1.6 Accounting Terminology
1.7 Accounting Cycle
1.7.1 Distinction between Book-keeping and Accounting
1.8 Summary
1.9 Keywords
1.11 Review Questions
1.11 Further Readings
2
, 1.1 Meaning and Definition of Accounting
Accounting is treated as the language of business.
It records all the transactions which can be measured in money and
have occurred in a particular period.
Accounts of a business provide useful information to its users.
There are many definitions of accounting. Some of the most important
definitions are given Notes
below:
1. As per Robert N. Anthony – “Accounting system is a means of
collecting, summarizing, analyzing and reporting, in monetary terms,
information about the business”.
2. The American Accounting Association (AAA) has defined accounting
as, “the process of identifying, measuring and communicating economic
information to permit informal judgments and decisions by users of
information”.
3. The Committee on Terminology of American Institute of Certified
Public Accountants gave a generally accepted definition of accounting –
“Accounting 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.”
On the basis of above definitions we conclude that accounting is a
science as well as an art of recording of activities of the business which
can be measured in money and analyzing and interpreting them.
3
